International Journal of Bank Marketing

Success factors in e-channels: the Malaysian banking scenario

Ong Hway-Boon Cheng Ming Yu
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Ong Hway-Boon Cheng Ming Yu, (2003),"Success factors in e-channels: the Malaysian banking scenario", International
Journal of Bank Marketing, Vol. 21 Iss 6/7 pp. 369 - 377
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Wai-Ching Poon, (2007),"Users' adoption of e-banking services: the Malaysian perspective", Journal of Business &
Industrial Marketing, Vol. 23 Iss 1 pp. 59-69 http://dx.doi.org/10.1108/08858620810841498
Nelson Oly Ndubisi, Queenie Sinti, (2006),"Consumer attitudes, system's characteristics and internet banking adoption in
Malaysia", Management Research News, Vol. 29 Iss 1/2 pp. 16-27 http://dx.doi.org/10.1108/01409170610645411
Alain Yee-Loong Chong, Keng-Boon Ooi, Binshan Lin, Boon-In Tan, (2010),"Online banking adoption: an empirical analysis",
International Journal of Bank Marketing, Vol. 28 Iss 4 pp. 267-287 http://dx.doi.org/10.1108/02652321011054963

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 Success factors in e-channels: the Malaysian banking
scenario
Keywords
Electronic commerce, Malaysia,
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)
Distribution channels,
Commercial banks
Abstract
One of the most significant
implications of technological
advances in the banking sector is
the possibility of delivering
banking services through
electronic channels (e-channels).
E-channels provide alternatives for
faster delivery of banking services
to a wider scope of customers.
Nowadays, e-channels have
gained increasing popularity in
delivering banking services.
However, prior to the
implementation of e-channels,
several factors and investment
costs must be identified to ensure
a more cost effective and efficient
execution of e-channel services. A
survey is thus conducted to
determine factors that are
essential for the successful
implementation of e-channels by
domestic commercial banks in
Malaysia. Data were collected
from primary sources and were
analysed via frequency analysis
and factor analysis. The results of
the survey suggested that banks'
operation management is the main
factor affecting the success of
ATMs, PC and branch banking,
while product innovation and
knowledge development factors
are found to have the most
significant effect on the success
of banking kiosks and phone
banking respectively.
International Journal of Bank
Marketing
21/6/7 [2003] 369-377
# MCB UP Limited
[ISSN 0265-2323]
[DOI 10.1108/02652320310498519]
Ong Hway-Boon
Multimedia University, Cyberjaya, Selangor, Malaysia
Cheng Ming Yu
Multimedia University, Cyberjaya, Selangor, Malaysia
Introduction
Rapid technological advances have
introduced significant changes in the global
economic and business environment.
Malaysia is no exception to this trend. In this
regard, all industries in Malaysia are in one
way or another being affected by the
advancement of the technological
innovation. In the banking industry, bank
branches alone are no longer sufficient to
provide banking services to cater the needs of
today's sophisticated and demanding
customers. The provision of banking services
through electronic channels (e-channels)
namely ATMs, PC banking, phone banking
and banking kiosks have provided an
alternative means to acquire banking
services more conveniently.
E-channel, also known as innovative
distribution channel (Wong, 1998; Kimball et
al., 1997), or online banking (Daniel, 1999) or
technology-intensive delivery system (Filotto
et al., 1997), refers to the methods of
delivering financial products using
electronic media such as personal computer
(PC), the telephone, and the Internet
(Dannenberg and Kellner, 1998). More
specifically, ATM or the automatic teller
machines, is the most commonly used
electronic distribution channel that enables
bank customers to conduct their banking
transactions (deposits, withdrawal or
balance enquiry) 24-hours a day. Essentially,
all banks in Malaysia provide ATM services.
Alongside ATMs, phone banking is another
e-banking option. With a centralised
consumer service department, phone
banking provides services such as account
balance enquiry, instruction to issue bankers
cheques and give standing instructions. Each
call will first reach an automated response
system, but a consumer may also re-route a
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call to a service representative. Most banks
keep the phone centres open 24-hours a day.
Some examples are Direct Access of Southern
Bank, Tele-banking of RHB Bank and
Maybank. PC banking, or also known as
remote e-banking, self-service banking, home
banking and office banking, is the third form
of e-banking. PC banking could be done via
Web-based or Internet. By using a personal
computer that is equipped with a modem and
loaded with the necessary software,
consumers can carry out banking at home or
office. PC banking allows consumers to check
account balances, credit card activity,
transfer funds and bills payment. Another
e-channel that is currently available is the
banking kiosk (also known as banking booth
or virtual kiosk). Banking kiosk is basically
the integration of phone banking, ATM and
PC-based banking services, where consumers
are able to access their account either by
telephone, ATM or the computer terminal. At
present, banking kiosk services in Malaysia
are provided by Phileo Allied Bank (now
operating under Maybank).
Although the latest technique of e-channels
is said to provide convenient services and a
reduced operating cost, implementing
e-channels involves substantial risks and
costs. How should banks integrate the
e-channels with existing channels
successfully? What would be the appropriate
staffs' training programme? How can
customers be encouraged to accept the new
delivery channel? How should banks cope
with the ever increasing and rapid
technological changes in delivering effective
services? As such, the basic question is: what
would it take to bring about the success in
implementing e-channels in banks?
This study attempts to identify factors that
banks should possess to ensure a successful
implementation of e-channels in domestic
commercial banks. The five e-channels
The current issue and full text archive of this journal is available at
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[ 369 ]
 Ong Hway-Boon and
Cheng Ming Yu
Success factors in e-channels:
