Information technology plays an important role in banking functions and operations. Be it automated teller machine, online account information, money transaction on the go or payment at online merchants. It and communication has added to the functions and responsibilities to the competitive banking market. Internet users throughout the globe have been increased multifold due to its immense potential to cater solutions in all sectors. Penetration of internet from developed to developing countries has been witnessed widely in last one decade. Banking is also one sector which could not remain unaffected with integration of internet in its functions and operations. This has led to evolution of internet banking and its derivative services offered by various banks. Internet Banking differs greatly from the traditional branch banking. As Sadeghi, T. (2004) stated "virtual banks or branchless banks are quit new concept to describe banks with no physical layout like a branch and offer services only via the internet and ATMs used to deposit and withdraw capital." Actually, IB allows bank customers to deal with any inquiry or operation online without having the need to refer to the branch at any moment. IB is one revolutionary service which has become "need to have" from "nice to have". Mukherjee and Nath, 2003 stated; "For the last five years, adoption of IB has been getting particular attention in academic studies because special issues have been dedicated on this subject by the banking journals topic". Many studies have been carried out on the adoption of IB in developing countries, Jaruwachirathanakul & Fink, 2005; Shih & Fang, 2004; Suganthi & Suganthi, 2001; Norazah, 2010; Tan & Teo, 2000 and also on IB in Mauritius. However, because of its rapid pace of development it is essential to have updated studies on the subject.
2.1 Banking Sector
Banking is a service oriented sector operating with highly competitive operators. Since new non-banking financial organizations have emerged in the market, competition has gone cutthroat among existing banks, upcoming banks and new financial institutions in order to provide quality services and meet client's expectations. As stated by Wendel and Chinn (2000), "the entire structure of business, previously dominated by banks is currently being switched." The banks act primarily as a channel between agents having surplus of funds and those having fund deficit. Profit is the main concern for most of the banks and thus they need to continuously evaluate the system they are using to remain competitive, profitable, and also to simply stay in business. As stated by Kohli and Jawarski (1990) "Market intelligence is essential for the survival of the industry."
Recently, structure of the global financial system has been tremendously changed due to globalization. Diversification in activities and integration of more risky and highly complex portfolio operations is in practice by almost all of the banks lately. Globalization has resultedin harmonizing banking regulations, which in turn accelerate the expansion of regional and global development of banking services. At Geneva in 1987, it came into the picture for the first time with the agreement which is known as the 'Basel Convention'. The Basel II was introduced in June 2007 and Basel III was elaborated in 2010. According to Van Roy, Patrick (2005), "through the introduction of Basel II, Banks have better understanding, measure and control of sophisticated risks they face." The Basel III standards aim was to creat a strong banking sector which could be able to absorb the shocks from the economic and financial sector (Crina Raluca Bucur, 2010).
2.2 Banking Channels Evolutions
Over the years, with the globalization and development of the banking sector, there have been various changes in bank channels to help banks remain competitive. The traditional based banking channels have been replaced by technology based service delivery.
Branch banking channels are known as the traditional system for delivering banking services. Branches are regarded as the face of the bank as customers can directly meet and interact with the branch officers. Branch banking channel have a significant role in banking activities as safety and accuracy of transactions could be well maintained by operating face to face (Wan et al., 2005). ATM banking channels are electronic terminals that allow customers to perform banking activities any time. It allows customers to withdraw money, make deposits or transfer funds between accounts. ATM channels is the second after branch banking channel because it is convenient to use, and easy to access (Boon and Yu, 2003). MCB becomes the first bank to install ATM's in Mauritius in 1987. According to Ramsay and Smith (1999), after the branches and ATMs, telephone banking was the most favored channel.
Studies show that customers use telephone because it is accessible to all, cheaper and easier to use. Point of sale banking devices like the blue bamboo became the new electronic banking channel of banks. This service facilitated payments as bank customers are no longer required to carry cash with them. Finally, IB and mobile banking are the latest banking channels introduced.
