The Impact of Electronic Banking Essay Example

are the basic practices on how to keep and spend money in a wise way. The breadwinner of a family must save at least 20% of his income for the future expenses. And the main domain of the banks comes in. The banking procedures are not that hard to understand and it became an ideal part of one’s livelihood securities. As time evolves and many technologies are introduced, the banking industry became updated in terms of the banking process. The banks let the technology stayed in their system and became part of it.

The technology benefited both the bank and their clients. Evolution of Banking Industry The first electronic banking product was money transferred via telegraph in the mid 1800’s. To answer various questions about the securities and interest of the clients, the banks lend funds to purchase the ideas of innovation of banking industry. The first process in saving money is through the use of passbooks. But the new generation wants a new system that will help them access to their fund in an ease, and at the same time with security.

For the busy people, they find it very time consuming to wait in the line just to withdraw or deposit your cash in the teller of the bank. And some of them became so irritated when they were in the last of the long line and they are in hurry. But the clients don’t have to worry no more because the era for the banking procedure already absorbed the fast life cycle of every individual. The introduction of the ATM (Automated Teller Machine) Card is just like you have a full amount of money

in a thin plastic. It is ideal to carry anywhere, anytime.

The features of it make the clients live at peace for it also have a security pin to make the card only available to the one who owns it. Plus, there are called Electronic Card or often named Credit or Debit Card which automatically charges the purchased product. But still there are many unconvinced clients that are daring the bank to take more advantageous in the time where all the people need convenience. So the start for the Online banking (or Internet banking) came. This allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society. Advances in microprocessors led to the development of the personal computer which could retrieve both summary and detail bank account information. The personal computer also allowed the user to move funds, which provided greater control of cash. 2 The demand for the kind of obscuring and only few people can access to this kind of banking preferences. Although it is very efficient in those people who spend most of their time facing their expensive computer and locked in a same room. It is also applicable for those who stay at home as long as they have a connection in the internet.

And it is called Home Banking procedures, for at the same time, a client can track the transactions via phone or internet services. The purpose of the electronic banking is to let the bank go for you, if you cannot go for it. Impact of Electronic Banking For most customers, it is a convenience that they have grown

accustomed to the electronic banking. And for the large commercial customer, processing thousands or even millions of payments and/or sales a day – it would be impossible to live without the attachment on it. 3 The following can be the impact in the Banking Industry as well as with the consumers. The banks can become technology providers by spinning off technology resources to start up new business streams, they can become content providers for information regarding products, indices etc, they can become context providers for setting-up e-market spaces, and also enablers by providing back bone systems to support multiple payment system alternatives. The online channel enables banks to offer low-cost, high value-added financial services and also benefit from the promotional opportunity to cross-sell products such as credit cards and loans.

The online transaction costs can be as low as 1% of an equivalent off-line transaction, rapidly increasing the popularity of the online option with consumers, as well as banks. In saving time and money for users, banks offer online banking as a less expensive alternative to branch banking. In addition, on-line banking enables banks to acquire information on consumer habits and preferences, for later marketing purposes. An expanding customer base and transaction cost savings are major benefits for banks.

Although there is an awesome acceptance coming from the consumers, there are findings that sometimes, the electronic banking doesn’t work all the time. 5 1) The banks have showed that they completed the technological infrastructure for electronic banking services, internet and intranet in particular and the development of banks web sites. (Additional to this, the microwave signal cannot reach some bank sites, and that’s inconvenient for those people

who use to travel). 2) People prefer to provide electronic banking services through the internet but not converting the bank to be a total electronic bank. ) The environment is no completely ready for electronic banking services and there is no strategy to have electronic banks on the internet. 4) The high cost of electronic banking services on the short run due to the training of employees, and the costs of the electronic infrastructure. This means, that in the short run electronic banking service will have a negative effect on the bank’s profitability. With respect to the above findings, the bank that offers electronic banking services can realize benefits as well as the following: 1.

