The Internet is a powerful tool for communication and research as well as providing businesses with means of connecting with consumers and generating income. Advancement in Information and Communications Technology (ICT) and the rise in the volume of banking business performed electronically are causing what will be a vital catalyst for changing the business policies of financial institutions in Ghana. According to Niels Peter Mols in his 1998 publication on “The behavioral consequences of PC banking”, electronic banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic mediums. This system allows customers to access their accounts, transact business, make enquiries and have prompt responses from banks.
Electronic business or e-business basically refers to buying and selling of goods and services as well as providing the customer technical support via the internet. It may also refer to any business that uses Internet technology to improve productivity and profitability. In all these processes and procedures of transacting business via electronic means, papers are eliminated unlike those performed in a traditional brick and mortar bank branch. Arunachalam Vadivel (Indian scientist) further described electronic banking as ‘Green Banking’.
In the early 1980s, database programmers came up with the idea of electronic banking whilst developing database software for banks and this evolved simultaneously with the development of the World Wide Web. The creative process of these services where banks were offering more and more tools, information and access to financial accounts to help customers achieve their financial goals sparked off many companies to start the concept of electronic business. In 1983, the Bank of Scotland offered Nottingham Building Society (NBS) customers the first electronic banking service in the UK and this latter formed the backbone for electronic banking facilities that followed till present day. The service was referred to as ‘homelink’. All what was needed was a telephone line connecting via a TV set and a telephone to process transfers and pay bills. This facility was however very restrictive because of the number of transactions and functions an account holder could execute within a time frame. This necessitated an upgrade of the product.
Yodlee, a UK account aggregation software developer, in 1994 built electronic banking software into Microsoft Money personal finance software leading to about 100,000 households accessing their bank accounts online and giving users the ability to view all their financial accounts in one place. The Stanford Credit Union took advantage of this development and created the first online banking website. According to Yoodlee in its January 2012 Online banking report, 8 US banks in 2001 have at least 1 million electronic banking users each out of about 19 million households actively using the service. Bank of America became the first bank to top 3 million online banking customers, more than 20 percent of its customer base. In comparison, larger national institutions, such as Citigroup claimed 2.2 million online relationships globally, while J. P. Morgan Chase estimated it had more than 750,000 online banking customers. Wells Fargo had 2.5 million online banking customers, including small businesses. Online customers proved more loyal and profitable than regular customers. In October 2001, Bank of America customers executed a record 3.1 million electronic bill payments, totaling more than $1 billion.
Apple launched its first iPhone in 2007 shifting banking via personal computers to smartphones and by 2009, users of online banking accounts shot up to about 50 million in the US. This led to bank branches increasingly becoming less important and banking moving to kiosks and online solutions. A report by Gartner Group in the same year estimated that about 47 percent of U. S. adults and 30 percent in the United Kingdom bank online. Online banking went mainstream from 2011 to date with the proliferation of smartphones and other devices with even late adopters rooting for the service to the detriment of traditional brick and mortar branches. Customers who use e-banking are willing to refer their bank to friends and family than do traditional banking customers. A satisfied customer who is happy about online services also maintain higher balances, require less customer support and have lower attrition rates as compared to bank branch consumers. This relationship eventually deepens and translates into customer loyalty.
With the advancement in electronic banking, some players in commerce took advantage of the times and launched their e-commerce wings to cash in on the new technology. This saw the launch of Amazon and eBay and they began to lead the way in e-commerce. Amazon originally operated by warehousing and delivering their goods and heavily invested in that. However, it took Amazon about 10 years after commencement of business to gain profitability which was hugely as a result of advancement in e-banking capabilities.
E-banking comes in several forms and classifications. The terms ‘PC banking’, ‘online banking’, ‘Internet banking’, ‘Telephone banking’ and ‘mobile banking’ refer to a number of ways in which customers can access their banks without having to be physically present at the brick and mortar branch. E-banking may be understood as the term that covers all these ways of banking business electronically.
This is the provision of banking services using a classic telephone line. A bank client can obtain the necessary information on dialling a telephone number specified in advance and calls may be recorded for quality assurance purposes. Before the requested banking service information is provided, the client’s identity is determined using contractually agreed terms. This contract is basically referred to as telephone, e-mail and fax indemnity. A customer who signs on to this service can access or request for information or issue an instruction on his account via these means and the bank is not liable for any loss that may be incurred in the process as long as due diligence is observed. The client advisor or telephone banker is a bank employee capable of providing any information about products and services and, following verification that he is speaking with an authorized person, can also perform any passive or active operation such as account balance information, transfer between accounts, bill payments, loan repayment information, payment order request, account statement via fax, e-mail etc. The telephone banker can also provide advice to clients and cross-sell other banking products and services. One advantage of this service is that it requires no additional technical equipment apart from a telephone. The common practice is that the bank’s call center operates 24 hours a day and it is thus possible to use their services from any place and time at your own convenience.
