Critical analysis of the impact of e-banking on the customers of the banking sector in the united kingdom and their future behavior

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Abstract

This research paper will compare and contrast the characteristics of the traditional banking and e-banking. Additionally, research will identify the similarities and differences between the virtual and the real-world banking industry customers. Distinguish the difference between the world of e-banking and the real world in terms of customer communications. Determine which traditional customer communications can and cannot be successfully ported to the world of e-banking. Assess what new communications techniques are uniquely available in the world of e-banking. And demonstrate how the use of multimedia technologies creates effective e-banking websites. Discussion of customer communication strategies and real-world examples will be presented.

Chapter 1-Introduction

1.1 Internet Banking in the United Kingdom and Europe

In the United Kingdom, Internet banking services are available and provided by twelve Internet banking services providers. The Egg, for example, is an Internet banking service provider (exclude current account features) that has more than 150,000 customers visited their web site during October 1998 to July 1999. The Internet banking services providers in the U.K. have encountered an increasing demand for cross boarder payment transactions for smaller amount of cash and payment over the Internet. Many banks continue to develop and launch new banking services on the Internet in order to satisfy and meet their Internet-based customer requirements in term of time, ease of use, security and privacy in the U.K. (Birch and Young, 1997; Mathew and Dagi, 1996; Gandy and Brierley, 1997).

In June 1999, the U.K. and eight other western European countries: France, Spain, Portugal, Germany, Switzerland, Holland, Luxembourg, and Scandinavia have become leading nations in providing Internet banking services in Europe.

Germany also has been rated as the nation that has the highest number of Internet banking services providers in Europe (Blue Sky International Marketing, 1999). Although the UK has smaller number of Internet banking sites on the Internet than in Germany, but it has been rated as the highest quality and functionality at no additional charges to their customers in Europe. However, there are two banks in the U.K. that charge additional fees for Internet banking services, Nat west and NPBS

In Scotland, the Bank of Scotland does not provide 24 hours Internet banking services via the web site. Customers can not access to Bank of Scotland web site between 1:00 a.m. and 5:00 a.m. during weekdays and between midnight and 5:00 a.m. during weekends. During the bank web site is not accessible, a daily back office operations and maintenance is performed to assure accuracy and security according to local restrictions, rules and regulations.

Most of customers in the U.K. and European countries use Internet banking services to inquire about their outstanding balances in saving and checking accounts, and details about their latest or last transactions for their daily reconciliation. The frequency to access the customer's account per day is quite high. Many banks, therefore, have provided many view only features for customers to inquiry and view the information on their accounts as often as they want per day. As a result, the banks have reduced both operating costs and work hours for their staffs at call centers and local branches for frequently asked (FAQ) and repetitive transactions.

1.2 E-banking security provokes fear or indifference for the British public

A recent study by analyst Forrester Research has unearthed conflicting views about the safety or otherwise of online banking. The survey of 11,300 UK net users found that while many online banking consumers are complacent about security, a large minority have given up online banking as a direct result of security fears.

Most UK net users are aware of security threats like phishing and keystroke logging but are unfazed by these risks and expect their banks to deal with the problem, even though these attacks are thrown against the consumer's PCs rather than a bank's own systems. Ideally users want banks to supply a blanket guarantee against fraud.

Based on responses to its survey, Forrester concludes that an estimated 600,000 from a total of 15m subscribers have ditched online banking as a direct result of security fears. Forrester reckons that users are confused and banks need to step up their efforts to educate customers about online fraud. Measures to restrict the functionality of some accounts (for example controlling how much money can be transferred on any day), stronger internet banking authentication and improved customer profiling are also needed to defend against security threats, it advises.

In addition to people who plan to drop net banking accounts as a result of security fears, another fifth of net users say that security fears will stop them ever banking online.

1.3 UK Consumers shy away from e-banking

Customers still value direct contact with real people in their bank branch. A vast majority of bank customers thinks that an online banking service is not important for their relationship with a bank.

According to a survey one third of customers rate e-banking as an important service, and of those only 22% actually use it.

Even more unwelcome news for many banks will be the poll finding that more than 30% of customers do not even know whether their bank provides online services at all.

The findings contrast starkly with the market expectations among banking executives. In an earlier Deloitte survey, financial services executives had predicted that customers would be eager to do their banking on the web.

