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Internet banking, despite its relatively brief existence and despite several disadvantages, offers a broad suite of features and resulting benefits to banking customers as well as banking institutions, features and benefits that promise to expand in the future. Evidence from a broad spectrum of research sources—professional journals, magazines, newspapers, reference material, legislative testimony, results of previous research, and commercial web sites—serve to support this thesis.
Brief histories of banking and the Internet are presented, first, as a
foundation for discussing the convergence of the two in the mid-1990s
into what became known as Internet banking. From there, Internet
banking is shown to have expanded geographically and, within the
industry, to banks of all sizes. Expansion has also occurred in terms
of available Internet banking features supported by new technologies
that opened new opportunities. Benefits from Internet banking are shown
to be available to banking customers as well as banking institutions,
and risks, such as those posed by security breaches, challenge
customers and banks. Most sources seem to predict a bright future for
Internet banking.
This dissertation adds to the existing body of knowledge by
demonstrating how the historical development of Internet banking,
ever-expanding features, introduction of new technologies, increasing
benefits, and a focus on improving security to mitigate risks point to
increased growth in Internet banking in the future. Another
contribution made by this dissertation to existing knowledge is the
synthesis of features identified in existing sources into a
comprehensive listing to provide a complete generic view of available
services. This listing may be used by customers or others as a basis
for evaluating the features offered by various banking institutions and
by future researchers as a benchmark for assessing growth in Internet
banking.
Glossary
Banking. “The business of dealing in money and instruments of credit” (Columbia Encyclopedia, 2004).
Bricks and Mortar. “A store (shop, supermarket, department store,
etc.) in the real world” (Computer Desktop Encyclopedia, 2001).
Browser Cache. “A temporary storage area in memory or on disk that
holds the most recently downloaded Web pages ” (Computer Desktop
Encyclopedia, 2001).
Clicks and Mortar. “Refers to businesses that offer online services
via the Web as well as the traditional retail outlets (offline) staffed
by people” (Computer Desktop Encyclopedia, 2001).
Cyberbanking (Cyber Banking). A term used to describe all types of
electronic banking including the Internet, personal digital assistant
(PDA), land-line telephones, mobile telephones, kiosks, and automated
teller machine (ATM) (Cyberbanking, 2005).
Cybercrook (Cybercriminal). “A person who gains illegal entrance
into a computer system or who diverts financial transfers into his or
her own account” (Computer Desktop Encyclopedia, 2001).
E-Commerce. “The transfer of funds, goods, services, and information
online—either over the Internet or across private networks (e.g.,
intranets or extranets)” (Leonard, 1998).
Extranet. “Corporate intranet that has been extended beyond the
usual company boundaries to include major customers or suppliers”
(Hutchinson Dictionary of Computing, Multimedia, and the Internet,
1998).
Internet. An “international computer network linking together thousands
of individual networks at military and government agencies, educational
institutions, nonprofit organizations, industrial and financial
corporations of all sizes, and commercial enterprises (called gateways
or service providers) that enable individuals to access the network”
(Columbia Encyclopedia, 2004).
Internet Banking. “The use of the Internet as a remote delivery channel for banking services” (Hasan, p. 6).
Intranet. “An inhouse web site that serves the employees of the
enterprise. Although intranet pages may link to the Internet, an
intranet is not a site accessed by the general public” (Computer
Desktop Encyclopedia, 2001).
Keyboard Logging. “Software installed by a cybercriminal on a
computer without the computer user`s knowledge, through e-mails, e-mail
attachments, Trojans, or Internet downloads. The keyboard logger can
then capture passwords or other security and personal information and
send it back over the Internet to the fraudsters.” (M2 Presswire, 2005)
Network. “Two or more computers connected for the purpose of
routing, managing, and storing rapidly changing data” (Columbia
Encyclopedia, 2004).
Personal Digital Assistant (PDA). “Lightweight, hand-held computer
designed for use as a personal organizer with communications
capabilities” (Columbia Encyclopedia, 2004).
Point and Click. The “basic method of navigating a web page or a
multimedia CD-ROM. The user points at an object using a cursor and a
mouse, and clicks to activate it.” (Hutchinson Dictionary of Computing,
Multimedia, and the Internet, 1998)
Portal. “A gateway site typically offering a search engine but also a
variety of other services, such as free e-mail (sometimes free voice
mail as well), chat, instant messaging, news services, stock updates,
weather reports, real estate listings, yellow pages, people finders, TV
and movie listings, shopping, and even tools to create and post (a
personal) Web page” (World Almanac and Book of Facts, 2001).
Screen Keyboard. “A virtual keyboard displayed (at the) sign-on
Internet site. Customers use the computer mouse to enter their password
into the screen keyboard, preventing keyboard loggers (from) capturing
the password since the physical keyboard (is not) being used.” (M2
Presswire, 2005)
World Wide Web. “Collection of globally distributed text and multimedia
documents and files and other network services linked in such a way as
to create an immense electronic library from which information can be
retrieved quickly by intuitive searches” (Columbia Encyclopedia, 2004).
Chapter 1
Introduction
“The banking industry of the 21st century is being shaped by an
unprecedented combination of pressures. Competition within the industry
increasingly is augmented by competition from new participants that are
able to target selectively segments of markets traditionally served by
banks. Largely gone are regulatory regimes that shielded banks from
external competition, or provided unique competitive advantages.
Competition is not merely regional or national, but global.
Compounding all this, advances in technology are fundamentally changing
the nature of how information is created, processed, and delivered--the
heart of what banks do.”
—Gillespie (1997)
Gillespie’s quotation establishes a context for this dissertation
through his articulation of the factors that are changing banking in
the new century—increased competition from established and new banking
organizations without consideration of political or geographic
boundaries, reduced regulation, and application of new technologies. It
is the new technologies that are being applied in banking that this
dissertation explores with a focus on Internet banking.
The dissertation will show that Internet banking, despite its
relatively brief existence and despite some disadvantages, offers a
broad suite of features and resulting benefits to banking customers as
well as banking institutions, features and benefits that promise to
expand in the future. A foundation will be established through a review
of existing knowledge on the history of Internet banking (Chapter 2).
Then, existing knowledge on the features of and technology applied in
Internet banking (Chapter 3), benefits and risks of Internet banking
(Chapter 4), and the future of Internet banking (Chapter 5) will then
be explored. Finally, conclusions about the current state of and future
possibilities for Internet banking will be presented.
A research methodology was applied in preparing this dissertation.
