Int. J. Electronic Finance, Vol. 3, No.

2, 2009 115

Recent trends and developments in e-banking in an

underdeveloped nation – an empirical study

Jiaqin Yang* and Kh Tanveer Ahmed

Management Department
Georgia College & State University
Milledgeville, GA 31061, USA
E-mail: jiaqin.yang@gcsu.edu
E-mail: kh_ahmed@ecats.gcsu.edu
*Corresponding author

Abstract: This paper describes a case study about the major issues and
challenges in the development of the electronic banking (e-banking) industry
of a relatively underdeveloped nation. This research shows that even in many
less developed nations, the application of e-banking can help their local banks
reduce operating costs and provide a better and fast service to their customers.
The research objectives are to investigate the current trends and developments
in e-banking and provide managerial insights for the banking industry in those
underdeveloped nations. The collected data are examined through statistical
analysis tools. Managerial implications are discussed with suggestions for
future research.

Keywords: electronic banking; e-banking; empirical study; developing nations.

Reference to this paper should be made as follows: Yang, J. and

Ahmed, K.T. (2009) ‘Recent trends and developments in e-banking in an
underdeveloped nation – an empirical study’, Int. J. Electronic Finance,
Vol. 3, No. 2, pp.115–132.

Biographical notes: Jiaqin Yang is a Professor of Management

at the Georgia College & State University, Milledgeville, Georgia, USA.
He received his PhD in Operations Management from Georgia State
University. His current research interests include operations strategy,
e-business and quality management. He has published in the International
Journal of Production Economics, the European Journal of Operations
Research, Decision Sciences, the Journal of Computers and Industrial
Engineering, Mathematical and Computer Modeling, Integrated Manufacturing
Systems, Environment International, the International Journal of Business,
Industrial Management and Data Systems, Facilities, Electronic Government,
the International Journal of Management and Enterprise Development, as well
as numerous professional conference proceedings.

Kh Tanveer Ahmed is currently a graduate student (Master of Accountancy at

Georgia College & State University, USA) and will graduate on May 2009.

Copyright © 2009 Inderscience Enterprises Ltd.

116 J. Yang and K.T. Ahmed

1 Introduction

E-business has been continuously growing as a new industry during the last decade
(Van Hoeck, 2001). The banking industry has been leading this trend in recent years,
and now all banking transactions completing through internet applications is sometimes
called e-banking. Some key issues addressed in the recent literature about the e-banking
include: customer acceptance and satisfaction, privacy concerns, profitability, operational
risks, and competition from nonbanking institutions (Boss et al., 2000; Smith, 2006;
Hwang et al., 2007; Shin, 2008). E-banking has revolutionised the way business is
transacted by globalising the business enterprise.
E-banking technologies have proliferated in recent years, and the availability of
a wide range of products has led to increasing adoption among consumers. These
technologies include direct deposit, computer banking, stored value cards, and debit cards
(Servon and Kaestner, 2008). Consumers are attracted to these technologies because of
convenience, increasing ease of use, and in some instances cost savings (Anguelov et al.,
2004). E-banking, in particular, has grown at impressive rates. Between 1995 and 2003,
e-banking increased eightfold (Hogarth and Anguelov, 2004). Between late 2002 and
early 2005, use of online banking increased 47%, a clear evidence that e-banking is
associated with better household financial management (Smith, 2006).
All businesses, including small and medium scale industries, no matter their
geographical locations, are all beneficiaries of e-banking. It encompasses all kinds of
commercial transaction that is conducted on an electronic medium, mostly through the
internet. E-banking links business to customers no matter their geographical location.
It allows companies to make new business contacts from different global business
alliances, test new products and services, and make market research and other enquiries
all at a minimal cost both financial and otherwise (Shin, 2008).
Smaller community banks, among others, are more interested in the application of
e-banking to gain certain competitive edges over their larger counterparts (Yang et al.,
2007). In addition to previous e-banking delivery systems, Automated Teller Machines
(ATMs) and telephone transaction processing centres, online banking provides banks a
new and more efficient electronic delivery tool (Costanzo, 2000). While ATMs were first
introduced in early 1980s and initially an attempt to reduce operating costs, telephone call
centres were developed in the 1990s to handle simple transactions and provide added
customer services from a remote location. E-banking has been viewed as an upgrading
from previous electronic delivery systems to open new business opportunities for the
banking industry (Ebling, 2001).
This paper describes an empirical study of investigating recent trend and
development of the application of e-banking (banking though internet) in a typical
developing country – Bangladesh, and its economic impact on local financial institutions.
Currently, Bangladesh is far behind in terms of e-banking development and applications.
More specifically, while it is a fact that currently many banks in Bangladesh have
implemented e-banking services, however, comparing with most developed countries,
the e-banking application in Bangladesh is only in its infancy stage and there is a
huge gap to be fulfilled with new research and development effort. As such, addressing
the current issues and challenges in the development of e-banking in Bangladesh is the
primary motivation of this research.
 Recent trends and developments in e-banking in an underdeveloped nation 117

