Impact of E-Banking in the UK

Impact of E-Banking in the UKAbstractThis research paper will comparing and contrast the characteristics of the handed-down beaching and e-banking. Additionally, research will identify the similarities and differences between the virtual and the real-world banking industry guests. Distinguish the difference between the world of e-banking and the real world in terms of customer communications. Determine which traditional customer communications plenty and can non be successfully ported to the world of e-banking. Assess what reinvigorated communications techniques ar unequivocally available in the world of e-banking. And demonstrate how the theatrical role of multimedia technologies creates effective e-banking tissuesites. Discussion of customer communication strategies and real-world examples will be presented. Chapter 1-Introduction1.1 net profit Banking in the joined Kingdom and EuropeIn the coupled Kingdom, lucre banking work argon available and tryd by twelve Interne t banking services suppliers. The Egg, for example, is an Internet banking service provider (exclude current line features) that has more than 150,000 customers visited their web site during October 1998 to July 1999. The Internet banking services providers in the U.K. receive encountered an increasing demand for cross boarder payment proceeding for smaller amount of cash and payment over the Internet. Many banks continue to develop and launch new banking services on the Internet in ordinance to satisfy and meet their Internet-based customer requirements in term of time, ease of wasting disease, security and privacy in the U.K. (Birch and Young, 1997 Mathew and Dagi, 1996 Gandy and Brierley, 1997).In June 1999, the U.K. and eight another(prenominal) western European countries France, Spain, Portugal, Germany, Switzerland, Holland, Luxembourg, and Scandinavia baffle become put acrossing nations in providing Internet banking services in Europe.Germany overly has been rated as the nation that has the highest number of Internet banking services providers in Europe (Blue flip over International Marketing, 1999). Although the UK has smaller number of Internet banking sites on the Internet than in Germany, but it has been rated as the highest superior and functionality at no additional charges to their customers in Europe. Howalways, at that place are two banks in the U.K. that charge additional fees for Internet banking services, Nat west and NPBSIn Scotland, the Bank of Scotland does not provide 24 hours Internet banking services via the web site. Customers can not access to Bank of Scotland web site between 100 a.m. and 500 a.m. during weekdays and between midnight and 500 a.m. during weekends. During the bank web site is not accessible, a daily back office operations and maintenance is performed to assure accuracy and security according to local restrictions, rules and regulations.Most of customers in the U.K. and European countries persona Internet banking services to inquire closely their outstanding balances in saving and checking explanations, and details active their latest or last transactions for their daily reconciliation. The frequency to access the customers bankers bill per day is quite high. Many banks, therefore, have provided many view all features for customers to inquiry and view the information on their accounts as often as they want per day. As a result, the banks have reduced both operating cost and work hours for their staffs at call centers and local branches for frequently asked (FAQ) and exigent transactions. 1.2 E-banking security provokes fear or indifference for the British publicA recent study by analyst Forrester question has unearthed conflicting views about the sentry go or otherwise of online banking. The survey of 11,300 UK net users found that while many online banking consumers are complacent about security, a large minority have given up online banking as a direct result of security fears.Most UK net users are aware of security threats like phishing and keystroke logging but are unfazed by these risks and expect their banks to deal with the business, even though these attacks are thrown against the consumers PCs alternatively than a banks own systems. Ideally users want banks to supply a binding guarantee against fraud.Based on responses to its survey, Forrester concludes that an estimated 600,000 from a total of 15m subscribers have ditched online banking as a direct result of security fears. Forrester reckons that users are conf utilise and banks need to grade up their efforts to educate customers about online fraud. Measures to restrict the functionality of some accounts (for example controlling how much bullion can be transferred on any day), stronger net income banking enfranchisement and improved customer profiling are also needed to defend against security threats, it advises.In addition to people who plan to drop net banking accounts as a result of security fears, another fifth of net users say that security fears will stop them ever banking online.1.3 UK Consumers shy away from e-banking Customers remedy measure out direct contact with real people in their bank branch. A vast majority of bank customers thinks that an online banking service is not important for their relationship with a bank. According to a survey one third of customers rate e-banking as an important service, and of those only 22% actually use it. Even more unwished-for news for many banks will be the poll finding that more than 30% of customers do not even know whether their bank provides online services at all. The findings contrast starkly with the market expectations among banking executives. In an earlier Deloitte survey, monetary services executives had predicted that customers would be eager to do their banking on the web. 1.3.1 Cutting costs, not customer upkeep Julian Badcock, retail financial services analyst at Deloitte, said customers w ere certainly not rating the internet or interactive services as a key factor in measuring their satisfaction with their banking service provider. A responsive service and the feeling of being treated as a valued customer were much more likely to make consumers feel happy with their bank. And more than 50% think it is important to have quick and at large(p) access to a local branch. The findings of the report make bitter reading for backers of internet banking tenuous plays like Virgin and Egg. Julian Badcocks conclusion 90% of customers at present are showing no interest in obtaining financial services from new entrants. Established players, meanwhile, have to worry whether their huge investment in online banking is money well spent. The need for expensive customer care does not sit nicely next to the cost-driven move to online banking. 