To understand the electronic distribution of goods and services, the work of
Rayport and Sviokla (1994, 1995) is a good starting point. They highlight the differences between the physical market place and the virtual market place, which they
describe as an information-defined arena. In the context of e-banking, electronic
delivery of services means a customer conducting his transactions from a remote
location (e.g. home) rather that visiting a local branch.
Automated teller machines (ATMs) were the first means of providing electronic
access to retail customers, made possible through the introduction of computer networks. Telephone banking arrived next, which was a revolutionary concept since it
made banking possible from anywhere as long as telephones were available.
In the mid eighties, online banking arrived. In its early form ‘online banking
services’ requiring a computer, modem and software provided by the financial
services vendors. Generally, these services failed to get widespread acceptance
due to high call costs and unfriendly system interfaces, and were discontinued by
most providers.
With the arrival and widespreadadoption of The World Wide Web, banks renewed
their interest in this area and started developing a web presence. The goal was for a
bank’s website to provide many, if not all, of the services offered at a branch. This
may include transactions as well as information, advice, administration, and even
cross-selling. However, the interactive nature of the Web not only allows banks to
enhance these core services, but also enables banks to communicate more effectively
and expand customer relationships. When combined with the improving analytical
capabilities of data mining and related technologies, the potential for enriching the
relationship with customers is unlimited. The most common services in current
e-banking offerings are described in Table 3.1.
Most banks and other financial institutions in the developed world have established
an Internet presence with various objectives. Some banks are there because their
competitors have done it. Others prefer a ‘wait and see’ practice. Some are using it
as a banking channel being part of their distribution /delivery management.
E-banking largely came into being as a result of technological developments in
the field of computing and communications but there have been a number of other
factors or challenges which played an important part in its development. According
to Jayawardhena and Foley (2000) the challenges for banks are fourfold. First, they
need to satisfy customer requirements that are complex and ever changing. Second,
they need to deal with increased competition from old as well as new entrants coming into the market. Third, they need to address the pressures on the supply chain
to deliver their services quickly. Finally, they must continually develop new and
innovative services to differentiate themselves from the competition, as having a
large branch network is no longer seen as a main source of competitive advantage.
E-banking is seen by many banks as a key tool to address these challenges.
Other reasons for the adoption of e-banking by banks may include achieving
competitive advantage (at least in short term), creating new distribution channels,
improving image, and reducing costs. These issues are discussed in the previous
chapter.