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Review Of Brick And Mortar Banking Information Technology Essay

Brick-and-mortar refers to an organization that possesses a building or store for business operations. Brick-and-mortar businesses are companies that have a physical presence, which is a physical store and offer face-to-face consumer experiences (Wikipedia: Brick and mortar business, 2010).

Brick-and mortar banking is a traditional banking system that typically offers full service banking including safe deposit boxes and access to a drive-through teller window with an actual physical location that you can visit or walk into. Branches of branch banking are typically stand alone branches of a bank, credit union or other financial institution that often are contained in its own building, offered a wide range of banking and financial services face-to-face to its customers. It is a banking system that markets its products and services through traditional channels, rather than the internet (Wikipedia: Branch - banking, 2010).

Banking in Malaysia has come a long way since the 19th century. During colonial days, the commercial banks were commonly called “exchange banks" since they mainly dealt with foreign exchange transactions for remitting and receiving funds to and from foreign countries. In 1913, Kwong Yik Banking Corporation was established in Selangor and becoming the first domestic bank in Malaysia. It is now become Malayan Banking Berhad (Banking industry, 2009).

During 1950s, foreign banks dominated the banking industry in Malaysia. Banking business in Malaysia has been undergoing tremendous changes since achieving independence in 1957. Domestic banks have expanded their network tremendously in line with the Government and Central bank policy. During 1980s, the central bank has introduced various legal and financial requirements which the commercial banks have to comply with to further strengthen the banking system.

There are many commercial banks, including both local banks or foreign banks in Malaysia. Local banks in Malaysia including Affin Bank, Alliance Bank, AmBank, CIMB Bank, EON Bank, Hong Leong Bank, MayBank, Public Bank and RHB bank.

Maybank, also called Malayan Banking Berhad is the largest bank and financial group in Malaysia. Maybank is listed as the top 10 bank in Malaysia and also listed as the second largest in Malaysia Stock Exchange and Bursa Malaysia. Currently, Maybank has 374 domestic branches and 90 international branches. The services provided by Maybank including opening accounts, giving loans, credit cards, investment & insurance and Islamic banking (Banking industry, 2009).

Hong Leong Bank founded by Ji Chiew in 1905 and started operating in Kuching. In 1978, the first branch of Hong Leong Bank was opened in Kuala Lumpur. The main branch of Hong Leong Bank was then relocated in 1982 and it was listed in Kuala Lumpur Stock Exchange. Hong Leong Bank offers services like personal banking, priority banking and Hong Leong Club Reward (Banking industry, 2009).

Malaysia’s financial landscape has gone through tremendous changes for the past 3 decades. The banking sectors has now revolutionized irreversibly from a “brick-and-mortar” banking system into “click-and-transact” banking system. Web-based businesses usually have lower costs and greater flexibility than brick-and-mortar operations (Investopedia.com, 2005). Now, a large majority of industries have evolved through technological advancements, thus shifting their services from brick-and-mortar to provide online services. (Brick and Mortar, 2005)

With the advent of internet, it has become affordable even for retail customer to setup a virtual branch in their home. Now, banking services can be done at your door step anytime from any part of the world at your own convenience.

Review of Internet Banking

Internet banking is refer to a system that provide the facilities for the bank customer to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent device (Comptroller’s Handbook, 1999). Internet banking allows customers to conduct financial transactions including transfer money between accounts, pay bills, see statements and perform other financial transactions over the internet on a secure website which is operated by their retail or virtual bank, credit union or building society (Wikipedia: Online banking, 2010).

Internet banking was introduced in the 1980s and it has been around for quite a few years. In the past, the computer systems that made the information systems operate were rarely noticed by the customers. Today, web sites, electronic mail and electronic bill presentment and payment systems are a critical way for the banks to reach their customers (Comptroller’s Handbook, 1999).

Internet banking products and services which offered to the customers include wholesale products as well as retail and fiduciary products. Some examples of wholesale products and services including cash management, wire transfer, automated clearinghouse (ACH) transactions, bill presentment and payment. Besides that, examples of retail and fiduciary products and services including balance inquiry, funds transfer, downloading transaction of information, bill presentment and payment, loan applications, investment activity and other value-added services. In addition, other internet banking services also include providing internet access as an Internet Service Provider (ISP) (Comptroller’s Handbook, 1999).

