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Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 12
November 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 751
A Review Study on Dynamics of Online Banking
Mr.K.GOWRI SHANKAR
Research Scholar
(Part Time PhD Program)
Department of Management Studies
Rayalaseema University
Kurnool
ABSTRACT
Online banking is a new phase in retail banking services. With the help of online banking several types of
services through which customers can request information and carry out their banking transaction such as
balance inquiry, inter account transfers, utility bills payment, request check book etc., via a
telecommunication network or internet without physically visit the branches. The advent of the Internet has a
significant impact on banking service that is traditionally offered by the branches to the customers. With the
help of the Internet, customers can do their banking anytime and anywhere as long as Internet access is
available. This new type of service has been called "online banking" or "Internet banking." Customers are
being facilitated by reducing their visits in banks and they can carry out their transactions via internet or
ATM Machines instead of personally visiting the branches. The Promotion of online banking technology
enabled the banks to enhance its operations with cost cutting effectively and efficiently in order to handle
daily banking affairs via online banking channel. This Paper examines trends and dynamics of online
banking.
[Keywords: online banking, e-banking, retail banking, security risk]
[1] Introduction:
Online banking is a new phase in retail banking
services. With the help of online banking several
types of services through which customers can
request information and carry out their banking
transaction such as balance inquiry, inter account
transfers, utility bills payment, request check book
etc., via a telecommunication network or internet
without physically visit the branches (Daniel, 1999).
The advent of the Internet has a significant impact on
banking service that is traditionally offered by the
branches to the customers. With the help of the
Internet, customers can do their banking anytime and
anywhere as long as Internet access is available. This
new type of service has been called "online banking"
or "Internet banking." It can be defined as
performing financial transactions over the Internet
through a bank's website. Customers are not the only
beneficiary of this new service. Making use of online
banking, commercial banks may greatly increase the
market coverage and better track customers as well.
The first online banking services based on the
Internet were provided by Stanford Federal Credit
Union (SFCU) in October 1994 (Business Wire,
1995). Online banking helps banks to retain and
enhance the loyalty of their existing customers,
increase customer satisfaction, provide opportunity
to the banks to increase market share, reduce
administrative and operational cost and to improve
banks’ competitive positions against their rivals
(Khalfan et al., 2006).
[2] Online Banking Trends:
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Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 12
November 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 752
Singhal Divya and Padhmanabhan (2008) found that
Major factors responsible for internet banking were
‘utility request’, ‘security’, ‘utility transaction’,
‘ticket booking’ and ‘fund transfer’. More than 50
per cent of total respondents agreed that internet
banking is convenient and flexible ways of banking
and it also have various transaction related benefits.
Maenpaa Katariina et.al (2008) identified that
Consumers’ perceptions differed in four of seven
dimensions of internet bank services when examined
along the criterion of expertise. Results revealed that
security was not a concern for any of the user
groups. Mannan Syed Abdul (2010) analysed that
Customers were satisfied with technology oriented
banks products and services. Different parameters
and guidelines were suggested to bankers on which
they need to improve and spread the awareness of
electronic banking products and services. Srivastava
and Rajesh Kumar (2007) observed in their study
that Education, gender, income and training play an
important role in usage of internet banking.
Inhibitory factors like trust, gender, education,
culture, religion, security and price can have minimal
effect on consumer mind set towards internet
banking. Naana Adams Abigail and Odartey
Lamptey Adnan (2009) examined that Banks need to
promote internet banking by having an active stake
in the development of internet infrastructure and
offering more incentives to customers. Mohammed
Hossain and Shirley Leo (2008) stated that
Customers' perception was highest in the tangibles
area and lowest in the competence area.
[3] Review of Literature: Online Banking
Barczak et al. (1997) underlined the consumer
motives for use of technologically based banking
services and distribution channels and found that
customers could be clustered on their money
management philosophies. Johnston (1997)
illustrates that certain actions, such as increasing the
speed of processing information and customers, are
likely to have an important effect in terms of
pleasing customers; however other activities, such as
improving the reliability of equipment, will lessen
dissatisfaction rather than delight customers and
suggests that it is more important to ensure that the
dissatisfiers are dealt with before the satisfiers.
Daniel (1999) quantifies the current provision of
electronic services by major retail banking
organizations in the UK and the Republic of Ireland.
Additional insight into the banks' adoption of this
new channel is gained by exploring two areas
important in the analysis of new offerings, that is: an
organization's approach to innovation; and their view
of the current and future markets.
