Adoption of Internet Banking in Greece, a Consumers’ Perspective



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2.3 Transactions Over the Internet


A very helpful classification of the transactions conducted using alternative ways of banking is presented by Cronin (1997). Specifically, Cronin proposes three categories


  1. Basic products and services include account checking, reports with the most recent transactions, twenty-four hours account management and home financial management services such as household budgeting.

  2. Intermediate products and services include any kind of bill payments, account reconciliation, loan management as well as historical performance data and stock and mutual funds information.

  3. Advanced products and services include more sophisticated services such as foreign exchange currency trading, tax return preparation, income tax filings etc.



2.4 Advantages of Electronic Banking from Banks’ Perspective


The advantages of internet banking are very important for the banks. The first advantage for the banks is in the savings on costs. In Table 2.2 (Benton 2002) the cost of transactions using different channels are presented and it is more than obvious that the Internet is the cheapest delivery channel for the banks. According to Mols, (1998) electronic banking is considered to be a “cheap” distribution channel for the banks. According to Jayawardhena (2000) the cost of a simple non-cash transactions can be 11 times more expensive for the bank if is conducted in the physical branch of the bank and not over the Internet. These estimates are based on studies by Downes and Mui (1998), Wylie (1999). It is clear that the Internet is a cheap distribution channel, it is important though to understand how exactly the utilization of the Internet results in a reduction of costs. According to Jayawardhena (2000) the main reasons of the cost reduction is because of the reduction and the more effective use of personnel and equipment as well as from the economic usage of space and operational savings. Furthermore, banks can reduce paper work, eliminate human errors and subsequent customer disputes (Kiang et al. 2000). Additionally banks are able to save costs reducing human resources or even reducing the number of physical branches. The enormous savings of physical branch reduction cannot be compared with the costs of maintaining a web site. According to DeYoung (2005), banks in order to exhibit profits should direct customers to the low-cost internet channel thus reducing the resultant surplus branches or convert them into sales outlets rather than transactions centres.


Table 2.2: Banking Transaction Costs

Channel

Average cost per Transaction

Full service branch

$ 1.00

Mail

$ 0.70

Telephone

$ 0.25

PC Banking

$ 0.015

Internet Banking

$ 0.010

Definition : Direct cost of a non-cash payment transaction (excludes set-up installation and capital expenditure cost)

Source: Benton (2002)


Moreover using the Internet as a channel to deliver services is a way for banks not only to retain existing customers but also to attract new ones. First of all, Lymperopoulos et al. (2004) mentions the image of the bank. Banks, providing technological innovation to their customers build their reputation and discourage consumers from switching over to competitors, attracting more customers and retaining existing ones. Jayawardhena (2000) shows that the proportion of users who use the Internet are usually well educated and wealthy which “suggests that potential users are high net worth customers”. Probably they keep higher balances in their accounts and conduct more transactions, which mean higher revenues for the banks. Furthermore Mols (1998) found that e-banking users are more satisfied with their bank compared to non-users, provide more positive word-of-mouth communication, and they exhibit more possibilities to purchase again and less possibilities to change bank.


Jayawardhena (2000) refers to mass customization as an advantage of internet banking. Internet banking enables banks to successfully segment and target their customers and provide deep personalization to their relationship making easier to retain them. Dannesnberg and Kellner (1998) refer that using the Internet is possible for the banks to customize information according to users’ personal needs.
According to Jayawardhena (2000) the Internet facilitates effective marketing and communication with the customers. Quelch and Klein (1996) mention the advantage of advertisement. Specifically, the banks have the opportunity to host their advertisements and marketing campaigns with minimum costs skipping the incremental charges of prolonged exposure that exist in traditional media. Banks using the Internet, are able without any additional costs to advertise their products 24 hours per day. Furthermore, they can inform their customers for any new products available with minimum costs. Mass customization enables banks offer tailored offers to their customers any time and day retaining customer’s satisfaction and loyalty.


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