Adoption of e-Banking in Context of a Developing Country ...

Adoption of e-Banking in Context of a Developing

Country, Pakistan

By

Mohammad Mohsin

CIIT/SP03-PCS-001/ISB

PhD Thesis

In

Computer Science

COMSATS Institute of Information Technology

Islamabad-Pakistan

Fall, 2009

II

COMSATS Institute of Information Technology

Adoption of e-Banking in Context of a Developing Country, Pakistan

A Thesis Presented to

COMSATS Institute of Information Technology, Islamabad

In partial fulfillment

of the requirement for the degree of

PhD (Computer Science)

By

Mohammad Mohsin

CIIT/PhD/CS-03/001/ISB

Fall, 2009

III


A Post Graduate Thesis submitted to the Department of Computer Science as

partial fulfillment of the requirement for the award of Degree of PhD (Computer

Science).

Name Registration Number

Mohammad Mohsin CIIT/SP03-PCS-001/ISB

Supervisor

Dr. Sajjad Mohsin

Professor, Department of Computer Science

Islamabad Campus

COMSATS Institute of Information Technology (CIIT)

Islamabad.

February, 2010

________________________________________________________________________

IV

Final Approval

This thesis titled


By

Mohammad Mohsin

CIIT/SP03-PCS-001/ISB

Has been approved

For the COMSATS Institute of Information Technology, Islamabad

External Examiners:

Prof. Dr. Arshad Ali,______________________________________________ School of Electrical Engineering and Computer Science (SEECS) National University of Science & Technology (NUST) Islamabad, Pakistan Prof. Dr. Ammanullah Khan,_______________________________________ Department of Computer Science Bahauddin Zakariya University (BZU) Multan, Pakistan

Supervisor: ______________________________________________________________

Prof. Dr. Sajjad Mohsin

Department of Computer Science, Islamabad

HoD: __________________________________________________________________

Dr. Nasro-Min-Allah

Department of Computer Science, Islamabad

Dean, Faculty of Information Sciences and Technology ___________________________

Dr. Sajjad Mohsin

V

Declaration

I, Mohammad Mohsin registration number CIIT/SP03-PCS-001/ISB hereby declare that I

have produced the work presented in this thesis during the scheduled period of study. I

also declare that I have not taken any material from any source except referred to

wherever due. If a violation of HEC rules on research has occurred in this thesis, I shall

be liable to punishable action under the plagiarism rules of the HEC.

Signature of the Student: Date (Revised Submission): 18-06-2012

_____________________ Mohammad Mohsin

(CIIT/SP03-PCS-001/ISB)

VI

Certificate

It is certified that Mr. Mohammad Mohsin, Registration Number CIIT/SP03-PCS-

001/ISB has carried out all the work related to this thesis under my supervision at the

Department of Computer Science, COMSATS Institute of Information Technology,

Islamabad and the work fulfills the requirement for award of PhD degree.

Date: February, 2010 (Original Submission) January, 2012 (Revised Submission)

Supervisor:

____________________________________Professor Dr. Sajjad Mohsin

Dean, Faculty of Information Sciences & Technology

Head of Department:

_________________________________________

Dr. Nasro-Min-Allah, Associate Professor & Head

Department of Computer Science, CIIT, Islamabad

VII

DEDICATION

Dedicated to my parents and family

VIII

ACKNOWLEDGEMENTS I would like to express my sincere gratitude to my supervisor Dr. Sajjad Mohsin and to

my ex-supervisors Dr. Romana Aziz and Dr. Abul Faiz Muhammad Ishaq, for their

guidance and support throughout the course of this research. Their constant

encouragement kept me going even in the most difficult of times.

I am indebted to Dr. John Ward, Dr. Mehmood Shah and Dr. Shariq Khoja for their help

and counsel.

I would also like to thank:

the Advisory committee members for their guidance;

the Higher Education Commission (HEC) Pakistan for funding the research;

the faculty and administration of COMSATS Institute of Information Technology, in

general, and department of computer science in particular, for extending valuable

academic and administrative support;

Managing Director NIBAF, Mr. Kazi Abdul Muqtadir, for his invaluable help and

facilitating meetings with the experts and access to the banking organizations;

all the research participants for their valuable time and the access provided;

Hassan Z. Ali, S. M. Shakeel, and M. Khalil for the time and effort spent, checking the

translations of the data collected in the interviews; and

my brother and sisters for their prayers and my wife and children for their patience and

support.

And last, a very special thanks to the Rector CIIT, Dr. Junaid Zaidi, who spared time to

guide me on numerous occasions and without his inspiration and support the completion

of this research, would have been much more difficult.

Mohammad Mohsin,

( CIIT/SP03-PCS-001/ISB)

IX

ABSTRACT

Adoption of e Banking in Context of a Developing Country, Pakistan

Based on the notion of e-Readiness, this research aims to provide a detailed and original

explanation of the factors that may affect the adoption of Internet banking, which is a

relatively latest variant of electronic banking, by banking organizations in Pakistan.

Moreover, it explores the relationship between Internet banking adoption and the contextual

factors in a way to classify and relate these factors according to their role assessed in the

adoption of Internet banking. The existing body of knowledge in this area is mainly

concentrated in the cultural context of developed countries which fails to capture the

idiosyncrasies in the contextual environment of the banks in Pakistan and hence their affect

on the adoption of Internet banking. In Pakistan, there is very little research conducted on

banking organizations, particularly none of research studies has addressed the factors and

their role in influencing Internet banking adoption in Pakistan, the focus of this research.

This study uses mixed research methods in a manner in which the quantitative methods and

data analysis approach is employed to supplement the core of data analysis which is carried

out using qualitative and interpretive approach. First stage in this research involved, an online

survey of the entire banking sector of Pakistan which was conducted to assess the level of

Internet banking functionality extended by the banking organizations in Pakistan. Next, the

key factors influencing the adoption of Internet banking were identified through field

interviews and case study on a banking organization. This was followed by case studies on

three banking organizations two of which had already adopted Internet banking and the

remaining one was contemplating to adopt. And finally, data was collected through a web

based survey from eighteen banking organizations to supplement the analysis of case studies.

This research identified the following factors as the key factors influencing the adoption of

Internet banking; Organizational Readiness and its constituent factors namely Organizational

structure; Resources; Commitment; Adoption strategy; 2. Internal Technological Readiness

and its constituent factors namely Relative advantage, Security Risk, Compatibility,

Technology complexity); 3. External Technological Readiness and its constituent factors

namely Access Technology and Infrastructure; Availability of complementary assets; 4.

Environmental Readiness and its constituent factors namely Policy Readiness; Market

Readiness; and Society Readiness.

X

The research demonstrates that the factors shaping the internal e-Readiness dimension of an

organization are more likely to determine the decision on adoption of Internet banking.

Whereas, the factors that shape the external e-Readiness dimension of an organization are

likely to determine the decision to move to a next higher level of adoption. These factors based

on their perceived role in influencing the adoption of Internet banking were further classified

and grouped as Motivational, Inhibiting and Situational factors. Motivating factors included

commitment, compatibility, availability of complimentary assets, and relative advantage.

Inhibiting factors included security risk, technology complexity, access technology

infrastructure, market readiness, and society readiness factors. Situational factors included

organizational structure, adoption strategy, resources and policy readiness.

XI

LIST OF PUBLICATIONS

1. Shah, Mahmood H.; M. Mohsin, Mohmood, Zaigham; Aziz, Romana,“Organisational barriers in offering e-banking”, Journal of Electronic Commerce in Organizations, Vol. 7, Issue 2, pp 67-82, 2009.

2. A. F. M. Ishaq, M. Mohsin,“Mobile Commerce” in: "Encyclopedia of Wireless and Mobile Communications”, ISBN 978-1-4200-4326-6, Taylor & Francis Group, USA, 15 April 2008 . pp. 267-291.

3. Shariq Khoja, Richard Scott, M. Mohsin, A. F. M. Ishaq,“Developing a conceptual-framework for e-health readiness assessment tools for developing countries” International Hospital Federation Reference Book 2007/2008.

4. Shariq Khoja, Richard Scott, M. Mohsin, A.F.M. Ishaq,“e-health readiness assessment tools for healthcare institutions in developing countries” Journal of Telemedicine and eHealth, Vol. 13, Issue 4, pp 425-432, 2007.

5. M. Mohsin, A. F. M. Ishaq, Romana Aziz, Kazi Abdul Muqtadir,“A survey of Internet banking Websites of Pakistan” Journal of The Institute of bankers Pakistan, Vol. 73, Issue 3, pp 67-74, 2006.

6. A. F. M. Ishaq, M. Mohsin,“Mobile commerce applications” in: "Hand Book of Wireless Local Area Networks: Applications, Technology, Security and Standards", ISBN 0-8493-2323-1, Taylor and Francis CRC Press, USA, 2005. pp. 267-291.

7. M. Mohsin, A. F. M. Ishaq,“ Innovation adoption and diffusion research studies: a literature review”, Presented in International Conference on Contemporary Issues in Information Technology in OIC Members States, Islamabad-Pakistan, Jul. 26-27, 2005.

8. M. Mohsin, A. F. M. Ishaq,“A Review of information systems planning and a case study employing critical success factors (CSF) method”, Proceedings of the National Conference on Information Technology and Applications, Pakistan, Apr. 21-22, 2005. pp. 186-194

9. Abou Bakar Nauman, Romana Aziz, A Faiz M Ishaq, M. Mohsin,“An analysis of capabilities of Pakistan as an offshore IT services outsourcing destination”, Proceedings of the IEEE INMIC 2004 8th International Multitopic Conference Lahore-Pakistan, Dec. 24-26, 2004. pp. 403-408.

10. M. Mohsin, A. F. M. Ishaq, “A cross-country study of internet and cellular services diffusion among different telecom market structures”, Proceedings of The 2004 International Research Conference on Innovations in Information Technology, Dubai-UAE, Oct. 4-6, 2004. pp. 73-82.

11. M. Mohsin, Rana Muqtadir, A. F. M. Ishaq, “Mobile commerce - the emerging frontier: exploring the prospects, applications and barriers to adoption in Pakistan”, Proceedings of International Workshop on Frontiers of Information Technology, Islamabad - Pakistan, Dec. 23-24, 2003. Vol. II, pp. 387-400.

12. M. Mohsin, A. F. M. Ishaq, “Monitoring the diffusion of internet and cellular mobile service in Pakistan using a practical framework”, Presented in the Workshop on Development of IT indicators, Dec. 08, 2003. Islamabad, Pakistan.

XII

TABLE OF CONTENTS

Chapter 1. Introduction to Thesis 1

1.1 Research Rationale 1

1.2 Research Context 3

1.3 Research Scope and Problem 5

1.4 Research Objectives 7

1.5 Research Questions 8

1.6 Research Methodology 8

1.7 Thesis Structure 9

Chapter 2. Literature Review and Research Framework 12

2.1 Introduction 12

2.2 Some Key Definitions/Concepts 12

2.3 ICT Landscape in Pakistan 16

2.4 Electronic Banking and its Types 17

2.5 Electronic Banking in Pakistan 19

2.5.1 Electronic Banking Infrastructure in Pakistan 22

2.6 Theoretical Background and Framework 24

2.6.1 Contemporary Focus of the Adoption Related Research Stream in Developing Countries

26

2.6.2 Summary of the key Literature on Internet Banking Adoption

28

2.7 The Framework 33

2.7.1 Internal e-Readiness Dimension 34

2.7.1.1 Organizational Readiness 34

2.7.1.2 Technological Readiness 40

2.7.2 External e-Readiness Dimension 44


2.7.2.3 Environmental Readiness 47

2.8 Gaps in the Literature 49

Chapter 3. Philosophical Perspective and Research Strategy

50

3.1 Introduction 50

3.2 Philosophical Issues 50

3.2.1 Positivism 52

XIII

3.2.2 Interpretivism 53

3.3 Research Strategy 55

3.3.1 Survey 58

3.3.2 Case Study 60

3.4 Research Design 62

3.4.1 Research Process for the Preliminary Field Work

66

3.4.1.1 A Survey of Internet Banking Offerings in Pakistan

66

3.4.1.2 Pilot Field Study 66

3.4.1.3 Case Study Based on Secondary Data 68

3.4.2 Research Process for the Main Case Studies 69

3.4.2.1 Case Study Selection Criteria 70

3.4.3 Research Process for the Web Based Online Survey

71

3.4.3.1 Survey Design and Collection of data 71

3.5 Types of Data Collected 74

3.5.1 Data Collection Methods 75

3.6 Data Analysis 82

3.7 Research Design Quality 82

3.8 Conclusion 84

Chapter 4. Initial Research Work and the Development of the Research Framework

85

4.1 The Objectives of the Initial Research Work 85

4.2 Survey of Internet Banking Services in Pakistan 86

4.2.1 Framework and Methodology for Evaluation of Internet Banking Websites

86

4.2.2 Results and Discussions 88

4.3 Exploration of Organizational Issues in Offering Internet Banking in Context of Banks in a Developed Country

93

4.3.1 Background Information about the Participating Organizations

93

4.3.2 Results and Discussions 94

4.4 Pilot Field Study to Identify the Factors and their Role in the Adoption of Internet Banking in Context of Banking Organization(s) in Pakistan

100

XIV

4.4.1 Key Factors Influencing the Adoption of Internet Banking Identified in Field Survey

100

4.4.2 Pilot Case Study 103

4.4.2.1 Background Information about the Bank

103

4.4.2.2 Internal e-Readiness Dimension 104

4.4.2.3 External e-Readiness Dimension 110

4.4.3 Discussion of the Findings of the Field Survey and Case Study

112

4.5 Initial Propositions for Research 116

4.6 The Framework to Understand Internet Banking Adoption in Context of Pakistani Banks

118

4.7 Summary 120

Chapter 5. Case Studies 122

5.1 Introduction 122

5.2 Case Study I 122

5.2.1 Background Information about the Bank 122







5.3 Case Study II 136






5.3.3.1Technological Readiness 145


5.4 Case Study III 149




XV





5.5 Conclusion 160Chapter 6. Analysis of Case Studies 161


6.2 Assessment of the Level of Adoption 161

6.3 The Structure of the Analysis 164

6.4 Assessment of Adopter Category of Banks 165

6.4.1 Internal e-Readiness of Adopter Category of Banks

165



6.4.2 External e-Readiness of the Adopter Category of Banks

167



6.5 Assessment of the Planner Category of Bank 168

6.5.1 Internal e-Readiness of the Planner Category 168



6.5.2 External e-Readiness of the Planner Category 169



6.6 Analysis and Classification of Factors Involved 170

6.6.1 Motivating Factors 171

6.6.1.1 Commitment 171

6.6.1.2 Awareness of Attributes of Innovation 172

6.6.1.3 Availability of Complementary Assets 177

6.6.2 Inhibiting Factors 178

6.6.2.1 Awareness of Attributes of Innovation 178

6.6.2.2 Access Technology and Infrastructure 180

6.6.2.3 Market and Society Readiness 182

6.6.3 Situational Factors 184

XVI

6.6.3.1 Resources 184

6.6.3.2 Adoption Strategy 185

6.6.3.3 Organizational Structure 186

6.6.3.4 Policy Readiness 187

6.7 Discussion on the Initial Propositions Generated in the Pilot Field Study

188

6.8 Understanding this research in the light of IS Theories and Literature

190

6.9 Conclusion and Summary 195

Chapter 7 Analysis of Online Survey 197


7.2 Research Process 197

7.3 Analysis of Data 198

7.3.1 Integration of Value Adding IS with Internet Banking Channel

199

7.3.2 Relative Advantage of Adoption of Internet Banking

200

7.3.3 Statistical Analysis 202

7.3.3.1 Discriminant Analysis 202

7.3.3.2 Independent Sample T-test 204

7.4 Discussion 206







7.5 Chapter Summary 227

Chapter 8. Summary and Conclusions 229

8.1 Summary 232

8.2 Key Research Findings 233

8.3 Contribution to the Knowledge 235

8.4 Limitations of the Study and Areas for Further Research

239

Bibliography 241

XVII

LIST OF FIGURES

Figure 1.1 The research context model 7

Figure 1.2 Thesis outline 11

Figure 2.1 Types of electronic banking 18

Figure 2.2 A comparison of share of electronic vs. paper based banking in

Pakistan

120

Figure 2.3 Growth of various channels of e-banking in Pakistan 21

Figure 2.4 Number of cards in circulation in Pakistan 22

Figure 2.5 Growth of ATM’s and Online Branches in Pakistan 23

Figure 2.6 Conceptual framework of Internet banking adoption 34

Figure 3.1 Research design and stages 65

Figure 4.1 Evaluation of websites of banks in Pakistan 90

Figure 4.2 Comparison of Internet banking functionality 93

Figure 6.1 Assessed and projected level of adoption of each of the bank 163

Figure 6.2 IS adaptation of Diffusion of Innovation theory 191

Figure 7.1 Research process for the survey 198

Figure 7.2 Success in Integration of other value adding IS with Internetbanking

200

Figure 7.3 Comparison on investing in projects related to Internet banking 208

Figure 7.4 Comparison on awareness of Adopter and Planner banks 208

Figure 7.5 Comparison on vision of Adopter and Planner banks 209

Figure 7.6 Comparison on resources of Adopter and Planner banks 210

Figure 7.7 Top Management Support at Adopter and Planner banks 211

Figure 7.8 IT literacy and Internet Acces in Adopter and Planner banks. 212

Figure 7.9 Compatibility with change of Adopter and Planner Banks 213

Figure 7.10 Assessment of perceived technical, managerial, and other skills 214

XVIII

LIST OF FIGURES

Figure 7.11 Assessment of capacity to support applications requiring high

bandwidth

215

Figure 7.12 Assessment of experience in computer based network applications 215

Figure 7.13 Assessment of attitude in experimenting with new technologies 216

Figure 7.14 Perceptions on availability of reliable and efficient infrastructure 217

Figure 7.15 Perceptions on Support from local IT industry 218

Figure 7.16 Perceptions on secure electronic transaction environment 219

Figure 7.17 Perceptions on suitability of Internet banking for Pakistani society 220

Figure 7.18 Perceived trust among customers on the use of electronic services 221

Figure 7.19 Conduciveness of the legal environment to conduct business on the

Internet

222

Figure 7.20 Perceptions on effective laws to protect consumer privacy 223

Figure 7.21 Perceptions on security in conducting electronic banking

transactions

224

Figure 7.22 Perceived role of government in the promotion of Internet banking 224

Figure 7.23 Perceptions on awareness and demand among customers 225

Figure 7.24 Perceptions on preference for traditional way of doing business 226

XIX

LIST OF TABLES

Table 2.1 A comparison of share of electronic banking vs. paper based banking

in Pakistan

20

Table 2.2 Growth of various channels of e-banking 21

Table 2.3 Number of cards in circulation in Pakistan 22

Table 2.4 Growth of ATM’s and online branches in Pakistan 23

Table 2.5 Key literature on adoption of Internet banking and other related

innovations used in operationalization of the research framework

28

Table 3.1 Two opposite poles of research approaches 52

Table 3.2 Types of survey 58

Table 3.3 Data collection sources and method in the field survey 67

Table 3.4 Distribution of questionnaire items 72

Table 3.5 Scoring for items with favorable or conducive conditions 73

Table 3.6 Scoring for items with un-favorable or non conducive conditions 73

Table 3.7 Data types 75

Table 3.8 Data collection methods, purpose of the study and the type of data

collected

76

Table 3.9 Background details of interviews conducted for research 77

Table 3.10 Participant banks filling online questionnaire categorized as Adopter

and Planner banks

81

Table 3.11 Elements of research quality 83

Table 3.12 Reliability statistics for the internal consistency of the Instrument 84

Table 4.1 Categorization of websites of the banks 86

Table 4.2 List of components with names and number of constituent

components

87

Table 4.3 Degree of presence of banks in Pakistan on the World Wide Web 88

XX

LIST OF TABLES

Table 4.4 Detailed evaluation results 91

Table 4.5 List of organizational barriers/issues identified 95

Table 4.6 List of key factors influencing the adoption of Internet banking, as

identified through the pilot study with corresponding literature reference

102

Table 4.7 Initial propositions developed for further analysis 117

Table 4.8 Structure for data collection and analysis 119

Table 6.1 Grouping of factors according to their perceived role 172

Table 6.2 Comparison with IS theories and Literature 194

Table 7.1 Integration of other value adding IS with Internet banking channel 201

Table 7.2 Perceived benefits of adoption of Internet banking 201

Table 7.3 Analysis of Adopter and Planner category banks 203

Table 7.4 Independent Sample T-tests across Adopters and Planners of Internet

banking

204

Table 8.1 Grouping of factors according to their perceived role 238

XXI

LIST OF APPENDICES

Appendix-1 Questionnaire used in semi structured interviews 257

Appendix-II Questionnaire used in online survey 262

Appendix-III List of participants interviewed in pilot and main studies 265

Appendix-1V List of participants in the online survey 267

Chapter 1

1

Chapter 1. Introduction to Thesis

1.1 Research Rationale

Truly man has been able to traverse a large distance in time to achieve improved living,

interaction and transformation from an agri-economics to industrial-economics and to the

information economy. Interaction of multiple forces have contributed in transforming the

world economy. Disruptive forces of revolution, globalization of markets, widespread

diffusion of information and communication technologies (ICT), the rise of the

information economy and decentralization of structures are commonly acknowledged as

important forces shaping the world economy [1, 2]. These multiple forces are not uniform

in all the regions of the world and hence the changes vary in their intensity in relation to

their geographical locations. Amongst these forces of change, information economy is

visibly one of the most prominent forces of change in the world economy. This

information economy in itself is characterised and driven by the unprecedented and

continuing growth in ICT with Internet as its latest variant. The Internet, which is a

shared global computing network, has to a considerable extent, eliminated the

geographical barriers between different regions of the world. This has in turn created an

opportunity for the individuals, organizations, communities, and countries to participate

in the activities of the global networked economy. Advances in Internet technologies

along with other active agents of change are transforming the world economy into a

‘global economy’ enabling business transactions in real time on a global scale [1].

According to El-Sawy et al. [3] the Internet is creating a new type of economy that may

be called the ‘digital economy’. He further argues that this emerging economy is bringing

with it new forms “of IT-enabled inter-mediation, internet banking, virtual supply chains,

rapidly changing electronic Commerce (e-Commerce) technologies, increasing

knowledge intensity, and unprecedented sensitivity of time-to-market by customers”.

Barras [4] described the financial sector as ‘the vanguard of the service revolution’ and

claimed that the diffusion of ICT innovations from the banks to the rest of the service

sector would eventually reap benefits for the whole world economy. Many researchers

have considered the implications of developments in information technology (IT) to be so

pervasive that they will eventually contribute towards a new wave of economic growth at

a macro level, with attendant rewards for its central character [5-7]. The banking sector is

a fundamental part of an economy and in order to effectively promote and participate in

Chapter 1

2

the emerging economy initiatives, banking organizations need to cope both with major

changes in information and communication technologies and with the kind of rapid

changes in the wider social and economic environment that are endemic to modern

society.

Internet banking, embodying the use of Internet as a delivery channel for banking

products and services, is one of the latest of the several generations of electronic banking

systems that has attracted increasing attention from banks and other financial services

industry participants [8]. A number of operational, tactical and strategic implications such

as reduction in transaction cost, enhanced customer service, flattening of organization

structure and improving the competitive position have been reported in the literature as a

result of adoption of Internet enabled electronic banking by banks [9-13]. In literature

[14, 15], we thus find enhanced interest of researchers in understanding the ways in which

banks adopt Internet enabled innovations and the benefits realized from them.

While the adoption and functioning of innovative Internet enabled electronic banking

services in developed economies may appear to be relatively straight forward and

comfortably manageable initiatives, the same cannot be said with confidence with regards

to such initiatives in context of a developing country like Pakistan, where the

environment for pursuing electronic initiatives is much more turbulent and different from

the developed countries in many aspects [16-20]. The efforts to transform business

practices by banks in Pakistan from the old patterns of a traditional bank to a new agile

electronic financial service provider, is much likely to encounter issues and challenges

that might be much higher in magnitude or may be different in the very nature of the

concerns.

The adoption of Internet in business in developing countries and in particular Pakistan has

been relatively a new phenomenon. In spite of tremendous ongoing developments in

Internet technologies resulting in better capabilities and economics, there are not enough

published studies. While IT has gained strategic importance to many businesses in

developed countries, the organizations in developing countries continue to view IT as of

their operational and service requirement only. Thus the newness of technology together

with how IT has been viewed in organizations in developing countries, explains to some

extent, the lack of research studies in developing countries and in Pakistan.

Chapter 1

3

This study is on the adoption of Internet enabled electronic banking by banking service

providers in Pakistan. There is a dearth of systematic information which can advance our

understanding on the role and influence of the contextual factors on the adoption of

Internet enabled electronic banking by banking organizations in Pakistan. In the absence

of this knowledge, bankers and policymakers alike have had to plan using largely

anecdotal evidence and conjecture.

This research intends to fill this gap in knowledge. It explores the factors and analyzes

their role in shaping or influencing the adoption of Internet banking, which is one of the

latest variants of e-banking systems, by banks in Pakistan.

1.2 Research Context

Pakistan is a populous country of over 161 million with a per capita income of 1085 US

dollars in 2007-08 [21]. There are forty nine scheduled banks in the country regulated by

state treasury bank Pakistan (SBP). The ownership of these banks is characterized as

public sector banks, private sector banks with distinction of local private and foreign

private and specialized banks. There are about twenty four million consumer banking

accounts in the country [22]. Efforts to document the economy are underway, however,

the economy remains to a large extent, undocumented. Until the last few years the

e-landscape in the country for Internet enabled electronic banking was hardly supportive -

Internet access was limited and of low speed, banks were averse to risks, concerns of

security and personal authentication were alarming and hardly any infrastructure existed

to support Internet enabled electronic banking. The situation has improved considerably

in just a few years - from non existence of ATM’s five years ago to a substantial network

of over 3000, existence of interconnectivity at nation wide level in more than seventy

percent of the branch networks, and over 1.5 million credit card holders [23]. The

financial services industry is an important area for study as it plays a major role in the

changing fortunes of Pakistan towards embracing electronic economy and also as an

instrument of government monetary policy. Banking and finance industry in Pakistan is

also becoming the largest investor in new technology within a society where the service

industries are gaining some importance.

In the global financial banking industry context, the Pakistani banking industry has a

weak competitive position. This position looks more under threat from international new

economy perspective, where there would be no trade and tariff barriers, implying

Chapter 1

4

individual states would find it difficult to protect local industries, including local banking

industry, from international competition. This competition is also to be expected from

new entrants traditionally considered to be non financial institutions. For example, large

corporations, like Intel and Microsoft, could use their domination of world-wide

computer markets to introduce new forms of money transmission, and mobile cellular or

fixed line telephone operators and large chains of retail stores can start providing many of

the financial services through Internet enabled electronic banking that were once

considered to be strictly the domain of financial organizations.

Banking in Pakistan, until the last decade, remained in strict state control and regulation

and consequently little incentive and competition existed for innovation proponent [24].

In that era, technology adoption and automation in Pakistani banks remained confined to

the limited objectives of achieving internal operational efficiency and internal

management control functions. For this purpose banking organizations had transaction

processing systems (TPS) to record daily transactions and management information or

reporting systems (MIS) to perform management control functions. Banks in Pakistan

matched well with the attributes of the classic oligopoly described in literature as “risk

avoidance; product uniformity; buttoned-down managerial conformity; standard interest

rates and pricing; limited cost control and market innovation; relatively undifferentiated

customer service and surprisingly, considering the lack of competition-lack lustre

financial performance” [25]. Thus an element of strategic use of technology for achieving

organization goals through customer satisfaction and fulfilment was badly missing.

However, subsequently in 1990’s liberalization in financial policies for establishing

commercial banks in private sector and privatization of state owned banks, coupled with a

host of other favourable factors such as, improved electronic regulatory framework,

existence of IT policy strongly backing e-Commerce activities, improvements in the

backbone national connectivity infrastructure, and excessive banking liquidity, have

created opportunities for banking organizations to adopt innovations [26]. Ataullah et al.

[24] in a study on Pakistani banks on post liberalization period suggest that “banks exhibit

more improvement in their efficiency due to slight intensification of competition as a

result of adopting new financial technology (e.g. computerization of bank branches and

Automated Teller Machines) and the introduction of new financial products (e.g. credit

cards and car financing schemes)”.

