An Evaluation of Internet Banking
in New Zealand
Presenter: Winnie Chung
1
Agenda
The evolution of Internet banking in NZ
Internet Banking Figures as at 2000
Scope of the study
Research questions
Research methodology
Hypotheses
Results
Overall interpretation and recommendation
Conclusion
Future research implications
2
The evolution of Internet banking
ATM
EFPTOS
Telephone
Banking
Internet Banking
New Zealand has extremely high adoption of
ATM and EFTPOS services (Boer, Evans and
Howell, 2000)
3
The preparedness of Internet banking
New Zealanders become accustomed to,
adopted, and adapted to electronic means of
non-cash transactions
This familiarity and preparedness would
transfer to adoption of other technologies
such as Internet banking (Boles de Boer,
Evans and Howell, 2000)
4
Internet Penetration
New Zealand has already achieved a
significant level of Internet penetration and
usage, higher than that of Australia and most
other OECD countries (Boles de Boer, Evans
and Howell, 2000)
More than 50% of New Zealanders have
access to the Internet and 34% use it on a
regular basis (The New Zealand Herald,
2000a).
5
Three Stages of Online Development
for Banks (Hamlet, 2000)
Fundamentals
Typically ten web pages or less in size
Basic information
Dynamics
More features
E.g. updated information on product and rates and
calculators
Intelligent e-banking
Interactive online banking (e.g. real time services, customers
and community forums and suggestion boxes)
Allow customers to access account information, transfer
funds and other related activities
6
The Banking Sector
Interaction
Banking
E-tailing
Gaming
Survey sites
Information
Travel
Media
Brand Marketers
Government
Sectors in the Infotainment Framework
7
7 New Zealand online banks
Intelligent e-banking
8
Internet Banking Figures in 2000
About 200,000 New Zealanders use the
Internet for banking in 2000 (The NZ Herald,
2000e)
Survey reported in 2000 indicates that
Internet banking is beginning to take off (The
NZ Herald, 2000)
15% using it
26% of those who do not, saying that they
may adopt it in the coming year
9
Scope of the Study
“Retail” Internet banking i.e. personal
banking
Everything a branch teller would normally do
Exclude value added services
E.g. buy and sell shares, securities trading,
insurance purchases
Exclude business and rural based Internet
banking
Exclude the reasons why people do not use
the Internet
10
Research Questions
What is the current situation and
performance of NZ retail banking websites?
What are the reasons that prevent New
Zealanders from using retail Internet
banking?
How to increase the utility of NZ retail
Internet Banking services to existing NZ
Internet users?
How can the current retail Internet banking
services be improved?
11
Research Methodology
Evaluation of websites
Quantitative data of each bank
• Based on Hersey’s model
Survey
User perspective
User satisfaction
Comparison with the components in the
Hersey’s model
12
Website evaluation
A website evaluation model (Hersey)
Search
Company
Customer
Product
P
e
r
f
o
r
m
a
n
c
e
E
a
s
e
Negotiation
Order
o
f
u
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e
Payment
Delivery
After-sales
Community
A
e
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h
e
t
i
c
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f
f
e
c
t
I
n
n
o
v
a
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n
13
Other Important Components for
Website Evaluation
Privacy and security concerns are the main
barriers that constrain the uptake of Internet
banking (Young, 2000 and O’Connell, 1998)
Technology interface attributes (Dabholkar,
1995)
Reliability, security, accessibility, ease of use,
enjoyment and control
14
Tailored Hersey’s model
15
Survey
Population:
Anyone in New Zealand who has been
using the Internet
Judgement sampling design
The exploratory nature of this study infers
that judgment sampling is acceptable
although generalisibility is not guaranteed
Pilot survey
16
Data Analysis Method
Website analysis
The analysis of the data obtained by the
questionnaire will consist of the following:
Descriptive statistics such as mean and frequency
are provided with graphs
Cross tabulations
Chi-square tests
Correlations
Compare the website evaluation
against the users perspective
result
Spearman’s rank correlation
17
Hypotheses to be tested
Early adopters (banks) provides better
Internet banking services (i.e. functionalities)
