This action might not be possible to undo. Are you sure you want to continue?
Electronic Banking. Risks and Prospects. Recording of Use and Confidence Degree from the Customers of Greek Banks. Iordanis M. Eleftheriadis
Lecturer Department of Business Administration, University of Macedonia Economic and Social Sciences, Egnatias 156, Thessaloniki, Greece, P.O. 54006 e-mail: firstname.lastname@example.org Abstract: The e-banking constitutes an electronic alternative network of payments and benefit of services. The need of creation of electronic alternative channels has been distinguished well in advance by the foreign banking organizations, which relied mainly on the outburst that was observed in the use of internet. The benefits are many, both for the customers and for the banks. The banks that are activated in the Internet are susceptible mainly to the systematic, law part and to the reputational risk and the customers of the electronic banking channel are puzzled concerning to the subject of safety of their transactions and personal data. The aim of this report is, not only to analyse the meaning of electronic banking and to present all the alternative providing banking service networks, but also to focus on the advantages and on the risks that the growth of electronic banking has brought about while at the same time the degree of infiltration and the level of consumers’ satisfaction in the Greek banking market will be determined. Through the empirical research, which was carried out, the conclusions that concern the degree of acceptance, usage and confidence from the customers, who are the basic receptors of this undertaking, will be drawn. Initially, the imprinting of the Greek active user of Internet Banking profile is presented, (sex, age-related team, studies, income, time of Internet Banking used, services used) and then the evaluation of his choices follows (evaluation of services through Internet, what comes first during the Internet Banking use and in what degree he is influenced by the already existing situation in level of satisfaction and confidence). Besides, the objective of this research is not only to report on those who have already been using the internet banking, but also to measure the availability and probability of utilisation of it in the future, since according to the research most customers appreciate that shortly many transactions with physical presence in the shop will come to an end. The basic conclusion is that while a great amount of the population develops dynamically by adopting the new technologies rapidly, a high percentage still falls short, without incorporating the information technologies in their daily activities. Greece is a peculiar country with regard to the customers that maintain their traditional characteristics who wish and seek the contact with the bank as physical presence. The age and the level of education are the most important determinant factors for the adoption and use of Internet Banking. A basic suspending factor is the ignorance and the lack of suitable technical support services. The marketing
Copyright © 200x Inderscience Enterprises Ltd.
Author departments of banks should help educating new users and advertising the new services everywhere. Finally, one of the most interesting conclusions is that the most precious asset that should be protected by the banks is not money but information. Their protection constitutes a challenge and a fundamental concern for the banks so that a climate of lack of confidence, which will restrain the access of customers in the new banking environment, is not created. Keywords: Electronic Banking, Internet Banking, Risk, Customer Satisfaction, Security 1. Introduction The objective of this report is to look into the risks and prospects of electronic banking and more specifically internet banking. The report is comprised of two sections. In the first section, the basic terms of electronic banking as well as its basic networks of implementation are presented. In the second section we present the risks that are associated with the operation of banking institutions. The consequences of growth of new electronic channels of service are impressed, on the different forms of risk that compose the total risk and ways of confronting with them are formulated. The second section, through the analysis of results of empirical study (research with questionnaires), impresses the degree of infiltration of Internet banking (i-banking) and the degree of satisfaction of customers of banks from the use of provided services. 2. Electronic banking. Basic terms - definitions. The term electronic banking (or remote banking) is referred to the remotely conduct of traditional innovative banking activities with the use of electronic means ( Basle Committee, 2003). According to the Union of Greek Banks, electronic banking is regarded as "any commercial transaction that is carried out between the bank and the customers through electronic networks and it helps or leads to the sale of banking services/products" (Union of Greek Banks, 2000). The modern alternative networks providing banking services are: ● The network of automatic withdrawal machines (ATM-Automated Teller Machine). Through the ATMs the possibility of realisation of transactions with the use of credit card, cash card or smart card is provided. ● Phone Banking. The user is connected, by using simple telephone connection of vocal telephony with a special automated call centre. ● Mobile banking. A mobile telephone or any other similar appliance is used, which does allocate the possibility of bidirectional communication. ● Electronic FundsTransfer/Point of sales (EFT/pos). Substantially, it is about electronic appliances of capital transfer in the points of sale (Electronic Funds Transfer - Point Of Sales, EFT/pos), which are situated in places where products or services are sold to potential consumers. ● Internet Banking. The user has the possibility to perform his banking transactions through Internet himself. ● PC Banking. The user is connected through his personal computer directly with the bank information systems, without the interference of other networks, for example, the internet. ● TV Banking. The method of bidirectional television, where a television appliance is usually used with the possibility of bidirectional communication, connected with a cable television network.
