CHAPTER II

REVIEW OF LITERATURE

With the advent of computers and internet, Indian banks have spent crores

of rupees to provide electronic channel banking. They invested heavily in expanding and

improving the IT systems and, in the process, have come up with multiple channels of

distribution like call centers, computerized branches, kiosks, ATMs, internet banking and

mobile banking. In this study, the focus is on Internet Banking (IB) because in today‘s

cyber age it is emerging as the most important and most popular delivery channel for

banking services.

The main objective of this chapter is to review the theoretical and empirical

information available from similar or at least related studies. Review of extant literature is

the foundation on which any systematic scientific research is built. Existing theoretical

and empirical background serve as a basis for formulating the conceptual model to be

tested in the study and to relate its empirical findings with those of earlier studies. The

relevant literature is classified and presented under the following three main headings: (1)

Theories on innovation adoption (2) Studies outside India and (3) Studies in India.

2.1 Theories on Innovation Adoption

Internet Banking is an innovation in the field of banking technology. The literature

on innovation adoption showed that there are several theories that explain the factors

influencing the adoption of new technologies. Important among them are; Theory of

Reasoned Action (TRA), Innovation Diffusion Theory (IDT), Technology Acceptance

Model (TAM), Theory of Planned Behaviour (TPB) and Decomposed Theory of Planned

Behaviour (DTPB).

Fishbein and Ajzen (1975) in their Theory of Reasoned Action (TRA) posit that

behavioural intentions are determined by (a) an individual‘s attitude towards the behaviour

and (b) subjective norms surrounding the performance of the behaviour. An attitude

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towards adopting an innovation is derived from an individual‘s beliefs that adopting the

innovation will lead to certain consequences. Intention to perform a behavior will take

place if the individual has a positive evaluation of performing the behaviour. The more

favorable the attitude with respect to certain behaviour, the stronger should be an

individual‘s intention to adopt the behaviour. Subjective norm refers to a person‘s

perceptions of the social pressure to engage in a certain behavior. The idea suggests that

attitudes and beliefs of others (friends, family, colleagues, peers etc.) in groups to which a

person belongs will shape his/her behaviour towards the usage of a specific technology.

According to Roger’s (1983) Innovation Diffusion Theory (IDT), innovation

adoption is a process of uncertainty reduction. To reduce uncertainty about the new

technology, individuals will gather and synthesize information about the technology.

Based on three decades of innovation study, five key attributes affecting the adoption of

any innovation were suggested. These five characteristics are relative advantage,

compatibility, trialability, observability and complexity. The first four attributes are

positively and the last attribute is negatively related with the adoption rate. Perceived

relative advantage refers to the degree to which an innovation is perceived as being better

than its precursor. Perceived compatibility refers to the degree to which an innovation is

perceived to be compatible with existing values and current needs. Trialability refers to

the degree to which an innovation is perceived as being trialable on a limited basis prior to

any decision to adopt. Observability of an innovation is the degree to which an innovation

is visible to the other members of a social system. Complexity is the degree to which an

innovation is perceived as relatively difficult to understand.

Davis (1989) developed Technology Acceptance Model (TAM), according to

which ‗users‘ adoption of computer system depends on their behavioural intention to use,

which in turn depends on attitude, consisting of two beliefs, namely perceived ease of use

and perceived usefulness. TAM is an adaptation of TRA in the Information System (IS)

field. TAM theorizes that a technology that is easy to use, and if found to be useful will

have a positive influence on the intended user‘s attitude which in turn increases intention

towards using the technology that generates the adoption behaviour. Perceived usefulness

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is defined as the degree to which ‗a person believes that using the system will enhance his

or her performance‘. Perceived ease of use, on the other hand, is defined as the degree to

which ‗a person believes that using the system will be free of mental effort‘. TAM is one

of the most utilized models for studying IS (Information System) acceptance (Al-Gahtani,

2001). TAM has been the instrument in many empirical studies and it has been found that

its ability to explain intention and attitude towards using IT is better than TRA (Theory of

Reasoned Action) and TPB (Theory of Planned Behaviour) (Mathieson, 1991). TAM is a

powerful, highly reliable, valid and robust predictive model that may be used in a variety

of contexts (King and He, 2006). However, in many studies additional variables have been

introduced to TAM and these external variables have added the model‘s predictive power.

Ajzen (1991) in his Theory of Planned Behaviour (TPB), which is an extension of

TRA, posits that behavioural intentions are a function of (i) an individual‘s attitude

towards the behaviour, (ii) the subjective norms and (iii) the individual‘s perception of

behavioural control. Perceived behaviour control reflects the individual‘s beliefs of his or

her ability to perform the behavior, which are affected by external factors (e.g., time and

money) and internal factors (e.g., ability and self efficacy). The TPB proposes that one‘s

behavioural intention is influenced not only by the attitude and subjective norms but also

by perceived behavioural control. This is based on the premise that individuals are likely

to engage in certain behaviour when they believe they have the required resources and

confidence to perform the behaviour.

Taylor and Todd (1995) proposed the Decomposed Theory of Planned Behaviour

(DTPB), which combines aspects of the TPB with aspects of IDT. The theory postulates

that attitude, subjective norms and perceived behavioural control will influence the

intention to use a technology. Taylor and Todd took the TPB one step further by

decomposing the attitudinal, normative and perceived control beliefs into multi-

dimensional constructs. This provided higher explanatory power and a more precise

understanding of the antecedents of behavior. Attitude is decomposed into perceived

usefulness, ease of use and compatibility, which influence the formation of attitude toward

certain behaviour. Subjective norm is decomposed into peer influences and superior

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influences, and perceived behavioural control is decomposed into self-efficacy,

technology, and resources.

2.2 Studies outside India

Milind (1999) quantified the factors affecting the adoption of IB by Austrialian

consumers. Security concerns and lack of awareness about IB and its benefits stand out as

the major obstacles to adoption of IB. The other reasons for non-adoption are difficulty to

use, unreasonable price, resistance to change, lack of access to computers/internet.

Kolodinsky et al., (2000) in their study of one thousand US households assessed

attitudes toward electronic banking. Households were clustered into three groups as

―technophobes‖ (those most resistant to the use of electronic banking technology),

―technophiles‖ (those most accepting) and ―in betweens‖. In general, technophiles were

found to be younger and to have higher income and education. Use of PC banking was

more than ten times greater among technophiles than technophobes. They conclude by

saying that positive attitudes toward e-banking services matter more than demographic

factors in determining whether such services are used.

Mantel (2000) investigated the factors that influence consumers' willingness to use

electronic bill payment. Using survey data of 1,300 US household primary bill payers,

binomial logistic regressions were estimated to explain (1) the likelihood of using direct

bill payment and (2) the likelihood of being a "high user" of bill payment technology. Low

users are those who pay fewer than 20 percent of their bills electronically; high users pay

more than 30 percent of bills with direct bill payment technology. The findings include;

The likelihood of using electronic bill payment is positively associated with age,

PC ownership, income, credit card holder, home ownership, desire for control

(controlling when bill is paid, option to stop payment, and, desirability of paying

bills when out of town are important), and desire for incentives (willingness to use

if financial incentive provided).

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Electronic bill payment use is less likely for customers who desire receiving a

receipt for payment.

The likelihood of being a high user is positively associated with age, income,

viewing the ability to pay bills when out of town as important, and an opinion that

banks are not opened at convenient times.

Concerns about privacy or security have some impact on the intensity of bill

payment use.

Liu and Kirk (2000) conducted a study to ascertain factors critical to web site

success among consumers. They identified five key factors: quality of information,

service, system, playfulness and design of the web site system. The first factor, quality of

information included the dimensions of relevance, accuracy, timeliness, customization and

completeness of information presentation. The second factor, service included the

dimensions of quickness in response, assurance, empathy, and follow-up. Third factor,

system included security, correctness of transaction, customer control of transaction,

order-tracking facility and privacy dimensions. Fourth factor, playfulness included

customer‘s sense of enjoyment, interactivity, attractive features and enabling customer

concentration. The fifth factor, design of the web site system included organized

hyperlinks, customized search functions, speed of access and ease of correcting errors.

Polatoglu and Ekin (2001) conducted an empirical study to explore consumer

acceptance of IB services in a Turkish bank. Their study examined both consumer related

factors that may affect the adoption of an innovation or a product (such as complexity,

perceived risk and relative advantage of IB comparing to branch banking) as well as

organizational factors such as marketing effort. All the above variables were found to

influence the adoption. The results suggest that IB not only reduces operational cost to

bank but also leads to higher levels of customer satisfaction.

Byers and Lederer (2001) in their article entitled "Retail bank services strategy: a

model of traditional, electronic, and mixed distribution choices‖ concluded that it was

changing consumer attitudes rather than bank cost structures that determines the changes

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in distribution channels; they added that virtual banks can only be profitable when the

segment that prefers electronic media is approximately twice the size of the segment

preferring street banks.

Jun and Cai (2001) have, based on the analysis of 532 critical incidents in e-

banking, developed 17 dimensions of e-banking service quality, which can be classified

into three broad categories – customer service quality, banking service product quality,

and online systems quality. The derived dimensions for customer service quality are

reliability, responsiveness, competence, courtesy, credibility, access, communication,

understanding the customer, collaboration, and continuous improvement. There is only

one dimension of product variety/diverse features for banking service product quality. The

dimensions for online system quality are content, accuracy, ease of use, timeliness,

aesthetics, and security. They recommended that banks offering IB service should focus

more on the dimensions such as responsiveness, reliability, access, ease of use, accuracy,

and product variety/diverse features because these dimensions tend to have strong impacts

on either customers‘ satisfaction or dissatisfaction, depending on the quality performance

of those dimensions.

Zeithaml et al., (2001) developed e-SERVQUAL for measuring e-service quality.

They identified 11 dimensions of service quality: Access; ease of navigation; efficiency;

flexibility; reliability; personalization; security/privacy; responsiveness; assurance/trust;

site aesthetics; and price knowledge.

Broderick and Vachirapornpuk (2002) have constructed a model of perceived

service quality in internet banking. They identified the following five key elements that

are regarded as central influence on perceived service quality: customer expectations of

the service, the image and reputation of the service organization, aspects of the service

setting, the actual service encounter and customer participation. They further note that

among these elements, service setting and customer participation have the most immediate

impacts on service evaluation.