Because the field of Internet banking is relatively young—extending
only about ten years into the past—and, because the technology is
advancing so rapidly, the bulk of the research was performed using
professional journals, magazines, newspapers, legislative testimony,
results of previous research, and commercial web sites. Encyclopedias,
dictionaries, and other reference material were used as sources for
definitions and other descriptive information. Most references will be
to Internet banking in the United States as this form of banking is
most popular in that country in terms of sheer numbers (United Press
International, 2001) and, thus, has benefited from the most study of
its usage. The approach to presenting reviews of existing knowledge
represents a logical progression from establishing a historical
foundation followed by building a framework of the features,
technology, benefits, and risks associated with Internet banking. The
capstone of the research segment of this dissertation will be a
presentation of selected existing knowledge on the future of Internet
banking.
Before beginning the exploration of the history of Internet
banking, there is a matter of semantics that should be addressed.
Online banking, PC banking, computer banking, home banking, electronic
banking, or Internet banking—these are all names used to denote remote
banking using a personal computer which connects to the bank’s computer
using a telecommunications utility (Harper, 2000). Cyberbanking
(sometimes referred to by its component words, cyber banking), which is
a relatively new term, is also used. Although these various terms are
often used interchangeably, they are not always synonymous. For
instance, the term PC banking can be used to denote the use of
proprietary software to connect directly to the financial institution,
whereas Internet banking (the term that will be used in this context)
is defined as “use of the Internet as a remote delivery channel for
banking services” (Hasan, 6). The difference between the two terms is
that the latter uses the Internet as a communications medium and the
former does not. Cyberbanking is a more encompassing term that refers
to all types of electronic banking including the Internet, personal
digital assistants (PDAs), land-line telephones, mobile telephones,
kiosks, and automated teller machines (ATMs) (Cyberbanking, 2005).
Internet banking is a segment of the much larger technological world
of what is known as e-commerce. E-commerce, in simple terms, is “the
transfer of funds, goods, services, and information online—either over
the Internet or across private networks (e.g., intranets or extranets)”
(Leonard, 1998). E-commerce, then, encompasses PC banking and Internet
banking as well as home banking, computer banking, electronic banking,
and cyberbanking.
Chapter 2
Historical Development of Internet Banking
Internet banking is but the latest episode in the saga of banking,
a story that traces its roots to ancient times. This chapter begins
with a brief discussion of the birth and evolution of banking, which
Columbia Encyclopedia (2004) defines as “the business of dealing in
money and instruments of credit.” Following the introduction to
banking, a brief presentation on the history of the Internet, which the
same source defines as the “international computer network linking
together thousands of individual networks,” will be offered. These
separate discussions of the history of banking and the Internet will
then converge into a presentation of selected existing knowledge on the
relatively recent history of and developments in Internet banking.
Historical Development of Banking and the Internet
The Columbia Encyclopedia (2004) traces banking back to its simple
beginnings as it was practiced in temples in Egypt, Babylonia, and
Greece. “Bankers” of the time accepted deposits of gold and silver then
made loans of these deposits, charging high interest rates for their
lending services. By 600 B.C., private banking was born then later
developed by the Greeks, Romans, and Byzantines. The predecessors of
modern banks were chartered for specific purposes. For instance, in
1171, the Bank of Venice was chartered to make government loans and, in
1609, the Bank of Amsterdam was chartered to receive gold and silver
deposits. Each society established its own variations on the banking
theme to support its economic and social life.
Switching now to a discussion of the origin and evolution of the
Internet, Leonard (1998) recounts its birth in the 1960s “as a defense
department and academic research tool.” She continues her story of the
history of the Internet by describing its evolution by the 1990s into a
more user-friendly communications method that provided ready access to
“entertainment-related content” and information. Later, with the
addition of security measures, the Internet became a “transmission
media” for e-commerce and for transforming the way governments and the
private sector interface with the individuals and communities they
serve. The Hutchinson Dictionary of Computing, Multimedia, and the
Internet (1998) furnishes more detail about the history of the
Internet, stating that it began as an effort by scientists in the
United Sates to develop a data-sharing network that could withstand a
bomb attack or other disaster. Later, in the 1980s, the Internet grew
as universities implemented mechanisms to share facilities and
information. But it was the establishment of the World Wide Web in the
1990s that fueled the current expansion of Internet availability to
many, many people in virtually every part of the world.
Historical Development of Internet Banking
“You can bank on it. Banking at home could be the first profitable
breakthrough on the information superhighway.” So wrote Leckey more
than ten years ago, in 1994. His words turned out to be prophetic. This
segment consists of a presentation of existing knowledge on the
historical developments in Internet banking.
In the early days of electronic banking, dial-up services that
connected directly to the bank’s computer system using telephone lines
were used (Hogarth, 2004). This was before the Internet was used
extensively by individuals. One example of this, dating from 1995, was
at Barclays Bank. Barclays’ service required that customers have a
computer and modem, run a proprietary Microsoft Windows application,
and access a central number to perform computer banking transactions.
Even a decade ago, Barclays was already offering these services: making
bill payments, obtaining interim statements, requesting balance
inquiries, and transferring funds (Gold, 1995). And, in 1995, First
Interstate Bank in the United States began seven-day, 24-hour per day
online banking services with the following features (Cambridge Telecom
Report, 1995): (1) access to checking, savings, money market, overdraft
protection, credit line and credit card accounts and balance
information; (2) transfer of funds between accounts; (3) payment of
bills through a service without writing a check; (4) downloads of
statement information into customers’ personal computers; and (5)
receipt of answers to questions through a built-in private e-mail
system.
Even in the mid-1990s, banking institutions were already exploring
new technology as Morrall (1994) wrote: “Developments in home banking
have pushed the banking industry to develop its communication
technology and have triggered an increasing number of alliances with
credit card services, banks and communication technology vendors.”
Then came the Internet, featuring the World Wide Web, to banking
customers everywhere. Gervino (2000, citing American Banker Community
Banking, 1999) claims that the Internet, as a communications medium, is
growing faster than either television or radio grew in their early
years. With the popularization of the Internet, according to Hogarth
(2004), in the United States “the use of electronic banking became more
widespread among…households between 1995 and 2003 while the proportions
of households using traditional (non-electronic) banking methods
declined.” Hogarth (2004) contends that computer banking grew by a
factor of five in the six-year period from 1995 until 2001 and by a
factor of three between 1999 and 2003. She added a caveat that “a large
proportion of consumers still conduct at least some banking business
‘in person’.” Hogarth (2004) establishes a correlation among personal
computer ownership, Internet access (especially high-speed Internet
access), higher income levels, awareness of available Internet banking
services, and the use of Internet banking. Newman (2005) also
establishes a parallel between high-speed Internet access and growth in
the use of Internet banking.
Larger banks were the first to offer Internet banking services to
customers. The Xinhua News Agency reported in 1999 that large banks
were “early adopters” of Internet banking technology but that community
banks were beginning to offer it. Greim (1997) writes that Internet
banking “is growing at the top and bottom of the financial food chain,”
referring to its adoption by larger banks as well as smaller ones.
