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An Evaluation of Internet Banking in New Zealand

Presenter: Winnie Chung

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AgendaThe evolution of Internet banking in NZInternet Banking Figures as at 2000Scope of the studyResearch questionsResearch methodologyHypothesesResultsOverall interpretation and recommendationConclusionFuture research implications

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The evolution of Internet banking

New Zealand has extremely high adoption of ATM and EFTPOS services (Boer, Evans and Howell, 2000)

ATM

EFPTOSTelephone Banking

Internet Banking

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The preparedness of Internet banking

New Zealanders become accustomed to, adopted, and adapted to electronic means of non-cash transactions This familiarity and preparedness would transfer to adoption of other technologies such as Internet banking (Boles de Boer, Evans and Howell, 2000)

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Internet PenetrationNew Zealand has already achieved a significant level of Internet penetration and usage, higher than that of Australia and most other OECD countries (Boles de Boer, Evans and Howell, 2000)More than 50% of New Zealanders have access to the Internet and 34% use it on a regular basis (The New Zealand Herald, 2000a).

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Three Stages of Online Development for Banks (Hamlet, 2000)

FundamentalsTypically ten web pages or less in sizeBasic information

DynamicsMore featuresE.g. updated information on product and rates and calculators

Intelligent e-bankingInteractive online banking (e.g. real time services, customers and community forums and suggestion boxes)Allow customers to access account information, transfer funds and other related activities

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Interaction

Gaming

Brand Marketers

Travel

Government

Banking

Survey sites

E-tailing

Media

Information

Sectors in the Infotainment Framework

The Banking Sector

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7 New Zealand online banksIntelligent e-banking

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Internet Banking Figures in 2000About 200,000 New Zealanders use the Internet for banking in 2000 (The NZ Herald, 2000e)Survey reported in 2000 indicates that Internet banking is beginning to take off (The NZ Herald, 2000)15% using it26% of those who do not, saying that they may adopt it in the coming year

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Scope of the Study“Retail” Internet banking i.e. personal banking

Everything a branch teller would normally doExclude value added services

E.g. buy and sell shares, securities trading, insurance purchases

Exclude business and rural based Internet bankingExclude the reasons why people do not use the Internet

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Research QuestionsWhat is the current situation and performance of NZ retail banking websites?What are the reasons that prevent New Zealanders from using retail Internet banking?How to increase the utility of NZ retail Internet Banking services to existing NZ Internet users?How can the current retail Internet banking services be improved?

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Research MethodologyEvaluation of websites

Quantitative data of each bank• Based on Hersey’s model

Survey User perspective User satisfaction Comparison with the components in

the Hersey’s model

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Website evaluationA website evaluation model (Hersey)

Search

Customer

Product

Negotiation

Order

Payment

Delivery

After-sales

Community

Company

Ease of use

Performance

Innovation

Aesthetic

Effect

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Other Important Components for Website Evaluation

Privacy and security concerns are the main barriers that constrain the uptake of Internet banking (Young, 2000 and O’Connell, 1998) Technology interface attributes (Dabholkar, 1995)

Reliability, security, accessibility, ease of use, enjoyment and control

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Tailored Hersey’s model

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SurveyPopulation:

Anyone in New Zealand who has been using the Internet

Judgement sampling designThe exploratory nature of this study infers that judgment sampling is acceptable although generalisibility is not guaranteed

Pilot survey

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Data Analysis MethodWebsite analysis The analysis of the data obtained by the questionnaire will consist of the following:

Descriptive statistics such as mean and frequency are provided with graphsCross tabulationsChi-square testsCorrelations

Compare the website evaluation result against the users perspective

Spearman’s rank correlation

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Hypotheses to be testedEarly adopters (banks) provides better Internet banking services (i.e. functionalities)Difference in quality between large and small banks

Large banks have more resources so they can provide better Internet banking services

Banks that provide better services/functions have better performance from the customers’ perspective

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Hypotheses to be testedHigh income groups are more likely to use Internet bankingOlder customers may be less receptive to Internet bankingCustomers with higher education backgrounds are more likely to use Internet bankingRegistration for Internet banking is related to the use of ATM, EFTPOS and phone banking

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Hypotheses to be testedSatisfaction is related to the length of Internet banking use (i.e. how long one has been using Internet banking)Satisfaction is related to future usageFuture usage is related to the length of Internet banking use

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Website Evaluation Results

1 – Bank Direct (ASB)

2 – ANZ

3 – Fastnet (ASB)

4 – BNZ

5 – National Bank

6 – TSB

7 – WestpacTrust

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The General Banking PatternsUsage of different banking facilities

0%10%20%30%40%50%60%70%80%90%

100%AT

M

EFT

PO

S

Pho

neba

nkin

g

Inte

rnet

bank

ing

Cou

nter

serv

ices

Dire

ctde

bit

Aut

omat

icpa

ymen

t

Dire

ctcr

edit

Banks

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The Importance of Elements to Internet Banking

N Minimum Maximum Mean

The importance of security 184 1 7 6.65The importance of providing up to date information 184 1 7 6.33The importance of providing internet services free from technical problems 184 1 7 6.21The importance of response time 184 1 7 6.08The importance of download time 184 1 7 5.83The importance of ease of use 184 1 7 5.76The importance of ease of navigation 184 1 7 5.73The importance of provision of customer information 184 1 7 5.64The importance of provision of bank information 184 1 7 5.47The importance of range of banking activit ies/services 184 1 7 5.47The importance of provision of product information 183 1 7 5.41The importance of attract ive graphics 184 1 7 4.09The importance of the use of animations 184 1 7 3.33

This is measured in a 7-point Likert scale with 1 indicating very unimportant and 7 indicating very important