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Ziqi and Michael (2002) employed survey data and regression analysis to

measure consumer attitudes toward internet based e-retail banking and to explore its

viability and prospects on the demand side. They found that individual expectations

regarding accuracy, security, transactions speed, user friendliness, user involvement, and

convenience were the most important quality attributes in the perceived usefulness of

internet based e-retail banking. In addition, willingness to use is found to depend

significantly on the first five factors.

Heikki et al., (2002a) explored the effect of different factors affecting attitude

formation towards IB in Finland. Their purpose was to determine those factors that

influence the formation attitude towards IB on the one hand, and their relation to the use

of IB, on the other. Their study was based on 1167 responses and attitude formation was

studied using Structural Equation Modeling. They used four factors such as demographic

variable, prior experience of computers, personal banking experience and reference group

influence. Their results revealed that online banking usage correlates positively with prior

computer experience, personal banking experience, education, income and household size.

Usage correlates negatively with reference group influence, gender, age and marital status.

The results suggest that a typical online banker user is relatively young, well educated

with high level of income.

Barry et al., (2002) conducted a study in United Kingdom to develop an

understanding of consumer attitudes towards bank delivery channels. They found that the

most important factors encouraging consumers to use online banking are lower fees

followed by reduced paper work and human error, which subsequently minimize disputes.

Heikki et al., (2002b) grouped customers into three groups: non-user, new user

and old user (long standing users) to study consumers‘ beliefs and reactions to IB in

Finland. Their findings revealed that each group held different beliefs about IB. For non-

users, the most important belief about IB was that it provides no personal service. For

new user, IB lowers their banking expenses, saves time and free from constraints of time

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and place. Old user‘s beliefs about IB were that it is faster, cheaper, free from constraints

of time place and consistent with the standard of service.

Ramayah et al., (2002) in a study conducted in Malaysia found that the awareness

of IB among consumers was high. However, only 23 per cent of these consumers have

had some IB experience. Security, availability of infrastructure, and complexity of

technology were found to be the major inhibitors for the adoption of IB.

Suh and Han (2002) investigated the effect of trust on customers‘ acceptance of

IB in Korea by incorporating trust into the TAM model. The results of statistical analysis

using Structural Equation Modeling indicated that trust is an important determinant of

intention to use IB. Trust, perceived usefulness and perceived ease of use were significant

determinants of attitude. Attitude and perceived usefulness had significant effect on the

intention. Finally, intention had significant effect on the actual usage.

Winnie and John (2002) examined how New Zealand banks enhance their retail

banking services through the Internet. The main factors that inhibit the adoption of IB in

New Zealand are security, doubt about the complication of IB and the ability to bank

using other facilities. Other important factors that customers use to judge the performance

of retail IB services are response time, services free from technical problems and up-to-

date information. Most customers use retail IB to check bank statements and account

balances. New Zealand banks perform extremely well in providing up-to-date information.

However, the authors suggested that further improvements on security, download time,

response time and ability to provide services free from technical problems should be

considered in satisfying customers‘ requirements.

Bomil and Ingoo (2002) confirmed in their study that two beliefs, ease of use and

usefulness, partially explain the user‘s behaviour in the emerging environment such as IB.

They introduced trust as another belief in TAM that has an impact on the acceptance of

IB. According to the results of their statistical analysis, trust is one of the most significant

beliefs in explaining a customer‘s attitude towards using IB. Trust has a more direct effect

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on an individual‘s behaviour than perceived ease of use in the OB context, while

perceived ease of use has a greater total effect on a customer‘s actual use.

Gerrard and Cunningham (2003) in their survey conducted among Singapore

customers found a positive correlation between convenience and online banking and

remarked that a primary benefit for the bank is cost saving and for the consumers a

primary benefit is convenience. Their study identified eight characteristics which

influenced the rate of adoption. The results showed that adopters of IB perceive the

service to be more convenient, less complex, more compatible to them and more suited to

those who are PC proficient. Confidentiality of consumer data is an important concern in

the adoption of online banking. Customers fear that someone will have unlimited access

to their personal financial information. They also noted that the perceived usefulness

depends on the banking services offered such as checking bank balances, applying for a

loan, paying utility bills, transferring money abroad and obtaining information on mutual

funds.

Boon and Ming (2003) undertook a survey to determine factors that are essential

for the successful implementation of e-channels by domestic commercial banks in

Malaysia. Data from primary sources analysed using factor analysis revealed that banks‘

operation management is the main factor affecting the success of ATMs, PC and branch

banking, while product innovation and knowledge development factors are found to have

the most significant effect on the success of banking kiosks and phone banking

respectively. The study concluded that banks in Malaysia should concentrate on

enhancing their operation and product management through a mixture of branch banking

and e-channels, like ATMs, phone banking and PC banking.

Wang et al., (2003) used extended TAM as a theoretical framework with

‗perceived credibility‘ as a new TAM factor (perceived ease of use and perceived

usefulness as traditional TAM factors) to study the determinants of user acceptance of IB.

Perceived credibility is used as a new construct to reflect the security and privacy concerns

in the acceptance of IB. Significant effects of perceived usefulness, perceived easy of use

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and perceived credibility on behavioural intention to use IB were observed, with perceived

ease of use exerting a stronger influence than both perceived usefulness and perceived

credibility. The new TAM variable has a stronger influence on behavioural intention to

use IB than the traditional TAM variable, perceived usefulness. The findings of their

study suggest that in order to attract more users to IB, it not going to be enough to make

the system easy to interact with. It is of paramount importance to develop IB systems with

valuable functions and with a trustworthy protection of security and privacy for the users.

Their results revealed that users who have a higher computer self efficacy are likely to

have more positive usefulness and ease of use beliefs, but have more negative credibility

belief about the IB.

Laura and Kate (2003) conducted a Delphi study of IB in Ireland and USA

among 50 panelists comprising of experts from various fields. The panelists arrived at a

consensus that IB was very important or of very great importance to retail banking and the

usage through the internet are expected to increase from 16 percent in 2003 to 23 per cent

in 2011. The predicted future adoption level ranges from 70 per cent, at the lowest point

to 98 per cent, at the highest point. The results also showed that internet will contribute as

part of a multi channel (bricks and clicks) strategy, rather than as a standalone (clicks

only) strategy. The developing functionality of IB may enable some banks to achieve

competitive advantage through delivering higher perceived customer value.

Rotchanakitumnuai and Speece (2003) conducted a qualitative study to identify

how corporate customers perceive barriers to usage of the IB provided by banks in

Thailand. Nine critical barriers to IB were found, which fall roughly into three broad

categories. The first category is trust barriers, which includes concerns about the security

of the communication network, reliability of transactions and trust in service provider. The

second category is legal support barriers, which includes the ability of the courts to resolve

IB disputes efficiently, fair liability for bank customers in responsibility for any financial

mistakes and privacy protection. The third category is organizational barriers, which

includes negative attitudes of the management, lack of IT resources, and lack of

knowledge to most effective use of IB.

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White and Nteli (2004) undertook a study that focused on why the level of

increase of internet usage for banking purposes has not increased at the same rate of

increase in the number of internet users in UK. They grouped respondents into two groups

using cluster analysis. One group was most concerned about security-related issues while

the other group was more interested in the convenience, speed and timeliness of the

service.

Michel and Irwin (2004) in an empirical study conducted, on a sample of 135

MBA and other post graduate students, to measure customer satisfaction with internet

banking in South Africa found that there were five interrelated, yet distinct factors that

made up customer internet banking satisfaction – Customer support, security, ease of use,

transactions and payments, and information content and innovation.

Pikkarainen et al., (2004) investigated Online Banking acceptance in the light of

traditional Technology Acceptance Model (TAM) and developed a model indicating

online banking acceptance among private banking customers in Finland. Their findings

indicated that Perceived Usefulness (PU) and information on online banking on the

website were the main factors influencing online banking acceptance.

Minjoon et al., (2004) conducted exploratory research in the context of online

retailing and identified six key online retailing service quality dimensions as perceived by

online customers: reliable/prompt responses, access, ease of use, attentiveness, security,

and credibility. It was found that reliable/prompt responses, attentiveness and ease of use

had considerable impacts on both customer‘s perceived overall service quality and

satisfaction. They also found that there is a significant positive relationship between

overall service quality and satisfaction. The same relationship has been found in the

studies conducted by Caruana (2002); Jamal and Naser (2002); Ting (2004).

Singh (2004) undertook a study to determine the reasons for not banking online. It

was found that more males used IB than females in South Africa and ATM usage was far

greater than IB usage. Majority of IB users used the service for inter account transfers and

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checking balances/statements. Security was the prime issue for those not using IB.

Potential users wanted guaranteed safety and loyalty rewards to get them to bank online.

IB satisfaction and culture were specifically examined by Irwin and Michael

(2005), using postgraduate management and MBA students at two leading business

schools in South Africa. A refined measure of IB satisfaction with five main dimensions:

customer support and service, ease of use, security, information content and Innovation,

and transactions and payment, was used. Security dimension was the focus of attention in

the study and differences in perception across contrasting cultural groups found to differ

on the dimension of uncertainty avoidance ( it is one of the dimensions of culture, which

means the degree to which people in a culture feel uncomfortable with uncertainty and

ambiguity) were compared. The high uncertainty avoidance group was found to be less

satisfied with security than that with lower uncertainty avoidance group.

Bauer et al., (2005) empirically validated a measurement model for the construct

of web portal quality among German users of e-banking portals by performing exploratory

and confirmatory factor analysis as well as reliability analysis. They identified six main

quality dimensions related to three generic service categories: core services, additional

services, and problem solving services. Security/trustworthiness and basic services

represent the basic demands of portal users and form the core service category. Attractive

cross buying services and added value constitute a second dimension representing the

additional services that facilitate the use of the core products. Transaction support and

responsiveness of the service provider which are assured by personalized offers and

content as well as interactive decision tools constitute the problem solving service

category.

The e-competence of IB customers in Denmark was investigated by Mattsson and

Helmersson (2005). A diverging pattern of e-competency was found. One group of

customers was able to handle the web site and the other group felt abandoned and was not

able to adopt technology. They suggest that this has important practical implications as it

supports the notion that not all customers are comfortable with web technologies.

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Therefore banks that intend to deliver services via internet need to make the web site easy

to use and to provide necessary help functions to overcome this feeling of abandonment.