Community banks, typically smaller banks without branches, were slow to
accept Internet banking. In 1998, Marshall stated: “Internet banking is
still far from a common—and many would say, necessary—product,
especially for community banks,” citing as reasons the lack of
financial resources and know-how as well as the question as to whether
Internet banking would be profitable. Just one year later, Golz (1999)
claimed that community banks were a driving force in Internet banking
and that technology had offered an “electronic equalizer” for smaller
banks to more effectively compete with larger ones. Davidson (2000)
states that Internet banking may play a “pivotal” role in helping
community banks to compete with larger banks, particularly in deriving
what he suggests is more than half of their revenues from
nontraditional bank services. The Chairman of the United States Federal
Reserve in Chicago Michael Moskow confirmed comments by Golz and
Davidson in a 2001 speech (EFT Report, 2001):
“While smaller banks traditionally have been at a disadvantage by
comparison to their larger competitors, the Internet has served to
level the playing field to some degree.”
"By forging cooperative alliances with technology, insurance, brokerage
and other firms, many small banks are keeping pace with larger
organization(s). Larger banks can utilize their brand identity and
larger budgets for technology and marketing, but smaller banks often
better understand the needs of their customers and respond quickly with
personalized service."
The downside effects of a lack of financial resources and know-how in
community banks may be mitigated by third-party Internet vendors that
furnish their systems and expertise to multiple banking institutions.
Tejerina (2001) confirms Golz’s statement about the role of third-party
vendors in assisting smaller banks in competing with larger ones using
Internet banking. In 1999, Golz wrote that Internet banking had gone
“mainstream.” Interestingly, the reasons why large banking institutions
and smaller community banks enter the Internet banking arena may be
quite different. Europemedia (2002) reports: “The electronic banking
sector is not particularly attractive to large, strong banks that have
been active in the market for several years. Internet banking
constitutes an opportunity for smaller banks aggressively prospecting
for clients to spread their strengths. For traditional banks, the
electronic channel is a defensive, not an offensive weapon.”
Up to this point, the historical development of Internet banking has
focused on banks that offer Internet banking in addition to services
offered in their physical banking locations. But a new age in banking
is dawning—the virtual bank. This phase of continuing banking evolution
is dramatically different from traditional banking. Contrasted to
traditional banks that only offer services from physical banking
locations (known as bricks and mortar banks) and banks that offer
services from physical banking locations and via the Internet (known as
clicks and mortar banks), virtual banks offer no services from physical
banking locations; instead, their services are only available to
Internet customers (italicized terms quoted from Computer Desktop
Encyclopedia, 2001). Intelligent Finance (2005) is one example of a
virtual bank offering savings and investment accounts, mortgages,
personal loans, credit cards, and insurance. Other Internet-only
virtual banks have such intriguing names as Egg and Cahoot (Pritchard,
2002). ING Direct is an example of a virtual bank thriving in today’s
Internet banking market. ING Direct’s web site touts the following
benefits of their banking institution (ING Direct, 2005):
• great interest rates;
• no fees;
• no minimums;
• 24-hour access to accounts;
• fast account opening (less than five minutes); and
• mortgages and certificates of deposits.
ING Direct splits the cost savings it realizes from Internet banking
with its customers by offering higher interest rates. ING Direct has
spent millions of dollars on marketing in an effort to convince
prospective customers to use the Internet as their banking gateway
(Australian Banking & Finance, June 16, 2003).
Another relatively new development is the introduction of Internet
banking services for personal digital assistants, or PDAs. M2 Presswire
reported in 2001 that Nationwide, which was the first institution to
offer Internet banking in the United Kingdom in 1997, was enhancing its
PDA services to include account transfer and bill payment features. Now
Internet banking customers can have bank account access while “on the
go”; they are no longer required to access their accounts from a fixed
computer location with a hardwired telecommunications connection.
Feig (2004) provides some interesting statistics about the use of Internet banking in the United States today:
• Employees at work use Internet banking extensively; it is the
fifth most popular type of Internet site visited for personal business
(Feig, 2004, citing the Harris Interactive Web at Work Study, 2004).
• The top three uses of Internet banking (with the percentage of
users who avail themselves of the services) are account monitoring (95
percent), funds transfer between accounts (64 percent), and bill
payment (55 percent) (Feig, 2004, citing the Michigan Survey Research
Center’s Surveys of Consumers, 2003).
• Convenience was given as a very important reason for using
Internet banking by 79 percent of users with 71 percent of users citing
time savings as very important. Another very important factor was
24-hour availability of Internet banking services (Feig, 2004, citing
the Federal Reserve Bulletin, U.S. Consumers and Electronic Banking
1995-2003, 2004).
A spokesperson for the Pew Internet and American Life Project states
that “of all the major Internet activities tracked by Pew since March
2000, online banking has grown the fastest” (Newman, 2005). The New
Hampshire Business Review (2000) cites several reasons for the
increasing popularity of Internet banking: the reduction in concerns
about Internet security, greater public confidence in conducting
business over the Internet, the convenience offered to Internet banking
customers, the low cost to customers of obtaining and using Internet
banking, and the declining costs to banks associated with installing
Internet banking.
In 2000, Robinson reported that, despite marketing efforts by banks
in the United States, there has not been the massive move to Internet
banking that they would have preferred. To prove her point, she states
that, although fifty percent of American homes have computers, only
five percent avail themselves of Internet banking services. And, many
people who try Internet banking later abandon it. Stavins (2001) writes
that despite predictions of “a cashless and checkless society,” in the
United States, electronic transactions “still constitute only a small
fraction of all payments made,” although she adds that “the rate of
growth of electronic payments is estimated to exceed that of paper
checks.” Groenfeldt (2000) seems to confirm the statements made by
Robinson and Stavins. He states that the reality of Internet banking
has not met the expectations and gives Internet banking the following
narrative report card:
“Leaders in Internet banking offer a wide range of services, full
integration of the Internet with other delivery channels, intensive
marketing of their Internet service and strong customer service
support.”
“But a gap looms between the leaders and what smaller banks can offer.
Internet banking, often considered a way for community banks to draw
even with their big city competition, could actually widen the gap
between them.”
Others contend that Internet banking is making significant inroads. In
2003, Hielscher furnished the following statistics on the top ten banks
in the United States based the number of customers who use the service:
(1) Citibank (7,600,000); (2) TD Bank/Canada Trust (4,500,000); (3)
Bank of America (4,400,000); (4) Wachovia (4,000,000); (5) Wells Fargo
(3,300,000); (6) Bank One (3,200,000); (7) Fleet Boston (2,600,000);
(8) Chase (2,200,000); (9) US Bancorp (1,400,000); and (10) Fifth Third
(1,000,000).
