18-08-2012, 03:47 PM
Customer Perception towards Online Banking Services: Empirical Evidence from Pakistan
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Abstract
The Promotion of online banking technology enabled the banks to enhance its
operations with cost cutting effectively and efficiently in order to handle daily banking
affairs via online banking channel. Customers are being facilitated by reducing their
visits in banks and they can carryout their transactions via internet or ATM Machines
instead of personally visiting the branches. The researches so far done reveal that
mostly the customer of banks are unaware about online banking services and there is a
lack of trust among customers on online banking services. Especially Pakistan is far
behind the developing countries as a lot of services regarding online banking are not
available in Pakistan. This study examines the customer perception, preferences,
problems and suggestions about online banking in Pakistan. The study reveals that
mostly customers prefer internet banking (IB) services over branch banking due to
reliability, convenience, speed, safety and security, cost effectiveness, user-friendly, and
error free system. In contrast the parallel finding shows that security problems, lack of
trust and knowledge, ATM machine problems etc. affect the adoption decision of
customers of internet banking services. The services which are not in Pakistan e.g. Cash
depositing facility through ATM machines, “SMS/E-mail Alert” Service, Transfer funds
through ATM machines, Payment of utility bills through internet are found most required /
demanding services by the customers in this study.
INTRODUCTION
Online banking is a new phase in retail banking services. With the help of online banking
several types of services through which customers can request information and carry out
their banking transaction such as balance inquiry, inter account transfers, utility bills
payment, request check book etc., via a telecommunication network or internet without
physically visit the branches. (Daniel, 1999; Mols, 1998; Sathye, 1999). In future along
with physical market competition the virtual market (market space) also going to take
place (Rayport and Sviokla, 1994 a, b). Due to this fact more and more banking
companies thinking about switching their businesses from the physical to virtual market
(online technology). Today, the key success factor for the developing economies is
“Information” (Kenny & Qiang, 2003, p. 14). As advancements in technology and
information system are arising rapidly and different kinds of electronic banking systems
are introducing by banks, where each system has a unique and systematic way that
facilitate the user to interact with the bank in easiest way. The first online banking
services based on the Internet were provided by Stanford Federal Credit Union (SFCU)
in October 1994 (Business Wire, 1995).
Objective of the Study
The main objective of this study is to know about the customer perception regarding the
usage of online banking in Pakistan. The study further explores either customer feels the
Internet Banking as a valuable and useful step of technology in banking services or not.
For this purpose to conduct the research in every city of Pakistan is very difficult
because data collection is not an easy task at national level. For the ease of data
collection and to save the time & cost, the present study conducted this research in
Khyber PukhtoonKhawa (KPK) province of Pakistan. In order to know all about Internet
Banking, the information which is gathered is split up into 3 parts. Initially, the study
explored that why customers use internet banking (IB). Secondly, why customers do not
use IB and in the last we took customer perceptions about improvements that should
bring in IB services in Pakistan. This information will become very helpful for managers
to determine the customer perceptions about those IB services which are still not
available to them and help them to formulate strategies / policies about IB according to
customer needs and wants.
Importance of the Research Paper / Practical Implications
This study is of great importance specially for banking industry in Pakistan. This
research will help the managers to cope the problems of customers about IB services
which are indicated in the study. The customers views have also been taken in same
study about those IB services which still not available in Pakistan whereas they are
available in other developed countries. So in relation to that information it will help the
managers to formulate strategies / policies about those IB services which are still
unavailable to the users of IB services in Pakistan and also give the competitive
advantage against other banks and also facilitate to compete global market. In result
new banking strategies will fulfill the customer’s requirements about IB services and
increase customer loyalty as well.
LITERATURE REVIEW
Online banking is the emerging issue, which is expending rapidly in banking industry
especially in Asian countries. Extant literature on E-banking or online banking normally
focused on the customers’ perception about IB services their advantages or flaws and
the areas of further improvement. Some of them are given below.
Gikandi and Bloor, (2009) investigate the factors that influence the adoption and
effectiveness of e-commerce in retail businesses in Kenya. Two surveys were carried
out (Initial and follow-up) in the years 2005 and 2009, respectively, which involved banks
controlling approximately 90% of formal retail banking in Kenya. The purpose of the
follow-up surveys is to monitor the trends in 4 years (2005 – 2009). The result shows
that there was a drastic shift in the importance attached to some e-banking drivers
between years 2005 and 2009. They concludes that e-banking has matured in
developed countries, it would be expected that banks in developing countries would
learn some lessons from the developed countries and be spared some of the
uncertainties undergone by their counterparts in technological development.
CONCLUSION AND RECOMMENDATIONS
The quick services in Pakistani banking sector, make obtainable a proposal to use
modern technologies to improve operational competence and fineness of services to
obtain and grasp the consumers. The use of online banking in Pakistani banking
services provides the probabilities to banks to operate consumers’ zeal to assume
the services having much planned benefit. In Banking Industry the Internet Banking is a
new era which explores the new horizons of success and development to facilitate and
for the betterment of society and open the door of development for banking industry to
enhance businesses operations. But unluckily the evidences of the research show that
mostly services are not available in Pakistan, which have been introduced many years
before in other developed countries.
This study reveals that the major issues in the IB services are security, safety and the
lack of trust especially on ATM machines. Fraudulent transactions, robbery, bad and
unreliable ATM services (e.g. stuck-up the ATM card, incorrect Dr or Cr amount in the
account etc) are the reasons which playing a vital role in reducing the trust of consumers
on IB. The results also show that reliability, convenience, speed, safety and security
have the major contribution to retain and attract the customers.