Mobile banking is a variation of electronic banking and a good example of how the lines between the various forms of e-banking are becoming gradually blurred. Smart phones or small hand-held PCs are providing bank customers with access to the Internet and thus paving the way to Internet banking. It assures immense flexibility through self-service and brings financial services right into the palm of customers anywhere and anytime. However, the use of mobile banking is still in a nascent state.
The Ghanaian banking industry has in recent years witnessed a significant amount of transformation with the emergence of innovative products and services. Most banks now employ very innovative and cutting edge technology to offer improved accessibility to its customers. One of such innovations which is fast catching up with a lot of Ghanaians in the banking sector is Mobile banking, also known as M-Banking, SMS Banking, etc. This service affords the banking public the opportunity to transact business with their respective banks from the comfort of their mobile phones on the go. A client can automatically receive information about his account balance through a prompt: an SMS is sent to the client immediately after a certain operation is performed. Alternatively, a client sends a text message in the appropriate format to a short code provided by the bank requesting for services such as currency exchange rates or interest rates on loans and investments. Providing these is simple for the bank because this is publicly accessible information that needs no protection. However, information that is not for public consumption can only be accessed based on technologies that uses passwords and the principle of electronic keys as an added security feature.
Although the awareness of this facility has gained popularity in developed countries such as the United Kingdom, the United States and Europe, subscribers to the facility in Ghana still account for a tiny percentage of the banking public so far. Undoubtedly, most Ghanaians have become mobile-savvy, and are always trying out advanced hand-sets and services. The convenience that comes with mobile banking, however, comes with great responsibility for users to ensure maximum security.
The increasing awareness of the importance of computer literacy has resulted in increasing use of personal computers through the entire world. The term ‘PC banking’ is used for banking business transacted from a customer’s PC. Why are so many people suddenly choosing their personal computers as the new way to view and manage their money at the bank? This is because it is a valuable option to have. There is no need to queue at brick and mortar branch to perform the most basic transactions when they can be done quickly from the desktop PC anytime, day or night. It is a simple process where users log on to the banks’ Intranet proprietary software system using a username and password.
Internet banking is the most convenient way to transact banking business at any time or place at one’s own convenience. It would free both bankers and customers of the need for proprietary software to carry on with their online banking transactions. Customer behavior is changing rapidly and currently, financial service is characterized by individuality, independence of time and place and flexibility. These facts represent huge challenges for the financial services providers. So the Internet is now considered to be a ‘strategic weapon’ for them to satisfy the ever-changing customers’ demand and innovative business needs.
Civilization coupled with the quest for higher purpose with career, family, religious and social lives have occupied each individual’s time leaving no space for other activities out of the normal daily routine. Electronic banking therefore appears as a boon to fill in the gap and make the cycle whole again. Users of electronic banking believe their accounts are protected and can only be accessed with username and passwords which they securely protect hence account information is safe. However, like all cherished goods, electronic banking has its own drawbacks.
Cases of forgery have been reported in online banking over the years as a result of activities of hackers. These activities are carried out by the use of proxy websites and phishing. Hackers pretend to be an electronic user’s bankers and send emails enticing users to follow a link and once this is done, it leads to a counterfeit bank website requesting login details. These details then gets to the hands of thieves who use them at will. Most users realize these when they receive their bills at the end of the billing cycle.
Hackers can also infiltrate a bank’s system through their own criminal activities and not necessarily through an electronic user. A recent case is that of Tesco Bank in the UK where the bank’s system was attacked fraudulently on the weekend of 5th and 6th November 2016. According to Benny Higgins the Chief Executive of the bank, ‘about 40,000 accounts saw suspicious transactions over the weekend, of which half had their money taken’. Customer’s got hint of their lost when they realized their card transactions were being declined at the ATM, POS and online and some also received text messages from the bank prompting them of transactions undertaken when they are actually not in the know. This caused panic amongst the bank’s customers and this could lead to a run on the bank. A UK cyber security expert Prof Alan Woodward said ‘”I’ve not heard of an attack of this nature and scale on a UK bank where it appears that the bank’s central system is the target,”
Online fraud is not limited to any geographical location and as such widespread in nature. In Malaysia, 13 commercial banks agreed to spearhead campaign aimed at creating awareness among the general public on trending ways used by scammers in defrauding innocent victims. According to Abu Hassan Alshari (assistant Governor of Bank Negara Malaysia), online banking cases have declined since the awareness campaign started and has resulted in a decline in online fraud cases. He added that as of last year, losses due to online banking fraud, had dropped to RM3.2 million ($728,000) from RM3.4 million ($773,000) previously.
