The Acceptance of E-Banking in UAE - Essay Example

?The Acceptance of E-Banking in UAE Background satisfaction in the use of e-banking services and brands is often gauged by the analysis of the frequency of use of these products ahead of traditional banking practices (Uslu, 2007: 133). This implies that the reliance an individual would place on E-Banking can to a reasonable extent be assessed by examining the frequency with which clients of a bank use the E-Banking services instead of traditional banking services and practices. Fazlollahi (2002: 94) identifies three main reasons why clients of banks would rather opt for e-banking rather than the traditional methods. These reasons are Affect-based Trust, Cognition-based Trust and Satisfaction. Trust is developed over cumulative processes of interaction and and after the amassing of immense knowledge between the parties involved in the transactions (Ford, 1981). Affect-based Trust is related to the the benefits that the client would get directly like quick and improved services whilst Cognition-based services relates to those advantages that a client would see and have evidence of like reduced cost of transactions and access to money without queuing and the like. Jointly, these two add up to the satisfaction a client would gain by patronizing e-commerce products of a bank. In this research, we therefore ask, what are the important factors that affect e-banking in UAE? What are the main consumer attitudes towards e-banking services in UAE? What is the effectiveness of e-banking services rendered by banks to individuals and organizations in UAE? The research seeks to add up to the stock of knowledge on the effectiveness of e-banking services rendered in UAE and the customer attitudes to e-banking services in UAE. Since this area is not often studied in a structured manner, the research seeks to explore the realities in UAE pertaining to these matters and then recommend ways for solving issues and also lay the foundation for further studies in this area of research. The research is also in partial fulfillment of my degree. After several semesters of studying in the thought course, I hope to apply my knowledge gained to a real life problem and recommend solutions that can become the guide for further studies and research. I therefore hope to use this research as a ground for the application of my skills and competencies acquired in my study of this program. The research would provide a background for the study of trends and matters pertaining to e-banking. This can enable banks, consumers and potential consumers to get a good understanding of the reaction of consumers to e-banking products and services that are offered in the UAE. Literature Review Online banking is the “process that allows a consumer to perform banking functions online. Online banking can be accomplished through the internet with specific account information and a consumer password” (Sam, 2008: 7). Online banking refers to an electronic form of carrying out traditional banking processes and transactions through the Internet and other forms of computer software systems. This implies that online banking enables a consumer to complete a banking activity using the internet and other related electronic tools like mobile phones and other sophisticated computer systems. This is also referred to as e-banking, which encompasses banking carried out in an electronic format. In a bank, e-banking a typical e-banking department consists of groups responsible for marketing and sales, internet activities, electronic commerce, call center services, ATM operations and mobile phone bank services (Hlupic, 2003: 109). In other words, e-banking combines the operations and activities of several related departments in a bank to ensure that the clients of the bank get the opportunity to undertake normal banking services through electronic means. This requires the co-operation and combined efforts of several units to ensure that customers get prompt attention about their transactions, reduce fraud and get a good understanding of the internet banking services that is carried out in the bank. Typical services provided by e-banking include financial information, product and service information, account management, B2B payments, bill payments and presentation, fund transfers, commercial wire transfer and loan application (Kondabagil, 2007: 4). E-banking is therefore used by banks to carry out some functions that can be rendered over the internet and other electronic media in a relatively easier manner. These include popular activities like the transfer of information, account orders and other transactions that can be fed to the central information systems of the bank through real-time systems and structures. E-banking has several advantages to banks and this include the promotion of the brand name of the bank electronically, maintaining good customer relations, increased IT speed and the acquisition and control of competitive advantage by banks (Kondabagil, 2007). To the customer, e-banking can facilitate the changing of profile, access to quick information by different banks, reduced transaction costs, cross-selling and global reach (Kondagagil, 