There are 3 types of internet banking being used currently in the marketplace, which are:

Informational

Communicative

Transactional.

Informational banking system is the basic level of internet banking. Typically, the bank as a stand-alone server has the marketing information about the bank’s products and services. Informational banking system can be provided by the bank or outsourced. There is no path between the server and the bank’s internal network in the informational systems; hence the risk is relatively low, causing the server of web site to be vulnerable or alteration. In order to prevent unauthorized alterations to bank’s server or web site, appropriate controls must be in place (Comptroller’s Handbook, 1999).

Communicative banking system allows some limited interaction such as electronic mail, account inquiry, loan applications or static file updates for name and address changes between the bank’s systems and the customer. There is a path for the servers to the bank’s internal network; hence the risk with this configuration is relatively higher than with informational systems. In order to prevent, monitor and alert management of any unauthorized attempt to access the bank’s internal networks and computer systems, appropriate controls need to be in place. In this environment, controls on virus become much more important as well (Comptroller’s Handbook, 1999).

Transactional internet banking allows customers to perform transactions such as accessing accounts, paying bills, transferring funds, etc. There is a path typically exists between the server and the bank’s or outsourcer’s internal network; hence the risk is highest and strongest controls need to be in place (Comptroller’s Handbook, 1999).

Marketing strategies vary as banks seek to expand their markets and employ lover cost delivery channels. There are some market factors that may drive a bank’s strategy, which are competition, cost efficiencies, geographical reach, branding and customer demographics. These factors are motivating a bank to evaluate their technology and access their electronic commerce and internet banking strategies (Comptroller’s Handbook, 1999).

However, internet banking also creates new risk control challenges for the banks. Potential risk of the banks refers to events, which are expected or unexpected that may have an adverse impact or effect on the bank’s earnings or capital. There are 9 categories of risks, which are credit risk, interest rate risk, liquidity risk, price risk, foreign exchange risk, transaction risk, compliance risk, strategic risk and reputation risk (Comptroller’s Handbook, 1999).

CHAPTER 2 – CONTENTS

2.0 Advantages and Disadvantages of Brick-and-Mortar Banking

2.0.1 Advantages of Brick-and-Mortar Banking

People nowadays think of internet banking is better than brick-and-mortar banking. However, brick-and-mortar can also provides some of the benefits to customers. Some of the advantages of brick-and-mortar banking are stated as below:

Convenience

Brick-and-mortar allows the customers to contact their sellers face-to-face. Some people prefer choosing traditional banking methods compared to internet banking, especially for those senior citizens. The convenience and time efficiency of brick-and-mortar banking are more suitable for those people who like to multitask. Moreover, some of the customers prefer using traditional banking rather than using internet banking because they can ensure that they can get the transaction receipts provided when they see their money change to another hands after successful of a certain transaction (Comparing the services of traditional banking vs online banking, 2010).

Customer services

Brick-and-mortar banks are best to provide the customer services. Most of the older generations prefer using brick-and-mortar banking services because they know the service well and can go to the branch to withdraw their money, bank in money or even deal with the staffs. Furthermore, they can ask from the bankers to get information that they want face to face with the staffs (Branch (banking)-wikipedia, the free encyclopedia).

c) Security

Security is always the issue and so they are still many people prefer to use brick-and-mortar banking services. If the customers have problems, they can easily ask for assistance from a bank representative to sort out their problems. Some people also feel comfortable when they actually see the money change hands as compared to online banking wherein all the proof that they get about their transactions is the receipt provided to them by the site after completion of a certain transaction (Comparing the services of traditional banking vs online banking, 2010).

2.0.2 Disadvantages of Brick-and-Mortar Banking

However, there are some disadvantages of brick-and-mortar banking as stated below:

Slow service

When talk about the Brick-and-mortar banking service, it also helps those customers who need to borrow money or loans from the banks. However, through this traditional banking service, the banks will require longer time period for making loans to customers. Sometimes, it involves more prerequisites, and also slows of shifting money compared with internet banking. This will make those customers feel troublesome and refuse to use brick-and-mortar banking service again (What are the advantages and disadvantages to dealing with internet-only banks).