1.3.2 Educating customers Long-term hopes for cost savings will only materialize, if consumers can be persuaded to use the services. A recent sur vey by consulting firm Cap Gemini Ernst Young had found that currently meet 4% of all bank transactions in Europe are done online, a number expected to rise to 25% by 2003. In the United States just 3% of transactions are done online, and there growth prospects are more modest, with the share of online transactions seen to reach 12% within lead years. Such growth rates, however, can only happen if banks begin to educate their customers about the benefits of online banking, Deloittes analysts say. Chapter 2-Literature Review2.1 Executive SummaryHow secure is online banking for the official and not so regular internet user?The internet is becoming a more globally known form of communication around the world these days and its used largely in conjunction with personal/ business sector in any casels to spread out the horizons of e-commerce.As many small to large business fol pathetic the trend, looking for soaring profits, by placing their business online, they are left to find a t hreat in the online world in terms of security issues. This can be extensive in regards to online banks and financial institutions that provide the businesses with their transactions, along with the present threats of personal privacy and protection flaws associated with banking online. Online banking is not just about viewing accounts online, or paying bills. It has more to that, it admit transferring of funds, shopping online etc.As a proven fact, felonies consisting of fraudulent behavior have attacked national Australian banks and are currently in legal quandary over the astounding issue. Presently, uncertain of the root of the crime, banks have been forced into an unacceptable situation in regards to customers bank accounts.With alarming issues of security online, there are a few travel that can be taken in say to prevent such matters from arising or basically in order to avoid hackers into your privy life.2.2 The internet and its benefitsAs todays busy world is immensely changing in the depth of telecommunications whilst advancing in the technological age, we are left to find borderline time to do the basic necessities such as shopping, banking relaxing. So along came e-Shopping, and e-Banking. Online banking is for you if it will save you time and money. E-commerce plays a major role in how the internet is used in terms of a consumer business, or B2B relationship, but there just isnt enough security online. 2.3 What is online banking about?nline banking may be considered just as a system where you view your accounts and pay bills, but it is not just about that. Online banking is about shopping online, transferring funds, viewing transactions histories, servicing your accounts online and getting in contact with your bank around the clock.As shown by the statistics, lenience to banking online can be proven handy. The convenience can be dominant, since not only is extend time reduced, but ATM machines, telephone banking or banking by mail are often unnecessary. Technology continues to make online banking, easier for the average consumer. Not only regular consumers, but also many small, medium and large businesses are finding it rather efficient. Bankrate.com (28-10-2005)In the past, online banking consisted largely of banks partnering with large software companies such as Microsoft, to provide the online banking services within their personal finance software. Microsoft.com (1996) this led to the first of two approaches referred to as the client-based system, allowing customers to use the money curbment software and their own computing machines to access the bank via a modem and a phone line. The second approach is that of the newer Internet-based systems which allow customers to simply dial in development any computer and use the banks software.From a business perspective, they actually have more danger associated to their business, than a consumer may. Home PCs are, as confirmed by all IT Security vendors and specialist s, the least protected albassera.com (21-06-2002). Ocp.co.uk (No Date) describes best the implications businesses could face up with the threat of online security fiscal savings that online banking has to offer. Increasing supply power by reaching a more global target Attract new customersAnd therefore the disadvantages that may occur to a business Level of learning for each customer may vary, or may even be too difficult to do online transactions. There a authorization threat of the site being hacked Lost information or errors in banking can lead to a loss of business Not all clientele may be happy with making purchases online. Initial set-up costs and on-going cost can be rather expensive to keep the site up-to-date.Proven by the disadvantages list, there are a lot of threats placed on a business in order to consider a place in the e-market.2.4 Internet BankingBanks are not the only commercial organizations locked in a love hate relationship with the Internet. On the one hand, cheap and ubiquitous, the Internet offers a potentially attractive way to serve customers without the heavy costs associated with the traditional bricks and mortar business model. On the other hand, the Internet is fundamentally open and insecure. It is the very antithesis of the private networks that industry and commerce have