Walker and Johnston (2005) conducted a study among 180 urban shoppers for

the purpose of illuminating reasons for using internet banking services, and establishing

whether or not regular use of these services necessarily implies loyal patronage and that

the customer has a sense of relationship with the service provider. Significantly, it was

found that regular use does not necessarily imply willing or satisfied use, or that the

customer has a sense of relationship with the service provider. Convenience related to

personal circumstance was found to be the main reason for adoption of IB. They also

found that the customers missed the personal aspect of traditional banking and that IB

should provide more personal interaction in conjunction with convenience that it offers.

Siu and Mou (2005) adapted e-SERVQUAL in their study to measure service

quality in e-banking of Hong Kong. Through factor analysis they identified four

dimensions such as credibility, efficiency, security and problem handling. Among these

four dimensions, only efficiency was found to have remained the same as the original

construct and the rest were newly generated.

Sylvie and Xiaoyan (2005) attempted to ascertain the extent of online and mobile

banking in China by establishing its market status, identifying the target customers, the

demographic characteristics of users and non users and comparing their attitudes towards

electronic banking adoption. The current market for online/mobile banking and the level

of awareness of these services were found to be low in China. The level of education did

not influence online/mobile banking adoption. With regard to consumers‘ attitude to these

services, perceived risks were found to be the most important factor that discouraged

Chinese adoption of OB. The findings also showed that Chinese respondents did not

attach much importance to convenience, ease of use and access to a wide range of services

free from time. Hackers and fraud were found to be one of the main barriers of OB

adoption in China. Previous experience with computers and new technology were the two

other factors found to affect Chinese adoption of OB.

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Kent et al., (2005) studied technology acceptance of IB in Estonia by adding trust

as an antecedent to TAM variables i.e. perceived ease of use and perceived usefulness.

The results of the hypotheses tested in a Structural Equation Model showed that trust has a

positive effect on both perceived ease of use and perceived usefulness. The findings of

their study point to the perceived usefulness of IB as the primary reason that Estonian

bank customers use the IB. They suggested that the TAM should be redefined to include

trust.

Dogarawa (2005) tested the hypothesis that electronic banking products and

services have not significantly improved customer satisfaction in Nigeria. Data analysis

carried out on a sample of 180, drawn from the population based on judgmental sampling

approach led to the acceptance of the hypothesis. The consumers of banking services in

Nigeria still find it useful to visit their bank branches regularly every month and they are

not very keen in going for electronic banking products due to lack of confidence and

adequate technology.

Maenpaa (2006), based on open ended exploratory interviews, has developed

seven dimensions of e-banking service quality: Convenience, security, status, auxiliary

features, personal finances, investment, and exploration. The researcher further suggested

that banks offering e-banking services need to focus more on the growing consumer

cluster of youngsters, who are viewed as the prospects of tomorrow.

Pikkarainen et al., (2006) measured end-user computing satisfaction of online

banking services in Finland by conducting a survey (n=268) using convenience sampling.

An exploratory factor analysis followed by a confirmatory factor analysis was used to test

the validity of the model in an online banking context. They found that three dimensions –

content, ease of use, and accuracy – are valid in measuring end-user computing

satisfaction of e-banking. Furthermore, their results elicit a solid relationship between

these dimensions and overall satisfaction of e-banking.

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Maria and George (2006) used generalized regression model to estimate the

probability of an individual using or not using OB services in Greece. The scope of the

study was to determine the crucial factors that affect an individual‘s decision to use or not

to use OB services. They identified as the most significant factors the individual‘s age,

the difficulties of using internet, the fear of changes in the banking sector due to

technological development and the lack of information concerning products and services

provided to customers through electronic delivery channels. Factors such as speed of

transactions or the cost of using the internet have little impact on an individual‘s final

decision.

Awamleh and Fernandes (2006) examined the factors influencing the intention to

adopt the use of IB among both users and non-users of IB in the United Arab Emirates.

They used seven factors such as computer self efficacy, image, perceived ease of use,

perceived risk, perceived usefulness, results demonstrability and subjective norms to study

the adoption of IB decisions by a potential user. The research model used by them is based

on Technology Acceptance Model (TAM) (Davis et al., 1989), Theory of Planned

Behaviour (TPB) (Ajzen, 1991), and Computer self-efficacy which is derived from social

cognitive theory. By using factor analysis, it was revealed that relative usefulness,

perceived risk, computer efficacy and image had a significant impact on continued usage

of IB for IB users, while relative usefulness and result demonstrability were the only ones

significant for non users of IB.

Gerrard et al., (2006) conducted an exploratory study in Singapore among 127

consumers who were not internet bank users to develop a better understanding of the

factors which explain why certain consumers are not using IB. They identified eight

factors – risk, no perceived need, lack of knowledge of service inertia, inaccessibility,

lacking the human touch, pricing concerns and IT fatigue. Their results state that the two

most frequently mentioned factors were perceptions about the risks associated with

internet banking and the lack of perceived need, a large majority indicated that they were

very content with the way they currently source their banking services. Other less

frequently mentioned factors were lack of knowledge of the service, inertia,

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inaccessibility, lacking human touch, pricing and IT fatigue. Their findings provide a base

for bank marketers to consider ways of expanding the number of consumers who use IB.

Edwin et al., (2006) investigated how customers perceive and adopt IB in Hong

Kong by developing a theoretical model based on TAM with an added construct Perceived

Web Security and empirically tested it‘s ability in predicting customer‘s behavioural

intention of adopting IB. In their model, they used PEOU and Perceived Web Security as

independent variables, PU and attitude as intervening variables, and intention to use as the

dependent variable. They found that PU is a major determinant of customer‘s intentions to

use IB. PEOU is a significant secondary determinant of customer‘s intention. However, it

is mediated through PU instead of having a direct impact on intention. Perceived Web

Security is also found to be a significant and direct determinant of customer‘s intention to

adopt IB.

Katariina (2006) divided Finnish consumers using IB services into four clusters

according to their needs and behaviour. The first consumer cluster is named the

‗suspicious‘, who have doubts about the safety of information processing in banking

transactions and they think that mistakes will occur more easily in IB service than at a

bank office. The second cluster is named the ‗eager‘, which experience that the usage of

IB service enhances their social status by differentiating them from consumers using

traditional bank services. The third cluster is named ‗reluctant‘, which do not experience

any kind of social appreciation in the usage of IB service. The fourth cluster is named

‗practical‘, who think that IB services are safe to use and privacy issues are maintained

when using these services. It is found that these clusters differ according to age and

education.

Ozdemir et al., (2006) conducted a qualitative method of enquiry among the high

ranking bank managers in Turkey. Their study found that the banks are developing and

launching their services on the basis of technology push rather than market pull factors.

The managers perceived ‗image‘ as one of the most significant factors influencing

consumers‘ banking decisions. The internet channel not only becomes a prospect for the

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sales and marketing of the banking products by itself, but also increases the sales and

marketing opportunities in the branches by enabling self service banking transactions that

in turn decreases the high workload of the branch personnel. According to the managers

in the study, cost advantages, speed (time savings), convenience, comfort, accessibility,

control beliefs and visibility are the most significant factors encouraging the adoption of

IB services.

A study conducted in Bangladesh by Nadim & Noorjahan (2007) tested a model

to investigate both direct and mediated relationship between customers‘ perceived

usefulness, ease of use, security and privacy and customer adaptation where customer

attitude was the mediating variable. The results showed that there is direct relationship

between these variables and customer adaptation and also indirect relationship mediated

by customer attitude.

Yiu et al., (2007) in a study conducted to identify the factors affecting the

adoption of internet banking in Hong Kong found that there was a high adoption rate of

internet usage in Hong Kong but a relatively low adoption rate of IB. Account balance

inquiry was the most commonly used banking services on the internet. The possibility of

performing banking transactions anywhere, any time and reduction in processing time are

the important reasons for the adoption while risk in using IB is one of the major inhibitors

of the adoption of IB. They found that the elderly are more reluctant to adopt new

innovations and respondents with higher income have much higher adoption rate of IB

than the low income respondents. They also found that perceived usefulness, perceived

ease of use, personal innovativeness in Information Technology and perceived risk of

adopting IB has a direct relationship with the actual adoption of IB.

Kuisma et al., (2007) conducted a qualitative study among 30 Finnish customers

to explore the reasons for consumer resistance to IB using the means-end approach and the

laddering interview technique. Many customers who use ATM for their payment

transaction seem to face the usage barrier perceiving IB to be unsuitable for them. Lack of

an internet connection, official receipt and bar code reader, and further, changeable

32

passwords and unclear proceeding at the monitor are concrete causes of resistance to IB.

Unwillingness to use one‘s own device for banking, habitual usage of ATM and markedly

negative attitudes and beliefs regarding the channel cause resistance due to psychological

reasons. The fear of possible misuse of changeable passwords, the fear of typing mistakes

due to absence of a bar code reader, lack of information about IB usage and the perceived

lack of an evidence due to lack of an official receipt are the most typical causes to risk

barrier for the use of IB.

Tommi (2007) explored and compared customer value perceptions in internet and

mobile banking in Finland using a qualitative in-depth interviewing method. The means-

end theory has been taken as the theoretical background for the study. According to this

approach, the way the products and services relate to customers can be represented by

three levels: attributes, consequences and desired end-states. Attributes describe the

product or service, consequences describe the benefits that the customer derives or seeks

as a result of product or service consumption, the desired end states are seen as the

ultimate ends that are served by the product or service means. The results indicate that

efficiency, convenience and safety are the most important desired end-states of bank

customers determining the differences in customer value perceptions between internet and

mobile banking. It is found that the small screen of the mobile phone makes the device

very difficult to use in fund transfer. The customers were found more worried about their

own errors made while using the service rather than data security or other security issues.

Kam and Riquelme (2007), based on a sample of 203 respondents who had

operated at least one IB account in Australia during the preceding four months prior to the

survey, classified respondents into five usage groups: daily, frequently (a few times a

week), weekly, fortnightly and occasionally. They also classified respondents on the basis

of length of IB adoption into three groups: early adopters, late adopters and laggards.