In a brick and mortar branch, customers get assistance with transactions when in need. A bank staff can easily be reached and spoken with unlike in the case of electronic banking. Answers to queries are often received after endless calls to customer service unit of the bank and in some cases customers are put on hold because the staff cannot immediately assist and will have to seek assistance form a colleague. Other times, contact details are taken with the promise of getting back to customers which never happens leaving the customer stranded. This practice eventually affects service delivery and e-business where the electronic user has to make payments for goods and services purchased.
Some customers do not trust the business of electronic banking. They always have doubts about the safety of money being processed electronically instead of face to face interaction with a bank staff for physical exchange of money or making payments for goods and services with cash instead of payment portals or at the POS. This is a major challenge facing the electronic age of banking.
Internet services are very poor in this part of the world where we find ourselves. This sector is still in a developing stage and as such there are interruptions in service provision. A user may find it difficult logging in to make payments for goods or services enjoyed because the network is down. Some people are also not comfortable using electronic banking because of their unfriendly user interface. A wrong click can cause monetary losses.
Security breaches especially on individual’s account requires co-operation from the individual to succeed. Fraudsters usually entice individuals with emails suggesting a claim to some prize money or landed property somewhere and eventually request for personal information including account log in details. The individual can make it difficult for these fraudsters to succeed in their act by ignoring such messages and avoid clicking on those links suggested to follow and also use a combination of alphanumeric and special keys as passwords for online log in.
Banks also owe it a responsibility to protect customers who entrust in their care not just monies but also their identity and other personal information. Such information should not be accessed by unauthorized persons either on the banks database or intercepted during transmission. Encryption is the most effective way to achieve this goal. Plain text should not be transmitted to customers but rather a cipher or encrypted text which can only be accessed by the intended recipient using the same secret code used at the source of the transmission.
There should also be a mechanism instituted to confirm the authenticity of users before giving out information on an account. Digital signature which is an e-signature technology of encryption and passwords can be attached to files before transmitting in order to verify the sender’s identity. Security certificates which are unique digital ID can also be used to verify the identity of an individual or a server.
Currently, banks invest heavily in firewalls so they can have the assurance that their banking system is protected from attacks over the internet. This they do by avoiding a direct connection of the banking system to the internet but rather through a firewall. Firewalls are basically network security systems that serve as a barrier between a trusted network and untrusted network in order to prevent unauthorized access to or from a private network.
The advent of electronic banking has created an information age and commoditization of banking services. Banks have come to realize that survival in the new e-economy depends on delivering some or all of their banking services on the Internet while continuing to support their traditional infrastructure.
Electronic business is providing a competitive advantage for banks by lowering operational cost and attaining customer satisfaction. A strong banking industry is inevitable in every country and can have a significant effect in supporting economic development through efficient financial services. The role of banking industry in Ghana needs to change to keep up with current trends. This change will include moving from traditional distribution channel banking and fully embrace the electronic distribution channel banking. Banks will have to move from providing basic electronic banking services to more advanced, convenient and safer ones. Users should be able to access online banking applications free from the appstore without having to log on to the bank’s website each time they intend to initiate a transaction. It should also be possible for users to book investments such as fixed deposit and Treasury bill online, initiate personal offshore remittances, buy and sell forex and all at the customer’s comfort without having to visit brick and mortar branch. This is the kind of special relationship technology should bring to users so that the bank becomes a ‘neighborhood bank’ no matter the distance between the user’s location and the bank.
The rise in electronic banking however will eventually lead to the death of brick and mortar branch since it will become the preserve for customers who prefer to manage their money and transactions through the old fashioned way. Branches will primarily serve as customer help points advising on products and services that are best for its customers as well as providing solutions to issues that may arise from the use of electronic banking.
Information technology has empowered customers and businesses with information needed to make better investment decisions and at the same time allowing banks to offer new products, operate more efficiently, raise productivity, expand geographically for a wider reach and compete globally. Every day, more and more people are turning to technology for their personal banking. It is a safe, convenient way to shop for financial services, maintain bank accounts and conduct business 24/7 without much limitation. Users today are able to better manage their time without having to plan their day around the bank. The days of having to spend hours in a queue at the bank just to make a deposit or transfer funds are gradually dying out and replaced with rather swift and efficient electronic means. In carrying out these transactions electronically, the use of paper is ruled out thus saving the environment as well as space in offices, cars and homes which previously would have been filled with printed bank statements, bills and other requests from the bank. Online banking allows users to have overview of personal financial situation so you are well informed of available account balance before making informed choices in a long term budget on payments and investments.
E-banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. Today, the click of the mouse offers customers banking services at a much lower cost and also empowers them with unprecedented freedom in choosing vendors for their financial service needs. The rise of E-banking is redefining business relationships and the most successful banks will be those that can truly strengthen their relationship with their customers.
