INFORMATION FOR MANAGERS

1. Roles and functions of the Internet in Online Banking.

In the light of the growing use and adoption of the Internet, it is evident that the use of the
Internet for financial and banking services has been increased (Ibbotson and Moran, 2020). Al-
Weshah et al. (2021) stated that some studies used the terms Ecommerce, Internet commerce,
and E-business in a compatible way (Stockdale & Standing, 2020; Poon and Swatman, 2019).
Ramsey et al. (2017) stated that the term “Electronic business” is used broadly and
interchangeably with E-commerce and Internet commerce to describe the Internet activities and
process in a business (Yousuf & Shanyu, 2021).

 Below discussed the role and functions of internet in online banking

Time Allocation

the role of internet banking and society has outlined since most people are busy in their daily
lives and they don’t even have quality time to spend with the close ones. In such a scenario,
standing in long queues for simply requesting financial transaction, turns out nothing less than a
headache. Thus, to stay away from such irritations, the concept of online banking was conceived.
This has reduced the time to process banking transactions and has helped to save customer’s
time. The services that are mostly used by maximum customers are transactions, online trading,
bill payment, shopping etc. The mode of the cash deposit in bank is for use to online transaction
cash, cheque and e-banking. Different banks may have different charge on their online service

Speed of Delivery/ Responsiveness

the role of Internet in online banking is the latest delivery channel for financial services. Internet
banking is a self-service that allows customers to perform financial activities over the internet
[1]. Regardless of the differences in definition, internet banking refers to many kinds of
electronic services through which bank customers can request information and get most of the
retail banking services via a computer. Internet banking provides a change from the traditional
way of face-to-face contact at a bank’s counter during office hours to a remote way by online
network connection anywhere at any time (24 hours a day, seven days a week).

Customers are particularly interested in the speed with which a service is offered or delivered
(The Wall Street Journal, 1990b; Bateson, 1985; Silpakit and Fisk, 1985). In addition, most
researches have indicated that in most cases, customers overrate the processing time of a service
(Hornik, 1984). Base on the above Lovelock and Young (1979) posited that on certain occasion
customers has a strong liking to carry out the service by themselves. This penchant is particularly
justified by the willingness of the customers to up the speed of delivery. An additional
justification could come from the suggestion of Maister (1985) who posited that unoccupied time
is comprehended as longer than occupied time. Also, Maister (1985) resolved that slow service
delivery has a negative effect on individuals “overall perceptions of the service quality”. So, if
individuals are expecting a rapid service delivery, it is probable that they will assess the service
more positively (Dabholkar, 1996). Similarly, Langeard et al. (1981) discovered also that time
was a significant factor for individuals in using a new service or technology. And in the same
way, Ledingham (1984) discovered that time savings were essential to individuals who use
electronic banking and shopping (Dabholkar, 1996

Easy for using financial transection

It very easy to use a bank through internet. it was very easy to use. people can use it anywhere
and at any time since they do not have to walk into the banking hall. Banking services can be
done anywhere. The only challenge is that most of the users of internet banking services in
Somalia are literate who are abreast with technology and the usage of the internet. This implies
that those who are illiterate cannot use internet banking services for their daily activities. The
illiterate could not easily use internet banking services hence they were satisfied with the
services provided by their bank.

Davis (1986) indicated that the Technology Acceptance Model (TAM) shows the power of ease
of use in technology adoption. Specifically, Davis defined ease of use as “the degree to which a
person believes that using a particular service would be free of effort’” (Davis, 1989, p. 320).
Langeard et al. (1981) also indicated that in choosing between different options of service
delivery, customers take into account the effort involved in using the service. Later, Davis et al.
(1989) and Bagozzi (1990) discovered that effort and complexity were related and included in
the “ease of use” attribute. For both authors, ease of use is also a relevant attribute to individuals
that use computer or similar technologies. Additionally, Guriting (2006) examined the
determinant to use internet banking in Malaysia Borneo. He found out that “the perceived ease of
use and perceived usefulness factors are considered to be fundamental in determining the
acceptance and use of various information technologies” Dabholkar (1996) put forward that most
persons are concerned about ease of use in order to save effort but also to reduce social risk.
Szymanski and Hise (2000) posited that “convenience” is similar to the attribute “ease of use”
(Dabholkar & Bagozzi, 2002). In the views of the authors, convenience looks to be an essential
factor of satisfaction with internet banking.

