Technological Innovation In Banking Sector

Published Date: 02 Nov 2017

N0354720

This research project is submitted in part-fulfilment of the degree of

Bachelor of Arts (Honours) Economics, Finance and Banking

Nottingham Business School

Nottingham Trent University

Summer 2013

Declaration:

I declare that I have personally prepared this article and that it has not, in whole or in part, been submitted as an assessment for any other module, degree or qualification. The work described here is my own, carried out personally unless otherwise stated. All sources of information, including quotations, are acknowledged by means of appropriate referencing.

I declare that this project has been conducted in accordance with Nottingham Trent University’s Regulations on Academic Irregularities, including those pertaining to research ethics and Data Protection legislation.

1. Introduction

The banking sector play an important role in the global economy. It has been under influence of many forces: both externally and internally (Gentle, 1993). Regarding external forces, technological innovation seems to have the most impact on this sector (Nellis, 1998). Internal changes was also driven by technological advances (Jayawardhena & Foley, 2000). The traditional banking was mentioned as "brick and mortar" banking to describe the delivery channel that banks actually use to interact with customer, which is based on face-to-face meeting (Lassar, et al., 2005). However, with the changes in technology, traditional banking has transformed to electronic banking. The delivery channel of banking services had changed significantly. From self-service technology such as automatic teller machine to telephone banking, those changes are forecasted to grow banks’ revenue, reduce banks’ cost and provide more convenience services for customers (Furst, et al., 2002). The most recent advances in the banking sector is Internet banking (or PC/online banking) (Power, 2000). The internet banking can offer two type of services: informational only and transactional banking. In this research, an internet bank is considered to offer transactional services.

The focus of this paper is to provide a landscape of the development of internet banking as well as issues that raised during this process. This paper will use secondary research to summarise historical and recent changes of internet banking and its’ adoption. The barrier in both developed and developing countries will be compared. It then will draw managerial improvement to address slow and no adoption of internet banking as well as addressing the performance of banks that adopt internet banking channel.

2. Internet banking

The internet banking was adapted first in 1995 (Furst, et al., 2000). It was referred as a remote delivery channel through the use of Internet for traditional banking services. There are two type of banking services: informational and transactional.

2.1 Informational services

The informational type of web services provide basic information of the bank, for example, the location of local branch can be found simply using the postcode that is provided by consumers (Gopalakrishnan, et al., 2003). The website can also be used as a marketing tool for the bank (Jayawardhena & Foley, 2000). The bank web page has the capability to publish and maintain marketing advertisements for a long period of time without additional cost (Quelch & Klein, 1996). Unlike traditional branch, which has limited spaces for advertisement, the bank web page can be designed to contain as much advertisements about new and existing products as the bank desire, while still maintain stability and availability 24 hours a day. Initial development and maintenance costs are very limited and significantly less than those traditional media. The bank can also include a more complex services such as interactive guide and financial calculation tools. Through a list of guided categories, customers will find services and products that suited their demand and profile. For example, customers want to take out a loan, they will then fill out their profile such as level of income, loan required and assets for security. The bank web page will show a list of available services that suitable for them to choose from. This interactive guide is similar to traditional credit officers and advertisement’s mail, however, it is more effective as it is customised and cheaper. Another basic function of informational services is the ability to access to customer account balance (Gopalakrishnan, et al., 2003). This is the view-only function that banks provide according to demand from customers based on several studies that observed bank telephone support centres (Gandy, 1998). Automatic teller machine (ATM) already done this task excellently. In addition, Internet banking provide customer with accessible and convenient delivery channel while they are at home, work or have limited access to other channels.

2.2 Transactional services

The transactional services including the ability to transfer funds from a saving account to current account, transaction history, bills payment, ordering checks and credit card services (Sullivan, 2000) (Chou & Chou, 2000). The ability to pay the bill for third party is very important. It will enhances the active management of the cash flow of household. The direct debit and standing order timing is not the best option for bill payments as household expenditure is largely made up by bills. The transactional services provide customer with the newest delivery channel to access to most retail banking services. It is the facility that open twenty-four a day, and seven day a week. Most daily banking services is offered to customers. Customers now can do their everyday banking activity without any delay, which they have used to wait in a queue in telephone line or an actual branch.