2 Literature review

For the past two decades, the banking sector has chosen a new service channel based on
the progress of information technology – internet to respond to the changes in customer
preferences and needs, increasing competition from non-banks, changes in demographic
and social trends, and government deregulations of the financial service sector (Byers and
Lederer, 2001). In the search for sustainable competitive advantages in the technological
financial service industry, banks have acknowledged the value to differentiate themselves
from other financial institutions through new service distribution channels (Daniel, 1999).
In addition, customer’s transaction and communication abilities have been improved by
the developments of information technology. Information technology enabled electronic
channels to perform many banking functions that would traditionally be carried out
over the counter (Giannakoudi, 1999). The rise of electronic payments media such as
debit and credit cards has caused the value of cheques paid in the USA to fall to – from
about $49 billion in 1995 to about $42 billion in 2002 (Gerdes and Walton, 2002).
Furthermore, the use of paper cheques has been supplemented step-by-step with
e-cheques (i.e., electronic images) allowing banks to have more storage capacity, reduce
costs, and improve customer services (Rose and Hudgins, 2005).
Banks have traditionally been in the forefront of harnessing technology to
improve their products and services. They have over the time been using electronic and
telecommunication networks for delivering a wide range of value added products and
services. The range of services and products offered by different banks vary widely both
in their contents and sophistication. E-banking provides enormous benefits to consumers
in terms of the ease and cost of transactions (Liu, 2008). However, it can be thought of as
a service that allows customers to use some types of computers to access account-specific
information and possibly conduct transactions from a remote location – such as at home
or at the workplace (Saleh and Andrea, 2002).
The growth in e-banking with the increase in the range of interface options available
to access online banking solutions has resulted in a steady increase in the number of
customers interacting through remote channels to a greater extent than before. In a
climate of increasing online competition, banks that have chosen to retain extensive
branch networks are re-aligning the roles of staff in these branches and moving towards a
relationship-driven sales culture (Durkin, 2007). E-banking has been around for some
time in the form of automated teller machine and telephone transactions. More recently,
it has been transformed by the internet – a new delivery channel that is fast, convenient,
available round the clock, and from whatever the customer’s location (Saleh and
Andrea, 2002). E-banking also can increase competition among banks, and allows banks
to penetrate new markets and thus expand their geographical reach. Some even see
e-banking as an opportunity for countries with underdeveloped financial systems to
leapfrog into advanced stages (Gao and Owolabi, 2008). Customer in such countries can
access services more easily from banks outside one’s own country through wireless
communication systems, which are developing more rapidly than traditional ‘wired’
communication networks (Gao and Owolabi, 2008).
A more recent e-banking development is wireless internet applications of banking
sometimes called m-banking (mobile banking) (Choi et al., 2006; Scornavacca and
Hoehle, 2007). With the combination of two most recent technological advancements
– internet and mobile phone, a new service (mobile data service) is thus enabled and
118 J. Yang and K.T. Ahmed

the first such wireless internet commercial transaction is performed by the banking
industry (Barnes and Corbitt, 2003). It is believed that m-banking will provide
another new channel for banking services, especially for certain remote areas where
online internet is still unavailable. Strategic implications and customer perception of
m-banking services are explored (Laukkanen and Lauronen, 2005) with a focus on the
consumer value creation and a better understanding about the customer-perceived value
of m-banking services. For instance, mobile internet service has been quite popular
in Japan (over 60 millions users in 2003) especially for those young and single
(i.e., unmarried) consumers (Scornavacca and Barnes, 2004). A summarised literature
review is described below.