They found that there is a close association between length of IB adoption and frequency

of IB use, suggesting that as users get acclimatized with the online environment, they

would tend to use IB services more often. Among the five usage groups, occasional users

have the most adverse reaction to the ‗ease of use‘ features of IB. In comparative terms,

33

daily and frequent IB users are more pleased with ‗ease of use‘ and ‗aesthetics‘ e-banking

service quality features than their less frequent counterparts. Early adopters tend to use IB

for share trading and bill payment activities more often than late adopters and laggards.

Guozheng et al., (2008) empirically measured the effect of ease of use, usefulness,

security and trust on customer interactions with internet OB in China. It is found that trust,

perceived usefulness, ease of use and security have significant impact on customer

interactions with trust belief having a relatively great impact on customer interactions

followed by usefulness, ease of use and security.

Laukkanen et al., (2008) divided non-adopters of IB into three groups, namely,

Postponers (those who intend to adopt IB within a year), Opponents (those who intend to

adopt IB but have not yet decided when) and Rejectors (those who do not intend to adopt

IB at all) and explored differences in their reasons for not using IB. They categorized the

reasons for not using IB as five barriers, namely, usage barrier, value barrier, risk barrier,

tradition barrier and image barrier. The results show low resistance to the postponers‘

adoption of IB while high resistance regarding all barriers is shown by rejectors. Risk

barrier is the most intense barrier to IB among opponents and rejectors. All the three

groups expressed concern in varying degrees to the risk of typing out the information of

the bill wrongly or that the connection will be lost while they are using IB. They are also

concerned that they might lose the list of PIN codes and they found inconvenience about

the use of changing PIN codes. Moreover, all the three groups seem to like visiting the

bank in person than using IB.

Khalil and Michael (2008) conducted an exploratory study into the adoption of IB

in Malaysia. They extended the Decomposed Theory of Planned Behaviour (DTPB) by

incorporating trust and examining its impact on an individual‘s intention to adopt IB. The

decomposition of attitude in this study reveals that specific factors such as relative

advantage, ease of use, compatibility, trialability and image significantly affected the

formation of attitude about IB. The decomposition of subjective norm reveals that friends,

family members and colleague or peers were found to have a significant positive effect on

34

the subjective norm. The decomposition of the perceived behavioural control into self

efficacy and resource facilitating conditions reveals that these are two significant factors

that can affect an individual‘s perception of his/her ability to use IB. The decomposition of

trust reveals three significant factors (i.e., disposition to trust, structural assurance and

integrity) that can be used by banks to increase the trust level of IB. Three interpersonal

trusts were tested in this study: competence, benevolence, and integrity. The study failed

to support the hypothesized relationship between perceived competence and benevolence

on trust.

Padachi et al., (2008) in their study conducted among 200 respondents in

Mauritius found that the mostly used internet banking services are inter account transfer,

payment to other personal account, transfer to credit card account, recharge mobile phones

among others. The most important factor affecting the adoption of IB was found to be

ease of use and other important elements featured reluctance to change, trust and

relationship in banker, cost of computers, internet accessibility, convenience of use and

security concerns. They also found statistical relationship between awareness, access to

internet facility, length of banking relationship, people working in the banking/ financial

sector, education level in the category ‗post graduate‘ and also income group with usage

of IB.

Ahmad and Saima (2008) in their study on banker‘s perceptions of electronic

banking in Pakistan found out that Bankers consider ‗minimizes inconvenience‘,

‗minimizes cost of transactions‘ and ‗time saving‘ to be important benefits and ‗chances of

government access‘, ‗chances of fraud‘ and ‗lack of information security‘ to be vital risks

associated with electronic banking. The bankers do not consider ‗reduction in HR

requirements‘ and ‗improves service quality‘ to be important benefits and ‗legal and

security issues‘ and ‗charging high costs for services‘ to be important risks associated with

electronic banking.

Katariina et al., (2008) examined the moderating role of familiarity, i.e. the

amount of accumulated IB experience, in consumer perceptions of IB in Finland. They

35

empirically tested the effect of IB familiarity on consumer perceptions of seven IB

dimensions: convenience, security, status, auxiliary features, personal finances,

investment, and exploration. The results revealed that IB familiarity correlates with

dimensions of status, auxiliary features, personal finances, and investment. The remaining

three dimensions – convenience, security, and exploration do not seem to correlate with IB

familiarity. The results also revealed that although low familiar users‘ current use of IB is

mostly restricted to only the basic functions of paying bills, making account transfers, and

tracking bank transactions, they are interested in utilizing more innovative service

dimensions like auxiliary features and personal finances. Moderately familiar consumers

adopt the most utilitarian stand towards IB; they want to carry out their basic bank

transactions as efficiently as possible without regard to any supplemental services. Of the

three familiarity groups, highly familiar users utilize the whole spectrum of IB services the

most.

Gang et al., (2008) used a model, by integrating TAM and D&M IS (DeLone and

McLean model of Information Systems) success model, to investigate the way in which IB

site features influence IB usage. The results supported the hypotheses that both service

quality and information quality of IB site are positively related to perceived usefulness and

system quality is positively related to perceived ease of use. They also found the positive

influence of perceived usefulness and perceived ease of use on IB customers‘ satisfaction

and customer satisfaction was found positively related to behavioural intention to adopt

IB.

Weihua et al., (2008) constructed a model, by drawing upon the social contagion

theory and institutional theory, to investigate how institutional forces such as coercive

pressures, normative pressures and mimetic pressures influence the acceptance of IB by

individuals. Coercive forces are coercive pressures, for example, to use such financial

services such as mortgage, loan and retirement account management, banks may require

users to embrace IB. Normative forces suggest that individuals will be more likely to

adopt IB if they perceive that a large number of other individuals in their social network

have already adopted IB. Mimetic pressures suggest that individuals may selectively

36

imitate the attitudes and behaviours that have been adopted by higher-status individuals.

The model is empirically tested and the results revealed that normative and coercive

pressures significantly influence the attitude and intention of adopting IB, while mimetic

pressures appeared not to. It is also found that coercive pressures have higher influences

on attitude and intention than normative pressures.

Sujana (2008) examined the adoption of internet shopping patterns exhibited by

Indian women currently residing in India and Australia. Results revealed that the

variables - perceived benefits, perceived ease of use are associated positively with the

adoption of internet shopping in country of origin and country of residence. The variable

perceived risk is negatively associated with the adoption of internet shopping. Both the

groups of women, i.e., women currently residing in India and Australia are found to be not

receptive to the adoption of Internet shopping. With the increase of age the amount of

time spent over the internet may decrease drastically thus reducing the interest to do

online shopping. Income, level of education and working status of the women are also

found to be positively associated with online shopping.

The factors affecting the growth of e-banking in Malaysia from the consumers‘

perspective were examined by Wai-Ching and Booi-Chen (2008). The results showed

that there were seven factors influencing the growth of e-banking – convenience of usage

(including internet accessibility and ease of use), cost of services, trust in bank (bank‘s

credibility), security concerns, awareness, reluctance of customers and government

supports.

Wai-Ching (2008) studied consumer acceptance or adoption of e-banking services

in Malaysia. Results showed that different age groups, education level, income level,

computer literacy, internet accessibility at home/office are having significant relationships

with the usage of e-banking. The young age group is more computer literate and finds it

easy to accept and use new technologies. Privacy and security are found to be the major

sources of dissatisfaction. Meanwhile, accessibility, convenience, design and content are

sources of satisfaction.

37

Loonam and O’Loughlin (2008a) conducted a qualitative research in the form of

semi structured interviews among 20 Irish online banking customers to explore

consumers‘ e-banking interactions and experiences in addition to assessing the dimensions

critical to e-banking service quality. They evaluated empirically ten e-service dimensions

in the context of e-banking service quality. A rank-ordered list of the importance ratings

of financial e-service quality dimensions are web usability, security, information quality,

access, trust, reliability, flexibility, responsiveness, self-recovery, and

personalization/customization. They recommended that proactive financial service

managers should concentrate energy on interactive elements such as web usability,

responsiveness, personalization and customization in a step towards enhancing the e-

banking experience.

Loonam and O’Loughlin (2008b) conducted an observational study of a

purposive sample of 20 consumers based upon their perceptions of the Bank of Ireland

website using unstructured and structured observation technique. The study highlighted

the value of the uses and web gratifications (information system, transaction and

enjoyment as three web gratifications) categorization system, which provides a key

platform to the study of e-service quality and offers e-banking providers a more effective

system of serving individual customer e-service needs. The findings showed that e-

banking customers currently seek two gratifications, namely information search and

transactions with enjoyment gratifications not featuring in e-banking customers‘

gratification set. Based on the structured observation findings, respondents perceived the

Bank of Ireland website as high quality. The study maintains that increased e-banking

consumption largely depends on the development of website responsiveness.

The quality of IB service from customer‘s perspective was measured by Sohail

and Shaikh (2008) in Saudi Arabia. Their results of the factor analysis produced three

dimensions of quality of IB services: efficiency and security; fulfillment and

responsiveness. They found that efficiency and security is the most influencing factor in

user‘s evaluation of service quality. Efficiency in IB mainly involves download speed,

ease of acquiring needed information and the organization of the information on the site

38

itself. Security involves protecting the users from the risk of fraud and financial loss.

They included technical reliability under the dimension fulfillment and found that it is the

strongest predictor of customer satisfaction. Responsiveness involves the extent of help

provided by banks in case of problems encountered by users while using the IB services.

The findings by Liao and Cheung (2008), on a research sample of 182

respondents with experience in IB, showed that the six service quality attributes –

usefulness, ease of use, reliability, security, responsiveness and continuous improvement

are positive determinants of customer satisfaction toward IB services in Hong Kong.

Yu (2008) used six dimensions classified into two constructs, viz., banking service

quality and system quality to assess and differentiate the quality of internet based services

in Taiwan. The first construct included the three fundamental dimensions: competence,

ease of use and service variety, while the latter construct comprises a further three primary

dimensions: reliability, responsiveness and security. The study found that ease of use is

the most influential attribute on the construct of banking service quality and competence

and service variety are very closely weighted and explain banking service quality, and

both lag far behind the ease of use. Security and reliability point to system quality and

both far exceed responsiveness, which is the least influential attribute on the construct of

system quality. With the help of Importance-Performance matrix of Martilla and James

(1977), the study provided a systematic approach to understanding the strengths and

weakness of the service quality of the banks under study in terms of the six attributes

mentioned.