Title 3. The risks Without a doubt, the technological growth has considerably affected the profile of Bank risks and financial institution formation more generally. Some of these risks are increased, while others on the contrary are possible to be decreased. In any case, the growth of electronic banking has created a new basis with regard to the degree of exposure to the risk and therefore consequently the need of not only a differentiated regulating frame, but also mechanisms of monitoring to be formed, which has already begun to be shaped in the fields of Basle Committee of Banking Supervision. The degree of exposing to risks, which are related to the electronic banking, depends mainly on the degree of adopting new alternative electronic means of distribution of services and products. Next, we are going to present these risks analytically as well as the diversification that is individually observed upon the growth of electronic banking (Eleftheriadis and Karatzoglou 2006). The business risk is the risk of not being able to achieve the business targets due to inappropriate strategies, inadequate resources or changes in the economic or competitive environment. It has to do with the ability the credit institution has in order to achieve the operational objectives by exploiting the available opportunities in the market. The big changes on the banking sector and the adoption of fast paced evolving technology also change the traditional strategic risks. A bank that will rush into the adoption of new technologies so that is rendered pioneer is risking losing its investment as information systems lose their value in very short time interval. Moreover, there is the risk of extensive investment in particular products or services, which will not become acceptable by the end users. On the other hand, if it maintains a more conservative attitude there is the risk of becoming last, in an environment where the competition is moving fast and strengthens its place in the market. Internet banking may soon convert from a complementary to the main provider of financial services and products. Consequently, a possible failure of a bank entering this sector, can have various consequences on its future position in the market, especially when the competition of the banks, which are clearly connected with the i-banking and do not have any physical substance (virtual banks), is already given. Finally, the consequences, for the strategy that a bank follows from inter-country activities it will undertake, should be evaluated, taking into consideration that the nature of internet is to encourage the expansion of banks in new markets abroad. Accordingly, the banks strategy should be readjusted globally so that it meets the new challenges and opportunities that will be shaped in the frames of new technological environment, with final objective to acquire a leading place in the sector of electronic banking. The operational risk is defined as the risk of loss as a consequence of the actions, the processes, the infrastructure, the technology or other factors that practise functional effect, including the false activities that include fraud. The Basle Committee of Banking Supervision defines as operational risk the risk of occurring damage, either from insufficient, inadequate internal processes and systems, or from human factor, or other external reasons. Operational risk differs from the traditional banking risks in that it does not come from the effort to achieve profit but it is an innate characteristic of banking activity. The operational risk is the risk of damage that is owed, in insufficient or unsuccessful processes (insufficiencies of systems and internal inspection), individuals (human faults, failures of administration) or systems (risk of damage or insufficiency of computer systems) or in exterior incidents (e.g. natural destruction, fires, legislative changes, lawful requirements, etc). The operational risks are directly related with the bad
Author operation of information systems, the processes of reports and the applied internal rules of observing the management of potential risk. Also, they are existent in all the products, the activities, the processes and the bank systems and all the departments and the services of the bank are involved. The operational risk can always arise and cause from negligible damage (eg risk from a photocopier damage) to essential and very important damage and could lead even to bankruptcy. It is a field of risk that both banks and enterprises generally have not accomplished to manage effectively with an organised way. The human factor constitutes one of the biggest operational risks that banks face. The reasons that can lead an employee, deliberately or not, to cause such damage are the lack of skills, the insufficient training or the fraud. The improvement of information technology transactions, the use of high technology from the banks for the automation of all manual procedures in combination with the high interdependence of financing systems, includes the possibility of transforming risks that are related with human errors in risk of malfunction of the system. The operational risks are also related to the safety of transactions, which depend on the handling and the structure of electronic systems of providing the financial services, the integrity and the right management of records, as well as the entrusting of electronics banking services to third parties. It constitutes, perhaps, the most important problem, which is directly connected with the electronic banking, which banking organizations are called to face. The loss that the world financial systems face from the offences of information systems is worrying. Risks caused by insufficient controls on certification issues and authenticity of co-contractors have probably as result the successful access and falsification of data as a consequence of attacks from malignant intruders (hackers). The consequences of these attacks vary depending on the intentions of those who carry them out, if that is to say they wish the simple overstepping of the system’s safety or if their objective is commercial sabotage or spying. They try to