As reported in the Accenture research 2011, Two third of the clients want banks to put forward a consistent service via multiple banking channels. Also, it is expected that in 2013 40% of the customers will use branches for their banking activities while 50% will use direct channels. The research also states that up to 80% of the time, IB will be used as the main channel for banking.
2.3 Internet Banking
IB services were initially introduced by the Nottingham Building Society and the Bank of Scotland in the early 1980s (Tait and Davis, 1989). However, they were not widely favored by bank customers and hence provision IB services were halted. In the early 1990s, with the rapid growth of information technology and electronic services, banks began to launch internet banking services again (Daniel, 1998). IB has been in existence in Mauritius since the year 1997.
In the past, bank clients had a direct connection with the front office employee who were the one having access to the bank's Information system (IS). However, with introduction of IB, bank customers can themselves access the bank's IS from any place where there is an internet connection; they no longer need to go to the branch for their daily transactions. In this situation, the customer is defined as the end-user of the bank's data processing system, where the user's PC plays a pivotal role (Gerrard, P.; J.B.Cunningham and J.F.Devlin, 2006)
Several authors have attempted to define IB, some are as follows:
According to Arunachalam and Sivasubramanian(2007), IB is where a customer can access his or her bank account via the Internet using a Personal Computer(PC) or mobile phone and web browser.
Ongkasuwan and Tantichattanon(2002) defines IB service as banking service that allow customers to access and perform financial transactions on their accounts from their web-enabled computers with internet connection to bank's websites any time they wish.
As stated by Khan (2007), Internet Banking includes the system that enables financial institution customers, individuals or businesses access accounts, transact business or obtain information on financial products and services on public or private network including internet.
Kim and al. (2006) simply says that Internet banking is the act of conducting financial intermediation on internet.
According to Ponemon (2005), three banking activities that most IB customers perform include viewing their bank account information, using bill payment services and making payments on product that customers have with other financial institutions, such as credit card or home equiy loan. Sadeghi and Farokhian (2011) also included funds transfer between accounts, ordering checks, managing investments and trade stock and requests of credit cards advances in the list of activities.
This year the number of internet users have worldwide has almost doubled reaching 2.27 billion users as compared to 1.15 billion users five years ago. Asia is reported to have the highest number of internet users and also the highest growth rate.
Source: Internet world stats
Source: CIA World Fact book
IB brings about many advantages for both the bank and the customer. From the bank's view the benefits are mostly related to cost savings (Sathye, 1999; Robinson, 2000) and IB remains one of the cheapest and more efficient delivery channels (Pikkarainen et al, 2004).
IB helps in cost saving, increase customer base, enable mass customization for e-business services, extend marketing and communication channel, search for new innovation services and explore and development of non-core services, Ongkasuwan and Tantichattanan (2002). Parisa (2006) said "IB is beneficial to financial institutions by lowering operating costs, improving customer banking services, retaining clients, reducing branch networks, and decreases the size of service staff."
Esser (1999) and Simpson (2002) summarized the main benefits of IB as follows:
Competitive advantage
Customer retention and attraction
Increased revenues
Reduced cost.
However, it should be noted that customers are still reluctant to use IB services as they are more concerned about the security of the system. Nsouli and Schaechter (2002) says that IB is not only vulnerable to the risks involved in the normal banking business but it also increases them, particularly compliance, transactional, liquidity and reputation risks.
2.4 Types of Internet Banking
Currently, there are three main forms of internet banking that are being used namely the informational, communicative and transactional.
Informational Internet banking is the fundamental level of Internet banking. This form of IB is not used to maintain accounts and does not also allow communication between the bank and the customers. It in fact just presents the basic information about a bank. It uses a stand-alone computer and stores all the market information of the bank's products and services. The bank is exposed to lower risks with informational IB, since there is no direct connection to the bank's main system. Examples of the informational IB may include the bank's website.