Quan et al., (2009) used Parasuraman, Zeithaml and Malhotra‘s E-S-QUAL scales

to measure IB customer‘s perceived e-service quality and studied its relationship with

customer loyalty in China. The e-service quality included five quality dimensions:

efficiency, fulfillment, system availability, privacy, and trust. The results found that e-

service quality has a significant positive effect on e-customer satisfaction, which means

the better e-service quality, the more e-customer satisfaction of IB services. The other

findings include the positive effect of e-service quality on perceived value and positive

39

effect of e-customer satisfaction on e-loyalty. However, no positive effect of perceived

value on e-loyalty was found.

Ochuko et al., (2009) used secondary data, from the World Bank Information and

Communication Technology (ICT) Report for 2006 and the Central Intelligence Agency

(CIA) World Fact book for 2007, to study the factors affecting IB adoption from both

customers‘s and bank‘s point of view. Their study used Fuzzy Interference System (FIS)

to define the adoption rate. Experimental results showed that security is the most

important factor because no matter how high government prioritization, literacy level of

internet users, and competition among Internet Service Providers are, as long as there are

low security levels, the adoption rate will be at the lowest level. They concluded that,

overall, the banks-specific factors are the main drivers for IB adoption.

Ming-Chi (2009) in a study conducted in Taiwan to clarify the factors influencing

the adoption of internet banking identified two external factors (perceived risks and

perceived benefits) influencing consumers‘ adoption of online banking. The important

findings include the following;

Security risk, financial risk, performance risk, time/convenience risk have negative

effect on the intention to the adoption of on line banking.

However, the influence of social risk was insignificant. This shows that customers

do not care about social pressure from their friends/family/work group with regard

to online banking.

Perceived usefulness has a significant effect on the intention to use online banking.

Attitude of the customers has a significant impact on consumer‘s intention to adopt

online banking. Attitude is predicted jointly by variables such as perceived

usefulness, perceived ease of use, perceived benefit and the five types of perceived

risk such as security/privacy risk, financial risk, social risk, time/convenience risk

and performance risk.

40

Santouridis et al., (2009) investigated internet service quality and its impact on

customer satisfaction, by examining the internet banking sector in Greece. A model, based

on SERVQUAL which consists of six dimensions, namely, assurance, quality of

information, responsiveness, web assistance, empathy, and reliability, was empirically

tested and the survey respondents ranked assurance as the highest performed dimension.

Responsiveness, quality of information and web assistance are grouped in the middle level

of the respondents‘ appreciation, while empathy and reliability are perceived as the least

performed internet service quality dimensions. All quality dimensions are proved to be

antecedents of overall customer satisfaction, with reliability having the most significant

impact.

Dube et al., (2009) conducted an exploratory study from the point of view of

banks to explore the extent of adoption of internet banking by commercial banks in

Zimbabwe as well as investigate the challenges they face in the adoption of this

technology. The facts brought out by their study are;

Majority of the banks use less than twenty per cent of service capacity of IB

facility. Those banks that have been using IB for many years indicated a high

capacity utilization comparing with banks that had just adopted the IB facility.

Payment of bills, checking of account balances, printing statement, funds transfer

and ordering cheque books are by far the most popular application of IB services.

Important perceived benefits of using IB were cost reduction, increased loyalty and

attracting new customers.

The adoption process of IB by banks was fraught with several challenges such as

compatibility with legacy systems, cost of implementation and security concerns

among others.

Ozdemir and Trott (2009) conducted a study in Turkish banking sector with the

twin objectives of identifying the factors affecting the process of IB adoption and to what

extent do IB adopter and non adopter segments differ from each other. Their study

revealed that perceived usefulness aspects such as time savings, fast service, cost savings,

instant access, opportunity cost savings (that is, enables more time for work) and

41

convenience were the most important facilitators for IB adoption. Perceived security risk

was identified as the most significant barrier for IB adoption. They found that there were

perceptual differences between IB adopters and non-adopters. Adopters perceived IB as

more users friendly, more useful and less risky compared to non-adopters.

Aldas-Manzano et al., (2009) analyzed the determinants of IB use, paying special

attention to the role of product involvement, perceived risk and trust in a sample consisted

of 511 Spanish IB users through structural equation modeling technique. Data analysis

showed that TAM beliefs (ease of use and usefulness) and perceived risk (security,

privacy, performance and social) have a direct influence on IB adoption. Perceived risk is

a key inhibitor of IB use and among the various risks security risk plays a key role. Trust

appeared as a key variable that reduces perceived risk. Product involvement plays an

important role in increasing perceived ease of use.

Sabah et al., (2009) identified several significant factors impacting customer

attitude towards online banking acceptance in the Saudi Commercial Banks. Their

research model used control variables such as social influence and awareness of services

influencing the PU, computer self efficacy, quality of internet connection influencing the

PEOU, Resistance to change, trust and demographic variables (age, gender, education,

income) influencing the attitude towards use of OB. They found that quality of internet

connection, the awareness of online banking and its benefits, the social influence and

computer self-efficacy are correlated significantly with the PU and PEOU, the basic TAM

variables. Moreover, PU and PEOU, education, trust, resistance to change are correlated

with the attitudes towards use of OB. However, age, gender and income are not correlated

with attitude of customers to use OB. Low awareness of OB is found to be a critical factor

causing customers not to adopt OB. They suggested that future studies could further

extend TAM model to include other variables such as customer loyalty to IB, cost,

perceived value and perceived risk.

Guangying (2009) conducted an experiment in China to investigate how users‘

perceptions about OB are affected by PEOU of website, the privacy policy and security

42

provided by the OB websites. The relative importance of the above three variables were

also investigated. It is found that PEOU was of less importance than privacy and security.

The results showed that providing a specific policy does have a significant impact on the

adoption of OB. The study distinguished the privacy and security and demonstrated both

factors playing an important role in the acceptance of OB, with security the biggest

concern for users. The study concluded by stating that the direction of future research may

shift to trust, which is more complicated and doesn‘t just include security and privacy

concerns.

Michal and Tomasz (2009) empirically tested the factors underlying the decision

to adopt OB in Poland. Their research model included six variables: perceived security,

internet experience, marketing exposure, use of other banking products like ATM or

telephone banking, type of internet connection used (dial up or broadband), and

demographic variables. Their results supported the hypothesis that the higher the

individual‘s perceived security of internet transactions, the higher the probability of using

OB services. It is also found that Individuals who have used the World Wide Web for a

longer period and have internet access at work, as well those who conducted internet

transactions in the past, were more likely to open an OB account. Their study also

supported the hypothesis that exposure to OB advertisements increases the likelihood of

IB adoption. Access to broadband internet connection did not increase the probability of

using IB. IB is found to be clearly favoured by educated males living in highly urbanized

area. Furthermore, mature customers over the age of 65 and minors under the age of 18

were less likely to use IB.

A study conducted by Egwali (2009) revealed the effectiveness of Security

Indicator in IB sites in some selected banks in Nigeria as it relates to users revealing

sensitive information to spoofed sites. Security Indicator designed to alert users and to

signal site trustworthiness were not fully comprehended by many participants. Twenty

seven per cent of the participants did not understand the full meaning of the Security

Indicator noticed in the banking sites while the attention of some users were not captured

43

enough, for they ignored the warnings completely. Even with the presence of Security

Indicator, 18.3 per cent of the participants still went ahead to submit sensitive information.

The relationships among three dimensions of service quality that influence overall

IB service quality and it‘s subsequent effect on customer satisfaction in New Zealand

banking context was examined by Rod et al., (2009). The service quality dimensions that

influenced overall IB service quality are: online customer service quality; online system

quality; and banking service product quality. Their results suggested that online system

quality is a significantly stronger predictor of overall IB service quality than both online

customer service quality and banking service product quality. Their structural model

results also showed a significant and positive relationship between perceptions of overall

IB service quality and customer satisfaction. This relationship suggested that when overall

internet banking service quality is perceived to be high, customers are more likely to be

satisfied.

Hernan et al., (2009) found that IB customer satisfaction in Kuwait can be

generated through improving courtesy, content, timeliness and, product and services

offered, the latter being the most important factor in driving IB satisfaction. The use of IB

facilities by customers in the order of most frequent uses are for checking balances,

transfer funds, check for standing orders, to pay bills, to transfer funds to others, to

buy/sell shares, request cheques and to sop ATM/credit cards. Majority of the customers

are found to be satisfied or very satisfied with the service and online system attributes.

Discriminant analysis rejected the hypothesis that satisfied customers use more OB

features than less satisfied customers

Quan (2010) used E-S-QUAL scales and DeLone and McLean‘s updated

Information System Success Model (D&M and IS success model) to measure online

banking customer perceived e-service quality and study on relationship with customer

loyalty in China. The four E-S-QUAL dimensions – efficiency, fulfillment, system

availability and privacy – are found to be the determinants of Chinese IB service quality.

It is also found that system quality, e-service quality and information quality can enhance

44

the customer‘s perceived value and customer satisfaction. E-service quality was found to

have both direct effect on customer loyalty and indirect effect on customer loyalty via

customer perceived value and customer satisfaction.

Zarei (2010) reviewed the recently developed methods for electronic service

quality evaluation E-SERVQUAL and WEBQUAL and compared their potential for

quality evaluation in online banking systems. E-SERVQUAL contains four dimensions of

core scale such as efficiency, fulfillment, reliability and privacy; and three dimensions of

recovery scale such as responsiveness, compensation and contact. The core scale refers to

the quality of the website itself while the recovery scale is more concerned with the actual

performance of the company, rather than with website performance. The WEBQUAL

instrument consists of four constructs, namely usefulness, ease of use, entertainment, and

complimentary relationship, all of which include a range of website dimensions. The

paper states that WEBQUAL is concerned with the technical service quality of a website,

not how a website works as a platform for delivering e-service quality to customers. But

e-service quality is measured by E-SERVQUAL based on how well the website woks as a

channel for delivering service quality to customers. The paper concluded by developing

an instrument for measuring the quality of online banking services by borrowing all the

dimensions of core and recovery scales except compensation and added assurance/trust

and site aesthetics dimensions.

