In a world moving at an overwhelming pace, technology has become the essential key driver in all aspects of our life. Internet is the catalysis without which, this would have never been possible. Now that Information Technology has been heartily accepted at home as well as at work, handling activities electronically can be envisaged (Tero et al; 2004).
Bill Gates (2008) once said, “Banking is essential, banks are not”. By this, he meant that traditional banking will gradually disappear and electronic banking, which attracts more and more new users, will replace it. According to Alter (2002), the evolution of electronic banking started with Automatic teller machines (ATMs) and has passed through telephone banking, direct bill payment, electronic fund transfer and the revolutionary online banking, which has been selected to be the future of financial electronic transactions.
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Internet Banking services were introduced in the early 80s by the Nottingham Building Society and the Bank of Scotland (Tait and Davis, 1989). Unfortunately these services were discontinued as the bank customers were wary and not fully ready to accept internet banking. With the rapid growth of IT in the 90s, banks launched internet banking again (Daniel, 1998) and this time, it met such an astonishing success that these electronic services ended up becoming industry standards.
Internet banking is the newest delivery channel that enables bank customers, through safe and appropriate systems, to gain access to general bank information on products and services offered and their accounts. Pikkarainen, Pikkarainen, Karjaluoto and Pahnila (2004, p.224) defines internet banking to be the “internet portal through which customers can use different kinds of banking services ranging from bill payment to making investment”. This happens through the bank’s website “without any intervention or inconvenience of sending faxes, letters, original signatures and telephone confirmations” (Thulani et al, 2009; Henry, 2000). Through the bank’s website, the bank customers can carry out activities such as balance reporting, inter-account transfers, bill payment via a telecommunication network without having to leave their work or home (Aladwani, 2001; Daniel, 1999; Mols, 1998; Sathye, 1999). With just a simple click of the mouse, Internet banking gives customers access to almost all types of bank transactions, apart from ultimate transaction, that is, the withdrawal of cash (De Young, 2001). Using Internet as an alternative channel for the distribution of financial services has become a necessity in order to achieve competitive advantage with the arrival of globalization and more hostile competition (Flavian et al, 2004; Gan et al, 2006).
THE MAURITIAN INTERNET BANKING SECTOR
Internet Banking is a relatively recent phenomenon in the country and one can assure that it has started to operate locally since 1997. Due to its diversification skills ranging from agriculture, information technology and financial services, Mauritius has experienced a rapid economic growth, thus joining the league of banks that use the internet as a distribution channel for banking services. The banking sector plays an important role in the economy, both in the reduction of unemployment and in the flow of foreign currency to the economy. The two largest local banks are the Mauritius Commercial Bank Ltd and the State Bank of Mauritius Ltd.
Some of the banks offering the internet banking services are the Mauritius Commercial Bank Ltd (MCB), the State Bank of Mauritius Ltd (SBM) and the Hong Kong Shanghai Bank (HSBC). The service offered encloses mainly inter account fund transfer, transfer of fund to credit card account, payment to other account, SWIFT payment orders, recharging mobile phones, foreign transfers, cheque and credit card transactions, current statement of account issue, standing order transactions, application for various accounts, loan and credit cards, bill payments.
Given the cross border implications of Internet Banking which almost eradicates all geographically boundaries, it is very important to have clear supervisory rules specifying which country supervisors have control over the internet banking activities as well as the elaboration of the applicable legal regime. To keep pace with the development in this line of business, a guideline on Internet Banking was issued to all banks in February 2001. The guideline sets out a regulatory framework for providing Internet banking services in Mauritius and establishes the minimum standards that should be followed by banks providing Internet Banking services. It further describes the requirements and processes to adopt in order to obtain the approval of the Bank by financial institutions who want to offer Internet Banking services. According to this guideline which came into effect the 2 April 2001, “Internet Banking refers to banking products and services offered by institutions on the internet through access devices, including personal computers and other intelligent devices”.
Types of Internet Banking
There are different forms of online banking which are web-based banking where customers can access their accounts when they use the internet (Aladwani, 2001). A second form of online banking is where the bank customer, through a modem, dials-up to the bank’s server to access his bank account. This is known to be dial-up banking. A type of dial-up banking, called Extranet, is a private network between a bank and its corporate customers.
Currently there are three kinds of internet banking which are employed in the market place (Thulani et al, 2009; Yibin, 2003; Diniz, 1998) and these are Informational, Communicative and Transactional.
An Informational website is the first level of Internet Banking. Marketing information about the bank’s products and services are found on a standalone server. There are typically no path between the bank’s internal network and the server.
A Communicative/simple transactional website allows a limited amount of interaction between the customer and the bank’s system. The interaction is restricted to e-mail, account inquiry, loan application or static file updates (name and address). Fund transfers are not allowed.
An Advanced website allows bank customers to make queries about their accounts, electronic transfer funds to and from their accounts, pay bills, update their account information and conduct other banking transactions online.
Therefore a bank who is planning to offer internet banking services, is expected to create an informational website first, then introduce a communicative website and finally an advanced transactional website where customers can perform the basic transactions.
Advantages of Internet Banking
Both the provider and the consumer benefit from internet banking. Online banking is considered to be the most important way to decrease cost and enhance or maintain services for consumers (Hua, 2009). From the banks’ perspective, it is the cheapest banking products delivery channel (Pikkarainen et al, 2004). Together with saving time and money, this service minimizes the possibility of bank tellers committing mistakes ( Jayawardhena & Foley, 2000). Less staff is required since the customers serve themselves in cyberspace. Karjaluoto et al (2002, p.261) argued that time and location were no longer limiting factors in banking as all over the world, customers can now easily access their accounts 24/7.