Reliability

It involves two concepts, dependability and uniformity in performance. Reliability also means
honouring the commitments in areas such as billing accuracy, proper record maintenance and
delivering the service within acceptable time limit (Saha and Zhao, 2005). It also “refers to the
correct technical functioning of a self-services technology and the accuracy of service delivery”
(Weijters et al., 2005, p. 9). Many authors have detected that reliability is significant in the
determination of service quality (Bagozzi, 1990; Davis et al., 1992; Parasuraman et al., 1988;
Zeithaml & Bitner, 2000). In addition, Van Gorder (1990) posited that reliability is the most
crucial characteristics for customers in the evaluation of service quality. Zeithaml and Bitner
(2000) advised that customers should be specifically influenced by the reliability of new
technology because they might be associated with risks such as the technology malfunctioning
(Shamdasani et al., 2008). Parasuraman et al. (1988) also considered reliability of the service as a
important factor of service quality. Furthermore Van Gorder also discovered that reliability is the
most crucial determinant of service quality (Van Gorder, 1990). Research on the use of
computers or technologies which share similar characteristics also affect performance (or
dependability) as it is an important attribute (Davis et al., 1989; Bagozzi, 1990; Davis et al.,
1992). Finally, Dabholkar (1996) in his study revealed revealed that reliability and accuracy are
appropriate measure for assessing service that has to do with technology.

Enjoyment

“Enjoyment refers to the extent to which the activity of using technology is perceived to provide
reinforcement in its own right, apart from any performance consequences that may be
anticipated” (Weijters et al., 2005, p. 8). Langeard et al. (1981) also considered this attributes
and discovered that some individuals take pleasure in playing with machines hence have a like
for self-service technologies. Davis et al. (1992) also discovered that individuals assess more
positively the fun generated in using such services. Dabholkar (1996) discovered that customers
are more likely to use a self-service technology if they think it would be pleasant (Shamdasani et
al., 2008). Finally, Holbrook et al. (1984) showed the fun or enjoyment features of computer
software, and Holbrook and Hirschman (1982) revealed that the newness characteristics
encourage individuals to try new technologies.

Privacy and security

This is made up of the guarantee that the record showing banking activities and security of
account information is not shared (Yang and Fang 2004; Saha and Zhao, 2005). Security is
another essential determinant in the decision of consumers to use Internet banking. Strong issues
on security are a common concern to individuals hence their unwillingness to use internet
banking (Madu, 2002). The ABF (1997) study indicated that security concerns kept both
consumers and bankers away from internet banking whilst the Walls report (1997) also indicated
that unless security is improved, more households would be willing to conduct their transactions
over the Internet. O’Connel (1997) study also indicated that in Australia security concerns were
shown to be the major cause of the slow growth of Internet banking in the country whilst
Polatoglu and Ekin (2001) also indicated that risk in terms of financial, physical and social
characteristics was the main cause of slow growth of internet banking usage. Roboff and Charles
(1998) in their study found out that most individuals had faint knowledge and understanding of
online banking security risks though they know of the risks. A further finding shows that
individuals are aware that their bank will protect their privacy hence their strong confidence in
their bank but have a weak confidence in technology use for online banking. Trout (1999) stated
in the findings that security issues are the major factor preventing customers from using the
Internet for financial transactions .The study further concludes by indicating that customers do
not see the benefit of using the internet for commerce and that an educational campaign would be
needed to make new internet offering successfully (Trout, 1999). Finally, Cunningham (2003)
indicated that one of the most important future challenges facing individuals or customers of a
bank is the fear of higher risks associated with using the Web for banking and financial
transaction.
Control