Difference in quality between large and small
banks
Large banks have more resources so they can
provide better Internet banking services
Banks that provide better services/functions
have better performance from the customers’
perspective
18
Hypotheses to be tested
High income groups are more likely to use
Internet banking
Older customers may be less receptive to
Internet banking
Customers with higher education
backgrounds are more likely to use Internet
banking
Registration for Internet banking is related to
the use of ATM, EFTPOS and phone banking
19
Hypotheses to be tested
Satisfaction is related to the length of
Internet banking use (i.e. how long one
has been using Internet banking)
Satisfaction is related to future usage
Future usage is related to the length of
Internet banking use
20
Website Evaluation Results
1 – Bank Direct (ASB)
2 – ANZ
3 – Fastnet (ASB)
4 – BNZ
5 – National Bank
6 – TSB
7 – WestpacTrust
21
The General Banking Patterns
Usage of different banking facilities
Direct
credit
Automatic
payment
Direct
debit
Counter
services
Internet
banking
Phone
banking
EFTPOS
ATM
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Banks
22
The Importance of Elements to
Internet Banking
N
Minimum
Maximum
Mean
T he importance of security
184
1
7
6.65
T he importance of providing up to date information
184
1
7
6.33
T he importance of providing internet services free from technical problems
184
1
7
6.21
T he importance of response time
184
1
7
6.08
T he importance of download time
184
1
7
5.83
T he importance of ease of use
184
1
7
5.76
T he importance of ease of navigation
184
1
7
5.73
T he importance of provision of customer information
184
1
7
5.64
T he importance of provision of bank information
184
1
7
5.47
T he importance of range of banking activities/services
184
1
7
5.47
T he importance of provision of product information
183
1
7
5.41
T he importance of attractive graphics
184
1
7
4.09
T he importance of the use of animations
184
1
7
3.33
This is measured in a 7-point Likert scale with 1 indicating very unimportant and 7 indicating very important
23
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Fr
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Mean of 7-point Likert scale
The Importance of Elements to
Internet Banking
The importance of each element
7
6
5
4
3
2
1
Elements
24
Unregistered Customers (59%)
Reasons for not registering for Internet banking
N
Minimum
Maximum
Mean
Unsure about the security of transactions
109
1
5
3.65
Can do all banking in other ways
109
1
5
3.56
Have not tried it before
109
1
5
3.51
Do not need instant 24 hours access to accounts
109
1
5
3.42
Like to be able to talk to staff in person
109
1
5
3.21
Do not think Internet banking is cheaper
109
1
5
3.17
Internet banking offers a limited range of services
109
1
5
3.14
T oo much hassle to register for Internet banking
109
1
5
3.05
Uncertain the benefit of Internet banking
109
1
5
2.99
Not sure how it works
109
1
5
2.76
Internet banking is complicated to use
109
1
5
2.42
Not aware of Internet banking services
109
1
5
1.95
Have no access/limited access to Internet
109
1
4
1.57
This is measured in a 5-point Likert scale with 1 indicating strongly disagree and 5 indicating strongly agree
25
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In es
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D
U
ns
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Mean of a 5-point Likert scale
Reasons for not Registering for
Internet banking
Reasons for not registering for Internet banking
5
4
3
2
1
Reasons
26
Likelihood to Register for Internet
Banking in the Next 12 Months
The likelihood to register for Internet banking
50
Percent
40
30
20
10
0
Very unlikely
Somew hat likely
Somew hat unlikely
Very likely
27
Likelihood to Register for Internet
Banking
Correlations between the likelihood to register for Internet
banking in the next 12 months and the reasons for not registered
Correlations p-value Alpha level Significant
Likelihood to register and Unsure about the security of transactions
-0.287
0.003
0.01
Yes
Likelihood to register and T oo much hassle to register for Internet banking
-0.19
0.048
0.05
Yes
Likelihood to register and Have not tried it before
-0.191
0.046
0.05
Yes
Likelihood to register and Like to be able to talk to staff
-0.214
0.025
0.05
Yes
Likelihood to register and Complicated to use
-0.185
0.054
0.05