2.1 Electronic banking

Electronic distribution channels provide alternatives for faster delivery of banking
services to a wider range of customers (Kaleem and Ahmad, 2008). E-banking is the
newest delivery channel of banking services. The definition of e-banking varies amongst
researchers partially because e-banking refers to several types of services through which
a bank’s customers can request information and carry out most retail banking services via
computer, television or mobile phone (Mols, 1998; Sathye, 1999). E-banking can also be
defined as a variety of the following platforms:
• internet banking (or online banking)
• telephone banking
• TV-based banking
• mobile phone banking
• PC banking (or offline banking) (Kolodinsky et al., 2004).
Most of the consumers who start banking online do it because they need to pay bills
frequently and would like to do it with minimum effort. Besides that, people use
the internet banking to keep an eye on their money matters, view their account balance
and check receiving payments from other parties. E-banking technologies can be
classified as either ‘passive’ or ‘active’ (Kolodinsky et al., 2004). Passive technologies
such as direct deposit do not require behavioural changes on the part of the
consumer. These innovations are therefore more easily spread to the mainstream.
Active technologies on the other hand, require new behaviour and are therefore more
challenging to propagate (Servon and Kaestner, 2008). E-banking requires perhaps
the most consumer involvement, as it requires the consumer to maintain and regularly
interact with additional technology such as a computer and internet connection
(Kolodinsky et al., 2004).

2.2. Different forms of electronic banking

The terms ‘PC banking’, ‘online banking’, ‘internet banking’, ‘telephone banking’ or
‘mobile banking’ refer to a number of ways in which customers can access their
banks without having to be physically present at the bank branch. E-banking may be
understood as a term that covers all these ways of banking business electronically
(Leow and Bee, 1999):
 Recent trends and developments in e-banking in an underdeveloped nation 119

• Tele-banking: Tele-banking service is provided by phone. To access an account

it is required to dial a particular telephone number and there are several options
of services.
• PC-banking: 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, i.e., customers can use their personal computers at home or at their office to
access their accounts for transactions by subscribing to and dialling into the banks’
intranet proprietary software system using password.
• Internet banking: Internet banking would free both bankers and customers of the
need for proprietary software to carry on with their online banking transactions.
Customer behaviour is changing rapidly. Now the financial service is characterised
by individuality, independence of time and place and flexibility. These facts
represent huge challenges for the financial service 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.
• Mobile banking (m-banking): A more recent e-banking development is wireless
internet applications of banking – sometimes called m-banking. With the
combination of internet and mobile phone, a new service (mobile data service) is
thus enabled and the first such wireless internet commercial transaction was
performed by the banking industry (Barnes and Corbitt, 2003).

2.2.1 Importance of e-banking

Thornton and White (2001) compared several electronic distribution channels available
for banks in the USA and concluded that customer orientation – towards convenience,
service, technology, change, knowledge about computing and the internet – affected
the usage of different channels. Howcroft et al. (2002) found that the most important
factors encouraging consumers to use online banking are lower fees, less paperwork,
and reduced human errors, which subsequently minimise disputes. Recent research also
suggests that increased use of online banking and bill paying can actually decrease
the occurrence of identity theft by taking personal information outside the mailbox
and eliminating a paper trail (Stafford, 2004). Gerrard and Cunningham (2003) found
a positive correlation between convenience and online banking and remarked that a
primary benefit for the bank is cost saving and for the consumers a primary benefit
is convenience.
E-banking does not only encompass the way one shops over the internet, but also the
ways one carries out banking transactions. This allowed customers, more independence
in the choice on where and when to bank. It is an obligation for banks to apply better
strict security levels due to the many kinds of threats that are recently identified with
these alternative channels (Smith, 2006). E-banking provides a number of advantages for
both the banks and their customers:
• It removes geographical limitations for small and medium size banks, thereby paving
ways for international operation without limits.
• It has no time limitation, i.e., banking transactions may be performed throughout
the day, week and from any place they can have access to the internet.
120 J. Yang and K.T. Ahmed

• It provides efficient cash management for interest optimisation.