Chapter 1

5

Successful and timely adoption of new technologies is a significant concern for the

organizations in developing countries like Pakistan. These organizations can hardly afford

instances that have been reported from other developing countries where it was found

that large amount of investments have been spent on automation of systems which

seemingly operate correctly but are ineffective for their real purpose [27]. Sometimes

even a delay in adoption and subsequent rollout of technology has many implications not

only on the Adopter but also on the other stakeholders [28]. In the case of Internet

enabled electronic banking, few banks are engaged in broadening their delivery systems

but many others are either hesitant in migrating to Internet as a delivery channel or are

not taking full advantage of available technology and are, therefore, falling behind their

competition [29]. In many instances it has also been found that the technological aspect of

the innovation eclipses the need to understand the adoption of technology from other

equally important dimensions. We found research studies that call for giving importance

to social and cultural aspects [30] as the subjective norms of the cultures also influence

adoption.

The challenges to innovation adoption in developing countries are different from those to

the developed countries. The first visible difference is in value of the factors that form the

external environment of an organization [31]. Many of the indicators of electronic

readiness showed marked variability in intensity and value from those in developed

economies of the world [32]. For instance, organizations in developed countries are

provided with infrastructure that is reliable, accessible, cost effective and robust.

Organizations in most of the developing countries like Pakistan cannot ignore the issues

of inadequate quality, reliability, cost of accessing, and availability of a robust

infrastructure [16]. For instance, Pakistan stands far below in electronic readiness

assessment rankings and has been ranked at the 64th position by the economist magazine

in e-Readiness out of a total of 70 countries [20].

1.3 Research Scope and Problem

This study is specifically on Internet enabled electronic banking and not on all other

variants of electronic banking like ATM, SMS banking, Phone banking and other

electronic delivery channels. The terminologies of electronic banking and Internet

banking have been used interchangeably in literature [33, 34] and the title of this

dissertation reflected that trend. However, the most recent literature is specifying Internet

banking separately from e-banking [35]. Henceforth, in line with the most recent

Chapter 1

6

literature, in this thesis report Internet enabled electronic banking will be referred to as

Internet banking only. This study is context sensitive and premise that the main

difference between developed and developing countries when it comes to implementing

IT initiatives, especially Internet enabled initiatives, is the distinctive dimensions of the

business environment. Information Systems is essentially a social science field and the

contextual realities within and outside the organizations have a major influence on the

adoption and implementation initiatives or decisions.

Pakistan is a developing country and banks in Pakistan experience far turbulent

environmental conditions in terms of organizational preparedness, market, technological

abilities, business ethics, policies, Internet regulations, politics, as well as different

customer behaviour. Because of this, the experience of introducing Internet banking by

bank(s) in Pakistan might be different and perhaps more challenging than the experience

of introducing Internet banking by banks in developed countries. Researchers have

advocated the need and importance of studying the adoption of new technologies in its

real contextual settings [36, 37]. Internet banking is a relatively new enabling application

of Internet and the existing research is mainly concentrated in the Anglo-American

cultural context and fails to address the expected idiosyncrasies in the contextual setting

of Pakistan. In Pakistan, there is very little research about banks and none on the factors

influencing Internet banking adoption by banks, the focus of this research.

Internet banking adoption by banks involves considerable investment and effort. In order

to increase the chances of success in adoption it is useful to understand the factors and

their role in the introduction of Internet banking. Understanding of this is important, both

for the banks who have introduced Internet banking and want to attain higher level of

adoption and the ones that are planning to introduce Internet banking. The perceptions of

the key participants responsible in the adoption effort may form the basis on which the

Adopter bank may take the decision of moving on to the next higher stage or level of

adoption. The bank that is planning to introduce Internet banking would come to know

about areas that discriminate it from the banks that have already adopted Internet banking.

The literature review was carried out by looking at two major areas of knowledge and

their relationships. These areas are: i) factors influencing IS/IT adoption with particular

emphasis on the factors influencing Internet banking adoption; and ii) existing electronic

landscape of Pakistan with emphasis on the electronic banking developments. The key

Chapter 1

7

factor that distinguishes this research is its context and it extends the literature about IT

adoption into a different cultural and economic environment.

The research context model as shown in figure 1.1 was used to select the literature and

shows graphically the focus of the research (the dark area in the centre) and related areas

of knowledge.

Figure 1.1 The research context model.

The primary aim of this research is to provide a better understanding about the factors and

their role in the introduction of Internet banking by banking organization(s) in Pakistan.

This research is not intended to replace the existing body of management knowledge in its

focused field, but rather to be used as a complement to them. Expected contribution to the

academic community include: development of a detailed account and understanding of

the contextual conditions that are enabling or inhibiting the adoption of Internet banking

thus opening new research directions for other researchers.

1.4 Research Objectives

The aim of this study is to provide a better understanding of Internet banking adoption by

banks in Pakistan by exploring the relationship between Internet banking adoption and the

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8

contextual factors or forces in a way to classify, relate and explain the different factors

identified by the important actors (strategic and operational management of the bank

responsible for sponsoring and implementing ICT enabled change initiatives in the bank,

members of the regulating organizations, technology consultants and solution providers)

as the key factors influencing the Internet banking adoption by Pakistani bank(s).

1.5 Research Questions

This research seeks to explore the influence of the contextual factors or forces on the

adoption of Internet banking by banks in Pakistan. The following are the two research

questions of this research, with question number 2 being the central research question.

1. What are the key factors influencing the adoption of Internet banking by bank(s)

in Pakistan?

2. How do these factors influence the adoption of Internet banking by bank(s) in

Pakistan?

1.6 Research Methodology

A pluralistic or mixed methods research strategy has been followed. It employs both qualitative

and quantitative methods of data collection and analysis. The core analysis in this research is

undertaken using interpretive, qualitative case studies. The analysis is also supplemented by

quantitative analysis of data collected through web based surveys. The study addresses the

central research question by employing survey and multiple case studies to explain the

behaviour of the factors in shaping the decision of adoption of Internet banking by banks

in Pakistan. Both case study and survey methods are one of the most common methods

used in information systems research [38, 39]. The contemporary nature of the Internet

banking innovation favoured the use of mixed methods approach. Case study has been

considered particularly appropriate for conducting research in developing countries [40].

The case study can capture ‘reality’ in substantial detail and is particularly useful when a

natural setting or a focus on contemporary events is needed. Survey method is useful in

understanding the behaviour of the factors in shaping the adoption at a particular point in

time and is pretty useful in depicting the broader picture of the phenomena of interest.

The epistemological stance of this research is interpretive and the investigations will be

aided by collection of data through semi structured interviews as well as field and online

web based surveys of the participants involved in ICT strategic planning, implementation

Chapter 1

9

and management of electronic delivery channels for financial services. The answer to

research question 1 is established through pilot field study constituting field survey and a

case study. Survey method is also employed in the preliminary stages of research to

present the snapshot of level of Internet banking offerings in the country.

1.7 Thesis Structure

The thesis is structured in eight chapters as shown in figure 1.2. In this first chapter, the

choice of the research subject was justified and the research objectives were briefly

presented.

Chapter two provides the context of the research. It begins by defining important

concepts related to the research subject and presents a literature review on factors

influencing Internet banking adoption and implementation. The literature review is

discussed and structured according to the nature of the factors with the aim of developing

a research framework to analyze the data collected in the case studies.

Chapter three reports the research strategy and describes the method which was

followed in conducting the research.

Chapter four presents three separate but related studies. The first study presents the

results of a survey to assess the degree of participation of all the banks of Pakistan on the

World Wide Web. The second study was conducted with the objective to understand the

organizational issues faced by two banks of a developed country while implementing

Internet banking. This was followed by a pilot field study for identifying the key factors

recognized for their influence on the adoption of Internet banking in context of banking

organizations in Pakistan. The objective of pilot field study is testing the relevance of

factors identified in literature related to Internet banking adoption and to explore for the

presence of any other factor that is specific to the context of the study. This chapter,

thereby, provides answer to the first research question of this study.

Chapter five presents a summary of the case studies and discusses the effect of factors on

the adoption of Internet banking in each case.

Chapter six presents the analysis of the case studies. The analysis is carried out by the

readiness category and by factor. The answer to the second research question, which

forms the central research question of this study, is presented and the factors are classified

on their perceived role in enabling or inhibiting Internet banking adoption.

Chapter 1

10

Chapter seven This chapter presents the analysis of an online web based survey

conducted at the last stage of the research study to investigate the influence of perceived

e-Readiness (internal and external) on the adoption of Internet banking by banking

organizations of Pakistan. This it does by exploring and analysing the perceptions of

authorized IT and e-banking officials of seventeen banking organizations about internal

and external e-Readiness as perceived by them.

Chapter eight summarizes the research and presents its conclusion. The contribution of

the research to the existing body of knowledge is also presented in this chapter.

Chapter 1

11

Figure 1.2 Thesis outline.

Chapter 2

12

Chapter 2. Literature Review and Research Framework

2.1 Introduction

This chapter reviews the contemporary literature to examine what is known about the

subject matter in hand and sets the tone for later chapters. As the focus of research is on

understanding the influence of contextual factors on the adoption of Internet banking by

banking organizations in Pakistan, it will examine those aspects which can provide a

framework or a model for the understanding of the subject in its proper context.

In the opening pages of this chapter, concepts or views on IT/IS/ICT, innovation,

adoption, e-Readiness, Internet banking are provided and the meaning of the terms as

used in this study are defined.

The chapter then proceeds to present the electronic landscape of the country and the

banking sector. This, it is hoped, will be helpful in understanding the context of the case

studies.

Next, a comprehensive literature review on the factors influencing Internet banking

adoption is presented with the objective of developing a conceptual framework or model

that can be used to analyze the data collected in the case studies. Factors identified in the

literature review are structured according to the nature of the factors. The chapter

concludes by identifying the possible gaps in the literature recognized through this review

which this research expects to bridge.

2.2 Some Key Definitions/Concepts

The definitions of the above mentioned terms in context of this study are presented as it is

important to clarify, so as to avoid any misunderstanding, the way in which these terms

are used in this study.

Information System (IS), Information Technology (IT)/Information and Communication

Technology (ICT:

The contemporary literature in many instances refers to or uses the terms or acronyms of

IS/IT/ICT sometimes as synonyms and in other instances with different meanings.

Information systems (IS) from a broader perspective has been defined as a system which

receives, processes, stores and transmits any form of information. Robert Galliers [39]

points out “Information systems are a complex topic. … it is a multi-disciplinary and very

Chapter 2

13

much a social, rather then a wholly technical science”. There has been an underlying

recognition among the IS research community that there can be no organization without

an information system. In fact, any organization can be interpreted as an information

system as it performs the tasks reflected as above in the definition of IS [39].

Checkland [41] has argued that any and every “Information System” can always be

thought about as entailing a pair of systems, one a system, which is served (adopting

entity) and the other a system which does the serving (technology) or the technology to

serve information. Since information technology is embedded in an IS, the pair of

systems as mentioned above are inseparable from each other and their interaction with

each other and the environment contributes in defining and shaping the IS.

In this study the adopting entity are the banks in Pakistan and the technology to serve

information is the Internet. These two systems make an Internet banking IS.

The role and functions performed by an IS has been changing with the developments in

the technology as well as with the changing needs of an organization. Khandelwal and

Ferguson [42] refer to the classification of IS/IT maturity and growth in an organization

into three era’s namely, data processing era; IT era and networking era. Each era reflects

the technology and the use for which it has been mainly put in by organizations

corresponding to that era or time period. In the early periods of technological

development, organizations introduced computing machines to mainly perform data

processing tasks and this period of IS/IT growth is known as data processing era.

Subsequently, as the organizational informational needs extended beyond mere data

processing activities and organizations felt for integration of the information, these

organizations migrated to more sophisticated solutions made available due to the ongoing

developments in the technology to serve information needs. That particular era is known

as IT era. Next in the continuum of this growth is the networking or ICT era that enabled

organizations to extend their reach and range of IS to serve information to their intended

users beyond the organization’s geographical boundaries [42].

Innovation:

Innovation has been defined in literature as a process, product, or even idea perceived as

new by the adopting entity [43, 44]. According to Tornatzky, [45] it is the perception of

the Adopter that defines its newness. This is irrespective of whether or not the same

innovation is in use by other organizations even in the same sector of economy [46].

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14

In many of the contemporary organizations most of the newness more appropriately

called innovation [47] is driven by the ICT's [48, 49]. Thus in literature, the ICT and/or

ICT enabled newness is widely referred to as an innovation [50-52].

Innovation adoption or ICT adoption has remained a topic of keen research interest

among the researchers as well as practitioners [53]. Innovation adoption is widely

associated in context of undertaking ICT and/or ICT enabled product/service/concept [51,

54]. Internet is one of the new ICT [55] and is considered as a great source of change

especially for the service sector of the economy.

We consider Internet banking a technological innovation for the bank(s) in Pakistan. It

has the potential to radically alter traditional ways of doing banking and alter the bank’s

relationship with its customers and other stakeholders in the market. This is in line with

the view of other researchers who qualify any thing as an innovation so long as it is new

to the given situation [56].

Types of IS Innovations:

Swanson [51] has classified IS innovations in the following three categories. This

classification has almost become a prevailing standard classification in many of the IS

studies [50].

Type I: technical innovations restricted to the IS functional tasks;

Type II: applying IS products and services to support administrative tasks of the business;

Type III: integrating IS products and services with the core business such that the

innovation may have strategic relevance to the firm.

Following the innovation classification of Swanson [51], we consider Internet banking as

a type III innovation as its integration with the core banking business leads to opening a

new delivery channel for banking products and services that is of strategic relevance for

the banks.

Stages of Innovation:

IS innovations are broadly grouped into two separate phases, generation of innovation

and adoption of innovation [57]. Generation is more close to invention and includes idea

creation and problem solving for product or process solutions whereas the adoption phase

is the acquisition and/or implementation of an IT innovation. This study is concerned with

the second phase i.e. adoption of innovation.

Chapter 2

15

Internet Banking:

This study views Internet as an enabling technological innovation. Barras [4] defines an

enabling technology as the one that can profitably be adopted as a means of production in

various sectors of the economy. Internet banking is a classical case of the enabling role of

Internet in which it is integrated with the banking processes to serve the purpose of a

remote delivery channel for the banking products and services. Internet banking refers to

the use of the Internet as a remote delivery channel for banking services [58]. Banking

services over the Internet can be classified into two categories: Informational and

Transactional. Informational services provide general information about the bank and its

products or services like branch location information, product description, loan or deposit

applications, and access to account balances [59]. Transactional services provide the

ability to initiate banking transactions such as moving funds from one account to another

account or making a bill payment from a current account or buying products and services

through the website of the bank [29]. An Internet bank in this study refers to a bank that

offers transactional services over the Internet channel.

Understanding the meaning of Adoption in context of this Study:

This study considers a bank as to have adopted Internet banking if it has acquired the

ability and has started to conduct financial transactions over the Internet channel.

The most commonly cited definition of adoption in IS adoption and diffusion literature is

that of Rogers [44]. “Adoption”, according to Rogers is “a decision to make full use of an

innovation as the best course of action available”.

Internet banking is a type III category of IS innovation. In case of type III innovations, the

organizations typically migrate towards increasing or full use of innovation in stages

starting from a level of no adoption to basic level adoption and then onwards to higher

levels of adoption. Commitment of enormous resources is needed for moving on from one

level of adoption to next higher level of adoption.

This study considers that the decision to make the initial and ongoing investments i.e.

moving from one level of adoption to a next higher level of adoption is contingent on the

organization’s perception about the readiness of conditions or factors for attaining a

relatively successful adoption.

Chapter 2

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E-Readiness:

The term ‘e-Readiness’ has been very comprehensively defined in the Computer Systems

Policy Project (CSPP’s) readiness guide for living in a networked world. The guide

defines e-Readiness as “the degree to which a community or an institution is prepared to

participate in the networked world” [60].

It is argued in this study that the perceptions of an organization about its level of

preparedness influence the organization’s decision to adopt and implement an innovation.

E-Readiness or level of preparedness may be assessed on the basis of the perceptions of

the relevant organizational members about the status in areas that might be most critical

for adoption of any particular innovation [61-63].

2.3 ICT Landscape in Pakistan

The Telecommunications and Information Technology sector remained under significant

focus of the government of Pakistan for the period 1996-2005. Telecommunication

policies announced in 2004 facilitated investments in telecommunication sector by

foreign and local groups. Under the deregulation policy, licenses were issued to Data

Network Operators (DNOPs) and Internet Service Providers (ISPs) as well as other value-

added services [64]. These developments paved the way for improvement and

modernization of the telecommunication infrastructure and further assisted in delivery of

basic, value added and broadband services.

In line with the global trends, the cellular and wireless sector of Pakistan has shown

stronger growth at the expense of fixed line telephony with a tele-density of merely 2.5

percent. According to Indicators provided by the Pakistan Telecom Authority (PTA), in

2008 the number of phones in the country stood at 95.7 million; 89 million cellular, 4.5

million fixed line and 2.2 million wireless local loop (WLL) [65]. In Pakistan, Internet

was launched in 1995. By year 1999, almost one hundred ISPs were there. The Internet

usage in Pakistan is 11.1% which is almost half the world’s average Internet usage of

21.3 percent [66]. The internet penetration over the population is very low. Furthermore,

most of services are available through dial up connections, which is inherently very slow.

In recent years, new services have been offered through broadband. But this is only

available in big cities and its subscription per 100 inhabitants is at 0.03 percent [65].

According to World Economic Forum (WEF) survey [66], Pakistan is ranked as on 98 out

of 134 countries. Ironically, Pakistan has a decline in its position as it was at 89th position

Chapter 2

17

as reported in previous year's report. Furthermore, some cellular companies have started

offering Internet services through General Package Radio Services (GPRS) and Enhanced

Data rates for Global Evolution (EDGE) technologies.

In Pakistan, from last few years, government shows its eagerness to promote the usage of

ICT in the country. National ICT research and development fund is established under

ministry of IT to transform Pakistan's economy into a knowledge based economy. The

major goal is to promote efficient, sustainable and effective ICT initiatives through

cooperative development of industrial and academic resources [67]. Nauman et al [68]

listed some commendable steps earlier taken by the government like training programs in

particular software tools, IT training of government employees, scholarships for students,

standardization of software industry, funding to universities to build IT infrastructure,

establishment of software technology parks in urban centres where infrastructure is

provided at low cost to promote the software and outsourcing industry. Due to recent

economic crisis on the planet, Pakistan faced some major problems in sustaining ICT

growth. However, the private sector has shown considerable achievements to uplift the

ICT sector at par with global advancements. More recently in 2009, in order to enhance

awareness among the students, IT labs have been established in High Schools [69].

Earlier, an e-government directorate was set up to identify and initiate key projects to

facilitate the citizens ICT enabled services. Until now, remarkable projects to use ICT for

the benefits of citizens have been completed namely, National Database Registration

Authority (NADRA), Vehicle Registration Project (MTMIS) etc. For universities of

Pakistan, an access to digital Library is offered under the project “Pakistan Education and

Research Network” (PERN). This network mainly offers Internet access, digital library

and video conferencing services to all of the Pakistani universities.

2.4 Electronic Banking and its Types

The definition of e-banking as provided by FFIEC [70] is the “automated delivery of

traditional and new products and services directly to the customers through electronic and

interactive communication channels”. This form of banking includes systems that enable

customers of the banks, individuals and businesses, to access accounts, transact business

as well as obtain information on financial services and products through a public or

private network.

According to Stamoulis et al. [71] electronic banking in essence is an innovation for the

financial industry that is enabled by the creative use of emerging IT and other business

Chapter 2

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forces. Electronic banking has introduced a new concept of branchless banking in which

the financial institutions as well as other non traditional financial actors are able to offer

financial services outside the traditional bank premises. The figure 2.1 presents the

different types of electronic banking enabling different ways of offering branchless

banking. All these types of electronic banking have freed the customer from the need of

physically visiting the branch premises and have enabled the provision of banking

services at any time and at any place of the customer’s convenience.

Figure 2.1 Types of electronic banking

PC Banking:

PC banking is a form of electronic banking in which any authorized user can access and

obtain financial services from a banking service provider using a personal computer

connected with the network of the bank [72]. As shown in the figure 2.1 PC banking can

be further divided into Online banking and Internet banking.

Online Banking refers to the conduct or obtaining of financial services with in a closed

network of bank with the use of proprietary software provided by bank while

Internet banking is banking from anywhere using Internet as a delivery channel.

Telephone Banking:

Telephone banking can be carried out through fixed or wireless telephone connections.

This form of branchless banking can be considered as a form of remote or virtual banking

where an authorized person can obtain some services by dialling a fixed or wireless

Chapter 2

19

touch-tone telephone or communication device, which is connected to an automated

system of the bank by utilizing automated voice response (AVR) technology.

Mobile Banking:

Mobile banking is the most recent addition to the electronic banking channels. Mobile

banking enables an authorized entity to request and receive banking information from the

bank using short message service (SMS) operated through a trusted mobile device [73].

There are two ways of sending and receiving information; they are the PUSH & PULL.

Push SMS is a one way message transmission service. It functions by sending a message

from an application (i.e. SMS banking application server) to the mobile phone. Common

example of it is a deposit or withdrawal alert that is transmitted by the banks SMS server

computer to the registered mobile number of the bank’s account holder after every

instance of deposit or withdrawal from that bank account. Pull SMS works by sending a

request and obtaining a reply. This is a full duplex functioning where an authorized

account holder sends a request to the SMS banking application and the application replies

with the information requested. Common example of this is sending a request for account

balance and getting back the updated account balance.

Automated Teller Machines (ATMs):

Automated teller machines (ATMs) were the first e-banking innovation to provide

electronic access to retail customers. ATM is the most popular and widely acceptable

form of branchless electronic banking worldwide that was made possible because of the

advancements in computer and telecommunication networks. ATM as the name suggests

is a substitute to the human teller. An ATM is an automated system that enables an

authorized individual to perform basic banking activities (checking one's balance,

withdrawing or transferring funds) at any time of the day. ATM’s are placed by the bank

at places that are convenient for most customers to visit and this has been made possible

because of the developments in computer networks.

2.5 Electronic Banking in Pakistan

Electronic banking in Pakistan is gradually gaining acceptance in the society that in

general prefers paper based financial transactions. Paper-based transactions employ cash,

cheques, pay order, demand drafts and telegraphic transfer instructions modes of

transactions. Whereas, the electronic financial transactions are conducted through the

electronic delivery channels namely automated teller machines (ATMs), real time online

Chapter 2

20

banking (RTOB), point of sales (POS), telephone banking/Interactive voice recognition

(IVR), Internet and mobile banking. Table 2.1 shows the comparison of the volume and

value of transactions conducted using paper based banking instruments and the electronic

banking channels in the year 2007 and 2008. The Table 2.1 shows a gradual increasing

trend of electronic banking in terms of both volume and value of the transactions.

However, despite this increasing trend, the Table 2.1 as well as Figure 2.2 highlights that

over ninety one percent of the financial transactions in terms of value and over 70 percent

in terms of volume are still carried out through paper based instruments [23, 74].

Table 2.1 A comparison of share of electronic vs. paper based banking in Pakistan

Electronic vs. Paper-based Banking

Volume of Transactions

(000) Value of Transactions

(In Billions)

FY 2006-07 FY 2007-08 FY 2006-07 FY 2007-08

Electronic 115099 139479 12684 14352

Paper-based 333544 333458 122735 145741

Total 448643 472937 135419 160093

% age composition

Electronic 25.65% 29.49% 9.37% 8.96%

Paper-based 74.35% 70.51% 90.63% 91.04%

Volum

e of Transactions

Value of T

ransactions

Figure 2.2 A comparison of share of electronic vs. paper based banking in Pakistan

Chapter 2

21

Table 2.2 shows the volume and value of transactions taking place across different e-

banking channels in the country for the year of 2006-2007 and FY 2007-2008. The Table

2.2 and Figure 2.3 show that ATM banking and online banking represent a major share of

the total number of e-banking transactions taking place in the country. In terms of value,

online banking represents a huge share of the total value (about 74% for the year 2007-

2008) of transactions. The next significant share is that of ATM banking followed by

minute share of other delivery channels including Internet banking.

Table 2.2 Growth of various channels of e-banking in Pakistan

Electronic Banking Delivery Channels

Volume of Transactions

(000) Value of Transactions (Rupees in Millions)

FY 2006-07 FY 2007-08 FY 2006-07 FY 2007-08

Online Banking 34,735 40,225 1,009,100 1,331,700

ATM Banking 60,074 78,762 316,216 452,972

Internet Banking 2,982 1,714 3,381.4 5,457.1

Call Centre/IVR 711 850 752.6 981.7

Mobile Banking N/A 62,28 N/A 14.54

Volum

e of Transactions

Value of T

ransactions

Figure 2.3 Growth of various channels of e-banking in Pakistan

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22

2.5.1 Electronic Banking Infrastructure in Pakistan

Table 2.3 and Figure 2.4 show the trend for the year 2005 to the year 2008 in the number

of plastic/electronic cards that were in circulation at the end of each year. The increasing

trend in the number of cards suggests that e-banking means have started to gain some

acceptance in Pakistan. The introduction of smart cards in the year 2005 is considered to be

another major step towards the establishment of a full-fledged e-banking network within the

country [75].

Table 2.3 Number of cards in circulation in Pakistan (source: SBP quarterly progress

reports, compiled into annual yearly figures by author)

Number of Cards (Millions)

FY 2005 FY 2006 FY 2007 FY 2008

Credit Cards 1.300 1.500 1.660 1.556

Debit Cards 2.900 3.500 4.800 5.940

ATM Only Cards 0.137 0.071 0.191 0.320

Smart Cards 0.100 0.300 0.412 0.422

Figure 2.4 Number of cards in circulation in Pakistan

Chapter 2

23

Likewise, Table 2.4 and Figure 2.5 show the growth of online branches and ATM

network in Pakistan over a period of four years. From Table 2.4 and Figure 2.5, we can

also see that by the end of year 2008 over 70 percent of the branches of the entire banking

sector in Pakistan stood automated to support online banking.

Table 2.4 Growth of ATM’s and Online Branches in Pakistan

Branch and ATM Network in Pakistan

FY 2005 FY 2006 FY 2007 FY 2008

ATMs 1,217 1948 2618 3523

Online Branches 3,265 3947 4979 5857

Percentage of Online Branches 46% 53% 64% 70%

Total Number of Branches (online and non online) in the Country 7105 7421 7755 8343

Figure 2.5 Growth of ATM’s and Online Branches in Pakistan

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24

2.6 Theoretical Background and Framework

Internet banking is an application of the Internet having a global appeal and dimension,

however, understanding its adoption in a localized context of bank(s) in Pakistan, might

be more usefully done by consulting two broad conceptual streams of literature that have

appeared in context of developed as well as developing countries. Researchers suggest

that the key difference between a developing and a developed country is in its

environment which in case of developing country is much more turbulent and uncertain

[76]. This poses great challenges for organizations in developing countries in their efforts

to initiate ICT enabled value creation opportunities [77]. IS researchers argue that

adoption of IT is dependent on contextual and environmental characteristics and the

factors found as of importance in one contextual setting may not hold as much relevance

in other contextual settings and vice versa [27, 78]. The researchers holding this view

have identified some issues that are of much more prominence in contextual settings of

developing countries [62, 79]. For instance Internet banking initiatives in the developed

world are built on robust foundations of readiness which means that there exist well

developed capacities and enabling Internet access conditions. Pakistan, like many of the

other developing countries, faces the issue of digital divide, a problem signifying a

considerable reduced status of the determinants of Internet access as well as under

developed capacities to absorb initiatives or efforts for increased participation in digital

economy initiatives.

We consider that because Internet banking has an international and global dimension,

some of the factors described through studies in developed countries would also hold in

context of developing countries. Apart from this, there could be some other contextual

issues that are specific to Pakistan and which might be influencing the adoption of

Internet banking by Pakistani bank(s) in important ways. In the following section we first

briefly describe some of the approaches or ways to understand the adoption of

innovations in the developed as well as developing countries and then present a

conceptual framework that accommodates the two perspectives.

A number of factors or determinants of ICT innovation adoption have been suggested by

various studies [80, 81]. These determinants vary depending upon the type of innovation

[51] and the category of Adopters which can be individuals [82], organizational units or

firms [83, 84], and country(ies) [81, 85]. For each category of Adopters, researchers

explored the adoption from certain focused perspectives [86]. The factors advancing an

Chapter 2

25

understanding on the adoption of ICT innovations can broadly be considered to be of

these three types:

1. Factors related to the Innovation/technology characteristics (e.g., security,

complexity, relative advantage, compatibility, usefulness, ease of use, etc.).