2.3 Product innovations

In the early stage of internet banking, it was only considered as a new delivery channel of existing products and services and as the means to increase operational efficiency. Disadvantages of a traditional branch is also answered by online banking. It brings a powerful marketing tool as well as increasing banks’ reputation. However, in the recent year banks have developed new type of services and products that was enabled by internet banking. Online banking now serve as a payment channel for shopping (Nasri, 2011). It provide a platform for online transaction to support many applications such as brokerage, Internet stock, online shopping and online auction in this e-payment area. The new platform also bring changes in structure and distribution methods to other firms and industry as well (Gopalakrishnan, et al., 2003). Another product innovation is the aggregation services. Such services cannot be delivered through other channel. This services allow customers to retrieve bills, deposit and account balance sheets in one place, then through transactional services, customers will pay for all of them in one place only – the bank website. Banks will get bills on the billing company website and make payments according to customer choices. A product that orientated around a specific group of customers is also available. For instance, bank can specified a specific interest rate for the poor loan repayment records and low credit histories customers. By distributing this, banks will attract more customers with different risk profiles.

3. Internet banking adoption

The internet banking brought to customers a huge changes and impacts in term of delivery of services (Sathye, 1999). There are several research on the factors that affect the adoption rate in both developed and developing countries. During the early stage of adoption, it has been predicted that in the next ten year, sixty per cent of retail banking transaction will be on the internet banking. Another study indicate that Internet banking will be used in some forms by up to twenty per cent of retail consumer and thirty per cent of corporate customers (Booz & Booz, 1997).

3.1 Incentive for adoption of internet banking

It is stated that the cost structure of internet banking is much lower than the traditional banking, bring down the expense ratio by forty per cent compared to the average bank. The bank website also generate marketing revenue as an online marketing channel that works 24 hours a day, 7 days a week. The cost saving feature of internet banking is estimated to be 11 times lower than a physical channel in term of a transaction cost for a non-cash payment (Jayawardhena & Foley, 2000). The cost savings also come from better utilisation of the equipment, space, workforce and operational saving as well as reduction in the resources required by branch. As stated by Akinci, et al. (2004), there are more incentive in the long run for banks and other financial institutions to expand their traditional delivery channel – the branch, which are considered as high staff and overhead costs.

Attract more customers and retain existing consumers is the primary goal of developing new services and products (Jayawardhena & Foley, 2000). Increasing in delivery channel will also increase the coverage of retail banking services as well as its’ effectiveness. This will enable different demographic target segments. Banks that will not or unable to follow the trend and answer to customers request will risk their market power to other competitors.

Internet banking opens new opportunity for new player to join the banking sector (Jayawardhena & Foley, 2000). The entry’s cost to banking sector has dropped since internet banking allow new entrants to deliver their services on the internet. This results in the low number of "brick and mortar" branch to cut down staffs and overhead cost and more focus on internet banking services. Online banking also allow new entrant to perform as a pure internet bank (Gopalakrishnan, et al., 2003). An internet-only banks has even lower cost structure than new entrant with mixed delivery channels. Therefore, they can offer very competitive rate on their products and gain comparative advantages. There was a case of a newcomer in United Kingdom that made a noteworthy entry into the market by operating successfully (Jayawardhena & Foley, 2000). They have a very low operating cost and took over twenty five per cent of Internet banking market share. Another case from United Stated that a new entrant adopt Internet banking at an early stage and become the "world’s first Internet-only bank" that permitted to offer "federally-insured deposit" (Gopalakrishnan, et al., 2003).

3.2 Factors affect internet banking adoption

First, Consumer awareness plays a pivotal role in the adoption of internet banking services (Sathye, 1999). It is stated that an essential products or services promotion strategy is to identify the benefits of products or services’ information. The best valued financial products in term of money will be seek by consumers. Therefore, the availability of internet banking should be introduced and be aware by customers. Customers should also be informed about the value that Internet banking will adds to other services or how it is compared to competitors. It is also stated that providers should not assume a good product will result in good sale without customer awareness (Cooper, 1997). Howard and Moore (1982) also stressed that a new branch must became aware by consumers. Therefore, if consumers are not adopting Internet banking, it may be the result of lack of customer awareness about availability and information of this delivery channel.

Second, the next factor that determine the adoption of new products or services is the "ease of use". Copper (1997) also identified "ease of adoption" as an important elements for a products or services to be adopted. It is said that the reason for home banking in USA to fail is consumers found it difficult to understand or use that products (Dover, 1988). Daniel (1999) also found that "ease of use" is the main factor that determine customer adoption in electronic banking study in UK and Ireland. The level of "ease of use" could be influenced by the content and design of the web page, its’ navigation and interactivity (Jayawardhena & Foley, 2000). Hence, not understanding of products or services can leads to low adoption rates of consumers.