• It provides convenience in terms of the capital, labour time and all the resources
needed to make a transaction.
• It has assisted banks to increase in data collection, data management, and financial
engineering that have improved the ability of potential creditors to assess the
creditworthiness of potential borrowers and to price the risk associated with those
borrowers through standardised mechanisms such as credit scoring (Ziqi and
Michael, 2003; Carlson et al., 2000).
E-banking has emerged as a significant and rapidly growing component of the world
economic exchange. Through e-banking the world economic exchange has been reduced
to a tiny global village in terms of its information capacity and the resources it holds
which can be accessed by anybody from anywhere in the globe (Hwang et al., 2007).

2.2.2 Current issues of e-banking

There are several major challenges and issues facing the e-banking industry today.
First, and perhaps most important is the security concern (Feinman et al., 1999;
Ziqi and Michael, 2003). Customers are certainly concerned of giving their bank account
information online or paying an invoice through internet. Another challenge facing
e-banking industry and the e-business in general is the quality of delivery service
– including both delivery speed (i.e., short advance time required in ordering)
and delivery reliability (i.e., delivery of items/services on time) (Furst et al., 2000),
which caused many e-business failures in the earlier dot.com era. Limited online
payment options have resulted in many customers to drop out in the last stage of the
purchasing process due to dissatisfaction and inconvenience. Finally, the issue of
customer unfamiliarity with the internet, which is prominent among senior citizens,
has recently caught some attention, because these customers believe that they are left
at a disadvantageous position and become very reluctant in doing business online
(Yang et al., 2007). Currently there are two different approaches in the e-banking
industry: a separate (from its traditional office) internet e-bank (i.e., virtual bank) with all
transactions being transacted online, or to add an online banking section to the services
already being offered by its major bank office (Hackett, 2000; Hughes, 2003; Sweeney
and Morrison, 2004).
This paper describes an empirical study of investigating recent trend and
development of the application of e-banking (banking through internet) in a typical
developing country – Bangladesh – one of the less-developed developing countries
in the world. While the e-banking application has advanced significantly during recent
years, especially in the developed nations and most emerging new economic power
nations (like China, South Korea, etc.), but in comparison, the development of e-banking
application is way behind in many relatively poor and underdeveloped nations (like many
nations in South Asia and Africa) (Gao and Owolabi, 2008). Currently, Bangladesh is
far behind in terms of e-banking development and applications, though many banks in
Bangladesh have been implementing e-banking during recent years. It is believed that
this is a typical underdeveloped country and its current e-banking application should be
quite representative to other similar nations.
 Recent trends and developments in e-banking in an underdeveloped nation 121

The primary objectives of this research are:

• to investigate the current state of e-banking development in Bangladesh
• to examine if the introduction of e-banking during last few years has improved the
efficiency and effectiveness of the bank’s operations
• to evaluate whether the implemented e-banking system has been able to help in the
curtailment of fraud in commercial banks of Bangladesh
• to highlight the challenges and dilemmas that the e-banking system is currently
facing in Bangladesh.

3 Research methodology

The original data for this research are collected through a comprehensive web-based
questionnaire survey (see Appendix), as well as some interviews with several
bankers from selected banks in Bangladesh. As shown in Appendix, the questionnaire
items are designed to capture bankers’ perceptions regarding e-banking, demographic
features, strategic considerations, operating issues, its effects on banks, customer-bank
relationships, technology considerations, and services offered through e-banking system.
This study focuses on the effect of e-banking on banks’ strategic and operational
dimensions. Strategic issues include such factors as threats posed by e-banks and the need
to offer internet banking; operational issues include providing better customer service,
lowering transaction costs, and providing additional financial services to customers. A set
of items was generated to gauge banks’ perceptions on the strategic and operational
impact of internet banking. Moreover, the questionnaire also focused on some related
demographic features which describe the size of the banks in terms of assets and their
customers. Similarly items are crafted to assess the benefits and services the customers
are getting by using the e-banking, as well as the technological considerations.
In the survey, those operational and strategic questions and benefit of the
e-banking are measured by the normally used five-point Likert scale (1 = strongly
disagree; 5 = strongly agree). In comparison, to make the questions easy to answer by
survey participants, those technological items are designed with simple ‘Yes’ or ‘No’
choices. For those items which may have multiple selections (like demographic and
current available e-banking services) the questionnaire was designed using ‘Check all
that apply’ option.
After an extensive and persistent selection effort in the city of Dhaka, Bangladesh,
there are 18 banks randomly selected to participate in this research. The survey results are
discussed in the next section.