Location

Customers need to go back to the physical branch for some banks’ services like taking loans from banks or withdrawing money from saving accounts. When they encounter problems related to their banks’ accounts, they need to rush back to the physical branch and ask help from the representative to solve the problems. If the location of the bank is far, it is inconvenient for those customers who are old or are not able to drive (What are the advantages and disadvantages to dealing with internet-only banks).

High cost

Brick-and-mortar banking need to pay high amount of expenses costs as they need to build the branches in everywhere to provide convenience to their customers. Therefore, these banks have to pay the expense of buildings and real estate. Thus, they should have higher need for fees to drive their banking model. Besides that, banks have to pay for other expenses that include bank tellers, rental of the physical location of the bank branches and other overhead costs associated with running a regular bank (What are the advantages and disadvantages to dealing with internet-only banks).

2.1 How Brick-and-Mortar Banking Model will become a thing of past in Malaysia

Nowadays, the brick-and-mortar banking has been getting more and more outdated. The reason is that maintaining bank locations is extremely expensive and brings lots of affects on the profit as they create great amount of expenses, including rental, insurance, real estate taxes, utilities and employees. It will be even more expensive if bank branches are opened in cities like Kuala Lumpur (Robin Trehan, 2009). 

Recently, most of the banks are trying to avoid using brick-and-mortar banking. There is no longer any need for a bank to have a number of brick-and-mortar banking located in every city in order to reduce their cost as we know that how much the profit that the banks will get is much depending on how they manage their cost (Robin Trehan, 2009). 

It makes much more sense for the bank to provide only ATMs in cities and locate its main center of operations in a suburb. Customers can easily and quickly handle their banking business online, at an ATM or even over a mobile phone at any time of the day or night. The technology keeps getting more sophisticated. Even if they are out of the country, customers who bank online can access their accounts at any time with ease (Robin Trehan, 2009).

The savings realized by eliminating unnecessary branch locations can be passed on to the bank’s customers in the form of a higher interest rate. 

However, it is tough when it comes to transferring business banking out of the building and into cyberspace. It will take some time for people to adopt internet banking. Banks need to make sure that all their business customers understand how internet banking works and why it is safe to be used and able to replace brick and mortar banking (Robin Trehan, 2009). 

It can be helpful to tell them that internet banking is actually in many ways more secure than the brick-and-mortar banking. For example, customers can be quickly informed via email or text if there is unusual account activity or if an account is close to being overdrawn. They can then take appropriate action immediately rather than having to wait to visit a physical branch (Robin Trehan, 2009). 

Therefore, nowadays customers are encouraged to get used to and adopt internet banking as it will bring lots of benefits to the society. This traditional service is no longer be used and at the end will be lesser and lesser available around this world (Robin Trehan, 2009). 

2.2 Advantages and Disadvantages of Internet Banking

Advantages:

a) Convenience

Internet banking allows users to pay all types of bills or make any transactions or investments through internet. If customers find that they have busy working schedules or they simply do not find it convenient to visit their banks, then they might want to consider using internet banking.  Internet banking is a fast and easy way of managing their bank accounts and it has the potential to save them a lot of time and money. This means that the users no longer need to go to banks, press button for a queue number, sit and wait for the their turns. The idea of online banking is just taking the advantage of the internet, which connects the users to their banks. The users are able to connect themselves with their banks and they may choose the number of transaction like balance inquiry, fund transfer, bill payments, loan applications and even stock or mutual fund trading with a proper secure authentication process. Basically, these services are offered to customers for free although some banks may charge a minimal fee for each transaction (Expat.com.my, 1997).

Besides that, it is easy and convenient for the users to open and use an account of internet banking. The users just need to answer few questions in an application form. Then, users have to create security measures which are their usernames and passwords in order to access into their own account. Finally, user just needs to print, sign and send in a form in order to complete in opening an account of internet banking.

b) Low cost

In addiction, the cost of internet banking is low. It is because there is a much lower overhead with online banks as they have lesser buildings to maintain, and they have lesser salaried employees to pay for.  These savings allow them to offer higher interest rates on savings accounts and lower lending rates and service charges (Correctbanking.com, 2001).

c) Flexibility

Internet banking also allows the users to easily compare the internet banks in order to get the best deal. This means that users just need to access to internet in order for them to visit and check a number of online banks to compare things regarding savings and checking account deals as well as their interest rates. The users can also find out other things which are related to what credit cards are available, credit card interest rates, and loan terms and so on.

