Banking is governed by the growing demands of
customers in terms of efficiency and technology. Technological
developments have allowed banking to be supplemented by services such
as telephone and PC banking, allowing customers to manage their
accounts from home. There is intense competition and in order to deep
up with its rivals, each bank is trying to match the other terms of
product and service. Internet banking is the latest innovation to
these banking services.
The primary reason for writing this article is that
e-commerce is a relatively new area for business and presents
tremendous potential for organisation to exploit opportunities on the
Internet. This article will give an overview of the general Internet
banking industry and will try to answer whether Internet banking is a
useful tool in terms of marketing and gaining customers for the banks
in their war of competition. The main aims of this research are to
answer whether Internet banking services and products are worthwhile
for the customer, how organisations are marketing their products, what
qualities are required to be a market leader and most important of all
if Internet banking is worthwhile.
Critically analyze how the Internet is used as a development tool for
Internet banking by looking at the benefits and pitfalls. Greater
emphasis will be placed on the pitfalls and possible ways in which
banks can overcome them.
identify how customer loyalty can maintain by Internet banks. Analyze
and recommend the different customer retention methods which
organisation are doing or could do to build customer loyalty.
the marketing techniques and strategies which banks employ to promote
their services. It is hoped that clear patterns will emerge from this
objective showing similar traits amongst the bank. It would be
therefore possible to explain what qualities are required to become a
market leader in the area of Internet banking. Examine whether
Internet banking is worthy by looking at all the evidence presented in
In the last year, the number of banks offering
Internet-based services have increased dramatically. There are many
advantages in using Internet banking service, the primary reason being
for Internet banking can be accessed from any PC with Internet access.
Other advantages for customers using Internet banking is that it is
largely free, users only pay for the phone line. Internet banking is
convenient if there is no delay like waiting in a queue, and one can
access their account 24 hours a day. There are also advantages for the
organisation that there is lower cost of operation because of no
physical branch and the organisation can capture detailed information
about the customer's lifestyle based on their activity on the web
THE POWER OF CUSTOMERS
The power definitely lies with the customer. The
Internet allows the customer to shop around and look for the best
offer of products and services available. At the click of a mouse,
customers can shop around instead of going to the local high and stand
in queues. The Internet allows customers convenience and control over
their finances. Customer loyalty to a particular bank cannot be
guaranteed anymore. However, the Internet will allow the banks to
track the movements of their customers and target tailored products
for their customers and this could infect increase loyalty.
More and more financial information is available on
the Internet and customers don't have to rely on bank employees to
advise them what to do with their finances. The Internet allows for
more transparency in assessing products where customers can use their
screens for the best products, services and pricing for their banking
POWER OF SUPPLIERS
Due to Internet, the power of the banks has
decreased. Recent changes in financial laws have also decreased the
As more Internet banks enter the industry it will
be seen that the power of the Internet banks will further decrease.
Internet banking doesn't guarantee customer loyalty because of various
reasons like choice and convenience. Banks will have to extremely well
thought out marketing strategies in order to attract customers.
THREAT OF SUBSTITUTES
In future, there might be electronic money. Life
without banknotes and coins might be a problem for banks to operate at
all. Some people think if there was no need for physical money, banks
would have very little to offer. Everything — transfers, payments,
even loading up electronic purses could be done on a computer. Having
money stored on smart cards is another possibility in the near future
as a substitute to Internet banking.
One of the main strengths of Internet banking is
ease of convenience, customers can get 24-hour access to up to date
Internet banking is a source for containing cost
for banks. Research has shown that it is cheaper to carry out a
transaction via the Internet than it is via a branch.
The image of banks is improved by having an online
banking site. It is another form of marketing, it indicates to the
consumer that the bank is up to date and is technologically advance.
Internet banking will allow the banks to have global reach.
Customers can get access to Internet banking
anywhere in the world, they just need an Internet connection.
Advantage over telephone banking is that customers
get visualize. There is an opportunity to view tables and figures.
Even though there is a threat of fraud, online
banking is relatively safe, customers are protected from hacking by
A further advantage of Internet banking is that it
can be accessed via any terminal. Internet banking has allowed banks
to contain costs to an extent. The main weaknesses are fear of
security, customer loyalty being affected, virus affecting the web
sites and also lack of personal communication between bank and
The main purpose of Internet banking is a means of
providing convenience to the customer. The bank said that 24-hour
access is the main benefit for customer using Internet banking and the
reason why they provide Internet banking is to give an alternative
method of banking which provides convenience. Customer also said that
Internet banking saves them time compared with high street banking and
88% of customer said that 24 hours access is an important feature of
Internet banking. Most of the Internet banking customers are
professionals who don't' have time to visit a local branch. They
require a service which is convenient, easy to use and with almost the
same product range and service of a high street bank. Providing 24
hours access 7 days a week provides convenience to the customer.
The benefit which the banks get include enhanced
publicity, increased revenue and enhanced reputation. However, if
there is a problem with Internet banking, the bank could encounter
Pricing is an important issue in Internet banking.