access customers’ data or even the banks data. Frequently enough they rely on any technical weaknesses of the systems. However, as it has already been mentioned, the greatest risks stem from the human factor. Researches carried out by experts on issues of security prove that in most cases of attacks the intruders had the volunteer or involuntary help of somebody that worked in the bank (Lemonakis 2005). In the case of planning the problem is located on some software, which reports periodical or permanent malfunctions. During the operation of the system a problem can arise in case of telecommunications connections loss, overloading or interruption of electric provisioning. The last category of operational risk that is related to the security of transactions is owed to factors outside the banks information systems and its personnel. The banks find particularly interesting the solution of entrusting the application of electronic banking in a third exterior supplier of such applications. In this way they avoid creating a software package and the essential infrastructure themselves. This means reduction on the cost and rapid adoption of e-banking. Unfortunately, a part or even the entire control is transferred from the bank to the external supplier and risks, which the bank cannot control. The problem becomes even bigger in the case when the exterior administrator does not have the experience needed or it is a relatively new company that ignores the banking risks. The legal - regulatory risk is the risk of non-compliance with legal or regulatory requirements. A big part of the legal framework is general and it is in effect for all the enterprises, in certain cases, however, a legislative framework that covers specific services exists. The individual regulations will be specific and they will be published by the regulating organizations that have legal competence for the particular sector. The legal risks are directly related to the electronic banking and they increased as its use is extended. They mainly stem from the uncertainty that exists in the legal - regulative framework concerning the electronic banking. In most countries an explicit regulating framework does not exist and this is owed to the little experience regarding the sector of
Title electronic banking. The problem becomes even bigger when a bank offers its electronic services to other countries as well, since a unified legal frame in international level does not exist. Each country puts its own rules into effect and it is difficult for a bank to constantly adapt its services and to be acquainted with all the laws that are in effect in every country. There is also a big problem with the validity of transactions and the certification of users through the electronic ways. Up to now we knew that the only way of identifying a person in a document was his own signature. Also the certification of a document was based on his physical existence. The development of technology and the applications of electronic banking changed the status. Both the documents, and the signatures are digital, that is to say virtual. The legislative framework of many countries, however, does not forecast such thing. Since 1999, as European Union is concerned the Directive 1999/93/EK places the basis for a regulating framework for the electronic signatures. The Directive was adopted by all the countries-member and in Greece with the Presidential Decree 150/2000 the Greek with the Community right was harmonised (Arhontakis, 1999). Another legal risk is related with the protection of the customers’ personal data. Bad use by the bank personnel or by exterior malignant intruders can expose a bank in serious legal risks. It is possible that the intruders acquire access in the databases of the banks and use the data of customers in order to commit a fraud. In this case a legal risk is created by the bad or not certified use of customers’ data. The legal risks, in which the financial institutions will be exposed from the use of electronic banking, are expected to increase because of the uncertainty that characterises the wider legal framework and the specific lawful regulations of transactions through an open electronic network as the internet is. The uncertainty with regard to the validity of transactions, the protection of personal data, the involuntary consumer’s exposure to foreign jurisdiction, the tax evasion, the laundering of money, the electronic fraud but also the legal responsibility in case a system collapses, increase the exposure to the legalregulatory risks. Supranational organizations or specialised institutions or even the financial institutions can contribute to the direction of determination and limitation of legal risks that the use of open electronic network as the internet entails. In terms of the European Union, a regulating frame has been developed that is concerned with questions such as the electronic (digital) signatures, the distant rendering of financial services, as well as the Directive on the electronic commerce. Also in OECD level many efforts have been made in order to put regulations on issues such as the counterfeiting of electronic money and the laundry of it, as special aspects of effort made for the prevention of economic crime. But even the financial institutions themselves can contribute to the restriction of legal risks and specifically those that are involved with issues that urgently interest the consumers (protection in the management of personal data, distribution of legal responsibility between bank and consumer in case of system’s failure e.t.c.). While the electronic commerce is expanding and to the extend that the financial institutions try to attract consumer credit with new products and services, the banks should undertake some kind of role in the systems of electronic certification by using digital certificates. The financial institutions can undertake the responsibility of certification or collaborate with specialised suppliers, ensuring, in this last case, the explicit conventional terms concerning the rights and the obligations of both parts. The systemic risk is the risk that a small incident will cause unexpected consequences in local, regional or international systems that are not connected immediately with the source of disturbance. The systemic risk is likely to influence a small or big number of companies of the same sector or to concern exclusively one single company. The rapid adoption of information technology from the banks and its negative aspects, are very much likely to increase the systemic risks. The focalisation of problems that will probably arise, might lead to negative chain reactions from bank to bank or even from country to country, provided that the volume of cross-border transactions has been