2. Factors related to the Adopter category (Individual, organization, community or

country) and their characteristics.

3. Factors related to the external environment context (e.g. economy, policy, market

characteristics).

The past research on the adoption of innovations by organizations has mostly been carried

out in the developed countries. These studies, depending upon the focus of the research,

have used or advanced different frameworks or models to structure the variables

influencing the adoption [53]. These frameworks and/or models advance the

understanding about the effect of various factors on the adoption of a particular

innovation by an Adopter from any of the above three perspectives or even in

combination of any or all of these perspectives. These can be categorized as innovation or

technology focused, organizational focused, external environmental focused and co-

evolution focused. Technology or innovation perspective focus on the attributes of

technological innovation such as the complexity, compatibility, relative advantage, ease

of use, usefulness and other attributes as key influencing factors on adoption [87, 88].

Their contention is that attributes of the innovation drive the innovations [44].

Organizational focused studies view organizational attributes such as resources, structure,

size, assets, strategies, management perspectives and their influence on adoption [89].

External environmental imperative studies focus on developing an understanding on how

the external environmental factors influence the adoption [90-92]. The co-evolution view

point investigates the influence of any two or usually all three of the perspectives on the

adoption of an innovation [93]. The co- evolution perspective assumes an interaction

among the forces of the IT innovation, the external environment, and the internal

organization. In this interaction the external environment of an organization usually

determines the internal environment of the organization. Organization’s in response to the

anticipated changes in external environment considers some actions or changes which

then affects the conditions outside the organization [93, 94]. Since co-evolution

perspective usually accommodates all other view points, therefore, the explanatory power

of such models is better than those models that mainly depend on only one or two

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perspectives [40, 95, 96]. The co-evolution approach can better explain differences in the

level of adoption among organizations in identical contextual situations [40].

2.6.1 Contemporary Focus of the Adoption Related Research Stream in

Developing Countries

The idea that developing countries have the “opportunity to leapfrog” [97] in the adoption

of Internet banking has not materialized in many countries due to various impediments.

The nature or the intensity of these impediments creates challenges that are different from

those in developed countries. Pakistan is a typical example of a developing country and

most of the issues mentioned from the perspective of a developing country are relevant to

Pakistan as well. Despite the potential of Internet to interconnect global economies [98],

its use in developing countries in applications like Internet banking is marked with many

hurdles and is not as straightforward as it may seem in context of developed countries

[99]. Developing countries, unlike the developed countries, often lack the necessary

enabling conditions and resources for adoption of ICT in general and Internet enabled

innovations in particular [100]. These countries, including Pakistan, are described to be

significantly deficient on many accounts including technological, legal, financial, market

as well as physical infrastructures [16, 62, 101, 102]. As a result, these countries are

considered as not ready or prepared enough to successfully adopt and implement ICT

enabled change initiatives. Various e-Readiness frameworks and tools have been

developed to assess the preparedness for participation in any particular ICT enabled

change initiative. These frameworks focus on different aspects of readiness for different

categories of ICT enabled applications. E-Readiness assessments are not specific to

developing countries only, however, as most available literature describes e-Readiness as

a response to the growing digital divide between the developed and developing countries

[16, 62], therefore, these assessments are mostly focused on bridging the digital divide

gap between developed and developing countries. Pakistan ranks considerably low on the

e-Readiness assessments [18-20]. Researchers are of the view that adoption and

implementation of ICT enabled initiatives in a country that ranks considerably low on

readiness rankings offers considerable different challenges than those experienced in

developed countries [100], [103]. For instance, Internet banking service providers

operating in developed countries would take for granted the presence of most of the

enabling factors such as availability of a relatively well-developed, accessible and

affordable infrastructure, consistency in legal, policy, and regulation matters, basic

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awareness about the innovation, and certain degree of confidence and trust on the service.

Internet banking service providers in a developing country, Pakistan, are not in a position

to ignore the impact of these and many of the other such factors that are expected to be of

much higher intensity. These issues have received high attention in developing countries

and several studies have identified the facilitators and/or inhibitors that are likely to

influence the adoption and success of ICT based innovations [104-108].

E-Readiness studies, in general, expose the determinants of reduced access as well as the

issues of capacity to utilize the access conditions. The access and capacity issues in these

studies mostly capture the constraints existing at external environmental level or at a

macro level--factors responsible for nation or country level digital divide and hence

e-Readiness approach is a facet of external environmental imperative approach. This

viewpoint advances the notion that diffusion of innovations would happen, even at

institutional or organizational level, by addressing the factors responsible for country

level digital divide. The argument put forth to support this view is that organizations

develop their capacities in response to the external environmental conditions. If these

conditions are enabling for a particular innovation then some organizations would always

be ready to take lead to adopt that innovation and in a relatively shorter time span the

contagion effect would take its course and organizations would have little or no choice

but to follow and mimic other organizations.

However, in developed countries where the external environment conditions are relatively

stable and organizations are faced with similar set of these conditions, we still find that

some organizations have yet not implemented Internet banking. That is why studies

carried out on Internet banking as well as on other category of innovations, all in

developed countries, suggest of innovation and organizational Readiness factors to better

account for initial adoption and the variations in the degree of adoption, or the digital

divide, among the organizations [83, 109-111].

It is posited that the variations witnessed, in the level of adoption by organizations in

developing countries in case of applications of Internet, might be possible to understand

in a better way through e-Readiness approach that also accommodates the organizational

and innovation factors. This is akin to co evolution approach in which the organizational,

innovation, and external environmental factors are considered as affecting the adoption.

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2.6.2 Summary of the key Literature on Internet Banking Adoption

Table 2.5 shows a summary of the most relevant literature for identifying the factors and

understanding their influence on adoption and use of Internet banking. Besides Internet

banking, variants of electronic banking systems and some other relevant IT/Internet

enabled innovations, are also included for operationalization of the research framework.

The literature suggests that Internet/IT enabled systems, despite being distinct, have

some common characteristics and attributes and some parallels can be drawn among

closely resembling ICT innovations [52]. These factors are arranged under the internal

and external category as is commonly done by other researchers in this area [52, 112]. In

line with the co- evolution approach it is conceived that the adoption of Internet for

conduct of transactional services by banks is influenced by the factors that influence an

organization from within its internal as well as external environment. The literature was

mainly searched using the electronic library information navigator, a digital library

resource of Higher Education Commission [113]. The search was carried out using the

key words of Innovation adoption, Internet banking adoption, e-Readiness and e-banking.

Table 2.5 Key literature on adoption of Internet banking and other related innovations

used in operationalization of the research framework.

Factors Type of IT Innovation

Ref.

Internal Factors External Factors

Strategic choice (Adoption strategy) and organizational design

Development of an enabling technology, availability of complementary assets and ancillary systems, critical user mass, impact of the Internet on introduction of innovation, roles of new entrants and incumbents in the adoption of Internet banking

Internet banking

[36]

Branching intensity, assets, cost Demand, Internet penetration, income, education and skills

Internet banking

[114]

Security of e-banking systems Internet banking

[115]

Lack of integration of related systems and processes

Internet banking

[116]

Ability of Internet banking service, availability of Internet

Internet banking

[117]

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Ref.


payments applications

Functionality; reliability, and usability

Internet banking

[118]

Propensity-to-trust, customer behaviors, structural assurances

Internet banking

[119]

Electronic connectivity Internet banking

[120]

Technology Integration (Integrating different channels),

customer behavior Online banking

[121]

Security, simplifying and integrating basic services, User-friendly web-interface, relative advantage

Online banking

[122]

Richness of website contents Market expansion e-banking [71, 123]

New products and services, good customer service

e-banking [124]

Top management support, Information privacy and security, power relationships, financial resources, awareness of technology benefits

IT knowledge and skills, PC penetration, Internet penetration, legal aspects and regulations, awareness of customers

e-banking [125]

Resources (financial and human), organizational flexibility, ability to provide fast and responsive products/services, systems and services integration

e-banking [34, 109]

Access (Infrastructure, infrastructure support, network security), capacity (confidence in government, social factors, economic factors, policy factors)

e-banking [126]

Lack of regulatory frameworks, trust, security and privacy standards, high trade barriers, customer and investor protections

e-finance [127]

Technology Integration Internet channel

[128]

Size of the bank ATM [129]

Characteristics of technology innovation (Compatibility,

Internet based

[130]

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Ref.


Relative advantage, Complexity), organizational factors (Customer interaction, Top management support), IS related factors (IS infrastructure, IS expertise, Importance of IS security)

Information System

Technology Integration, Technology characteristics or benefits. Re-engineering processes to web-enable them

e-Commerce [3]

Organizational Readiness, Compatibility, Perceived Ease of Use, Perceived usefulness, Managerial Productivity, Strategic Decision Aids

Organizational support (from industry)

e-Commerce [61]

Top management support. Project team reflecting various related functional areas, Systems security, Promotion of the project both internally and externally, up gradation of infrastructure, User-friendly web-interface

Up gradation of infrastructure e-Commerce [131]

Developing the ability to innovate rapidly and acquiring e-marketing skills

e-Commerce [132]

Awareness, governance, business resources, technological resources, human resources, commitment

Government e-Readiness, Market forces e-Readiness, Supporting industries e-Readiness

e-Commerce [63]

Compatibility and Technological complexity, size, Complementarities with Establishment location

External environment Internet and e-Commerce

[111]

Availability of technology resources, organizational structure, and managerial capabilities

Internet technologies

[133]

Technology readiness, core readiness,

Technology readiness , policy readiness, societal readiness

e-health [62]

Technology competence, firm scope, size

Consumer readiness, partner readiness, and competitive

e-business [53]

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Ref.


pressure

Low development and maintenance costs, interest in experimenting with new marketing tools, promote products and build the company’s image, benefits in obtaining and disseminating information, competitive considerations

Internet based sales presence

[134]

Technological performance benefits, access to new markets

External pressure e-processes [93]

Technology competence, size, scope, enterprise integration

Competition intensity, regulatory environment

e-business [135]

Cost, near zero inventory, quality customer service, secure payment system, order fulfillment system, shipping information system

Internet business, global electronic markets, dynamic markets, interactivity, connectivity, feasibility

Web based shopping systems

[52]

Organizational factors (MIS Personnel, ownership, organizational size, organizational culture )

Environmental factors (competition, government policies, market stability)

IT [136]

Strategy effects (expansion, control), structural effects (centralization, formalization, complexity), contextual effects (openness, norms, resources, size)

ISDN [137]

Software systems, hardware security, executive’s support, internal Internet system users, organizational characteristics, and organizational security policy

Internet security

[138]

IS experience, financial resources, CEO support, user participation

Consultant effectiveness, vendor support

International Systems

[139]

Relative advantage, managerial enthusiasm

Consultant support, Competitive pressure

IT [140]

Organizational readiness, perceived benefits

External pressure to adopt EDI [83]

Organizational size, CEO’s attitude to IT, CEO’s innovativeness, CEO’s knowledge of IT

IT [141]

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Ref.


Compatibility, complexity, trialability, observability

e-payment [142]

Cost, ease of use, flexibility, security, independence

Critical mass Internet payment systems

[143]

ICT infrastructure, human capital, institutional environment, logistics infrastructure, entrepreneurial activity, path dependence, regional differences

e-business [144]

Cultural concerns, national security, IT infrastructure, external environment, economic resources

Internet [85]

Framework:

Drawing upon the developed countries as well as on the developing countries

perspectives, this study assesses the role and influence of the factors in shaping the

adoption of Internet banking at selected bank(s) in Pakistan using the notion of

e-Readiness with a co evolution approach. [126, 145] defines ‘e-Readiness’ as the ability

to pursue value creation opportunities facilitated by the use of the Internet”. Internet

banking has been described as a value creation opportunity for the banking organization

[146]. On this basis e-Readiness of a bank may imply its ability to pursue or conduct

Internet banking. Relatively little is known of what determines the ability of banks of

developing countries in general and Pakistan in particular to introduce Internet banking.

However, studies on Internet banking adoption carried out in context of developed

countries as well as studies on other categories of innovations in context of developed and

developing countries concur that this ability of organizations is influenced from the

factors or conditions that constitute the technological, organizational and environmental

aspects of an organization. For this study, the idea to use the concept of e-Readiness to

explore the adoption of Internet banking emanated from one of the researcher’s separate

collaborative research work on e-Health Readiness assessment [16, 62].

This study has adapted the TOE framework of Tornatzky and Fleischer [45] to structure

the factors that might be having an important influence on the adoption of Internet

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banking by banks in Pakistan. The TOE framework has a sound theoretical basis and

consistent empirical evidence and has been applied on various types of IS innovations

including type III innovations like e-Commerce and e-Business [53, 147, 148]. On this

basis the TOE framework has been found useful to asses, evaluate and explore the effect

of these three aspects of organizations on the adoption and implementation of IS

innovations. Since Internet banking is also a type III innovation, therefore, we consider it

appropriate to adapt TOE framework to assess and explore the adoption of Internet

banking innovation.

2.7 The Framework

The framework as shown in figure 2.2 adapts the TOE framework [45] to structure the

factors that shape or influence the adoption of Internet banking along three aspects of

organization’s context namely organizational context, technological context and

environmental context. Assessment of these contexts reveals the readiness for adoption

and implementation of innovation [56]. Hence, these three contexts of an organization are

categorized as Organizational Readiness, Technological Readiness and Environmental

Readiness which is in line with literature [61, 149]. The assessment of the factors forming

these three readiness contexts constitutes the internal and external e-Readiness

dimensions of the banking organization. Therefore, these factors have been arranged into

two groups: internal factors and external factors. The perceptions of the bank about the

status of internal and external factors reflect the internal and external e-Readiness of the

bank i.e. ability to introduce or pursue Internet banking. It is argued that the perceptions

of the banking organizations on their level of preparedness influence their decision to

adopt Internet banking.

Technological Readiness category refers to the internal as well as external technologies

relevant to the organization and is further sub categorized as internal technological

Readiness and external Technological Readiness. Internal technological Readiness

category refers to the technology or innovation factors or forces that are in the control of

organization. Whereas, external Technological Readiness reflects the external

technological factors on which the bank exercises little or no control. Organizational

Readiness describes the structural characteristics such as firm size and scope; complexity

of its managerial structure; the quality of its human resources; availability of resources

and the adoption strategy. Environmental Readiness encompasses the factors such as

market, policy, legal and societal Readiness factors.

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Figure 2.6 Conceptual framework of Internet banking adoption

The framework postulate that the adoption of Internet banking in context of banking

organizations in Pakistan is influenced from the factors that shape the internal as well as

the external e-Readiness dimensions. These two e-Readiness dimensions are further

categorized around three aspects of an organization context, namely organizational

Readiness; Technological Readiness; and Environmental Readiness. The Technological

Readiness dimension is further bifurcated into internal and external categories. All these

categories are composed of factors that have been identified in the literature as affecting

adoption of Internet-banking.

2.7.1 Internal e-Readiness Dimension

2.7.1.1 Organizational Readiness

Organizational structure:

The IS and organizational literature refers to a number of examples on the association

between innovation adoption and organizational structure [61, 133, 135, 136]. The

organizational structure can be defined in terms of the coexistence of different parts in a

purposeful arrangement, working together as a whole. Kwon and Zmud [150] found that

structural characteristics of an organization affect information technology adoption.

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35

Grover [151] suggests a critical role of organizational characteristics on the adoption of a

new information systems. The various aspects of organizational structure that have been

studied include the influence of formalization of procedures, policies, role definitions;

[152-156] department integration, centralization [157-159], specialization, organizational

age [160, 161] and organizational size. Among these aspects of organizational structure,

organization size has received the most wide spread attention and has often been found a

relevant factor that affect innovation adoption [162].

Studies in context of financial and banking organizations have mostly referred to the

organizational size as the most important predictor to adoption [162]. Both advantages

and disadvantages are linked with the organizational size. The size of a bank is generally

measured in terms of total assets [36], although some authors measure it as number of

branches [163]. These two measures seem to be relevant to study the influence of size on

the adoption of Internet banking in context of Pakistan. This is based on the

understanding that a bank having higher total assets would be having more resources for

adoption of innovations and would be in a stronger position to take the risk and

challenges of adoption of a new technology such as Internet. Similarly, considering the

overall electronic readiness at institutional and country level it is assumed that the bank

having a greater number of physical branch network that is geographically spread across

the country would be in a disadvantageous position to offer Internet banking to all of its

customers. Centeno [164] also pointed out about the association between size and

innovation adoption behaviour arguing that a medium sized banks tend to adopt new ICT

technologies in general and Internet banking in particular more quickly than large or

small banks. The reason being that they have greater flexibility and a propensity to

innovate may lead to economies of scale as increasing the size creates a “critical mass”

which would justify innovation adoption. A number of studies in the financial sector

reflect a relationship between the adoption of new technologies in the financial sector and

size [129, 165-169]. Internet banking facilitates the co-ordination between the branches of

a bank and this is a strategic issue particularly for big institutions. A large bank offering

innovative services can reduce its average costs much more than a small bank, as it deals

with a higher number of customers and financial transactions. Another explanation to this

relationship is that the larger organization may have a greater need to use communication

technology to coordinate activities within the organization. Thus, while large banking

organizations are able to benefit from internal resources and leverage these into a

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competitive advantage, smaller banking organizations may well be forced to rely on a

partnering strategy, because their size may not allow them to rely on internal capacities,

as these are sub-scale compared to minimum-efficient scale [170]. Thus studies also

indicate that the growing importance of external sources of technology could reduce the

role of size as a determinant of adoption of technological innovations [165, 167, 171].

Escuer et al. [172] suggested medium sized bank takes less time to introduce technology.

Bughin [173] on the other hand observed small sized banks are more active in transferring

their customer base to on-line channels. It is generally possible to explain the positive

relationship between size and adoption of innovations in terms of economies of scale.

According to Luneborga [170], it is generally assumed that large organizations are able to

operate at lower unit costs than their smaller counterparts. Scale effects can be found in

almost any cost element. He further observed that “it is evident that large banks need less

marketing and computer systems cost per transaction than small banks. Large

corporations can afford to develop internal resources and core competences in technology

and services and invest in sophisticated infrastructure, including financial control

systems. However, large size does not ensure benefits of scale. Size only provides an

opportunity for scale economies and may not be achieved without adequate strategies and

actions”.

Small organizations have well-known advantages. Several organizational researchers

[170] have argued that ‘small is beautiful’ because problems of coordination and

motivation may be smaller in small organizations. The organizations may be more

flexible and customer oriented and their employees are presumed to perceive a closer link

between their actions and organizational performance [61]. Kevin Zhu [53] in a study on

adoption of Internet found that the firm size is negatively associated with Internet

adoption for e-business.

The positioning of the IT /Electronic Delivery Channel Department:

Shah et al. [109] in their study found that the formation of a separate group responsible

for Internet banking activities is of crucial importance for successful implementation of

Internet banking strategy. These researchers found out from their study on two banks that

the implementation of Internet banking was more advanced and successfully achieved in

the bank that had formulated a separate group or team that occupied a distinct and more

strategic position in the organization’s structure. The study further researched that

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creation of a separate group responsible for e-Commerce or Internet banking projects

improves the control over the project and improves the formal line of communication. In

another study on UK banks. Daniel [146] observed that banks where the Internet banking

function was of low status, their budget allocations were also modest and thus hampering

the growth of Internet banking.

In an earlier study on another category of IT, Ein-Dor and Sergev [174] found that the

firm size is inversely associated with the level of centralization of the IT or MIS function.

These researchers focused on the importance of the rank and location of the executive

responsible for IT/MIS and the existence of a steering committee to successfully

implement IS/IT in the organization. They concluded that the IS/IT structure is strongly

associated to the organizational structure. Porrass and Robertson [175] found that the

organizational structure strengthens the formal line of communication; helps control,

integrate and coordinate work activities; and defines the allocation of work roles. The

Internet has been reported to have resulted in a flatter organizational structure. While

information technology is being adopted, organizational structure is often re-examined

and adjusted to improve performance via pooled resources, innovation and collaboration

across organizational boundaries [49, 132].

Resources:

Resources to acquire or build organizational IT infrastructure have been identified as

significant determinants of Internet technologies adoption [133, 144]. Considering the

high importance of information technology in the banking industry the financial sector is

the biggest single investor in IT and Internet technologies [176]. Gearing up for the

adoption and development of a digital economy requires a number of resources, and the

most important of these resources is that of financial resource [177]. The interconnection

of proprietary banking information systems through a non proprietary and open source

Internet technology does entail investments in synchronizing and upgrading the existing

systems. Studies carried out on banking organizations in developed countries on other

category of IT innovations such as ATM etc pointed out for a relationship between

availability of financial resources and adoption of IT innovations [129] . In case of

Internet banking, the findings suggest a mix of response where in one study Shah et al.,

[109] found availability of resources as a critical success factor. Khalfan [125] in a study

on Internet banking in Omani banks reported lack of financial resources as a minor

constraint to electronic commerce adoption. Corrocher [114] observed that small banks

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usually have resource constraints and do not have the financial resources to invest in new

technologies. His findings showed that the cost involved in developing the computer

systems and networking infrastructure needed for Internet banking was not justified when

the likely return on investment (ROI) was considered.

Mols [178] observed that for some banks lack of financial and human resources will be a

problem because offering sophisticated Internet based services is an expensive project

requiring a great deal of changes in IT infrastructure. Similarly, Walczuch et al. [179]

reported that the primary deterrents for businesses establishing Web presence are the start

up costs as well as the costs associated with major organizational changes required for such

moves. Mols [178] suggests strategic partnerships between banks to share such costs.

Commitment:

Commitment refers to the existence of a person at a strategic position in the organization

who champions the cause of adoption of innovation. Some of the other alternate

constructs used in the literature that refer to commitment are the top management support,

championship etc. Many of the IS academic studies in the financial services sector have

advocated the immense importance and need of commitment and top management

support for successful introduction of new products and services [3, 86, 180]. Researchers

have advocated that successful adoption of IT within an organization can be determined

by considering management commitment to the IT by allocating necessary resources

[141]. Thong and Yap [141] have investigated Top Managers and CEO parameters in

their studies and found the importance of this factor. Moreover, Tan [181] have measured

the management support and found it a significant predictor of the Internet adoption. In a

study on UK banks Daniel [146] found out that lack of commitment and support at the top

level is one of the biggest issues hampering Internet banking introduction and

developments in some of the banks. Lee et al. [131] identified several critical success

factors (CSF’s) for e-Commerce initiatives. Similarly, Shah et al. [109] identified several

CSF’s for e-financial services implementation strategies. Both of these researchers

highlighted top management support as a leading CSF.

Adoption Strategy:

The relevance of an organization’s strategic orientation (e.g., ICT strategy, growth

strategy) has been considered as a determinant of innovation adoption in Internet banking

as well as in some other categories of ICT innovations [109, 137, 182, 183]. Strategy

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broadly refers to the management’s perspective, position, plan and actions taken to adopt

or introduce Internet banking. In context of this study, it includes the models, techniques,

frameworks and the timing of adoption of Internet banking. The literature reveals that

banks follow an adoption strategy that depends upon the management’s perspective and

its assessment about the need and the potential contribution expected out of the Internet

banking implementations in their organization. Thus the banks demonstrate a varied

readiness response for adoption of Internet banking. We come across banks that have

adopted a more aggressive adoption strategy in which they have integrated Internet with

their existing business processes to such an extent that enables them to offer almost all the

products and services available in conventional banking over the Internet. In some other

cases the degree of substitution or implementation of Internet is limited and the changes

are introduced in an incremental manner by complementing traditional functions and

services that are mostly sought and used by their customers [29]. Thus the banks

particularly in the developed countries have been observed to follow two prominent

adoption strategies for the adoption of Internet banking. These are based on whether the

Internet is integrated within the bank’s current delivery channels or is positioned as a

separate delivery channel [34]. The adoption strategies drive changes in the

organizational structure. The management’s perception and their assessment of the

potential on the use of Internet may lead to different strategic routes [184]. There exists a

strong argument that banks should adopt Internet banking as an additional delivery

channel and must keep their traditional channels such as branches, ATMs and call

centres intact [178]. Keeping the multiple channel strategy provides an opportunity for a

smooth transition from a branch banking strategy to an electronic banking services

strategy with broader market coverage and penetration.

More radical or aggressive adoption strategies naturally warrant greater changes in other

domains of organizational activity. Gopalakrishnan [36] observed significant differences

in the Internet banking strategies employed by banks that were otherwise similar in

several dimensions.

Banks also differ in their implementation approach. Sullivan [59], has found that most

banks are inclined to use the Internet to deliver services in a manner that is generally

consistent with their business strategies. Some banks may have a policy of outsourcing

the implementation work whereas others may feel of having sufficient capacities and

capabilities to implement the Internet banking solution in-house.

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2.7.1.2 Technological Readiness

Awareness of Characteristics of Technological Innovation:

The perceptions of the management about the potential benefits and risks of new

technology are well documented in literature for their affect on adoption [44, 93, 140].

The innovation adoption literature [45, 61, 63, 87, 185, 186] unequivocally theorizes that

the perceptions or awareness about the attributes of an innovation significantly influence

and shape the organizational efforts to adopt and further invest in the innovation to next

higher levels of adoption. The perceived characteristics of a technological innovation are

considered to be important discriminators between Adopters and non Adopters of that

technological innovation including Internet banking [110, 118, 187]. Researchers have

tested many attributes of technology for their affect on adoption and four of these

attributes namely relative advantage, risk, complexity, and compatibility, have been

consistently reported in technology innovation literature [186].

Relative Advantage:

Internet is the most recent of the ICT technologies and one of the important reasons for its

widespread acceptance as a medium of exchange is that Internet is expected to deliver a

number of operational, tactical, and strategic benefits that are anticipated to provide

relative advantage to the adopting entity. The banking industry has benefited most from

the developments in ICT by adopting new and more efficient means of technological

delivery channels [3]. According to Gopalakrishnan [36], Internet is the latest in a series

of technology based improvements to the delivery channels of the commercial banks that

brings enormous benefits like increase in profits by increasing efficiency, market reach

and range [122]. Internet banking as well as other electronic distribution channels can

save the cost to be incurred on setting up and maintaining a physical branch [188]. This

provides an opportunity to the bank to avail lower transaction and production costs and

thereby increase its profits [8]. Consequently we find that the cost of transaction through

Internet banking has been reported to be lowest in comparison to all other delivery

channels [36, 187, 189]. Internet banking transaction costs have been reported to 1–2:100

compared to physical branches, 1-2:30 compared to ATM's and 1:2–10 compared to

PC-based dial-up Internet [190].

Electronic delivery channels reduce the work load of its branch and call centre employees

since customers need not visit the physical bank premises or wait for their calls to go

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41

through the waiting queues of earlier customers or callers [191]. This aspect has been

confirmed by Hoffman [192] through a survey research, conducted in United States. He

found that online banks have seen a reduction in the calls volume at their call centres,

which they attribute to increased use of electronic channels.

Internet banking has also been found to enhance the image of the bank in the industry and

market [71, 109]. The use of Internet for banking has been predicted to become a basic

requirement of operation rather than just a source of competitive sustainable advantage

for the banking organizations [187]. Yan and Paradi [193] reported benefits like better

relationship with suppliers/customers, quick delivery of products and services, less

possibility of errors and anytime availability of services.

Security Risk:

The most commonly cited risk of employing Internet for conducting financial transactions

is the issue of security. Security issues are a major concern for the banks and their

customers [109, 125, 126]. Currently, the banking services provided through Internet are

limited due to security concerns, complexity and technological problems [191, 194]. The

architecture of Internet makes it an open network that enables any one from any where to

access the bank over the Internet channel. Prior to the Internet the remote access to banks

was available over electronic data interchange (EDI) systems. The EDI provided the

computer-to-computer exchange of standardized electronic transaction documents and

data over the proprietary value added networks (VANs) that are relatively more secure as

they provide limited access to a selected number of customers or bank branches. These

networks are established by private businesses to deliver services over and above those of

common carriers that are licensed by governments to provide financial services to the

customers. While the architecture of Internet has freed the bank from the technological

issues of limited bandwidth, platform dependency, and multiple software licenses [195], it

has definitely increased the risks in terms of security [196]. Although, the advancements

in Internet technologies have resulted in developing quite secure digital transmission

mechanisms and online payment systems, nevertheless, Internet security continues to be

considered as a major issue affecting the growth of Internet enabled services [138, 197].