entrusted with carrying transactions and other critical information. Despite the dichotomy, the Net continues to grow ever more rapidly in importance to the commercial world. From books and airline tickets to share trading and the filing of corporation tax returns, new users for the Net are proliferating.In most cases, the incentives of Internet Banking are either the need to meet competitive challenges and customers demand or the need to cut costs. As reported by The time of UK on Internet banking, a banking transaction action at a Bank costs around $1.07, $0.27 via an ATM and just one-cent on the Internet. The decision to use the net is rarely a technical one. Banks have opportunities in the new payments gateway in areas such as purchasing platforms, certification, shift services and trade finance, electronic bill presentment and payment, consumer Internet payments and also plethora of competition.There are five main reasons for going online. showtimely, Internet banking removes the need for animal(prenominal) straw man in new territories a web site gives global presence without in-country set up and ongoing infrastructure costs. Secondly, success carries few penalties because growth can be accommodated centrally, without recourse to building and operating new service centres (bank branches in retail terms). Thirdly, the time to market new products and services is dramatically reduced due to the standardized technology that characterizes the Internet. Fourthly, there is the chance to preach to the converted. Marketing costs in this medium can be concentrated on creating an effective meshworksite that attracts potential client s. Finally, the Internet fits well with the characteristics of Corporate banking where thousands of transactions which can be conducted daily and multiple updates provided, individuals can work easily from different locations and there is a growing belief that security fears will be resolved by evolving techniques and technology.For internet banking to work effectively, it needs to address the key issue of security. In conventional banking we use written references or prior knowledge to assure ourselves that we know who are doing business with us. We use controls to ensure that non parties are not party to a cloak-and-dagger deal cannot see or tamper with paper based information that is stored and in transit. And we use pen on paper scoreatures as an irrevocable sign of our agreement. Banks have long used encryption devices to scramble inter-branch links and communications with corporate customers. More recently firewalls and password tokens have been introduced to provide access control.In addition to security, quality of services is another key area in providing successful e-banking. Any customer is only a click away from a competitor elsewhere, so it is imperative that the e-banking experience reflects an optimal encounter each and every time. As simple as this sounds, developing the network management capabilities to rate and respond to the end user experience is no trivial matter. Much of the discussion so far has focused on e-banking as provided over the Web but the Web is only a beginning. The changing shape of Internet banking in the future will be fascinating to watch.Internet banking is a stalwart and highly practical solution but has delivered something of a surprise too. As Internet banking becomes more common, potential customers have increasing choice. The more informed among them are shopping for service not just on the basis of obvious criteria such as interest rates and functionality, but also on the quality of the security being provided . For those banks still debating the best Internet approach, the advice is to start small but start as early as possible. The number of customers and services should be limited initially while the potential of the technology is learned and the security and services levels are assured.2.5 Online banking securityNowadays, online banking is used primarily by meat of the internet-based system of customer/business to bank. All online transactions should be governed by an SSL (Secure Socket Layer) encryption. Gelman (1998, pg 39) states that information sent over the internet may pass done dozens of different computer systems on the way to its destination. This basically means the information being sent is to be encoded before transmitted from the destination computer to the banks computer. Knowing that your bank account details are being passed on to many other computers in order to reach its destination, doesnt exactly make you feel safe and sound about using online banking.A custome rs password or pass code serves as the first level of protection and is digitally sent separately for security purposes. This is also accompanied by the issuing of a Logon ID, which is a unique membership number. Currently online businesses and financial institutions face great danger as online banking can lead to fraudulent behavior. Atansov (2001) Credit card generators are readily available to download The impact of such a fact has left many internet users question about the security issues in regards to their personal information, their banking details and most of all their internet surfing privacy. From a recent survey it was shown that a massive 30% of regular internet users were too nervous to use online banking.2.6 Current online banking security issueAs it may have come to recent concern, most of the banks were overcome by an unknown source luring its customers to accidentally reveal their account details. An email was sent out to customers stating that their account deta ils needed renewing and that if they followed simple steps provided they could renew their accounts adequately. Some Net Bank customers have been deceived into providing their Net Bank client number and password as a result of a junk e-mail email which was widely circulated in UK. As none of the customers were aware that such a scam could happen, they gave their Login IDs, Passwords and account information away to very deceitful criminals.2.7 An issue about online banking security and