Control is defined as “the amount of leverage that a customer feels he/she has over the process or
outcome” (Dabholkar, 1996, p. 35). Additionally, Langeard et al. (1981) discovered that control
is important to individuals or customers who use self-service technologies such as internet
banking. Furthermore, Bateson (1985) and Bowen (1986) suggested that persons like self-service
technologies because of the feel of control than the monetary savings. Guiry (1992) indicated
that control is important to individuals in any kinds of service technologies. In a qualitative
research by Dabholkar (1996) to identify attributes of service quality, control was the only
dimension not identified. Dabholkar (1996) indicated that the reason for this result is because it
is difficult to articulate its attribute. Despites this, Dabholkar (1996) posited that control is
expected to be essential for evaluating the quality of self-service technologies. Moreover, Glass
and Singer (1972) and Langer (1975) indicated that if “a person’s belief that he/she has (or will
have) control, even in the absence of real control, will result in benefits similar to those
associated with real” (Dabholkar, 1996, p. 35). Furthering the argument, Bateson and Hui (1987)
indicated that a rise in the control of service had a positive influence in the perception of service
value to the customer (Dabholkar, 1996). Finally, Lee and Allaway (2002) exhibited that an
enhanced perceived control significantly contribute to the adoption of the technology
(Shamdasani et al., 2008).

2. Significance of Online Banking in the era of digitalization.

Digitalization is the use of digital technologies to change a business model and provide new
revenue and value-producing opportunities; it is the process of moving to a digital business.
(Zhou, 2016).

According to (Shukla, 2014) “Digital” is the new buzz word in the banking sector, with banks all
around the globe shifting towards digitalization. Banks of all sizes and across all regions are
making huge investments in digital initiatives in order to maintain a competitive edge and deliver
the maximum to its customers. Additionally, digitalization leads to robust data analytics and
intelligence, which helps banks get closer to customers and close in on competition. Basically
digitalization is a combination of two worlds: a new customer experience on the outside and an
efficient, effective operating model on the inside—both enabled by digitalization and the
underlying technologies, processes, and structures. (Weschool, 2017) mention that digitalization
impacts everything, and this impact is transformative. Digitalization is about taking full control
of your customer experience and managing all the needs, existing and new, for your customers
and developing a business model accordingly.

(Golani, 2017) says that the banking and financial services sector in India has undergone through
disruptive changes in the last decade as far as adoption of technology is concerned. With the
government providing incentives for digitalization of the economy, it is definitely the success
mantra for the banks. As the market is exposed to disruptive digital services, it is now putting its
hands on changing client preference from traditional banking to its digitalization. People have
actively started using technology to do banking transactions and avail other services because
they want more convenience at the cost of paying additional price.

(Rathee, 2017) says that revolutionary technological transformation that includes the features
like anytime anywhere banking, ultra-fast response time, the usage of digital channels by
avoiding or bringing down the paper-based transactions has changed the face of Indian banks.

(Yadav, 2017) highlights that digitalization is enhancing customer experience and making it easy
for the customer to do business with the Bank and vice-versa, by effective use of technology.
Chong, et al. (2010) empirically examines the factors that affect the adoption decision of online
banking in Vietnam. Perceived usefulness, perceived ease of use, trust and government support
was examined to determine if these factors are affecting online banking adoption. The results
showed that perceived usefulness, trust and government support all positively associated with the
intention to use online banking in Vietnam.

Contrary to the technology acceptance model, perceived ease of use was found to be not
significant in this study. The impact of online banking intensity on the financial performance of
community banks were examined by Acharya and Lingam (2008). Study results indicate that the
increasing use of internet as an additional channel of marketing banking services has
significantly improved the financial performance of community banks.