Nuseir et al., (2010), through multiple regression analysis on data collected from

457 customers who had e-banking transactions with banks in Jordan, examined the

relationship between the e-service quality dimensions (website attributes, reliability,

perceived risk, responsiveness and customization) and customer satisfaction. Their

empirical findings indicated that the e-service quality dimensions have a positive and

significant relationship with overall customer satisfaction and its individual elements. The

most influential dimensions (predictors) on the overall customer‘s satisfaction, in the order

of their importance are responsiveness, website attributes and customization. Reliability

and perceived risk did not have a significant impact on the overall customers‘ satisfaction

nor its elements individually, but the findings indicated that their effect is still positive.

45

The impact of service quality variables of e-banking on customer satisfaction in

Bangladesh was studied by Nupur (2010) by taking customer satisfaction as the

dependent variable and the five dimensions of service quality, namely, reliability,

responsiveness, assurance, empathy, and tangibles as the independent variables. The study

was carried out on a sample size of 250 respondents who are using e-banking 0-3 years. It

was observed that there is a relation between customer satisfaction in e-banking and the

five dimensions of service quality. Customer satisfaction on e-banking is found to be

above satisfactory level and the independent variables such as reliability, responsiveness

and assurance have strong impact on customer satisfaction.

The relationship between technology and service quality in the banking industry in

Kenya was established by Ombati et al., (2010) by conducting a study on a sample size of

75 users of e-banking services (internet banking, mobile banking and ATM). The study

found that more customers have adopted ATM banking than mobile and internet banking

and the method of cash withdrawal preferred is ATM but teller approach is preferred for

depositing cash. The service quality dimensions found out by the study in the order of

their ranks are; secure services, convenience, efficiency (time), performance of

transactions, accurate records, user-friendly system, be able to satisfy complaints, accurate

transactions, efficiency (overall) and recognition. The e-banking customers in Kenya

seem to be quite satisfied in the areas of security, efficiency, accurate records,

convenience and accurate transactions.

Ahangar (2011) conducted a survey among 300 users of IB in Tehran district of

Iran to identify the customer preferences towards the online banking and to find out the

various service quality dimensions, which affect the customer satisfaction. The results of

factor analysis revealed that the five factors that influenced satisfaction level of customers

are responsiveness, reliability, efficiency, privacy of information and easiness to use. It

was also found that customers in the middle age group (31-50) are more concerned about

the efficiency of bank website and privacy of their personal information and customers

who are using IB from less than 2 years have no trust on websites and afraid of using IB.

46

A survey, based on 11 dimensions of E-SERVQUAL model and 5 dimensions of

SERVQUAL model, was made by Kadir et al., (2011) among 486 students from different

universities in Malaysia to study the most important dimensions of quality services offered

by online banking systems and ATMs that affects the satisfaction level of customers. The

dimensions of E-SEVQUAL model consist of ease of navigation, trust or assurance,

privacy, responsiveness, reliability, customization, aesthetic design, efficiency, access,

flexibility, and price knowledge. Responsiveness, customization and flexibility

dimensions were found unable to respond customer‘s needs in online banking area.

Tangible and responsiveness dimensions of SERVQUAL model were found unable to

fulfill the respondent‘s expectation in respect of ATM services.

Muneer et al., (2012) investigated which online e-banking services were most in

demand in the banks in Jordan and to explore the most influential variables which

influenced customer demand for online banking services. The most demanded services

were requests for balance inquiries, bank statements, checks books, payment of bills,

transfers from one account to another, telephone banking, requests for interest rates, and

requests for currency rates and money wiring (internal and external). The most influential

variables which influenced customer demand for these services were the diversity of

online banking services, and their relative ease of use, level of education of customers, as

well as their perceptions of the level of risk and the volume of costs.

2.3 Studies in India

Rajgopalan (2001) in his book ―Banking in the New Millennium‖ expresses the

opinion that Internet banking is a cause of concern to majority of the offline banks who

should be ready for an unprecedented competition from the non-traditional banking

institutions that offer banking and financial services over the Internet.

Mukherjee and Nath (2003) tested a research model of trust in online banking in

India, using Structural Equation Model, in which shared value, communication and

opportunistic behaviour were antecedents of trust. They concluded that both shared value

47

and communication played a significant positive role on trust and that trust had a

significant positive influence on commitment.

Chawla (2004) compared the adoption and implementation of Internet banking in

India through the case study of two banks, HDFC bank and Punjab National Bank. A cost

comparison of IB with other banking channels showed that an average transaction at the

branch costs around 100; at an ATM it is about 40, and on the internet it is around 20.

But unfortunately a very small percentage of the customers use the IB in India. This is due

to factors like low PC penetration, and penetration of internet itself is low. Typically 55

percent, on an average, transactions of these two banks are on the ATM, 30 percent

branch, 8 percent on telephone and 7 percent internet. By showing the customer that the

internet is reliable, banks are able to get the customer to trust online banking more and

more. Banks have to make sure that the customers receive assistance quickly if they need

help.

Kannabiran and Narayan (2005) conducted an exploratory case study of a

leading private-sector bank in India, called International Hope Bank (IHB). Because of a

non disclosure agreement, the name of the bank has been disguised. It is one of the nine

new private-sector banks that came into being in October 1994. The case study discussed

the experiences of the bank in deploying IB and e-commerce in India. Their study

revealed that only a few of the banks in the country, all in the private sector like IHB, have

taken the business of banking through the technology-intensive delivery channels,

including branches, ATMs, IB, and so on and have been extremely successful. The

success could be attributed to their high level of technology adoption. The bank has over

100,000 customers using its IB facility, processing over 2000 transactions every day. New

private-sector banks in India like IHB have demonstrated, through their various

technology initiatives, that world-class technology can be deployed by Indian banks as

well. They conclude that the emergence of new business models for banks leveraged

through IT and the lead role taken by private-sector banks like IHB has brought enormous

pressure on the government-owned commercial banks to review their business models and

48

adopt a higher level of technology and alternate delivery channels in order to maintain

their leadership for economic development.

The service quality of Indian banks and service quality variation across

demographic variables was studied using SERVQUAL scale by Bhat (2005). Five banks

such as State Bank of India (SBI), Punjab National Bank (PNB), Jammu & Kashmir Bank

(J & K Bank), CITI Bank (CB) and Standard Chartered Grindlays Bank (SCGB) were

selected from four states in India, namely, Jammu & Kashmir, Punjab, Haryana and Delhi.

It was found that foreign banks are relatively close to the expectations of their customers

in comparison with Indian banks. The poor service quality among Indian banks is mostly

due to deficiency in tangibility and responsiveness. The service quality of Indian banks as

perceived by their respective customers is found to vary with their level of income.

Customers of higher age groups found the service quality of banks better as compared to

customers of lower age groups. Service is perceived to be better in states where

competition is higher and banks provide better quality service to business group customers

in comparison with service group customers.

A study on the Internet users, conducted by Internet and Mobile Association of

India (IAMAI Report, 2006) revealed the following;

About 23% of the online users prefer IB as the banking channel in India, second to

ATM which is preferred by 53%.

Out of the 6,365 Internet users sampled, a significant number of online users do

not use IB and hence there is a need to understand the reasons for not using it.

The prime factors or reasons for using IB include convenience, saving of time,

better control over finances, and more information available.

Most of the people have come to know about IB from the bank officials followed

by self-driven initiative (internal drive of curiosity) of the user and advertisements.

The share of online banking users is varying from state to state. Maharashtra has

the highest percentage (28.7%) of online banking customers followed by Delhi

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(17.7%). States like Bihar (1.6%) and Uttaranchal (1%) have the lowest share of

Internet users.

The people are not doing financial transactions on the banks‘ internet sites in India

because of reasons such as security concerns, preference for face-to-face

transactions, lack of knowledge about transferring online, lack of user friendliness,

or lack of the facility in the current bank.

Raghavan (2006) in an article titled ―Perception of Indian Banks in 2020‖ opined

that at present, over 85% of the finished payment transactions are electronic and

traditional way of doing banking at the branch level has relatively little importance to

electronic banking users. Many banks, including PSU banks, would have online ATMs,

phone banking, virtual banking, e-banking, IB, etc. by 2020.

Mohan (2006) in a paper captioned ―Information Technology on Indian banking‖

remarked that Indian banking is at the threshold of a paradigm shift and a significant

development has been achieved by banks in offering a variety of new and innovative e-

banking services to customers today, which were not thought of before. However, public

sector banks have not been able to harness the benefits of computerization.

Singh (2007) examined various phishing techniques and gave recent statistics of

frauds in banks and non-banking institutions in various countries including India. Popular

phishing cases in financial sector in India were also listed and discussed many methods to

combat bank frauds in general and phishing in particular. It is stated that to fight phishing,

institutions must adopt a multi-pronged approach with minimum four components. (a)

usage and development of new technologies to counter frauds, (b) educating customers

with riders everywhere, (c) helping law reinforcement agency by way of providing

information of the incidents, and (d) proper and regular stringent audit of online systems.

Malhotra and Singh (2007) conducted a study on the determinants of IB adoption

by banks in India covering 88 banks which include nationalized banks, private sector

banks and foreign banks. Their study brought out the following findings.

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Larger banks tend to adopt the IB technology more quickly than smaller banks.

The profitability of the bank has a positive effect on the adoption of IB technology.

New banks are more likely to offer IB than the old ones.

Banks with low branching intensity are more inclined to adopt IB to increase their

customer base.

The probability of IB is lower for public sector banks as compared to private sector

banks (both domestic and foreign)

They concluded by stating that banks have used IB as a complementary channel to the

existing branch network with an intention to increase the market share and lower the

expenses.

Srivastava (2007) conducted a qualitative exploratory research using

questionnaire among 500 bank customers of different banks from different regions of

Mumbai, India. The study focused on customer‘s perception on usage of IB. The study

revealed that education, gender and income play an important role in usage of IB.

Educated people, males, people with higher income are more IB users. Security, non-user

friendliness software, and unfair fees charged for using IB hold people back from using

IB. The study concluded with the remark that the perception of the consumers can be

changed by awareness program, friendly usage, less charges, proper security and the best

response to the services offered.

Srivatsa and Srinivasan (2007) used psychographics to study the banking

channel adaptation and the trends in the retail banking scenario in Karnataka, India. The

study has been confined to four regions of Karnataka namely Bangalore, Mysore, the twin

cities of Hubli and Dharward and Managalore. In all the four regions except Bangalore,

IB has not been perceived as a channel with convenience and safety and hence it not as

popular as other channels of branch banking, ATM banking and Tele-banking. However,

in Bangalore region IB has been perceived as a channel with convenience and safety and

consumers are comfortable using IB. It has been found that people clearly want

convenience and security in their choice of banking channels.