Author increased through the internet in such degree that it can influence the international financial system. The systemic risk can be increased since many participants in the particular market can use the same or similar software or equipment for the confrontation of the same problems. Because of their widespread application, the risk management models may create risks in cases of likely weaknesses and deficiencies that arise in periods of extreme conditions in the market. The dependence on exterior collaborators or suppliers is possible to lead to the gathering of certain administrative system operations and as a result the burden of risks of ensuring the proper operation of the electronic system of financial services, becomes the responsibility of certain specialised suppliers or even only one from whom all the financial institutions will be depended. Finally, the consumers’ behaviour reacting as a herd, can become worse, by increasing the markets’ activities or depriving it of liquidity, since the information is always diffused faster and the investment decisions are taken with unusual speed. The reputational risk is the risk that the reputation of a company will be adversely affected. The problem may be important, because it can lead to a direct, important reduction on sales of the company and, to extreme cases, even to its destruction. The risk of the bank losing its good reputation has to do with the negative public opinion which has as a result the important reduction of the banks funds or its clientele. The loss of reputation is likely to create a permanent negative public opinion of the bank for the total of services that it offers. Such risks in the frames of electronic banking can be owed in actions and omissions of the financial institution or even in actions and omissions of third parties who constitute collaborators or suppliers of the bank services. Risk of loss of good reputation for a financial institution can appear when the systems that are used or the products that are provided do not function according to the expectations and because of their big spread they create negative public reactions. Serious violations of safety from exterior or internal attacks on the electronic systems of the financial institution undermine the confidence of consumers. The appearance of problems of telecommunication networks that prohibit the consumers’ access to their accounts when there are no other alternative means of information available, can usually lead to the same result. The constant base on providing electronic services is of fundamental importance for electronic banking and constitutes one of its greatest advantages. The system should function and be available for the customer to use every day of the week, 24 hours a day. If the customer cannot have access to his accounts, because of periodical problems that are owed to the bank, dissatisfactions are created which have as a consequent the loss of reputation for the latter. Finally, the insufficient presentation of services on the Internet can also cause problems. This can be owed to an insufficient electronic page that does not contain all the essential information so that the customer can use the overall services provided. In the opposite case, when the presentation of services on the Internet which are not really available or which are provided with problems and delays can also cause dissatisfaction to the customer and loss of reputation for the bank. The risk of loss of reputation for a bank institution can be eliminated only if models of output for all the processes that are related to the Internet banking are developed. These models will have to reflect the desirable level of customers’ service and concern time and quality of services matters. It is important that any negative divergence from the models is tracked down by regular control mechanisms, which will as soon as possible restore the system. The credit risk is the risk that a counter party may not pay amounts owed when they fall due. The credit risk arises from the weakness of customers to pay back their loans and other issues and the lack of completing their conventional obligations. The choice to whom credit will be given and to what height is one of the most critical decisions a manager should take. The delay of payments creates a problem in the money flow that is maximised in the case when the payments are never settled. Even if the debts are finally paid, the additional expenses that are undertaken during the period of delay, or the
Title expenses that are required in order to collect the debts, can overlap the margin of profit. The credit risk can be increased when a bank expands its activities, both in the country and outside the borders with rapid steps. However, this rapid expansion requires more and more intensive controls, something, which is impossible to happen, at least shorttermly speaking. The problem becomes more intense to a foreign country rather than where the bank resides, where the essential information and experience, as well as the mechanisms of controlling the potential customers are not available. The most flexible and adaptable relation between the customers and the banks that provide services and products through internet, could affect on the increase of credit risk or even on important losses of capital because of the wrong loaning choices. The upgrade of lawful framework concerning the calculation of sufficiency of proper funds (Basle II) is expected to greatly benefit the financial organizations, on the effectiveness of credit risks