The typical security architectures used by the banks to beef up the security include the

encryption, firewall, and a certification of the bank’s server to prevent another

masquerading. According to Zhu [149], popular security protocols for transmission of

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data over Internet include secure socket layer (SSL), secure electronic transaction (SET),

wireless transport layer (WTL), and wireless public key security (PKS).

Breach of security falls into three main categories: 1) breaches with serious criminal

intent e.g. fraud, theft of information; 2) breaches by hackers e.g. defacement of website,

denial-of-service activities, virus attacks; and 3) breaches because of inadequate

protection of the computer systems. All these security risks can potentially create

financial, legal and reputation implications for the bank. Therefore, the banks need

proactive approach to information security, implementing best practice security controls,

involving active testing of such controls and regular reviews of security methods and

procedures [115].

Technology complexity:

Cooper and Zmud [198] indicated that type III innovations are inherently complex in

nature and require more technical skills as well as greater implementation and operational

efforts to attain more successful adoption. Complexity according to Rogers [44] is the

“the degree to which an innovation is perceived as relatively difficult to understand and

use”. Organizations that have not been continuously upgrading their technological

infrastructure and systems with the changing needs are likely to perceive the technology

as more complex [135]. Prior to emergence of the Internet as an enabling medium, the

history of computerization of banking records the transition in the banks internal IT-

infrastructure from mainframe, to PCs, to internally networked computing, and then to

ATM’s. These IT enabled banking services were interconnected through electronic data

Interchange (EDI) carried over the proprietary value added networks that are usually

owned and operated by banks or private third party. The use of Internet is likely to

introduce change that involves establishing new policies and procedures, setting up

additional ICT infrastructure, removing the organizational resistance, and meeting the

project implementation challenges [111, 128]. All of which are enough sources for the

perceived perception of complexity.

Internet banking systems are multifunctional systems that need to be integrated with other

banking delivery channels—remote and branch based that might have legacy systems

deployed at the back end. According to Shah et al. [109], shortcomings in technological

infrastructure are often the biggest hurdle in the implementation of e-business channels

and their integration with other channels. A prime requirements of Internet banking is its

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reliability of service for 24-hour and ensuring this requirement increases the complexity

especially when a bank has back end legacy systems for data storage and processing

[118]. This is because legacy systems were designed to provide services during the

specified periods only and suspension of services for other times for various reasons such

as data backups and end-of-day processing [116].

Introducing Internet banking requires both banking and non banking skills. Hence, its

successful adoption is both technically and organizationally challenging. A number of

research studies have highlighted the need of having best possible skills set and

competencies to implement Internet banking services [146, 199]. These researchers have

observed that the lack of suitable skills have acted as inhibitors [146, 191, 199-201]. A

study on Internet banking in UK [202], suggested that banks can reduce the time to

launch their Internet banking services by utilizing the experiences and skills of the

partners. Johne and Davies [203] stressed upon the need of developing managerial and

technical expertise within the organization for reaping the rewards of implementing

Internet based services. However, it has been observed that many of the electronic

services project are delayed or fail because of the shortage of skilled manpower [204]

Compatibility:

According to Rogers [44] “Compatibility is the degree to which an innovation is

perceived as consistent with the existing values, past experiences, and needs of potential

Adopters”. Internet banking is a radical change to the traditional banking delivery

channels and is likely to bring fundamental changes in the ways banking business

functions. According to Fruhling and Digman, [205] Internet enabled services require

fundamental changes in business because of the elimination of human interactions and

paper based processes. Successful implementation of Internet enabled change needs

thinking about the structure as well as the organizational culture [124, 136]. It also

requires special attention on an organization’s business processes with the existing IT

systems, as well as examining new processes designed specifically for Internet banking.

In most cases existing processes have to be re-engineered in order to align them with the

new processes. Organizations need to be geared up to face this challenge [206] and

carrying out a strategic planning exercise is normally recommended to manage ongoing

changes [207]. Lee and Kim [130] argue that the magnitude of change creates the need

for the new channels to be compatible and responsive to existing values, past experiences,

and needs of the organizations for attaining a relatively successful adoption.

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2.7.2 External e-Readiness Dimension


Access and Infrastructure:

The adoption and success of Internet banking and other electronic banking services is tied

to the availability of certain minimum level of national infrastructure, importantly

information and communications, with enough capacity to support the electronic banking

initiatives. Internet banking is an addition to the existing branchless banking delivery

channels that banks have been using to provide remote access facility to their customers.

Prior to the development of Internet as an enabling communication medium, the banks

were interconnected through proprietary electronic network owned and operated by banks

or private third party who was solely responsible to provide connectivity support to the

bank. This embodied a relatively less reliance of the banks on public domain networks to

successfully offer remote banking services. Internet enabled electronic services are

extended over the interoperable and worldwide public domain network based on standard

open source Transmission Control Protocol/Internet Protocol (TCP/IP). Internet has

several advantages over the earlier options of data transmission and connectivity.

Contrary to the limited bandwidth of the private network, the capacity of public Internet

is expanding very rapidly. However, reports indicate that Internet adoption in Pakistan, as

well as in other developing countries, has been constrained by the quality, availability,

and cost of accessing infrastructure [62, 208]. Research suggests that the level of

electronic connectivity has a bearing on the adoption rate of Internet banking. According

to Li and Worthington [120] the lack of development in electronic connectivity in

developing economies is a major limitation on the introduction and expansion of Internet

banking.

It is a well known fact that most of the developing countries including Pakistan are facing

great disparities between and within societies in the deployment and use of digital

technology, a problem which is commonly referred to as digital divide [145, 209]. Almost

all studies related to addressing this issue have highlighted access and infrastructure

related factors as one of the major issues confronting these countries. Pakistan, in-spite of

committing substantial investments on improving and uplifting the ICT infrastructure of

the country, has remained lowly rated in e-Readiness ranking of the countries even on the

index indicating the ICT infrastructure conditions [32, 210, 211]. Zarmeene [212]

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observed that the infrastructure in Pakistan is not much developed and it will take years

for the average citizen to benefit from online business. Maugis et al. [126] in a study on

e-Readiness for e-banking described access and capacity as the determinants to adoption

of e-banking. Their argument is that there can be no viable opportunity for e-banking in

the absence of access and capacity. Access in their model consists of factors that are

related to physical connectivity like infrastructure and services needed to enable

e-banking. These included Internet penetration, availability of Internet service providers,

availability of suitable bandwidth, tele-density, and wireless density. Capacity factors in

their model pertain to social, economic and related policy conditions.

Stamoulis, [123] while discussing the business value of different delivery channels,

observes that the quality characteristics of a banking service that is entirely based on

information technology are critically dependent on the availability of efficient and

reliable infrastructure and technology. According to Stamoulis, customers derive value

from a delivery channel that is efficient, reliable, dependable and easily accessible. Any

issue or compromise in these aspects of service is seen by a customer as a business or

bank’s failure. Jun and Cai [213] noted that slow response time and delay of service

delivery leaves the customer unsure about the proper completion of the requested

transaction. Disruption of information access has been found to be a common factor

related to unwillingness to use Internet channel [214]. Westland [215] described

inadequacy of Internet infrastructure as a major constraint in the expansion of Internet

banking services. Mohsin et al. [104] highlighting the barriers of conducting commerce

using electronic channels in Pakistan noted issues in infrastructure and payment systems.

These issues are important for the management of banking organizations in making the

decision to adopt Internet banking.

Availability of Complementary Assets:

According to Gopalakrishnan [36], complementary assets could be helpful in increasing

the reliability of the system, simplifying its use and bringing about enhancements in the

services. Complementary assets are the technologies, systems and the supporting

organizations that are often necessary for the development of Internet enabled services

and applications. Complementary assets in case of Internet banking may include the

secure payment systems, availability of specialized IT firms, consultants or solution

providers in the market as well as tools and technology. The availability of

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complementary assets are likely to positively influence the introduction of Internet

banking and whereas their scarcity may deter in its adoption.

Adoption of Internet banking services requires a collaboration of multiple firms involved

in the business of banking and information technology. Literature on inter organizational

systems (IOS) views collaboration or coordination as an essential factor for successful

deployment [139]. It is suggested that collaboration between channel partners enables

organizations to jointly optimize their performance in the value chain [216]. A case study

on a US bank explains that organizations involved in only banking or only IT will not be

able to develop systems which are as effective for Internet banking as an alliance between

organizations which are individually specialized in each of these industries [217].

Effective, efficient and secure electronic payment systems are very important for online

financial exchange between two parties. The importance of payment systems to the

financial institutions can be gauged from the reports mentioning that out of the total

worldwide bank spending on information technology, about ten to fifteen percent are

spent on the payments processing technology [218]. In Pakistan [104], like in some other

developing countries, e-payment systems have not gained broader acceptance due to

insufficient level of infrastructure, trust and e-banking culture. As a result majority of the

merchants and consumers do not trust or prefer to transact and process e-payments[219].

Finally, Turban et al. [143] listed independence, interoperability and portability, security,

anonymity, divisibility, ease of use, and transaction fees as crucial factors that determine

whether an Internet payment system will achieve widespread acceptance [143]. Likewise

in another similar study, Bohle [219] identified conditions that are related to successful

adoption of Internet payment systems. These are regulation, standardization and

interoperability, consumer protection, anonymity, privacy, security, and integration of

payments into online transactions.

External support in the form of specialists and consultants is of immense importance for

the effective integration and implementation of type III innovations [53]. However,

developing countries do not have enough skilled and experienced persons to implement

Internet banking and, therefore, they mostly engage specialists from the developed

countries. Effectiveness of consultant and vendor support found to be an important factor

influencing adoption in a study on another category of innovation [220].

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2.7.2.3 Environmental Readiness

According to Shore [78], Information systems adoption is significantly dependent on

environmental characteristics like national cultures, laws, and business conditions.

Demand and Competition:

The market forces such as perception of customer’s demand for the services over the

Internet channel could be an important factor in pushing non Adopter banks to gear up for

early adoption. Likewise, banks already offering basic Internet banking services would be

eager to move on to next higher level for the reasons of maintaining relative advantage

over their competitors [221].

Wu et al. [221], in a comparison of market scope for electronic remote banking and

branch banking observed scope of e-banking in markets where there exist virtual market

space, users with Internet connection, wide customer base, and the customers were active

participants. In developing countries like Pakistan, these conditions although are not

satisfactorily available at the whole of the country level but at the same time these

conditions to some extent exist in the urban populated areas. Stamoulis [123] considered

the identification of niche markets and its exploitation as important aspects for the banks.

Internet banking is a commercial application of Internet for a highly competitive sector of

economy. Banks are known for adopting new technologies in anticipation of gaining

competitive advantage. According to Dewan and Seidmann [222], banks are facing

competition from Internet enabled banks and other non-banking organizations offering

banking services and thus are looking for best strategies that will enable them to maintain

their current position. Griffiths and Finlay [223] mentioned that e-banking might provide

competitive advantage to the adopting bank over the non Adopter ones.

Policy and Regulations:

The conduct of business over Internet requires a certain necessary level of readiness to

create and implement regulatory and institutional frameworks. These frameworks are

necessary for smooth, transparent, effective and dispute free conduct of business over the

Internet channel. Hadidi [127] investigated the challenges to the progress of electronic

financial services in context of developing countries. According to Hadidi [127], lack of

regulatory frameworks, trust, security and privacy standards, high trade barriers, customer

and investor protections may impede the efforts to implement electronic financial

services.

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Previous research on e-commerce and Internet banking found that the usage of Internet

for conducting online business may grow provided the policies could address elements

such as consumer awareness and education, consumer privacy protection, consumer

protection in cases of fraud or technical problems and easily accessible and cheap

mechanisms for redressing disputes [119, 224]. The ICT policy of Pakistan is a

comprehensive enough policy document and envisions addressing all of these issues.

However, despite recognizing these areas to be of importance, Pakistan is still a long way

from attaining a minimum satisfactory level on any of the above areas or indicators. The

recent research on e-business adoption emanating in Pakistan found the IT policy of the

government to be an important factor that if not properly addressed could impede the

growth of e-business in the country [212]

Societal Readiness Factors:

Ein-Dor et al. [225] listed several socio-cultural factors that may affect the adoption and

use of Information systems. The concept of national culture is complex and researchers

argue that some of the socio-cultural traits are hard to change where as some others could

be gradually changed through education, training, awareness campaigns etc. The

economy in Pakistan to a considerable extent still remains undocumented and prevailing

culture continues to transact through cash and/or paper based transaction instruments [23,

74, 75]. The official e-banking statistics of Pakistan show tha crredit cards ,that were

initially introduced in the country more than three decades ago, have still not succeeded

in gaining wide spread acceptance.. In a population of over one hundred and sixty million

there are only one and a half million credit card holders in the country [Ibid]. Abbasi and

Zubair [226] posited that e-business in the country can not flourish until credit cards

become more acceptable in the society or some new payment methods emerge. Likewise,

the growth in the use of Internet enabled services is more likely to remain low in a

country where there exists issues related to customer behaviour, low purchasing power of

the people, fragmented markets, many different languages, undeveloped payment systems

and logistical problems [62, 106, 121, 126, 227].

2.8 Gaps in the Literature

This literature review also includes some of the research work or articles which were not

available at the time of development of the research framework for this study as these

were too recent to be used at that time. The literature review explains that contribution to

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knowledge in this area is on the rise especially from the economies which have very well

developed environmental conditions in terms of markets, knowledge, technological

abilities and infrastructure, policy and legal regulations, as well as customer profile well

exposed and accustomed with the use of technology. Developing economies in general

and Pakistan in particular are faced with quite contrasting conditions to the ones existing

in developed economies.

Researchers argue that adoption is a highly context dependant phenomenon and needs to

be explored in its proper organizational as well as environmental contextual perspective.

There is little evidence to support that the findings of research on adoption carried out in

context of developed countries can be generalized for their applicability as such in other

different contextual settings. There is lack of research on Internet banking in Pakistan

and none of the studies have addressed the key factors related to adoption of Internet

banking and how these factors interact to shape the decision of the banking organizations

to adopt Internet banking.

In this study we have used a framework, based on the notion of e-Readiness, to structure

the key factors influencing adoption. Exploring Internet banking adoption from the lens

of e-Readiness is a relatively new development gaining more acceptance in developing

countries. Most of the e-Readiness based studies have focused on macro-level constraints

and demonstrated an environmental imperative perspective.

The employment of an e-Readiness perspective to understand the relationships amongst

the factors influencing Internet banking adoption and between the categories of

Organizational Readiness, Technological Readiness, and Environmental Readiness, is an

addition to the literature. Internet banking adoption has not been explored from the lens of

e-Readiness in this manner.

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Chapter 3. Philosophical Perspective and Research Strategy

“The function of research is not necessarily to map and conquer the world but to sophisticate the beholding of it” Stake, 1995

3.1 Introduction

This chapter presents and discusses the research methodologies used in the field of

information systems and provided research strategies for our research. The first section

addressed the ontological and epistemological assumptions of fundamental methodologies

and the way they influence the process of research. Positivist and Interpretive research

paradigms have been explained to aide in understanding this research that has

incorporated features or elements from both positivist and interpretivist aspects of

research paradigms. Next the choice of research strategy with explanation and

justification of the research methods used in this study is presented. Further the overall

strategy and the research design along with the descriptions of the research methods,

tools, techniques of data collection and analysis have been explained.

This research work is an exploratory study and is aimed at understanding the influence of

contextual forces on the adoption of Internet banking by banking organizations in

Pakistan. This it does by looking at selected organizations in a sector and exploring the

perceptions of the key participants about the way the contextual forces are shaping the

organization’s decision to adopt Internet banking. The focus of exploration is at the level

of the individual - an investigation into the constructs of the key individuals who are

effective players in the adoption of Internet banking in the organization.

The research strategy adopted in this research is interpretive with pluralistic or mixed

method approach. The following sections provides an introduction and discussion of the

research strategy and methodology to be applied.

3.2 Philosophical Issues

The field of information systems, being a multi disciplinary, has the advantage of drawing

support from different philosophical perspectives. This results in choice of rich

methodology encompassing multiple approaches for carrying out research [228]. The

primary distinction between philosophical perspectives is between what Patton [229]

describes, with emphasis added by the researcher in italics, as “two fundamentally

different and competing inquiry paradigms; (1) logical positivism, which uses

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quantitative and experimental methods to test hypothetical deductive generalizations,

verses (2) phenomenological (interpretivist) inquiry, using qualitatative and naturalistic

approaches to inductively and holistically understand human experience in context

specific settings”. Hughes [230] also observed positivism and interpretivism as two

dominant philosophical perspectives with interpretivism having roots in phenomenology.

Information systems are considered as socio techno systems and most of the research in IS

has adopted either of these two philosophical perspectives of social science research [231].

Positivism and interpretivism philosophies have been considered in literature as locating in

opposite corners [232] and are viewed as dichotomous to each other [232-234].

Researchers in general follow either of the two philosophical poles with shades of

variations. Creswell [235], observed that any research embodies its own five

philosophical views i.e. ontology, epistemology, axiology, rhetoric and methodology.

Ontology refers to the nature of reality (i.e. underlying phenomenon); epistemology

describes the nature of knowledge and the process of acquiring it. Axiology reflects the

value in research, rhetoric refers to the way of explaining the research, and methodology

describes the way of conducting the research study. Table 3.1 shows the two types of

research dichotomies labelled as research approach I and research approach II. Each

research approach shares a bundle of characteristics that differentiates it from the other

approach. Information systems research in the past was dominated by the research

approach II (positivist, quantitative). However, the trend has been shifting towards new

approaches (interpretivist, qualitative) of research [39, 231, 236-242]. Among the new

approaches is also a trend of employing pluralistic or mixed research strategy

incorporating standards from both sides of Table 3.1 [243-246]). A detailed analysis of

the difference between research practices and the history of information systems as a

discipline is beyond the scope of this study. The following paragraphs are limited to a

brief discussion about positivism and interpretivism. This study has employed features or

elements from both positivist and interpretivist aspects of research paradigms and

follows a mixed or pluralistic research strategy. However, at the same time it is aligned

more with the research approach I, and can be described as interpretivist, qualitative,

exploratory field work supplemented by the use of quantitative methods.

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Table 3.1 Two opposite poles of research approaches (adapted from [247])

Research Approach I Research Approach II

Interpretivist

No universal truth. Understand and interpret from researcher's own frame of reference. Uncommitted neutrality impossible. Realism of context important.

vs. Positivist

Belief that world conforms to fixed laws of causation. Complexity can be tackled by reductionism. Emphasis on objectivity, measurement and repeatability.

Qualitative

Determining what things exist rather than how many there are. Thick description. Less structured and more respective to needs and nature of research situation.

vs. Quantitative

Use of mathematical and statistical techniques to identify facts and causal relationships. Samples can be larger and more representative. Results can be generalized to larger populations within known limits of error.

Exploratory

Concerned with discovering patterns in research data and to explain/understand them. Lays basic descriptive foundation. May lead to generation of hypothesis.

vs. Confirmatory

Concerned with hypothesis testing and theory verification. Tends to follow positivist, quantitative modes of research.

Field

Emphasis on realism of context in natural situation, but precision in control of variables and behavior measurement cannot be achieved.

vs. Laboratory

Precise measurement and control of variables, but at the expense of naturalness of situation, since real-world intensity and variation may not be achievable.

3.2.1 Positivism

The practice of positivism or positivist approach has a long tradition in the history of natural

sciences. The philosophy of positivism is immersed in the belief that systems of logic and

mathematics are essentially true because of their 1ogical forms and can be derived from

axioms. It believes that any other claim to knowledge is synthetic and can thus counterfactually

shown to be false [248]. Logical positivism has a strong following in both natural and social

science research. Hence, a dominant part of information systems literature, especially the one

appearing from North America, has followed the positivist research approach [238]. According

to Blaikie [249], positivism, entails ontological assumptions about an ordered universe made up

of discrete and observable events. It assumes that this order can be represented by logical and

quantitative generalizations about the relationships between concepts. Its epistemological

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perspective is that knowledge about the world is objective which is obtained by studying steady

uncomplicated structures and causal relationships between its elements.[243, 250, 251]. The

positivist philosophy has evolved over a period of time. While it accommodates qualitative

research methods as well but it still remains firmly rooted in objective measures and

conventionally focuses on realizing time and context free generalizations. For example, it is a

common belief that experimentation and observation, under strict control, can eradicate the

influence of social and cultural values. And research methods and procedures, if correctly

applied, would produce results that could be used to build up an image of reality independent

from the observer. In positivistic approach, the relationship between theory and practice is

considered as purely mechanistic [238]. Studies following positivist approach employ methods

like laboratory/field experiments, surveys and case studies.

Positivism explains the social world in terms of cause and effect relationship and deals with the

social and natural phenomena in the same way. Research techniques applied to study natural

sciences can be applied to study the interactions of individuals within an organization by

quantifying their behaviour. In essence, positivists look for the existence of a constant

relationship between events. However, when human beings are the focus of the study,

particularly when it is taking place in a social real world context, 'constant conjunction' in a

strict sense is rare as to be almost impossible to happen.

Critiques of positivism argue that assigning variables to complex situations underlying human

emotions and excluding the bias of researcher makes it inappropriate in studies where the

interaction is more than technical in nature [252]. With information systems being a complex

socio-techno system, researchers have advocated using richer ways of studying the complex

social world [231, 233, 236, 253].

3.2.2 Interpretivism

Interpretivism is the trend substituting qualitative positivism in modern social sciences. An

interpretivist approach considers that the social world is essentially relativistic and can only be

understood by interpreting the meaning that people assign to it. Interpretivism is the major

alternative to positivism but there exist other relatively less applied approaches such as the

critical perspective and post modernism. The research methods employed in interpretive

studies assume that our knowledge of reality is a social construction by human actors and

researchers, and thus subjective. Ontologically, interpretivists reject the positivist view of

reality as according to Walsham [231] “there is no objective reality which can be

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discovered by researchers and replicated by others….. All of us have our own realities

and it is the connection of these different realities that constitutes the shared social

world”. Interpretivist perspective implies that the social world is constructed by

individuals’ interaction and reality exists as a result of negotiations of meanings that

individuals produce as part of their daily life. The world, according to this approach, is

not a fixed constitution of objects but is rather "an emergent social process - as an

extension of human consciousness and subjective experience" [238, 251]. Human

behaviour is considered to be important as meaning and intentions are not only important

because they result in a particular reaction, but because that reaction results in producing

a reality. Creswell [254] describes interpretive approach as "an inquiry process of

understanding a social or human problem based on building a complex, holistic picture,

formed with words, reporting detailed views of informants, and conducted in a natural

setting".

Epistemologically, the interpretive perspective considers knowledge to be subjective and

a socially constructed phenomenon. For pursuing knowledge, a researcher needs to

understand the social world that its members produce and reproduce through their

ongoing activities. The interpretive approach has its roots in phenomenology and

hermeneutics. Phenomenology is deeply based in the work of [255, 256] and views a

phenomenon as objects of perceptions rather than facts or things that exist independently

of the observer. Phenomenology views the world as a socially constructed system.

Hermeneutics is mainly concerned with interpreting and ascribing meaning to texts. It

tries to explore how a reader interprets meanings that the writer tries to convey in the text.

However, today this technique is not just limited to analyzing interpretations of text.

Boland [257] argues that the use, design and study of information systems can be

considered as an hermeneutic process, since the output of an IS is a text that must be

interpreted by end users of the system.

The use of the interpretive approach in IS research is grounded in the belief that

information systems are socio-technical systems which do not exist in isolation from their

environment. There has been an increasing use of interpretive approach in information

systems literature [238, 239, 257-261]. A good part of the interpretive information systems

research has been conducted to study the relation of information technology to

organizational change through understanding this context of “information systems and the

process where by the information system influences and is influenced by its context” [231].

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3.3 Research Strategy

There is no universal best strategy as every research strategy has its own merits and

demerits. Therefore, a research strategy needs to be selected or tailored according to the

one that best meets the research objectives and researcher’s philosophical perspective.

This research is concerned with developing an understanding on the role or behaviour of

different factors influencing the adoption of an innovation, Internet banking, in context of

Pakistani banking organizations. While the field of innovation adoption has been of

considerable interest amongst the researchers and has generated a lot of investigations and

publications, however, most of the studies in this knowledge area have been undertaken in

context of developed countries. Hence the models or frameworks advanced through these

studies, although useful, are not able to capture some of the issues or events that possibly affect

the adoption of innovations in developing countries. While the adoption of Internet banking in a

developed country may sound simple and automatic, however, the same cannot be said about it

in a context, where the dynamics and status of the factors are expected to be much pronounced

than to those in developed countries. The conceptual model or framework advanced through

this research work provides another perspective to explore the perceived role of the factors in

shaping the adoption of Internet banking. Thus the purpose of this study, in its true perspective,

entail exploration of a new service in a new context and to accomplish it a pluralistic research

strategy has been followed. The core analysis in this research is undertaken through interpretive,

qualitative case studies. However, the analysis is also supplemented by quantitative analysis of

data collected through online and web based surveys.

Patton has extracted ten themes of interpretivist qualitative inquiry [229]. An assessment of

how these themes suit this research study are discussed below.

1. Naturalistic inquiry

This is entirely appropriate to a study of the adoption of Internet banking in context of banking

organization’s in Pakistan, a phenomena shaped by complex scenario in which the researcher

has no control over the process and its outcomes.

2. Inductive analysis

To quote Patton, "Immersion in the detail and specifics of the data to discover important

categories, dimensions, and inter-relationships" reflects the open endedness of the objectives.

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3. Holistic perspective

The approach adopted by the researcher is to develop an understanding about the topic of

interest in a holistic manner. The conceptual framework developed for this study includes the

factors from all known perspectives that have been used in related studies in other contextual

settings and are also confirmed to be the key factors influencing the adoption of Internet

banking in the contextual settings of this study by highly related participants.

4. Qualitative data

Patton's definition - "detailed, thick description; inquiry in depth; direct quotations

capturing people's personal perspectives and experiences" exactly defines the researcher’s

stance to present “rich text picture” about the role of the factors that influence the

adoption of Internet banking.

5. Personal contact and insight

The researcher is an IS/IT practitioner with several years of experience of working in the

IS/IT function of service sector organizations and has also worked with ICT planning

bodies in the country and his employing organization works as an agent in some

important ongoing ICT initiatives in the country. Thus the researcher has developed good

personal contacts and insight about the issues of importance in ICT adoption. This work

reflects the researchers desire to take advantage of his experience by investigating the

influence of contextual conditions on the adoption of Internet by organizations, in a sector

of economy that is of immense importance in the promotion of electronic services in the

country.

6. Dynamic systems

Patton explicates this as “attention to process” that is under constant change. The

liberalization of economy and the banking sector in Pakistan have pushed the banks to

constantly adopt the change by keeping pace with the fast paced developments in

technology at an international level. The banking organizations in Pakistan over the last

decade can be appropriately described as resembling a scenario of dynamic systems.

7. Unique case orientation

Patton’s suggested meaning to this is that each case is unique in many aspects. Each bank

is at a different level of adoption and also has variations in internal organizations

conditions.

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8. Context sensitivity

This research work is highly sensitive to context and is carried out on banking

organizations of a country that is ranked much below on e-Readiness rankings. Hence, the

factors known to be influencing the adoption of Internet banking might reflect marked

difference in their behaviour because of the significant differences in the intensity of the

factors from other contexts.

9. Empathic neutrality

In the words of Patton, “Complete objectivity is impossible; pure subjectivity undermines

credibility;” the researcher’s passion is to understand the world in all its complexity.

Qualitative inquiry thus creates an opportunity for the researcher to build on the area of

his strength, rather than stick to an awkward pose of objective neutrality.

10. Design flexibility

In order to manage the inherent complexity of the phenomena under study, it is highly

desirable to keep the provision of design flexibility. No other approach would allow

accommodating sufficient flexibility in the choice of design of research.

The above discussion builds a strong case for choosing qualitative research approach as

methodology for this study. However, from a positivist perspective there remains the

problem of ‘lack of scientific rigour’. One way to lessen this objection would be to take

an interpretivist perspective, but with a mixed methods or pluralistic strategy, by

incorporating quantitative methods as well. Cresswell [245] considers that blending of

qualitative and quantitative research is useful in creating synergy effect. According to

layder [244]:

“A multi strategy approach actively encourages the use of quantitative data and forms of

measurement in order to complement the core of analysis”

A pluralistic or multi strategy research is also known by different other names such as

multi trait-multi method research, methodological triangulation, integrated qualitative and

quantitative approach but the term ‘mixed methods’ is used most widely. The mixed

methods approach gives the flexibility to use different types of conventional study

methods (qualitative and quantitative) into a single study to increase the scope and

comprehensiveness of the study [245, 246]. According to [246], mixed method

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terminology is an umbrella term to signify linking or combining of more than one

procedures or methods.