the Malaysian banking
scenario
International Journal of Bank
Marketing
21/6/7 [2003] 369-377
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)
[ 370 ]
currently used by commercial banks are
branch network, automated teller machines
(ATMs), telephone banking, PC-based
banking and banking kiosks. The findings
would provide important information to
banks on how to implement the right mix of
e-channels effectively. This study may also
provide practical knowledge to other service
sectors that face similar pressures for change
from technological advancement, namely
insurance companies, stock broking firms
and other financial institutions.
Literature review
Several studies have attempted to identify
critical success factors for electronic and
non-electronic banking. Chen (1999) in an
attempt to identify critical success factors
when adopting various business strategies in
the banking industry in Taiwan, conducted a
survey of 336 domestic-owned and 39
foreign-owned banks in Taiwan in 1997. A
five-point Likert scale questionnaire was
mailed to branch managers of all 375 banks.
Data obtained were analysed using factor
analysis and thus four critical success factors
were identified, namely the ability of the
bank to manage operations, bank marketing,
developing bank trademarks and financial
market management (Chen, 1999).
In another banking study (Sciulli, 1998), it
was found that lower levels of centralisation,
higher levels of complexity, larger size and
higher levels of integration were highly
related to the successful implementation of
product and service innovations. Investing in
advanced and well established technologies,
integrating existing e-channels with new
technology, providing staff training and
proper planning were also determinants of
banks' ability to succeed in creating,
processing, generating and disclosing
real-time information to their customers
(Gupta and Collins, 1997). Other crucial
success factors include organisational
competence for innovation (Ghoshal and
Ackenhusen, 1998) as well as having a
centralised processing unit in the head office
to reduce operating cost and realise
economies of scale (Devlin, 1995).
According to Daniel (1999) an
organisation's vision of the future, prediction
of customer acceptance, and a culture of
innovation are the critical success factors for
e-services for retail banking in UK and
Republic of Ireland, while e-banking in
Germany has emphasised adequate and
appropriate software and hardware technical
equipment to run e-channels efficiently
(Dannenberg and Kellner, 1998). Since
e-channels will co-exist with the traditional
branch network, Dannenberg and Kellner
(1998) emphasised that current applications
of e-channels have to accommodate existing
operating systems as well as information
processing and reporting applications.
Consumers' preference for a mix of
delivery channels will mean that e-channels
like telephone and Internet banking may not
be the dominant delivery channel (Howcroft
et al., 2002). The branch network is still the
most preferred delivery channel for
acquiring current account transactions,
credit-based and investment-based services.
However, duplication of delivery channels
will result in increasing costs and banks will
be forced to educate consumers and
encourage them to use more of telephone and
Internet banking. In order to be cost effective
and successful in implementing telephone
and Internet banking, banks will need to
provide value for money, error free,
convenient and user-friendly services
(Howcroft et al., 2002).
Although the Internet provides many
opportunities for banks such as e-payment,
cost savings, enhanced reputation as an
efficient and advanced financial service
provider, attracting funds, unit trust and
stock brokering, it is still the case that
current banking services through the
Internet are limited due to security concerns
and technological problems (Mols et al., 1999;
Mols, 1999). For successful delivery of
financial services through the Internet, Mols
(1999) discovered that financial institutions
have to satisfy a vast range of complex
customers, deal with competition from new
entrants in the financial market, and
constantly improve their services to
maintain market share in the World Wide
Web.
Moreover, a survey on 65 largest retail
banks in Denmark to examine the effective
implementation of e-channels, such as PC
banking and Internet banking, revealed that
support from bank managers and top
management, an orientation towards the
future, a willingness to let old channels be
cannibalised by new channels, as well as the
bank size are some of the important factors
that ensure the successful implementation of
e-channels (Mols, 2001). In Europe, as well as
constructing solutions to manage routine
financial transactions, integrated solutions
to support existing business processes and
collaboration between competing financial
institution to cut down development cost
were found to be necessary for the success of
Internet banking (Seitz and Stickel, 1998).
In contrast, educating consumers on
Internet banking was found to be crucial to
 Ong Hway-Boon and
Cheng Ming Yu
Success factors in e-channels:
the Malaysian banking
scenario
International Journal of Bank
Marketing
21/6/7 [2003] 369-377
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)
forge ahead in Internet banking in Australia
(Sathye, 1997). The features, advantages, uses
and the whole concept of Internet banking
had to be made known to consumers in order
to ensure that Internet banking was
implemented successfully.
For financial institutions to better manage
and market their delivery of financial
services, Thornton and White (2001) analysed
consumers' attitude towards the usage of
financial distribution channels and tried to
identify if any particular patterns of access to
financial services exist. Results from the
survey conducted in New South Wales,
Australia, revealed that banks that adopt a
the success factor in this study. Indeed a
specific objective of the current paper is to
determine the extent to which success factors
identified in highly developed banking
systems are relevant in a context such as
Malaysia where e-banking is a relatively
recent phenomenon.
Methodology
In order to identify the factors that will bring
about success in operating e-channels,
self-administered mail questionnaires are
distributed among targeted population of
bankers currently employed by locally