1.3.1 Cutting costs, not customer care

Julian Badcock, retail financial services analyst at Deloitte, said customers were certainly not rating the internet or interactive services "as a key factor in measuring their satisfaction with their banking service provider". A "responsive service" and the feeling of "being treated as a valued customer" were much more likely to make consumers feel happy with their bank. And more than 50% think it is important to have quick and easy access to a local branch. The findings of the report make bitter reading for backers of internet banking pure plays like Virgin and Egg. Julian Badcock's conclusion: "90% of customers at present [are] showing no interest in obtaining financial services from new entrants." Established players, meanwhile, have to worry whether their huge investment in online banking is money well spent. The need for expensive customer care does not sit nicely next to the cost-driven move to online banking.

1.3.2 Educating customers

Long-term hopes for cost savings will only materialize, if consumers can be persuaded to use the services. A recent survey by consulting firm Cap Gemini Ernst & Young had found that currently just 4% of all bank transactions in Europe are done online, a number expected to rise to 25% by 2003. In the United States just 3% of transactions are done online, and there growth prospects are more modest, with the share of online transactions seen to reach 12% within three years. Such growth rates, however, can only happen if banks begin to "educate" their customers about the benefits of online banking, Deloitte's analysts say.

Chapter 2-Literature Review

2.1 Executive Summary

How secure is online banking for the regular and not so regular internet user?

The internet is becoming a more globally known form of communication around the world these days and it's used largely in conjunction with personal/business tools to expand the horizons of e-commerce.

As many small to large business follow the trend, looking for soaring profits, by placing their business online, they are left to find a threat in the online world' in terms of security issues. This can be extensive in regards to online banks and financial institutions that provide the businesses with their transactions, along with the present threats of personal privacy and protection flaws associated with banking online. Online banking is not just about viewing accounts online, or paying bills. It has more to that, it include transferring of funds, shopping online etc.

As a proven fact, felonies consisting of fraudulent behavior have attacked national Australian banks and are currently in legal dilemma over the astounding issue. Presently, uncertain of the root of the crime, banks have been forced into an unacceptable situation in regards to customer's bank accounts.

With alarming issues of security' online, there are a few steps that can be taken in order to prevent such matters from arising or basically in order to avoid hackers into your private life.

2.2 The internet and its benefits

As today's busy world is immensely changing in the depth of telecommunications whilst advancing in the technological age, we are left to find minimal time to do the basic necessities such as shopping, banking & relaxing. So along came e-Shopping, and e-Banking. "Online banking is for you if it will save you time and money. E-commerce plays a major role in how the internet is used in terms of a consumer business, or B2B relationship, but there just isn't enough security online.

2.3 What is online banking about?

  • nline banking may be considered just as a system where you view your accounts and pay bills, but it is not just about that. Online banking is about shopping online, transferring funds, viewing transactions histories, servicing your accounts online and getting in contact with your bank around the clock.

    As shown by the statistics, lenience to banking online can be proven handy. The convenience can be dominant, since not only is travel time reduced, but ATM machines, telephone banking or banking by mail are often unnecessary. Technology continues to make online banking, easier for the average consumer. Not only regular consumers, but also many small, medium and large businesses are finding it rather efficient. - Bankrate.com (28-10-2005)

    In the past, online banking consisted largely of banks partnering with large software companies such as Microsoft, to provide the online banking services within their personal finance software. Microsoft.com (1996) this led to the first of two approaches referred to as the client-based system, allowing customers to use the money management software and their own computers to access the bank via a modem and a phone line. The second approach is that of the newer Internet-based systems which allow customers to simply dial in using any computer and use the bank's software.

    From a business perspective, they actually have more danger associated to their business, than a consumer may. "Home PCs are, as confirmed by all IT Security vendors and specialists, the least protected" - albassera.com (21-06-2002). Ocp.co.uk (No Date) describes best the implications businesses could face with the threat of online security':

    • Financial savings that online banking has to offer.
    • Increasing supply power by reaching a more global target
    • Attract new customers

    And therefore the disadvantages that may occur to a business:

    • Level of learning for each customer may vary, or may even be too difficult to do online transactions.
    • There a potential threat of the site being hacked
    • Lost information or errors in banking can lead to a loss of business
    • Not all clientele may be happy with making purchases online.
    • Initial set-up costs and on-going cost can be rather expensive to keep the site up-to-date.

    Proven by the disadvantages list, there are a lot of threats placed on a business in order to consider a place in the e-market'.