Electronic Banking services have a positive effect on banks profitability. 2. There is a direct relation between increment of clients needs for banking services and bank’s distinction in providing electronic business. 3. The operation of providing electronic banking services is influenced by bank readiness and availability of electronic software and qualified man power. 4. Confidentiality and privacy have clear impact on protecting clients and bank from risks, and consequently the framework has an impact on banks information systems and its management upon providing banking services though Internet.

Conclusions The evolution of electronic banking products has made day to day banking operations faster and more efficient. The increased productivity gained through the use of electronic banking products has allowed businesses to do more with less. Businesses that do not use some form of electronic banking products will not grow. With research, cost benefit analysis and appropriate security controls, practically any business can benefit form electronic banking products. The growth of electronic banking has

not been limited to advances in information reporting.

Electronic payments have become a force majeure. With increased acceptance and advances in technology, the use of electronic banking products will continue to increase. For organizations to stay competitive and to grow, they must embrace electronic banking products. The banks are using the Internet as a strategic weapon, leveraging it as a distribution channel to offer complex products at the same quality they can provide from their physical branches, at a lower cost, to more potential customers, without boundaries.

But Internet widespread has deepening the concept of electronic business and considering it as promotion, bank service marketing method and successful method to improve banks relation with clients, informing them with available banking abilities through Internet in spite of small size of Internet community in some certain areas, which is used mostly by youth group who have high income or more than the middle approximately, which will reduce the importance of Internet and number of users. For most of the hours passed, the money that a person might have is starting to crawl toward his pocket.

All the process that he must do is to save in whatever manner he wants to. Online banking is popular but like the others, it needs securities ?? Read more: http://ivythesis. typepad. com/term_paper_topics/2009/08/evolution-and-th e-impact-of-electronic-banking-on-the-banking-industry. html#ixzz1KYdwDKm9 Role of the Electronic Banking Services on the Profits of Jordanian Banks Ahmad Zakaria Siam Al Balqa Applied University Amman College for Administrative and Financial Sciences, Jordan Abstract: This study aims at examining the effects of electronic banking on bank’s profitability in Jordan.

How banking sector finds itself before a new fact imposed by technology revolution and digits to change their work

mechanisms from traditional means to electronic means and the challenges banks face as a result. Furthermore, this study investigates the reasons behinds providing electronic banking services through internet, their impact on banking services in general and banks profitability in particular. Risks and challenges involved are discussed Results and recommendations are included. Results revealed that electronic banking service has a negative effect on banks profitability on the short term.

The importance of this study and the factors that make it unique is that, it discusses solely the topic of the effects of electronic banking on banks profitability, while most of other studies discuss the topic in general term. The findings of the study are the impact of electronic banking on banks profitability will be feature of the short run due to the capital investment by the banks on infrastructure and training but will be positive on the long run. Keywords: Internet, electronic banking, profitability. INTRODUCTION The world witnesses an information and technological revolution. This revolution has touched very aspect of people’s life including banking. Such changes and development have impacts on services quality, future of banking activities, and consequently, it’s continually competition ability in the world markets since going along with technology is one of the most important factors of economic organizations success in general and banks in particular. This motivates banks to spend more on technology and information to achieve maximum returns and attracting large number of clients. Furthermore banks have to provide an excellent service to customers who are sophisticated and will not ccept less than above average service. Thus, the issue of service marketing in general, and banking services in particular has become one

of the most important and modern directions which have witnessed a substantial expansion during the last years in almost all societies. This is because the increasingly significant role which banking services have with the widening and variety that these services are characterized with, thus banking services have touched most aspects of contemporary societies life and activities. Researcher has found that previous studies have not given the subject of (effects of electronic anking on banks profitability) its complete far share. Thus, researcher started this study to fill this gap and have the study complementing previous studies in this field. In addition, the emergence of newer banking services which are completely differs from the traditional services that people accustomed to, prompts people and organizations in Jordan to increase their banking activities. However, there still many factors that influence the customer’s visualization and impression in regard to the type of banking services they will receive; consequently these external and internal factors make the customer’s purchasing ecision harder and more complicated, and because the increasing importance of service sector, scarcity of published research about the new or the electronic banking services, and its effect on the cost, time and profitability of the bank, this study has come along to discuss the effects of the electronic banking services on the bank’s profitability. It is expected and hoped that the findings of this study would contribute to know the effects of the electronic banking services on the bank’s profitability and the other relevant issues. Study’s objectives: Besides the study’s aim which is he revealing of the effects of electronic banking services on bank’s profitability, this study has few objectives that can