This study uses mixed methods in a manner in which the quantitative methods and data

analysis approach is employed to supplement the core of data analysis which is carried

out using qualitative and interpretive approach.

The field of information systems research has been dominated by laboratory

experimentation, field survey and case study research strategies [238, 262]. This study

uses both field surveys and case study research strategies, both of which are explained

hereunder in more detail.

3.3.1 Survey

In Information Systems research surveys are widely used for collection of data. Survey is

a useful way of collecting data about a situation by asking relevant questions to a

representative sample of appropriate population. There are different types or modes of

data collection in survey method. Table 3.2 shows the common modes of data collection

in survey, its advantages, disadvantages and recommendation with examples in which a

particular mode is more useful.

Table 3.2 Types of survey.

Type of Survey

Advantages Disadvantages Recommendation

Web Survey Very low cost Extremely fast Complex questioning

assures better data Anonymity of

respondents results in more honest answers to sensitive topics

Respondents provide more detail to open-ended questions.

Survey software simplifies compilation and analysis of data collected.

Do not reflect population as a whole

Respondent completion rates lower for longer surveys

Random respondents may reply if your survey appears on Web page.

When desired target population consists mainly of Internet users.

Examples:

Business-to-business research

Employee Attitude surveys

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Type of Survey

Advantages Disadvantages Recommendation

Mail Survey Frequently used for social research

Low cost (almost 75% less than personal interviews)

Eliminates potential bias

May result in biased sample

Low response rate Time! Need to wait at

least several weeks for all responses to arrive

Target population is highly literate or is in a group with specialized interests

Telephone Survey

Reach 96% of all homes CATI software

streamlines process Interviewers can ask for

clarification on responses; additional detail

Sales calls often pose as "research" calls

Typical calling respondents personal time

Call screening is common

No visual support

General population surveys

Personal Interview Survey

Frequently used to gauge attitudinal behavior

Very good response rates Longer interviews

tolerated

Do not reflect population as a whole

Respondent completion rates lower for longer surveys

Random respondents may reply if your survey appears on Web page.

When desired target population consists mainly of Internet users.

Examples:

Business-to-business research

Employee Attitude surveys

Adapted from: “ Types of Survey”. Knowledge-Base Super Survey, Friday, 18-Mar-2005 Web.

25 Dec. 2009 http://knowledge-base.supersurvey.com/ [263]

Surveys are in general carried out through several ways e.g., mail surveys, online web

based surveys, telephone surveys or personal interviews. Data collected by the survey can

be quantitative or qualitative, and fact or opinion based [264]. They focus on the make up

of the sample, and state of affairs in the population at a particular point in time providing

snapshots of practices, situation or views. The typical central features of survey are the

use of a fixed, quantitative design, and the collection of a large amount of data in

standardized form from all the population involved. Survey research entails the collection

of data on a number of units and usually at a single juncture in time, with a view to collect

systematically a body of quantifiable data in respect of a number of variables which are

then examined to discern patterns of association [265, 266].Web based as well as mail

surveys have the advantage of targeting to a widely spread population sample and hence

increasing the possibility of deducing generalisation Web based online survey are more

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useful when the target audience is literate and have ready access to Internet. There are

many advantages of using web based survey. These include convenience, cost

effectiveness, increased possibility of quick reponse, better data storage and management

that makes it easy to carry data analysis. Surveys carried out through personal interviews

provide more in depth analysis but at the expense of a reduced sample size. This

advantage is realized provided that sufficient number of people provides their response.

Disadvantages of survey method are that there is no guarantee that the people who

actually respond are those from whom a response is required. Besides, response may be

influenced from the other members of that social system including secretaries, office

colleagues, friends and family members.

The researcher in this study has employed survey for collection of data using interview

and online web based modes at different stages of research. First it has used online survey

mode to present a snapshot of the Internet banking development in the country. Next

field interviews were done in field study stage and lastly online web based survey was

used to collect data from the IT and e-banking officials of the banking sector of Pakistan.

3.3.2 Case Study

Robson [267] present a solid argument for case studies to be regarded as a research

strategy. According to him “Case study is a strategy for doing research which involves an

empirical investigation of a particular contemporary phenomenon within its real life

context using multiple sources of evidence.”

And the most quoted definition of a case study is that of Yin [268] which states that "a

case study is an empirical inquiry that:

investigates a contemporary phenomenon within its real-life context; when

the boundaries between phenomenon and context are not clearly evident; and in

which multiple sources of evidence are used."

Case study research strategy has a scope of accommodating qualitative as well as

quantitative research approaches. Case study, as a method of research, has been employed

in studies following either of the two research paradigms i.e positivism or Interpretivism.

However, traditionally, it has far greater acceptance and popularity in studies following

qualitative interpretivist perspective of research. The case study is considered useful way

of studying a phenomenon as it allows the researcher to examine it in the real world

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contextual settings and without the need of detaching oneself from the phenomena under

study. Moreover, a case study research approach uses multiple sources and methods to

collect data, including observation, questionnaires, interviews, and documentation. This

allows a researcher to capture the different perspectives and views of the actors involved

in the process or context being analysed. The case study approach allows one to focus on

single or multiple units. Selection of multiple units is considered more helpful and

appropriate for advancing the knowledge in the areas that are relatively less developed

and where a single unit would not provide sufficient information. Yin [269] advocates

that the choice between adopting a case study or other empirical methods should be based

on three conditions: 1) the nature of the research question, 2) the level of control the

researcher has over the events, 3) and the extent of the focus on current events compared

to historical ones. Base research reflects that most research methods would be

appropriate to satisfactorily answer the research queries or questions concerned with

'who, what, where and when'. Case studies seem to be more appropriate for studying the

'how' and 'why' questions concerning contemporary events [270].

Yin [271] has described three different types of case studies with their relevance varying

according to the nature of the phenomenon under study. And these three types are: a)

explanatory, b) descriptive and c) exploratory. According to Yin [271] explanatory case

study is effective in studying the complexities of real life that are too complex to study

through other research methods such as experiments and surveys. He advocates the use of

theories as an initial guide to formulate a conceptual framework. Descriptive case studies

are considered useful in describing an event that influenced the real-life context. In

descriptive case studies theories or explanatory notions are seen to be part of the research

design. Exploratory case studies facilitate the exploration of an area where the existing

level of knowledge is low. These are observed to be more useful in areas where the

phenomena are less developed and the examination of the context is important [272]. The

case study approach has remained, among leading IS researchers in the field of

Information Systems [236, 238, 272, 273], as one of the preferred choice of research

methods. Researchers while advocating the use of the case study research approach also

admit that poor research design can leave the quality of research open to challenge [274].

In order to mitigate this threat, Yin [270] has recommended some useful steps such as;

having clear and adequate view of the issues to be studied-- this helps in the formulation

of an appropriate conceptual framework; selection of an appropriate number of cases for

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the study by being specific about the underlying criteria involved in the selection of cases;

following a suitable and efficient data collection and analysis strategy; and by adopting

appropriate data collection and analysis strategy; and by incorporating relevant measures

for ensuring validity and reliability in case study method.

The other most frequently cited limitations of case study relate to their ability to

generalize results, lack of rigor, the element of subjectivity in the data collection and

analysis, and issues associated with selection of site and the extended time needed to be

spent on each site [236, 252, 271]. Yin [271] observes that there are two type of

generalizations 1) statistical and 2) analytical. He suggests that researchers should focus

on the analytical rather than the statistical generalization. The reason being case studies

do not provide a basis for statistical generalization as they lack large population samples.

The elements of subjectivity and bias relate to the researcher's lack of control over factors

or variables. It is next to impossible for the researcher to ignore his culture, prior values

and norms that might influence the process of research. The influence of these issues can

be avoided by following multiple case study research design. Multiple cases is

recommended to have a variety of data that is helpful in validating the results. The issue

of access to the site and the extended time needed to be spent on site can be solved

through gaining prior knowledge about the site. It is also advisable to use tools,

techniques and databases that can help in managing and analyzing the data more

efficiently.

Many of the issues or criticisms related to the case study research strategy seem to be

either manageable or worth risking compared to the benefits expected out of its use. Yin

[270] has argued that by adopting an appropriate research design and maintaining a

balance between the earlier discussed six points, case study research method can be much

more effective in developing an understanding on research problems that are context

sensitive. It has also been argued in literature that case study research strategy is a better

strategy for conducting enquiry in contextual settings of organizations in developing

countries [40]. In the next section description of the research design is provided followed

by expanding on the overall research process adopted for conducting this study.

3.4. Research Design

The figure 3.1 presents the major phases of this research study and are explained in the

following paragraphs.

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The first step in any research work is the identification of a research problem. This

research was planned in a backdrop of ongoing efforts and initiatives at the highest

government level for incorporating efficiency and transparency in the economy of the

country, by bringing about ICT enabled change in various sectors of the economy.

Ministry of Information Technology (MoIT), a central governmental body for planning

coordinating and directing efforts to initiate and promote ICT programs, was

spearheading the national agenda to promote an ICT enabled change in the country. In

order to steer the vision into practice, the MoIT had constituted working

groups/committees to steer and oversee the implementation of ongoing ICT enabled

initiatives across various sectors of the economy. Some of the senior members of CIIT

and our research group are affiliated as think tanks to these ICT steering bodies/working

groups/committees. CIIT besides functioning as an academic institute is also a partner as

well as agent to many of the ICT initiatives of MoIT, government of Pakistan. This status

facilitated the researcher to access, communicate, and interact relatively easily, with the

members of the working groups and develop first hand knowledge about the progress and

concerns on ongoing ICT enabled initiatives at the country and institutional levels. One of

the key concerns observed in these forums was that despite committing substantial

investments and support for the use of ICT in commerce and business, the businesses in

the country have not shown enough enthusiasm on migrating to Internet enabled business

processes. Many of the members had good insight of these issues mainly based upon their

own intuition and assimilation of studies and experiences of developed countries.

However, it was strongly felt by them that thoroughly researched work in contextual

settings of organizations in Pakistan needs to be undertaken for making the ICT enabled

change initiatives a real success. Additional knowledge about the field of enquiry was

gathered through participation in relevant academic and business conferences, workshops,

and referencing ICT adoption related country and sector reports and literature.

The researcher chose to explore the adoption of Internet banking as historically banks are

known for their aggressive attitude in adopting innovations and it was rightly expected

from them to take the lead in embracing internet enabled initiatives. However, it was not

happening like this and hence formed an important concern for the ICT Planners and

policy makers. The researcher was also encouraged by some important members of

financial institutions who also appreciated the need to dig a little deeper on the underlying

factors shaping the behaviour of the banks. The researcher prepared a proposal and

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invited the expert comments of the relevant officials of the State Bank of Pakistan (SBP)

and the managing director (MD) of NIBAF (National Institute of Banking and Finance, a

subsidiary organization of SBP) on the proposed research and on the issue of availability

of the requisite data to the researcher. The researcher received useful and encouraging

comments on the proposal. However, officials of SBP, informed the researcher that some

data set desired by the researcher is as yet not fully compiled by SBP and would not be

available. Subsequently, the researcher made a presentation before MD NIBAF who

appreciated the proposed research and very kindly agreed to facilitate in arranging access

to relevant institutions and institutional members who could be expected to share the

requisite data. The valuable support of NIBAF in the form of expert opinion remained

available to the researcher throughout the design and execution of this research project

and indeed the personal and official contacts of MD NIBAF proved very helpful in

arranging access to the banks and institutional members.

The literature review as presented in chapter two had also revealed a scope and need to

explore the adoption of Internet banking. The primary information obtained from most

relevant stakeholders also confirmed the scarcity of knowledge base in Pakistan to

develop a better understanding on the adoption of Internet enabled services. However, an

exception to this is an evolving island of knowledge centre in CIIT where the knowledge

on adoption from the perspective of e-Readiness is in development and this research has

benefited from the work on e-Readiness assessment in the health sector of the country

[16, 62, 103]. The lack of research on banking organizations in Pakistan and the non

existence of up to date secondary sources of data on the adoption of Internet banking

services in context of Pakistan supported the importance of the collection of data at earlier

stages of the research from i) literature ii) experts iii) preliminary field work.

Miles and Hubermann [275] recommend an early development of a conceptual

framework and working on similar lines a conceptual framework based on the notion of

e-Readiness was advanced. Two key sources of information for the development of the

conceptual framework, namely, literature review, and experts’ opinions were considered.

The framework first of all, broadly structures the factors around three aspects of an

organization namely Technological Readiness (internal and external) Organizational

Readiness, and Environmental Readiness which shape or influence the organization’s

efforts to adopt and implement ICT enabled change. These three contexts are further

coalesced to arrive at a more parsimonious framework categorizing the electronic

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readiness into two dimensions of internal readiness and external readiness. The

application of the framework leads to the analysis that in order to understand the adoption

of Internet banking in contextual settings of banking organizations in Pakistan, it is

necessary to understand both the internal and external readiness dimensions and the

factors and the relationships between factors across the Technological Readiness,

Organizational Readiness, and Environmental Readiness categories. The factors included

in these readiness dimensions are the ones which were found in literature and were agreed

upon by the experts and advisory committee members, as the most relevant and important

factors for developing a better understanding on the adoption of Internet banking systems

in context of Pakistan.

Figure 3.1 Research design and stages

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3.4.1 Research Process for the Preliminary Field Work

The preliminary field work included the followings stages.

3.4.1.1 A Survey of Internet Banking Offerings in Pakistan

An online survey of the Internet banking portals of the entire banking sector of Pakistan

to assess the degree or level of their presence on the World Wide Web was conducted.

The survey was designed to provide background information about the banks and many

aspects of the Internet banking service functionality available at banking portals. The

survey was useful in identifying the level of adoption of Internet for conducting banking

services.

3.4.1.2 Pilot Field Study

The pilot field study was conducted in two steps. The first step involved conducting a

field survey using interviewing technique. And the second step involved carrying out a

detailed case study on a bank. These were conducted to identify which of the factors

identified in the literature are notably influencing the adoption of Internet banking by

banks in Pakistan. And also to explore any other factor(s) specific to the contextual

settings of this study that has hitherto remained unexplored in literature. The aim of this

exercise was mainly to refine the structure and contents of the framework so that it

includes only those factors that are perceived by the experts as of notably influencing the

adoption of Internet banking by banks in Pakistan.

In the field survey, the researcher carried out discussions using a semi structured

interview format with twelve highly relevant experts (see Table 3.3). The participants in

the field survey included senior managerial staff of the banks involved in strategic

planning and/or implementation of ICT enabled channels and in particular Internet

banking, senior management of regulating authority, consultants and vendors providing

Internet banking solutions. The institutional support of the NIBAF through its managing

director was very important first in identifying the individuals who have a lead role in

electronic banking initiatives in the banking sector and then in introducing the researcher

to them and arranging meetings with some of the key experts. Considering the relatively

small size of the electronic banking industry in Pakistan, survey/discussions with twelve

focused experts is a satisfactory sample size.

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Prior to meeting these experts, the researcher prepared a brief document containing the

objectives and outline of the research. A covering letter also explained the agenda of the

meeting and expected duration of the meeting session. This document was emailed/and or

personally delivered to each of the experts at least a week before the scheduled interview

appointment date. As an important aim was to explore for the possibility of any other

factor(s) considered by the experts as of specific to Pakistani banks, therefore a flexible

and open form of discussion appeared most appropriate. The information collected in

these interviews/ discussions was used to identify the factors that were recognized by the

experts for their notable influence on the adoption of Internet banking in context of banks

in Pakistan. The explanation provided by them was also noted.

This field survey was followed by an in depth case study on a bank to explore for any

further evidence on the factors that could be recognized for their influence on the

adoption of Internet banking by that particular bank. This study was used for further

refining the contents and the structure of our conceptual framework and generation of

initial propositions to be further investigated in the main case studies. Multiple sources of

evidence collection were employed in the case study that included the documentation,

interviews, questionnaire, and observations. Two types of questionnaire were used. The

first one was used to conduct the semi structured interview (see Appendix-1). The other

one was a survey questionnaire which subsequently was not used in analysis for reasons

explained at section at 3.4.2.1.

Table 3.3 Data collection sources and method in the field survey.

Interviews/Discussions Number of Respondents

Data Collection Techniques

Heads of e-banking or alternate delivery channels or strategic IT Planning department of banks

5 Semi structured interviews.

Strategic business management of the banks involved in ICT adoption decision making


Senior management and consultants of IT and Internet banking vendor organizations


Senior management of regulating body concerned with electronic channels.

2 Semi structured interview.

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3.4.1.3 Case Study Based on Secondary Data

This stage was not initially part of the research plan and was included subsequently upon

the researcher getting an opportunity to work as a visiting research scholar in Information

Systems Research Centre (ISRC) in Cranfield University, United Kingdom. Working in

ISRC enabled the researcher to participate, present and discuss his research work with the

members of ISRC and other IS research community participating in PhD seminar forums

like that of the annual event of PhD seminars hosted by London School of Economics

(LSE). At Cranfield University, the researcher got much better access to more relevant

secondary sources of information that enabled the researcher to explore issues in the

adoption of Internet banking in context of two leading UK banking organizations. The

reason for including this stage was that Internet banking is an application of Internet that

has a global appeal and dimension. While, anticipating that the introduction of a service

like Internet banking in developing country, Pakistan, would present some unique issues,

which need to be explored in its own context. However, at the same time it would be

reasonable to expect that the banking organizations, in developed and developing

countries, have many organizational attributes in common as well. Hence, the issues in

adoption of Internet banking, in view of some of the internal organizational factors, might

show common behavioural patterns in developing as well as developed countries context.

With many of the banks in developed countries such as UK having implemented Internet

banking, their experiences are expected to be beneficial for a study that sets off to explore

the adoption of Internet banking in considerably changed external environmental context

of a developing country, Pakistan. Hence, the researcher conducted an enquiry to learn

about the Internet banking implementation issues faced by two well known banks in UK

and the strategies, if any, adopted by them to address the identified issues. This particular

work on the UK banks is essentially based on a published secondary source of data,

which while containing researched information on the critical success factors of e-

financial services in UK [276], also implicitly contained data on the internal

organizational impediments faced by two well known UK banks in their efforts to

strengthen their Internet banking channels. This work was included in the preliminary

field work, and not in the chapter of literature review, as apart from the extensive data

extraction, synthesis and analysis work performed; the researcher also renewed or

updated the empirical results of earlier published work. For this, some of the original or

primary data sources of the published work were consulted and interviewed. The scope

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of the updated study was limited to develop an understanding about the internal

organizational issues and the strategies, if any, adopted by these banks to overcome or

mitigate those issues. The issues arising as a result of external environment such as

banking sector related issues and political or economical environment in which these

banks operated, were not considered for this study as no data about these were available

in the published source and the interviewees had only agreed to update data on issues

which had been in the scope of earlier study. This aspect posed a restriction on employing

the initially proposed framework for collection and analysis of data and the researcher

had to stick to critical success factor framework that was used in the original study for

data collection. The choice of the framework for providing a view of data from a strategic

organizational perspective rather than from e-Readiness perspective informs about the

barriers to adoption of Internet banking from developed countries context. Nevertheless,

it is anticipated that banks in Pakistan, because of some similarity in organizational

settings and structure, albeit operating under radically different external environmental

settings, could be facing some of the same internal organizational issues as reported by

the two banks of UK.

3.4.2 Research Process for the Main Case Studies

This study chooses to conduct main studies on most of those banks whose experts had

participated in pilot study stage. The banks chosen for case studies were mostly those

banks whose management/experts were found as more amenable and open to the idea of

participating in a study of relatively longer duration. The contacts developed in the pilot

field study were helpful in gaining access to the banks. The researcher contacted six

banks in all, out of which two banks did not volunteer to participate citing the reason that

they were in the planning stages of introducing Internet banking and would not like to

share the details at this stage. They perceived the topic to be sensitive and disclosing the

implementation of this new technology might affect their careers and business. The

remaining four banks agreed to participate after needing verbal assurance that the

researcher will not place 'unreasonable' demands upon organization time and resources.

No formal approval was arranged in each of the bank. In each bank the researcher first

had an informal meeting with the CEO or the next in line strategic positioned person.

These meetings were arranged by using the contacts that had developed during the field

survey stage and also by utilizing the contacts of MD NIBAF. The purpose of meeting the

top management was to project the importance of the research work to the researcher as

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well as to the banking sector. And, thereby, solicit the bank’s and their personal

cooperation and interest in the form of participation in the interviews in completion of the

work. The researcher’s request was well accommodated by all the banks and he was

provided an office for seating on sharing basis within the electronic banking divisions.

The researcher spent a time of about one month in each bank. Although the top

management of the banks obliged the researcher mainly because of the institutional and

personal references, however most of them did not seem convinced, of any direct benefit

of such academic efforts for their banks. The data of three banks has been used in this

study. The data of the fourth bank is not included, the reasons for which are mentioned in

the following paragraphs.

3.4.2.1 Case Study Selection Criteria

This study aims to understand the effect of contextual factors or forces on the adoption of

Internet banking by banks in Pakistan. The three banks chosen for the main study are all

in consumer banking business and experience similar sort of external environmental

conditions. They are also similar in many aspects in their internal organizational context,

however, exhibit difference in their ownership structure. The first bank is placed in the

category of public sector bank as the majority of its shares are owned by the state. The

second bank belongs to the category of local private bank as it is a privately owned bank

and the third bank belongs to the category of foreign banks as its ownership is

incorporated outside Pakistan.

The selected banks differ in their level of adoption. These banking organizations have

been broadly classified in two categories of ‘Adopter’ and ‘Planner’. Adopter category

represents those bank(s) that have implemented Internet banking at least to an extent that

its customers can access and view their accounts over Internet. Planner is that category of

bank that is contemplating the option to adopt Internet banking but has not yet

implemented Internet banking.

The researcher also approached and collected initial data from another bank of Planner

category. However, as data collected and consequent results were not adding any thing

new to the already existing findings. Hence, further work was not done in line with the

suggestions that there is no point in collecting further data when saturation seems to set in

the acquired data [274].

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Prior empirical research in IS/IT adoption studies have been conducted to a greater extent

through surveys. However, based on the experience in pilot case study, the researcher

decided not to use survey questionnaires as the main and only source of information

gathering. Firstly, in pilot case study, in at least two instances, consistent mismatch was

observed in the answers provided in response to many of the same questions asked in

interview sessions and the survey questionnaire by supposedly the same respondent.

Invariably, the reason for this was that the senior executives instead of filling the

questionnaires by themselves had instructed some one else in the organization to fill up

the questionnaire and thus the response collected through questionnaire did not represent

the views of the intended responder to the question. Moreover, the information collected

through survey questionnaire was found to be inadequate for providing a deeper

understanding of a complex situation involving a combination of multiple factors. Thus

the main field work was based on multiple case studies using several sources of data

collection. It may be appreciated that the intensity or the behaviour of the factors

responsible for influencing the adoption is not static and changes with time. The sample

case studies are useful in understanding the behaviour of the factors in shaping the

adoption at a particular point in time and hence have a contemporary focus.

3.4.3 Research Process for the Web Based Online Survey

The web based online survey was carried out about nine months after collection of data in

case studies.

3.4.3.1 Survey Design and Collection of data

Research process for the online web based survey proceeded through the following steps.

I. Design of survey questionnaire

II. Online hosting of survey questionnaire on Comsats IIT website.

III. Inviting participants to fill online survey

IV. Online collection of data

I. Design of Survey Questionnaire

Development of a questionnaire first led us to explore IS World forum and repository of

Association of Information Systems (AIS) where IS survey instruments are available for

the benefit of IS research community. However, at this repository, we found

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questionnaires on other types of Internet enabled innovations but not specifically on

Internet banking innovation. Hence, a questionnaire was developed on Internet banking

by benefiting from existing survey questionnaires on e-Commerce and other Internet

enabled innovations and services [61, 277]. The survey questionnaire for this study

comprised of 28 questions (see Appendix-II). Table 3.4 shows the distribution of

questionnaire items. Besides, these 28 questions, the online questionnaire also contained

some other questions on other variants of e-banking. The questions on other variants of e-

banking were included in the questionnaire for a separate study [26] carried as a

requirement for partial fulfilment of Master’s degree program completed under the co

supervision of this researcher. In this chapter the segment of the questionnaire items on

other variants of e-banking are not included and only 28 questions intended for this study

are presented and analyzed. This strategy or arrangement of collecting online data for two

separate but related studies was considered more feasible as it was expected that

respondents would be more inclined to accommodate a request of participating in one

survey of reasonable length instead of two separate surveys on a related topic.

Table 3.4 Distribution of questionnaire items S. # Survey Focus No of

Questions/Items1 Name of the bank and of the person filling the form 2

2 When and why did the bank started Internet banking 2

3 Number of Internet banking customers 1

4 Level of Integration of Internet with other services of the bank

1 with 10 sub options

5 Perceptions on Organizational Readiness 6

6 Perceptions on Internal Technological Readiness 5

7 Perceptions on External Technological Readiness 3

8 Perceptions on Environmental Readiness 8

Scale

There exist useful guidelines for developing a scale for measuring the beliefs and

opinions. This study also benefitted from one such guideline [278]. The questions on

exploring the perceived e-Readiness for adoption of Internet banking were designed on a

five point Lickert scale. This scale is frequently employed in IS research for measuring

perceptions or opinions [277]. This scale allows the respondents to indicate how closely

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their feelings match the question or statement on a rating scale. The number at one end of

the scale represents least agreement or "Strongly Disagree," and the number at the other

end of the scale represents most agreement, or "Strongly Agree."

Scale Scoring

The questionnaire consists of sixteen (16) statements or items that are indicative of

favourable or conducive contextual conditions and six (6) statements indicative of

unfavourable or non conducive contextual conditions for adoption of Internet banking.

The scoring for sixteen items mentioning favourable or conducive conditions was

1,2,3,4,5 with 5 i.e. strongly agree suggested of highest level of perceived e-Readiness

and 1 i.e. strongly disagree as lowest level of perceived e-Readiness on the item or factor

being measured. The scoring for the six items mentioning unfavourable or non conducive

conditions for adoption of Internet banking was revised i.e in a reverse order of 5,4,3,2,1

with strongly agree suggestive of lowest perceived e-Readiness and strongly disagree as

suggestive of presence of highest perceived e-Readiness on the factor to be measured.

Table 3.5 shows the scoring for items with favourable status or conditions and Table 3.6

shows the scoring for items with un-favourable status or conditions

Table 3.5 Scoring for items with favourable or conducive conditions.

Strongly Disagree

Disagree Slightly Agree Agree Strongly Agree

1 2 3 4 5

Table 3.6 Scoring for items with un-favourable or non conducive conditions. Strongly Disagree

Disagree Slightly Agree Agree Strongly Agree

5 4 3 2 1

Finalization of survey questionnaire

Before online hosting of the questionnaire it was pre-tested on four other PhD students

within the department in the Institute to assess its comprehension and the average

completion time. Moreover, two technical managers of banking organizations also

participated in the separate field test and found the questions generally clear and

appropriate for the target responders to understand and complete. Reliability of the

instrument was gauged by measuring the coefficient of reliability (cronbach alpha). The

values for coefficient of reliability were within acceptable limits.

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II. Online Hosting of Survey Questionnaire on Comsats IIT Website.

The questionnaire was uploaded on the official web server of Institute

(http://csr.comsats.edu.pk/) at the place reserved for introducing and highlighting on

going research activities of the department. This was done in anticipation of attracting

better response rate from banks as in general, participants are more likely to visit a link of

trusted and reputable institute instead to an anonymous website link. Likewise,

respondents are more likely to complete a questionnaire about which they are satisfied on

the aspects of purpose and importance of the study and the credibility of institution

making the request for participation in the survey. The purpose and importance of study

was conveyed to the participants through email administered separately to each intended

respondent. Moreover, introduction of research, its objectives and importance was also

displayed at the website to facilitate bankers desirous of knowing more about the

research and its importance for the researcher as well as to their bank and industry.

Testing of Online Survey Questionnaire

The questionnaire after being uploaded on official website was tested about its suitability

for data collection and for its operational reliability to ensure its accessibility and

availability. The live behaviour of the website during completion of online survey

questionnaire was also thoroughly observed and any missing links were corrected.