its futureIn the analysis for online banking security, many precautions can be taken in order to prevent trouble occurring in regards to account details, personal details and security information. Customers of online banking must play their part in securing online banking by helping to safeguard information, which can be done by protect their Logon ID and Password from misuses. These may include things like not telling other people their Login ID and/or Passwords, not using public computers to access their bank account information and being able to tell the difference of a secure and non-secure website.The future can only hold a solution for the current problem of online security, which can be solved in many different ways. Its best to avoid internet banking for the current moment and wait until there is an upgrade on its security. As many consumers are still nervous about using the internet for banking, the issue of security will be a thing of the past, just at this particular moment it shouldnt be overlooked.Chapter 3-Research Methodology3.1 Evaluation of five E-Banking Sites in the UKThere are two distinct models of E-Banking sites Pure Cyber banks e.g. in the UK, Cahoots, Egg, First Direct and Smile, which only have an Internet presence Traditional banks that provide E-Banking to complement retail banking, e.g. In the UK, Barclays, Nationwide and HSBC are some of the traditional banks that have an Internet presence to complement their brick and mortar branches. Not all the banks offer the full range of services on the Internet banks in both the aforementioned(prenominal) groups offer a wide range of services. These include personal banking, commercial banking for both small businesses and large corporations, loan application services.fiscal services such as applying for an Individual Savings Account (ISA), opening an E-Account, applying for a mortgage, etc.3.2 Methodology for Evaluation of E- Banking sitesI chose five E-Banking sites Egg, First Direct, and Smile in the pure cyber bank variety, and E- banking sites of Nationwide and Barclays, which also have physical branches.Aims and objectives To determine the ease of applying the evaluation instrument based on the e-SERVICE framework To demonstrate that an E-Commerce environment should not only have a usable Web site in conventional HCI or Usability terms, but should provide service quality that meets or exceeds the customers expectations.3.3 Research MethodThe research method involved conducting heuristic program evaluations of the E-Banking sites. Heuristic evaluations involve inspecting the user interface to check its conformance against a set of heuristics or objective principles (Nielsen, 1993). The heuristic evaluations involved two steps1. First of all I conducted usability heuristic evaluation. We applied an evaluation instrument consisting of several sub-heuristics of the usability heuristics approach.Provide an effective seat rogue are mark intuitive access and logical progression to key user tasks Integrate clear yet usable branding Ensure visual elements do not compromise usability Terminology should relate to the users tasks and not marketing speak Provide appropriate Metaphor for navigation from the home page Simplicity or busy is either appropriate?The heuristics in put back 2 and the sub-heuristics in the usability evaluation instrument (which is available from the authors) were derived from several sources in the publications and Web sites (e.g. www.us ableweb.com, Nielsens www.useit.com, IBM Web guidelines). The list of heuristics was also refined and updated during the authors experience of conducting usability evaluations of E-Commerce sites as a part of their consultancy activities. 2. Secondly I conducted heuristic evaluations of the five sites with respect to the e-CRM heuristics using the e-SERVQUAL evaluation instrument. (Based on the e-SERVQUAL framework).Table 2 Usability Heuristics Provide an effective home page Design a natural and manageable structure Provide an esthetical minimalist Design Enable easy and intuitive navigation Ensure Consistency Support the UserI considered the customer task scenarios listed in Table 3. The customer task scenarios presented here describe key situations of customers interaction with an E-Banking environment. Task scenarios are realistic, concrete and specific and help to guide the evaluator through heuristic evaluations. The evaluator (usability expert) interacts with the E- Commerce site to role-play a stereotypical customer and conducts the customer task scenario. While walking through the scenario and navigating through the site, the evaluator checks for the sites conformance against the heuristics, and makes a note of situations in the scenario where the E-Commerce environment does not adhere to the heuristics.Chapter 4- Research Findings4.1 Internet BankingInternet, a global system of computer networks, first appeared in 1969 under the figure Advanced Research Projects Agency Network in the United States (PBS Online, 2003). At present, about 13 millions serves are linked to the Internet across the globe, 99 per cent of which are located in advanced countries(CSE Online, 2003). Many banks use the Internet to offer services for both domestic and foreign consumers. At an advanced level, Internet banking is called transactional online banking, because it involves provision of facilities such as accessing accounts, funds transfer and buying financial products o r services online (Karjaluoto, Mattila and Pento, 2001, p. 348). The Internet also helps banks penetrate other financial markets without requiring their physical presence in those markets.Miklaszewska (1998) identified four roles for the Internet in a modern banking industry. First, it quickens financial transactions between banks and their consumers. Second, it gives financial institutions permanent access to financial information. Third, the Internet connects a banks head office to its branches. Finally electronic banking lets customers check their account information, pay bills, transfer funds between accounts, and perform other