be summarized as follow: · The impact of changes from traditional banking services into electronic ones, on banks as well as on customers, banks measures to cut costs of their electronic operations, and the future of electronic banking in Jordan. Therefore this study attempts to answer the main following questions. Am. J. Appl. Sci. , 3 (9): 1999-2004, 2006 2000 · What are the electronic business and internet, what is the main motive for banks to turn towards providing electronic banking services, nd does it face difficulties and barriers for this sake? · Is the prevailing framework of electronic transactions sufficient to protect working banks information systems and consequently does there banks have the required electronic software and human competence to keep up with digital world and achieve the banking distinction? · To realize the practical fact of providing banking services through banks web sites, and consequently does the client is educated and the employee is trained on electronic dealing, do the current rendered services level is sufficient to meet competitive purposes and to chieve the quality of banking service? Study’s importance: The importance of this study stems from the following items: 1- The size of service sector and its importance in economy: The size of service sector and its contribution to most of world’s economies is in rapid increase. Whereas the service sector contributed in 2005 by 74% of the working force in the USA and 67% in Canada. However in regard to Jordan which its economy is service economy in the first place; the rate of service sector contribution to the working force is 72% [1] . 2- Field research scarcity in this

field: There are very ew studies about the electronic banking services impact on banks profitability. At the same time this topic hasn’t received the sufficient research and study by people involved, while electronic banking services in growing constantly in Jordan as well as the rest of the world [2] . What makes this study different from other studies? This study does not differ greatly from other studies in this field; however it differs in some matters which make it a distinct study such as: This study reveals the most important obstacles which stand on the way of providing electronic banking services by the Jordanian banks. Where as to esearcher’s best knowledge- there is no single study discusses these obstacles as a separate topic by itself, other studies discuss the advantages, characteristics and the benefits which the Jordanian bank obtain from their electronic services such as the study by [3] . This study is a distinguished one because it reveals the major reasons for the banks to use internet to provide services to their customers, and the factors which lead to the success of the operations (more profits) and the ability to manage risks of using electronic means b · What are the electronic business and internet, what is the main motive for banks to turn owards providing electronic banking services, and does it face difficulties and barriers for this sake? · Is the prevailing framework of electronic transactions sufficient to protect working banks information systems and consequently does there banks have the required electronic software and human competence to keep up with digital world and achieve the banking distinction? · To realize the practical fact

of providing banking services through banks web sites, and consequently does the client is educated and the employee is trained on electronic dealing, do the current rendered services level is ufficient to meet competitive purposes and to achieve the quality of banking service? Study’s importance: The importance of this study stems from the following items: 1- The size of service sector and its importance in economy: The size of service sector and its contribution to most of world’s economies is in rapid increase. Whereas the service sector contributed in 2005 by 74% of the working force in the USA and 67% in Canada. However in regard to Jordan which its economy is service economy in the first place; the rate of service sector contribution to the working force is 72% [1] . - Field research scarcity in this field: There are very few studies about the electronic banking services impact on banks profitability. At the same time this topic hasn’t received the sufficient research and study by people involved, while electronic banking services in growing constantly in Jordan as well as the rest of the world [2] . What makes this study different from other studies? This study does not differ greatly from other studies in this field; however it differs in some matters which make it a distinct study such as: This study reveals the most important obstacles which stand on the way of providing electronic banking ervices by the Jordanian banks. Where as to researcher’s best knowledge- there is no single study discusses these obstacles as a separate topic by itself, other studies discuss the advantages, characteristics and the benefits which the Jordanian

bank obtain from their electronic services such as the study by [3] . This study is a distinguished one because it reveals the major reasons for the banks to use internet to provide services to their customers, and the factors which lead to the success of the operations (more profits) and the ability to manage risks of using electronic means by bank’s management.