management and the achievement of higher levels of efficiency. The banks will have to adopt systems of administrative information, which should be characterised by well-organised processes of collection and treatment, convenient disposal, precision, reliability and completeness of information. The complete and automated exploitation of bank data for the production of statistical reports that are useful for the control of the credit risk measurement models is of particular importance. The aim is the development of a complete system of credit risk measurement and evaluation that will cover the entire portfolio, in which the potential credibility of the financed customer (probability of breaching obligations) and the ensuring (height of likely damage in case of breaching obligation) are combined. This will make the calculation of bad debts and consequently, the required capital that stems from the relative supervisory regulations better and easier. The market risk is the risk of loss due to changes in market prices. This includes the interest rate risk, the foreign exchange risk, the commodity price risk and the share price risk. The main market risks that the company has to deal with are the risk of interestrates, the changes in the exchange parities and the changes in the prices of products. In banks, it can be presented in marketing transactions as well as in the management of assets and liabilities. The sector of unit trust includes the biggest part of these risks. The market risk is usually owed to real facts. However, in certain cases the intense psychological reactions of investors can be altered into an avalanche of chain reactions that can drift prices. Financial institutions, which will exchange foreign currencies with electronic money (which they will either produce or distribute), are very likely to be exposed to market risks, if, for example, the interest-rates of foreign currencies change considerably. Both the enterprises and their customers, that do business through the Internet, ask from the banks to play the role of guarantor and mediator in between their transactions. The validity and the reliability of a banking institution offer security and facilitate the commercial transactions. This, however, involves undertaking responsibility concerning the banks, which undertake as well the markets current risks. The banks, in order to control the risks of the market that arise from the total number of their activities effectively, follow specific principles and policies. All the market risks (of interest, exchange, shares, products, variability) are observed and calculated in daily basis by the model of assessment of risks. For the confrontation of risks from changes in the rates of interests and exchange, the banks have determined a specific strategy that contains a wide range of limits, including strict limits of open position. More specifically, for the confrontation of risk from changes in the interest-rates there are limits of the highest damage. For the restriction of risk from changes in the rates of exchange, limits of open exchange position have been approved. For the confrontation of risk from fluctuations in the prices of shares, highest limits with regard to the sums that can be invested in shares have been placed for purposes of marketing, as well as various other restrictions, such as highest rate of investment in a particular editor, in a particular sector, etc. The liquidity risk is the risk that amounts due for payment cannot be paid due to a lack
Author of available funds. The fulfilment of obligations when these become claimable is likely to occur even to companies that have profits. This weakness is owed clearly to the current weakness of covering the debts. The banks, in order to satisfy the requirements of the lawful framework, have established particular policies of liquidity management. These policies will have to ensure that, sufficient liquid assets constantly exist, which could cover corresponding obligations and also ensure that an important part of medium-term assets can be financed by liabilities, which expire simultaneously. Additional problems of liquidity can result if a bank is specialised in the benefit of financial services through Internet and it is found in weakness to ensure that its funds are sufficient enough to cover requirements of fulfilment and liquidation any given moment. 4. Recording of use and confidence Degree of internet banking from the customers of Greek banks Banks were for many years the first organizations that used electronic channels for the communication and the transactions. Banks developed the abilities of technology and they began to offer many of their products and their services through internet. This way of providing banking services is known as internet banking and includes the supply of products and services for retail banking, banking products and services for big customers and companies, as well as services of electronic payments with the use of electronic channels. Relatively recently, models of cross-border electronics banking have been developed, which make possible the supply of distant services of electronic banking from the banking institutions that are situated in one country, to customers of other countries, in which there is no authorisation of operation and consequently they do not have any physical presence. The banks that are activated on the internet, develop their enterprising spirit in two fundamental fields, as company to company (b2b) and company to consumer (b2c). Moreover, they developed the possibility of transactions between the government and the citizens (g2c) and the companies (g2b), by helping in the greatest degree on the growth and on the establishment of initiatives of electronic governing (e-government). The benefits from the use of electronics banking services, which are provided through the internet, concern the facility of use and the availability of services in a 24hour base, the possibility of access in the services regardless the physical position of the user, the speed of realisation and completion of transactions compared to the traditional ways, a high level of security of