Banking services involve: verifying account balances, moving funds from one account to another, confirming that transactions have taken place, ensuring checks have been cleared, placing orders for new cheque books, submitting applications for loans and credit cards, and carrying out bill payments.
Internet banking can be defined as the delivery of banking services to customers through the Internet network (Yiu, et al. 2007). At the basic level, Internet banking means establishing a Web page by a bank to provide information about its product and services (Daniel, 1999). At an advance level, Internet banking is the enabling of transactional banking services to customers over the Internet (Karjaluoto, et al. 2002).
Internet banking was first introduced in the early 1980s Kalakota &Whinston,(1997), in which consumers were provided with an application software program that operates on personal computer (PC) which can be dialed into the bank via a modem, telephone line and operated the programs remotely on the consumer PC. However, the lack of Internet users, and costs associated with using online banking, stunted its growth. It was only in the late 1990s that Internet Banking really caught on as the Internet explosion had made consumers more comfortable with making transactions over the web.During dotcom fallout, it became apparent that Internet Banking was not the panacea banks had thought it to be. Between 2001 and 2004 Internet Banking investment growth experienced a significant slowdown. Nevertheless the customer base for Internet Banking was growing steadily from 2000 to 2005(Accenture, 2005)
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With respect to Internet Banking, a common confusion exists between the terms of online banking, Internet Banking as well as PC banking. The terms Internet Banking and online banking are often used in the literature to refer the same things. According to Hamid et al (2007), online banking is another term used for Internet Banking. Both share the similar meaning. Internet Banking or online banking can be defined as the service that allows consumers to perform banking transactions using a computer with an Internet connection (Lloyd, 2007).
Thulani et al (2009) refer Internet Banking as systems that enable bank customers to get access to their accounts and general information on bank products and services through the use of bank’s website, without the intervention or inconvenience of sending letters, faxes, original signatures and telephone confirmations. It is the types of services through which bank customers can request information and carry out most traditional retail banking services such as opening an account or transferring funds to different accounts, and new banking services, such as electronic online payments via a telecommunication network without leaving their homes or organizations (Aladwani, 2001; Daniel, 1999; Sathye, 1999). It provides universal connection from any location worldwide and is universally accessible from any Internet linked computer (Thulani et al, 2009; Perumal and Shanmugan, 2004; Bradley and Stewart, 2003 and Rotchanakitumnuai and Speece, 2003).
At an advanced level, Internet Banking is called transactional online banking (Sathye, 1999). On the other hand, PC banking is defined as a home banking whereby consumers supplied with a financial software package on disks, allowing consumers to fill in details offline and then to send them into the bank over the bank’s private network. Unlike PC banking, Internet Banking or online banking does not require proprietary software or access to a private network (Hamid et al, 2007).
Thulani et al (2009), Yibin (2003) and Diniz (1998) identify three functional types of Internet Banking that are currently employed in the market place i.e. Informational, Communicative and Transactional.
- Informational – This is the basic level of Internet Banking. Typically, the bank has marketing information about the bank’s products and services on a stand-alone server.
- Communicative – This type of Internet Banking system allows some interaction between the bank’s systems and the customer. The interaction may be limited to electronic mail, account inquiry, loan applications or static file updates (name and address changes).
- Transactional – This level of Internet Banking allows customers to directly execute transactions with financial implications. The basic transactional site only allows a transfer of funds between the accounts of one customer and the bank. The advanced transactional site provides a means for generating payments directly to third parties outside of the bank. This can take the form of bill payments via a bank official check or electronic funds transfer/automated clearing house entries.
Internet Banking has been regarded as the most important way to reduce cost and maintain or enhance services for consumers (Hua, 2009). By offering Internet Banking services, traditional financial institutions seek to lower operational costs, improve consumer banking services, retain consumers and expand share of customer. Internet is the cheapest delivery channel for banking products as it allows the entity to reduce their branch networks and downsize the number of service staff. The navigability of the website is a very important part of Internet Banking because it can become one of the biggest competitive advantages of a financial entity (Ortega et al., 2007).
Internet Banking is a process of innovation whereby customers handle their own banking transactions without visiting bank tellers (Qureshi et al., 2008). Recent evidence suggests that an Internet-based consumer banking strategy may be effective, with reports of more profitable, loyal and committed consumers compared with traditional banking consumers (ABA, 2004; Fox, 2005). Thus, contemporary banks now regard the Internet channel as equally important to traditional channels of branches, automated teller machines (ATM), telephone banking and call centers (Gartner, 2003). In the new banking environment, Internet Banking is increasingly managed as an operational activity and an important element of a multi-channel strategy (Black et al., 2002).