multi-channelling distribution channel to

owned commercial banks in Malaysia.
meet the needs of different market segments
Questions are designed to identify the factors
faced relatively higher costs. As such,
that are responsible for the successful of
Thornton and White suggested that financial
implementation of e-channels by domestic
institutions should specialise in the delivery
commercial banks under the supervision of
of particular grouping of distribution
the central bank of Malaysia.
channels that would maximise their profit.
Data collected were analysed based on
This means if a financial institution finds
primary statistics such as the frequency
that its profit comes mainly from
analysis and reliability tests. In addition,
service-oriented customers, then it would be
factor analysis and Spearman correlation
best for the banks to concentrate on human
analysis were adopted to determine success
interface type of services like branch
factors for the operation of e-channels by
network. If banks were to attract or retain
commercial banks.
convenience, technological or change
Based on the Malaysian Central Bank's
oriented customers, then they should focus
report (Bank Negara Malaysia), as at 31
on more self-service or online electronic type
December 1999, there were 20 domestic
of distribution channels.
commercial banks and 13 foreign owned
In brief, Levy (1998) summarised the
commercial banks in Malaysia. In total, there
critical success factors for success for
are 1,554 domestic bank branches in
high-technology organisations as innovation,
Malaysia. With the expectation of
manpower, organisation and knowledge
approximately 20 per cent response rate, 750
factors. Technological innovation will evolve
questionnaires were mailed out to the
as a result of the availability of new
targeted sample. The sample was selected by
technology or combination of old and new
using a systematic sampling method where
technology. Equally, innovation may be
one bank branch is selected on a random
market driven for banking services if market
basis and the following branches are selected
needs are well established and well
at evenly spaced intervals of one branch until
recognised. An organisation experiencing
the 750 samples are obtained. A total of 112
rapid technological change, has to create a
responses were received, 16 were returned
framework to motivate personnel to achieve
unanswered and 24 uncompleted, leaving 72
the organisation's objectives, recruit best
completed responses that are usable,
staff and retain good staff that they already
representing an effective response rate of just
have, as well as keeping abreast of the latest
below 10 per cent.
technological ``know-how'' and ``know-why''
(Levy, 1998). Technology know-how relates to
appropriate skills and knowledge of IT with
regards to operation, while technology
Findings and analysis
know-why is the collection of knowledge, In terms of working experience in the
experience, and intuition that yields accurate banking industry, the modal value suggests
prediction of future trends and needs. that most of the respondents have five to ten
A review of the current literature years of working experience in banking
suggested that as yet there is no generalised institutions. Table I illustrates this.
conclusion to be drawn on what contributes In our survey, the respondents were asked
to the successful implementation of to rank their views with regards to ATMs,
e-banking. However, the factors identified in banking kiosks, phone, PC and branch
the studies conducted in various parts of the banking, based on a five-scale Likert
world provide a useful guide in determining questionnaire. Respondents ranked channels
[ 371 ]
 Ong Hway-Boon and
Cheng Ming Yu
Success factors in e-channels:
the Malaysian banking
scenario
International Journal of Bank
Marketing
21/6/7 [2003] 369-377
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)
Table I success factors via a reliability test. Next, we
Working experience employ the Spearman rank correlation
analysis to determine the relationship of
Years of working experience Frequency
factors, if any, for each e-channel as well as
<5 11 the relationships between individual success
5-10 22 factors across channels.
>10-15 11 First, we conducted the factor analysis to
>15-20 15 reduce the number of inter-correlated
>20 13 variables with overlapping characteristics by
Total 72 using correlation matrices. For each
Mode 5-10 years e-channel under study, there are 26 items in
the questionnaire. Respondents were
from the most successful channel used by required to rate each variable according to
their bank to deliver financial services to the degree to which it contributed to the
their customer to the least successful. The success of a particular channel. Table III

