An Evaluation of Internet Banking in New Zealand

1. An Evaluation of Internet Banking in New Zealand Presenter: Winnie Chung

2. Agenda • The evolution of Internet banking in NZ • Internet Banking Figures as at 2000 • Scope of the study • Research questions • Research methodology • Hypotheses • Results • Overall interpretation and recommendation • Conclusion • Future research implications

3. ATM Telephone Banking EFPTOS Internet Banking The evolution of Internet banking • New Zealand has extremely high adoption of ATM and EFTPOS services(Boer, Evans and Howell, 2000)

4. The preparedness of Internet banking • New Zealanders become accustomed to, adopted, and adapted to electronic means of non-cash transactions • This familiarity and preparedness would transfer to adoption of other technologies such as Internet banking (Boles de Boer, Evans and Howell, 2000)

5. Internet Penetration • New Zealand has already achieved a significant level of Internet penetration and usage, higher than that of Australia and most other OECD countries (Boles de Boer, Evans and Howell, 2000) • More than 50% of New Zealanders have access to the Internet and 34% use it on a regular basis (The New Zealand Herald, 2000a).

6. Three Stages of Online Development for Banks (Hamlet, 2000) • Fundamentals • Typically ten web pages or less in size • Basic information • Dynamics • More features • E.g. updated information on product and rates and calculators • Intelligent e-banking • Interactive online banking (e.g. real time services, customers and community forums and suggestion boxes) • Allow customers to access account information, transfer funds and other related activities

7. E-tailing Gaming Interaction Survey sites Banking Brand Marketers Information Travel Media Sectors in the Infotainment Framework Government The Banking Sector

8. 7 New Zealand online banks • Intelligent e-banking

9. Internet Banking Figures in 2000 • About 200,000 New Zealanders use the Internet for banking in 2000 (The NZ Herald, 2000e) • Survey reported in 2000 indicates that Internet banking is beginning to take off (The NZ Herald, 2000) • 15% using it • 26% of those who do not, saying that they may adopt it in the coming year

10. Scope of the Study • “Retail” Internet banking i.e. personal banking • Everything a branch teller would normally do • Exclude value added services • E.g. buy and sell shares, securities trading, insurance purchases • Exclude business and rural based Internet banking • Exclude the reasons why people do not use the Internet

11. Research Questions • What is the current situation and performance of NZ retail banking websites? • What are the reasons that prevent New Zealanders from using retail Internet banking? • How to increase the utility of NZ retail Internet Banking services to existing NZ Internet users? • How can the current retail Internet banking services be improved?

12. Research Methodology • Evaluation of websites • Quantitative data of each bank • Based on Hersey’s model • Survey • User perspective • User satisfaction • Comparison with the components in the • Hersey’s model

13. Search Company Performance Ease of use Aesthetic Effect Innovat ion Customer Product Negotiation Order Payment Delivery After-sales Community Website evaluation • A website evaluation model(Hersey)

14. Other Important Components for Website Evaluation • Privacy and security concerns are the main barriers that constrain the uptake of Internet banking (Young, 2000 and O’Connell, 1998) • Technology interface attributes (Dabholkar, 1995) • Reliability, security, accessibility, ease of use, enjoyment and control

15. Tailored Hersey’s model

16. Survey • Population: • Anyone in New Zealand who has been using the Internet • Judgement sampling design • The exploratory nature of this study infers that judgment sampling is acceptable although generalisibility is not guaranteed • Pilot survey

17. Data Analysis Method • Website analysis • The analysis of the data obtained by the questionnaire will consist of the following: • Descriptive statistics such as mean and frequency are provided with graphs • Cross tabulations • Chi-square tests • Correlations • Compare the website evaluation result against the users perspective • Spearman’s rank correlation

18. Hypotheses to be tested • Early adopters (banks) provides better Internet banking services (i.e. functionalities) • Difference in quality between large and small banks • Large banks have more resources so they can provide better Internet banking services • Banks that provide better services/functions have better performance from the customers’ perspective

