Int. J. Electronic Finance, Vol. 3, No.

2, 2009

115

Recent trends and developments in e- banking in an underdeveloped nation an empirical study Jiaqin Yang* and Kh Tanveer Ahmed
Management Department Georgia College & State University Milledgeville, GA 31061, USA Email: jiaqin.yang@gcsu.edu Email: kh_ahmed@ecats.gcsu.edu *Corresponding author
Abstract: This paper describes a case study about the major issues and challenges in the development of the electronic banking (e -banking) industry of a relatively underdeveloped nation. This research shows that even in many less developed nations, the application of e -banking can help their local banks reduce operating costs and provide a better and fast service to their customers. The research objectives are to investigate the current trends and developments in e-banking and provide managerial insights for the banking industry in those underdeveloped nations. The collected data are examined through statistical analysis tools. Managerial implications are discussed with suggestions for future research. Keywords: electronic banking; e-banking; empirical study; developing nations. Reference to this paper should be made as follows: Yang, J. and Ahmed, K.T. (2009) Recent trends and developments in e-banking in an underdeveloped nation an empirical study, Int. J. Electronic Finance, Vol. 3, No. 2, pp.115 132. Biographical notes: Jiaqin Yang is a Professor of Management at the Georgia College & State University, Milledgeville, Georgia, USA. He received his PhD in Operations Management from Georgia State University. His current research interests include operations strategy, e-business and quality management. He has published in the International Journal of Production Economics, the European Journal of Operations Research, Decision Sciences, the Journal of Computers and Industrial Engineering, Mathematical and Computer Modeling, Integrated Manufacturing Systems, Environment International, the International Journal of Business, Industrial Management and Data Systems , Facilities, Electronic Government, the International Journal of Management and Enterprise Development, as well as numerous professional conference proceedings. Kh Tanveer Ahmed is currently a graduate student (Master of Accountancy at Georgia College & State University, USA) and will graduate on May 2009.

Copyright 2009 Inderscience Enterprises Ltd.

116 1

J. Yang and K.T. Ahmed

Introduction

E-business has been continuously growing as a new industry during the last decade (Van Hoeck, 2001). The banking industry has been leading this trend in recent years, and now all banking transactions completing through internet applications is sometimes called ebanking. Some key issues addressed in the recent literature about the e-banking include: customer acceptance and satisfaction, privacy concerns, profitability, operational risks, and competition from nonbanking institutions (Boss et al., 2000; Smith, 2006; Hwang et al., 2007; Shin, 2008). E-banking has revolutionised the way business is transacted by globalising the business enterprise. E-banking technologies have proliferated in recent years, and the availability of a wide range of products has led to increasing adoption among consumers. These technologies include direct deposit, computer banking, stored value cards, and debit cards (Servon and Kaestner, 2008). Consumers are attracted to these technologies because of convenience, increasing ease of use, and in some instances cost savings (Anguelov et al., 2004). E-banking, in particular, has grown at impressive rates. Between 1995 and 2003, e-banking increased eightfold (Hogarth and Anguelov, 2004). Between late 2002 and early 2005, use of online banking increased 47%, a clear evidence that e-banking is associated with better household financial management (Smith, 2006). All businesses, including small and medium scale industries, no matter their geographical locations, are all beneficiaries of e-banking. It encompasses all kinds of commercial transaction that is conducted on an electronic medium, mostly through the internet. E-banking links business to customers no matter their geographical location. It allows companies to make new business contacts from different global business alliances, test new products and services, and make market research and other enquiries all at a minimal cost both financial and otherwise (Shin, 2008). Smaller community banks, among others, are more interested in the application of ebanking to gain certain competitive edges over their larger counterparts (Yang et al., 2007). In addition to previous e-banking delivery systems, Automated Teller Machines (ATMs) and telephone transaction processing centres, online banking provides banks a new and more efficient electronic delivery tool (Costanzo, 2000). While ATMs were first introduced in early 1980s and initially an attempt to reduce operating costs, telephone call centres were developed in the 1990s to handle simple transactions and provide added customer services from a remote location. E-banking has been viewed as an upgrading from previous electronic delivery systems to open new business opportunities for the banking industry (Ebling, 2001). This paper describes an empirical study of investigating recent trend and development of the application of e-banking (banking though internet) in a typical developing country Bangladesh, and its economic impact on local financial institutions. Currently, Bangladesh is far behind in terms of e-banking development and applications. More specifically, while it is a fact that currently many banks in Bangladesh have implemented e-banking services, however, comparing with most developed countries, the e-banking application in Bangladesh is only in its infancy stage and there is a huge gap to be fulfilled with new research and development effort. As such, addressing the current issues and challenges in the development of e-banking in Bangladesh is the primary motivation of this research.