The development work for such services continued, but a major breakthrough was made almost
after a decade in 1994 when Stanford Federal Credit Union became the first financial institution
in the U.S. to offer internet banking to all of its customers. In 1996, the first-ever internet-only
bank was launched called Net Bank.

3. bank customers would benefit from using Online Banking.

4. drawbacks of Online Banking from the perspective of bank customers.

a. Security Concerns
Security concerns are one of the most significant drawbacks of online banking from the
perspective of bank customers. As online banking involves the exchange of sensitive personal
and financial information over the internet, it is vulnerable to cyber-attacks and fraud
(Mangalaraj et al., 2018). A breach in security could lead to unauthorized access to customer
accounts, resulting in financial loss and identity theft (Huang et al., 2019).

Moreover, online banking systems are also susceptible to phishing attacks, where attackers use
fraudulent emails and websites to trick customers into divulging their login credentials and other
sensitive information (Mashkoor et al., 2020). This highlights the need for customers to remain
vigilant and aware of potential security threats when using online banking services.

In addition, a study conducted by Al Mutawa et al. (2021) found that customers also have
concerns about the security of their personal devices, such as computers and mobile phones,
which are used to access online banking services. Customers must ensure that their devices are
adequately secured with the latest antivirus and firewall software to mitigate the risk of cyber-
attacks.

Therefore, it is essential for banks to implement robust security measures, such as two-factor
authentication, encryption, and regular security updates, to protect their customers' sensitive
information and prevent unauthorized access (Mashkoor et al., 2020). In conclusion, security
concerns must be addressed to enhance customer confidence in online banking services and
promote their wider adoption.

b. Technical Issues
Another drawback of online banking is technical issues that may arise, such as system crashes or
slow response times. These issues can disrupt banking services, leading to customer frustration
and inconvenience. In an article published in the International Journal of Business and Social
Science (2019), researchers found that technical issues were a significant barrier to the adoption
of online banking in Pakistan. Technical issues can also lead to financial losses for customers,
especially if they are unable to access their accounts during emergencies.

c. Lack of Personal Interaction

Online banking lacks the personal interaction that customers experience when visiting a physical
branch. Customers may feel disconnected from their banks and their financial advisors, leading
to a lack of trust in the bank's services. An article published in the Journal of Internet Banking
and Commerce (2019) found that lack of trust was a significant barrier to the adoption of online
banking in India. Lack of personal interaction can also lead to a lack of understanding of
financial products and services, which can result in poor decision-making.

d. Limited Accessibility

Online banking requires an internet connection and a device, such as a computer or smartphone,
to access banking services. This requirement may limit the accessibility of online banking for
customers who do not have access to these resources. An article published in the Journal of
Banking and Finance (2021) found that lack of accessibility was a significant barrier to the
adoption of online banking in rural areas of India. This limitation can lead to financial exclusion,
where some customers are unable to access banking services, which can result in financial
hardships.

e. Inconvenient for Certain Transactions

While online banking offers convenience, certain transactions may be inconvenient to complete
online. For example, customers may need to deposit cash or checks, which cannot be completed
online. An article published in the Journal of Retailing and Consumer Services (2020) found that
customers preferred to visit a physical branch to complete transactions that required face-to-face
interactions. This limitation may result in customers having to visit a physical branch, which may
be inconvenient and time-consuming.
In conclusion, online banking offers several benefits to bank customers, such as convenience and
accessibility. However, it also has drawbacks that must be considered, including security
concerns, technical issues, and lack of personal interaction, limited accessibility, and
inconvenience for certain transactions. These drawbacks can lead to customer frustration and
distrust in banking services. Banks must address these issues to ensure that online banking
services are secure, accessible, and convenient for all customers.

The banking industry has undergone significant changes over the years, with the adoption of
information technology being one of the most notable developments. With the advent of online
banking, customers have the ability to perform transactions and manage their finances from the
comfort of their homes or offices. However, the implementation of online banking has not been
without its challenges. This paper will discuss the issues and challenges associated with the
implementation of online banking based on five articles from reputable journals.