4 Result analysis

The results of Questions 1–3 of the survey are presented in Figures 1 and 2,
showing the basic demographic information pertaining to the e-banking in Bangladesh.
From Figure 1, it can be seen that the asset size of the commercial banks in Bangladesh
is not very healthy. Most of the banks’ asset fall into the category of less than $20 million
122 J. Yang and K.T. Ahmed

range. Only two banks’ total asset is more than $100 million which represent that most of
the commercial banks in Bangladesh are not very healthy in terms of their asset size.
It may be surprising to see in Figure 2 that a huge majority of customers in Bangladesh
are either not familiar with the e-banking services and not using it at all or using
e-banking rarely – there are 50% of customers with ‘Less than 25%’ e-banking services
usage followed by 44% customers under ‘26% to 50%’ e-banking practice category.
These data clearly indicate that although e-banking service has been offered by most of
the commercial banks in Bangladesh, but a majority of people are either not familiar with
the system or not willing to use the e-banking service.

Figure 1 Total assets of surveyed banks (see online version for colours)

Total Asset of Banks

11%
39% Less than $20 million
22%
Between $20 and $30 million
Between $50 and $99 million
More than $100 million
28%

Figure 2 Percentage of current bank customers using e-banking services (see online version
for colours)

Percentage of customers using the E-banking system

6% 0%

Less than 25%

26% to 50%
51% to 75%
50%
44% 0ver 75%

The results about the e-banking operational issues are summarised in Table 1. It can be
seen from Table 1 that almost 90% of the banks reported that the benefits of internet
banking outweigh the associated costs. This certainly should be viewed as a positive
sign from the business perspective, that all banks in a underdeveloped nation
(like Bangladesh) have been convinced to believe in the benefit and the potential
from the development of e-banking services – which could be the primary motivation for
those banks in their future e-banking development. In addition, the participating banks
 Recent trends and developments in e-banking in an underdeveloped nation 123

reported benefits in the following areas: increases in the customer base (72.22%),
improvements in customer service (88.89%), lower transaction costs (83.33%),
opportunities to offer additional services (e.g., insurance, brokerage services, credit
card applications) (94.44%), secured the customer’s personal information (83.33%),
and increased customer satisfaction (88.89%). All are remarkable improvements from
banks’ operational perspective. Clearly, it is evidenced that even in an underdeveloped
nation (like Bangladesh), the banks offering e-banking services will have much more
competitive advantages compared to their counterpart who do not offer e-banking
services. However, only 27.78% of the respondents believed that customer accounts
would be less costly to maintain through internet banking. The survey also revealed that
more customer training/education is needed (61.11%) in promoting e-banking services.

Table 1 Result summary of operational issues

Operational measures of e-banking Mean % Agreeing % Neutral % Disagree

1. Benefit outweigh the cost 4.28 88.89 11.11 0
2. Allows banks to increase customer base 3.61 72.22 16.67 11.11
3. Improves customer service 4.33 88.89 11.11 0
4. Lowers transaction costs 3.78 83.33 0 16.67
5. Offers opportunities to provide 4.22 94.44 5.56 0
additional services
6. Accounts are less costly to maintain 2.72 27.78 27.78 44.44
7. More customer training/customer 3.67 61.11 27.78 11.11
education is needed in promoting
e-banking services.
8. E-banking services will enhance your 4.17 83.33 16.67 0
competitive position in the market.
9. Your e-banking services increased the 3.83 88.89 11.11 0
degree of customer satisfaction.
10. Your bank believes that the customer’s 4.00 83.33 16.67 0
personal information security is better
now than it was before.
Notes: Items are measured using a five-point Likert scale (1 = Strongly Disagree;
5 = Strongly Agree).