functions. Customers will soon have access to additional services such as online stock and bond trading (Miklasewska, 1998, p. 283).The Internet gives financial institutions discordant opportunities to conduct their various financial transactions. It enables banks to introduce international payments. It also helps banks cut time, money and risk. Many tr ansactions can be done through the Internet. Availability of data through the Internet helps both banks and consumers reduce risk-taking in their financial transactions.Usually banks use Internet for publicity purposes, which include informing the public about the characteristics of financial products (e.g., electric charge rate, type of accounts available within the bank, interest rate on lending and borrowing, etc.). Large banks such as Citibank offer On-line LC issuance services to traders and cross-border finance facilities to foreign investors. Respondents noted that the response to those Internet services is high.Internet improves banks delivery system. But, the branch remains the main channel for delivering banking services in developing countries. Individuals still prefer face-to-face banking rather than buying financial services via the telephone or the Internet. The removal of barriers on the use of new technologies would encourage banks to invest in e-commerce and TV ban king.The Internet improves two essential factors in global banking businesses time and location (Oxford Analytical Citibank, 1999). The time needed to access bank services through the Web is extremely short. The Internet is also available everywhere in the world. As a result, Internet technology has globalised the banking industry many banks use e-banking to puff up their market share abroad.This section has shown that the Internet is a means to penetrate new markets without a physical presence in the host country. It enables banks cut their costs and to provide large packages of services in short space of time. The result is an increase in banks output levels and boost in their profit margin.4.2 Advanced development Technology and Banking EfficiencyThe Internet increases banks efficiency by helping them reduce the cost of producing and delivering financial services. The Internet alters the pricing strategy of the banking product. Banks price their products at the respectable lev el for the electronic market. The price of financial services is usually lower via the Internet than in the branch (Jun and Cai, 2001) this has made the Internet an attractive banking environment for clients. As profit margin decreases, new products are delivered through new channels, retail services and securities being the main areas of change. Global banks also use the Internet to expand their activities and to earn new market share (Oxford Analytical Citibank, 1999).The Internet enhances competition in the banking sector as many non- banking institutions offer their services through Internet channels. Banks also face severe competition on the lending side from global markets. Financial service clients have access to all information about products (e.g. pricing and characteristics) through the Web. This has increased transparency and reduced the cost of financial instruments. Therefore, banks have to apply different mechanisms for pricing their products. As shown in Table 1 the n umber of banks branches will decrease as electronic distribution channels become more popular. Internet also enhances the delivery of large range of financial products. These improve banking efficiency by facilitating payment processing. The goal is to attain high value-added products. The Internet plays a vital role in the key challenges facing Financial Services Institutions today. It provides a tremendous opportunity for Financial Services Institutions to reduce transaction costs, exploit new markets and roll products much faster than was possible via traditional channels (Banker, 2000, p. 4. Bank managers stressed that the Internet enhances the global competitiveness of financial institutions by increasing their output levels.4 The Internet is also a means to manage business-to-business5 or business-to-customers transactions effectively. A strong Internet infrastructure is necessary to allow banks improve their electronic data interchange.6 Co-operation between telecommunication firms and financial institutions facilitate the modernization of online banking. Increased capital investments and clear rules for online banking also fosters the growth of e-business activities and enhance market transparency (interview notes, 2003). Finally, bankers surveyed in this research believe that the Internet is a means to boost the relationship between providers and users of financial services in the marketplace. The Internet allows market participants to access all the standard banking services at a low price. This motivates individuals and investors to purchase large packages of banking services via the Internet.4.3 Problems Associated with the Advances in Information TechnologyThe major problem facing Internet banking is the physical delivery of cash. Clients regularly receive financial information through banks Web sites. Nevertheless, it is impossible to make a physical delivery of cash through the Internet. Clients also require instant access to products prices and financial information. The very concept of the end-of-day is meaningless in the world of e-commerce, where customers may be anywhere in the world and demand consistent and instant levels of services (Banker, 2000, p. 6). Banks should labour innovation to become more competitive. The Website must also complement branch services, meaning that products offered via the Internet have to describe how they supplement or replace services available inside the branch. Advantages of e-banking Low costs (particularly fixed costs) Cross-border expansion High franchise value Strength link with customers Market share growth Financial information potential Simple to access. Disadvantages of e-banking New competitors Complicate services valuation Development costs Low security.Source Salomon Smith