Recent trends and developments in e-banking in an underdeveloped nation

117

Literature review

For the past two decades, the banking sector has chosen a new service channel based on the progress of information technology internet to respond to the changes in customer preferences and needs, increasing competition from non-banks, changes in demographic and social trends, and government deregulations of the financial service sector (Byers and Lederer, 2001). In the search for sustainable competitive advantages in the technological financial service industry, banks have acknowledged the value to differentiate themselves from other financial institutions through new service distribution channels (Daniel, 1999). In addition, customers transaction and communication abilities have been improved by the developments of information technology. Information technology enabled electronic channels to perform many banking functions that would traditionally be carried out over the counter (Giannakoudi, 1999). The rise of electronic payments media such as debit and credit cards has caused the value of cheques paid in the USA to fall to from about $49 billion in 1995 to about $42 billion in 2002 (Gerdes and Walton, 2002). Furthermore, the use of paper cheques has been supplemented step-by-step with e-cheques ( i.e., electronic images) allowing banks to have more storage capacity, reduce costs, and improve customer services (Rose and Hudgins, 2005). Banks have traditionally been in the forefront of harnessing technology to improve their products and services. They have over the time been using electronic and telecommunication networks for delivering a wide range of value added products and services. The range of services and products offered by different banks vary widely both in their contents and sophistication. E-banking provides enormous benefits to consumers in terms of the ease and cost of transactions (Liu, 2008). However, it can be thought of as a service that allows customers to use some types of computers to access account-specific information and possibly conduct transactions from a remote location such as at home or at the workplace (Saleh and Andrea, 2002). The growth in e-banking with the increase in the range of interface options available to access online banking solutions has resulted in a steady increase in the number of customers interacting through remote channels to a greater extent than before. In a climate of increasing online competition, banks that have chosen to retain extensive branch networks are re-aligning the roles of staff in these branches and moving towards a relationship-driven sales culture (Durkin, 2007). E-banking has been around for some time in the form of automated teller machine and telephone transactions. More recently, it has been transformed by the internet a new delivery channel that is fast, convenient, available round the clock, and from whatever the customers location (Saleh and Andrea, 2002). E-banking also can increase competition among banks, and allows banks to penetrate new markets and thus expand their geographical reach. Some even see ebanking as an opportunity for countries with underdeveloped financial systems to leapfrog into advanced stages (Gao and Owolabi, 2008). Customer in such countries can access services more easily from banks outside ones own country through wireless communication systems, which are developing more rapidly than traditional wired communication networks (Gao and Owolabi, 2008). A more recent e-banking development is wireless internet applications of banking sometimes called m-banking (mobile banking) (Choi et al., 2006; Scornavacca and Hoehle, 2007). With the combination of two most recent technological advancements internet and mobile phone, a new service (mobile data service) is thus enabled and

Thank you for evaluating

BCL easyConverter Desktop

This Word document was converted from PDF with an evaluation version of B ! eas" onverter Des#to$ software that only converts the first 3 pages of "our PDF% Activate "our software for less than &'(
htt$)**www%$dfonline%com*eas"converter*

T+!,

lic# on the lin# -elow to $urchase