This chapter will review the e-banking system in Malaysia and review the relevant literature on consumer perception towards e-banking. In addition, this literature review also considers the discussion of customer satisfaction and loyalty towards internet banking.
Bu using internet, clients can access to their accounts doing transaction or access to other services with cost reduction and more convenience because online bank are operation 24hours per day, 7days per week.
Furthermore, banks able to expand their market penetration internationally and offer personalized online services like clients able to check their account balances and monthly statement by login to the secure website of the bank, make payments, and transfer funds to other accounts. The speed of online banking transaction is generally faster than ATM processing speeds.
Internet banking also provides advantages likes flexibility, individually and mobility which is a brand new distribution channel for clients to make on-line transaction. The improvement of internet protection through security technologies such as automatic log-off, firewalls, encryption, monitoring tools and authentication to ensure clients trust on internet banking (Banking Info, 2007).
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Table 1 are the benefits arise are summarized by Thulani et al.(2009) in their research paper on various study of internet banking.
Bradley and Stewart (2003), Rotchanakitumnuai and Speece (2003), Jayawadhera and Foley (2000), Nath et al 2001, Al-Sukkar and Hasan (2005) and Singh (2004), Corrocher (2002),Chang (2003), Sullivan and Wang (2005).
Increased customer base
Bradley and Stewart (2003), Jayawadhera and Foley (2000), Jen-Her Wu et al 2006 and Singh (2004), Corrocher (2002).
Enable innovation and development of non-core business services
Jayawadhera and Foley (2000), Nath et al. (2001), Karem (2003), Corrocher (2002), Chang (2003).
Marketing and communication
Jayawadhera and Foley (2000), Karem (2003), Corrocher (2002).
Increased consumer loyalty and satisfaction
Jen-Her Wu et al 2006 and AL-Sukkar and Hasan (2005), Nath et al. (2001).
High profit consumers
Jen-Her Wu et al 2006 and AL-Sukkar and Hasan (2005), Nath et al. (2001).
Ability to attract new consumers
AL-Sukkar and Hasan (2005).
Table 1: Benefits of Internet Banking
Source: Thulani et al. (2009)
2.1.2 Dis-advantage of Internet Banking
AL-Sukkar and Hasan (2005) and Singh (2004) had identify the disadvantages of develop internet banking. They stated clients have to pay indirect cost as some of the internet banking systems charge money on browsing connectivity on personal computer. Moreover, cash are not available through internet. Customers are unable to withdraw cash or deposit cash by using internet banking. They also emphasize on security concerns, the issue of security concerns may delay the clients' adoption of internet banking.
Before using internet banking, applicant required to go through some procedure in one of the bank branch, especially the clients want to open a joint account. Some of the clients not familiar to internet browsing, they have to go through tutorials to familiarize with the navigation tools. Unfortunately, clients require re-familiarizing the navigation tools to access their account once banks update and upgrade their online system.
Last but not least, trustworthiness is the most difficult yet most important issue face by clients. They always wonder whether the transaction or payments have been proceeding to another account accurately.
2.2 Aspect that Influence Consumer Perception towards Internet Banking
The financial institutions have been use the Internet as an alternative way in order to provide services and interact with their customers. The electronic banking (e-banking) is no exception. Three of the most important characteristics of financial services to extend e-banking are: High availability, Scalability, and Security. (Antovski and LJ, 2001). According to them, high availability also can define in reliability, availability and serviceability. The e-banking are design for easy and continuous service to customers.
Yibin and MU (2003) also stated the three improvements of the system infrastructure which are to build-up the reporting services for online transaction, improve the e-payment system, and improve the telecommunications infrastructure and other forms of electronic transaction. Factors such as the speed of transactions or the cost of using the Internet have little impact on an individual's final decision. After setting up better system infrastructure through Web, the new delivery channel can highly recommended to clients by giving guarantee on security, privacy and trust of Web system to minimize barrier. The adoption of electronic banking forces consumers to consider concerns about password integrity, privacy, data encryption, hacking, and the protection of personal information (Benamati and Serva, 2007).
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The following research provided the analysis on different aspect that will effect customer perception towards internet banking.
2.2.1 Electronic Security (E-Security)
Electronic security is a tool or process designed to restrict entry or prevent unauthorized access to a system's information assets or is a risk-management (Thomas et al., 2002). Mueller (2001) stated that e-security prevents the hacker and others from accessing customer's information, security pin number or credit card number. Thomas et al. (2002) highlighted e-security adds value to a naked network.
As Internet is a new distribution channel for banking system, it require to providing sufficient security to maintain trustworthiness of clients towards the internet. Any inexpedient of security in Internet usage may lead to increase fear and desperate among the clients and bar them to use the banking system as their private information being hacked.