In internet banking perspective, the risk level that referred here is the reliability and security of transactional services of online banking (Cooper, 1997). Cooper (1997) also point out that the risk level is an important factor that determine the adoption of a onsumer. The Wallis Report (1997) point out that financial transaction will be conducted by households over the internet if its "security is improved". It is also mentioned that in online commercial transaction, "security is of major importance" (Gopalakrishnan, et al., 2003). In banking, security is the most importance factors in determining adoption of new products and services. Users of internet banking are aware that the "risk of security breach in internet banking transaction is much higher than a breach in simpler retail online transaction". Security is also cited as number one reason for not adopting online banking by customers.

The resistance to changes is the fourth factor that could affects internet banking adoption (Sathye, 1999). The traditional delivery channels were brick and mortar branch and telephone banking. When the traditional process are adequately fulfil the customer needs, the new technologies like internet banking will face resistance to adopt. It is said that there are a specific need that must be fulfilled for customer to take up new technology and change they current operating ways (The Wallis Report, 1997).

Finally, accessibility to computer and internet is required in order to adopt internet banking. Daniel (1999) identified that one of the reasons for low usage of internet banking in the UK and Ireland was the lack of accessibility of customer to adequate personal computer.

3.3 The case of internet banking adoption in developed and developing countries

Developed and developing countries has different demographic as well as economy conditions, this section will address the barrier to adopt internet banking in some countries in both categories to point out the differences.

3.3.1 Developed countries

In the United Kingdom, despite all the advantages that internet banking potentially bring to the sector, only twelve banks provide online banking and only more than half a million customer use this services (Jayawardhena & Foley, 2000). In customers’ perspective, the reason for slow adoption could be extremely low awareness of customers about internet banking as in the only twelve providers, there are three of four biggest banks in the UK. They account for at least three fourth of the total bank customer, which are 40 million accounts. Secondly, the level of financial management services that provided are very limited despite that customers desire for more control over their account and financial services. Technical issues can be taken into account as different operation system of a computer might not be fully supported. Banking transaction is expected to have human interaction, in this case, the resistance to change to internet banking channel might be stronger than expected. A more recent research point out that internet banking security are the key concern for consumers despite technological improvements to its security (White & Nteli, 2004).

In Australia, literature noted that reason for slow adoption by customers are security concern and lack of awareness (Sathye, 1999). However, there is no empirical evidence to support this theory. On the other hand, lack of awareness and security concerns are responsible for non-adoption of online banking. Lack of awareness referring to information about the internet banking services and its benefits are not available to consumers. The research show that more than seventy per cent of customers were not aware of Internet banking, follow by sixty eight per cent of the total respondents does not receive enough information about the added value or benefits of internet banking. According to the research, most customer want to understand the benefits of online banking services before adopting it.

Corrocher (2006) estimated that the adoption rate of Italian bank is only at twenty one per cent of total banks. It is also mentioned that there are important issues that need to be addressed. The banks use internet banking as a strategy to capture new customer and less focus on the delivery channel for existing customers. Bigger bank with close contact to customer and network of branches are less likely to adopt internet banking. Although there is incentive to invest in new value added services for its customers, the process of adoption seems to be slowed down by a large customer base of those banks. Secondly, certain degree of sophistication of customers is required for using internet banking. Therefore, traditional interest-based bank are slower in adopting internet banking than trading bank.

In the case of Poland, technological innovation is willingly adopted (Polasik & Wisniewski, 2009). However, there are certain obstacles exist. Poland is experiencing a lag behind in term of Information and Telecommunication Technologies development. This represent the lack of computer and internet access to facilitate online banking services. Low level of broadband availability in rural areas is also the reason for slow adoption. The research shows empirical evidence of gender to have large impact on the decision to adopt internet banking services.

In Hong Kong, The level of adoption for internet banking is significantly lower than ATM (Wan, et al., 2005). Research also show that online banking adoption rates is still higher than branch banking. Reasons for lower usage of internet banking against ATM is that both channel has high level of convenience, however, requirement of computer facilities and inability to withdraw cash reduce the adoption rate of internet banking despite that online banking provide much more information to customers. The benefits of internet banking were acknowledged by consumers, however, it did not have enough effect to change consumers’ behaviour.