Finally, this study is a unique one because it discusses the effects of electronic banking services on bank’s profitability. Unfortunately the electronic banks in Jordan has not received the proper attention by researchers, according to the university of Jordan’s information center (belongs to the library), despite the fact that there are many banks which provide such services. The following are samples of international and local previous studies in this regard: 1- The research paper [3] aimed to examine the current and potential characteristics of electronic banks, and the earned benefits from internet use to produce, provide nd market banking services, along with electronic technology in banking industry with the focus on the strategic roles of electronic banks and analyze Jordan as a case study in this field. They interviewed 98 managers at 17 banks [4] . In fact, the use of electronic communication in finance goes back much further than the 1970s. As long ago as 1918, the payments between banks used to be settled electronically over the telegraph. This use of electronic communications in payments systems has steadily increased over time. Now virtually all large payments between banks and corporations are done electronically.

Financial services industry has removed the boundaries between different financial institutions, enabling new financial products and services to appear and

making the existing ones available in different packages. According to [5] , electronic banking refers to the use of the Internet as a remote delivery channel for providing services, such as opening a deposit account, transferring funds among different accounts and electronic bill presentment and payment. This can be offered in two main ways. First, an existing bank with physical offices can establish a Website and offer these services to its ustomers in addition to its traditional delivery channels. Second, is to establish a virtual bank, where the computer server is housed in an office that serves as the legal address of such a bank. Virtual banks offer their customers the ability to make deposits and withdraw funds via ATMs (Automated Teller Machines) or other remote delivery channels owned by other institutions, for which a service fee is incurred. The study [6] indicated that, Electronic Funds Transfer (EFT) was introduced in the late 1970s. ATM, telephone banking and the acceptance and growth of credit cards were introduced in the 1980s.

According to [7] , it costs just two cents for an Internet transaction, compared with 36 for an ATM transaction and $ 1. 15 for a teller-assisted service. Despite that, consumers have still given their orders to transfer money i traditional ways. The main reasoning for that, according to [8] , is that since no Internet security firewall can be guaranteed perfect, both sellers and buyers may be concerned that competitors will be able to extract sensitive or proprietary information, or a virus might spread from one participant in the exchange to others. According to [9] , consumers are demanding and xpecting more than just one

set of banking products from their forays online and off-line. [10] Stated that, banks are using the Internet as a strategic weapon, leveraging it as a distribution channel to offer complex products at the same quality they can provide from their physical branches, at a lower cost, to more potential customers, without boundaries. [11] Proposed that, banks can become technology providers by spinning off technology resources to start up new business streams, they can become content providers for information regarding products, indices etc, they can become context providers for setting-up e-market paces, and also enablers by providing back bone systems to support multiple payment system alternatives. According to [12] , the online channel enables banks to offer low-cost, high value-added financial services and also benefit from the promotional opportunity to crosssell products such as credit cards and loans. [13] Indicated in his study that, online transaction costs can be as low as 1% of an equivalent off-line transaction, rapidly increasing the popularity of the online option with consumers, as well as banks. In saving time and money for users, banks offer online banking as a less expensive alternative to branch anking. In addition, on-line banking enables banks to acquire information on consumer habits and preferences, for later marketing purposes. An expanding customer base and transaction cost savings are major benefits for banks. The most important findings of their study are: 1) the study samples of banks have showed that they completed the technological infrastructure for electronic banking services, internet and intranet in particular and the development of banks web sites. 2) People prefer to provide electronic banking services through the internet but not converting the