Table 2 displays the result from the survey pertaining to the strategic considerations.
For example, about half (50%) of surveyed banks believed that developing e-banking
services is essential for a bank’s survival in the marketplace and thus mandatory in order
to compete effectively. In addition, 39% of banks reported that banks not offering
internet banking services would lose customers to other banks and the rest (61%)
responded neutrally about this strategic issue. All surveyed banks (100%) agreed that
internet banking improves bank’s efficiency so that they can offer better services.
Furthermore, a majority (89%) of the respondents said that they have established
e-banking into their banks’ future strategic planning. The same amount of respondents
(89%) also believed that using the e-banking system gives their banks an impression of a
progressive bank in the market. All the above confirm the fact that has been observed in
the development of e-banking industry in the current developed nations.
124 J. Yang and K.T. Ahmed

Table 2 Result summary of strategic considerations

Strategic considerations of e-banking Mean % Agreeing % Neutral % Disagree

1. Essential for banks’ survival 3.50 50 38.89 11.11
2. Gives the impression of a 3.56 88.89 11.11 0
cutting edge bank
3. Important to compete effectively in the 4.11 88.89 11.11 0
near future
4. Banks not offering internet banking 3.39 38.89 61.11 0
will lose their potential customers
5. Improve bank’s efficiency so that bank 4.28 100 0 0
can offer better services
6. Your bank has established 4.17 88.89 11.11 0
e-banking into your bank’s future
strategic planning.
Notes: Items are measured using a five-point Likert scale (1 = Strongly Disagree;
5 = Strongly Agree).

For the questions towards assessing the impact of e-banking on the bank’s customers,
the results are displayed in Table 3. As using e-banking implies to the customers
the potential reduction of physical visits to the banks, easy online payment, viewing the
statement online anytime, and accessing on the account around the clock, positive
responses are expected. Not surprisingly, as seen in Table 3, a majority of surveyed
banks (77.78%) view that e-banking service has significantly benefited their customers.
For instance, over 88.89% indicated that the availability of e-banking reduced the
frequency of customer visits to a physical bank, which in turn saves time and money
for both customers and bankers. Most surveyed banks (72.22%) responded that
customers can access to accounts around the clock is one of the most important features
of e-banking to the customers. Customers can view the monthly statement and make
payment online is viewed another important benefit (77.78%). A majority of bankers
(55.56%) believe that customers enjoy their benefit by using the e-banking, and about
72.22% agree that customers are secured in using e-banking.

Table 3 Result summary of e-banking benefits to customers

E-banking benefits to customers Mean % Agreeing % Neutral % Disagree

1. Customers are getting substantial amount 3.89 77.78 22.22 0
of benefits
2. Reduces the frequency of customer visits 4.06 88.89 11.11 0
to a physical bank
3. Customers can view online monthly 3.94 77.78 22.22 0
statement and make payment online
4. Customers enjoy their benefits by using 3.67 55.56 44.44 0
the e-banking
5. Customers can access to accounts 3.94 72.22 22.22 5.56
around the clock
6. Customers are secured in using e-banking 4.00 72.22 22.22 5.56
Notes: Items are measured using a five-point Likert scale (1 = Strongly Disagree;
5 = Strongly Agree).
 Recent trends and developments in e-banking in an underdeveloped nation 125

Technological issues of e-banking development are also part of interest in this research,
and the results from the survey about those technology related considerations are
displayed in Table 4. Some important implications can be learned from Table 4,
for example, a majority of the banks (78%) reported that they are lack of high quality IT
professionals to design and develop their e-banking systems, a clear signal for the lack
of higher education institutions and training capacity in a least-developed country like
Bangladesh. That is confirmed when over half (57%) indicate that they had difficulties
in finding and recruiting talented high quality IT individuals to run their e-banking
operations. In addition, only half (50%) of the banks believe that government is providing
enough support to train more qualified IT professional in order to meet this demand
for e-banking development (and other high technology industries). And consequently,
only 28% of banks agree that maintaining such an e-banking system is an easy task.
The results above clearly indicate that while the shortage of talented IT professionals
in the information technology and specifically in the e-commerce area may be a major
short-term obstacle in the further development of e-banking in Bangladesh, but to build
more modern up-to-date high quality higher education institutions and the foundation to
improve the educational level of general population by the government and the society as
a whole should be a real long-term solution.