III. Inviting Participants to fill online survey

The final questionnaire was uploaded and the representative’s of the banks were then sent

email invitations to participate in the online survey by clicking on the hyperlink to the

survey. The online data collection was completed in about three weeks.

The participants profile, follow up process, and data collection is discussed in section

3.5.1 data collection methods.

3.5. Types of Data Collected

This study followed a mix method research approach and collected qualitative data for

the core analysis through case studies of banking organizations and supplemented it with

quantitative data collected through online survey. Table 3.7 below gives the description

and the key differentiation among the two types of data collected.

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Table 3.7 Data types [279]

Qualitative data It is based on meanings expressed through words.

The resulting data is in a non standardized format requiring classification into categories.

The analysis on the data is conducted through conceptualization.

Quantitative data It is based on meaning derived from numbers.

The collected data is in numerical and or standardized format.

The analysis on the data is conducted through statistical methods.

Adoption of Internet systems in context of developing countries like Pakistan is not as

straightforward or automatic a phenomenon as one would expect it to be in context of

developed countries. The aim of this study was not to understand the role of influencing

factors in a mechanistic manner with relatively little consideration of contextual aspects,

but to understand its role while recognizing and accepting the complexity of the

environment in shaping the ability of the organization to introduce internet enabled

services. A qualitative approach to data collection was considered more suitable for

main case studies as this method is expected to provide “thick description” of the

problem under investigation. However, for presentation of a broader picture of the whole

banking sector a quantitative approach to data collection though online survey was

considered better option and the same was used.

3.5.1 Data Collection Methods

The researcher has used more than one method for collection of data in this study. These

methods were chosen to serve, in a best possible manner, the requirements of the specific

phase of the research and those of the source from which data was elicited (see Table

3.8). This is in line with the suggestion of Robson [266] who disapproves unnecessary

tight linkage of data collection methods to that of research strategies adopted. Instead, he

suggests a strategy of ‘pick and mix’ or multiple method strategy can be used to great

effect. The case study analysis for this research was conducted using a number of data

gathering tools such as interviews, observations, questionnaires and referring to historical

documents. The data in survey phase was collected using the online web based survey

mode.

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Table 3.8 Data collection methods, purpose of the study and the type of data

collected

No. Research Questions Research Approach

Purpose/Data Collected

Type

Data Collection Methods

1 What are the key factors influencing the adoption of Internet banking by bank(s) in Pakistan?

Exploratory Qualitative

Literature review Data collected in

pilot field study through semi structured interviews

2 How do these factors influence the adoption of Internet banking?

Exploratory Qualitative supplemented with Quantitative

Individual semi structured interviews

Documents Questionnaire Observations Online web based

survey

The data in the website survey stage of the preliminary research work was collected by

observing the Internet banking functionality available at the entire websites of the banks

in Pakistan. The main data for the other preliminary stage work carried out to explore the

organizational issues in offering Internet banking by two banks in UK, was gathered in a

desk research involving extensive data synthesis and analysis of a published work [276].

This data was complemented with individual telephonic interviews with electronic

commerce team members of the two banks of UK. A total of five telephonic interviews

were conducted, with three of these in one bank and two in the other bank. These team

members have had the responsibility of implementation and strengthening of electronic

channel strategies in their respective banks.

In the next round of pilot field study and main case studies data was elicited via semi

structured interviews. These were conducted on one to one basis so as to provide an

increased understanding of opinions/perceptions of the key individuals, concerning this

study. The notion of active interviews [280] was used in this phase of research. Active

interviews are considered useful to explore predefined topic areas and are conversational

yet focused in intent. Whilst this flexible structure required constant interaction and

alertness it also gave the researcher the opportunities to explore possibilities of finding

any new factor that is specifically related with the context. In pilot field study a number

of interviews were recorded on electronic media and transcribed. For the remainder, notes

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were taken and following the recommendations of Robson [266], were written up on the

same day. Not all interviews were recorded on electronic device as it was felt to interfere,

by projecting a sense of formality to participants, which could reserve them from coming

up with specific details. Alternatively, in the main studies all interviews were

electronically recorded and fully transcribed by the researcher with the prior countenance

of the participants. Most interviews lasted for on or around one hour time duration. Table

3.9 lists the participants of the four case studies, including the pilot case study. Appendix-

III presents the combined list of participants for the Pilot field study and main case

studies.

Table 3.9 Background details of interviews conducted for research

Name of the Bank

Type of Interview

Respondent Position in the organization

Respondent Designation

Number of Formal* Interviews

Number of Informal* Interviews

Allied Bank Limited

Face to Face

Chief Operations/ Next to CEO or president of the bank in hierarchy

Senior Executive Vice President

1 -

Face to Face

Head Branch Operations & e-Commerce Group

Senior Vice President

1 1

Face to Face

Head of Development of Internet banking product

Assistant Vice President

1 1

Face to Face

Internet banking Operations team member

Officer group III

2 1

Face to Face

Development team member, Internet banking

Officer group I 1 -

Face to Face

Head, Alternate Delivery Channels

Executive Vice President

1 1

Face to Face

Head of IT services Senior Vice President

1 1

Face to Face

Internet banking operation team member

Officer group I 1 1

United Bank Limited

Face to Face

Global Head e-Commerce Executive Vice President

1 2

Face to Face

Group Executive, Global Operations and Technology

Senior Executive Vice President

1 -

Face to Face

Head Systems Services Department


2 -

Face to Product Manager e- Vice president 1 2

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Name of the Bank

Type of Interview

Respondent Position in the organization

Respondent Designation

Number of Formal* Interviews

Number of Informal* Interviews

Face Banking

Face to Face

Assistant Product Manager, e-Banking


1 1

Face to Face

System Architect, IT Division


1 1

Face to Face

Management Associate Officer group I - 1

Meezan Islamic bank

Face to Face

Chief Operating officer Senior Executive Vice President

1 1

Face to Face

Head of e-Commerce Senior Vice president

1 1

Face to Face

Head Information Technology


1 -

Face to Face

In-charge Internet banking product development

Deputy Manager

1 1

ABN AMRO Bank

Face to Face

Country Executive, Pakistan

Country Executive

- 1

Face to Face

Head e-ADC Executive Vice President

1 -

Face to Face

Head e-Business Head e-Business

2 1

Avenza Solutions

Face to Face

Technical Expert Principal Engineer

1 -

Face to Face

Technical Expert Software Engineer

1 -

Oratech Face to Face

Vice President 1 -

Transaction Processing Systems(TPS)

Face to Face

Internet banking development team member

- 1

* Formal Interviews are those which were conducted in office. Informal Interviews were conducted in

informal settings.

Finally data in case of Online Web based survey was received and collected from

eighteen banks and was stored online in the backend data base installed in CIIT server.

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Profile of Participants of online survey

This survey questionnaire was directed at Information Technology resource persons

responsible for the adoption and management of e-banking channels in their banking

organizations. State Bank of Pakistan (SBP) as well as Institute of Bankers Pakistan (IBP)

maintains a list of officials who are nominated and authorized by their banking

organizations as contact persons in matters concerning e-banking. The name, email

address, contact phone and fax numbers of authorized contact persons was taken from

that list.

Mode of Invitation

This study used the above mentioned list and requested all members of this list to

participate in this survey. The request and follow up was made in the following ways.

Electronic Mail

All listed individuals were sent request through email to participate by clicking on the

survey link. The contents of the email highlighted the following salient features in a brief

but clear way.

Status of the Institute and its ranking by HEC at which this research is undertaken.

Motivation and reasons of conducting this study.

Desired respondents and the importance of filling of this questionnaire by

appropriate and relevant individuals.

Importance and benefits of this study to Industry and academia and

encouragement on why respondent should participate in this study.

The same letter on the official pad of the Institute and bearing the name, designation, and

signatures of the supervisor was also sent in attachment. This process was done in an

expectation of developing trust of the respondent on the legitimacy of the survey and

thereby increasing chances of response.

The list provided email addresses of sixty individuals from all banks. Emails were sent to

all of these addresses; however, only forty people could receive emails. Seven email

addresses were not in use and thirteen emails bounced back because of delivery failure.

Total emails Not in use Failure Sent

60 7 13 40

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Follow up on Non respondents

Only few responses were received in the first few days of hosting of the online survey, so

a follow up or reminder was made first through telephone calls and FAX and at later stage

in some instances through personal visits to these banks. Like email addresses not all fax

numbers were operative. The list provided sixty five fax numbers of different persons

from different banks. Only forty faxes could be sent. The remaining twenty five numbers

had either changed or the fax machines installed at given number were not responding.

Total Fax Not in use Not responding Sent Faxes

65 8 17 40

Data Collection/Number of banks completing the survey online

The list available with SBP contains names of forty nine banking organizations

(investment banks, commercial banks, Deficit Finance Institutions) out of which the

invitation to participate in online survey was received by forty banking organizations. Out

of this, a total of eighteen banks completed the survey online. Three banks filled the

questionnaire on paper upon personal visit to their bank. However these responses have

not been used in this study as these were not completed by relevant IT and e-banking

officials. Out of eighteen online responses data of 17 banks has been used in this study.

The names of the banks whose authorized members responded to the survey is

summarised in Table 3.10. The banks in this list are also arranged under two categories of

Adopters and Planners. The banks that have adopted Internet banking are categorized as

Adopter banks and the banks that have not adopted Internet banking are categorized as

Planner banks. (See Appendix IV for names of officials of the bank filling the online

survey).

No of Banks invited to fill survey

No. of banks filling Survey online

No. of banks filling Survey on Paper

Data of number of banking organizations used in Analysis

40 18 3 17

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Table 3. 10: Participant banks filling online questionnaire categorized as Adopter and Planner banks

No. Adopter Banks No. Planner Banks

1 Habib Bank Ltd (HBL) 1 Bank of Punjab (BOP)

2 Muslim Commercial Bank Ltd (MCB) 2 PICIC Commercial Bank Ltd (PICIC)

3 Allied Bank of Pakistan Ltd (ABL) 3 Mybank Ltd (MYbank)

4 Askari Commercial Bank Ltd (ACBL) 4 Faysal Bank Ltd (FB)

5 Saudi Pak Commercial Bank Ltd (Saudi Pak)

5 ABN Amro Bank N.V (ABN Amro)

6 Meezan Bank Ltd (Meezan) 6 The Bank of Khyber (KB)

7 SME Bank (SME)

8 Al-Baraka Islamic Bank (Al-Baraka)

9 Atlas Bank Ltd (Atlas)

10 CresBank (Mashreq Bank P.S.C) (CresBank)

11 Habib Metropolitan Bank Ltd (HMB)

12 JS Bank Ltd (JS)

3.6 Data Analysis

Analysis was carried out on qualitative and quantitative data by applying appropriate and

relevant data analysis techniques suggested in literature for each type of data collected.

Strauss and Corbin [281] mentioned that carrying out analysis of qualitative data requires

some creativity to place the raw data into logical, meaningful categories; to scrutinize

them in a holistic fashion; and to find a way to communicate this analysis to others. A

common issue of qualitative data analysis is that it is often indistinct how the findings

presented in the research work were derived from often huge volume of data collected.

Miles and Hubermann [275] recommend that in qualitative research an early development

of a conceptual framework is useful as it enables the researcher to compartmentalize the

data. This guideline was adopted and the conceptual framework was found to be very

useful as it prevented the researcher from becoming overwhelmed with the large amount

of data that emerged from the case studies. The next stage after the completion of data

collection was the analysis of data. The selection of methodology used for data analysis is

to a considerable extent determined by the requirements of the type of data. Miles and

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Huberman [275] observe that the major concern of data analysis is to provide reliable

answers to the research questions which make it a complex process. The major issue in

this is that whilst qualitative data provide a thick description they are different to

quantitative numerals in that they can be interpreted in multiple ways and hence are to

some extent unclear. Qualitative data analysis is defined by Bogdan and Taylor [282] as

‘working with data, organising it, breaking it into manageable units, synthesizing it,

searching for patterns, discovering what is important and what is to be learned and

deciding what you will tell others’. The researchers in qualitative studies commonly

utilize coding and clustering techniques for data analysis. In this study the guidelines

provided by Robson [266] for coding and clustering were used. Miles and Hubermann

[275] recommend the use of a checklist of codes and this approach was utilized in the

main case studies. The checklist was generated from the field studies in which the

structure of the framework was refined and finalized for use in the main case studies.

Statistical analysis was carried out on the data collected from the eighteen banks that

participated in the online web based survey. The statistical analysis was carried out in

two steps. In the first step, a preliminary discriminant analysis determined which of the

main e-Readiness factors/category differentiated between banking organizations that have

adopted Internet banking (Adopters Category) and those that have not adopted Internet

banking at the time of conduct of this survey (Planner category). In order to obtain more

insights into the perceptions of IT and e-banking officials on the influence of contextual

conditions on the adoption of Internet banking, we compared the mean score of both the

Adopters and Planner banks by using Independent Sample T-test to identify the items

within each main factor on which the perceptions of the two category of banks

significantly differ from each other. This test is useful in suggesting possible areas where

the gap between perceived e-Readiness is wide enough between the Adopter and Planner

banks. The items identified as significant are also suggestive of critical areas of concern

on which these banking organizations and other stake holders need to pay more attention.

3.7 Research Design Quality

Yin (1994) has provided the criteria for judging the quality of a research design and these

are: construct validity, external validity and reliability. The tests proposed by Yin to

ensure the quality of research are applied within the context and objectives of this study

as shown in Table 3.11

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Table 3.11 Elements of research quality

Research Design Quality Parameters

Methods Utilized

Construct validity

(Using correct operational measures for the concepts being studied)

Multiple sources of data and collection techniques.

The refined conceptual framework was reviewed by advisors and participants

External validity

(Establishing the domain to which a study’s findings can be generalized)

Multiple case studies were executed.

Survey of entire banking sector of Pakistan was conducted.

Reliability

(Minimizing errors and biases in the study)

Observation of recommended case study protocol procedures.

Data was collected in a rigorous manner.

Sources of information are outlined.

Literature was thoroughly reviewed.

Testing of questionnaire was conducted to ensure reliability of the Instrument used.

Table 3.11 shows that a number of measures were taken to ensure the validity and

reliability of the research. Regarding the reproducibility of the results, it may be

appreciated that the intensity or the behaviour of the factors responsible for influencing

the adoption is not static and changes with time. The results of case studies and survey

are useful in understanding the behaviour of the factors in shaping the adoption at a

particular point in time and hence have a contemporary focus. This study clearly outlines

the sources of information and observes the recommended procedures for mixed methods

studies. Patton [229] observed that data credibility depends less on sample size than on

the richness of the information gathered. Keeping this concept in mind, while conducting

case studies an effort has been made to collect the same sort of data in the form of in-

depth interviews with various highly relevant informants, regardless of their position in

the organization. In literature the methods outlined in Table 3.11 are considered as

satisfactory for ensuring the credibility of the data analysis and research and the same

have been employed in this research study.

The instrument used in the survey was tested for its reliability by measuring the

coefficient of reliability (cronbach alpha). This is done to ensure the internal consistency

of items measuring a particular factor or construct The results confirmed the internal

consistency of the items used in the questionnaire. The coefficient of reliability as seen in

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Table 3.12 is valid for all factors. The analysis was done using SPSS software and the

alpha coefficient for all the factors came out around or over 0.9 which suggests of

relatively high internal consistency of items. A cronbach’s alpha value of 0.7 is

considered satisfactory in most cases.

Table 3.12 Reliability statistics for the Instrument

Reliability Statistics

Factor Cronbach's Alpha

Cronbach's Alpha Based on Standardized Items

N (number of items)

Organizational Readiness

0.965 0.967 6

Internal Technology Readiness

.900 .915 5

External Technology Readiness

.917 .926 3

Environmental Readiness

.918 .938 8

3.8 Conclusion

This chapter contains a brief discussion of the chosen epistemologies and justification for

their use in this study. It also describes and examines research methodologies commonly

employed in IS research and the one used in this study. The research process was

outlined to explain how this research was carried out.

The research design section is the most important part of this chapter which details the

data collection and analysis methods and techniques used in this study. The chapter

concludes by outlining the methods adopted in this research to ensure that the results of

the study are valid and reliable. The remaining chapters of this dissertation will follow the

sequence of research steps as identified in the research design part of this chapter.

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Chapter 4. Initial Research work and the Development of the

Research Framework

4.1 The Objectives of the Initial Research Work

This chapter presents the preliminary research work completed prior to initiating the main

case studies. The preliminary research work was planned to meet the following

objectives.

1. To have an initial outlook of the actual levels of Internet banking services being

offered by banks in Pakistan.

2. To explore the issues of Internet banking adoption in context of banking

organization(s) of a developed country, UK.

3. To identify which issues or factors related in the literature could be recognized

in Pakistani bank(s).

4. To discover further factors associated with Internet banking adoption that could

be particular to banks in Pakistan.

5. To develop and test the structure of the interview for the main studies and

reinforce the researcher’s interviewing skills and techniques.

This preliminary research work and the objectives defined therein are linked with the

fulfilment of the overall objectives of this research study. The above mentioned

objectives were pursued by carrying out three separate but related studies as described in

chapter 3. In the following sections, the relevant data and findings from these three

studies will be presented and those issues that seemed relevant for the development of the

research framework will be identified. It is acknowledged that the direction of the

research until this stage appeared very broad and not very focused as there appeared to be

more data in the responses than just provisioned by the theoretical framework. In order to

balance this aspect a more elaborate structure for data collection and analysis was

developed and questions were amended according to the compiled structure. This resulted

in the collection of more focused data in the main studies.

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4.2 Survey of Internet Banking Services in Pakistan

This study was designed and carried out in the preliminary stages of the research to

explore the degree of World Wide Web presence of the entire population of banks

operating in Pakistan and has also appeared in the print [29]. In the following section the

author briefly discusses the framework employed to evaluate the functionality available at

the Internet banking websites, research methodology, and the findings of the survey.

4.2.1 Framework and Methodology for Evaluation of Internet Banking

Websites

Framework:

Websites are categorized as Informational or Transactional in literature [283]. The

differentiation is on the basis of type of service available at the website. Informational

websites are considered to be the ones that provide general information about the bank

and its products or services. Transactional websites are the ones that provide the ability to

initiate banking transactions or buying products and services through the website of the

bank. This criterion was used to categorize websites of the banks as Informational (non

Internet banking enabled) or Transactional (Internet banking enabled).

Table 4.1 Categorization of websites of the banks

Website Type of Service Example

Informational Informational websites provide general information about the bank and its products or services.

Advertising, Product/Service information, company information, Annual reports and financial performance

Transactional Transactional websites provide the ability to initiate banking transactions or buying products and services through the website of the bank i.e. Transactional websites are enabled for Internet banking.

Opening Accounts, on line Statements, Bill Payments, Balance enquiry, Funds transfer

The websites of the banks identified as Transactional or Internet banking enabled were

further evaluated for the Internet banking functionality available at and through the

website of the bank. Internet banking functionality was evaluated by using tailored

Hersey’s model [284] after introducing some minor adjustments in the model. In this

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model, the functionality of an Internet banking website is determined by characterizing

the website along seven components namely 1) Information, 2) Legal Statement, 3)

Order, 4) Ease of Use, 5) Aesthetic Effects, 6) Performance, 7) Others. These seven

components were found in literature as appropriate parameters on which to evaluate the

overall Internet banking experience [12]. Each of these seven components further

contains element(s) to characterize the functionality for that particular component. Each

element is observed for the presence or absence of the functionality associated to that

element. Table 4.2 shows the names of the components with examples of elements to be

found in a particular component along with the total number of elements to be evaluated

under each component. The assessment of functionality is carried by marking ‘1’ for

presence and ‘0’ for an absence of functionality corresponding to the assessed element.

These scores are then added up to assess the Internet banking functionality for each of the

seven components. The scores of these seven components are added to assess aggregate

Internet banking functionality available at and through the banking website.

Table 4.2 List of components with names and number of constituent components

S No. Component Number of elements in each component

Example of elements

1 Information 3 Company information, product information

2 Legal Statement 2 Security policy, legal disclaimer

3 Order 30 Balance enquiry, funds transfer, opening account

4 Ease of Use 5 Help function, navigation menu/buttons

5 Aesthetic Effects 2 Graphic animations

6 Performance 1 Response time

7 Others 4 Innovation features, competitions or rewards

Methodology:

The entire population of banks operating under regulations of the State Bank of Pakistan

constituted the sample for this study. The names and the web addresses of banks were

obtained from the website of the State Bank of Pakistan (SBP). Those banks whose web

addresses were not available on SBP website were further searched using Google to

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confirm the banks presence or absence on the cyber space. Each individual bank’s

website mentioned in the list was evaluated to identify the type of service available at the

website as per the classification given in Table 4.1. The websites offering Transactional

services were further explored for presence or absence of website functionality elements

that are grouped under seven components as mentioned in Table 4.2. The aggregate

scores for each of the seven components as well as the collective score for the overall

website were recorded. Chapter 2, mentions the nomenclature used by the SBP to classify

the banking organizations into categories and sectors and the same has been adopted in

presenting the survey data according to individual bank as well as category wise and

sector wise.

Table 4.3 Degree of presence of banks in Pakistan on the World Wide Web

Banking sector Category of bank No. of banks

Transactional website

Informational

website

Public Sector Commercial Banks (PSCB)

Nationalized Commercial Banks

2 0 2

Denationalized Commercial Banks

4 3 1

Provincial Commercial Banks

2 1 1

Foreign Banks (FB)

Foreign Commercial Banks 11 2 9

Local Private Banks (LPB)

Private Commercial Banks 17 2 15

Specialized Banks (SB)

Development Financial Institutions (DFI's)

6 0 6

Micro Finance 4 0 1

Specialized Banks 3 0 2

Total Number of Banks in Pakistan 49 8 37

4.2.2 Results and Discussions

Table 4.3 presents sector wise, category wise as well as aggregate data about the degree

of presence of banking organizations of Pakistan on the World Wide Web. It can be

inferred from the Table 4.3 that out of forty nine (49) banking organizations thirty seven

(37) of these have Informational only websites, eight (8) have Transactional websites and

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the remaining four (4) banking organizations do not have any presence on the web. A

category wise view of data shows that banks belonging to four of the eight listed

categories of banks have Transactional websites and the banks falling in other four

categories have Informational only websites. These banking categories are ranked on the

basis of the ratio of the number of Transactional websites in a particular category to the

total number of banks falling in that category. On this basis, the category of

denationalized commercial banks ranks highest as three (3) of the four (4) banks of this

category have Transactional website offering Internet banking the remaining one bank in

that category has an Informational website. Like wise the provincial commercial banks

category is placed second as out of a total of two (2) banks in that category one has a

Transactional website and the other bank in that category has an Informational website.

Next in ranking is the category of foreign commercial banks where only two (2) banks

have Transactional websites and the remaining nine (9) banks in that category have

Informational websites. The only other category having Transactional websites is the

category of private commercial banks where it is found that out of a total of seventeen

(17) banks of this category only two (2) banks have Transactional websites with the

remaining fifteen banks having only the Informational websites.

This same data when viewed sector wise showed that all eight (8) banks grouped as

PSCBs have websites with five (5) of these having Informational websites and the

remaining three (3) having Transactional websites. Out of the seventeen LPBs, fourteen

(14) of them have Informational and three (3) of them have Transactional websites. The

foreign banks (FBs) sector shows nine (9) of the banks have Informational websites and

only two (2) banks have Transactional websites for their operations in Pakistan. The

specialized banking sector has the worst representation on the World Wide Web as out of

a total of thirteen (13) banks only nine (9) have Informational websites with four (4)

failing to even have a web presence.

Table 4.4 presents the overall standings of the eight (8) banks offering Internet banking.

The ranking is based on the aggregate scores assessed for the seven functionality

components. Figure 4.1 summarizes the data presented in Table 4.4 and also shows these

banks clubbed under their respective banking sectors, this helps to infer the performance

of individual banks within their respective sectors. The figure 4.1 shows that in the

category of foreign banks Citi bank and Habib Bank AG Zurich are the only two banks

offering Internet banking. Three Public sector commercial banks (PSCB), namely Habib

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Bank Limited (HBL), United Bank Limited (UBL) and Bank of Punjab (BOP) offer

Internet banking. The rest of the banks of this sector have Informational websites.

Likewise, three banks belonging to LPB’s sector have Transactional websites or Internet

banking enabled websites. These banks are MCB, Askari Commercial Bank (ACB) and

Metropolitan Bank (MB). Of all the eleven (11) foreign banks only two (2) are offering

Internet banking services in Pakistan. Thus it observed that foreign banks operating in

Pakistan have not yet committed to offer Internet banking to a large extent. It is also

interesting to note here that almost all of these foreign banks are operating Internet

banking services in other parts of the world and their websites are Transactional but their

branch network in Pakistani is perhaps not electronically ready to extend Internet banking

to their customers and thus their services are limited to Informational category only.

A comparative analysis of individual banking websites puts Citi bank as leading with a

gross score of thirty nine (39) followed by a score of thirty eight (38) each by MCB and

Habib Bank AG Zurich. The relatively good performance of Citi bank and Habib Bank

AG Zurich may be attributed to their prior Internet banking experience at global level

particularly in developed countries. MCB although being a local private bank matches the

performance of its competitor foreign banks perhaps due of its relatively early adoption of

technology and its aggressive deployment to achieve business goals. Therefore, the score

of thirty eight (38) by MCB is a clear indication that it has well exploited the Internet as a

product/service delivery channel. In the PSCB group, Habib Bank is ahead of the three

banks with a score of twenty four (24) followed by UBL nineteen (19) and BOP eleven (11).

Aggregate Evaluation Scores

39 38 38

2018

2319

11

0

5

10

15

20

25

30

35

40

45

CITI HB AG MCB ACB MET HBL UBL BOP

Foreign Banks Local Private Banks Public Sector banks

Figure 4.1 Evaluation of websites of banks in Pakistan.

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Table 4.4 Detailed Evaluation Results

Type of Service Elements Public sector banks Private Foreign HBL UBL BOP MCB ACB Metro CITI HBAG

INFORMATION Company Information 1 1 1 1 1 1 1 1

Services Information 1 1 0 1 1 0 1 1

Product Information 1 1 1 1 1 1 1 1

Sub total of INFORMATION category= 3 3 3 2 3 3 2 3 3

LEGAL Legal disclaimer 1 1 1 1 0 1 1 1

Security Policy 1 0 0 1 0 0 1 1

Sub total of LEGAL category = 2 2 1 1 2 0 1 2 2

ORDER Statement of Account(s) 1 1 1 1 0 1 1 1

Balance Enquiry 1 1 1 1 1 1 1 1

Funds Transfer 1 1 0 1 0 0 1 1

Bills Payment 0 0 0 1 1 0 1 1

Third Party Transfer 1 0 0 1 0 0 1 1

Opening accounts 0 0 0 1 0 0 1 1

Receive Alerts 0 0 0 1 0 0 1 1

Requests & Intimations 1 1 0 1 1 0 1 1

Cash Management Online 0 0 0 1 0 1 1 1

E-Shopping 0 0 0 0 0 0 1 1

Credit Card Payment 1 0 0 1 1 1 1 0

Standing Instructions 1 1 0 1 0 1 1 1

Loan Applications 1 0 0 1 1 0 1 1

Customer Correspondence 1 1 1 1 1 1 1 1

Insurance 0 0 0 0 1 1 1 1

Mobile Banking 0 0 0 1 0 0 0 0

Brokerage 0 0 0 1 0 0 0 0

Investments 0 0 0 1 1 0 1 1

Online Remittance of Funds 0 0 0 1 0 1 1 1

Tax advisory service 0 0 0 0 0 0 1 1

Financial Planning 0 0 0 0 0 0 1 1

Linking A/Cs Online 0 0 0 1 0 0 1 1

Market News Online 0 0 0 0 0 0 1 1

Trading Online 0 0 0 0 0 0 0 0

Foreign Exch. Trading 0 0 0 0 0 0 0 0

Foreign exch. Rates update 0 1 0 1 1 1 0 1

Car Loan Applications 1 1 0 1 1 0 1 1

Account and Managers password Change facility

1 1 1 1 1 1 1 1

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Type of Service Elements Public sector banks Private Foreign HBL UBL BOP MCB ACB Metro CITI HBAG

Banking procedures Guide 0 0 0 1 0 0 1 1

Account, locker, loan, ATM card application submission

0 0 0 1 0 0 1 1

Sub total of ORDER Component = 30 11 9 4 22 11 10 25 25

EASE OF USE Frequent Asked Questions 1 0 0 1 0 0 1 1

Tutorial/Demonstration 0 0 0 1 0 0 0 0

Search function 1 0 0 1 0 0 1 1

Help function 0 0 0 1 0 0 1 0

Navigation menu/buttons 1 1 1 1 1 1 1 1

Sub total of EASE OF USE Component = 5 3 1 1 5 1 1 4 3

AESTHETIC EFFECTS

Graphics 1 1 1 1 1 1 1 1

Animations 1 0 0 1 1 0 1 0

Sub total of AESTHETICS Component = 2 2 1 1 2 2 1 2 1

PERFORMANCE Website Response time (within 30 seconds)

1 1 1 1 1 1 1 1

Sub total of PERFORMANCE Component =1 1/1 1/1 1/1 1/1 1/1 1/1 1/1 1/1

OTHERS City, Country and Code Wide Branch Locator functionality

1 1 1 1 1 1 0 1

Account blocking facility 0 1 0 1 0 0 1 1

Bank Policies on loan and other areas

1 1 0 1 1 1 0 1

Rewards 0 0 0 0 0 0 1 0

Sub total of OTHERS Component = 2 2 3 1 3 2 2 2 3

Total = 47 24 19 11 38 20 18 39 38

Percentage 51% 40% 23% 81% 42% 38% 83% 81%

A detailed analysis of Table 4.4 provides comparison of the eight banks on the seven

individual components measuring website functionality. Table 4.4 and figure 4.2 shows

that all the eight banks perform equally on the performance component that is measured

by response time. There are little variations among banking websites on the components

of Information, Legal, and Aesthetics. The Ease of Use and the others components show a

slight variation and put some impact on the overall standings of banking websites.