bank to be a total electronic bank. ) The environment is no completely ready for electronic banking services and there is no strategy to have electronic banks on the internet. There is another study by Shuqair 2003 entitled “Practical electronic banking services by the Jordanian Banks” one of the most important finding in this study is that; the high cost of electronic banking services on the short run due to the training of employees, and the costs of the electronic infrastructure. This means, that in the short run electronic banking service will have a negative effect on the bank’s profitability. Finally these studies and other coming studies need to ddress the effects of electronic banking services on bank’s profitability. Some studies showed that people (customers) prefer electronic banking services over the traditional ones [14] . The study is based on discussing and proofing the validity of the following hypothesis: 1. Electronic Banking services have a positive effect on banks profitability. 2. There is a direct relation between increment of clients needs for banking services and bank’s distinction in providing electronic business. 3. The operation of providing electronic banking services is influenced by bank readiness and vailability of electronic software and qualified man power. 4. Confidentiality and privacy have clear impact on protecting clients and bank from risks, and consequently the framework has an impact on banks information systems and its management upon providing banking services though Internet. Study population is consisted of all working banks in Jordan which have sites on internet regardless its activate dealing with electronic banking business or not, the study samples included all banks mentioned in annex No (2), taking in

consideration the time differences of these banks joining electronic service orld, and its interest to develop its electronic work to provide the distinguished executive services to customers. The study sample consists of 20 commercial Banks operating in Jordan. At the beginning of the 1980s NSF NET Company was established aiming to link the giant computers of high speed for scientific purposes. This net replaced ARPA NET and NSF NET became the basic pillar in Internet world [14] . RESULTS For the purpose of identifying the implementation extent of electronic banking services in the banks "study sample" we have distributed the following questionnaire, which consists of twenty questions.

The responses categories were divided to determine its frequencies to "Always- sometimesrarely". All answers were treated with full Background of the Study Problem Statement . Many people are patronizing the national electronic payment platform and various progammes have been  rolled out concurrently to boast the payment system. Currently a team of official from the Ghana interbank Payment and Settlement Systems (GhISS) and the bank are registering and issuing e-zwich cards across the country. Also Point of sale (POS) devices are being deployed at  new outlets, while new institutions me being brought on  board.

At  the beginning of the year, the Chief  Executive of GhlPSS  Fred France promised to develop the e- zwich platform to modernize the country’s  payment  system. He intimated that significant number of people will own the e-zwich cards and its patronage will increase tremendously by the end of the year. Speaking in an interview, the General Manager in charge Project and Business Development, Archie Hesse, said there is en increase in the volume of transaction with regard

to the use of the e-zwich cards. He said following the issuance of e-zwich cards to Senior High School (SHS) students.

The extent of transaction has increased significantly. Although the exercise is still underway, lot of the students who have already received their cards have begun using them. So far the enrolment exercise has ended in the Volta region while the registration process in the Northern. Upper West and Upper East are expected to end soon. He said the registration team is in the other regions busily enrolling the students onto the platform Mr. Hesse also disclosed that the staff of the country’s premier teaching hospital, Korle Bu has been issued with the biometric cards.

He explained that the exercise at the Hospital allow the payment of allowances and outer emoluments from internally   generated fund to be disbursed through the e-zwich cards. Additionally, POSs will be placed at the hospital to give patients and visitors to facility the chance to make payment. A similar exercise will begin shortly at the begin shortly at komfo Anokye  Teaching Hospital in Kumasi, following   successful discussion s with the hospital administrators. The Trust Hospital in Accra is already using e-zwich cards. The use of  the biometric card will significantly reduce the amount cash that these health facilities manage.

He stressed that patients can avoid the risk of carrying huge sums of money. Commenting on efforts to improve accessibility, the General Manager side GhlPSS would target a lot of pharmacies where POSs would be deployed so that cardholders can pay for products using their e-zwich cards. ‘’Today, you cannot buy fuel after 10pm in most places because they close for fear

of a robbery attack. But if we use more of e-zwich cards, then these fuel stations would not need to close because they would  have less of physical cash on them. ’ He said GhPSS was engaging the Oil Marketing Companies (OMCs) to see how the e-zwich cards can be used effectively. Mr Hesse also touched on plans to enable drivers and traders use the biometric cards He said currently major transport terminals in Accra have POSs, where any one can go and put their cash on the card. Going forward, he added that GhIPSS and the banks would move to the Eastern region to issue e-zwich cards to drives, traders and commuters at the transport  terminals and also deploy POSs at those places. The exercise would commence at Nkwakwa by the end of this month and extended to Koforidua and Nsawam.