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The Importance of Elements to Internet Banking

The importance of each element

1

2

3

4

5

6

7

Elements

Mea

n of

7-p

oint

Lik

ert s

cale

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Unregistered Customers (59%)

N Minimum Maximum Mean

Unsure about the security of transactions 109 1 5 3.65Can do all banking in other ways 109 1 5 3.56Have not tried it before 109 1 5 3.51Do not need instant 24 hours access to accounts 109 1 5 3.42Like to be able to talk to staff in person 109 1 5 3.21Do not think Internet banking is cheaper 109 1 5 3.17Internet banking offers a limited range of services 109 1 5 3.14Too much hassle to register for Internet banking 109 1 5 3.05Uncertain the benefit of Internet banking 109 1 5 2.99Not sure how it works 109 1 5 2.76Internet banking is complicated to use 109 1 5 2.42Not aware of Internet banking services 109 1 5 1.95Have no access/limited access to Internet 109 1 4 1.57

Reasons for not registering for Internet banking

This is measured in a 5-point Likert scale with 1 indicating strongly disagree and 5 indicating strongly agree

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Reasons for not Registering for Internet banking

Reasons for not registering for Internet banking

1

2

3

4

5

Reasons

Mea

n of

a 5

-poi

nt L

iker

t sca

le

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Likelihood to Register for Internet Banking in the Next 12 Months

The likelihood to register for Internet banking

Very likely

Somewhat likely

Somewhat unlikely

Very unlikely

Per

cent

50

40

30

20

10

0

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Likelihood to Register for Internet Banking

Correlations between the likelihood to register for Internet banking in the next 12 months and the reasons for not registered

Correlations p-value Alpha level SignificantLikelihood to register and Unsure about the security of transactions -0.287 0.003 0.01 Yes

Likelihood to register and Too much hassle to register for Internet banking -0.19 0.048 0.05 Yes

Likelihood to register and Have not tried it before -0.191 0.046 0.05 Yes

Likelihood to register and Like to be able to talk to staff -0.214 0.025 0.05 Yes

Likelihood to register and Complicated to use -0.185 0.054 0.05 No

0.1 Yes

Likelihood to register and Internet banking offers a limited range of services -0.183 0.057 0.05 No0.1 Yes

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Internet Banking Users41% registered for Internet banking39% use Internet bankingOf the 41%, some registered Internet banking with more than one bank but none registered with more than three banks

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Registration with BanksRegistration with Banks

Overseas bank

WestpacTrust

Bank Direct

National Bank

BNZ

ASB

ANZ

Freq

uenc

y

50

40

30

20

10

0

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The Usage of Different Banking Activities

The Usage of Different Banking Activities

Communicate with ban

Cheque reconciliatio

Order cheque or depo

Make payment

Download account inf

Purchase banking pro

Check bank statement

Transfer funds betwe

Check account balanc

Fre

quen

cy

100

80

60

40

20

0

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Internet Banking Usage FrequencyInternet Banking Usage Frequency

Not used yet

Less than once per m

Once per month

More than once per m

Once per week

More than once per w

Once per day

More than once per d

Perc

ent

40

30

20

10

0

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Banks Performances from the Customer Perspective

Average Score for Each Bank (Customer Perspective)

50.0%55.0%60.0%65.0%70.0%75.0%80.0%85.0%90.0%95.0%

100.0%

AN

Z

AS

B

BN

Z

NB

NZ

BD

WP

T

Ove

rsea

sba

nks

Banks

Scor

e

Website Evaluation

1 – Bank Direct (ASB)

2 – ANZ

3 – Fastnet (ASB)

4 – BNZ

5 – National Bank

6 – TSB

7 – WestpacTrust

Survey Results

1 – Bank Direct (ASB)

2 – Fastnet (ASB)

3 – National Bank

4 – WestpacTrust

5 – ANZ

6 – BNZ

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The Overall Performance and Importance of each Element for all NZ banks

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Hypotheses Summary

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Overall Interpretation and Recommendation

It must be noted that getting customers to register for Internet banking does not guarantee that they will use the servicesWhether a customer will register for Internet banking is related to his/her age and education level but not income

Younger customers (less than 20) are less likely to register (within the next 12 months)Higher education customers are more likely to register

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Overall Interpretation and Recommendation

Internet access is not a barrier that prevents customers from registrationMain factors that prevents registration are security concern, the availability of other ways of banking and the complexity of using retail Internet bankingFactors considered very important to retail Internet banking are security, update information, free from technical problems, response time and download timeBanks are not encouraged focus on attractive graphics and animations as these factors are not as important

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Overall Interpretation and Recommendation

NZ banks perform extremely well in providing update information. Maintaining this is necessaryThe security of transaction and ease of use are also revealed in NZ banks’ websites but further improvement on security is requiredImprovement on download time, response time and technical problems needed

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Overall Interpretation and Recommendation

Additional functionalities could be useful but the quality of service is more importantBank Direct is perceived as the best bank that provide retail Internet banking services followed by Fastnet (ASB)Banks are encouraged to focus on factors that are considered important in order to increase customer satisfaction. This enhances the retention of current Internet banking users.

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ConclusionRetail Internet banking has high potential in NZBanks should understand what factors that prevent customers from registering Internet bankingTo improve performance, NZ banks should focus on factors such as security, response time, download time and freedom from technical problemConsideration of all these factors for designing, implementing, maintaining and promoting websites would help to attract new registration and increase retention

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Future Research ImplicationsMore inferential statistics on the topicProbability sampling should be employed to ensure generalisibility of findingsFuture research could study from the banks’ perspectives in addition to customers’ perspectivesLongitudinal study is also advocated

This allows researchers to study how the uptake of Internet banking proceeds