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Gupta and Islamia (2008) conducted a survey among a sample of 2000

consumers in the major cities of India to examine the consumer behavior with respect to

IB vis-à-vis conventional banking, and to explore the possibility of blending these banking

systems. Their study revealed the following;

Daily users of IB are almost absent and the percentage of those using once in two

days is meager and majority of the IB users use IB 1-5 times a month.

Gender wise usage of the IB reflects polarization towards males.

The customer satisfaction levels in case of public sector banks are the lowest while

in case of private banks it is comparatively better. In general Indian consumers are

partially satisfied with the IB services.

Consumers feel that IB is easier compared to conventional banking. Conventional

banking lacks speed especially in case of public sector banks.

Ratings on various parameters such as accuracy, speed, confidentiality,

customization, ease of use, safety, empathy, and trust are comparatively higher in

case of frequent users ( 1- 5 times a month) and high income groups.

They concluded that IB in India is only at its primitive stage dominated by the Indian

private and foreign banks. The use of IB is confined to a few consumer segments. The

risks associated with IB are many, which the banks have to model using sophisticated

systems and extensive use of technology.

Ajay and Garima (2008) conducted an empirical study of IB in India covering

300 customers of public sector and private sector banks. Their objective was to find out

the factors that affect the usages of IB and to identify why people have not accepted

technology fully though it provides much advantage to the banking customers. The

following are the important findings of their study;

Internet accessibility, awareness, attitudes towards change, proper guidance to

operate IB services, security concerns, trust on bank and problem solving attitude

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of bank employees are the major factors affecting the adoption of IB services in

India.

Consumers get disheartened by the complicated functions while accessing the IB

services.

All respondents lack trust and confidence to make any big financial transaction

over internet.

There are demographic differences between internet bank users and non-internet

bank users. Younger generations who are generally more computer literate and

have an affinity for the web are more likely to adopt IB.

Geetika et al., (2008) conducted a survey among 100 adult internet users in

Allahabad with the objective of analyzing the perception of IB customers; internet users

who do not use IB services and to study the various security features offered by internet

banks. Through their study the following findings emerged;

There exists not much difference in the basic IB services offered by various banks.

A careful analysis of the websites of the various banks revealed that the design of

the website, technological up gradation, security features, consumer friendliness,

and value-added services varies from bank to bank.

The customers look for ease in performing banking transactions along with more

and updated information when adopting IB. Customers do not use all services

equally. Checking balances online and E-ticketing is the most popular services.

Users of IB give most importance to excellent services, followed by brand name of

the bank. Lack of time is one of the prime reasons for not opening an IB account.

There is a greater concern for security among the non-users.

Kamadkodi et al., (2008) made a study on a sample of 292 customers of public

sector, old private sector, new private sector and foreign banks drawn from 15 cities/towns

including three of the four metros spread across eight states in India. The study intended to

find out whether banks understand the preferences of the customers and deliver services

matching the expectations of the customers in the era of electronic banking. The top 10

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factors of importance influencing the respondents to choose a bank are: safety of funds,

secured ATMs, ATMs availability, reputation of the bank, personal attention, pleasing

manners of the staff, confidentiality, closeness to work, timely service and friendly staff

willing to help. The study found that a wide gap exists in human service in banking while

technology based services are exceeding expectations.

Sudeep (2008), based on a sample of 266 responses, identified that perceived

usefulness, perceived ease of use, consumer awareness, consumer security concerns,

quality of facilities, subjective norms and, trust and privacy are the factors which did

influence IB acceptance in India. The study gave empirical evidence that the acceptance

of IB was significantly influenced by the two constructs of Technology Acceptance Model

(TAM), namely, perceived usefulness and perceived ease of use. The study empirically

tested a research model which was extended from TAM for predicting IB acceptance.

Malhotra and Singh (2009) presented the current status of IB in India and it‘s

implications for Indian banking industry by using a panel data of 85 banks for the period

of 1998-2006. The analysis indicated that, on an average, internet banks are larger, more

profitable and more operationally efficient than non internet banks. Internet banks have

higher asset quality and are better managed to lower the expenses for building and

equipment. No significant association between adoption of IB by banks and their

performance was found. But IB has a negative and significant impact on profitability of

private sector banks particularly new private sector banks. This is due to the fact that

these banks were operating with higher cost of operations, including fixed cost and labour

cost, thus affecting negatively the profitability of these banks. IB is found to have a

negative and significant impact on risk, which shows that, the adoption of IB had not

increased the risk profile of banks.

Khan et al., (2009) developed a seven dimension model using regression analysis

for measuring the overall service quality of i-banking in India from customer‘s

perspective. The seven dimensions are reliability, accessibility, user-friendliness,

privacy/security, efficiency, responsiveness, and fulfillment. Data analysis revealed that

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responsiveness dimension has the greatest influence on overall service quality followed by

reliability, and accessibility. Customers are not very much satisfied with user friendliness

and efficiency dimensions. The results also indicated that the customers feel that banks

fail to provide satisfactory services on two dimensions, viz., privacy/security and

fulfillment.

Uppal and Chawla (2009) analysed the customer‘s perceptions regarding e-

banking services and also studied the problems faced by the bank customers while using

e-channels by conducting a survey of 1200 respondents belonging to public sector, private

sector and foreign banks in Ludhiana district, Punjab, India. The major findings of the

study were that the customers of all banks are interested in e-banking services, but at the

same time are facing problems like inadequate knowledge, poor network, lack of

infrastructure, unsuitable location, misuse of ATM cards and difficulty to open an account.

The study sought the suggestions of bank customers to improve services of banks through

e-channels. The suggestions include providing variety of services, create awareness

among employees, convenient accessibility of ATMs, polite and sympathizing employees,

assisting customers to choose etc..

Jamwal and Padha (2009) explored the impact of demographics in influencing

Indian internet users in consuming different services online and analysed the current

issues related to security in IB system. The cost per transaction of IB over other mode of

banking was found to be very low and traditional banks spend 60 per cent of the revenue

generated to run a branch while the cost of providing same services via internet comes out

to be only 15 percent, which is a huge savings for banks and consumer. People between

the ages of 18-49 with high income showed high interest on IB. Nearly 43 per cent of the

OB users in the survey were in the 26-35 years age bracket. Nearly 83 per cent of the

users were male and 60 per cent of the users had relationships with two or three banks. IB

risks consist of risk associated with credit, interest rate, transaction, liquidity and price etc.

Sunayna (2009) collected data from a sample of 100 respondents of IB users of

public and private banks in Hissar district in order to identify the customer preference

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towards on line banking and to find out the various service quality dimensions that affect

customer satisfaction in IB. Through factor analysis five factors that influence the

satisfaction level of customers were identified. The factors in the order of their degree of

influence on the satisfaction level of customers are responsiveness, reliability, efficiency,

privacy of transactional information and easiness to use the bank website. The study

concluded with the remark that various banks have to take important steps to make their

website more reliable and more responsive to give more value and satisfaction to

customers.

Indian customers‘ perception in the context of e-banking has been examined by

Reeti et al., (2009) and it was found that friends or relatives to be the most important in

increasing their awareness level about e-banking and in influencing them to use it. The

second most important influencer was advertisement via different media such as

television, newspaper, magazine, internet, mailing flyers etc. The usage frequency of IB

services significantly depended on the age of respondents and that people in the age group

of 31-45 years using e-banking most frequently. Respondents opined that using e-banking

for balance inquiry to be the most useful, closely followed by inter-account transfer of

funds and they found e-banking least useful for lodging complaints. Customer satisfaction

with security and trust, convenience and ease of use, and value proposition influenced

customer‘s overall satisfaction with e-banking, to a very large extent. Slow transaction

speed was found to be the most frequent problem faced, closely followed by non-

availability of the server while using e-banking. The expense of using e-banking was

found to be the least frequent problem.

Dhiraj (2009) in an article entitled ― India‘s leapfrogging steps from bricks and

mortar to virtual banking: prospects and perils‖ opined that the trend towards electronic

delivery of banking products and services is occurring partly as a result of consumer

demand, and partly because of the increasing competitive environment in the global

context. New competition from private and foreign sector banks have put the profitability

of even the established brick and mortar banks under pressure. The potential for net

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banking in India is immense, considering the rising penetration levels of the internet in

Indian homes and offices.

Mallick (2009) in a paper titled ―Risks in IB‖ discussed the various risks

associated with e-banking from a bank‘s perspective. The important risks associated with

IB are credit risk, interest rate risk, liquidity risk, price risk, foreign exchange risk,

transaction risk, compliance/legal risk, strategic risk, reputation risk, cross border risks

and information security risk. The paper concluded with the remark that in today‘s wired

world, quick service is what is demanded by one and all, e-banking can no doubt help in

this regard, provided the risks involved are minimized to the extent possible.

Kumar and Sinha (2009) in an article ―An overview of E-banking in India‖ cited

various instances of hacking and phishing attacks reported throughout India. They

remarked that cyber crimes prove that IB has several loopholes that can be easily

exploited and users need to be extra cautious while making online transactions.

A research, conducted in Hyderabad, India, based on convenience sampling of 200

people, half of which are people associated with the banking industry and the rest from

people not associated with banking by Yahya et al., (2009) identified that education,

banking literacy, computer literacy, availability of internet facilities, awareness and

availability of services and technology have positive impact on the acceptance of OB

technology. Perceived cost of technology is found to be negatively related to the

acceptance of IB.

In an article titled ― No more traditional banking, only virtual‖ by Srinivas (2009)

discussed various e-banking channels and suggested security tips for customers which

include changing password frequently, abstaining from revealing PIN either via mails or

phone, avoiding cyber cafes for net banking etc.

Joshua (2009) in a study conducted in Karnataka found that awareness levels

about IB were found to be 78% among users and 31% among non users. IB is the widely

adopted electronic banking service next to ATM. The significant predictors of IB use were

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identified as income levels, perception regarding the relative advantage, their

innovativeness and perception of risk. Non-usage of IB services was found to be due to

the lack of proper awareness, security concerns and ‗happy with other modes of

transactions such as branch banking and ATMs. Of the antecedent beliefs such as ease of

use, perceived usefulness, compatibility and security concerns, except for ease of use all

the other constructs were found to have significant impact on attitude towards IB and the

attitude towards IB had significant influence on intention to use it and finally the intention

to use IB had significant influence on actual IB usage.