transactions, the more efficient management of all kind of transactions, the access to a wide range of information and the reduction of transactional cost. On the present report, in the second section, we are going to present the results of an empirical study that is related to the recording of the degree of use and the confidence level of internet banking of the Greek bank customers. Research methodology. A questionnaire was created and distributed to bank customers in the wider region of Thessaloniki prefecture. In the questionnaire the following forms of questions were used: • Yes/no questions • Scaled questions • Multiple choice questions 224 valid questionnaires were collected which were supplemented by individuals at random (men and women) of all ages and education levels, in the wider region of Thessaloniki prefecture. It is about customers of banks that use or not electronic banking systems for their service. Besides, the objective of this research is not only to report on those who already use internet banking, but also to measure the intention and the probability of its utilisation in the future. The sample is balanced regarding to the sex since 114 women (50,9%) and 110 men (49,1%) constitute it. Individuals over 18 years
Title old who are able to use banking transactions participate in this research. The age-related distribution of participants is less balanced. The highest percentage of participants belongs in the team of 26-35 years of age (46,4%), while follows the age-related team of 36-45 years old (26,8%) and those over 45 (23,3%). Finally only 3,6% belongs in the age-related team of 18-25. With regard to the professional condition, we distinguished the following categories: businessmen 2,7%, self employed person 11,6%, civil servants 32,1%, employees 45,5%, not unemployed 1,8%, housewives 4,5% and students 1,8%. Finally, with regard to the education level we have the following categories: graduates of primary school 2,7%, graduates of high school 42,9%, graduates of higher education institutions-polytechnic college 41,1% and graduates postgraduate - holders of doctoral title 13,4%. We also distinguished the participants of the research according to their income in following categories: a 7,1% have income smaller than 5000 euros, 51,8% income of 5000 – 15000 euros, 31,3% income of 15000 – 30000 euros, 6,3% income of 30000 – 50000 euros and 3,6% income higher than 50000. As for the sums of deposits, the participants are classified in the following categories: 42,0% have deposits less than 5000 euros, 29,5% deposits of 5000 – 15000 euros, 10,7% deposits of 15000 – 30000 euros, 11,6% deposits of 30000 – 50000 euros and 6,3% deposits more than 50000 euros. The profile of participants is completed with the degree of internet use. A percentage of 39% people asked, stated that they do not use internet at all. From those that stated that they use the internet, an 11% states that it uses the internet very little, 22,3% quite enough, 21,4% much and only 7,1% very much. The first question asked concerned the different ways of transaction that they use. The sum of the people asked, as it was expected, prefers cash desks, a very important percentage uses ATM (87,5%), while a 29,5% percentage uses the internet. A much smaller percentage is that of people who use Phone Banking (8%), while no one from them uses Mobile Banking. (figure 1)
Method of Transaction
Figure 1: Ways of transaction Those who use the internet were asked what kind of transactions they use through the internet. The 21% use the internet only for informing, the 30% for account payments, the15% for capital transfers and the 34% for all their banking transactions. It has to be mentioned that, with the order they were reported, each answer includes all previous as well. (figure 2)
Transactions Executed Through Internet
All transactions 34%
View Accounts, Loans, Transactions 21%
Transfer funds to someone else account 15%
Payments Credit Cards, Public Utilities 30%
Figure 2: Executed transactions through internet On the question, how often they use banking transactions through internet, a 21% answered that it holds a transaction a month, 51% a transaction a week, 25% 2 to 3 transactions a week, while the 3% almost daily. (figure 3)
Frequency of transactions
2-3 times per week 25%
once per month 21%
once per week 51%
Figure 3: frequency of transactions We asked the users of internet banking how long they have been using the internet banking. Most of them (58%) answered that they use the internet banking 1-5 year, follow those who have been using internet banking for less than a year (24%). Smaller is the percentage of those who have been using it for 5-10 years and more than 10 years with percentages 12% and 6% respectively. (figure 4)
How much time do you use i - banking
more than 10 years 6% Less than a month 5 to 10 years 0% 12%
Between 1 month to 1 year 24%
1 to 5 years 58%
Figure 4: How long they have been using the internet banking With regard to the degree of confidence in the new forms of electronic banking, the 30,3% states absolute confidence, the 51,5% high, the 15,2% states reservations, while only a 3% entrust little or do not entrust electronic banking at all. The users of electronic banking gave these answers. (figure 5)
Degree of confidence of e - Banking
Little 3,0% Not at all 0,0%
Very High 30,3%
Figure 5: Degree of confidence of internet banking We asked from the users of internet banking to compare it with the services they get when visiting the bank. We see that only the 34% state preference to electronic banking. The 51% prefer less or more the service via the bank shops. (figure 6)
Degree of satisfaction from the service via internet comparatively to service via bank shops
Very High 0% High 34%
Not at all 21%
Figure 6: Degree of satisfaction from the service through internet or a bank shop We asked the users opinion about electronic banking with regard to the security of transactions through internet. A percentage of 72,7% considers the transactions a lot or very secure. Only a 9,1% has an opposite opinion, while a percentage of 18,2% give a neutral answer. (figure 7)
Are transactions via internet secure?