Moreover, internet banking also allows the users the ability to view their accounts at anytime. By having this advantage, it is easier to prevent or catch fraudulent activity in their accounts before much damage is done. As soon as they log into their accounts, they will be able to see whether there is anything amiss when you check on your deposits and debits. This lets them get started on correcting the problem immediately if they have found out any fraudulent activities (Correctbanking.com, 2001).

d) Safety

It provides safety too to the users if they use internet banking. This is because the crime rate has been increasing nowadays. It is very dangerous for a person to withdraw a large sum of money from banks for some payment purposes as the person might get robbed anytime by the robbers. It can be avoided by using internet banking as the users can make payments or transactions online no matter how large are the total sum money involved.

Disadvantages

In today's busy world, when people do not have much time even for personal work, Internet banking solves their problems. Many people who use internet banking services believe that as their accounts can be accessed by user name and password that only they know, their money is in safe hands. Whatever information they need about their bank account is only a click away. However, like all good things, even Internet banking has certain disadvantages.

a) Lack of Trust

Lack of trust is one of the disadvantages of internet banking. Many people still do not trust the internet banking services through internet. This is because they prefer to deal with human beings as they trust others like them rather than to trust a machine especially letting the machine to manage their money. They will worry that whether their money will be safe if being processed through internet banking (buzzle.com, 2000). For the new internet banking users who used internet banking services for only a few times, they may still feel worried whether or not they did the right thing such as clicked the right button and so on. They can only feel safe and comfortable when they print the transaction receipt and the transaction appeared on the bank statement (WebInternetBanking.com, 2007).

b) Security

Besides that, security threat has been a big concern to the publics. This is because they worry about the news or cases that related to fraudulent bank transactions that happen often will happen to them (WebInternetBanking.com, 2007). There are some cases of forgery have been happened in internet banking. There are some websites which can hack the usernames and passwords of internet banking users and later misuse them. In such cases, many people lose their money without getting informed and they will only know huge loses have been incurred when they receive the bill (buzzle.com, 2000). So, the users of internet banking have to very trust to the bank that their account and personal information are safe (eHow.com, 2006).

c) Difficult for First Timers

Another disadvantage of internet banking is it is difficult for first timers. This is because the first timers need to take some time to learn how to use and adopt internet banking. For example, they need to spend quite some time to open an internet banking account as they need to answer quite a number of questions related to their personal details. Because of this complexity, the first timers may be discouraged to use this internet banking service (WebInternetBanking.com, 2007). In addition, the first timers might worry that they might click wrongly while making transactions and cause them to have monetary losses (buzzle.com, 2000).

d) Accessibility

Furthermore, another concern about internet banking is its accessibility. If the internet server in the area that the users stay goes down, the users will be unable to access their accounts to make any payments or transactions through internet banking (eHow.com, 2006).

e) Impersonal

The next disadvantage of internet banking is it can be impersonal for the users to doing transactions through internet banking. This means that the users make payments or transactions and do business with the use of computer only. No individual will be there to receive and check their money or correct some wrong information that the users might have made. And for people who feel comfortable to deal with people, who provide personalized services and using paper and money, face-to-face, internet banking is not an ideal service for them to use (WebInternetBanking.com, 2007).

f) Customer Service

Last but not least, customer service affects people to use internet banking too. One very common disadvantage of online banking is when a person has some problem or query. In a normal bank, if one faces some problem, one can go to some employee of the bank to solve it. However, in the case of Internet banking, one will find oneself making endless calls to the customer service department (eHow.com, 2006).

2.3 Comparison between Brick-and-Mortar Banking and Internet Banking

Interest Rates

Internet Banking – Interest rates is the biggest selling point for internet banking as they can keep their costs down and give that money back to their customers in the form of higher interest rates on savings accounts, money markets accounts and so on.

Brick-and-Mortar Banking - Interest rates will never be a strong point for brick-and-mortar banking. Their high expenses cause them to be not able to pay high interest to their customers.