Dixit and Datta (2010) investigated the factors which are affecting the acceptance

of e-banking services among adult customers above the age of 35 and also studied the

level of concern regarding security and privacy issues in Indian context. Factor and

regression analyses of data revealed that many factors like security & privacy, trust,

innovativeness, familiarity, awareness level increase the acceptance of e-banking. The

findings showed that in spite of their security and privacy concern, adult customers are

willing to adopt OB if banks provide them necessary guidance. They concluded their

study with the recommendation that banks have to increase the level of trust between

bank‘s website and customers.

The impact of customer‘s awareness on their satisfaction towards e-banking

services in Gwalior city, India was examined by Keswani and Chaturvedi (2010). They

found that awareness has a significant contribution to customer‘s satisfaction towards e-

banking services. Customers are aware of the e-banking and the main factor that affects

their awareness towards e-banking is their confidence and awareness of services. They

also found that there is no difference between awareness and satisfaction of customers

towards the choice of e-banking.

Prasad and Harish (2010) compared the various e-channels available with ICICI

and HDFC banks and their usage by different segment of retail customers. The study was

conducted among a sample size of 250 collected across India on the basis of convenient

sampling method. Three products, Any Branch Banking (ABB), IB and phone banking,

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were brought under the purview of their study. It was found that highest percentage of

population (56 per cent) is not using IB and it has not picked up popularity in both the

banks for a reason that the basic internet connection is required to use the product and it‘s

usage is subject to various regulatory as well as security guidelines. They also found that

customers of high income group are the highest users of IB and customers with low

income levels are the ones who use it the least. They concluded that out of the three

products, ABB is used more.

Baskar and Ramesh (2010) used thirty service quality variables, which are

narrated into three important factors, namely, online customers‘ service quality, online

information system quality and banking service product quality in a study conducted on a

sample size of 236 online banking customers in India. The results brought out by the

study indicated that the online customers‘ service quality, online information system

quality and banking service product quality are significantly and positively influencing the

customer satisfaction. The elders perceived more on the online customers‘ service quality

of banks than the youngsters. The same trend is noticed in the other service quality factors

as well.

A study conducted by Mannan (2010) in Maharashtra, India revealed that all the

respondents have acknowledged their awareness of the e-banking concepts. It is also

found that only educated, well to do persons, and male forms the majority of the users and

90.6% respondents feel that online banking system saves time, 74% say that it is

financially secured, 81.1% respondents think that learning to use a net banking/online

banking is easier but 18.9% disagree with this statement.

Uppal (2010) studied the productivity and profitability of various bank groups in

pre and post e-banking period and found that banking with technology has proved to be an

asset for the banking industry. The study concluded with the opinion that there is a

paradigm shift in the performance of all bank groups and industry, particularly new

private sector banks and foreign banks, in the post e-banking period.

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Marakarkandy and Daptardar (2011) evaluated IB sites of public, private and

foreign sector banks operating in India, from the dimension of functionality with the focus

on web site services such as dissemination, transaction and relationship. These services

were sub divided into basic services, intermediate services and advanced services.

Assignment of scores on these services revealed that Punjab National Bank from the

public sector, HDFC bank and ICICI bank from the private sector and Standard Chartered

Bank from the foreign sector top in the evaluation. The average performance of foreign

banks followed by private banks is higher than the public sector banks. The study

concluded with the remark that the new private sector and foreign banks lack a strong

branch network in India and they were in the forefront of adopting innovative service

delivery channels like IB.

Uppal (2011a) exhibited the growth of information technology in various bank

groups. In India, in 2009, 79 percent branches were under core banking. The maximum

technology is taking place in new generation private sector banks as well as foreign banks.

The proportion of public sector bank‘s branches which achieved full computerization

increased from 93.7 per cent as at end-March 2008 to 95.0 per cent as at end-March 2009.

IB as a percentage of total branches of all bank groups under study showed remarkable

progress during the e-banking period under study from 2001-02 to 2007-08.

Safeena et al., (2011) investigated the impact of perceived usefulness, perceived

ease of use and perceived risk on the use of IB in India by using the extended TAM model

among 116 samples selected on the basis of convenience sampling method. Their results

have supported the hypothesis that perceived usefulness and perceived ease of use have

positive effect on the use of IB, while perceived risk have negative effect on the use of IB.

Security and trust are two elements in perceived risk and customers are not ready to take

any risk on using IB. They emphasized the need for the banks to engage in security

enhancement activities such as encryption, firewall, and user protection and authenticity.

Trust is found to be the more influencing factors for IB adoption, implying that controlling

the risk of IB is more important than providing benefits.

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Uppal (2011b) conducted a study to explore the extent of IB in Indian banking

industry during the period from 2000-01 to 2006-07. The study divided Indian banking

industry into five groups as per the RBI guidelines: G-1 – SBI & Associate Banks (8); G-

II – Other Nationalised banks (20); G-III – Old private sector banks (17); G-IV – New

private sector banks (8); and G-V – Foreign banks (29). In terms of the number of

branches providing IB services, G-IV holds the top position (72.75%) followed by G-V

(50.17%), G-I (30.04%), G-III (15.31%) and G-II (4.35%). In terms of number of

customers using IB services G-IV holds the strong position with 53,61,893 customers in

the year 2006-07 followed by G-V with 29,10,125; G-I with 25,31,141; G-II with

7,78,599; and G-III with 1,89,314 customers. The study also discussed the challenges

faced by Indian IB and suggested some strategies with their possible solutions like; to

spread awareness regarding IB and to increase its area and scope to enhance IB services in

India, particularly in rural and semi-urban areas.

Kumbhar (2011) identified that demographic characteristics, internet access,

awareness, customer education, cost effectiveness and service quality were the most

important factors in the adoption of IB in an empirical investigation undertaken through a

customer survey of 250 respondents of public and private sector banks in Satara and

Kolhapur city of Maharashtra, India.

In a study conducted by Mohammed and Shariq (2011) in the city of Lucknow,

Uttar Pradesh, India to examine the adoption of e-banking channels, particularly ATM, it

was found that ATM was the most adopted technology by banks. They found no

significant association between usage of ATM and variables like education, gender,

occupation, income, type of accounts. The major hindrance in the adoption is the fear of

insecurity among non-users.

Shukla and Shukla (2011) in a paper captioned ―E-Banking: Problems and

Prospects‖ stated that E-banking offers a higher level of convenience for managing one's

finances even from one's bedroom. However, it continues to present challenges to the

financial security and personal privacy. Customers are advised not to share personal

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information like PIN numbers, passwords etc with anyone, including employees of the

bank; change ATM PIN and online login and transaction passwords on a regular basis;

ensure that the logged in session is properly signed out.

Mishra (2011) provided useful tips to ensure safety of IB transactions. IB users

are advised not to reply to any mail, phone call or letter, asking for the IB information like

login id or password, and not to click on any link provided in any mail, claiming to be the

link for the bank‘s website are the important tips, among others.

Ajimon and Gireesh (2011a) explored the factors influencing the adoption of IB

services and suggested a theoretical model, by drawing up on several theories on

technology adoption and empirical evidences through extensive literature review. The

suggested model integrates Technology Acceptance Model, Theory of Planned Behaviour,

Innovation Diffusion Theroy, Decomposed Theory of Planned Behaviour and Institutional

forces.

Ajimon and Gireesh (2011b) identified the factors contributing to customer

resistance to the use of IB through extensive literature review. The inhibiting factors or

the barriers for the adoption of IB are mainly classified into functional and psychological

barriers. The paper concluded with the remark that the potential for IB in India is immense

and therefore banks in India should concentrate on increasing the use of internet for

delivering banking services at low cost to customers.

Ajimon and Gireesh (2012a) explored the emerging payment systems in India

using secondary data and found that emerging payment systems in India for large value

transactions is RTGS, ECS for bulk payments and NEFT for one to one fund transfer.

Mobile banking is emerging as a popular e-banking channel in India and over a period of

nearly two years, mobile banking transactions in India have increased by 13 times in

volumes and value terms.

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Ajimon and Gireesh (2012b) conducted a study in Idukki district of Kerala and

classified risk in IB into three factors, viz., financial & social risk, security & time risk and

performance risk using factor analysis. The popular IB services among the customers are

checking balances, followed by inter-account transfer, payment to other account and e-

ticketing.

Ajimon and Gireesh (2012c) examined the benefits of e-banking channels as

perceived by banking customers in Kottayam district of Kerala. According to banking

customers, e-banking helps banks to build an image in the minds of customers and thereby

enhance their competitive position. Customers are benefited by getting quick services at

low cost. Banking customers are attracted towards banks that provide more of e-banking

services than branch banking services because it not only saves their time but also reduce

their operating and administrative cost.

Kamal and Ipshita (2012) developed a five dimension model of IB service

quality and validated through Confirmatory Factor Analysis (CFA). The five dimensions

uncovered in their study are security/privacy, reliability, efficiency, responsiveness and

site aesthetics. Their findings indicated that all dimensions carry significant impact on the

overall IB service quality perceptions and customer satisfaction.

2.4 Summing Up

In the wake of the above literature, it is found that a flurry of studies on IB was

conducted in the past. Adoption, perception and usage, service quality of IB by customers

were the topics heavily examined in e-banking literature. Most of the studies were

conducted on IB services by extending the well-established Technology Acceptance

Model (TAM) and the major factors influencing the adoption of IB by customers include

perceived usefulness, perceived ease of use, awareness of services, computer and internet

proficiency, perceived web security, social influence, trust and demographic variables,

among others. The main factors for the non adoption of IB by customers include lack of

awareness, lack of infrastructure, various functional barriers (usage, value and risk

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barriers) and psychological barriers (tradition and image barrier). Most of the studies used

E-SERVQUAL model to study the various service quality dimensions and the main

service quality dimensions of IB comprises of responsiveness, reliability, efficiency,

privacy and fulfillment. These service quality dimensions did have an impact on customer

satisfaction as well. The studies reviewed are excellent sources to identify the research

gap existing in the area of IB in Kerala and to understand the important variables related

to the topic.