Table 4 Technological considerations in e-banking

Technological considerations of e-banking Yes (%) No (%) Total (%)

Deficiency of IT Professionals 78 22 100
Difficulty in Recruiting Qualified Professionals 57 43 100
Government Support 50 50 100
Technological Constraints 28 72 100

The final two sections of the survey are focused on the current available e-banking
services and the areas to assist potential customers by the banks in promoting
e-banking system. The results about the current available e-banking services (provided by
the surveyed banks) are displayed in Figure 3. It is interesting to see that in this research,
less than half of surveyed banks (39%) currently offer online enquiry and transfers
service – the very basic service of any e-banking systems in the developed nations.
While over 50% of selected banks (61.11%) provide online billing payment service,
may be a positive sign. In contrast, only one-third of banks (33.33%) allow online
deposit account service. As expected, most advanced e-banking services such as: online
small business loans and online trust fund are all very limited (less than 5%), quite
insignificant. The above results confirm the presumption of this research that there
is a huge gap between those well developed and new emerging economic powers
(like the USA, European nations, and China) and those least-developed nations (like
Bangladesh) in terms of the development and application of e-banking services,
as well as other high-tech industries. While an international help from world’s developed
nations certainly will be a big plus, but the policies and appropriate effort of the
governments of those least-developed nations will be the key to reduce this gap in the
foreseeable future.
126 J. Yang and K.T. Ahmed

Figure 3 List of e-banking services currently provided (see online version for colours)

E-banking services
Online inquiry and transfers

Online bill-pay

23% 27% Online mortgage application

0%
Online small business loans
4%
Online trust funds
4%
42%
0% Online investment and options
management
Online deposit accounts

In terms of e-banking application in a least-developed nation, an appropriate education

and training of potential customers is another critical area. As seen in Figure 4,
in this research, a positive sign is that a majority of surveyed banks currently provide
some kind of help to their customers. These assistances include employees’ assistance,
personal service over telephone, e-mailed instructions, website ‘help’ capabilities, etc.
More specifically, about 45% of surveyed banks offer assistance to their customers
through e-banking brochures, 11% of banks offer customer training, and another
11% have online e-banking demos to their customers. A conclusion here is that those
efforts should be enhanced further in the future e-banking development in those
least-developed nations.

Figure 4 Available assistance to e-banking customers (see online version for colours)

Help or Assistance provided to customers

30%
Brochures
48%
Training
Online banking demo
Others
11%
11%
 Recent trends and developments in e-banking in an underdeveloped nation 127

5 Summary and future research

This paper describes an empirical study about the major issues and challenges in
the development of e-banking applications faced in relatively underdeveloped nations
– based on a case study in a typical underdeveloped nation – Bangladesh. The research
objective is to investigate the current trend and development of e-banking industry and
therefore to provide managerial insights for the banking industry in those underdeveloped
nations. The primary data for this study are collected through a carefully designed survey
questionnaire, and in the survey, over 18 commercial banks in this underdeveloped nation
are randomly selected. This research shows that even in a least-developed developing
nation, the application of e-banking can help their local banks to reduce related operating
costs and provide a better and fast service to their customers.
However, this research also reveals that there is a huge gap between those
well developed and new emerging economic powers (like the USA, European nations,
and China) and those least-developed nations (like Bangladesh) in terms of development
and application of e-banking services. For example, there is still a huge population in
these least-developed nations are either not familiar with the e-banking services and not
using it at all, although e-banking service has been offered by local commercial banks.
In addition, there is a large shortage in those least-developed nations in terms of
high quality IT professionals to design, develop, and operate their e-banking systems.
A learned implication is that reducing such a shortage of talented IT professionals in the
information technology through high quality training may be a short-term answer to this
challenge in the further development of e-banking application, but to develop up-to-date
high quality higher education institutions and the foundation to improve the educational
level of general population by the government and the society (as a whole) should be a
real long-term solution. To realise the above objective, while an international help
(especially from those developed nations) will be a big plus, but the policies and
commitments of the governments of those least-developed nations will be the key to the
expected success.
This research has some limitations. First, due to the time constraint, a larger sample
size was not obtained. Furthermore, the sample did not include those working in the
government-owned banks in Bangladesh. In addition, in order to avoid a very lengthy
survey questionnaire, some important and related e-banking issues (i.e., specific
technological obstacle) are not covered in the designed questionnaire.

