The Emergence of E-banking in Pakistan: Its Risks and Benefits from
Consumer Perspective
Muhammad Jehangir. Email: janisbg22@yahoo.com
Abdul Wali Khan University KPK Pakistan.
ABSTRACT
Information Technology has transformed the conventional methods of banking
operations, the term e-banking emerged and became a competitive tool for banking
industry, to penetrate and survive in the rivalry situations. But it is also a challenge for
those who have with the decision to do or do not. Convenience, speed, easy-ways of
utilization and inexpensive techniques are the advantages, which has overcome the
disadvantages of e-banking. The disadvantages like unauthorized data access, data loss
and fraudulent activities make puzzles in the minds of customers either to trust upon ebanking or not, resultantly jeopardizing customers’ satisfaction. Customer satisfaction in
the services industry is considered a backbone, and has the central importance in planning
and strategic managements’ decision floors. This paper tends to explain the advantages
and disadvantages of e-banking, and evaluate the degree of impact on customers’
satisfaction. Also would suggest some managerial implications to beat these
disadvantages and make the e-banking, more reliable for customers and, more profitable
for the banking organizations. Total 201 Electronic banking users were selected randomly
on convenient sample basis from five commercial banks in Khyber Pakhtunkhwa (KP)
District of Pakistan
Keywords: Information Technology, E-banking advantages and disadvantages, Customer
Satisfaction, Competitive Tool & Challenge, Khyber Pakhtunkhwa (KP) Pakistan.
INTRODUCTION
Internet and Web has changed the aspects of businesses and customer services,
particularly in banks. Banks has provided efficient electronic services to customers,
which is an excellent source of revenue for banks, and considered a competitive edge. If
there is any failure in delivering these electronic services, banks might lose their
competitive edge, Most of the revenues and customers (Gronfeldt and Strother, 2006).
Electronic banking is an automated delivery of new and traditional banking products and
services, using electronic channels, like computers and telecommunication technologies.
The e banking, customers, either individual or business wise could access their accounts
enquiries; make transactions via using electronic channels.
“In recent year’s use of electronic and internet banking is considered the most important
aspect of electronic commerce environment” (Wang, Y. et al., 2003).
1
LITERATURE REVIEW
Benefits and Advantages of Electronic Banking
SCN Education B.V. (2001), suggested that E-Banking has advantages like high revenue
generators, there are few banks who provide services online on internet, they are
considered as leader of technology implementation and have better brand image than
other banks; costs are reduced on providing services online, such banks are efficiently
judge the needs of their customers because of regular feedbacks.
Low fee, less paper work and less human errors are involved in the processing of
electronic banking transactions and thus the customers are encouraged to use it (Kiang et
al., 2000; Howcroft et al., 2002). Transactions are conducted outside the bank premises
and off the official banking hours, 24 hours 7 days a week, day and night, as convenience
is the reason for adopting electronic banking. Gerson, (1998), Gerrard and Cunningham
(2003), adopted that convenience and multi functionality for customers and cost saving
for banks are the features of information technology base system for bank products and
service in satisfying customer needs.
E-banking is the combination of alternative channels for providing services to customers
in different ways and locations, rather than bank premises, as a result physical queues,
branch administrative expenses and overheads are minimized and customer satisfaction is
maximized (Thornton and White, 2001). Banks are providing services to their customers,
at their homes or offices and as a result convenience, satisfaction and loyalty built,
(Robinson 2000). Online banking is considered, as a marketing channel for improving its
financial performance in most of the US banks (Acharya, Kagan and Lingam 2008),
“While banks are fully experienced in capturing economies of scale, developing business
in international trade, increasing market expertise and creating brand image with the
physical side of their operations. Online banking presents a different set of challenges”
cited and adopted from (Avery, Baradwaj, and Singer, 2008).
Risks/Disadvantages of Electronic Banking
With the opportunities, the Electronic Banking has many challenges like security threats,
complex operations and technology barriers, cited in Ahmed Kaleem & Saima (2008)
adopted from Sathye, 1999; Mols, 1999). “A major concern in both money and banking
is a lack of trust between customers and the banks” Schaefer (2005). Customers need
trustworthy and secure information system like web sites and other bank storage
applications. Any loss or breach in system, could suffer the customer edge (Loiacono,
2000). Delay of service delivery and slow response, cause customer un-satisfaction that
whether the transaction has been done or not, (Jun & Cai, 2001). “According to Liao and
Cheung (2002), beliefs of customers in respect of accuracy, security, transaction speed,
user friendliness, user involvement and convenience, are the most important attributes in
the perceived usefulness of electronic based banking”.