Communicative IB is where basic form of communication takes place between the bank's system and the customers. These are in the form of e-mails, account inquiry and updates, loan applications, contact information updates and balances. The communication IB is liable to more risk compared to the informational one as there may be a route to the bank's internal server. Therefore, there need to be appropriate security to prevent illegal access to the bank's system and to control viruses.
The third form of IB is the transactional IB where customers can carry out transactions online, benefiting from the advantages of traditional banks. Transactions that are normally executed include accessing accounts, withdrawing money, paying bills, transferring funds, account updates; in short, customers can completely access and control their accounts. However, this type of IB is riskier than the other two types because there is a path existing between the server and the bank's internal system. Therefore, greater security is needed and implemented to avoid fraudulent activities
2.5 Adoption of Internet Banking
Customer adoption of IB depends on several factors including user-friendliness, level of internet experience, types of services provided, attitude, delivery, access and delivery time and experience. Gao and Owolabi studied the factors determining the adoption of IB in Nigeria, they include the level of awareness or attention, the accessibility to computers and the internet, convenience, privacy, costs, and the availability of knowledge and support concerning IB. Gerrard and Cunningham (2003) studied the spread of the internet banking over the singapore market. As a result of a survey of 240 individuals, they concluded that is the people are well-educated and are familiar with personal computers then internet is being used by 46 per cent of the population. Moreover, Milind Sathye (1999) determined the factors affecting the adoption of Internet banking by consumers in Australian province. His survey sample was derived from Australian individual residents and business firms. It shows that one of the basic reasons for sluggish adaptation of internet banking in Australia is obviously security concerns and lack of awareness about Internet banking and its benefits. Padachi, Rojid and Seetanah (2008) analyse the factors that influence the internet banking adoption in Mauritius. From a survey of 200 individuals, they observer that inter account transfer, transfer to credit card account, payment to other personal account, recharge mobile phones amongst others were the mostly used services among customers. Their cross tabulation results also reveal that there is no significant relationship between internet banking users and non- internet banking users with respect to age group and education level.
Consumer Adoption:
Awareness
Interest
Evaluation
Usage
Customer Satisfaction:
Commitment
Loyalty-Retention
Referal or recommentadation of service
IB services:
Access to Account
Control of Account
Usage of account
Conceptual Framework: source: Qureshi et al (2008), Mohamed & Pearson (2007), Nolubisi & Sinti (2006) and Raman et al. (2008)
2.6 Internet Banking Adoption Models
Based on previous studies, there are three most common IB acceptance models used by researchers which include the Theory of Reasoned Action (TRA), Theory of Planned behavior (TPB) and the Technology acceptance model (TAM)
2.6.1 Theory of Reasoned Action (TRA)
The TRA model was proposed by Ajzen and Fishbein (1975). According to this model, the decision of an individual to adopt an innovation is influenced by his attitude towards the behavior and subjective norm. The theory assumes that the intention to perform a behaviour will be higher when the individual has positive evaluation of performing the behaviour (Ajzen, 1991). The attitude towards performing the behavior reveals a person's positive and negative feeling toward the target behavior. Subjective norms refer to the perceived influences of social pressure to perform or not to perform the target behavior. "The person's belief that specific individual or groups think he should or should not perform the behavior and his motivation to comply with the specific referents" (Ghobadian A., S.Speller and M.Jones, 2004).
Attitudinal beliefs
Outcomes Evaluation
Attitude towards the Action
Behavioral Intention
Normative beliefs
Motivation to comply
Behavior
Subjective norm
TRA Model Diagram; Source: The role of behavioral adoption theories in online banking services (T.Sadeghi and S.Farokhian, 2011)
2.6.2 Theory of Planned Behavior (TPB)
The Theory of Planned Behavior (Ajzen, 1985) is an extension of the TRA model. The researcher introduced a third element to the TRA model which as stated by him influence an individual's intention to carry out a behavior which is known as perceived behavioral control. The idea of Perceived Behavioral Control is similar to the concept of self-efficacy of Bandura (1982). The TPB proposed that a person's intention to perform an act is affected by his attitude towards the act, subjective norms, and perceived behavioral control (Ozdemir, S. and P. Trott, 2009). Ajzen's model comprises of three variables attitude, subjective norms, and perceived behavioral control to demonstrate the direct influence that they have on the behavioral intention.