e-channels were pre-determined, namely illustrates the mean ranking of the items for
ATMs, banking kiosks, phone banking, PC each channel.
banking and branch network. The channels The related items can be grouped under a
that were not ranked by respondents were smaller number of more meaningful factors.
deemed unavailable or not provided by the For each e-channel, the correlation matrix
banks. transforms the 26 items into a new set of
At present, the most successful delivery composite variables or principal components
channel used by banks to deliver their that are unrelated.
financial services is discovered to be bank The combination of variable that accounts
for most of the variance in the original data is
branches, followed by ATMs, phone banking,
the first factor. The second factor is defined
PC banking and banking kiosks. In future,
as the best linear combination of variables
say for the next five years, the bankers felt
explaining the variance not accounted for by
that financial services will be mostly
the first factor. Subsequent factors are
delivered by PC banking followed by ATMs
derived in the same manner. Variables with
and phone banking, banking kiosks and
more than 50 per cent loadings of the rotated
lastly branch networks. The findings are
component matrix are accepted, while those
summarised in Table II.
with less than 50 per cent loadings are
Our analysis began with factor analysis to
dropped. For each e-channel, five factor
reduce the number of inter-correlated
solutions are retained for variables of more
variables with overlapping characteristics.
than 50 per cent loadings from the rotated
We then proceed by examining the component matrix table. These represent the
underlying dimensions for the measure of various factors which determine the success
of e-channels.
Table II The overall significance of the correlation
Present and future distribution channel matrix was also tested using Bartlett's test
Rankings and Kaiser-Meyer-Olkin (KMO) measure of
E-channels 0 1 2 3 4 5 sampling adequacy test. Bartlett's test shows
the existence of non-zero correlation, while
ATMs
KMO test reduces the set of variables
Present 0 24 44a 2 1 1
collectively to meet the necessary sampling
Future 0 19 22b 19 9 3
adequacy. The Bartlett's test indicates
Banking kiosks non-zero correlation existed with a
Present 3 2 2 14 15 36a significance of less than 1 per cent. As for
Future 0 4 8 16 20b 24 KMO, the reduced set of variables
Phone banking collectively meets the necessary threshold of
Present 0 0 2 34a 26 10 sampling adequacy of more than the
Future 0 8 22b 12 17 13 acceptable MSA value of 0.50. That is to say
that the coefficient of all variables is
PC banking significantly correlated, indicating
Present 1 0 3 20 28a 20 feasibility of conducting factor analysis. The
Future 0 27b 15 14 10 6 summary of both Bartlett's test and KMO test
Branch network is illustrated in Table IV.
Present 0 46a 21 2 1 2 The output of the component analysis and
Future 0 14 4 11 16 27b varimax rotation suggests that the success
factor for implementing ATMs would depend
Notes: a Mode for present distribution channels; b Mode for future distribution channels
on the bank's operation management,
[ 372 ]
 Ong Hway-Boon and
Cheng Ming Yu
Success factors in e-channels:
the Malaysian banking
scenario
International Journal of Bank
Marketing
21/6/7 [2003] 369-377
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)
followed by product innovation, knowledge
development, planning and control and
organisational factors. On the other hand, the
success factor for banking kiosks would
primarily depend on product innovation,
followed by planning and control, bank's
operations management, knowledge
development factor and finally, the pricing
factors.
As for PC banking, the success factor
would mainly depend on the bank's
operations management factor, followed by
the organisational factor, product
innovation, knowledge development and
finally, the planning and control. Finally,
bank's operations management factor. Other
factors affecting the ability of bank branches
to function successfully are planning and
control, knowledge development, product
innovation and finally, organisational
factors.
In short, banks' operations management is
discovered to be the main factor affecting the
success of ATMs, PC banking and branch
networks. In other words, for ATMs, banks'
operation management factor is closely
associated with the availability of various
bank services, the established good
customer-banker relationship as well as staff
familiarity and professionalism in servicing

similar to ATMs and PC banking, the results and advising customers. As for the success of
suggested that the success factors of bank branch and PC banking, it seems to depend
branches are primarily dependent on its largely on staff training to instil familiarity

