Essay: Internet banking

ABSTRACT

Internet Banking is one of the most up-to-date Internet technology applications. Its success depends to a large extent on the customer satisfaction. By the rapid growth of information technology, banks in many parts of the world are trying to change their traditional methods and are trying to adapt in to new technologies. One of the most fundamental changes of banking industry is the movement from traditional banking to more electronic banking. This report focuses on the factors affecting the growth of Internet Banking in Pakistan. The factor includes the concerns of security, trust, awareness and internet availability influencing the usage behavior and the customer satisfaction in Internet Banking. There is also a lack of awareness in consumers. Although Internet Banking is one of the major ways to reduce transaction costs for the consumers, the consumers are not aware of that. Similarly, the Banks also need to make consumers aware of the Internet Banking services and facilities but there is not much efforts from there side.

METHODOLOGY

Data was collected from two sources. Primary research was done on Internet and relevant information was collected from there. The data for the Secondary research are collected from both the experienced and inexperienced users in Karachi through a questionnaire survey, and a total of 70 usable responses are received. SPSS Program is applied to test for the relationships among the constructed hypothesis in the research model. The overall researches findings have been presented as objectively as possible through the use of different tests, graphs, cross tabulations, etc to make it more reader friendly.

The questions in the survey include:

1. Have you ever / do you use Internet Banking?
2. How did you get aware of banking facilities over Internet?
3. How often do you avail Internet Banking facilities?
4. Do you find the web design and content appropriate and easy to understand for doing Internet Banking?
5. Which of these Internet Services you use most often? (You may tick more than 1)
6. In your experience did you find the use of Internet Banking to be more efficient than normal banking?
7. Do you think the banking industry in Pakistan should move from Traditional Banking to Electronic Banking now?
8. How you ever felt insecure transacting over internet?
9. What according to you is the main reason to use internet banking? (Rank them from 1 to 5, with 1 being the highest and 5 the lowest)
10. What according to you is the main reason why people are reluctant to use internet banking in Pakistan? (Rank them from 1 to 5, with 1 being the highest and 5 being the lowest)

INTRODUCTION

The new millennium has experienced explosive growth of Internet Banking in many countries and transformed traditional banking practice. Internet banking has changed the way of services provided by the banking sectors to their customers. If banks can transformed from traditional banking to internet banking they can seek to lower costs, improve customer banking services, reduce their branch networks, retain customers, and downsize the number of their service staff.

Internet Banking is undoubtedly moving at the speed of light, but it is outpacing human time, the time needed to build trust. Trust has been identified as key to Internet Banking, because it is crucial wherever risk, uncertainty, and interdependence exist. The banking sector is strongly associated with high levels of trust related to security and privacy issues in the physical environment. However, this association has not yet been translated in the internet banking world to its full potential. Customers are reluctant to adopt internet banking because of security and privacy concerns and trust-related issues.

Plus in a country like Pakistan where 40 to 50% population is illiterate, web interface and internet availability is one of the important issues faced by the internet banking industry. It is very difficult to train the population about how to use these services and facilities.

One other issue faced by the internet banking industry is the awareness of the consumers. Although Internet Banking is one of the major ways to reduce transaction costs for the consumers, the consumers are not aware of that. On the contrary they think that internet banking would be more costly than traditional banking. An example of this would be the online money transfer fee that is charged by the banks (Rs 375 in case of Allied Bank Limited); where as if this money is transfer through internet the charges would be only Rs 21.

FINDINGS

GENDER CATEGORIZATION

Gender

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Female	21	30.0	30.0	30.0
	Male	49	70.0	70.0	100.0
	Total	70	100.0	100.0

AGE DISTRIBUTION

Age

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Below 18	2	2.9	2.9	2.9
	18-22	34	48.6	48.6	51.4
	23-27	27	38.6	38.6	90.0
	28-32	2	2.9	2.9	92.9
	32 and Above	5	7.1	7.1	100.0
	Total	70	100.0	100.0

EDUCATION LEVEL

Education

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Metric / O-Levels	1	1.4	1.4	1.4
	Intermediate / A-Levels	11	15.7	15.7	17.1
	Bachelors	32	45.7	45.7	62.9
	Masters	26	37.1	37.1	100.0
	Total	70	100.0	100.0

QUESTION 1: Have you ever / do you use Internet Banking?

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Yes	23	32.9	32.9	32.9
	No	47	67.1	67.1	100.0
	Total	70	100.0	100.0

QUESTION 2: How did you get aware of banking facilities over Internet?

Awareness

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Through Print Media	2	2.9	8.3	8.3
	Television	1	1.4	4.2	12.5
	Bank’s Customer Relation	9	12.9	37.5	50.0
	Word of Mouth	11	15.7	45.8	95.8
	Others	1	1.4	4.2	100.0
	Total	24	34.3	100.0
Missing	System	46	65.7
Total		70	100.0

QUESTION 3: How often do you avail Internet Banking facilities?

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Rarely	10	14.3	41.7	41.7
	Sometime	10	14.3	41.7	83.3
	Frequently	4	5.7	16.7	100.0
	Total	24	34.3	100.0
Missing	System	46	65.7
Total		70	100.0

QUESTION 4: Do you find the web design and content appropriate and easy to understand for doing Internet Banking?