However, the Order component contains most of the elements for assessment therefore;

scores achieved on this component actually make an overall difference in the ratings of

the websites. Order component contains many of the banking services that can create a

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real value addition for the customer and thus banking organizations should look for

initiating these services.

Comparison of Internet Banking Functionality Measured Along Seven Components

0

10

20

30

40

50

CITI HB AG MCB ACB MET HBL UBL BOP

Others

Performance

Aesthetic effects

Ease of Use

Order

Legal Statement

Information

Foreign Banks Local Private Banks Public Sector banks

Figure 4.2 Comparison of Internet banking functionality

4.3 Exploration of Organizational Issues in Offering Internet Banking

in Context of Banks in a Developed Country

As described in chapter 3, this study is a desk research involving extensive data synthesis

and analysis of a published work, complemented with individual telephonic interviews

with electronic commerce team members of two banks of UK. One of the reasons of

carrying out this work was to develop an understanding on the internal organizational

issues perceived by these banks. The knowledge and the experience gained from this

work exposed the researcher about the organizational issues many of which were later

found to be of importance and concern to the banks in Pakistan as well. In the following

section after briefly providing the background information about the participating banks,

the inherent problems of offering Internet banking services from the viewpoint of the

banking organizations in question are enlisted, discussed and analyzed.

4.3.1 Background Information about the Participating Organizations

The two banks in this particular research endeavour are referred to as Bank-A and Bank-

B, for confidentiality reasons.

Bank-A:

This Bank is a medium sized well-known bank. It is part of UK's major financial services

groups and offers a broad range of financial and banking services to personal, commercial

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and small business customers. It can trace its origins back to the nineteenth century and

has gone through several name changes and became a listed FTSE 100 public limited

company on the London Stock Exchange, in late 1990s.

Bank A’s distribution network consists of around 300 branches providing UK-wide

coverage, a number of call centres for phone banking, a network of over 2100 ATMs, a

website which is continuously improving in terms of functionality. This bank also uses

the network of UK Post Offices, where commercial, small business and personal current

account customers can transact at 18,000 locations across the UK.

Bank-B:

The second bank is another leading provider of personal financial services and products

in the UK. It has more than 400 branches nation-wide. Initially a small building society, it

has now established itself as a national bank with high street branches throughout the UK.

It has developed several subsidiary companies offering a wide range of services including

life assurance, unit trusts and an estate agency. Bank B was also floated on the London

Stock Exchange as a plc in late 1990’s.

4.3.2 Results and Discussions

Although the two banks considered the implementation of their electronic channels

strategy to be moderately successful, there were many inherent difficulties that needed to

be resolved before the expected benefits could be achieved. These benefits being: lower

transaction costs, increased customer satisfaction and increased cross-selling. Table 4.5

presents the list of the organizational issues identified by the two banks. The discussion of

these is presented below.

Culture of short-term targets:

This was a commonly cited problem at Bank-A. Management’s focus appeared to be on

achieving short-term sales targets and not looking at the bigger picture. For example,

according to their Head of Credit Cards and Loans, “in the early days of e-Commerce we

set ourselves very ambitious targets while not understanding our limited IT and project

management capabilities, led to many disappointments. Instead of revising targets to

bring them into realistic limits, we started setting short-term goals which is making things

worse”. This resulted in creating an atmosphere of competition between different teams

within the organization and between different service delivery channels, such as

e-banking and branch banking, thus reducing the prospects of mutual co-operation. This

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caused different teams to work for achieving individual aims rather than to work towards

the overall vision of the organization.

Informants at Bank B did not report it as a barrier.

Table 4.5 List of organizational barriers/issues identified

Sr. No Organizational barriers/issues

1 Culture of short-term targets

2 Lack of e-Commerce promotion within organization

3 Limited research and development

4 Lack of understanding and knowledge about e-Commerce

5 Lack of product differentiation and categorization

6 Lack of understanding of customers

7 Difficulties in personalizing products:

8 Integration of related systems and processes

9 Technology taking precedence over business process change

10 Website design and operational functionality

Lack of understanding and knowledge about e-Commerce:

To succeed in e-Commerce implementation, it is important that people at all levels,

within the organization, understand the related issues. Without a wide-spread

understanding the progress can be seriously hindered. The importance of this factor was

highlighted by their e-Commerce Development Manager, when he stated, “the support

from top management is crucial for success but what determines the pace of progress is

the support from rest of the organization. We are not 100% there yet” This problem was

very clearly evident at Bank-A. For example, the marketing department insisted on using

direct mail or phone calls for marketing purposes. Whereas the e-Commerce team

believed that email marketing was better, cheaper and more efficient. Besides, such

emails could also contain direct links to Bank-A’s products and services. There was also a

lack of knowledge regarding other possibilities e.g. establishing business partnerships

through other popular websites to attract more visitors as well as business-to-business and

business-to-customer relationships.

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Bank B exhibited much better understanding and knowledge about e-Commerce then

Bank A, however, it was still found short of having a well designed website that would be

able to incorporate operational functionality of Internet channel to its fullest

Lack of product differentiation:

At Bank-A, there was almost no product differentiation for different channels. With the

exception of personal loans, there was no difference in pricing or speed of product

delivery via the Internet. Lack of incentives for customers to manage their financial

affairs online was seen by many interviewees to be a key obstacle in e-Commerce growth.

Some felt that Bank-A did not have enough e-Commerce functionality in place to fully

utilize this option. This problem is being addressed at Bank A as they now have a wide

portfolio of e-products which offer better value than traditional products.

At Bank-B, many informants did not consider provision of incentives to be necessary to

attract customers to the new channels. They thought that their positive brand image, good

customer service and technological leadership were enough to attract new customers.

Another reason cited by their Customer Support Manager was that they, “did not

differentiate between products for e-channels and products from traditional channels

because our main target is customers, who preferred a multi-channel solution rather than

hunt for bargains from Internet only banks”. This assumption on the part of Bank B

proved a barrier to Internet banking success as take up by new customers was much lower

than expected. It is taking them some time to realize that the customers normally do

expect product differentiation (i.e. cheaper products or quicker delivery) from electronic

channels.

Lack of understanding of customers:

Gathering information about customers was considered to be a key problem area at Bank-

A. This was consistent with the findings in [124],that predicted advances in technology

and arrival of new service delivery channels often resulted in the growth of users with

sophisticated needs and, thus, new ways need to be found to serve such needs. According

to some interviewees, this aspect was likely to be resolved in the near future, when data

ware housing systems will be in place and so, better systems integration would enable the

provision of useful data. Some interviewees at Bank-A disagreed with the idea of using

customer information for the personalization of financial services, arguing that financial

services are not like computers or music CDs where personalization is fairly common.

The reason given was that an average customer only buys a financial product almost once

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in five years, on average, limiting the scope for use of historical financial information for

personalization purposes. Another reason, cited by a senior e-Commerce team manager,

was the time pressure to launch new products, which would then leave little room for an

organized effort to gather and analyze data about customers’ response. Due to these

reasons, efforts to understand customers are generally limited to a brief product testing or

monitoring the effects of various marketing activities.

At Bank B, customer data was managed much better and it was effectively used for cross

selling of their products. As a result, the number of their products per customer figures

was much higher (4 per customer in comparison to 1.6 at Bank A). Bank B could build on

their existing successes by broadening the scope of their information gathering and

analyzing technologies across all channels. Whereas, it is true that e-Channels are better

suited to this kind of activity, understanding customers’ interaction patterns with all

channels would be very useful, as it would provide a fuller picture to be utilized to further

enhance their relationship with customers. Efforts, such as implementation of latest data

mining technologies and staff training are under way to make improvements in this area.

Bank B’s success in this area is a good indicator for other banks to embrace the fact that,

even in banking, understanding customers is as vital as in other businesses.

Difficulties in personalizing products:

At Bank-A, while the scope for personalization in standardized financial services (such as

current accounts or saving accounts) is very limited in comparison to say, book retailing,

an improved understanding of customers, enabled by e-Commerce and data-mining

technologies, can greatly enhance the prospect of cross selling of their products. One

example of this is the use of logged files and click stream analysis to understand why

some customers leave the process of filling in an application form incomplete. Once the

reasons are known, steps can be taken to improve the situation. At Bank-A, customer data

was not kept, there was a great difficulty in targeting the customers and personalization of

products. Their figure of around 1.6 products per customer, as mentioned above, is not

great in comparison with some of Bank-A’s competitors (such as 4 per customer for bank

B) and shows a weakness in the Bank-A’s efforts towards personalizing products for

customers. This finding was in line with Harden [285] who argues that e-channels erode a

direct relationship with customers and stresses the need for personalization in customer

communication to keep them loyal. Bank B is much more successful in this regard.

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Limited research and development:

At Bank-A, Research and Development (R&D), which was carried out by just one person

with very limited budget, was another area identified by many informants as a barrier to

growth in e-banking. R&D should involve a multi-disciplinary team and act like a think

tank within the organization to enable it to take a long-term strategic view of technical

and business developments and facilitate successful innovation. According to [124], the

Internet is forcing banks to create new products and services and to make existing

products more suitable for online delivery. A well-resourced R&D team can make

significant contribution in this regard. Similar conclusions were reached at Bank-B where

R & D activity is almost non-existent.

Lack of e-Commerce promotion within organization:

Around 1500 jobs from Bank-A disappeared within 18 months after the implementation

of Internet banking. Internet banking was not the only factor in these job losses but it was

the main reason blamed by many in the organization. Given this type of general

impression, it is surprising that they have made little noticeable effort to promote

e-Commerce within the organization. As a consequence, lack of enthusiasm for new

e-channels, amongst managers outside the e-Commerce department, may be one of the

reasons for a relatively slow speed of improvement in their e-Commerce functionality.

Integration of related systems and processes:

Lack of an appropriate sensible approach to integration of related systems and activities

appeared to be the most critical problem at Bank-A. Although, certain steps have been

taken, it is continuing to be a key obstacle in improving the functionality of their website

and integrating the various delivery channels. Shortage of financial and human resources

and lack of project management skills, in particular project planning skills, were

commonly cited as the main reasons for this problem. This finding is consistent with the

research of Mohamed and Al-Jaroodi [116], which identified integration problems as key

obstacles in the growth of e-banking. At Bank-B, the integration was not considered a

barrier. This was because they have well-established middleware systems, which enables

them to easily integrate new products with existing systems.

Technology taking precedence over business process change:

Both the banks reported that they initially erred in their approach to Internet banking by

introducing the technology first and then making organizational structural and business

process adjustments and changes. Although the banks have reported that they were able to

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demonstrate flexibility in accommodating the changes needed in the departmental

structures and business process, it was done at the cost of time spent on learning the right

approach. According to a member of the e-Commerce team in Bank A, initially, they

made the mistake of jumping on to e-Commerce without much planning and realization

of its organizational impacts. However, they learnt from their mistakes quickly and

followed e-Commerce with the required organizational changes such as the

re-engineering of business processes and modifications in the organization’s management

structure. This helped them to speed up decision-making process. E-Commerce Director

at Bank A commented by saying “we would quite often build technology and then tell

people about the process that goes with the technology, but we should start with the

process which identifies the customers’ needs from end-to-end and then build the

processes and acquire the technology to support the processes”.

The experience of Bank B is not much different in this aspect and according to

e-Commerce Enhancement Manager "we did it the wrong way, the re-engineering of

business process followed the introduction of e-Commerce rather than the other way

round”. This finding is consistent with existing research findings where this is stated as

one of the main problems in technology initiated change [286, 287].

Website design and operational functionality:

At the Bank A, website was fairly well designed but little efforts were made to keep it

updated to improve customers’ experience. It also offered little functionality due to

backend integration problems mentioned above.

At Bank-B, poor website design and lack of operational functionality was considered by

some informants as one of the key barriers in Internet banking growth.

These findings, although particular to just two UK banks, are expected to have useful

implications for the banking organizations contemplating to introduce or strengthen

Internet as delivery channel in other contextual settings including Pakistan as well. The

purpose of taking up this work was to learn from the experiences of the two UK banks

and apply these findings in a manner that could benefit other financial institutions,

embarking on similar Internet banking projects.

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4.4 Pilot Field Study to Identify the Factors and their Role in the

Adoption of Internet Banking in Context of Banking

Organization(s) in Pakistan

The pilot study explored and investigated the factors documented in the literature and are

perceived to be influencing the adoption of Internet banking by bank(s) in Pakistan.

Moreover, it also looks for the evidence of any new factor that might be of consequence

in the specific contextual settings of this study. The data collected was used to refine and

adjust the structure of the initially proposed framework, so that it contains only those

factors that were considered by the participants as relevant enough, for advancing and

developing an understanding on the adoption of Internet banking by bank(s) in Pakistan.

In the pilot study the evidence was explored through a field study constituting field

surveys and a case study on the bank having adopted Internet banking. The participants

included in the field study were senior managerial staff of the banks involved in strategic

ICT planning and implementation of ICT enabled channels, senior management of

regulating authorities, consultants and vendors providing Internet banking solutions. The

data gathered in the pilot study was then compared with past research and some initial

propositions were generated that appeared to be relevant for examination. In order to

collect data in an organized way a structure (see Table 4.8) was developed to improve

data collection and the subsequent data analysis for the main case studies.

The following section presents the list of factors recognized by the survey participants as

the factors influencing Internet banking adoption by banks in Pakistan. This is followed

by the results of the case study that further substantiated the evidence collected through

field surveys and explored the way these factors shape the efforts of the bank in

introducing Internet banking. This is followed by discussion of the factors identified by

the participants in the field survey and in the case study.

4.4.1 Key Factors Influencing the Adoption of Internet Banking Identified in

Field Survey

Different factors, arranged under internal and external e-Readiness dimension as well as

categorized under the three aspects of an organization’s context(organizational,

technological, environmental), were considered by the participants as of high relevance

for developing a better understanding on the adoption of Internet banking in context of

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bank(s) in Pakistan (see Table 4.6). The explanation provided by the expert participants

of the survey on such factors is discussed collectively with the discussion on the case

study.

The participants interviewed in the field survey generally found factors already identified

in literature, as quite comprehensive. The factors mentioned in Table 4.6 were considered

by them as more relevant and important. There were some additional factors that were

identified by two of the participants that apparently were new findings. The additional

factors mentioned by two of the respondents as new findings were not pointed to be

exerting any notable influence on the adoption and were not included. Moreover, a later

rechecking also confirmed that the same factors were listed in literature but with different

construct or factor name. There was an observation from the participants that warranted

some minor adjustments in the content of the framework. The observation was regarding

the unit for measuring the size of an organization. The researcher was using the count of

the number of employees and the financial ratios as indicator of organization’s size. The

participants, however, suggested that a more appropriate yardstick to measure

organization size would be the count of the number of branches of a bank and its

distribution or spread across the country. This is because the banks with relatively fewer

branches usually operate in urban areas, where they are expected to face fewer digital

divide issues in adoption, as compared to a bank with a large branch network spread

across the entire country. This suggestion was incorporated and the structure or template

for data collection (see Table 4.8) was amended accordingly. A pilot case study on one

banking organization of Pakistan was then conducted. The purpose of this pilot case study

was to further look for evidence of any new factor(s) that may be notably related to

Internet banking adoption and learn about how these may affect Internet banking

adoption.

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Table 4.6 List of key factors influencing the adoption of Internet banking, as

identified through the pilot study with corresponding literature reference.

Dimension Factors identified through pilot study Literature

Internal e-Readiness


Organizational Structure [36, 146, 276]

Size, number of branches, relative positioning of IT department in the bank’s hierarchy

Resources [114, 125, 176]

Financial & HR

Commitment [109, 131, 181]

Top management support, the investment of adequate financial and other resources for the development

Adoption Strategy [36, 58, 59, 222]

Models and techniques used, stages followed in implementation, timings of adoption

Awareness of Attributes of Innovation [276, 288]

Technological Readiness (Internaland

External)

Relative advantage

Security Risk [115, 131, 138, 227] The sensitiveness of Internet banking to security breach

Compatibility [116, 289]

The compatibility of the changes to work procedures initiated by the adoption of Internet banking with the beliefs and values, the existence of favorable attitudes towards implementation, with the IS infrastructure, Past experiences, and business needs

Technology Complexity [116, 289]

External e-Readiness

The complexity of the skills required to develop and manage, the required knowledge of development methodologies, the relative ease or difficulty in integration of technology with banking IS

Access Technology and Infrastructure [120, 125, 126]

Access speed, access type, penetration of Internet, telecommunication access infrastructure, capacity of network

Availability of Complementary Assets [36]

Technology tools, vendors, consultants and solution providers, real time payment systems, online security and trust services

Environmental

Readiness

Market Readiness Factors [36]

Consumer demand, competition

Policy Readiness Factors [58, 125, 126]

Policies, legal framework and the role of regulators

Societal Readiness Factors [114, 145]

Culture

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4.4.2 Pilot Case Study

4.4.2.1 Background Information about the Bank

Allied Bank Limited (ABL) is one of the largest and the oldest of the banks in Pakistan. It

has a physical branch network of over 700 branches geographically spread across all parts

of the country. These branches, serving the urban and rural population of 300 cities and

towns, are all connected through a data communication network enabling the bank to

offer real time online retail banking to customers at any of their physical branch premises.

The history of the bank dates back to 1942 when it started its operations with the name of

Australasia bank in the Indian subcontinent. After the creation of Pakistan in 1947 as an

independent country, Australasia Bank had to close its operations in Indian territories and

reorganize its operations in the newly formed state of Pakistan. The bank continued

functioning as a private limited bank until 1974. In the same year the bank was

nationalized and the incumbent board of directors was dissolved and the bank was

renamed as Allied Bank Limited. ABL continued to function and expand for the next

seventeen years as a state owned bank with state management control. ABL is also one of

the first banks to be privatized as a result of financial reforms and deregulation policies of

the government of Pakistan in 1991. In the process of privatization, the employees of the

bank were provided a preferential right to bid for the ownership of the bank and

consequently ABL entered a new phase in banking history when its employees

successfully won the bid of ownership and management of the bank. The employees as

share holders managed the bank for the next thirteen years. In the year 2004, the

ownership of the bank was transferred to a consortium comprising Ibrahim Leasing

Limited and Ibrahim group and the shareholders of these groups were issued shares of

ABL which were then formally listed in all the stock exchange companies of Pakistan.

ABL is offering a wide range of banking products and services. The products include a

variety of banking account types accessible through multiple delivery channels, consumer

products such as master card, lending products and corporate leasing products. The

services offered are remittances, utility bill payments, Hajj services, lockers and

commodity operations. ABL is an established brand in retail banking and is also

committed to serve the needs of commercial and corporate banking with a focus on

service delivery enabled through Information Technology.

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4.4.2.2 Internal e-Readiness Dimension

The status of factors comprising the categories of Organizational Readiness and

Technological Readiness (internal) reflects the internal e-Readiness dimension. The

perceived conditions of these factors are presented below.

Organizational Readiness:

ABL is represented by its board comprising of a total of eleven members designated as

Directors. The board is headed by a Chairman who holds the majority shares of the bank.

The Chairman in consultation with the members of board appoints the President of the

bank, who by virtue of his appointment also holds the position of Director in the board.

The President is responsible for bank wide operating direction, growth, and financial

performance. The various banking business functions are organized under different

groups in the bank headed by its Chief. There exists a separate Information Technology

group in the bank and its Chief reports directly to the President of the bank. There are

four different departments working under the Chief of IT Group. One of these

departments is designated as Technical Services Department that provides support and

technical services to core banking and Alternate Delivery Channels (ADC’s) including

Internet banking service named as Allied Direct. The operational responsibility of ADC’s

including Allied Direct lies with Alternate Delivery Channel (ADC) department whose

head reports to the President through the office of the Chief of Operations.

The banks financial and otherwise performance on key performance indicators has been

extremely good. The bank has an asset base of Rs.263 billion depicting a growth of 42%

consecutively for the last two years [290, 291]. The leading credit rating organizations of

the country mention the overall outlook of ABL as positive for short as well as medium to

long term [292]. The interviewees mentioned that adoption of an innovation like Internet

banking within normal acceptable market costs is of no financial burden for the bank.

ABL feels that banking sector as a whole faces difficulty in finding good human resource

and the ABL bank is no exception to it. The Group Chief (Operations) commented,

“There is a shortage of good bankers in the country and especially of such people who

know banking as well as technology”. He informed that ABL was amongst the first

nationalized banks to be privatized and had to work on its employees to change with the

new realities. However, the banker observed that through a continuous process of training

and change management, it has been successful in motivating or pushing its employees of

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the nationalized era to change with the changing requirements. Therefore, it is no longer

burdened with those employees of the public sector era who were not well conversant

with technology.

The top management of ABL has a reputation of being committed to providing high-tech

innovative solutions and value-added services to its customers. The Group Chief

(Operations) emphasized, “we are keen on following the International good practices and

trends and don’t want to be left behind other industry participants. Our board is mindful

of the role of alternate delivery channels including Internet to their banking operations

and business”. The Group Head (Branch Operations) remarked, “The chairman and the

president are fully committed to bring continuous improvements in the banking services

through systematic adoption of technology. It is quite natural that when the chairman

and the president are behind the idea then chances of its successful adoption increase

manifold. Our President has an educational profile of an IT Professional and thus he

fully backed the process of Internet banking adoption”.

Regarding process of adoption, the Group Chief (Operations) stated, “Technologies are

changing quite rapidly and it’s an important decision for a bank to choose a technology

solution that has a longer life expectancy and also there are relatively less issues of

integration of the technology to other technologies”.

The Group Chief (Operations) informed, “We follow a strategic planning process that

guides us in our decision of adoption. The decision to adopt by itself is a complex process

and each situation of adoption has to be looked into its context. Organizations are a

complex social system. You need to work as a team and in some instances, no matter how

much convinced you are on an issue, you need to accommodate the views of your

superiors and colleagues on that issue also. Thus decision making is not just simple. In

the case of Internet banking, we went through a number of stages and processes that

included meetings, evaluations and justifications, prior to arriving at the decision for its

adoption”.

The management delegated the task of implementing Internet banking to the IT group.

According to the Head IT (Technical Services Department) they engaged the best

available consultancy firm whose services remained available to them at all the stages of

the project. ABL has chosen a model of outsourcing for the implementation of Allied

Direct Internet banking product, however software components or modules that involve

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confidential data are developed in house. Transaction Processing Systems company

(TPS), which is a software, systems and consulting firm for e-banking and e-payment

products, solutions and services, is partner to ABL for the deployment of Internet

banking. TPS started its business in Pakistan in the year 1996 and in a relatively short

span of time, it has emerged as a leader in the financial software Industry of Pakistan.

TPS has also successfully deployed over two hundred e-banking and e-payment solutions

across eighteen countries of the world. The 1- LINK network, the largest inter bank

shared switch network of Pakistan, is also one of the services provided by TPS.

Technological Readiness:

The Assistant Vice President (AVP) responsible for Internet banking implementation

informed that one of the major challenges that bank faced was upgrading the legacy

systems and changing from a paper based system to paperless environment like Internet

banking. The AVP stressed, “Our President has had the vision for a long time to provide

IT enabled services at par with International banking norms to our customers. But the

MIS infrastructure of the bank was a problem as it was old paper based system. The top

management provided full moral and financial support to bring the MIS and the requisite

infrastructure in place, which has made it possible for us, to offer online services such as

Internet banking”.

The investments in building capacities and ICT enabled infrastructure has paid off for the

bank, as the interviewees in ABL took a pride in informing that their branch network, all

across the country, is interconnected and the communication and transactions are done

online almost on real-time basis. AVP IT (Technical Services Department) observed,

“Project complexity increases manifold with the size of the organization. Although

staying online is easy, but doing it in a large bank with 741 branches, is a gigantic task.

Maintaining electronic data of all customers, even accounts of sixty years old in far flung

areas, archiving it, using digital signatures and integrating technology to make it happen,

are all concerns and our bank has successfully done all these. The existence of stable and

solid foundations of MIS being in place with online connectivity, gave us an

advantageous position to implement Internet banking. Had that not been in place, we

would have continually struggled with problems encountered in a typical paper based

system and would have faced a lot more challenges in implementing Internet banking”.

The AVP IT commenting on the project management issues observed that ABL

outsourced the work to TPS who already had been their strategic partner in deploying self

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banking technology solutions for the last ten years. “TPS has deployed the ATM network

for our bank by virtue of which they are well familiar to our technology platforms,

existing infrastructure and environment”.

There have been issues of delay and the project failed to meet the project completion

timelines and it’s still affecting the bank in expanding the services. The AVP IT

considers both the bank and the vendor responsible for this, as according to him, “First

from the bank’s side, order confirmation to TPS was issued quite late. As a result, the

expertise and resources of TPS that were reserved for Allied Direct product got engaged

on some other client’s projects. And from the vendor’s side, TPS could not free up its

resources and make them available shortly after receiving the delayed confirmation

order. Now again after live operation when we are considering to add additional

functionalities in the Allied Direct product, we are having the same problem. The target

dates which we are demanding, they are unable to accommodate. At this time they have

resource constraints as they have a number of projects running”.

Group Chief (Operations) finds little issues on the compatibility of Internet banking with

the operating practices and changes caused by the adoption of Internet banking with

existing operating practices, beliefs and values. Commenting on these the Group Chief

(Operations) said, “While introducing any thing new to the system there are two pathways

or options before the management. The first pathway is to train and prepare people for

the change, change the processes and then introduce technology. The other option is to

get ready made standard technology, change the processes around technology and

prepare people to adopt the changed process. There are definitely pros and cons of each

option but we adopted the second approach for our Allied Direct service. To make it

acceptable and popular, ABL has initiated a massive awareness campaign to educate its

branch level operational management about the facilities and features of Allied Direct.

The branch management is quite receptive in introducing additional self delivery

channels, as their experience with ATM’s has shown to them that these actually decrease

their operational staff’s work load”.

AVP IT also endorsed the views by explaining that the back end processing of Internet

banking is same to that of the processing carried by an ATM switch. He argues, “Actually

Internet banking got the advantage that our ATM network was already working and the

processes were well known. In Internet banking the only difference from ATM is that its

front end interface is different, however, the processing at the back end is the same to the

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one being used in ATM switch. The switch handles transactions on ISO standards,

irrespective of whether these transactions are generated from ATM’s or through Internet

banking”.

Internet banking is perceived to contribute in a number of benefits of strategic and

operational significance to the bank. The interviewees cited several intangible benefits of

Internet which, according to them, may not appear or reflect in the financial balance sheet

of the bank, but they attribute to the growth of the business. The Group Chief

(Operations) narrated that banks need to be sensitive to the changing domestic and

international market trends and consumer needs-- and devise and adjust their business

strategies accordingly. The adoption of Allied Direct by ABL is in anticipation of the

evolving e-Commerce market trends and consumer preference for more flexibility and

convenience, without the constraints of time, space and location. Profitability is always an

underline motive in launching any product or service, however, right now its financial

contribution may not reflect in the balance sheet. The bank expects to gain operational

efficiency and reduction in Transactional costs from Internet banking. He remarked,

“Certainly yes, the adoption of alternate channels, including Internet banking, has led to

improvements in our delivery operations, resulting in more satisfied customers who now

have 24 hours banking service available at their fingertips, without the need to leave the

work place or desk. Transaction cost to us in case of paper based was rupees eighty (Rs.