Recently, Lohse (2005) reported that those people who have tried
Internet banking in the United States grew by 47 percent over the past
two years. She attributed much of this growth to increases in the
number of men, “tech-savvy” younger adults, and affluent households
that pay their bills and manage their finances online. Lohse states:
“In the past two years, men are more likely to handle their banking
online than women—49 percent vs. 39 percent—compared with an equal
propensity between the sexes two years ago…Those with higher household
incomes are more likely to be banking online, with 55 percent of
Internet users making $75,000 or more trying it, compared with 32
percent of Internet users with household incomes under $30,000.”
Stavins (2001) confirms Lohse’s findings in writing that “younger, more
educated consumers with higher incomes” are most likely to make
electronic payments.
Despite its growing popularity, Internet banking is not equally
accessible to all people. The poor, minorities, the elderly and the
disabled are underserved. However, banks are making inroads in
assisting individuals with special needs (Lee, 2000; AAP General News,
2002). Although certain groups are underrepresented among Internet
banking users, one group is heavily engaged—younger people, especially
members of Generation X, or those individuals between 28 and 39 years
of age (Newman, 2005, citing the Pew Internet & American Life
Project).
The expansion of Internet banking is occurring worldwide:
• In the United Kingdom, as mentioned earlier, Barclays Bank was an
early entrant with its PC banking application in 1995 (Gold, 1995).
But, Little (2004) reports that growth in Internet banking among small
businesses has slowed significantly with slow Internet access and
security fears cited as two reasons for the slowdown.
• In Europe, including the United Kingdom, the number of Internet
banking customers nearly tripled in three years to 60 million reported
M2 Presswire in 2003. While most of these users were in the United
Kingdom and Germany, the highest per capita number of users was in the
Scandinavian countries. For instance, banks in Norway lead the rest of
the world in Internet banking penetration as well as in the proportion
of banking customers who pay bills or place brokerage orders via the
Internet (Brown-Humes, 2000).
• “The rapid growth of Internet banking is transforming the way
wealthy Asians manage their finances,” reports Richardson (2000). Wui
(2002) reports that, in Malaysia, interest in this form of banking is
growing and, although some of the more advanced applications (e.g.
paying bills electronically) are still elusive, more basic functions
are being implemented successfully.
• South America’s growth in Internet banking reflects that continent’s
recent rapid growth in Internet usage (Joelson, 2002). He writes:
“If…the region's banks follow the lead of a handful of financial
institutions in Brazil, Mexico, Argentina and Chile that have
implemented among the world's best practices online, Internet banking
rates should soar. Joelson cautions that anyone who expects significant
growth should realize that “better marketing may help spread mobile and
Internet banking, but it won't be enough to bring Latin America to an
overall level akin to that of North America and Canada.”
• O’Connell (2001) writes that banks have “aggressively implemented”
Internet banking in Australia. In this country, “Internet banking now
provides a fully virtual option for almost all transactions,” according
to Australian Banking & Finance (February 28, 2003). The results
are paying off. Moullakis (2005) recently reported that, for the first
time, the number of Internet banking transactions exceeded the number
of paper check transactions. This is quite a change since 1999, when
Australian Banking & Finance reported that “consumers may have
learned to bank by ATM, phone, and home computer, but an old-fashioned
visit to the teller window is still the most popular way to complete a
transaction.”
• Stander (2004) writes about Internet banking in South Africa where
this technology is also taking hold and compares implementation there
with implementation in Singapore.
Despite the proliferation of Internet banking, it has not been easy
for banking institutions to implement. Burgess (2002), in expressing
the opportunities and obstacles that technology has presented, writes:
“the financial services industry has embraced technology and hurtled
forward into the brave new world,” but that “technology has created
opportunities and obstacles to financial organisations.” Some of the
obstacles Burgess cites are incompatible hardware and software that
have been encountered during banking mergers and acquisitions,
cumbersome information technology infrastructures that have restricted
product offerings and inhibited effective customer relationship
management, and high technology costs that have prevented development
and implementation of improved systems. Yet, despite the obstacles,
Burgess admits that “technology makes working within the financial
services sector easier.”
Hogarth (2004) provides two of the underlying reasons that that may
help to explain why Internet banking is growing in popularity: first,
people are becoming more comfortable with using the Internet for their
banking business and, second, there has been an increase in positive
attitudes in each of the years from 1999 until 2003, adding that people
also feel more secure about the safety of using the Internet for
banking. Banks are not just waiting for customers to accept Internet
banking. Michelsen (2002) reports that some banks are pursuing a
marketing initiative of installing “kiosks” in bank offices to
demonstrate the advantages and capabilities of Internet banking by
allowing customers to perform Internet banking transactions as if they
were using their home computers.
In closing this chapter summarizing selected existing knowledge on
the historical development of Internet banking, the words of Patrick
Thomas, a senior Internet Analyst at Nielson/Net Ratings, seem to
capture the essence of the state of this electronic approach to banking
today (Business Wire, 2002): "’For many, online banking has become an
integral part of the overall banking experience, helping to spur growth
and loyalty for those institutions who effectively meet customer
needs.’”
Chapter 3
Features and Technology Associated with Internet Banking
Queue busters are what Pritchard (2000) calls Internet banking
services, referring to the time savings and convenience customers enjoy
by avoiding waiting lines at traditional bricks and mortar banking
offices. The benefits of Internet banking will be the topic of Chapter
4 but, before beginning that discussion, a summary of selected existing
knowledge on the features associated with this form of electronic
banking will be presented and the underlying technology of Internet
banking will be explored.
Features Associated with Internet Banking
“Traditional Internet banking services are listed as opening an
account, transferring funds among accounts, making payments, and
conducting investment and trading transactions” (Hasan, 6). Hasan also
lists services that are commonly used by banks assembled in what he
calls “standard packages”:
• making deposits and withdrawals;
• paying bills;
• managing credit and debit cards;
• managing money market accounts;
• checking account balances;
• transferring funds;
• applying for loans and other services;
• applying for mortgages and related services;
• obtaining stock quotes and trading in investments;
• participating in electronic commerce;
• managing assets; and
• participating in insurance programs.
Australian
Banking and Finance (May 18, 2004) describes how flexible the features
of Internet banking are: “Internet banking offers customers the
capability to view balance and transaction history, order new
statements, transfers, pay bills or pay anyone.” And, for business
customers, “the small business features of Internet banking include
payroll payments and payments file upload facilities.” Hielscher (2003)
lists Internet banking features as viewing cleared checks as well as
ATM transactions and deposits, transferring funds among accounts, and
paying bills. Johnson (1997) lists the features of Internet banking
that were available even as early as eight years ago: balance checking,
funds transfer, bill payment, and account information download to
personal computer finance software. Lohse (2005), in writing about
Wells Fargo Bank’s Internet banking features, reports that the bank:
“…has seen more customers flock to online banking as the bank has added
functions, from basics like checking account balances online to paying
bills to getting bills automatically sent or paid online.” Hogarth
(2004) describes the following Internet banking features:
• funds transfer;
• bill payment;
• account balance information;
• account statement review;
• paper check order requests;
• stop-payment requests;
• investment account monitoring;
• credit card statement review; and
• credit, investment, and insurance shopping information.