Table III
Mean and mode rankings of e-channels
Attributes ATMs Banking kiosk Phone banking PC banking Branch network
1 Ability of internal auditing and control 1.75 (2) 1.79 (1, 2, 3) 2.25 (2) 2.08 (2) 1.54 (1)
2 Adequate technical support 1.47 (1) 1.47 (2) 1.96 (2) 1.82 (1) 1.63 (1)
3 Cost reduction, e.g. reduced paper work 1.50 (1) 1.57 (0) 1.61 (2) 1.65 (1) 1.79 (1)
4 Availability of appropriate technology 1.53 (1) 1.47 (0) 1.82 (2) 1.74 (2) 2.67 (3)
5 Availability of various bank products 1.97 (2) 1.49 (2) 2.18 (2) 1.83 (2) 2.50 (2)
6 Bank's reputation and good image 1.64 (1) 1.29 (2) 1.75 (2) 1.65 (1) 1.43 (1)
7 Branch managers encourages e-banking 1.71 (1, 2) 1.56 (2) 1.92 (2) 1.86 (2) 1.72 (1)
8 Clients' utilisation for making enquiries 1.82 (2) 1.79 (3) 1.90 (2) 1.97 (2) 2.08 (2)
9 Clients' utilisation to perform transactions 1.50 (1) 1.60 (0) 1.92 (2) 1.90 (2) 1.85 (2)
10 Developing new business to meet unmet demand 2.40 (2) 1.72 (2) 2.21 (2) 1.97 (2) 1.78 (1)
11 Slower growth in the number of bank branches in the 2.63 (3) 2.0 (0) 2.50 (2) 2.53 (3) 2.67 (2)
past five years
12 Strong commitment by staff 2.18 (1) 1.69 (3) 2.22 (2) 2.22 (2) 1.85 (1)
13 New features of banking services 1.93 (1) 1.61 (0) 1.89 (2) 1.89 (1) 1.85 (1)
14 Management ability of bank managers 2.26 (2) 1.85 (0) 2.38 (2) 2.33 (2) 1.81 (2)
15 Reduction of operating staff in the past five years 2.82 (0) 1.94 (0, 3) 2.74 (3) 2.44 (3) 2.54 (2)
16 Reliable service 1.86 (1) 1.64 (0) 2.19 (2) 2.08 (2) 1.65 (2)
17 Service fees charged on e-banking services are well 2.56 (2) 1.99 (0) 2.61 (2) 2.47 (2) 2.54 (2)
received
18 Service fees charged on e-banking are similar to other 2.11 (2) 1.87 (3) 2.36 (2) 2.31 (2) 2.25 (2)
commercial banks
19 Soundness of the banking system 1.71 (1) 1.48 (0) 1.74 (2) 1.71 (2) 1.67 (1)
20 Speed of handling transactions 1.60 (1) 1.58 (0) 1.85 (2) 1.74 (2) 1.94 (2)
21 Staff familiarity with features of e-banking services 1.92 (2) 1.78 (2) 2.26 (2) 2.24 (2) 1.75 (2)
22 Staff professionalism 2.07 (2) 1.64 (3) 2.14 (2) 2.13 (2) 1.86 (2)
23 Sufficient funds allocated for R&D 2.24 (2) 1.75 (2) 2.21 (2) 2.07 (2) 2.08 (2)
24 Sufficient funds allocated to develop computer network 1.99 (1) 1.78 (2, 3) 2.14 (2) 1.99 (2) 1.92 (1, 2)
25 Current bank merger exercise 2.60 (2) 2.10 (3) 2.71 (2, 3) 2.63 (3) 2.56 (2)
26 Long term relationship established with customer 2.03 (1) 1.64 (0) 2.25 (2) 2.19 (2) 1.63 (1)
Note: The numbers in the parentheses represent mode

Table IV
Bartlett's test of sphericity and KMO test
ATM Banking kiosks Phone banking PC banking Branch
Bartlett's test chi-square value 731.198* 2,462.046* 719.652* 1,208.989* 778.370*
KMO MSA value 0.66265 0.91992 0.67475 0.83611 0.64742
Note: * 1 per cent level of significance