2007). It is therefore evident that e-banking has several advantages both for banks and people who patronize banking services and products. This therefore makes it a very good development in the banking industry that is worth preserving and promotion. E-banking systems are fairly easier to be set up and managed by banks. The main areas of interest and concern include continuous usage, security and the improvement of services as and when necessary (Mahmood, 2005). E-banking is much more popular in the developed world because developed countries have more sophisticated internet and electronic infrastructure that supports the online banking system (Jatana, 2007). However, the efficiency, effectiveness and low economic requirements of e-banking systems is making it more popular with banks and customers around the world (OECD, 2005). This has led to the popularization of e-banking in nations around the world. E-banking services however need to be examined closely from time to time to ensure that issues and problems related to them are always identified and solved to ensure that customer satisfaction is attained and maintained to a very high level and standard (Lu et al, 2007). Research shows that most banks in the UAE are still in the early stages of adopting e-banking systems and structures (Bruce, 2007). This indicates that there is the need for the E-banking sector of UAE to be studied thoroughly and changes made as and when necessary. As of the year 2005, 18 out of the 48 banks in UAE had well developed E-banking systems and structures (Bruce, 2007). An estimated $190 million was sunk into e-banking structures and systems in UAE to provide high quality e-services to bank customers in 2005 (Bruce, 2007). Bruce (2007) categorizes e-banking systems and infrastructure in UAE in one of 3 categories namely Basic, Intermediate and Advanced systems. The basic system is mainly linked with the flow of information between customers and banks on account information and urgent updates like existence of accounts, balance enquiries, ATM cancellation services and simple customer information like account balances and inflation rates. The intermediate e-banking system is made up of set up and cancellation of instructions, search engines, the opening of new accounts, email access and requests for credit cards. The advanced level systems of e-banking includes interface customization, interactive features, client banking, corporate banking, online insurance and online wealth management. All these levels of e-banking provides several levels of online banking that are to provide easy and convenient banking systems through the use of the internet and mobile phones. There is the need for research to be conducted into these areas and aspects of e-banking to gauge the level of interest that customers are gaining from the use of these electronic services and activities. This can only be done by going out to customers of banks to acquire primary data and information about attitudes and opinions relating to the use of e-banking tools and software for the transaction of businesses between banks and their customers in UAE. Hypothesis A hypothesis is a statement that is tested for its truthfulness or falsity in a research (Kothari, 2005). In this research the hypothesis that being tested is as follows: E-Banking systems and structures are providing customer satisfaction for bank clients in UAE. This is because by default, e-banking is meant to provide fast, safe and convenient services for clients. The proliferation of e-banking services in UAE suggests that existing users of e-banking services in the country are pleased with the current systems and therefore the research would seek to test to draw a conclusion on whether this hypothesis is valid or not. Research Methodology The research would employ various elements of academic research and examinations to proof whether the hypothesis identified above is valid or not. a. Research Methods The research methods to be employed will include interviews and a survey that were conducted through the presentation of questionnaires. These questionnaires sought to acquire information from the various respondents who were take from different backgrounds related to the banking sector of UAE. b. Sample Information There were two stages of primary data collection conducted for this paper. The first set of data was collected by interviews with staff members connected to e-banking from five out of the 48 banks (circa 10% of UAE banks). The banks interviewed included Dubai Islamic Bank, Emirates Bank International, National Bank of Dubai, Abu Dhabi Commercial Bank and Invest Bank- Sharjah. This 10% represent the largest banks in UAE's e-banking industry (Bruce, 2007). The staff members interviewed belonged to Marketing/Sales Staff, Internet/IT Staff, E-Commerce Staff, Call Center Staff, ATM Operations, Mobile Phone Operator. Aside this, 5 clients from each of these five banks were consulted to fill questionnaires about e-commerce. Another 25 clients from different banks were also consulted at random to to fill questionnaires. c. Instrument and Measures: The interviews and questionnaires used for the conduct of the interviews can be found in Appendix 1 and 2 respectively below. d. Data Analysis Data collected from the interviews were generalized to come up with a common pattern of the most popular claims made by respondents. For the questionnaires, data collected were aggregated and average ideas, trends and concepts were collated for the sake of generalization to come up with a theory on the trends and findings. 