South Korea has the highest Internet banking adoption in the world (Chang, 2005). Government contribution is the most important reason for this level of adoption. The social-economic gaps is narrowed by Korean Government. The internet banking services are widely accepted and seem to be a national phenomenon. The social norm is also a key driver of the adoption of online banking. The rapid adoption of internet banking from banks and customers are driven by the unique social structure of Korea, which Korean tend to act together rather than separately.

3.3.2 Developing countries

Critical research in Thailand show that Internet banking is being hesitate to adopt by bank customers (Rotchanakitumnuai & Speece, 2003). Online banking is ranked as less important than telebanking and ATMs. Low reliability of transactions and disbelief of the service provider are the main reason for worries of the security of the services. It is also a barrier for non-Internet banking customers which have no confident and intention to change to Internet banking. All consumer have a big concern about the reliability of the internet banking services, especially non-user. Thailand is still lacks ability to protect customers in case of security breach in internet banking or financial lost. In addition, internet banking services are not trusted by the consumers. The reason for that is lack of relationships to customers and no visible prior experience as well as no strong reputation. Face-to-face interaction with the banks is still the delivery channel that many Thai corporate customer prefer. With such strong issue related to trust, adoption to internet banking services with weak relationship is less desired in Thailand.

In India, the survey show that sixty two per cent of total sample banks has transactional Internet banking (Malhotra & Singh, 2010). However, most of the market is still unexploited by banks. The reason for this gap is the low adoption rate among foreign bank and old private sector. The research also shows that wider range of internet banking services are offered by larger banks and banks that have more experience in online banking. They also have more aggressive plans to extend the online banking services than smaller banks. Empirical evidence suggest that internet banking services will be affected most by the size variable.

China also has a similar barrier that prevent Internet banking adoption decision among consumers: privacy, finance performance risks and security (Zhao, et al., 2008). In a more recent research, the barrier for adoption is lack of trust in the banks in China from respondent (Zhao, et al., 2010). This barrier is further concerned when Internet banking services was introduced and raised additional issues of viruses and hackers. The Internet banking adoption will still be considered as too risky.

3.4 Comparison

Within the developed countries categories itself, there are different trend in the adoption rate of internet banking. In the Europe, UK and Australia, the adoption of online banking services is slow compared with Asian counterpart. In South Korea, the adoption of internet banking is very welcomed and has successfully implemented into its system. In contrast, the adoption seem to be less welcomed in Italia as big banks tend to keep their traditional delivery channels. Lack of awareness and Security concern seem to be the most cited barriers. However, lack of facilities, which are supposed to be rare in developed countries, are now observed in Poland. The resistance to change has also been perceived in the UK, Italian, India and Hong Kong. ATM is ranked higher than Internet banking in both Hong Kong and Thailand due to the ability to withdraw money at any time. Security concern and trust is being addressed more intense in developing country. China and Thailand perceived Internet banking services as very risky and unreliable. Unlike South Korea Government, which willingly supporting the adopting of internet banking on its banking system, Thailand Government seem to lack the ability to protect its own banking sector from perceived risk in Internet banking. In contrast, India does not have a serious concern about security by the other two countries.

Developed and developing countries have some similar element of barriers. However, the characteristic of the two categories’ barriers is different. Developed countries have less concern about security than in developing countries. On the other hands, requirement of facility is the barrier of internet banking adoption in developed countries.