No
0.1
Yes
0.05
No
0.1
Yes
Likelihood to register and Internet banking offers a limited range of services
-0.183
0.057
28
Internet Banking Users
41% registered for Internet banking
39% use Internet banking
Of the 41%, some registered Internet
banking with more than one bank but
none registered with more than three
banks
29
Registration with Banks
Registration with Banks
50
Frequency
40
30
20
10
0
ANZ
BNZ
ASB
Bank Direct
National Bank
Overs eas bank
WestpacTrust
30
60
40
Frequency
The Usage of Different Banking
Activities
The Usage of Different Banking Activities
100
80
20
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ba
ith
w
e
at
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ti o
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c o ep
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O
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Mlo
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31
20
Percent
Internet Banking Usage Frequency
Internet Banking Usage Frequency
40
30
10
t m
y eper
ed e
us nc
ot o
N an
th
ss
Le
th
on m
r m per
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or
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or
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d
ay r
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M
0
32
Banks Performances from the
Customer Perspective
Website Evaluation
100.0%
2 – ANZ
95.0%
2 – Fastnet (ASB)
90.0%
85.0%
80.0%
75.0%
70.0%
65.0%
60.0%
55.0%
50.0%
7 – WestpacTrust
6 – BNZ
WPT
6 – TSB
BD
5 – ANZ
NBNZ
5 – National Bank
BNZ
4 – WestpacTrust
ASB
4 – BNZ
ANZ
3 – National Bank
Score
3 – Fastnet (ASB)
Overseas
banks
1–
Survey Results
Average Score for Each Bank (Customer
Bank Direct (ASB)Perspective)
1 – Bank Direct (ASB)
Banks
33
The Overall Performance and
Importance of each Element for all
NZ banks
34
Hypotheses Summary
35
Overall Interpretation and
Recommendation
It must be noted that getting customers to
register for Internet banking does not
guarantee that they will use the services
Whether a customer will register for Internet
banking is related to his/her age and
education level but not income
Younger customers (less than 20) are less likely to
register (within the next 12 months)
Higher education customers are more likely to
register
36
Overall Interpretation and
Recommendation
Internet access is not a barrier that prevents
customers from registration
Main factors that prevents registration are security
concern, the availability of other ways of banking and
the complexity of using retail Internet banking
Factors considered very important to retail Internet
banking are security, update information, free from
technical problems, response time and download
time
Banks are not encouraged focus on attractive
graphics and animations as these factors are not as
important
37
Overall Interpretation and
Recommendation
NZ banks perform extremely well in providing
update information. Maintaining this is
necessary
The security of transaction and ease of use
are also revealed in NZ banks’ websites but
further improvement on security is required
Improvement on download time, response
time and technical problems needed
38
Overall Interpretation and
Recommendation
Additional functionalities could be useful but
the quality of service is more important
Bank Direct is perceived as the best bank that
provide retail Internet banking services
followed by Fastnet (ASB)
Banks are encouraged to focus on factors
that are considered important in order to
increase customer satisfaction. This
enhances the retention of current Internet
banking users.
39
Conclusion
Retail Internet banking has high potential in NZ
Banks should understand what factors that prevent
customers from registering Internet banking
To improve performance, NZ banks should focus on
factors such as security, response time, download
time and freedom from technical problem
Consideration of all these factors for designing,
implementing, maintaining and promoting websites
would help to attract new registration and increase
retention
40
Future Research Implications
More inferential statistics on the topic
Probability sampling should be employed to
ensure generalisibility of findings
Future research could study from the banks’
perspectives in addition to customers’
perspectives
Longitudinal study is also advocated
This allows researchers to study how the uptake
of Internet banking proceeds
41