    2.4 Internet Banking

    Banks are not the only commercial organizations locked in a love hate relationship with the Internet. On the one hand, cheap and ubiquitous, the Internet offers a potentially attractive way to serve customers without the heavy costs associated with the traditional bricks and mortar business model. On the other hand, the Internet is fundamentally open and insecure. It is the very antithesis of the private networks that industry and commerce have entrusted with carrying transactions and other critical information. Despite the dichotomy, the Net continues to grow ever more rapidly in importance to the commercial world. From books and airline tickets to share trading and the filing of corporation tax returns, new users for the Net are proliferating.

    In most cases, the incentives of Internet Banking are either the need to meet competitive challenges and customers demand or the need to cut costs. As reported by The Times of UK on Internet banking, a banking transaction action at a Bank costs around $1.07, & $0.27 via an ATM and just one-cent on the Internet. The decision to use the net is rarely a technical one. Banks have opportunities in the new payments gateway in areas such as purchasing platforms, certification, trade services and trade finance, electronic bill presentment and payment, consumer Internet payments and also plethora of competition.

    There are five main reasons for going online. Firstly, Internet banking removes the need for physical presence in new territories - a web site gives global presence without in-country set up and ongoing infrastructure costs. Secondly, success carries few penalties because growth can be accommodated centrally, without recourse to building and operating new service centre's (bank branches in retail terms). Thirdly, the time to market new products and services is dramatically reduced due to the standardized technology that characterizes the Internet. Fourthly, there is the chance to preach to the converted. Marketing costs in this medium can be concentrated on creating an effective Website that attracts potential clients. Finally, the Internet fits well with the characteristics of Corporate banking where thousands of transactions which can be conducted daily and multiple updates provided, individuals can work easily from different locations and there is a growing belief that security fears will be resolved by evolving techniques and technology.

    For internet banking to work effectively, it needs to address the key issue of security. In conventional banking we use written references or prior knowledge to assure ourselves that we know who are doing business with us. We use controls to ensure that non parties are not party to a confidential deal cannot see or tamper with paper based information that is stored and in transit. And we use pen on paper signatures as an irrevocable sign of our agreement. Banks have long used encryption devices to scramble inter-branch links and communications with corporate customers. More recently firewalls and password tokens have been introduced to provide access control.

    In addition to security, quality of services is another key area in providing successful e-banking. Any customer is only a click away from a competitor elsewhere, so it is imperative that the e-banking experience reflects an optimal encounter each and every time. As simple as this sounds, developing the network management capabilities to assess and respond to the end user experience is no trivial matter. Much of the discussion so far has focused on e-banking as provided over the Web but the Web is only a beginning. The changing shape of Internet banking in the future will be fascinating to watch.

    Internet banking is a robust and highly practical solution but has delivered something of a surprise too. As Internet banking becomes more common, potential customers have increasing choice. The more informed among them are shopping for service not just on the basis of obvious criteria such as interest rates and functionality, but also on the quality of the security being provided. For those banks still debating the best Internet approach, the advice is to start small but start as early as possible. The number of customers and services should be limited initially while the potential of the technology is learned and the security and services levels are assured.

    2.5 Online banking security

    Nowadays, online banking is used primarily through the internet-based system of customer/business to bank. All online transactions should be governed by an SSL (Secure Socket Layer) encryption. Gelman (1998, pg 39) states that information sent over the internet may pass through dozens of different computer systems on the way to its destination. This basically means the information being sent is to be encoded before transmitted from the destination computer to the banks computer. Knowing that your bank account details are being passed on to many other computers in order to reach its destination, doesn't exactly make you feel safe and sound about using online banking.

    A customer's password or pass code serves as the first level of protection and is digitally sent separately for security purposes. This is also accompanied by the issuing of a Logon ID, which is a unique membership number. Currently online businesses and financial institutions face great danger as online banking can lead to fraudulent behavior. Atansov (2001) "Credit card generators are readily available to download" The impact of such a fact has left many internet users wondering about the security issues in regards to their personal information, their banking details and most of all their internet surfing privacy. From a recent survey it was shown that a massive 30% of regular internet users were too nervous to use online banking.

    2.6 Current online banking security issue

    As it may have come to recent concern, most of the banks were beaten by an unknown source luring it's customers to accidentally reveal their account details. An email was sent out to customers stating that their account details needed renewing and that if they followed simple steps provided they could renew their accounts adequately. "Some Net Bank customers have been deceived into providing their Net Bank client number and password as a result of a spam email which was widely circulated in UK. As none of the customers were aware that such a scam could happen, they gave their Login ID's, Passwords and account information away to very deceitful criminals.