3.5 Managerial Implication

Security concern is the main barrier in many countries. Consumers decision whether to make transaction over the internet or not are largely influenced by financial risk and privacy concern (Zhao, et al., 2008). Apart from personal details, insecure Internet banking services system that can bring potential undesired outcomes were also customer concerns. For instance, consumer passwords, account detail will be exposed or an unauthorised access will affect customer account. Financial lost will be perceived by customers in those cases. Not only money lost will be concerned, financial risk and privacy concerns has been observed to have a positive relationship, which indicate that if customers worry more about the financial lost, they will also worry more about losing their private data. This is logical to use "after-sale" as an element to reduce customer risk perception. The adoption of internet banking services is very sensitive to media stories such as computer viruses and hackers. The consumer confidence can be damaged by those adverse media publicity (Sathye, 1999). To ease their concerns and restore their confidence, a quick response to those media stories and publicity is needed. Security aspects information should be presented in non-technical and simple from to ensure understanding of consumers. Government intervention could play pivotal role in mitigate security concerns, through the use of suitable public regulations and security. Those implementation should ensure the stability of the system as a whole as well as increasing the speed of internet banking adoption. Internet banking adoption most important determinant is perceived security from customer (Polasik & Wisniewski, 2009). Customers trust is very hard to gain, however, very fatigue against media publicity, maintaining a good record with customer and eliminating potential security threats is of highest priority. Further development of security system can be implemented for increased security. For example, the bank can changes from single password protection to "two-factor authentication systems" that consist of a normal consumer password and an auto generated password. That password can be sent to consumer by text message or a device which sync with bank server and change the automatic password every minutes. Limit on transaction per day or require consumer ID to transfer large amount of money can be implemented for additional safeguards. With the new technological security, consumers will have more confident in Internet banking system and lead to increased rate of adoption. However, guaranty from the bank to cover any losses that occurred due to online fraud is the best protection from customers’ point of view. Security concerns should not only focus on the bank, but also the consumers. They should not have their personal detail and account detail written down or saving it on the computer. Consumers can also be the victim of phishing. It is a form of stealing customer information by sending email asking for account detail. The bank will never ask for banks login ID or password. Therefore, customer should not tell anyone their account and personal detail. Viruses and hackers are also the main concerns of consumers. By installing anti-virus and anti-spyware as well as the firewall, customer can mostly avoid those risks. The bank can negotiate with software developer to provide them those software with discounted prices for consumer uses. Possible solution for issues like resistance to changes, lack of awareness about products and benefits and "ease of use" is increase the level of publicity by providing a hand-on experience for customers in supermarket, shopping centre as demonstration kiosks. A better rate of deposit and loans can help to ensure customer loyalty to the bank and the services as well. Regarding reliability of the internet transaction, the concerns are stronger among non-adopter rather than internet user (Rotchanakitumnuai & Speece, 2003). The bank need to provide a mean of contact to user to raise the stability level as well as solving the problems if occurred. Support call centre is a very good example of ensuring quality of other services. However, most of people still prefer the traditional face-to-face interactions within branches. Therefore, branches should be prepared to assist customers with problems they faced. Even though it not the branch responsibility to support customers, there should be a degree in which branch can help customers. For examples, some staffs will be trained to handle common Internet issues or assist them with support call centre. Facility to access internet banking within branches and supermarket could be implemented to solve the accessibility problems. Those facilities also help consumer to describe problem clearer to staff and immediate solution could be applied. Banks can also change their website to a more user friendly design with interactive information. The website should be written in non-technical language and have clear explanation as well as closely guide consumers.

