CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.0 INTRODUCTION
This chapter presents a
review of previous studies related to the present study. The chapter
constitutes examination of studies related to service delivery and customer
satisfaction in e-banking. It also examines the relationship between customer
satisfaction, customer retention and service delivery. The chapter also
outlines the Electronic banking services available in the Nigeria Commercial
Banks.
2.1 THEORETICAL FRAMEWORK
This
research work is anchored on the theories of Innovation Diffusion Theory (IDT),
formulated by Everett M. Rogers in 1962.
It is the pioneering theory that laid down the primary foundation for
the future of innovation diffusion research (Rogers, 1962). It was grounded in theories
of economics, sociology and communication and a synthesis of adoption-diffusion
literature across disciplines, IDT for short identified five characteristics of
an innovation that influences its adoption: relative advantage, compatibility, complexity, trial ability, and
observability.
Relative advantage: (RA) refers to an
individual‘s belief that E-banking is better than traditional ways of banking
and can be related to
diverse
economical, social, convenience and satisfaction dimensions of E-banking (e.g.
convenience in the form of freedom from time and place constraints,
efficient management of finance, a better overview of banking matters, and the
speed of conducting banking activities).
Compatibility:
(CO) is an individual‘s perception that E-banking is consistent and congruent
with his or her existing understanding, values, needs and past
experiences. It can also be defined as the fit between E-banking and the social
and technological infrastructure of an individual. E-banking adoption involves acquiring a set
of complementary technologies: familiarity with computers, Internet
proficiency, and engagement with computer-mediated communications and
transactions. The influence of one technology on the next generation of that
innovation is expected to be positive especially when the relationship between
the two technologies is compatible (Lee et al ., 2005). In other words,
willingness to adopt a new technology is affected by a prior adoption pattern
of related technologies and a greater level of compatibility. This will allow
the new technology to be interpreted in a more familiar context. Customers‘perception
of compatibility with other services (e.g., home banking, ATMs e-payment,
and phone banking) and with the E-banking service medium (Internet) has
been found to be positively related to their attitude towards E-banking and its
usage (Puschel et al ., 2010).
Complexity:
(CP) refers to the degree to which E-banking is perceived to be relatively
difficult to comprehend and use. Although CP and CO are closely related, the
distinction can be made that CP has more to do with the actual competence and
skill involved in using E-banking, whereas CO manifests
general perceptions towards E-banking use. Previous research suggests CP
has a negative effect on the use of E-banking (Black et al .,
2001).
Trialability: (TR) refers to the degree to which an
individual perceives the bank to offer chances for him/her to try E-banking
prior to any decision to adopt. A limited number of studies has shown that TR
is an important factor for E-banking adoption as individuals will feel more
comfortable with the technology and are more likely to adopt it if they are
offered experimental low-cost or low-risk trial of IB (Black et al. ,
2001).
Observability:
(OB) is defined as the degree to which an individual can see the availability
of E-banking to others and can observe
others using the service. Rogers (1962) suggests that the more visible an
innovation and its benefits are, the greater the likelihood of adoption, simply
because the gains from adoption will be more easily recognized. However, most of
the studies using IDT framework have either found OB to be of marginal
importance in predicting E-banking behavior (Lee et al ., 2004) .
2.1.2 ELECTRONIC
BANKING
E-banking has been
defined differently by researchers partly because e-banking services vary
(Daniel, 1999; Sathye, 1999). For instance, Salehi and Zhila, (2008) indicated
that e-banking involves an electronic connection between bank and customer in
order to prepare, manage and control financial transactions of the customer by
the bank. This type of banking has been found to be driven through the
following channels:
·
Internet
banking (or online banking),
·
Telephone
banking,
·
TV-based
banking, and
·
Mobile
phone banking (or offline banking).
Applications of ICT
within the banking sector are the development of products and service such as:
networked branches, ATMs, Banking,
Electronic Bill Payment among others.
The Commercial Banks have
under their electronic banking models the following: Internet banking, Mobile
banking, Cards and ATM‟s-etc..These developments have enabled banks to provide
more diversified, secured and convenient financial services.
Internet Banking: This
is a service that gives the customer of the bank access to their account always
at any time and any place that the service is available through the internet.
The services enable customers to transfer funds, download and print statements,
request for cheque book, withdrawal booklet make payments through the internet.
Mobile Banking: This is an innovative
service that allows the customer to perform banking transactions via the mobile
phone. The service offers the customer the opportunities such as : transaction
alert (informing customers of account activity), account enquires, mini
statement, requesting etc..
The Master card is an international electronic card
that allows the card holder to transact business through MasterCard branded
terminals.
2.3
EMPIRICAL REVIEW
According to
literature, some researchers limit the concept of e-banking to internet banking
while others limit it to retail banking (Daniel, 1999; Aladwani, 2001) and yet
others define e-banking to include both retail and corporate banking (Simpson
2002).
Also, the Basel
Committee Report on Banking Supervision (1998) advanced that e-banking involves
the provision of retail and small value banking products and services (e.g.
deposit-taking, lending, account management, the provision of financial advice,
and electronic bill payment) through electronic channels.
Karjaluoto, et. al.,
(2002) argued that banks have the prerogative to determine among the numerous
e-banking services, the most suitable for their operations. Additionally, they
stressed that Internet technology is the main electronic distribution channel
in the banking industry. Similarly, Wang, et. al., (2003) postulated that
e-banking was underutilized in the 1990s primarily because organizations
limited it to the marketing of their products and services. The assertion that
e-banking has been underutilized could be due to lack of knowledge or the high
illiteracy level of a section of the banking population.
Thornton and White
(2001) in a study of customer orientations and usage of financial distribution
channels in the Australian financial industry, revealed that due to the
competitive pressure following the deregulation in the 1980s, most financial
institutions adopted Information Technology (IT). In addition, Rafiu (2007)
asserted that the challenge to expand and maintain banking
market share has influenced many banks to invest more in making better use of
the e-banking.
The emergence of
e-banking had made many banks rethink and review their IT strategies in the
competitive markets. This translates to the fact that e-banking services have
significant effect on banking operations.
The adoption of
e-banking services has led to significant reduction in long queues in some Nigeria
banks and hence the reputation of such banks has increased.
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