Access to financial data by some-one else, other than the customer itself, or
confidentiality is another barrier in adoption of electronic banking (Gerrard and
Cunningham, 2003). White and Nteli (2004) found that there is a significant increase in
internet users in UK but rather to use internet and electronic banking due to fear of
security and safety concerns.
2
There are no specific laws or regulatory rules and regulations to govern electronic
banking, and protect customers, from an unauthorized access to their data. Larpsiri et al.,
(2002) found that there is no clearity, either the online transactions documents are
accepted, like other hard documents used in normal conventional banking system or not.
“Other risks associated to electronic banking, are job losses, lack of opportunities to
socialize and the development of a lazy society (Black at al., 2001)”.
Customer Satisfaction
Kotler and Armstrong in 2004 defined customer satisfaction in the following words,
“Customer satisfaction is the extent to which a product’s perceived performance matches
a buyer’s expectation.”
Customer satisfaction is normally measured in the context of product and services, but
another important variable is the customer expectations about the product or services,
when the expectations are higher, they are difficult to satisfy and if the expectations are
lower, then they are easy to satisfy. Therefore, it is resulted that customer satisfaction
depends upon expectations and behaviors (Walidin, 2007; Waskita, 2007). “Customer
satisfaction is defined as a feelings or judgment by customers towards products or
services, after they have used them (Jamal and Naser, 2003).”
Zeithmal, et al, (1990), laid down the scope of customer satisfaction in the following five
points:
1. “Tangibility, appearance, physical facilities, equipment, personnel, and
communication materials.
2. Reliability, the ability to perform the promised service, dependably and
accurately.
3. Responsiveness, willingness to help customers and provide them prompt service.
4. Assurance, the knowledge and courtesy of employees and their ability to inspire
trust and confidence.
5. Empathy, caring, individualized attention the firm provides to its customer”.
Customer lodge a complaint when he is dissatisfied with the product or service (Yeung et
al., 2002), customers’ dissatisfaction can be fully eliminated to optimum level if their
complaints are resolved (Oliver, 1981), but reducing of dissatisfaction is not always leads
to satisfaction (Dabholkar, 1994) adopted from Andrew Musiime & Fayth Biyaki, 2010)
HYPOTHESES DEVELOPMENT
H1: Advantages of e-banking have positive impact on Customer Satisfaction.
H2: Disadvantages/Risks of e-banking have negative impact on Customer Satisfaction.
CONCEPTUAL FRAMEWORK
3
SAMPLING AND METHODOLOGY
Total 201 Electronic banking users were selected randomly on convenient sample basis
from five commercial banks in Khyber Pakhtun Khwa (KPK) District of Pakistan, total
33 questions (4 Demographics, 10 Customer Satisfaction, 09 Advantages of IT and 10
Risks of IT) were asked, using five-point Likert scale, self administered questionnaire
method. Total 230 questionnaires were distributed, 201 of those were retuned, and used
for data analysis, and thus the rate of return was 87%. A demographic profile table shows
the respondents detail, gender, marital status, age and education backgrounds.
Demographic Profile Table
Demographics
Gender
Marital Status
Age
Education
[N=201]
Items
Male
Female
Single
Married
18-20
20-30
30-40
Above 40
High School
Intermediate
Graduation
Masters
MS/Phd & Above
No. of Respondents
145
56
74
127
2
96
78
25
24
67
42
55
13
Pecentage
72.1
27.9
36.8
63.2
1.0
47.8
38.8
12.4
11.9
33.3
20.9
27.4
6.5
RESULTS AND DISCUSSION
Ahmed Kaleem & Saima Ahmed (2008) conducted; the same type of study on “Bankers
Perception of Electronic Banking in Pakistan” their focus was only on the employees of
Pakistan commercial banks and their views regarding electronic banking. Only mean and
rank analyses were discussed in their research analysis.
While in this study we have focused on electronic banking customers and treated
employees as internal customers. For analysis both customers and employees are
interviewed. This study also judges the customer satisfaction in the context of e-banking
usage. SPSS 16.0 and Microsoft Excel 2011 were used for data processing and statistical
analysis.
Reliability Tests, Mean, Median Mode, Min, Max and Standard Deviation of Variables
Variables
Alpha
Items
Mean
Customer Satisfaction
.820
10
3.83
E-Banking Benefits
.616
9
E-Banking Risks
.783
10
Med
Mode
Min
Max
S.D
3.90
4.20
3.483
4.43
.636
4.05
4.11
4.00
3.851
4.49
.668
3.59
3.60
3.40
3.320
3.96
.618
4
Cronbach’s Alpha (Reliability) of customer satisfaction shows (.820), E-Banking Risks
(.783) and E-banking Benefits with (.616) respectively, which all are acceptable as per
statistical standards. Means score (4.05) of e-banking benefits show the highest and
Customer Satisfaction score (3.83) second in rank in the above table. There are some
risks related to e-banking which show in mean score (3.59), standard deviation (S.D) of
e-banking benefits show highest score (.668), customer satisfaction score second in rank
(.636) and third and minimum is (.618) of e-banking risks. It proved that customers are
satisfied with the introduction and benefits of e-banking and its features for transactions
processing.