Thomas et al. (2002) stated that although technology offer a new distribution channel for financial institution but it creates opportunities for crimes to be committed very quickly. A criminal can use the tools available on the Web to hack database on internet and steal personal hidden identities in seconds. This is why e-security must be taken very seriously. However, Raigaga (2000) stated that some banker has delay the online banking service due to the security concern.
Consumer perceptions of security are measure through the operations and processes of encryption, protection, verification and authentication. The mechanisms of encryption, digital authentication, firewalls, protection, filtering routers, and personal identification numbers influence the internet customers' perception towards security and might increase the confidence and trust of consumer.
E-security is one of the important factors to be stressed. Most of the customers refuse to use internet banking as the alternative way to carry on transaction and payment because they afraid of losing their private information and data on hacker.
"Trust is considered as a strategic variable in current marketing" (Selnes, 1998). Meanwhile, the development of internet banking brings new challenges, this lead to an increase of motivation in bank to provide a better service. Bank image will might slightly improve if clients' able to enjoy better service. Bank image and consumer trust are significant influence the individual behavior (Ratnasingham, 1998).
Bank image and customer trust are significantly affect individual behavior and their level of perception (Ratnasingham, 1998; Rexha et al., 2003; Lehu, 2001; Ba, 2001). Since the online banking give a higher level of risk to the clients, so Gefen et al. (2003) stated that trust is an important aspect to take note when doing internet transaction because it determines the nature of businesses. The issue of trust arises when risk is involved.
Trust is the main factor being concern because bank and clients are physically separated from each other and there is a large number of suspicious about the e-security over the Internet. Generally, customers distrust and worries about the reliability of internet banking even the e-security system is good.
Apart from this, Chellappa (2002) also emphasize on "trust will be favorably influence with the increase in perceptions of security in EC (Electronic commerce) transactions". Furthermore, clients' lack of confidence and trust on the e-security is the main obstacle prevent e-banking is being developed further. As William Pitt, the eighteenth century British statesman once said, "confidence is a plant of slow growth".
2.3 Customer Satisfaction and Loyalty towards Internet Banking.
For offline environments, it is common knowledge that quality of services and products is a key determinant of customer satisfaction and customer loyalty (Caruana, 2002; Cronin and Taylor, 1992; Kelley and Davis, 1994; Parasuraman et al., 1988). The quality of services delivered through a Web site has become a more significant success factor than low prices or being the first mover in the market space (Mahajan et al., 2002; Reibstein, 2002; Shankar et al., 2003).
Research by Patricio et al. (2003) goes one step further to measure service quality of various banking services through different delivery channels, including the electronic and traditional channels. They have found that perceived service quality with one delivery channel has an impact on how another channel is perceived.
Moreover, Fassnacht and KoÂ¨se (2007) found that high electronic service quality in web-based services had an important role in building overall customer trust for the service provider. Furthermore, Jean-Michel (2003) notes that customer is most important in designing, providing and evaluating the level of service quality. Customers' past experience with the service is one of the factors that influence them to use Electronic banking for transaction.
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According to Vohra (2002), electronic banking makes it easier for customers to compare banks' services and products. This can increase competition among banks and allow banks to enter into new markets by overcoming resistance and thus expand their geographical boundary. Banks operate websites through which customers are not only able to inquire about account balances, interest, and exchange rates but also conduct a range of transactions.
Shailey et al. (2003) therefore notes that understanding customer' requirements and meeting their demands and expectations is becoming a challenge. However, acceptance of this new technology has not yet been found to be equal in all parts of the globe indicating a lack of a common generalizability. Ramayah et al. (2002) suggest that users will eventually lose interest in using Internet banking if they feel that it is not useful to use Internet banking even though the system is rather easy to handle.
One of the most important discussions was carried out by Machauer and Morgner (2001), who defined four clusters of German bank consumers. These were "transaction oriented", "generally interested", "service oriented" and "technology opposed" groups. In another study in Singapore, Liao and Cheung (2002) found that individual expectations regarding accuracy, security, transaction speed, user-friendliness, user involvement, and convenience were the most important quality attributes in the perceived usefulness of Internet-based ebanking. Among these, the first five determined the willingness of consumers to use of Internet based banking. According to Zorayda Ruth B. Andam (2003), 42% of respondents said they had access to computers and 7% said they had access to the Internet. Therefore, it can be perceived that this large variance has been found due to security obstacle in Asia and the emerging markets. This may be one of the greatest reasons why people do not initiate online banking or open investment accounts. Then, we might draw our concerns on perceived service quality and indeed, access to high quality services and products is another crucial concern. Apparently, there may also be a preference for personal contacts with the banks.
Nexhmi et al. (2003) stated that clients' satisfaction will have a role in development but a more important element is to maintain close bank-customer relationship. Overall customer satisfaction with the bank will be directly related to the level of trust within the relationship.
customer satisfaction and customer
retention are increasingly developing into key success factors in e-banking.