    2.7 An outcome about online banking security and its future

    In the analysis for online banking security, many precautions can be taken in order to prevent trouble occurring in regards to account details, personal details and security information.

    Customers of online banking must play their part in securing online banking by helping to safeguard information, which can be done by protecting their Logon ID and Password from misuses. These may include things like not telling other people their Login ID and/or Passwords, not using public computers to access their bank account information and being able to tell the difference of a secure and non-secure website.

    The future can only hold a solution for the current problem of online security, which can be solved in many different ways. It's best to avoid internet banking for the current moment and wait until there is an upgrade on its security. As many consumers are still nervous about using the internet for banking, the issue of security will be a thing of the past, just at this particular moment it shouldn't be overlooked.

    Chapter 3-Research Methodology

    3.1 Evaluation of five E-Banking Sites in the UK

    There are two distinct models of E-Banking sites:

  • Pure Cyber banks; e.g. in the UK, Cahoots, Egg, First Direct and Smile, which only have an Internet presence;

  • Traditional banks that provide E-Banking to complement retail banking, e.g. In the UK, Barclays, Nationwide and HSBC are some of the traditional banks that have an Internet presence to complement their brick and mortar branches.

    Not all the banks offer the full range of services on the Internet; banks in both the aforementioned groups offer a wide range of services. These include personal banking, commercial banking for both small businesses and large corporations, loan application services.

    Financial services such as applying for an Individual Savings Account (ISA), opening an E-Account, applying for a mortgage, etc.

    3.2 Methodology for Evaluation of E- Banking sites:

    I chose five E-Banking sites: Egg, First Direct, and Smile in the pure cyber bank variety, and E- banking sites of Nationwide and Barclays, which also have physical branches.

    Aims and objectives:

  • To determine the ease of applying the evaluation instrument based on the e-SERVICE framework;

  • To demonstrate that an E-Commerce environment should not only have a usable Web site in conventional HCI or Usability terms, but should provide service quality that meets or exceeds the customers' expectations.

    3.3 Research Method

    The research method involved conducting heuristic evaluations of the E-Banking sites. Heuristic evaluations involve inspecting the user interface to check its conformance against a set of heuristics or design principles (Nielsen, 1993). The heuristic evaluations involved two steps:

    1. First of all I conducted usability heuristic evaluation. We applied an evaluation instrument consisting of several sub-heuristics of the usability heuristics approach.

    Provide an effective home page are:

    • Ensure intuitive access and logical progression to key user tasks;
    • Integrate clear yet usable branding;
    • Ensure visual elements do not compromise usability;
    • Terminology should relate to the users' tasks and not marketing speak;
    • Provide appropriate Metaphor for navigation from the home page;
    • Simplicity or busy is either appropriate?

    The heuristics in Table 2 and the sub-heuristics in the usability evaluation instrument (which is available from the authors) were derived from several sources in the literature and Web sites (e.g. www.usableweb.com, Nielsen's www.useit.com, IBM Web guidelines). The list of heuristics was also refined and updated during the authors' experience of conducting usability evaluations of E-Commerce sites as a part of their consultancy activities.

    2. Secondly I conducted heuristic evaluations of the five sites with respect to the e-CRM heuristics using the e-SERVQUAL evaluation instrument. (Based on the e-SERVQUAL framework).

    Table 2: Usability Heuristics

    • Provide an effective home page
    • Design a natural and manageable structure
    • Provide an aesthetic minimalist Design
    • Enable easy and intuitive navigation
    • Ensure Consistency
    • Support the User

    I considered the customer task scenarios listed in Table 3. The customer task scenarios presented here describe key situations of customer's interaction with an E-Banking environment. Task scenarios are realistic, concrete and specific and help to guide the evaluator through heuristic evaluations. The evaluator (usability expert) interacts with the E- Commerce site to role-play a stereotypical customer and conducts the customer task scenario. While walking through the scenario and navigating through the site, the evaluator checks for the site's conformance against the heuristics, and makes a note of situations in the scenario where the E-Commerce environment does not adhere to the heuristics.

    Chapter 4- Research Findings

    4.1 Internet Banking

    Internet, a global system of computer networks, first appeared in 1969 under the name "Advanced Research Projects Agency Network" in the United States (PBS Online, 2003). At present, about 13 millions serves are linked to the Internet across the globe, 99 per cent of which are located in advanced countries

    (CSE Online, 2003). Many banks use the Internet to offer services for both domestic and foreign consumers. "At an advanced level, Internet banking is called transactional online banking, because it involves provision of facilities such as accessing accounts, funds transfer and buying financial products or services online" (Karjaluoto, Mattila and Pento, 2001, p. 348). The Internet also helps banks penetrate other financial markets without requiring their physical presence in those markets.