Model Summary
Adjusted R
Model
R
R Square
Square
Std. Error of the Estimate
1
.809
a
.75
.66
.60628
2
.283
a
.14
.11
.62660
a. Predictors: (Constant), E-Banking Benefits Model-1, E-Banking Risks Model-2
In model summary table (Model 01) shows R Square value .095% variance predicted in
dependent variable from the effect of dependent variable, while (Model 02), and shows
.14% variance. More than 50% benefits are higher than risks of e-banking to customers.
b
ANOVA
Model
1
2
Sum of Squares
Regression
df
Mean Square
7.702
1
7.702
Residual
73.147
199
.368
Total
80.850
200
2.717
1
2.717
Residual
78.133
199
.393
Total
80.850
200
Regression
F
Sig.
20.955
.000
a
6.919
.009
a
a. Predictors: (Constants), E-Banking Benefits Model.1 E-Banking Risks Model.2 b.
b. Dependent Variable: CS
ANOVA (Analysis of Variance) shows the significance of model(s), and the predictor EBanking Benefits- model 1 have (F= 20.955); and Risks in model 2 have (F= 6.919),
Coefficients analysis shows the Standardized Coefficients Beta (.75; Benefits) and (.14;
Risks) these results indicate that benefits have high impacts on customer satisfaction
(Dependent Variable) than risks.
5
Coefficients
a
Standardized
Unstandardized Coefficients
Model
1
B
(Constant)
Std. Error
2
(Constant)
Beta
2.644
.263
.74
.064
3.156
.261
.19
.072
E-Banking Benefits
E-Banking Risks
Coefficients
t
.79
.13
Sig.
10.036
.000
4.578
.000
12.072
.000
2.630
.009
a. Dependent Variable: Customer Satisfaction
Standardized Beta Coefficient shows the contributions of independent variable and tvalue shows the impact of independent variables on dependent variable, Standardized
Beta of e-banking benefits contribute (.74) and t-value have (4.578) impact on customer
satisfaction as Stnd. Beta of e-banking risks (.19) and t-value as (2.630) have less
contributions and impacts on customer satisfaction than e-banking benefits model.
Standardized, unstandardized beta and t-value of e-banking benefits is higher than ebanking risks which is also showed Figure 1 in e-banking benefits and risks chart.
Figure 1
Risks
Benefits
0
200
400
600
800
1000
CONCLUSIONS AND RECOMMENDATIONS
This paper have theoretically and empirically provided some arguments, that electronic
banking have advantages, which boosts the business and competitive edge of the banks,
but e-banking risks are also paralleled in rank, which needs attention of the strategic
policy makers and IT based system designers, to overcoming these risks and make the
electronic banking more safe, risks free and reliable. Banking industry considered as pure
service industry and customer satisfaction is the main theme of a banks’ strategic policy.
E-banking attributes affect customers’ satisfaction positively or negatively. E-banking
attributes, interfaces, programs, processings, data protection and data backups, should be
designed in such a way that is fully protected by fire-walls, and wrong doers should not
be allowed to hi-jack this data, and thus customer would be fully protected by any data
6
loss or unauthorized data access. Such implications would build the image of e-banking,
more concrete in the minds of its customers, and banking industry would grow up beyond
the desirable results of all the stakeholders.
REFERENCES:
Acharya, R. N., Kagan, A., & Lingam, R. S. (2008). Online banking application and
community bank performance. The International Journal of Bank Marketing , 26 (6),
418-439.
Avery, A. E., Baradwaj, B. G., & Singer, D. D. (2008). An examination of Hofstede's
cultural factors in explanation of differences in citibank international retail banking web
sites. Journal of Business & Economics Studies. , 14 (2), 73-90.
Ahmed Kaleem and Saima Ahmad (2008), “Bankers’ Perceptions of Electronic Banking
in Pakistan”, Journal of Internet Banking and Commerce, April 2008, vol. 13, no. 1, page
01-15.
Andrew Musiime & Fayth Biyaki (2010), “Bank Clients` Perception of Information
Technology Usage, service Delivery and Customer Satisfaction: Reflections on Uganda`s
Banking sector” International Trade & Academic Research Conference (ITARC) London 2010, page 1-33.
Black, N.J., Lockett, A., Winklhofer, H., Ennew, C. (2001), "The adoption of Internet
financial services: a qualitative study", International Journal of Retail & Distribution
Management, Vol. 29 No.8, pp.390-8.