Very Much 18,2%
Not at all 0,0%
Little 9,1% Some 18,2%
Figure 7: Security of electronic transactions Of course, the users feel less confidence about the security of personal data. The 51,6% consider it very secure or very much secure, while the 15,2% have opposite opinion. The one third of the people asked, gave a neutral answer to this question. (figure 8)
Are personal data secure to transactions via internet?
Very Much 6,1%
Not at all 0,0%
Figure 8: Personal data security The users of internet banking were asked to select the main reason for which they use internet banking. The answers that were selected are the following: the 24hours service (48,5%), the simplification of processes (30,3%), the limited time available (12,1%) and better information (9,1%). It is interesting that no one mentioned the cost. (figure 9)
Which one is the main reason for you to use i - banking
better information 9,1% lower cost 0,0% simplification of processes 30,3% 24hours service 48,5%
limited time available 12,1%
Figure 9: Reasons for using internet banking The customers who do not use internet banking were respectively asked why they do not do so. The higher percentage reported that they are not internet users 31,65%, the 29,11% finds it very complicated, the 22,78% considers that it does not provide personal data security, the 17,72% declares insufficiently informed, the 13,92% believes that it does not provide security of transactions. It is interesting that a percentage of 2,53% reports to the slow service, while the 1,27% the high cost. (figure 10)
Reasons of not using i - banking;
I don’t use internet slow service not well informed not secure transactions not secure for personal data high cost Its too complicated
0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00%
Figure 10: Reasons of not using internet banking The next question aimed to investigate the intention of people asked, who do not use internet banking, of becoming users in the future. Most of their half (53,2%) were not placed neither positively neither negatively. A percentage of 30,4% gave a negative answer. Only the 16,4%, showed a positive intention. Only, for the 6,3% the use of internet banking constitutes top priority. (figure 11)
Do you intent to use i - banking in the future? Top priority 6,3% Into the next year 0,0% Not earlier from the next year 10,1%
I don’t Know 53,2%
Figure 11: Intention of using internet banking Despite their negative attitude, as it appears from the next question, most of the people asked, whether they are users of internet banking or not, they agree in a percentage of 74,9% that many of the banking transactions will stop from being held with physical presence in the shop in the next five years. Only the 24,1% sees this development in length of a decade’s time. (figure 12)
When do you thing that most of the transactions will become electronic?
into the next year 9,8%
in a decade 24,1%
in 1 to 5 years 66,1%
Figure 12: What will the form of banking transactions be in the future? A last question that we addressed to all participants of the research concerned the prospect of becoming customers of a virtual bank, that would provide the services only through the internet. A percentage of 25,9% answers negatively in this possibility, a 33,9% is hesitant, while the same percentage 33,9% states that they would attempt such a prospect. Only a 6,3% supports very positively the prospect of becoming a customer of a virtual bank. (figure 13)
Would you become customer of a virtual bank?