4. Internet banking Performance

Internet banking services is perceived to reduce banks’ operational cost, increase banks’ revenue growth and provide consumers with convenient services (Furst, et al., 2002). Internet banking has been offered in two main ways. A traditional "brick and mortar" bank can host a website to offer transactional internet banking as an additional delivery channel for the bank. An alternative is to establish an Internet-only bank or virtual bank. The computer server that host the website may be located in a workplace that functions as legal address of such bank. The virtual bank can offer its customers the means to make deposits as well as withdraw funds via remote delivery channels of other banks. Internet banking has become more and more widespread in the world (DeYoung, et al., 2007). Internet banking option are offered for retail and business customers of all of the largest banks in US. An industry report that ninety per cent of medium-sized bank and sixty per cent of small community banks are offering internet banking for customers in 2005. The new delivery channels will affect the banks existing products and services and lead to the changes in banking performance .With such promising features that reduce cost and increase revenue growth, the actual effect of Internet banking on performance is not presented clearly. Furst, et al., (2002) report that between Internet and non-Internet bank, there are significantly performance differences. Internet banks which hold more than one hundred million dollar perform better than non-internet banks. In term of smallest bank, the smallest Internet bank perform worse than smallest non-internet banks. There was no big different between large non-internet banks and large Internet banks. Excluding the smallest bank, Internet banks have higher return on equity and have better accounting efficiency ratios than non-Internet banks. However, Internet bank with less than one hundred million dollar in assets had very worse profitability and accounting efficiency than a same size non-internet bank. New small banks that offering internet banking are the cause for those different in performance. With a relatively reasonable setting up cost and low percentage of customers, Internet banking have no sizeable impact on the whole sector. A more recent report was presented by DeYoung, et al., (2007) point out that Internet banking will bring changes in the relationship between customers and banks. For example, online loan application can be evaluated relies on quantifiable "hard" information that can be automatically put in a credit scoring model. However, the "soft" information that needed to establish a credit relationship is usually generated in the in-person-meeting between load applicants and loan officers. Regarding to banking performance, research found that interest expenses and revenue were mostly unaffected by Internet adoption. On the other hand, strong and systematic evidence suggest that non-interest income has increased with Internet adoption, the most significant is the increased fee from deposit accounts. Service charges revenue increased from four to six per cent at click-and-mortar banks. There are strong demand for priced depositor services at internet Banks despite the data did not show the increase in revenue is the result of higher fees or higher sales volume. Therefore, click-and-mortar bank was signalled by depositors to provide better quality services than traditional banks. The finding indicates that Internet banking is a product innovation. However, switching to click-and-mortar type of bank provided no evidence of reduced overhead expenses, which as previously expected in the Internet-only model. In contrast, banks with transactional website were observed to have higher labour expenses, mainly due to increase in average salaries. Depend on the specification, Internet banks has increased salaries and benefits expenses by 2.2% to 4.6%. The changes in labour price were largely based on the change in input mix, from low skilled to higher skilled labours, indicate that Internet banking is partially a process innovation. Bank profitability was significantly improved economically and statistically, indicates that Internet adoption was associated with it. Return on equity increased by seven to eleven per cent. Increased financial leverage was the main reason to some of the improvement in return on equity, although the evidence of improved profitability was not as strong as in return on assets regressions. On balance sheet side, evidences indicates that Internet banks experienced 5% to 8% faster asset growth rate than traditional banks. It’s show that adopting a transactional internet banking services, the bank has an extra of 5 to 8 million dollar to the average of 104 million dollar during the same period. Overall, bank assets had little systematic impact by adopting a transactional online banking. There were no statistically significant patterns or systematic in liquid assets, which is cash, securities and fed funds sold, loan quality and most loan categories. Credit card lending has increased by 6 to 13 per cent when internet banking was adopted. This finding was support for our assumption that Internet channel suggest a process innovation and is most beneficial to transactional lending, enabling a traditional product to be circulated in a non-traditional way. There are evidence suggest that temporary source is being relied on by the internet adopting banks to fund their increased in asset growth. There were little evidence of changes in averages deposit account size. Therefore it is possible that the falling size of core deposit account was offset by the large increasing of brokered deposit. While the evidence suggest that internet banking hold less capital than traditional bank, there were no immediate answer for this behaviour. Another research conducted by Hernando and Nieto (2007) focus on the Spain perspective. The result indicates that physical branch has been served as complementary means of transacting with customers rather than its substitute. The branch network is remained as important channel for retail banking products in Spain despite the large investment has been put on Internet as distribution channel. It take times for the adoption of Internet banking as a delivery channel to have any impact on performance. Profitability has been impacted positively by the adoption of a transactional website. After three year of adoption, the impact become significant and is observed in term of ROA and ROE. A significant reduction in overhead expenses explains the profitability of gain that associated with the adoption of online banking. This effect reaching a maximum roughly two and a half years after the adoption. The analysis show that this effect explain the main drivers of better performance.

5. Conclusion

Internet banking is referred as a remote delivery channel through the use of Internet for traditional banking services. In early stage of its development, Internet banking services enables a new channel for traditional banks. It bring the answer for most of the brick-and-mortar bank limitation. The adoption of Internet banking brings cost reduction as well as in crease in assets growth to the bank. It also provide a much more convenience banking experience through the use of internet. It also provide banks with a powerful marketing tools that can literally store all the advertisement of the banks. The transactional services enable product innovations across traditional banking products.

The adoption of internet banking has been predicted to have a robust expansion in both retail and corporate banking. The incentive to adoption is to attract more customers and retain existing members. However, the benefit that internet banking provide financial institution was better than that. It allow traditional bank to cut down their overhead cost and focus more on internet banking services. New entrant also has access to internet banking, opening a new opportunity to enter the market.

However, there are also factors that prevent the adoption of internet banking. Five elements of barriers has been identified: lack of customer awareness, "ease of use", security, resistance to changes and accessibility to computer and internet.

Several cases in different country were addressed to see if it fits the factor that was identified earlier. Both developed and developing countries are considered. Both categories show similar kind of barriers, however, the intensive and characteristic of each country is different.

Managerial implication provide information for countries to try to lower the barrier for internet banking adoption and solution for recent problems that many countries are facing.

Lastly, Performance of internet bank are compared with non-internet bank to provide a better understanding of benefits of internet banking adoption in both sort run and long run.

6. Limitation and further research

The limitation of this paper is the lack of up to date information of some developed country, which could provide a more comparable information between the two categories of country. The performance of internet banking is limited to a small periods range and low number of quantitative articles.

In further research, this article will be more focused on one element of internet banking, specifically performance against traditional bank and Internet only bank.

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