Dabholkar, P. (1994), "Technology based service delivery", Advances in Service
Marketing and Management, Vol. 3 No.1, pp.241-71.
Gronfeldt, S., & Strother, J. B. (2006). Service Leadership: The quest for competitive
advantage. Thousand Oaks, CA: Sage Publications Ltd.
Gerson, V. (1998), "Service with more than a smile’", Bank Marketing, Vol. 30 No.8,
pp.32-6.
Gerrard, P., Cunningham, J. B. (2003), "The diffusion of Internet banking among
Singapore consumers", International Journal of Bank Marketing, Vol. 21 No.1, pp.16-28.
Gerrard, P., Cunningham, J. B. (2003), "The diffusion of Internet banking among
Singapore consumers", International Journal of Bank Marketing, Vol. 21 No.1, pp.16-28.
Howcroft, B., Hamilton, R., Hewer, P. (2002), "Consumer attitude and the usage and
adoption of home-based banking in the United Kingdom", The International Journal of
Bank Marketing, Vol. 20 No.3, pp.111-21.
7
Jamal, A., Naser, K. (2003), "Factors influencing customer satisfaction in the retail
banking sector in Pakistan", International Journal of Commerce & Management, Vol. 13
No.2, pp.29-53
James A.O’ Brien Management Information System Third Edition, Management
Information Technology in the Networked Enterprise, page 10-11.
Jun, M., Cai, S. (2001), "The key determinants of Internet banking service quality: a
content analysis", International Journal of Bank Marketing, Vol. 19 No.7, pp.276-91.
Kiang, M.Y., Raghu, T.S., Hueu-Min Shang, K. (2000), "Marketing on the Internet –
who can benefit from an online marketing approach?” Decision Support Systems, Vol. 27
No.4, pp.383-93.
Kotler, Philip and Gary Armstrong (2004), Principles of Marketing, 10th ed, New Jersey,
USA: Prentice Hall.
Loiacono, E. T. (2000). WEBQUALTM: A web site quality instrument. Unpublished
doctoral dissertation. Athens, Georgia: University of Georgia.
Liao, Z., Cheung, M.T. (2002), "Internet-based e-banking and consumer attitudes: an
empirical study", Information & Management, Vol. 39 No.4, pp.283-95.
Larpsiri, R., Rotchanakitumnuai, S., Chaisrakeo, S., Speece, M. (2002), "The impact of
Internet banking on Thai consumer perception", paper presented at the Conference on
Marketing Communication Strategies in a Changing Global Environment, Hong Kong.
Mols, N.P. (1999), "The Internet and the banks’ strategic distribution channel decisions",
International Journal of Bank Marketing, Vol. 17 No.6, pp.245-300.
Oliver, R. (1981), "Measurement and evaluation of satisfaction process in retailing
setting", Journal of Retailing, Vol. 57 pp.25-48.
SCN Education B.V. (2001). Electronic Banking: The Ultimate Guide to Business and
Technology of Online Banking, (1st
ed.). Germany: Vieweg.
Sathye, M. (1999), "Adoption of Internet banking by Australian consumers: an empirical
investigation", International Journal of Bank Marketing, Vol. 17 No.7, pp.324-34.
Schaefer, G. K. (2005). Money, trust, and banking: An integrated approach to monetary
theory and banking theory. New York: Palgrave Macmillan.
Thornton, J., White, L. (2001), "Customer orientations and usage of financial distribution
channels", Journal of Services Marketing, Vol. 15 No.3, pp.168-85.
8
Wang, Y.; Wang, Y; Lin, H. and Tang, T. (2003), “Determinants of users acceptance of
Internet Banking an mpirical study,” International Journal of Service Industry
Management, 14(5), pp-501-519.
White, H., Nteli, F. (2004), "Internet banking in the UK: why are there not more
customers?", Journal of Financial Services Marketing, Vol. 9 pp.49-57.
Walidin, Astari (2007), “A Market Study of Consumer Satisfaction with City Cars: The
Link between Consumer Behavior and Customer Satisfaction”, undergraduate thesis,
Faculty of Business Administration, Swiss German University, Banten, Indonesia.
Waskita, Egah Sari (2007), “Customer Satisfaction and Business Improvement: A Case
Study of Smiley’s Café”, undergraduate thesis, Faculty of Business Administration,
Swiss German University, Banten, Indonesia.
Yeung, M., Ging, L., Ennew, C. (2002), "Customer satisfaction and profitability: a
reappraisal of the nature of the relationship", Journal of Targeting, Measurement and
Analysis for Marketing, Vol. 11 No.1, pp.24-33.
Zeithmal, Parasuraman and Barry (1990), Delivering Quality Service. Balancing
Customer Perceptions and Expectations, Chicago: The Free Press.
9