[ 373 ]
 Ong Hway-Boon and
Cheng Ming Yu
Success factors in e-channels:
the Malaysian banking
scenario
International Journal of Bank
Marketing
21/6/7 [2003] 369-377
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)
and proficiency with PC banking, as well as
fast and efficient services, good service
quality to establish long term relationship
with clients, acceptable pricing of service
fees, and an efficient management of the
banks' daily operation.
Product innovation is found to be the most
important factor determining the success of
banking kiosks and the success of phone
banking is most dependant on knowledge
development of staff involved in delivering
services via telephone. As such, product
innovation which is associated with the
availability of appropriate technology and
technical support, user-friendly electronic
services, proper introduction and
development of electronic services to ensure
higher utilisation at lower cost are the main
factors affecting successful product
innovation in banking kiosks. Since phone
banking involved delivery of services
without face to face interaction, first hand
information and ability to handle queries
promptly are important in determining the
success of phone banking. A summary of the
success factors for all e-channels is
illustrated in Table V.
Third, a reliability analysis was carried
out to check whether the underlying
dimension for the success factors generated
through factor analysis would elicit reliable
and consistent responses over a repeated
and direction of relationship for the factors
for each e-channel. The coefficient's sign
signifies the direction of relationship. A
positive sign means that the factors are
moving in the same direction, whereas a
negative coefficient signals otherwise. The
absence of a relationship is indicated by an
approximate zero coefficient.
At 5 per cent level of significance, success
factors for ATMs, phone banking and branch
networks are not significantly correlated.
However, as for banking kiosks, at 5 per cent
level of significance, planning and control
factor has weak to moderate correlation with
product innovation as well as knowledge
development factor. The correlation
coefficient, rs, for product innovation as well
as planning and control are ±0.417, and ±0.475
for knowledge development factor as well as
planning and control factor.
As for PC banking, at 5 per cent level of
significance, planning and control factor has
negative but weak to moderate association
with product innovation factor (rs = ±0.446)
and knowledge development factor
(rs = ±0.469), respectively. A summary of the
Spearman correlation analysis of success
factors is illustrated in Table VII.
Finally, we explore the similarities in
ranking of success factors across channels
and found that at 5 per cent level of
significance, bank operation management of
experiment or test. Across the channels, the  PC banking has positive and moderate
score is the highest for bank's operation association with ATM and banking kiosks
management, second is product innovation, with rs of 0.436, 0.449 and 0.485, respectively.
followed by planning and control, pricing, At 5 per cent level, bank operation
organisation structure and lastly the management of branch network also has
knowledge development channel. All positive and moderate association with
e- channels have alpha values of at least 0.7 banking kiosks and PC banking with rs of
and are therefore deemed reliable. Table VI 0.585 and 0.485, respectively.
presents the summary of  scores of the
reliability test.
In order to test for the relationship of
factors for each e-channel, the Spearman
Rank correlation coefficient is conducted.
Spearman Rank correlation coefficients,
ranging from +1 to 1, estimate the magnitude
As for product innovation, at 5 per cent
level of significance, PC banking has positive
and moderate association with ATM,
banking kiosks and phone banking, while
banking kiosks has positive but weak
association with ATM and phone banking.
However, at 5 per cent level of significance,

Table V
Success factors for all distribution channels
Per cent of variance rotated sum of squared loadings
Success factors ATMs Banking kiosks Phone banking PC banking Branch network
Bank's operation management 12.18 (1) 16.80 (3) 7.85 (5) 21.41 (1) 12.35 (1)
Product innovation 11.27 (2) 22.913 (1) 10.71 (2) 12.92 (3) 9.56 (4)
Knowledge development 11.13 (3) 16.09 (4) 14.33 (1) 9.92 (5) 10.93 (3)
Planning and control 9.98 (4) 21.27 (2) 10.66 (3) 8.25 (4) 12.07 (2)
Organisational structure 7.95 (5) ± 10.04 (4) 14.59 (2) 8.93 (5)
Pricing ± 8.93 (5) ± ± ±
Cumulative per cent rotated sum of squared loadings 52.51 86.00 53.59 67.09 54.84
Note: The parentheses represent ranking of factors affecting the success of distribution channels

[ 374 ]
 Ong Hway-Boon and Table VI
Cheng Ming Yu Reliability test, 
Success factors in e-channels:
the Malaysian banking Banks' operation Product Planning and Organisation Knowledge
scenario
management innovation control Pricing structure management
International Journal of Bank
Marketing  value 0.9178 0.8779 0.8596 0.8220 0.7920 0.7454
21/6/7 [2003] 369-377

Table VII
Spearman correlation coefficient of success factors
Banks' operation Product Knowledge Planning and Organisation
management innovation development control structure
ATMs
Banks' operation management 1 ±0.194 (0.343) ±0.355 (0.075*) ±0.169 (0.409) ±0.013 (0.95)
Product innovation ±0.194 (0.343) 1 ±0.021 (0.918) ±0.111 (0.59) ±0.119 (0.563)
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)