Internet makes the transactions efficiently and expertly at an unmatched speed. Internet banking offers the possibility to manage several bank accounts on one site and these sites are compatible with software such as Microsoft money.
With increasing competitive pressures from existing firms and new blood on the market, competition is an important logic to be considered. Using internet banking as an alternate channel has allowed banks to target various demographic segments more efficiently, thus retaining existing customers and attracting new ones. While supplying internet banking services, banks establish and extend their customer relationship (Robinson, 2000).
The concept of online banking is an uprising in the field of banking and finance as the account holder does not have to visit the bank and queue to perform the basic transactions like balance inquiry, recent transactions record, transfer fund to employees accounts in the form of salary, bill payments and phone account top up. On top of this, the interest rates are higher for online banking than with traditional banking (3.4% to 4%).
Many persons like internet banking as there is no credit check. If someone has a bad banking history of financial problems, at a traditional bank, their application to open a bank account would be turned down. This is not the case with internet banking. Some banks offer the facility of online loaning where an instant loan is provided by only filling a form. Internet banking web-sites are highly performing systems, easy to understand and navigate, with simple instructions designed to answer all queries about banking. Customers also have a wide range of opportunities to invest such as stock quotations and news updates (Lee, 2009).
Qureshi et al (2008) stated that it is essential to extend internet banking to customers in order to maximize the advantages for both the service providers and the customers. The navigability if the site is a very vital part of internet banking as it can become one of the biggest competitive advantage of a financial body (Ortega et al, 2007). The banking sector performance increases everyday due to the rise in technology usage. Online banking is time saving (Qureshi et al, 2008).
E-banking is now less vulnerable to safety and security related issues. Secure Socket Layer (SSL), Password Based Encryption (PBE) and electronic signatures has increased the level of security. If any inconsistency occurs in an account, it can be traced easily, making internet banking more trustworthy. Avinandan & Prithwiraj, 2003; Urban, Sultan and Qualls, 2000 have identified trust to be an important factor for the financial online services. Furthermore an empirical study has shown that consumers make online decisions based only on trust. In developing countries, trust plays a crucial role for customers to accept and use online banking (Benamati and Serva, 2007). Belanger, Hiller and Smith (2002) defined privacy as being “the ability to control and manage information about oneself”.
Some banks offer real time customer assistance to customers who have trouble finding their way through the web site or the proceedings of the internet banking registration through instant messaging, email or even the telephone.
Disadvantages of Internet Banking
Indisputably since the emergence of internet banking, it has been playing an important role for both the service providers and the consumers. Nevertheless, this phenomenon is observed differently among customers who either accept it heartily or reject it. Those who accept it, as proposed by Clark and Mills (1993), prefer impersonal relationship, that is, “exchange oriented customers”. They like the 24 hour availability of services, the simplicity of the transactions, the no-queuing factor and no fixed branch-operating hours (Al-Somali et al,2009) while those who reject it look for the human touch and social benefits of traditional banking. These are known as the “communally oriented customers” (Clark and Mills, 1993).
Those who reject internet banking are wary of the risks involved in it. Featherman and Pavlou (2003) defined perceived risk as the “potential for loss in the pursuit of a desired outcome of using an e-service”. The risks perceived are;
it is the constant anxiety of transactions faults causing a monetary loss suffered by customers who perform online transactions. Clearly internet banking lacks the assurance provided in traditional banking (Lee et al., 2009, p.2) and this is due to the fact that online banking is considered as an innovation which is incompatible with consumers’ habits (Kuisma et al., 2007, p.77).
This risk is innate from the consumers’ fright of losses incurred by failures of online banking websites. Customers are often troubled that a disconnection from the Internet might occur while performing electronic transactions which might lead to “huge” unexpected losses (Kuisma et al., 2007). This was confirmed by Sathye (1999) who claimed that Internet access is a decisive variable on which the adoption of online banking depends and by Almogbil (2005) who succeeded in showing that a significant relationship exists between the speed of Internet access and the acceptance of electronic banking.
It stems from the fear of being seen in a negative way by others (Kuisma et al., 2007, p.77) or causing the disapproval of one’s friends/family/work group by adopting online banking (Agarwal et al., 2009, p.4). Venkatesh and Morris (2000) approve that social influence plays a central role in determining the approval of new information technologies. Nonetheless, it is commendable to note that others’ opinions are particularly informative in the early stages of experience (Hartwick and Barki, 1994) when potential information technologies’ adopters are not sufficiently informed.
It refers to the possible loss due to fraud or a hacker, putting at risk the security of an online customer (Lee et al., 2009, p.2). This risk is emphasized since the appearance of phishers whose hobby consists on attempting to deceptively collect personal information, such as usernames, passwords and credit card details. They not only lead to users’ monetary loss, but also violate users’ privacy (Entrust, 2008). Suh and Han (2002) point out that, unlike in offline banking, that is traditional banking, trust is a pressing need in internet banking.
It is the time’s loss and the lateness in receiving the payment or the difficulty of navigation (Lee et al., 2009, p.2). This can be due to a disorganized Web site, to slow-downloadable pages, to the long time needed to be a PC-literate.
Apart from this, the credulity of an institution must be verified before opening an account in an internet bank and entrusting the life-savings of an individual. The institution must be legitimate and must be checked against the listing of the FDIC.
A major disadvantage would be that when several failed attempts have been done to login the account, after having given the wrong password, the account becomes inactive. The customer will have to go through a lengthy procedure to get it reactivated again. Weeldreyer (2002) claims that internet banking is not living up to the hype.
Another problem would be the down time of internet, where no customer will be able to access hi/her bank account because there is no internet connection for hours probably. The connection could also be unstable during bad climatic conditions such as heavy rain.
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