53% of customer said they were attracted to the bank because of its
attractive rates. Generally pricing is far better than street banks.
The rates for savings account are about twenty times better in
Internet banks than high street bank.
Customer service is generally poor even though the
banks regarded it as being important and unchanged. Customers miss out
on the human element found in high street banking. They have to find
information themselves and don't have any representative to help them
or give them advice. E-mail and call centres are there for the
customer and do have an effective reply time or answer customer
inquiries, however, customer still perceive customer service being
poor in Internet banking.
Advertising and promotion play a major role in
bringing awareness of the products and service and are vital. The
majority of customers had seen some sort of advertising or promotion
given by the banks. The most effective medium for bringing awareness
was the television, not surprising as it reaches out to a greater
number of people.
Customer loyalty is an important feature for
retaining customers. Personalizing products or services to a
customer's needs is another effective method for increasing customer
Both banks and customers were unanimous in saying
that possible problem in Internet security was the main disadvantage.
The main worries users concerning with the security was that of credit
card fraud and hackers getting access to account details. This is
shown by the large percentage showing 785 and 69% respectively. Credit
card fraud has been a publicized crime, which costs the credit card
industry millions of money every year. With credit card details being
sent over the Internet there is no signature authorization, therefore
anyone who gets hold of a customer's credit card details can use it
for online theft. Therefore, it is understandable why credit card
fraud is a major worry for Internet users. However, it is still a rate
to encounter to have such problems. Banks have encountered problems in
The primary research was done to find out if
Internet banking is worthwhile for the customer. 92% customers said
that Internet banking is worthwhile. There was a strong agreement
amongst individuals as to Internet banking being overall worthwhile.
It would be fair to say that disadvantages put aside, Internet banking
does cater for most of the needs of its subscribers. Because most
customers perceive that the greatest benefit of Internet banking is
providing convenience, they use the Internet banking service mostly to
resolve issues which saves them time from going into a branch.
Internet does save time for the customers. Both questionnaires show
that Internet banking is convenient, so because of this it is not
surprising that customers think that Internet banking is worthwhile.
A book titled Advertising on the Internet by N.
Barrett and a magazine called e-business provided information on the
origin of the Internet. It gave details on how it was developed by US
government funded research agency nearly 30 years ago for use to
linking universities and research establishments and how it has
expanded to the worldwide web.
E-business was a very useful magazine in providing
information on the overview of the Internet. It contained an
interesting article by J. Nunn on how Internet has evolved and how it
has become relevant to modern business. The article told how companies
are starting to realize the opportunities the Internet offers them.
This is due to the growth of people online. "The Internet is
still experiencing rapid growth. According to analysts Data monitor,
over 100 million people and organisation are closely connected to the
Internet across the globe, and in the UK nearly 11,000 are joining the
Internet everyday." J. Nunn goes on to add the benefits of the
Internet. "At a time where many are trying to be
consumer-oriented, the Internet allows a one-to-one relationship with
the customer. Companies can track the behavior of their visitors at
the web site enabling them to build a customer profile of the customer
behavior." Other benefits mentioned were that companies are using
the Internet to cut out elements that do not add value.
Another great source for information concerned
Internet banking, the book consulted was Cyber marketing. The book was
used to have information on how Internet marketing is different from
conventional marketing. Marketing on the Internet has many
similarities to traditional marketing, such as knowing your market and
targeting your marketing materials to that market but here are a few
A number of articles gave useful information
related to Internet banking. Internet banking was first mentioned in
the Banker in 1995, when it covered the opening of the first Internet
Bank in the world, Security First Network Bank (SFNB) launched in
October 1995. Within the first week of operation more than 500
accounts, and that number continues to grow. Accounts had been opened
for customers in 32 states across the US. SFNB's customers are
provided with current accounts, a Visa card, and electronic bill
The "Dawn of a new e-economy" was an
article from The Banker (July 2001) and was written by E.R. Baldock.
He mentioned in the paper that e-commerce is not just about having a
web site, it creates a whole new economy that gives the power to the
customer. Just having a presence on the Internet with basic customer
services is not enough to woo customers. Before the e-economy,
consumers waiting to shop around for the best deal had to search the
high street, make a lot of telephone calls but the Internet has
e-economy is fundamentally different to the economic model that has
dominated the industrial revolution.
A book titled "The banking revolution" by
M. Carrington, P. Langguth & T. Steiner contained an analysis of
the future of the banking. It gave an overview of high street banking,
telephone banking services, PC banking and Internet banking. There
were useful case studies on various banks like Royal Bank of Scotland,
Nationwide and First Direct.
The Internet also had articles concerning Internet
banking. The Journal of Internet and commerce is available only on the
Internet and there were useful articles obtained from it. One such
article concerned Customer retention and was written by Dr. G Wiegran
and H. Koth (1). The authors said that building customer retention
requires three elements: Customer loyalty, share of wallet and product
Newspapers like the Financial Times and the Times
were also consulted, they contained introductory information on the