5. Results and Discussion: Out of the bank staff members interviewed in the research, four of them were providing advanced e-banking services whilst only one was at the intermediate level of electronic banking. This suggests that most of the top banks in the UAE are at very high levels of e-banking service provision because of the maturity and growth of these sectors for these banks. Three out of the five banks studied had some form of e-banking systems and structures in place before 2005. The other two put offered e-banking services to their clients after between 2005 and 2007. This shows that the UAE's growth and development index for e-banking is relatively higher than other developing countries. Four out of the five banks studied in the research stated that they created e-banking systems to maintain trust. Two stated explicitly that the idea was to reduce congestion and the time spent by customers in transacting business with them. One stated that e-banking systems were set up to give customers more options in terms of acquiring information and indulging in transactions with the bank. Three of the banks stated that the e-banking system was created to improve communication between customers and the banks. In terms of strategic importance of e-banking, all the banks agreed that the e-banking system was meant to promote their banks as modern, international or technologically advanced. This shows clearly that e-banking is strongly connected with the enhancement of reputation in banks around the United Arab Emirates. In terms of usage of e-banking services, 64% of respondents said they were already clients of the banks before e-banking services were introduced. 20% of the respondents showed that they opened accounts with their banks after e-banking systems had been introduced whilst 16% were not sure. This suggests that e-banking services are relatively new systems and most clients of banks had to evolve from the use of traditional systems onto the new e-banking systems and methods. As many as 82% of respondents had used some form of basic package of e-banking service before. 56% had used intermediate e-banking services whilst only 28% were using the advanced tools and systems for e-banking in their banks. This shows that basic e-banking packages are very common in UAE and this suggests the popularity of such packages. On the other hand, only a small percentage have used the advanced tools and systems of e-banking for their activities. In terms of reducing transaction costs, 12% of respondents said e-banking had no effect on their transaction costs. Another 26% stated that e-banking had little influence on their transaction costs whilst 40% attested that e-banking has had a significant reduction in their transaction costs. This shows that e-banking is marginally attaining its aim of cutting down transaction costs.. For the reduction of waiting time, 6% and 16% of customers stated that e-banking had little or no effect on their waiting times for transactions to be processed. However, another 34% stated that e-banking has some kind of effect on the length of their transaction of their business with the banks. In terms of comparing prices, 52% of respondents stated that they do not compare prices of transactions and costs between their banks and other banks. 22% sometimes do but only 4% of the respondents regularly compare prices. This shows clearly that most customers of UAE banks do not compare the prices of their costs of transactions with other banks electronically. Finally, 2% of the clients say they do not use e-banking when they travel abroad. Another 62% stated that they do use some form of e-banking service when they travel outside UAE. However, 22% of the respondents stated that they have not traveled outside UAE over the past year. 6. Implications and Conclusion: From the study, it is evident that most banks established e-banking systems to render better services for customers and also improve their reputation before their customers and members of the general public. E-banking is more of a transition from the traditional banking system to a more modern and sophisticated method of banking for most UAE bank clients. Basic e-banking services are common with bank users in the United Arab Emirates. Intermediate e-banking services are becoming common but advanced systems and structures of e-banking are yet to gain the popularity the other classes have attained. A sizable number of UAE bank clients have seen significant reduction in their transaction costs because of the use of e-banking systems and tools. Another sizable group of bank clients agree that e-banking helps reduce the time they spend completing bank transactions. Few clients of e-banking services compare prices between e-banking service providers and other competitors. Most of them do not do any