Customer Service

Internet Banking  – No matter how fast the internet gets or how easy it is to make a call, it is always tough and frustrating when we try to get a hold of a customer service representative to answer your questions. People that prefer talking to a person who can answer their questions face to face will have to take some time for them to adopt internet banking.

Brick-and-Mortar Banking  - Having the face-to-face conversation ability is a huge selling point for brick-and-mortar banking. No matter how big the problem, it can be solved easily. The ability for the users to easily deposit checks or cash at the branch is a big advantage for brick-and-mortar banking.

Amount of Products

Internet Banking  - It depends on the bank, but some online banks only offer a savings, checking, and CDs. They pride themselves on simplicity and doing the job right so they do not stretch themselves thin with credit cards or loans.

Still, customers will not be able to hold all of their financial accounts within one internet banking as they just do not offer enough products – something like credit cards or student loans are never an option for internet banking.

Brick-and-Mortar Banking  - These banks have so much more money available to them so they can offer an array of products that fit all of customers’ banking needs.

Online Options

Internet Banking  – This is the second biggest selling point for internet banking. They only exist online so banks can almost guarantee that their web interfaces are going to be superb. They offer easy transfers, multiple savings accounts, automatic saving capabilities and son on.

Brick-and-Mortar Banking  - Some of the big banks have quality web interfaces, but they are not as advanced as internet banking as they do not offer as many tools.

2.4 Comparison between the Popularity of Internet Banking in Malaysia and other countries

Internet plays an important role in this electronic world. It has been growing very fast in these recent years. It enables people to use the banking services through online. Internet banking is a new trend of services offered on internet. It makes some of the paper based work to become electronic based work which easy the bank and also the customers. The internet banking defeated the traditional brick and mortar services and developed very fast in many countries in the world. Although it is very popular in many countries, there are still some countries left behind of it because of the unstable economic and other reasons. One of them is they are not able to afford to pay for the internet connection and installation.

Statistic of Internet Users in ASEAN Countries

Source: Malaysian Communication and Multimedia Commission

The statistic above shows the internet users in ASEAN countries where Singaporean and Malaysian use the internet the most. This also tells us there will be more internet users in our country and Singapore choose to use internet banking instead of walk into the banks. Cambodia and Myanmar only show a very low level of internet users. It is impossible for the residents to learn internet banking and adopts the internet. Majority of the residents in these two countries are uneducated and poor. They have no money to pay for internet and proper education. Only the rich ones can afford for the internet connection. Therefore, most of the people in Cambodia and Myanmar will less likely to use internet to do the internet banking services because they have less or even no knowledge about the information technology. This means the internet banking services are still yet popular in these two countries compared to Malasia and Singapore.

In India, there is only 1 percent of Internet users use the Internet Banking services in the year of 1998 but increased to 16.7 percent in March 2000 according to the Indian Research by Kotak Securities. According to the news published in Financial Express, the International Data Corporation (IDC) report stated that the current internet banking users in Indian stand at over 2 million but there is less than 1 million of the users are active. Although there is an increase in the number of the internet banking user but most of them are inactive. The active internet banking users in India stand 15 percent of the total population of India. More and more banks are offering the internet banking services to the customers. The current growth of internet banking in India is still slow but steady and it is a potential market in the future. The IDC feels that the internet banking will expand very fast in the future years because the information technology in India is facing a revolution.

In Malaysia, according to the government research, most of the people use internet for daily work and personal usage. Based on the research done by Energy, Communications and Multimedia Ministry, there was 7 percent of the Malaysian residents subscribed for internet in year 2000. In year 2008, there is also researches show that the internet banking has been growing more and more popular in Malaysia. There are over 4.5 million registered internet banking customers in Malaysia which is 85.5% of the total internet users and internet banking has a yearly growth rate of 40.6%. From the statistic above, we can know that internet banking has now become the part of Malaysian’s life. More Malaysians are using internet banking to do their transaction for convenient purposes. It helps them to save time and cost and do it at anytime and anywhere with the internet connection.