The web site, MsMoney.com (2004), lists the following features of Internet banking:
• checking account balances;
• balancing a checkbook;
• transferring money between accounts;
• tracking recent account activity;
• authorizing electronic bill payments;
• requesting copies of past statements and processed checks;
• ordering traveler’s, cashier’s, and regular checks;
• issuing stop payment requests;
• applying for automobile, mortgage, home equity, student, or personal loans; and
• receiving investment product and service information.
Pritchard (2000) writes that the “core features” of Internet banking
are very similar among banks. He lists these core features as checking
bank account balances, transferring funds between accounts, and bill
payment. The New Hampshire Business Review (2000) cites the following
features of most Internet banking services: anytime account access;
funds transfer between accounts, including loans; account history
download, including statements; account information download into
financial software; and bill payment. Harper (2000) separates the
Internet banking features that most banks offer (i.e. checking account
balances, transferring funds among accounts, and paying bills
electronically) from those that some banks offer (i.e. applying for
loans, downloading account information, trading stocks and mutual
funds, and viewing paper check and deposit slip images).
Expansion in features is having an impact on the definition of Internet
banking itself, claims Hasan (6). For example, he writes: “The latest
definition of Internet banking emphasizes the inclusion of ‘on line
trading’.” Some banks, such as Wells Fargo in the United States are on
the leading edge in adding Internet banking features. Groenfeldt (2000)
writes: “More recently, the bank (Wells Fargo) has added incremental
services that customers need, such as the ability to change their
address, request a copy of their statement or order traveler checks and
foreign currency for next-day delivery,” and adds that “The bank is
continually adding functionality, from online brokerage to mortgages.
Online student loans will come later in the year, and bill presentment
and limited wireless access sometime down the road.” And, another
banking institution, KeyCorp, claims that its customers can do
everything on the Internet that they can do in one of its physical
locations, “except get cash” (Groenfeldt, 2000). Australian Banking and
Finance (2003) reports that recent new features added to Internet
banking include “automated pre-set payments, pay anyone in Australia
and pay anyone overseas facilities…and bill presentment capability.”
Following the recommendations of Courtier and Gilpatrick (1999,
cited in Lu, 2004) concerning regularly surveying or otherwise gauging
the needs and desires of customers before introducing new Internet
banking strategies, U.S. Bank in the United States solicited consumer
feedback to identify the features its customers would like to see
incorporated into its Internet banking services. The result was that
the bank dramatically redesigned its Internet banking web site to
include the following new customer-friendly features (Business Wire,
2002):
• “a snapshot view” of all of the customer’s accounts (e.g. checking
accounts, savings accounts, credit card accounts, loan and credit line
accounts, and mortgage accounts) showing the names and types of
accounts, each account balance, and the total amount available in each
account;
• the facility for the customer “to create account nicknames, such
as ‘John’s Checking’ or ‘Jane’s College Fund’,” thereby relieving the
customer of the need to memorize account numbers;
• presentation of transaction details in a screen image resembling a
customer’s checkbook register with a provision that allows the customer
to sort and find a specific transaction;
• a simplified process for transferring funds in which the option to
perform funds transfer is always available on the computer screen; and
• an improved navigation facility providing “one-click” access to more options at any time during the session with the customer.
U.S. Bank also provides other features that facilitate Internet
banking for its customers (Business Wire, 2002): opening checking or
savings accounts, purchasing certificates of deposit, receiving and
paying bulls, and downloading transactions to customers’ financial
management software products. Before committing to U.S. Bank’s Internet
banking, customers can view its features on a multimedia presentation
at the bank’s web site (U.S. Bank, 2005).
In Chapter 2, reference was made to Nationwide’s enhancement of
Internet banking using personal digital assistants, or PDAs, which are
devices that allow customers to perform their banking without being
confined to a computer with a wired connection (M2 Presswire, 2001).
Nationwide lists the following services available from customers’ PDAs:
• access to information about some of Nationwide’s products and services;
• authorized access to the individual customer’s balance and transaction information;
• account funds transfer;
• bill payment; and
• access to credit card information including transactions, credit limit, available balance, and next payment due.
Technology Associated with Internet Banking
Technology in this context refers to technical aspects of Internet
banking (e.g. hardware, software, and telecommunications utilities) as
well as the processes involved in carrying out Internet banking
transactions. Before exploring the technology used in Internet banking,
it is important to understand some basics about the technological
foundation of the Internet. In describing the Internet as being
“composed of people, hardware, and software,” The World Almanac and
Book of Facts (2001) provides this layperson’s explanation:
“The Internet involves (three) basic elements: server, client, and
network. A server is a computer…that makes data available to other
programs on the same or other computers—it “serves” them. A client is a
computer that requests data from a server. A network is an
interconnected system in which multiple computers can communicate via
copper wire, coaxial cable, fiber-optic cable, satellite transmission,
etc. When you use a browser to go to a site on the World Wide Web, you
access the site’s files…
Here are the steps in opening and accessing a file:
• In the browser, specify the address, or URL, of the website.
• The browser sends your request to the Internet service provider’s server.
• That server sends the request to the server at the specified URL.
• The file is sent to the ISP’s server, which sends the file back to the browser, which displays the file.”
Pritchard (2000) writes: “Online banking is a pretty sophisticated
application for a computer, and banks can be more than a little fussy
about the software and computers they will support,” adding that “ it
is best to have an up-to-date version of the web browser: the
application that displays Internet pages on a computer.” He attributes
the “fussiness” by banks about hardware and software to their concern
for security, a topic which will be explored in the next chapter.
Hielscher (2003) describes the Internet banking process from a
customer’s point of view in very simplistic terms: “For most computer
users, banking online is simple. They go to their bank's web site and
log in to their accounts with a user name and password.” Berger (1998)
provides a summary of the Internet banking process, again
simplistically and from the customer’s perspective. She writes that
customers connect with their banks, enter personal passwords, then
point and click to pay their bills, check their balances, or transfer
funds between their accounts.
Finally, Spiotto (2001) describes the relatively standard process used
in electronic bill presentment and payment (EBPP). EBPP, which is a
feature of many Internet banking systems, serves as an example of the
processes used in Internet banking:
• The customer receives an invoice either electronically, typically by
electronic means or by postal mail. For electronic invoices received at
the EBPP web site (usually the customer’s bank), the customer is
notified by e-mail.