Yes of cource 6,3%
Mayby I could try 33,9%
I don’t know 0,0%
I would be hesitant 33,9%
Figure 13:Would you entrust a virtual bank? Statistical Analysis: The objective of the statistical analysis was the investigation of the degree of dependence between specific variables. More specifically, we looked into the existence of correlations between the variables of sex, age, education, income, use of internet with the use of internet banking transactions, the degree of satisfaction, the degree of confidence and the prospect of use of internet banking. The use of internet banking is connected with the degree of use of internet (Pearson 0.669 in level of
Author importance 0,01), which is expected when somebody who uses the internet is likely to use internet banking in a more intense degree. Also, we measured an important interrelation between the use of internet banking and the age of the users (0,572 in 0,01), the level of education (0,398 in 0,01) and the income (0,319 in 0,05). Statistically there is no important correlation between the use of internet banking and the sex of the user. Differentiation as for the behaviour between men and women is observed, in the degree of satisfaction and the opinion about the security of transactions. Specifically we observe that a negative correlation exists between the sex and the degree of confidence of banking transactions through internet (-0,345 in the 0,01). This means that women entrust the banking transactions that are held through internet less. The results for the degree of satisfaction (-0,319 in a 0,01) are equivalent. Another interesting conclusion drawn concerns the relation between the degree of confidence and the degree of satisfaction in connection with the time interval of use and the frequency of internet banking use. It is characteristic that we did not observe any important correlation between these variables. This means that neither the time somebody uses internet banking nor the frequency of use can change his opinion about the security of transactions or his degree of satisfaction. The same goes with the results of the opinion for the security of personal data. 5. Conclusions The present paper examined two dimensions of the application of internet banking. In the first section, we examined the consequences of internet banking application in the configuration of total risk, by examining the individual effects on the different types of risks that compose the total risk. The general observation is that the growth of electronic banking and internet banking, have as result the differentiation of risks that they face. More specifically the growth of internet banking will have as result the increase of business, operational, legal and systemic risk. The results for the reputational risk the liquidity risk and the market risk are similar. On the contrary, the application of internet banking can lead to the reduction of credit risk. On the second section of the paper, through the analysis of the empirical study results, we presented the degree of infiltration of internet banking and the degree of satisfaction of bank customers from the use of the provided services. Finally, we examined the prospect of growth of internet banking in the Greek market. The main conclusions are the following: • While a part of the population does present a considerable dynamic in adopting the use of new technologies, a big amount still falls short, without having incorporated the use of internet applications in their daily activities. • The more the use of internet is increased, the more the familiarisation with it is increased as well, making the users feel more secure with better knowledge, so that they can use banking transactions through internet with greater comfort and higher frequency. The security of personal data and the security of transactions are and will always be, as the analysis shows, the main elements of the effort to increase the use of internet banking and all of the new electronic channels. • The age and the level of education are the most important defining factors for the adoption and use of internet banking. • The time period that somebody uses internet banking, as well as the frequency of use, do not change his opinion about the security of transactions or his degree of satisfaction. The results regarding the opinion about the security of personal data are similar. • There seems to be no intention from the customers of banks that do not use internet banking to alter their attitude. It would be wise, for the banks to make changes by undertaking initiatives in order to achieve a change in the behaviour of their
Title customers. 6. References Basle Committee (2003) "Risk Management Principles for Electronic Banking" Basel Committee Publications, No. 98, July 2003, Bank for International Settlements. Basle Committee, (1998) "Risk Management for Electronic Banking and Electronic Money Activities, Basle Committee being Banking Supervision", Basel Committee Publications, Eleftheriadis M. Iordanis, V. Karatzoglou, (2006) "Assessment and Management of Risk", Instructive and Training Material of Program "Growth of Entrepreneur Via Continuous Education of Advisers and Decision Support (ANEMOESA)" Arhontakis A. (1999) "Banking services and products through internet. World platform of energetic communication and electronic commerce ". Giannopoulos Giorgos (2003) "Internet Banking: Legal Issues from the Implementation of Banking Transactions through Internet ", Bulletin EET vol. 34. Lemonakis M. Christos (2005) "Operational Risk of Banks and healthy practices of management of electronic transactions" Maurogiannis Dimitris (2003) "Security of Electronic Transactions", Bulletin EET vol. 34. Tsamis Alexandros (2005) "Developments, Ascertainments and Dilemmas in Modern Electronic Banking", UNION of GREEK BANKS,
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.