While compared to Singapore, their information technology is more advanced than our country. More and more people are able to purchase computers and subscribe for the internet. The internet users stand a 66 percent of the total population of Singapore including the foreigners. "The increasing popularity of e-banking indicates that more and more people acknowledge the benefits of accessing information and transacting online. When people see that it is easier and faster to transfer funds online than to queue up at the bank, they begin to appreciate the value of e-commerce.", said Dr. Jack Loo, Country Manager, NetValue of Singapore. The internet banking has become more popular in Singapore where 30 percent of the internet users were visiting the internet banking sites in July compared to the 25 percent in March based on the recent research done by NetValue.

The internet banking is more popular in Malaysia compared to Singapore, India, Cambodia and Myanmar. Although the Singapore has more advanced IT than our country, the popularity of internet banking is still not good than Malaysia. While the popularity of the internet banking in other countries which had mentioned above are still low compared to Malaysia.

2.5 How can Internet Banking become a successful and profitable service and fully replace Brick-and-Mortar Banking in Malaysia

To make the Internet banking become a successful and profitable service that can fully replace the brick-and-mortar banking in Malaysia, there are several ways that the banking sector can do:

1. Have the good internal control over the Internet banking system

To make the Internet banking to fully replace the brick-and-mortar banking services, the banking sector must make sure that they can actually control and assure that the system will function appropriately. The objectives of controlling the Internet banking is to assure that the banking sector has the consistency in the technology planning, consistency with the strategic goals, the effectiveness and the efficiencies of the Internet banking that is compliance with the banking policies and legal requirements. Besides that, data and service availability, data integrity, data confidentiality is also a good internal control that the banking sectors should look into. For example, a good internal control should include which information can be accessed by the employees and which information can be accessed by the customers. When a banking sector has a good internal control over the Internet banking, the customers will think that using a Internet banking is a good try for them to move into because they can safeguarding their assets, having a proper authorization and reliability transactions by just having a few clicks on it (Internet Banking, 2003). Thus, the Internet banking not just adds values to the banking sectors but also improve their profitability level.

2. Provide a proper education for citizens on Internet banking and how to use it

Although Internet banking has been developing since long time ago, but some citizens in Malaysia are still fears to use it. Why is it so? The reason is very simple. It is because they do not have the proper education on Internet banking and what actually the Internet banking can provide for them. For some people, they are very shy. They try to avoid using Internet banking because in their mindset, they think that by having transactions over the Internet, they will be scrutinized by a larger group of people compared to they just make their transaction at local bank. It is not that they doing anything wrong, it is just a matter that they feel very embarrassed on what they are doing. If these groups of people can fully understand that the transactions that make over the Internet are their own private business, then, it can help to increase the rate of people using Internet banking and they might become the most avid customers of Internet banking also. Besides that, Internet banking also provides a paperless environment. Some of the people especially senior citizens will feel very uncomfortable if there is no any written proof of transaction, and in later time, they will lose the ability to prove anything of the transactions that they make. But what the people think is actually wrong. Actually, Internet banking does not have to be a completely paperless. They can actually print out the transaction or receipt which you have made, a monthly statement and sometimes print off a copy of given cheques, in most cases. If our citizens have a proper education on the Internet banking, they will start using the Internet banking and will find that it is a useful tool and something that can make their life simple.

3. Having an intensive marketing Internet service and strong customer service support

The banking sector has to communicate with their customers about what types of services they provide over the Internet. For instance, services such as apply a loan from online or even make some changes to your account are allowed on the bank website. So, the bank should have formed a special team to promote these types of services to the public. Besides that, a profitable Internet banking strategies depends very much on the proper development of the market segmentation, identifying the potentially most Internet banking’s customers and caters what they need. The banking industry really has to look into whether the customer service levels have been established. For example, a customer wants to check their account balance by using the Internet banking, but for sometimes, the customer is unable to check their account balance if the bank does not update the account on the Internet fairly frequently. This make it hard for the customer to check their current account if they just having a purchase or any others transaction or if there is any of the overdrawing of the purchase. So, the high service quality of the bank to its customer must be delivered to ensure that the customer would not run away from using this Internet banking services.