• The customer logs onto the EBPP web site and reviews the invoice
then authorizes the EBPP provider to pay the total amount of the
invoice or a portion of it.
• If the invoice is not electronically delivered to the customer and
is, instead, delivered to the customer by postal mail or in person,
s(he) logs onto the EBPP web site and enters instructions for paying
the invoice. Typically, future variable and recurring payments can be
scheduled.
• When the customer’s authorized payment request is received by the
EBPP provider, the provider transfers funds using an overarching
automated payments system used by multiple providers. If the payee
accepts electronic payments, payment of the invoice is made
electronically. On the other hand, if the payee cannot accept this form
or payment, a paper check or a bank draft is mailed to the payee.
Chapter 4
Benefits and Risks of Internet Banking
This chapter begins with a summary of existing knowledge about the
benefits, or advantages, of Internet banking. Following the discussion
of benefits, a presentation on existing knowledge about the
disadvantages and, particularly, the risks associated with Internet
banking will be offered. The benefits and risks of Internet banking
accruing to individuals, to banking institutions, and even to nations
will be explored.
The Benefits of Internet Banking
Internet banking provides customers with greater control over the
savings and lending decisions they make than was available in the past
(Business Wire, 2000). “Banking in cyberspace promises speed,
convenience, and maybe lower costs,” suggests Association Management
(2001). This segment explores existing knowledge on the benefits of
Internet banking.
The web site MsMoney.com (2004) lists benefits associated with Internet banking, including the following:
• convenience;
• expedience;
• inexpensive cost;
• banking services that are available at any time of the day or night;
• banking services available on weekdays, weekends, and holidays; and
• banking access available anywhere in the world with a computer and Internet access.
Groenfeldt
(2000) seems to confirm, in part, the benefits listed by MsMoney.com
when he writes that customer surveys and focus group interview results
reveal that convenience and time savings are the primary reasons that
bank customers use Internet banking. Schaechter (2002) suggests that
Internet banking “makes it easier for customers to compare banks'
services and products” and, on a global basis, Internet banking may
present an “opportunity for countries with underdeveloped financial
systems to leapfrog developmental stages,” adding that “Customers in
such countries can access services more easily from banks abroad and
through wireless communication systems, which are developing more
rapidly than traditional ‘wired, communication networks’.” Berger
(1998) sets forth two benefits: first, Internet banking is a
“time-saver” and, second, the burden of Internet banking software
upgrades falls on the bank, not on the customer.
One ecstatic customer of Internet banking exclaimed: “‘On-line banking
is the greatest thing since sliced bread…If I want to pay my bills at
midnight, I can do it. I can transfer things instantaneously into my
savings account. I don't have to get in the car and physically drive
down to the post office with a check. If I have a question, I drop an
e-mail off and get an answer within five minutes.’” (New Hampshire
Business Review, 2000) Another customer stated: "The different
functions are amazing…I can surf through all my accounts to find which
checks have cleared and which haven't. I can look at the checks online,
and turn them over to see who signed it.’” (Hielscher, 2003)
In Chapter 3, Pritchard’s (2000) reference to Internet banking services
as queue busters highlighted the benefit to customers of avoiding the
waiting lines at traditional banks. But he suggests that the benefits
do not accrue to banking customers alone; he states that banks enjoy
benefits as well, citing savings on each transaction (versus providing
the services in person or over the telephone) even when the investment
in the Internet banking infrastructure is considered. He also cites
increased customer loyalty and sale of additional services (e.g.
investment accounts) to customers.
Schaechter (2002) also describes the benefits to customers and the
banks themselves in writing about the transformation in banking offered
by the Internet as a “new delivery channel for banking services that
benefits both customers and banks.” She adds that, for the customer,
“access is fast, convenient, and available around the clock, whatever
the customer's location” and banks can provide services more
efficiently and at substantially lower costs. For example, she contends
that, in the United States, “a typical customer transaction costing
about $1 in a traditional ‘brick and mortar’ bank branch or $0.60
through a phone call costs only about $0.02 online.” Schaechter (2002)
adds that Internet banking “can increase competition among banks, and
allows banks to penetrate new markets and thus expand their
geographical reach.” Low (2000) also stresses the benefits of Internet
banking to customers and banks: “The introduction of Internet banking
has benefited both banks and consumers alike. Banks now have the
ability to cross-sell their financial and non-financial services such
as insurance and investment products while creating value and
convenience for consumers.”
Silverman (1999) cites benefits available to banks from Internet
banking as cost savings from processing transactions more efficiently,
increased levels of deposits from customers, and improved tracking of
customers’ needs and desires. In writing about Internet banking in the
United States, Leonard (1998) compares the costs of banking
transactions conducted by various means, clearly illustrating the
benefits financial institutions can enjoy by employing Internet banking
technology:
• in-person bank transactions cost $0.76 each;
• ATM transactions cost $0.43 each;
• transactions by telephone cost $0.24 each; and
• Internet transactions cost only about $0.01 each.
Robinson (2000) writes that banks can benefit from Internet banking
because online transaction processing costs are “dramatically less” and
customers perform the bulk of the work; because electronic banking can
“solidify and extend a bank’s relationship with its customers”; and
because online banking services are essential in successfully competing
with services from “other financial institutions, investment concerns,
and insurance companies.” Another benefit to banking institutions is
that the availability of Internet banking technology is helping them to
globalize their operations, according to O’Connell (2001). A further
benefit is that Internet banking gives banks an opportunity to overcome
complaints about poor customer service offered in their physical
banking locations. Banks can offer superior service and reduce costs at
the same time (Australian Banking & Finance, June 16, 2003).
The Disadvantages of Internet Banking with a Focus on Risks
Now attention turns from the benefits of Internet banking access to
its disadvantages. Berger (1998) cites disadvantages as the relatively
high cost and the possibility of power failure during the Internet
session resulting in the customer not knowing whether his or her
transaction was processed. MsMoney.com (2004) lists the following
disadvantages associated with Internet banking:
• need for an account with an Internet Service Provider (ISP);
• time-consuming initial set up;
• changing to another bank is more difficult than with changing banks in a traditional banking arrangement;
• required basic computer skills with knowledge of the Internet;
• a degree of comfort with using a computer; and
• concern for security, especially unauthorized access to accounts.
The final disadvantage listed by MsMoney.com—security, specifically
risks associated with security in Internet banking—was the focus of
most of the research into existing knowledge on the topic of
disadvantages. As such, the balance of this chapter will be devoted to
presenting a summary of existing knowledge on the topic of Internet
banking risks.