2.6.3 Technology Acceptance Model
Initially developed by Davis (1986), this model is most widely used by researchers to explain the adoption of IB. The two essential variables in TAM are:
Perceived Usefulness (PU) is defined as "the degree to which a technology is able to provide a means-end relationship, that is, the given technology as a means to a desired end" (Doll et al., 1998). Sayar and Wolfe (2007) stated that customers find IB attractive as it is possible to conduct transactions anytime and anywhere, faster and lower fees are incurred compared to using traditional bank branches.
Perceived Ease of Use (PEOU) refers to "the extent to which a person believes that using a particular system would be free of effort" (Davis et al., 1989).
Researchers have added different external variables in the TAM model which includes relative advantage, self- efficacy, Perceived credibility, experience, trial ability, among others.
Perceived Usefulness
Actual System use
Behavioral Intention to use IB
Perceived Usefulness
External Variables
External Stimulus Cognitive response Intention Behavior
The Technology Acceptance Model (TAM)
Source: Davis & Venkatesh, 1996
2.6.4 Comparison between the models
Yousafzai et al. (2010) compared the TRA, TBP AND TAM theories and concluded that TAM is better than the two other models. Comparing the TAM (Davis, 1986) and the traditional TPB model, the TAM was found to have better predictive power, as Taylor and Todd (1995, p. 169) noted:
"In comparing the two versions of TPB, we believe that there is value added as a result of the decomposition, in terms of increased explanatory power and a better, more precise, understanding of the antecedents of behavior. Moreover, if the aim is to predict usage only, then TAM is preferable" (Taylor and Todd 1995, p. 170).
Karahanna et al. used both models and concluded that the general measures were as good, if not better, at predicting behavior than beliefs obtained for a specific situation. Whereas, Mathieson compared TAM with TPB and found that while TAM was a slightly better predictor of intention, TPB show better explanatory power due to the specific beliefs that were derived.
In Mauritius, the service sector makes up of almost 70% of the economy. The Mauritian banking sector has been fast growing and shown resilience for the past years. Starting from being a mono-crop sugar dominated economy; Mauritius has diversified its economic composition during the last thirty years. The country is now the leading center of offshore financial activities in Africa. Mauritius has 19 domestic banks and 11 offshore banks which indicates the importance of banking sector in the country. Financial institutions are licensed by the Bank of Mauritius (BOM) to transact domestic banking business. The Basel II is operational in Mauritius as from end March 2008, following guidelines from the BOM.
.
http://www.bankrate.com/brm/olbstep2.asp
http://finance778.com/Online-Banking/20080122/329.html
http://www.occ.gov/static/news-issuances/news-releases/1999/nr-occ-1999-94-internet-banking.pdf
http://www.bnz.co.nz/personal-banking/footer/online-banking/internet-banking-for-business
http://www.ehow.com/list_6949866_types-internet-banking.html
http://www.ehow.com/list_6076256_types-online-banking.html
http://www.ehow.com/about_5340363_different-types-online-banking.html
http://bankeroff.com/index.php/banking/34-interesting-facts/84-increased-use-of-online-banking-services-to-improve-customer-loyalty
http://electronicbanking.wordpress.com/2009/05/11/different-types-of-electronic-banking-services/
http://epubl.ltu.se/1653-0187/2009/045/LTU-PB-EX-09045-SE.pdf
http://www.scribd.com/doc/46958956/Online-Banking-Thesis