4. Provide a banking functionality with minimum operating cost

As a customer of the bank, do you ever complained that the high service charges on bank? Actually, this high service charge by the bank is use to maintain the traditional ‘brick-and-mortar’ based structure such as the staffing, security, utility, storage and others overhead costs. Thus, you will see that the bank will charge high service fees and pay a very low interest rate on the deposit which you place in the bank (Internet Banking-The way to go, 2009). One of the biggest advantages of this Internet banking is to permit you make the payment originally. For example, a businessman who is involved in a trading activity that has a 14-day credit term to pay back to his creditor, but unfortunately, the businessman forgets about this. It is because when he wants to bank-in the money to his creditor, he needs to travel to the traditional brick and mortar banking structure. Instead of 14-days credit term has now become the 17-days. So, the creditor will have extra charge on the late payment. Now let us look at a different situation, the creditor was giving the businessman the same 14-days credit term. Besides that, the creditor offer a 10% discount if the businessman can pay it within the 10 days of the credit term. So, this savvy businessman use the Internet banking that can directly pay to the creditor’s account and thus he gets the discount and helps him to save the operating cost and extra fees charges. So, by promoting to the public that the Internet banking can help to reduce operating cost, I am sure that there will attract more individuals or enterprises using this Internet banking as their main choice to do any banking services.

2.6 Ways to improve Internet Banking

The banks have to improve their internet banking to make their customer continue to be loyal to them and thus help them to increase their revenues. Banks can no longer assume that just having an online presence is enough but they have to make sure that their internet banking services need to be a satisfying, engaging experience, if they want to do better than their competitors. A successful online service must be much more than a copy of the paper-based services available at bank branches. Features such as online customer support and financial calculators are the best ways to increase the interaction between customers and the bank (ComputerWeekly.com, 2005).

One of the ways to improve internet banking is banks have to be more active in managing their digital touch points by creating websites with high standard of quality and mobile banking offerings that function as a seamless part of a positive overall customer experience. This is because according to a research, digital touch points have become extremely important components of the overall banking experience over the past 10 years, and they promise to become even more important in the future (ComputerWeekly.com, 2005).

Besides that, banks should reduce the number of staff in order to reduce the total costs and bank also can put the information technology and online security systems together and reduce the infrastructure of construction that requires to services the customer. Besides, banks can improve internet banking by allow the users or customers making some different online tasks without asking the permission from the banks. This method will also help banks to increase their revenue.

The third ways is banks need to understand what make the people want to use internet banking (blog.taragana.com, 1996). This ways is very important. This is because by knowing what make people want to use internet banking, banks improve the quality of internet banking to satisfy the need of users.

The fifth ways is adding some systems in internet banking. This additional system is almost combining with the existing system, application, procedure and information of bank. Thus, this will help to reorganization operations and remove the person that without job or jobless within the organization. This method is more convenient to the online bankers because it just need one username and password to entry. Besides, it also can have additional ability for online banker such as billing or payment of electronic, online brokerage services and others. Besides adding systems for online bankers, banks also can add more system in internet banking for the users. This adding system can have many methods such as to pay the e-statements from the bill of retailer to cash management, and then the users also can create an effective or powerful fraud protection element for security on all channels (Brent W., 2008).

The sixth ways is decrease the costs of internet banking. Normally, banks are always likely to making the costs become lower or minimize the costs. Internet banking commonly charges for all its own users rather than for those active users only (Brent W., 2008). If decrease or minimize the costs of internet banking, then the banks will charge lower for all its own users. Therefore, the users will more likely or will be more loyal to u use internet banking of the banks.

The seventh ways is improve the accessibility of characteristic and functionality of internet banking. Most of the users or customer will feel more desire if banks can improve this (Brent W., 2008). This is because the improvement in the functions of internet banking can let the users can make more investment or transaction through internet banking.

CHAPTER 3 - CONCLUSION

Winnie

Wikipedia: Online banking, 2010. Retrieved from http://en.wikipedia.org/wiki/Online_banking

Wikipedia: Brick and mortar business, 2010. Retrieved from http://en.wikipedia.org/wiki/Brick_and_mortar_business

Wikipedia: Branch (banking), 2010. Retrieved from http://en.wikipedia.org/wiki/Branch_%28banking%29

Comptroller’s Handbook, 1999. Retrieved from http://www.occ.treas.gov/handbook/intbank.pdf

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