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Yes	23	32.9	95.8	95.8
	No	1	1.4	4.2	100.0
	Total	24	34.3	100.0
Missing	System	46	65.7
Total		70	100.0

QUESTION 5: Which of these Internet Services you use most often?

Balance Inquiry

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Balance Inquiry	20	28.6	100.0	100.0
Missing	System	50	71.4
Total		70	100.0

Bill Payment

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Bill Payment	4	5.7	100.0	100.0
Missing	System	66	94.3
Total		70	100.0

Credit Card Payment

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Credit Card Payment	7	10.0	100.0	100.0
Missing	System	63	90.0
Total		70	100.0

Funds Transfer

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Funds Transfer	14	20.0	100.0	100.0
Missing	System	56	80.0
Total		70	100.0

Account Summary

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Account Summary	17	24.3	100.0	100.0
Missing	System	53	75.7
Total		70	100.0

Transaction History

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Transaction History	12	17.1	100.0	100.0
Missing	System	58	82.9
Total		70	100.0

QUESTION 6: In your experience did you find the use of internet banking to be more efficient than normal banking?

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Yes	20	28.6	87.0	87.0
	No	3	4.3	13.0	100.0
	Total	23	32.9	100.0
Missing	System	47	67.1
Total		70	100.0

QUESTION 7: Do you think the banking industry in Pakistan should move from Traditional Banking to Electronic Banking now?

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Yes	53	75.7	75.7	75.7
	No	17	24.3	24.3	100.0
	Total	70	100.0	100.0

QUESTION 8: Have you ever felt insecure transacting over internet?

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Always	21	30.0	30.0	30.0
	Sometimes	36	51.4	51.4	81.4
	Not at all	13	18.6	18.6	100.0
	Total	70	100.0	100.0

QUESTION 9: What according to you is the main reason to use internet banking?

	Convenience	Cost Saving	Sense of security	Availability	Time Saving
	Count	Count	Count	Count	Count
1.00	35	4	5	4	22
2.00	16	10	8	21	15
3.00	11	14	8	26	12
4.00	3	28	15	15	8
5.00	5	14	34	4	13

QUESTION 10: What according to you is the main reason why people are reluctant to use internet banking in Pakistan?

	Security	Trust	Awareness	Internet Availability	Cost
	Count	Count	Count	Count	Count
1.00	34	14	13	6	3
2.00	12	26	14	16	2
3.00	8	17	25	12	8
4.00	4	11	13	26	16
5.00	12	2	5	10	41

ANALYSIS

My research is based on the factors that are affecting the growth of internet banking in Pakistan.

I conducted a research in which my sample included both the experienced and the inexperienced people who have / who have not used internet banking. The percentage distribution was very close and therefore we assume that the results we achieved have an equal probability of existing in reality.

The total number of people surveyed was 70, out of which 49 were males and 21 were females. The largest chunk of people surveyed lies in the age bracket of 18-22, followed by those who were between the ages of 23-27. The education level of almost 83% of the total sample was either Bachelors or Masters.

People who have used internet banking were 32.9% of the total sample where as the remaining people are inexperienced with this facility. This shows that only a very small percentage of the population have actually tried this facility in Pakistan.

The most common way people got aware of the banking facilities over internet is through word of mouth followed by bank’s customer relation. This shows that banking industry in Pakistan is not making the kind of efforts they should make in order to make people aware of the kind of facilities they can avail over internet.

Only 4.2% of the total sample finds the web design and content to be inappropriate, which is actually a good sign. The web design and content is easy to understand according to the people which are a very positive sign for the future of the internet banking in Pakistan.

The most common type of facilities that people avail on internet is as follows:

1. Balance Inquiry
2. Account Summary
3. Funds Transfer
4. Transaction History
5. Credit Card Payment
6. Bill Payment

87% of the entire population thinks that internet banking is more efficient way of banking than the traditional banking. On the same hand 75.5% of the population thinks that the banking industry in Pakistan should move from Traditional Banking to Electronic banking now.

However security remains the main concern for the people in the country and a large chunk comprising of 81.4% of the population who feels insecure while transacting over internet.

The main reasons to use internet banking according to people are (from highest to lowest):

1. Convenience
2. Time Saving
3. Availability
4. Cost Saving
5. Sense of security

The main reasons why people are reluctant to use internet banking in Pakistan are (from highest to lowest):

1. Security
2. Trust
3. Awareness
4. Internet Availability
5. Cost

The main reason indicated in my research why people are reluctant to use internet banking in Pakistan is because of the sense of security they felt than that compared to the traditional banking. This is because of the level of crime in our society is to such an extent that it is difficult to expose such secret information on the web.

CONCLUSION

Pakistan is an agro based country where we lack in technological advancements.

The total population of the country is 170 million out of which almost 40 to 50% of the entire population is illiterate. A huge chunk of the population in the country does not even have a bank account. The increasing crime rate in the country raises the question of security and trust. Internet is not available in rural areas while the banks are not playing a big role in making the customers aware of the internet facilities they could avail from internet banking. Keeping all these factors in mind it won’t be wrong to say that it would be a very difficult job to wide spread the use of internet banking in Pakistan. Therefore, it is because of such conditions that we can say that the growth of internet banking in Pakistan seems really difficult at this point of time.