5. Issues and challenges with the implementation of Online Banking.

a. Technology and Security Standards

Whenever we use the internet, we risk experiencing technology and service interruptions. System
stability and efficiency can affect your ability to access your accounts if your internet is slowed
or stopped entirely. Similarly, no matter how sophisticated the tech, bank servers are still prone
to both intentional and accidental downtime.

System downtime can be a challenge as not only are users unable to make payments or conduct
transactions but concerns about data and fund security also start to emerge. 

Marketers should prioritize alleviating customer worries by explaining that their funds are not at
risk if technical issues occur. However, they should also ensure adequate communication of
planned system downtime, like scheduled maintenance, so that customers know to expect service
interruptions.
Banks should designate a network and database administrator with clearly defined roles as
indicated in the Group’s report.Banks should have a security policy duly approved by theBoard
of Directors. There should be a segregation of duty of Security Officer / Group dealing
exclusively with information systems security and Information Technology Division which
actually implements the computer systems. Further, Information Systems Auditor will audit the
information systems.
b. Legal Issues
Considering the legal position prevalent, there is an obligation on the part of banks not only to
establish the identity but also to make enquiries about integrity and reputation of the prospective
customer. Therefore, even though request for opening account can be accepted over Internet,
accounts should be opened only after proper introduction and physical verification of the identity
of the customer.
c. Regulatory and Supervisory Issues
As recommended by the Group, the existing regulatory framework over banks will be extended
to Internet banking also. Only such banks which are licensed and supervised in India and have a
physical presence in India will be permitted to offer Internet banking products to residents of
India. Thus, both banks and virtual banks incorporated outside the country and having no
physical presence in India will not, for the present, be permitted to offer Internet banking
services to Indian residents
d. Risks
Perceived risk, including e-banking, is the possibility of failure in creating the desired result of
using e-banking services. Most experts have added perceived risk to collecting factors essential
for the adoption relationship between perceived risk and e-banking services (Alkailani, 2016).
Reliable and safe internet transactions are necessary to the effectiveness of services. Commercial
banks include classified financial Transactions that involve high standards of confidentiality and
reliability (Case & Dashen, 2016). Researchers have shown that e-banking users have faced at
least one and often more electronic security attacks. Then when it comes to internet banking, this
risk has been magnified in scale and implications. The consequence of such a negative
experience has had a sustained impact on the level of perceived risk clients had while banks on
the website. (Cunningham et al., 2005) found in the preliminary phase; the perceived risk is
usually considered an essential factor—consumer purchase method. Customers perceived risk
first once they are realize the need for a service or product.

E-Banking poses some different risks as compared to the traditional banking. These risks are
more pronounced in the case of Internet banking. Firstly, the risk of technological changes has to
be carefully watched. This is essential to update technologies and remain cost effective and
customer friendly.

e. Security Issues

Security is one of the most significant challenges for online banking marketers because of the
inherent concerns that are traditionally associated with banking online. Although banking
systems are designed to be virtually impenetrable, cyberattacks and fraudulent activity are still a
reality. But often users don’t realise that their online habits may be putting them at risk.

Fraudsters prey on poor privacy habits on the part of the user. Issues like weak passwords and
using unsecured networks make people vulnerable to online attacks, like login credential theft
and phishing, which could result in fraudulent bank transactions.

Marketing professionals in the online banking sector need to focus on demonstrating and
explaining the security of their online bank systems, but also educate customers on how to be
more conscientious online by improving their privacy and security habits. Practices like multi-
factor authentication and using passphrases represent a good starting point

While making online payments or transferring money from one account to another, the online
bankers are always concerned about the hackers and anti-social elements. Hacking enables the
unethical hackers to penetrate the accounts of online bankers, and spend their money.

f. Necessity of the Internet

For availing the benefits of online banking one should have access to the Internet. For this
purpose, he should own a desktop, laptop or PDA device, and an Internet connection.
6. Summary of the assignment.