19. Hypotheses to be tested • High income groups are more likely to use Internet banking • Older customers may be less receptive to Internet banking • Customers with higher education backgrounds are more likely to use Internet banking • Registration for Internet banking is related to the use of ATM, EFTPOS and phone banking

20. Hypotheses to be tested • Satisfaction is related to the length of Internet banking use (i.e. how long one has been using Internet banking) • Satisfaction is related to future usage • Future usage is related to the length of Internet banking use

21. Website Evaluation Results 1 – Bank Direct (ASB) 2 – ANZ 3 – Fastnet (ASB) 4 – BNZ 5 – National Bank 6 – TSB 7 – WestpacTrust

22. The General Banking Patterns

23. The Importance of Elements to Internet Banking This is measured in a 7-point Likert scale with 1 indicating very unimportant and 7 indicating very important

24. The Importance of Elements to Internet Banking

25. Unregistered Customers (59%) Reasons for not registering for Internet banking This is measured in a 5-point Likert scale with 1 indicating strongly disagree and 5 indicating strongly agree

26. Reasons for not Registering for Internet banking

27. Likelihood to Register for Internet Banking in the Next 12 Months

28. Likelihood to Register for Internet Banking • Correlations between the likelihood to register for Internet banking in the next 12 months and the reasons for not registered

29. Internet Banking Users • 41% registered for Internet banking • 39% use Internet banking • Of the 41%, some registered Internet banking with more than one bank but none registered with more than three banks

30. Registration with Banks

31. The Usage of Different Banking Activities

32. Internet Banking Usage Frequency

33. Banks Performances from the Customer Perspective Website Evaluation 1 – Bank Direct (ASB) 2 – ANZ 3 – Fastnet (ASB) 4 – BNZ 5 – National Bank 6 – TSB 7 – WestpacTrust Survey Results 1 – Bank Direct (ASB) 2 – Fastnet (ASB) 3 – National Bank 4 – WestpacTrust 5 – ANZ 6 – BNZ

34. The Overall Performance and Importance of each Element for all NZ banks

35. Hypotheses Summary

36. Overall Interpretation and Recommendation • It must be noted that getting customers to register for Internet banking does not guarantee that they will use the services • Whether a customer will register for Internet banking is related to his/her age and education level but not income • Younger customers (less than 20) are less likely to register (within the next 12 months) • Higher education customers are more likely to register

37. Overall Interpretation and Recommendation • Internet access is not a barrier that prevents customers from registration • Main factors that prevents registration are security concern, the availability of other ways of banking and the complexity of using retail Internet banking • Factors considered very important to retail Internet banking are security, update information, free from technical problems, response time and download time • Banks are not encouraged focus on attractive graphics and animations as these factors are not as important

38. Overall Interpretation and Recommendation • NZ banks perform extremely well in providing update information. Maintaining this is necessary • The security of transaction and ease of use are also revealed in NZ banks’ websites but further improvement on security is required • Improvement on download time, response time and technical problems needed

39. Overall Interpretation and Recommendation • Additional functionalities could be useful but the quality of service is more important • Bank Direct is perceived as the best bank that provide retail Internet banking services followed by Fastnet (ASB) • Banks are encouraged to focus on factors that are considered important in order to increase customer satisfaction. This enhances the retention of current Internet banking users.

40. Conclusion • Retail Internet banking has high potential in NZ • Banks should understand what factors that prevent customers from registering Internet banking • To improve performance, NZ banks should focus on factors such as security, response time, download time and freedom from technical problem • Consideration of all these factors for designing, implementing, maintaining and promoting websites would help to attract new registration and increase retention

41. Future Research Implications • More inferential statistics on the topic • Probability sampling should be employed to ensure generalisibility of findings • Future research could study from the banks’ perspectives in addition to customers’ perspectives • Longitudinal study is also advocated • This allows researchers to study how the uptake of Internet banking proceeds