Knowledge development ±0.355 (0.075*) ±0.021 (0.918) 1 ±0.182 (0.375) ±0.273 (0.177)
Planning and control ±0.169 (0.409) ±0.111 (0.59) ±0.182 (0.375) 1 ±0.227 (0.265)
Organisation structure ±0.013 (0.95) ±0.119 (0.563) ±0.273 (0.177) ±0.227 (0.265) 1
Product Planning and Banks' operation Knowledge
Banking kiosks innovation control management development Pricing
Product innovation 1 ±0.417 (0.034**) ±0.19 (0.351) ±0.063 (0.761) ±0.247 (0.223)
Planning and control ±0.417 (0.034**) 1 ±0.138 (0.5) ±0.475 (0.014**) ±0.055 (0.789)
Banks' operation management (±0.19) (0.351) ±0.138 (0.5) 1 ±0.03 (0.884) ±0.218 (0.285)
Knowledge development ±0.063 (0.761) ±0.475 (0.014**) ±0.03 (0.884) 1 ±0.112 (0.584)
Pricing ±0.247 (0.223) ±0.055 (0.789) ±0.218 (0.285) ±0.112 (0.584) 1
Knowledge Product Planning and Organisation Banks' operation
Phone banking development innovation control structure management
Knowledge development 1 ±0.214 (0.295) 0.008 (0.97) ±0.166 (0.418) ±0.057 (0.782)
Product innovation ±0.214 (0.295) 1 ±0.045 (0.828) ±0.194 (0.343) ±0.125 (0.544)
Planning and control 0.008 (0.97) ±0.045 (0.828) 1 ±0.32 (0.111) ±0.069 (0.739)
Organisation structure ±0.166 (0.418) ±0.194 (0.343) ±0.32 (0.111) 1 ±0.147 (0.473)
Banks' operation management ±0.057 (0.782) ±0.125 (0.544) ±0.069 (0.739) ±0.147 (0.473) 1
Banks' operation Organisation Product Knowledge Planning and
PC banking management structure innovation development control
Banks' operation management 1 ±0.215 (0.291) ±0.13 (0.526) ±0.156 (0.446) 0.045 (0.828)
Organisation structure ±0.215 (0.291) 1 ±0.089 (0.665) ±0.346 (0.084*) ±0.161 (0.432)
Product innovation ±0.13 (0.526) ±0.089 (0.665) 1 0.136 (0.508) ±0.446 (0.022**)
Knowledge development ±0.156 (0.446) ±0.346 (0.084*) 0.136 (0.508) 1 ±0.469 (0.016**)
Planning and control 0.045 (0.828) ±0.161 (0.432) ±0.446 (0.022**) ±0.469 (0.016**) 1
Banks' operation Planning and Knowledge Product Organisation
Branch network management control development innovation structure
Banks' operation management 1 ±0.046 (0.823) 0.058 (0.779) ±0.249 (0.22) ±0.099 (0.629)
Planning and control ±0.046 (0.823) 1 ±0.138 (0.5) ±0.272 (0.178) ±0.324 (0.107)
Knowledge development 0.058 (0.779) ±0.138 (0.5) 1 ±0.091 (0.66) ±0.076 (0.711)
Product innovation ±0.249 (0.22) ±0.272 (0.178) ±0.091 (0.66) 1 ±0.071 (0.731)
Organisation ±0.099 (0.629) ±0.324 (0.107) ±0.076 (0.711) ±0.071 (0.731) 1
Notes: The parentheses represent  value; * 10 per cent level of significance; ** 5 per cent level of significance

knowledge development of ATM has positive
and moderate association with banking
kiosks and PC banking, while banking kiosks
has a positive and moderate association with
phone, PC and branch banking. At 5 per cent
level, knowledge development of branch
network also has positive and moderate
association with phone banking.
Nevertheless, planning and control for PC
banking is discovered to be negative and
moderately correlated with phone banking, rs
is ±0.480 at 5 per cent level. Besides, at 5 per
cent level, organisational structure for branch
network is positive and moderately associated
with PC banking while phone banking is found
to be positive and strongly associated with PC
banking and branch network with rs of 0.733
and 0.729, respectively. The summary of
relationship of success factors across channels
is presented in Table VIII.
[ 375 ]
 Ong Hway-Boon and
Cheng Ming Yu
Success factors in e-channels:
the Malaysian banking
scenario
International Journal of Bank
Marketing
21/6/7 [2003] 369-377
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)
Discussion and conclusion
The findings suggested that domestic
commercial banks in Malaysia would have to
enhance their operations management so as
to succeed in using ATMs, PC banking and
branch networks as their main e-channel.
This finding is consistent with the work of
Chen (1999) which showed that the main
critical success factor in adopting various
business strategies in the banking industry
in Taiwan was banks' operations
management.
However, product innovation is found to be
the most important factor determining the
innovation and knowledge development
factor for banking kiosks and PC banking. As
the number of branch networks reduced and
more banking kiosks are set up, there will be
fewer operation staff and managers
concentrating on daily operation function
but more on marketing and promoting
banking services. Eventually, there will be
an increasing need for technical support staff
and development of technology to provide a
variety of online services to meet the
customers' demand.
Besides, a tight internal auditing and
control as well as reduction in the growth of
bank branches would also restrict the

development of bank products and

success of banking kiosks and the second
factor (the principal factor being knowledge
development), affecting the success of phone
banking. Though factors are not significantly
correlated for ATMs, phone banking and
branch networks, it should be noted that any
effort to improve planning and monitoring of
banking services would have a negative but
weak to moderate impact on product
introduction of new technology to reduce
operation cost via PC banking.
Beyond doubt, the factor analysis and
Spearman correlation examination implied
that domestic banks in Malaysia could
concentrate on enhancing their operations
management and product management to
succeed in providing banking services
through the mixture of the traditional branch