    Miklaszewska (1998) identified four roles for the Internet in a modern banking industry. First, it facilitates financial transactions between banks and their consumers. Second, it gives financial institutions permanent access to financial information. Third, the Internet connects a bank's head office to its branches. Finally electronic banking lets customers check their account information, pay bills, transfer funds between accounts, and perform other functions. Customers will soon have access to additional services such as online stock and bond trading (Miklasewska, 1998, p. 283).

    The Internet gives financial institutions various opportunities to conduct their various financial transactions. It enables banks to introduce international payments. It also helps banks cut time, money and risk. Many transactions can be done through the Internet. Availability of data through the Internet helps both banks and consumers reduce risk-taking in their financial transactions.

    Usually banks use Internet for publicity purposes, which include informing the public about the characteristics of financial products (e.g., commission rate, type of accounts available within the bank, interest rate on lending and borrowing, etc.). Large banks such as Citibank offer On-line LC issuance services to traders and cross-border finance facilities to foreign investors. Respondents noted that the response to those Internet services is high.

    Internet improves banks' delivery system. But, the branch remains the main channel for delivering banking services in developing countries. Individuals still prefer face-to-face banking rather than buying financial services via the telephone or the Internet. The removal of barriers on the use of new technologies would encourage banks to invest in e-commerce and TV banking.

    The Internet improves two essential factors in global banking businesses: time and location (Oxford Analytical Citibank, 1999). The time needed to access bank services through the Web is extremely short. The Internet is also available everywhere in the world. As a result, Internet technology has globalised the banking industry; many banks use e-banking to expand their market share abroad.

    This section has shown that the Internet is a means to penetrate new markets without a physical presence in the host country. It enables banks cut their costs and to provide large packages of services in short space of time. The result is an increase in banks output levels and boost in their profit margin.

    4.2 Advanced Information Technology and Banking Efficiency

    The Internet increases banks efficiency by helping them reduce the cost of producing and delivering financial services. The Internet alters the pricing strategy of the banking product. Banks price their products at the right level for the ‘electronic market'. The price of financial services is usually lower via the Internet than in the branch (Jun and Cai, 2001); this has made the Internet an attractive banking environment for clients. As profit margin decreases, new products are delivered through new channels, retail services and securities being the main areas of change. Global banks also use the Internet to expand their activities and to earn new market share (Oxford Analytical Citibank, 1999).

    The Internet enhances competition in the banking sector as many non- banking institutions offer their services through Internet channels. Banks also face severe competition on the lending side from global markets. Financial service clients have access to all information about products (e.g. pricing and characteristics) through the Web. This has increased transparency and reduced the cost of financial instruments. Therefore, banks have to apply different mechanisms for pricing their products.

    As shown in Table 1 the number of banks branches will decrease as electronic distribution channels become more popular. Internet also enhances the delivery of large range of financial products. These improve banking efficiency by facilitating payment processing. The goal is to attain high value-added products. "The Internet plays a vital role in the key challenges facing Financial Services Institutions today. It provides a tremendous opportunity for Financial Services Institutions to reduce transaction costs, exploit new markets and roll products much faster than was possible via traditional channels" (Banker, 2000, p. 4. Bank managers stressed that the Internet enhances the global competitiveness of financial institutions by increasing their output levels.4 The Internet is also a means to manage business-to-business5 or business-to-customers transactions effectively. A strong Internet infrastructure is necessary to allow banks improve their electronic data interchange.6 Co-operation between telecommunication firms and financial institutions facilitate the modernization of online banking. Increased capital investments and clear rules for online banking also fosters the growth of e-business activities and enhance market transparency (interview notes, 2003).

    Finally, bankers surveyed in this research believe that the Internet is a means to boost the relationship between providers and users of financial services in the marketplace. The Internet allows market participants to access all the standard banking services at a low price. This motivates individuals and investors to purchase large packages of banking services via the Internet.