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Appendix
Questionnaire about e-banking in Bangladesh
E-banking Please refer to all banking activities/transactions through internet for this research

Responses
Demographic issues (Please select only one for each question below)
Internet banking
1. What are the total assets of your bank? [ ] Less than $20 million
[ ] Between $20 and $30 million
(Small vs. Large) [ ] Between $50 and $99 million
[ ] More than $100 million

2. Based on your estimate, how many of your customers [ ] Less than 25%
have been using the e-banking services from [ ] 26% to 50%
your branch?
[ ] 51% to 75%
[ ] Over 75%

3. Based on your estimate how many total numbers of [ ] Less than 500
customers you have in your branch? [ ] 501 to 2000
[ ] 2001 to 5000
[ ] 5001 to 8000
[ ] 8001 to 10 000
[ ] Over 10 000
Strongly Strongly
Agree Agree Neutral Disagree Disagree
Operational issues (5) (4) (3) (2) (1)
Please rank the following statement with
5-Strongly Agree; 4-Agree; 3-Neutral; 2-Disagree;
1-Strongly Disagree.
Internet banking
4. Benefit outweigh the cost
5. Allows banks to increase customer base
6. Improves customer service
7. Lowers transaction costs
8. Offers opportunities to provide
additional services
9. Accounts are less costly to maintain
10. More customer training/customer education is
needed in promoting e-banking services.
11. E-banking services will enhance your
competitive position in the market.
12. Your e-banking services increased the degree of
customer satisfaction.
13. Your bank believes that the customer’s personal
information security is better now than it
was before.
 Recent trends and developments in e-banking in an underdeveloped nation 131

Questionnaire about e-banking in Bangladesh (continued)

Strongly Strongly
Agree Agree Neutral Disagree Disagree
Strategic issues (5) (4) (3) (2) (1)
Please rank the following statement with
5-Strongly Agree; 4-Agree; 3-Neutral;
2-Disagree; 1-Strongly Disagree.
Internet banking
14. Essential for banks’ survival
15. Gives the impression of a
cutting edge bank
16. Important to compete effectively in
the near future
17. Banks not offering internet banking
will lose their potential customers
18. Improve bank’s efficiency so that
bank can offer better services
19. Your bank has established
e-banking into your bank’s future
strategic planning.
Benefit of the e-banking to the customers
20. Customers are getting substantial
amount of benefits
21. Reduces the frequency of customer
visits to a physical bank
22. Customers can view online monthly
statement and make payment online
23. Customers enjoy their benefits by
using the e-banking
24. Customers can access to accounts
around the clock
25. Customers are secured in using
e-banking
132 J. Yang and K.T. Ahmed

Questionnaire about e-banking in Bangladesh (continued)

Technological issues Yes (1) No (2)
Please check the following statement with 1-Yes; 2-No
Internet banking
26. Do you believe that you have the deficiency of qualified IT
professional to run the e-banking?
27. If your answer to question number 28 is yes, do you have the
difficulty to recruit enough qualified professional?
28. Do you believe that government is supporting to generate
more and more qualified IT professional?
29. Is e-banking technologically easy to maintain?
Current e-banking services provided Responses (Please check all that apply)
Internet banking
30. Does your bank currently offer any of [ ] Online inquiry and transfers
the following new services? [ ] Online bill-pay
[ ] Online mortgage application
[ ] Online small business loans
[ ] Online trust funds
[ ] Online investment and options management
[ ] Online deposit accounts
31. Does your bank currently offer any of [ ] Online cheque order
the following new services? [ ] Online order of travellers cheques
[ ] Online money order
[ ] Online order of traveller’s cheques
[ ] Online money order
[ ] E-signature
32. What kind of help or assistance is [ ] Brochures
offered to your e-banking customers?
[ ] Training
[ ] Online banking demo
[ ] Others (e.g., employee assistance, personal
service over the telephone, e-mailed
instructions, website ‘help’ capabilities)