Table VIII
Spearman correlation coefficient across channels
ATM Banking kiosks Phone banking PC banking Branch network
Banks' operation management
ATM 1.0000 0.0437 (0.8323) ±0.2462 (0.2253) 0.4364 (0.0258**) 0.1082 (0.5987)
Banking kiosks 0.0437 (0.8323) 1.0000 ±0.1800 (0.3789) 0.4493 (0.0213**) 0.5847 (0.0017**)
Phone banking ±0.2462 (0.2253) ±0.1800 (0.3789) 1.0000 0.0875 (0.6708) 0.1328 (0.5179)
PC banking 0.4364 (0.0258**) 0.4493 (0.0213**) 0.0875 (0.6708) 1.0000 0.4846 (0.0121**)
Branch network 0.1082 (0.5987) 0.5847 (0.0017**) 0.1328 (0.5179) 0.4846 (0.0121**) 1.0000
Product innovation
ATM 1.0000 0.3873 (0.0506*) 0.3402 (0.0890*) 0.5502 (0.0036**) 0.1416 (0.4903)
Banking kiosks 0.3873 (0.0506*) 1.0000 0.3816 (0.0544*) 0.6962 (0.0001**) 0.1156 (0.5740)
Phone banking 0.3402 (0.0890*) 0.3816 (0.0544*) 1.0000 0.4762 (0.0139**) 0.0653 (0.7513)
PC banking 0.5502 (0.0036**) 0.6962 (0.0001**) 0.4762 (0.0139**) 1.0000 0.2513 (0.2156)
Branch network 0.1416 (0.4903) 0.1156 (0.5740) 0.0653 (0.7513) 0.2513 (0.2156) 1.0000
Knowledge development
ATM 1.0000 0.4825 (0.0125**) 0.3203 (0.1106) 0.5409 (0.0043**) 0.2185 (0.2836)
Banking kiosks 0.4825 (0.0125**) 1.0000 0.6292 (0.0006**) 0.5386 (0.0045**) 0.4900 (0.0111**)
Phone banking 0.3203 (0.1106) 0.6292 (0.0006**) 1.0000 0.2007 (0.3255) 0.4017 (0.0419)
PC banking 0.5409 (0.0043**) 0.5386 (0.0045**) 0.2007 (0.3255) 1.0000 0.0205 (0.9208)
Branch network 0.2185 (0.2836) 0.4900 (0.0111**) 0.4017 (0.0419) 0.0205 (0.9208) 1.0000
Planning and control
ATM 1.0000 0.1166 (0.5706) 0.0325 (0.8748) 0.1350 (0.5107) 0.3183 (0.1130)
Banking kiosks 0.1166 (0.5706) 1.0000 ±0.3538 (0.0762*) 0.3450 (0.0844*) ±0.2178 (0.2852)
Phone banking 0.0325 (0.8748) ±0.3538 (0.0762*) 1.0000 ±0.4803 (0.0130**) 0.3730 (0.0606*)
PC banking 0.1350 (0.5107) 0.3450 (0.0844*) ±0.4803 (0.0130**) 1.0000 ±0.3532 (0.0768*)
Branch network 0.3183 (0.1130) ±0.2178 (0.2852) 0.3730 (0.0606*) ±0.3532 (0.0768*) 1.0000
Organisation structure
ATM 1.0000 0.1576 (0.4418) ±0.2709 (0.1808) 0.0687 (0.7387)
Phone banking 0.1576 (0.4418) 1.0000 0.7331 (0.0000**) 0.7285 (0.0000**)
PC banking ±0.2709 (0.1808) 0.7331 (0.0000**) 1.0000 0.5892 (0.0015**)
Branch network 0.0687 (0.7387) 0.7285 (0.0000**) 0.5892 (0.0015**) 1.0000
Notes: The parentheses represent  value; * 10 per cent level of significance; ** 5 per cent level of significance

[ 376 ]
 Ong Hway-Boon and
Cheng Ming Yu
Success factors in e-channels:
the Malaysian banking
scenario
International Journal of Bank
Marketing
21/6/7 [2003] 369-377
Downloaded by UNIVERSITAS TRISAKTI, User Usakti At 01:04 05 February 2016 (PT)
banking as well as e-channels like ATMs,
banking kiosks, phone banking and PC
banking. Nevertheless, it should be noted
that this survey is conducted prior to the
introduction of Internet banking in June
2000. As such, respondents are not asked to
specifically rank their opinions on Intranet
or Internet-based banking, though both use
personal computers as a means of operation.
Also, this study has focused on identifying
success factors of implementing e-channels of
domestic commercial banks and thus no
comparison is done between local and foreign
owned banks. It would be good to take note of
the weaknesses and advantages of domestic
banks in terms of provision of electronic
services as well as to be better equipped to
face liberalisation[1] in year 2007.
Note
1 Malaysia is committed to the General
Agreement on Trade in Services (GATS) of the
World Trade Organisation (WHO) to gradually
and progressively liberalise its financial
sector. The opening of the domestic financial
sector to foreign competition is to create a
more competitive and efficient financial
sector.
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