    4.3 Problems Associated with the Advances in Information Technology

    The major problem facing Internet banking is the physical delivery of cash. Clients regularly receive financial information through banks' Web sites. Nevertheless, it is impossible to make a physical delivery of cash through the Internet. Clients also require instant access to products' prices and financial information. "The very concept of the end-of-day is meaningless in the world of e-commerce, where customers may be anywhere in the world and demand consistent and instant levels of services" (Banker, 2000, p. 6). Banks should promote innovation to become more competitive. The Website must also complement branch services, meaning that products offered via the Internet have to describe how they supplement or replace services available inside the branch.

    Advantages of e-banking:

    • Low costs (particularly fixed costs); Cross-border expansion;
    • High franchise value; Strength link with customers; Market share growth;
    • Financial information potential; Simple to access.
    • Disadvantages of e-banking
    • New competitors;
    • Complicate services valuation; Development costs;
    • Low security.

    Source: Salomon Smith Barney (1999, p. 5)

    4.4 Online banking: phishing for security

    Security is of major importance to online consumers. Though they also worry about unpleasant content or spam, their foremost concerns relate to security. Viruses, credit card number theft, interception of data, collection of personal details and identity theft received most mentions in this survey in the UK. The attitude is similar in most European countries. Security vulnerabilities are part of web reality, however. The success of the internet has attracted a rising number of hackers and other scallywags. Given the wide-spread use of automated attack tools against internet- connected systems, the overall damage is potentially much larger than the reported vulnerabilities and incidents indicate at first glance. Phishing is the most current threat. Phishing attacks use 'spoofed' e-mails and fraudulent websites. They are designed to fool recipients into divulging personal financial data such as credit card numbers, account usernames and passwords, or social security numbers. By hijacking the trusted brands of well-known companies, phishers are able to convince up to 5% of recipients to respond to them.

    4.5 Benefits from the UK customers'point of view

    The main benefit from the bank customers' point of view is significant saving of time by the automation of banking services processing and introduction of an easy maintenance tools for managing customer's money. The main advantages of e-banking for corporate customers are as follows (BankAway!2001; Gurău, 2002):

    • Reduced costs in accessing and using the banking services.
    • Increased comfort and timesaving — transactions can be made 24 hours a day, without requiring the physical interaction with the bank.
    • Quick and continuous access to information. Corporations will have easier access to information as, they can check on multiple accounts at the click of a button.
    • Better cash management. E-banking facilities speed up cash cycle and increases efficiency of business processes as large variety of cash management instruments are available on Internet sites of UK banks. For example, it is possible to manage company's short-term cash via Internet banks in UK (investments in over-night, short- and long term deposits, in commercial papers, in bonds and equities, in money market funds).
    • Year 2001 has found, that providing faster, easier and more reliable services to customers were amongst the top drivers of e- banking development. The main benefits from e-banking for private customers are as follows (Bank Away! 2001):
    • Reduced costs. This is in terms of the cost of availing and using the various banking products and services.
    • Convenience. All the banking transactions can be performed from the comfort of the home or office or from the place a customer wants to.
    • Speed. The response of the medium is very fast; therefore customers can actually wait till the last minute before concluding a fund transfer.
    • Funds management. Customers can download their history of different accounts and do a "what-if" analysis on their own PC before affecting any transaction on the web. This will lead to better funds management.

    4.7 Motivational aspects of Internet bank usage

    Some of the factors, which affect person's usage of Internet banking, are pretty straightforward; obviously a person should have an access to a computer with an Internet connection either at home or in the office. It is possible to use computers with Internet connection also in some of the self-service branches. The research of online shopping has pointed out that prior web experience has impact on the persons' beliefs about computers and technology in general (Crisp et al 1997, p 4) and it is quite obvious to draw a conclusion that the same applies also for Internet banking. Consumers who are on ease with computers and use them also for other purposes find it convenient to start banking over the Internet.

    Although personal characteristics have been identified as significant predictors of consumers' adoption of an innovation several researchers have shown that it is the perceived attributes of the innovation itself rather than the characteristics of the innovators that are stronger predictors of the adoption decision (Black et al 2001, p 391, Polatoglu, Ekin 2001, p.157).

    Clients demand a minimum relative advantage in order to switch channels. It means that the new innovative service should be perceived to be better that it's predecessor. In the case of Internet banking in UK this is achieved via two strategies: added convenience and price incentives

    The branch-banking venue is characterized by long waiting lines and slow service and it is quite logical that those who have the possibilities try to use Internet banks. The negative motivation of pricing has been successfully used by the banks. The transactions in Internet banks are either considerably lower priced or without any fee at all but for the transactions in branches the fees are very high according to the UK standard. That is definitely one of the main reasons why the branch transactions are quickly losing their popularity.

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