Just as Internet banking offers benefits to customers and banking
institutions alike, this electronic tool also presents risks.
Schaechter (2002) suggests that Internet banking “is not only
susceptible to, but may exacerbate, some of the same risks—particularly
governance, legal, operational, and reputational—(that are) inherent in
traditional banking.” For instance, Schaechter suggests that legal
risks a bank might experience include expanding so quickly that it does
not become familiar with local laws and regulations thereby exposing
their assets to losses through lawsuits. Schaechter states that, in
response to these risks, “many national regulators have already
modified their regulations to achieve their main objectives: ensuring
the safety and soundness of the domestic banking system, promoting
market discipline, and protecting customer rights and the public trust
in the banking system.”
A comprehensive and representative assessment of risks facing Internet
banking is offered by Vaughn (1999). He categorizes risks into three
groupings—overt, common, and strategic risks—that may negatively impact
banks and their customers. Overt risks, according to Vaughn, involve
security issues including the following:
• theft of information as it is transmitted over the Internet;
• unauthorized access to bank databases;
• creation of fraudulent transactions by criminals;
• web site vandalizing using “electronic graffiti”;
• disturbance in the normal functioning of the bank’s web site;
• shutdown of the web site with resulting denial of service to customers; and
• creation of fraudulent banks or “takeover” of legitimate bank electronic facilities.
Vaughn (1999) lists common risks as:
• mechanical failure;
• software “bugs”;
• human error;
• banking employee turnover;
• computer viruses;
• inadequate system capacity to manage the workload;
• power failure;
• communications disruption; and,
• inadequate disaster recovery capability.
Vaughn’s (1999) list of strategic risks includes:
• unintuitive or frustrating-to-use customer software;
• unplanned upgrades due to rapid hardware and software obsolescence;
• failure to keep abreast of the latest security risks and countermeasures;
• training challenges posed by constant introduction of new technologies;
• lack of knowledge of the complex Internet banking environment; and
• inadequate law enforcement preparedness.
Vaughn (1999) lists a broad spectrum of individuals who can present
security risks to Internet banking: the “casual voyeur” or “thrill
seeker,” true criminals, and terrorists. He contends that all of the
risks associated with Internet banking can be “mitigated through the
implementation of proper technology, coupled with diligent and
professional operation following safe and sound practices.” For
instance, he suggests encryption, firewall, and intrusion detection
technologies to mitigate overt risks; adequate management and adherence
to professional information systems guidelines for mission critical
systems to mitigate common risks; and development of strategies to
address strategic risks.
Pritchard (2000) provides some direction in carrying out Vaughn’s
(1999) suggestion for applying “safe and sound practices.” Pritchard
(2000), in describing security risks, stresses the need for individuals
banking online to keep passwords secret and to be aware of unusual
transactions being posted to their accounts. He suggests that Internet
banking users should be very careful when using computers in public
places such as at work or in Internet cafes, urging users to “clear the
information in their browser cache after each visit to the bank site.”
Banking institutions, too, are aggressively improving their Internet
banking systems by addressing Vaughn’s (1999) recommendations for
security enhancements through “implementation of proper technology.”
Recently, according to M2 Presswire (2005), Citibank Consumer Bank
became the first banking institution in the United Kingdom to implement
a screen keyboard feature for customers to use in logging into its
online banking service to furnish improved protection from cybercrooks
such as those who perform keyboard logging. PR Presswire (1999) reports
on a fingerprint biometric security system being jointly developed and
implemented by information technology companies and ING Direct. Using
this system, Internet banking customers would authenticate themselves
using a special computer mouse designed to read their fingerprints.
Chapter 5
The Future of Internet Banking
Chairman of the United States Federal Reserve in Chicago Michael
Moskow, speaking in 2001 on the topic of Internet banking (EFT Report,
2001) stated: “’The industry is marked by continuing evolution. For the
past three years, we have heard promises that the Internet would
provide banks with competitive advantage, improved customer service and
access, revenue generation and expense reduction. More recently, banks
have begun citing customer retention as their primary motive to offer
on-line functionality. The extent to which these promises can be kept
remains to be seen.” William B. Harrison, president and chief executive
officer of Chase Manhattan confirms that Internet banking is still
developing, stating: "I am absolutely convinced that we are in the
early stages of a technology revolution that will far surpass the
industrial revolution" (Gervino, 2000).
The Federal Reserve Chairman’s comments indicate that Internet
banking has not achieved full maturity. Internet banking is still
developing and expanding as Harrison’s comments suggest. This chapter
will explore selected existing knowledge sources on the possible future
of Internet banking, including a look at customer behavior in making
bill payments electronically using the Internet that may provide some
insight into problems which may need to be addressed in the future.
So, what does the future actually hold for Internet banking?
A selection from Federal Reserve Chairman Moskow’s 2001 speech
provides some indication of the actions banks will have to take in the
future to leverage the benefits of Internet banking for themselves and
for their customers (EFT Report, 2001): “Although early innovators may
have achieved a degree of competitive advantage, as more financial
institutions begin offering similar services, that advantage is not
sustainable...While technology innovation can offer great benefits,
deployment of technology for its own sake is not a winning strategy…To
deliver innovative products and services, banks must make tradeoffs in
their choices about the use of new technologies among key attributes
such as cost, convenience, safety and complexity.”
Another indication of future actions banks might want to take comes
from Mantel (2000) who studied the behavior of customers in making
electronic bill payments. He writes: “Although the checkless society
has been predicted for decades, checks remain the most frequently used
noncash payment method in the U.S., contrary to trends in a number of
other countries.” Mantel found that customers who did not use this
service did not perceive electronic bill payments as substitutes for
paper checks. Further, he found that a greater number of customers
would accept electronic bill payment if additional product features
such as “error resolution, service level guarantees, customer service,
the ability to make partial payments, and more convenient signup were
bundled with electronic bill payment services.” Mantel recommends that
financial institutions focus their future marketing attention on
funding development of these features rather than on overcoming
customers’ resistance to change.
Spiotto (2001) adds the following problems with electronic bill payment that banking institutions should address in the future:
• many organizations cannot deliver their bills electronically;
• entering payment information into personal computers is inconvenient for many customers;
• bill payment services are often perceived as being too expensive;
• many organizations are awaiting more customer interest in electronic
bill payment before upgrading their technology and many customers are
waiting for more organizations to offer the service;
• customer banking habits are slow to change; and
• customers have security and privacy concerns regarding Internet banking.
Europemedia (2002) paints a less than bright picture of the future
of Internet banking, specifically for banking institutions such as ING
Direct that do not have physical banking locations: “The growth
potential of virtual-only banks is nearing exhaustion, with the
majority of clients considering the electronic channel a supplement to
traditional banking rather than an independent stand-alone service.”