Broderick's and vachirapornpuk's (2002) study
proposes and tests a service quality model of internet
banking. Their research uses participant observation
and narrative analysis of a UK internet banking
website community to explore how internet banking
customers perceive and interpret the elements of the
model. Findings of the study show that the level and
nature of customer's participation had the greatest
impact on the quality of the service experience and
issues such as customers' zone of tolerance, the
degree of role understanding by customers and
emotional response potentially determined, expected
and perceived service quality. Akinci at al. (2004)
conducted the study to develop an understanding of
consumers' attitudes and adoption of Internet
banking among sophisticated consumers. Users and
non-users of Internet Banking (IB) were examined
based on a random sample differ with respect to
academicians, demographic, attitudinal, and
behavioral characteristics. The analyses revealed
significant differences between the demographic
profiles and attitudes of users and non-users.
Eriksson et al (2004) concluded in their research that
the perceived usefulness of internet banking is, for
banks, a key construct for promoting customer use.
They also suggest that models of technology
acceptance should be re-formulated to focus more on
the key role of the perceived usefulness of the
service embedded in the technology. Trust as another
belief that has an impact on the acceptance of
Internet banking. Guriting (2006) examines the
factors that determine intention to use online banking
in Malaysia Borneo. In his study, the perceived ease
Page 3 of 6
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 12
November 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 753
of use and perceived usefulness factors are
considered to be fundamental in determining the
acceptance and use of various information
technologies. Rod. at al. (2009) examine the
relationships among three dimensions of service
quality that influence overall internet banking
service quality and its subsequent effect on customer
satisfaction in a New Zealand banking context. The
results show significant relationships among online
customer service quality, online information system
quality, banking service product quality, overall
internet banking service quality and customer
satisfaction.
Hasim and salman (2009) conducted a study to
determine the factors that affect sustainability of
internet usage by Malay youth in Kota Bharu, a rural
town in the north east of peninsular Malaysia. The
researchers study and concluded that there is
sustainability of internet usage among Malay youth.
Gikandi and Bloor, (2009) investigate the factors
that influence the adoption and effectiveness of e- commerce in retail businesses in Kenya. Two
surveys were carried out (Initial and follow-up) in
the years 2005 and 2009, respectively, which
involved banks controlling approximately 90% of
formal retail banking in Kenya.
Chong, et al. (2010) empirically examines the factors
that affect the adoption decision of online banking in
Vietnam. Perceived usefulness, perceived ease of
use, trust and government support was examined to
determine if these factors are affecting online
banking adoption. The results showed that perceived
usefulness, trust and government support all
positively associated with the intention to use online
banking in Vietnam. Contrary to the technology
acceptance model, perceived ease of use was found
to be not significant in this study. Malhotra and
Singh (2010) conduct an exploratory study and make
effort to present the current status of Internet
banking in India and the extent of Internet banking
services offered by Internet banks. In addition, it
seeks to examine the factors affecting the extent of
Internet banking services.
[4] Merits of Online Banking:
Carlson (2000) examined that Technological
developments in banking make it much easier and
cheaper for customers to compare and contrast
products and to establish multiple banking
connections and enable consumers to alter the
purchasing, decision making process of the
customer. SAS Institute AB (2000) concluded that
Customers need access to a computer with internet
which signifies that the access to a customer’s
account is solely dependent in technology in the case
of online banking. A third party services is required
by the bank to run the online banking services to
their clients.
Zigi and Micheal (2003) found out that E-banking
has enabled banks to increase their data collection,
and management, efficient financial engineering that
have improved the ability of assessing potential
creditors, measuring the creditworthiness of potential
borrowers and to price the risk associated with those
borrowers through standardized mechanisms such as
credit scoring. Kannan (2004) stated that Besides its
benefits, electronic banking has its own draw backs
as well. One of the main important disadvantages of
electronic banking applications internationally is the
lack of governmental policies that guides Internet
banking operations across international borders.
[5] Demerits of Online Banking:
Hood (1979) concluded that The evidences of
various researches show that there is a high
association between consumers’ usage patterns of
ATMs and their demographic profiles. Ram and
Sheth (1989) examined that the customer
dissatisfaction and resistance is one of the major
causes of market failure of innovation. Aladwani
(2001) examined that security and safety are the
most challenging issues for the banks. Beside them,
to build and retain the customers’ trust will also
become a future challenge for banks especially in
internet banking. Lee and Turban (2001) found out
that Majority of the customers hesitate to use internet
banking services because of security and privacy