kind of comparison between service providers. Finally, it is seen from the research that most Emiratis utilize their e-banking services once they are outside UAE. Only a few Emiratis do not use e-banking when they are out of the country. This study shows that there is a level of interest in e-commerce services that is growing at a very fast pace. It suggests that in the future, most bank clients in UAE will be strongly reliant on e-banking services for their operations. This must therefore prompt banks to spend more money on e-banking services since it is being widely accepted by their clients. In future, there will be the need for detailed studies of the various components of this research to establish exact consumer behavior in relation to e-banking services. This can enable banks to improve their e-banking services and also identify appropriate niches to specialize. References Bruce, Budd (2007) “A Preliminary Investigation of 'Brick-to-Click' Banking Presence in the United Arab Emirates” in Journal of Internet Banking and Commerce August 2007 Vol 12 No 2 Fazlollahi, Bijan (2002) Strategies for E-Commerce Success Idea Group International Ford, Henry (1981) Trusts and Loyalty in Business Innovation Systems New York – McGraw-Hill Hlupic, Vlatka (2003) Knowledge & Business Process Management Idea Group International Jatana, Rimpi, Uppal, RK (2007) E-Banking in India: Challenges & Opportunities Prentice-Hill India. Kondabagil, Jayaram (2007) Risk Management & Electronic Banking Concepts & Best Practices Singapore: John Wiley & Sons Asia Kothari, C. R. (2005) Research Methodology New Delhi: New Age Publishing Lu Jie; Ruan Da & Zhang Guangquan (2007) E-Service Intelligence: Methodologies, Technologies & Application London: SAGE Publication Mahmood, Mo Adam (2005) Advanced Topics in End User Computing Volume 4 Idea Group International OECD (2005) Trade Finance Infrastructure Development Handbook for Economics Singapore: UN Economic & Social Commission for Asia & The Pacific Sam, Ian (2008) Online Banking & The Role of CRM: The Impact of the Internet as Online Business Platform on CRM Norderstedt, Germany: GRIN Verlag Uslu Aypar (2007) Developments in Marketing Science Volume 30 Academy of Marketing Science Appendix 1 Interviews with E-Banking Staff/Stakeholder Dear Sir/Madam, In partial fulfillment of my degree, I am undertaking a research on customer satisfaction in relation to E-banking services in the United Arab Emirates. I will therefore be grateful if you could honor this interview with me in relation to your bank's e-banking systems and structures. Please note that this interview is highly confidential and under no circumstances will your personal data, views and opinions be released to a third-party. Name of Respondent: Name of Bank: Position in Bank (Circle as Appropriate): Marketing/Sales Staff Internet/IT Staff E-Commerce Staff Call Center Staff ATM Operations Mobile Phone Operator E-Banking Services Provided by Bank (Circle as Appropriate): Basic Intermediate Advanced 1. When did the E-Banking system of your bank start operating? 2. What do you expect to provide for your customers via e-banking? 3. What strategic position do you hope to attain on the market by using e-banking services? Thank you. Appendix 2 Questionnaire Dear Sir/Madam, In line with the completion of my degree, I am conducting a research on customer satisfaction in relation to the use of e-banking services in the United Arab Emirates. If you have used any form of e-banking services in the United Arab Emirates, I would be very grateful if you would fill out this questionnaire to enable me to gauge and assess the your level of satisfaction with e-banking in the United Arab Emirates. Although this is an academic study, collective details of findings to be made in this research are likely to go to help in the improvement of e-banking services in the United Arab Emirates. Please note that this research is a confidential exercise. Thus, on no account will your personal information be released to third parties. Thank you very much. 1. Name of Respondent 2. Bank of Respondent: 3. What kind of account do you hold with the bank? 4. How long have you been saving with the bank? (Circle as Appropriate) 0-1 year 1-2 years 2-3 years 3-4 years 4-5 years 5+ years 5. Were you saving before the introduction of the e-business systems? Yes/No 6. What e-banking service have you been involved with at your bank? (Please circle as appropriate) BASIC [Email Notifications of Transactions] [Basic Bank Transactions] [ATM Requests & Cancellations] INTERMEDIATE [Account Set up Systems] [Email Instruction of your Bankers] [Request for Credit Cards] ADVANCED [Interface Customization] [Interactive Client Banking] [Online Wealth Management] [Insurance & Real Estate updates] 7. Has the e-banking service reduced your transaction costs? No A Little Significantly 8. Has the e-banking service reduced your waiting time? No A Little Significantly 9. Do you use your e-banking service to compare prices and options from other banks? No Sometimes Often 10. Has the e-banking service been of any service to you outside the UAE over the past year? No Yes I have not traveled outside UAE in recent times Read More