But some see Internet banking as a threat to traditional “bricks and
mortar” banks that do not provide such a service (Computergram
International, 1999).
Kaur (2000) suggests that future Internet banking development might
include making the banking institution’s web page a portal to the
entire World Wide Web. Under this scenario, bank customers could check
their e-mail messages, read current news, check their horoscopes, and
do everything else they would normally do on the Internet without
leaving the bank’s web site. Kaur claims that doing this would allow
the banking institution to “lock in” its customers. Groenfeldt (2000)
suggests than Internet banking in the future should include commonly
need features such as furnishing extensive customer service (i.e.
online assistance or assistance by telephone) and ordering checks in
addition to less commonly needed ones such as obtaining an image of a
past banking statement or an image of a check.
Certainly, Internet banking security will be an important factor in the
future just as it is today. The screen keyboard feature being
introduced by Citibank Consumer Bank (M2 Presswire, 2005) and the
fingerprint biometric security system being jointly developed for ING
Direct (PR Presswire, 1999) are two examples of how banking
institutions are responding to real and potential security threats.
Some banks have developed complex sets of strategies that provide
insight into the future of Internet banking. The strategies of one such
bank, Security First Network Bank, include (The Banker, 2000):
• offering the same services that a direct retail bank offers;
• multi-channel access, meaning access using different technologies;
• personalized service;
• partnerships and joint ventures with “best of breed” information technology vendors; and
• use
of customer relationship management technology including data
warehousing that provides front-end customer interfaces and back-end,
transparent data collection about customers for the purpose of
cross-selling products.
At the micro, banking institution, level, Gervino (2000, citing US
Banker, 1999) suggests that banks must take a strategic view of
Internet banking in the future, suggesting that the following actions
be taken:
• identify the target market;
• determine if the bank’s organization and business processes align
with a new Internet strategy and whether any reconfiguration is in
order;
• determine if the current brand should be maintained or if a new, improved brand should be created;
• decide how the new services will be differentiated from those of competitors;
• determine if the bank’s Internet service mix should remain the
same or should a new set of services be offered to customers; and
• decide on the appropriate type of pricing and whether it should be different for different customers.
On a grander scale—at the national, or macro, level—Schaechter
(2002) suggests that there are questions that officials must answer in
the near future regarding the impact of Internet banking. Exact
quotations are used to capture the exact meaning of the important
issues she raises.
• “If electronic banking does make national boundaries irrelevant by
facilitating capital movements, what does this imply for macroeconomic
management?”
• “How is monetary policy affected when, for example, the use of
electronic means makes it easier for banks to avoid reserve
requirements, or when business can be conducted in foreign currencies
as easily as in domestic currency?”
• “When offshore banking and capital flight are potentially only a
few mouse clicks away, does a government have any leeway for
independent monetary or fiscal policy?”
• “How will the choice of the exchange rate regime be affected, and
how will e-banking influence the targeted level of international
reserves of a central bank?”
• “Can a government afford to make any mistakes? Will the spread of
electronic banking impose harsh market discipline on governments as
well as on businesses?”
Chapter 6
Conclusions
This dissertation set out to show that Internet banking, despite its
relatively brief existence and despite some disadvantages, offers a
broad suite of features and resulting benefits to banking customers as
well as banking institutions, features and benefits that promise to
expand in the future. That purpose has been fulfilled.
The history of the development of Internet banking established that
this electronic financial management tool is a fairly recent
phenomenon—dating from the mid-1990s—brought about by the convergence
of traditional banking and modern Internet technology. The presentation
of existing knowledge on the historical development of Internet banking
indicated expansive growth worldwide with penetration into virtually
every continent and throughout the banking industry, in banks both
large and small, mirroring growth in access to the Internet itself.
There is every reason to believe that the geographic expansion of
Internet banking will continue to increase, providing borderless
banking access to people everywhere.
As Internet banking has expanded geographically, it has also
expanded in terms of the features it offers. Today, Internet banking
has the capability to support no less than 25 different features. Using
the features described in the presentation of selected existing
knowledge, the following list was synthesized to provide a
comprehensive view of Internet banking features available through
various banking institutions today:
• 24-hour per day/seven day per week access to Internet banking web sites;
• wireless account access;
• opening an account;
• customizing accounts to make them more user-friendly;
• viewing account balances;
• viewing transaction histories;
• viewing check and deposit slip images;
• downloading account information to the customers’ personal computers;
• balancing checkbooks;
• ordering paper checks;
• ordering traveler’s and cashier’s checks;
• purchasing certificates of deposit;
• ordering foreign currency;
• requesting stop-payment actions;
• making deposits;
• making withdrawals;
• transferring funds among accounts;
• receiving electronic bills;
• making payments to others (e.g. paying bills);
• obtaining stock quotes;
• conducting investment transactions;
• participating in electronic commerce;
• applying for and managing credit and debit card accounts;
• applying for automobile, mortgage, home equity, student, and personal loans;
• managing assets;
• participating in insurance programs;
• obtaining savings, checking, credit, investment, and insurance information; and
• notifying banks of changes-of-address.
This listing may be used by customers or others as a basis for
evaluating the features offered by various banking institutions and by
future researchers as a benchmark for assessing growth in Internet
banking.
A review of selected existing knowledge on the future of Internet
banking suggested that available features will continue to expand in
the future just as geographic penetration promises to continue. The
expansion in features parallels, and is certainly dependent to some
degree on advances in Internet banking technology (e.g. mobile banking
access supported by new PDA communications technology). The forecast is
that Internet banking will continue to grow in terms of breadth (i.e.
geographically) and depth (i.e. features) as new technologies continue
to develop.
The benefits of Internet banking were shown to accrue to both
banking customers and banking institutions, helping to explain the
continued growth in its use by customers and in services offered by
banks in what is a mutually beneficial relationship. As features have
increased, so have benefits to both parties. For instance, additional
features have resulted in time savings for Internet banking customers
as they can now perform most banking tasks from their personal
computers, eliminating physical trips to the bank, and introduction of
new features has continued to decrease costs and increase customer
loyalty for banking institutions. On the other hand, disadvantages,
especially risks to customers and banks continue to plague Internet
banking; however, customers’ increasingly positive attitudes about the
security provided in electronic banking may indicate that banks are
making headway in dealing with security risks. The prediction is that,
as the breadth and depth of Internet banking continue to expand, the
benefits to customers and banks will continue to grow as well. As
cybercrooks and others intent on doing harm find new ways to breach
Internet banking security, the prediction is that banks will continue
to ramp up their efforts to maintain the integrity of their systems and
to protect customers.
In summary, all indicators—rapid historical development, expanding
features, introduction of new technologies, increased benefits, and a
focus on improving security to mitigate risks—point toward continuing
growth in Internet banking in the future.
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