80) per transaction which has come down to rupees fifteen (Rs. 15) per transaction in

case of ATM and much lower in case of Internet banking. We are not competing in a

niche market. We are providing a wide array of banking products and services and

Internet banking is one of these, which improve our image and reputation in the

Industry”.

Group Head (Branch Operations) mentioned several aspects of Internet banking that

motivated the management to adopt it. According to him, “the decision to increase

delivery channels for consumer banking is a business decision. We as a bank, need to

keep pace with developments taking place in the international banking arena and do not

want to be left behind. Being a commercial organization, profitability is obviously an

ultimate objective; however, profitability cannot come too soon. So at present it’s an

image building concern. We can claim that all our branches are online, we have Internet

banking. We may not get what we have invested in the near future, but down the road, we

expect it to be profitable for the bank. Yes of course, the most important aspects are the

saving in time, efficiency and convenience to customers. Remittances earlier used to be

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through paper based instruments like posts, drafts TTs etc. Now it’s all automated and

online. Now you can instantly remit the money to any place at any time”.

All of the interviewees argued that Internet banking has increased the operational and

security risks for the banking business. Group Chief (Operations) observed, “Internet

banking is 110 percent more risky then paper based banking”. Similarly, AVP IT

(Technical Services Department) elaborated it by saying, “Definitely, risk increases as

you increase the access of the user. However, it depends on the procedures designed and

adopted to handle these risks. We don’t want the procedures to become so complicated

that the customer can not use the facility”.

ABL considers that the security of Internet banking is a serious concern and they

acknowledge that, while the bank adopts all necessary procedures to ensure security, the

fact remains that the breach of IT systems can happen; AVP IT explains it in these words,

“for instance you cant stop spoofing—when a block of data can be sniffed or taken out

from the channel then it’s the mechanism of encryption that guarantees security so that

the data sniffed is not meaningful for the sniffer”.

He further conveys “Definitely, the customer will prefer that side where he feels more

secure and his interest is not hurt. He doesn’t want to bear any damages. We have to keep

our site secure and we also have to properly communicate to the customer how secure we

are, and that he can use our facilities with confidence. There are two aspects, some times

organizations achieve maximum security but they can not satisfy the customer how

effectively they have secured their site. It should be from both sides, and we have tried it

from both sides. We have kept our site secure and we also assure the customer that the

site he is going to use is secure and his transactions will not be lost. No one can access

his information and his security interests will not be compromised. We have tried our best

to secure our site and to inform the customer how effective that security is. For this we

have applied a lot of things. We have obtained a certificate from VeriSign. Our procedure

to get the password is also secure; we do not ask the user to give the full password so that

all the information is not shared. We have also made some other procedures so that no

one can use the account of another person”.

As with most new applications, successful adoption of Internet banking warranted a steep

learning curve and sufficient availability of knowledge and stock of skills. The developer

involved in the in-house development of front interface and authorization narrates that it

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was his first experience to work on a web based application and that he was in the process

of acquiring knowledge and skills. He mentioned, “To think from the point of view of the

web, it was the first time for us. There are a number of requirements and expectations

from the web based application which is stringent from that of a non web based

application. The interface has to be simple and at the same time attractive, without being

too heavy on the bandwidth requirement aspect; The process of authorization should be

easy; It should not only be secure enough, but more importantly, it should give the feeling

of a secure environment to the end user”.

ABL is considering migration to TEMENOS T24 CORE, which is a core banking system.

The bank’s existing core banking is based on legacy systems. According to ABL,

integrating Internet banking with the old legacy systems developed in COBOL warranted

some special skills and knowledge which were not available in-house.

4.4.2.3 External e-Readiness Dimension

The status of factors comprising the categories of Technological Readiness (external) and

Environmental Readiness reflects the external e-Readiness dimension and the perceived

conditions of these factors are presented below.

Technological Readiness:

The Group Chief (Operations) observed that while Internet banking is new to Pakistan, it

is something that has already been implemented by many banks in Western countries.

Commenting on the availability of ancillary assets and complementary technologies he

emphasized that large banking organizations always have the choice to appoint

consultants and vendors from international market and in most cases the consultants

appointed by the bank are the ones who have had experience of working in International

markets. Similarly, he argued that having a single vendor dependency is always better

than the multi vendor option. It becomes too complex to integrate and manage relations

with too many vendors and because of this, their bank prefers the single vendor option.

The AVP IT elaborated more on the same aspect by saying, “There are a number of

vendors who claim to have professional expertise and a large number of clients. But in

fact there are only a few vendors who actually deliver, most just get the contract. We also

consult with other peer banks related to IT in the market. We also review their experience

in the market, what is the reputation of the vendor in the market? There was not a very

long list from which we had to select vendors. From that small list, we checked which

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vendor was related to our existing infrastructure that would be utilized in this project.

Who already knew our environment on which this product is based? Keeping these things

in mind, we preferred TPS and got most of the work done by them”.

The Bank officer (Technical Services Department) sounded optimistic about the growth

of IT infrastructure in the country and commented, “Because of earlier ICT

infrastructure, banks had to keep distributed and independent databases rather than

centralized. It was done so that individual data at the branch level remains available in

case of non connectivity with other branches. But now, improvement in ICT infrastructure

has encouraged banks to go for centralized databases and integration of all channels and

databases”

The Group Head (Branch Operations) while appreciating the country wide developments

in building network infrastructure points out, “Yes there are problems of downtimes and

link breakages which sometimes create problems, but I think its improving”. Commenting

specifically upon the bandwidth, speed and quality issues there appeared a consistent

impression of all interviewees and one of them expressed by saying…. “the dialup

services are not good enough for using Internet services however, these issues will

improve with the penetration of DSL services in the country which at present is too high

priced for customers”.

The System Development Team Member added that availability of appropriate

developmental facilities and platforms is a non issue and all developmental tools are

readily available in the market.

Environmental Readiness:

Interviewees at ABL perceived that more marketing and awareness campaigns are

required to educate customers about Internet banking services. They perceive that the use

of Internet is in infancy in the country. The most critical challenge in offering Internet

enabled services like Internet banking is that customers are not aware of how to use it. “In

Pakistan, most of the people are not much familiar with Internet banking. They don’t

know how to use the Internet or even their e-mail accounts. They complain of not

receiving any communication from the bank when in fact the mails sent by us are usually

being blocked by their e-mail service providers, as spam. Most of the users are unable to

resolve such problems”.

Group Head (Branch Operations) observed, “At urban level, the customer Readiness by

and large is somewhat satisfactory. There is a need from the banks to market it and

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create its awareness. The government also needs to create awareness in its adoption. In

small cities there are issues of awareness, and the government and the banks need to

work together to create awareness. We have instructed our branch managers to promote

and guide people in this regard”.

Head IT remarked that the government is working to implement cyber laws; however,

these being not promulgated is not an immediate matter of concern for their bank.

Commenting on this question the AVP IT informed, “No I don’t think that sufficient laws

exist to prevent computer crimes. I am myself one of the members of a committee named

Computer Crimes Committee, whose task is to evolve rules and regulations and suggest

measures to prevent computer crimes. Although, computer crimes and frauds are a

universal issue and problem, we have in place all necessary measures to prevent them,

such as existence of firewall, hacker’s protection soft wares etc.”

Almost all interviewed participants observed that at present there is not much demand of

Internet banking among consumers and neither is their bank under any pressure to adopt

it. They consider the role of SBP as encouraging and supporting for the entire banking

Industry of the country.

4.4.3 Discussion of the Findings of the Field Survey and Case Study

The size of the bank was considered to be an important factor that could have an impact

on the introduction of Internet banking. This also finds support from literature where the

banks in smaller size generally are considered early Adopters of Internet banking. This is

possibly because smaller size organizations require relatively little effort in migrating to

new processes. However, all the banks that have adopted Internet banking in Pakistan, as

observed in websites survey, are relatively medium to large size banks of the country. In

context of this study the factor, size of the bank was measured in terms of number of

branches, rather than on the number of employees or financial ratios, as recommended by

the participants. The issue of inadequate access or digital divide becomes more prominent

in urban versus rural areas and ABL considers it to be its big achievement by succeeding

in bringing all of their branches, rural as well as urban, online. The respondents in the

field survey were of the view that creation or introduction of a new channel like Internet

banking could benefit by forming a dedicated separate team, which has greater

independence of working and enjoys relatively more direct reporting hierarchical position

in the organization. In ABL, there is a separate team for handling Internet banking

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operations only; however, its team lead enjoys an intermediate hierarchical position in the

bank. This aspect of the bank shows that Internet banking as a separate channel is not

receiving any special importance, it is being considered as just another alternate delivery

channel for the bank.

The findings from the field survey considered availability of resources to be a factor of

notable importance; however, the result of the case study suggests that investment

required to offer Internet banking services is not a major concern for ABL. However,

ABL perceives that the investment on implementing Internet banking system in itself is

considerably lower, than what actually is required to develop infrastructural capacity

capable of supporting applications like Internet banking.

The readiness of human resource of the bank, to adapt with the rapidly changing

technology enabled processes, was perceived to be an important concern for the banks, by

the survey participants. The strategic management of ABL informed that it is a

manageable issue for the bank as the bank had already offloaded such staff, just after

privatization, who were not geared up for the changing business environment. The staff

retained and recruited subsequently, understands the need of bringing about technology

enabled change. The HR development function of the bank acknowledges the need to

continuously look after the training needs of staff and it accordingly arranges relevant

trainings to keep the staff useful and motivated to perform their work.

The field survey participants identified commitment of the top management as an

important factor in the introduction of Internet banking. In case of ABL, it was

mentioned by the participants that the President of the bank himself has an IT educational

background and supports the strategic planning team members, in pushing for early

adoption of innovative delivery channels. The bank, under his leadership, has made

successful investments in introducing other IT enabled delivery channels like ATM and

phone banking.

Internet banking adoption appears to be influenced from the banks strategy on when and

how to expand their delivery channels. A bank would adopt if, in its assessment, the need

and the potential contribution expected out of the Internet banking implementation is

indicated. The methods, tools and techniques employed by the bank, in the process of

adoption, reflect its preparedness on how to expand the delivery channels. ABL has a

strategy of keeping multiple channel option for its customers and at the time of the pilot

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study, it was deploying the application in an incremental manner, starting with basic

services, to be followed later on by more advanced services. ABL relies upon technology

specialist organizations and followed a strategy of outsourcing the Internet banking

development work.

The findings of the survey suggest the availability of skilled human resource, as a key

concern. ABL also shared this concern by commenting that there exists an overall

shortage of highly skilled IT professionals in the country, and the banking sector

including their bank, to be of no exception in bearing the impact of this issue.

Nevertheless, the bank conveyed its satisfaction, in being able to limit the impact of this

factor, by offering a conducive working environment and competitive market based

remuneration to its IT staff, thereby succeeding in retaining qualified staff.

Adoption of Internet banking has been found in this pilot study as to be considerably

related with perceived characteristics of the Internet banking technology. They include

the relative advantage or the benefits that could be derived from its use; the compatibility

of the service with the existing operating practices, beliefs, values and attitudes

favourable towards implementation in the bank; perceptions about the risks involved in

adopting Internet banking; and the perceptions on the complexity of Internet banking

technology. The anticipated benefits listed by ABL perfectly coincide with the survey

findings as well as literature (see Table 4.6). ABL considers Internet banking as a more

risky channel for the conduct of banking operations mainly because of the inherent

features of the Internet channel that makes it prone to security breaches. The bank

considers it a challenge in keeping its website sufficiently user friendly and at the same

time secure enough from any of the known security breaches.

The adoption of Internet banking seems strongly influenced from the external e-

Readiness factors. The field survey participants, while hoping for improvements in the

infrastructure and access related factors, conveyed special concern on their existing

status. Inadequate access conditions, low quality noise prone connections were considered

as inhibitors to adoption. The weak national ICT infrastructure is considered to limit the

choice to roll out the Internet banking service to its fullest scale. ABL complains that the

issues of inadequate access and connectivity affect the quality of Internet banking service

which leaves the customer unsatisfied. The bandwidth available through dialup

connection was considered as not enough for satisfactory use of Internet banking service.

Hopes of improvement were pinned to the penetration of broadband Internet DSL service,

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provided, it becomes available at much reduced rates than the prevailing price in the

market.

There were no two opinions amongst the experts participating in the survey, on the

critical role of the complementary assets for the conduct of Internet banking. The

widespread perception of the participants was that the country’s IT industry, with the

exception of a few isolated examples, has not developed sufficiently to the requisite level

of capability maturity, needed for ensuring systems compliance with the core principles

of banking IT systems. Thus, there is a strong dependence of banks in Pakistan on

international and foreign based vendors, consultants and solution providers. There are

certain obvious disadvantages of this dependence, such as that of increased cost,

customization issues, and in particular higher maintenance expense. There was a strong

opinion among the experts that the small and medium sized banks would be inclined to

adopt Internet banking when they feel that the IT industry of the country is ready enough

for providing IT solutions with complete backup support services. On the contrary,

ABL’s management expressed their confidence on the ability of the local IT industry.

ABL follows a strategy of outsourcing IT development work and maintains a long term

contractual relationship with a local firm. Although, ABL faced several issues in the

implementation of Internet banking and the project took a considerably long time to

complete, the AVP explained that the issues that surfaced in the project were well known

to occur in IT projects and could have been managed by improving the project

management skills and practices. Most of the participants of the field survey perceived

that one reason for the delay in Internet banking adoption is that the banks are waiting for

the completion of the initiatives of institutions like SBP and NIFT (National Institutional

Facilitation Technologies), to deploy systems that reduce systemic and operational risks.

These include deployment of modern payment systems at the central bank and trust

certification and authorization through NIFT.

The experts confirmed that the market conditions are likely to determine and impact the

banks’ course of action for offering Internet banking. The researcher noticed variations in

the perceptions of the participants on the status of some of the factors representing the

market readiness. Internet banking is in evolutionary stages in Pakistani banking sector

and as such there is no significant pressure faced by a bank, from its competitors, for its

adoption. However bankers, whose banks have taken the lead in the adoption of Internet

banking, perceived that early adoption has placed their banks in a competitive

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advantageous position over the late or non Adopter banks. The banks differ in their target

market segment and differ in the composition base of their customers. Hence, the

participants also differed in their perception regarding the demand for Internet banking.

The participants, while agreeing on the need of creating awareness among the potential

customers, differed in their assessment of the demand for Internet banking. Some

participants observed that there was no pressure or demand of the customers to introduce

Internet banking. On the contrary, some of the interviewees, whose banks had introduced

Internet banking, informed that their banks’ had considered the aspect of demand and

found out that a reasonable number of customers were more likely to use Internet

banking, than other banking channels. However, the findings of the case study show that

ABL did not adopt Internet banking in anticipation of short term demand but rather other

factors such as image enhancement and relative advantage were more pronounced in its

adoption decision.

The pilot study confirms the critical role of policy Readiness in ensuring an environment

whereby electronic transactions can be carried with confidence in a secure and trusting

manner. All experts observed that the legal and regulatory framework concerning

electronic payments are not well developed and need updating in view of evolving

international best practices. They apprised that banking companies’ ordinance of 1962

was the main legal and regulatory document and was drafted when banking products and

services were different. As the technology factor has changed the banking process, thus

there is a need of new laws based on the recognition of new concepts and technologies.

However, majority of the participants appeared satisfied with the ongoing efforts of the

policy making institutions for creating a robust legal infrastructure catering to the needs

of Internet banking and other electronic payment systems. ABL management was not

much concerned about the existing policy status and ascribed its satisfaction to the

commitment of the policy forming bodies in devising policies that would encourage and

promote the evolution of electronic banking in the country.

4.5 Initial Propositions for Research

Table 4.7 exhibits the initial propositions developed on conclusion of the pilot study

which need further investigation in order to better understand the adoption of Internet

banking. These propositions are affected not only by individual factors but also by

relationships amongst and between the e-Readiness categories and dimensions.

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Table 4.7 Initial propositions developed for further analysis

# Propositions Internal e-Readiness Dimension

External e-Readiness Dimension


Technological Readiness


1 Top management support, although vital for Internet banking adoption, does not necessarily lead to adoption if the external e-Readiness conditions are perceived as less conducive.

X X X X

2 Despite the need of making huge investments for developing infrastructure and capacity to provide a platform to support Internet banking applications, the cost of introducing Internet banking is not seen as a major inhibitor.

X X

3 Legacy systems are a common issue that creates problems of systems integration.

X

4 Awareness of attributes of innovation profoundly influences the adoption of Internet banking

X

5 Policy Readiness although identified as important is not seen at this stage of market as a major inhibitor in the adoption of Internet banking

X

6 The support for implementing Internet banking, in the form of availability of skilled human resource, vendors, consultants, technology solution providers, is not fully developed in the country and is affecting the adoption of Internet banking.

X X

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4.6 The Framework to Understand Internet Banking Adoption in

Context of Pakistani Banks

Based on the notion of e-Readiness, this framework stipulates that the adoption of

Internet banking, in context of banking organizations in Pakistan, is affected from the

factors that shape the internal and external e-Readiness dimensions of an organization.

These two e-Readiness dimensions are further categorized around three aspects of

organizations context, namely Organizational Readiness; Technological Readiness

(internal and external); and Environmental Readiness. These categories are based on the

factors identified in the literature as affecting Internet banking adoption and also

confirmed by the survey participants as the factors of high relevance for developing a

better understanding on the adoption of Internet banking, in contextual settings of

banking organizations in Pakistan.

The framework was further tested and refined in the field case study and the issues

identified in the field work, and presented in this chapter, were added to the framework

in order to obtain a more complete perspective of the factors that affect Internet banking

adoption in Pakistani banking organizations. The data collected in the field work was

extensive, containing relevant and even not so relevant information. Hence, a checklist, as

shown in Table 4.8, was maintained to structure the interviews and data collection in the

main case studies. The structure is based on the factors that were identified by the experts

as the dominant factors affecting the adoption of Internet banking.

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Table 4.8 Structure for data collection and analysis

1. Factors related to the internal e-Readiness dimension 1.1 Organizational Readiness

1.1.1 Organizational structure 1.1.1.1 Organizational size 1.1.1.2 Positioning of Internet banking channel in the

organizational structure 1.1.2 Resources

1.1.2.2 Financial & HR 1.1.3 Commitment

1.1.3.1 Top management support and vision 1.1.3.2 The investment of adequate financial resources for

development and operation 1.1.4 Adoption strategy

1.1.4.1 Process of adoption 1.4.1.2 Timings of adoption

1.2 Technological Readiness (internal) 1.2.1 Awareness of attributes of innovation

1.2.1.1 Relative advantage 1.2.1.2 Security risk 1.2.1.3 Compatibility 1.2.1.4 Complexity

2. Factors related to the external e-Readiness dimension 2.1 Technological Readiness (external)

2.1.1 Access technology and infrastructure related factors 2.1.1.1 Penetration of Internet 2.1.1.2 Access speed 2.1.1.3 Access type, capacity and infrastructure

2.1.2 Availability of complementary assets 2.1.2.1 Technology tools, vendors, consultants/solution

providers 2.1.2.1 Online security and trust services, real time payment

systems 2.2 Environmental Readiness

2.2.1 Market, Society and Policy Readiness Factors 2.2.1.1 Demand, competitive pressure 2.2.1.2 Consumer readiness (considering national culture, behavior

and awareness) 2.2.1.3 Policies, legal framework and the role of regulators

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4.7 Summary

This chapter presented and discussed the research work completed prior to initiating the

main case studies. The chapter begins by reporting the findings of the survey, carried out

to assess the type and extent of services available, at and through the websites of the

entire population of banking organizations of Pakistan. Next the results of a study

conducted to explore the internal organizational issues faced by two banks of UK in their

efforts to implement Internet banking. This sensitized the researcher on the organizational

issues some of which were also expected to be prominent in Pakistani banks. This is

followed by a pilot field study. The purpose of the pilot field work was to identify factors

recognized for influencing Internet banking adoption in context of Pakistani banks.

Participants in the pilot study included IT and strategic management personnel of banks

and representatives from regulatory bodies, technology vendors and solution providers.

The data gathered in the pilot study was then compared with literature and some initial

propositions that appeared relevant for examination were generated. In order to collect

data in an organized way a structure for data collection was developed to improve data

collection and the subsequent data analysis.

In view of the objectives as mentioned in the beginning of the chapter, the following

findings are presented.

a) The survey of the websites of banks in Pakistan showed that, only eight banks out of a

total of forty nine, were offering Internet banking services at that particular point in time.

Out of the eight banks offering Internet banking services, three belong to public sector,

three to the local private sector and two to foreign owned private sector. A detailed

assessment of the Internet banking functionality available at and through the websites of

these eight banks was carried and these banks were ranked accordingly. The information

acquired through this survey helped the researcher in developing an overview of the

Internet banking offerings in the country and enter the field studies with relevant

information. The survey also provided a basis to discriminate Internet enabled banks form

non Internet enabled banks. The information gathered was also put in use in framing of

some questions for the interview sessions in the main studies.

b) The chapter also highlights the generic barriers to Internet banking and reports the

inherent organizational problems faced by two UK banks, in their efforts to develop

Internet banking channel. In this particular study, the barriers to Internet banking from

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strategic organizational perspective only are accounted for and discussed. The results of

this study provided additional empirical support for issues identified in the literature and

revealed a few factors that are unique to banks in UK. The researcher anticipated a

possibility that the banking organizations of Pakistan, who are embarking on similar

Internet banking projects, could also be facing the same issues as well as some new

unique issues in the changed contextual settings of the study.

c) The pilot study carried out through field surveys and a case study on a Pakistani bank,

confirmed as applicable to Pakistani banks, most of the factors pointed out in literature

and extracted from studies in UK context, for their influence on Internet banking or

closely related innovation. Although, the Pakistani national culture, policies, markets as

well as the level of development of the Pakistani support industry, are likely to have a

prominent impact on adoption, however, this impact is not because of hitherto unknown

or altogether new factors. However, many of these factors, especially external readiness

factors, exhibit marked differences or variations in the manner in which they influence the

adoption of Internet banking in contextual settings of a developing country, Pakistan.

Thus the difference is in the values and relationship of the factors in shaping the adoption,

which makes the phenomenon of adoption interesting for further study from an

e-Readiness perspective

d) The framework advanced in this pilot study suggests that the adoption of Internet

banking in Pakistan is affected by the factors organized under three aspects or categories

of an organization’s readiness namely Organizational, Technological, and Environmental

Readiness. The participants identified the factors motivating the banks to adopt Internet

banking and pointed out the anticipated benefits that conform to the literature findings.

e) The pilot study as well as the literature review and extract of empirical research on UK

banks, contributed in giving a structure to the framework for improved collection and

analysis of data in a software package.

f) The field study helped the researcher in developing and testing his interview skills and

protocols to be followed in conducting a research interview. The semi structured

composition of the interview questions allowed the researcher to find an appropriate

sequence of questions to conduct further interviews in main studies. However, at the same

time interviewees were free to comment, at any time, on any issue related to the topic,

therefore, it was neither always possible nor desirable to stick to the same sequence.

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Chapter 5. Case Studies

5.1 Introduction

This chapter presents and describes the three cases studied for the research in this

dissertation. The purpose of this phase of the research was to further develop the concepts

presented earlier in chapter # 2 and # 4 and to explore and understand the role of the

contextual factors/forces in shaping the decision of the particular banks to adopt Internet

banking. The data collected during case studies are structured according to the

framework proposed in chapter 4.. Interviews and observation were employed as primary

data collection techniques. The participants interviewed were senior business/technical/

managerial staff of the banks and their technology partner institutions having the

responsibility of strategic ICT planning and implementation of ICT enabled channels and

in particular Internet banking. Other sources such as historical documents, published

materials and organizations’ internal literature were accessed to collect data during doing

case studies . Further details on the process of research for these cases are already

discussed in chapter three.

The three banks chosen deal in consumer banking business and experience similar sort of

external environmental conditions. They are also similar in many aspects in their internal

organizational context but also show variations to some extent, like difference in

ownership structure, size and resources. The first bank is placed in the category of public

sector bank as the majority of its shares are owned by the state. The second bank belongs

to the category of local private bank as it is a privately owned bank and the third bank

falls in the category of foreign banks as its ownership is incorporated outside Pakistan.

The first two cases studied and presented are of the two banks that have adopted Internet

banking. The third case presented is of the bank that has not yet adopted Internet banking.

In the following sections each of the case studied is presented.

5.2 Case Study 1

5.2.1 Background Information about the Bank

UBL (United Bank Limited) may be considered as one of the largest banks in Pakistan

keeping in view its capacity in many of the aspects such as of branch network, banking

deposits, assets and employment. Its branch network extends to well over one thousand

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branches spread across all the geographic regions of the country as well as fifteen

branches in few overseas locations. It has total assets of over Pak Rs 380 billion (US $ 6

Billion) and over ten thousand employees serving in all the branches of the bank.

The bank was established in 1959 in the private sector. In early 1970's in accordance to

the state's policy of nationalization, the ownership and management of UBL was acquired

by the state and the bank was nationalized. Prior to nationalization, UBL was considered

to be one of the aggressive banks and market leaders in introducing innovative products

and services. UBL claims to be the first bank that introduced the concept of plastic

money in the country during the pre-nationalization period. The bank remained under

state management for almost next three decades which found little incentive and/or

opportunity for innovation proponent. In the era of nationalization almost the whole of the

banking industry, with the exception of foreign banks, was under state management and

thus a very little real competition existed in the banking sector. In 1990’s the policy of

deregulation and reforms introduced by the successive governments of Pakistan for

liberalization of financial sector, eventually led the government to inject investments and

upgrade the banking technological infrastructure so as to make it attractive for purchase

by foreign investors. In the year 2000, the management and controlling shares of the bank

were sold to private sector. The current key share holders/investors of the bank belong to

the royal family of gulf region, UAE.


The status of factors comprising the categories of Organizational Readiness and

Technological Readiness (internal) reflects the internal Readiness dimension. The

perceived conditions of these factors are presented below.


UBL has a hierarchical organization structure and works as a corporate entity. A board of

ten members (i.e Directors) represents its share holders. Two of the members hold the

position of chairman and deputy chairman of the board. The board appoints the president

of the bank who heads the management and operations of the bank. The organizational

chart shows an e-Commerce department responsible for Internet banking operations. The

head of e-Commerce department directly reports to the president of the bank.

The bank's management and the implementation team perceive that the cost on adoption

of Internet banking is of no consideration for the bank and consider it to be an

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insignificant factor in their decision of adoption and implementation. The interviewees

argue that for an organization with an investment base as large as that of UBL, there is no

question of limited financial resources for adopting an alternate delivery channel. The

financial statements of the bank for the last three years show a healthy upward trend [293-

295]. The Head of e-Commerce group argues, “The ROI was not obvious and clear but

cost of Internet banking has never been an issue. E-Commerce as a service is not

expensive. Core banking system is expensive, but e-Commerce services are just integrated

with the core banking solutions”.

The bank also has a separate Information Technology department comprising of staff

strength of well over one hundred skilled IT professionals. This aspect of having a pool of

qualified human resources available is considered as a big asset and one of the motivating

factor for going ahead with the decision of implementing Internet banking in house.

According to the Head of e-Commerce, “they (the top management) have had the

realization and vision of e-Commerce’s potential for the bank and are of the opinion that

it will be a key for future banking and, therefore, decided to run it as a business.

E-Commerce has a special importance for the bank and that is why you will see that UBL

has set up an independent e-Commerce department under which the Internet banking and

various other electronic distribution channels fall”. This vision of the top management

infact is one of the dominant factors that facilitated and led to the priority development of

Internet banking products and services. The management believed in many of the

intangible benefits that would be available to the bank on the adoption of Internet

banking. Perhaps this is the reason that UBL has been one of the early initiators of the

Internet banking service in the banking sector.

UBL considers itself to have a culture of progressiveness and leadership in innovation

adoption. UBL proudly claims that it was the first local bank in Pakistan to introduce

credit cards in the country and also to be the first amongst Pakistani banks to have an

online branch network. The management sees that it is because of this heritage and

history of the bank, that in spite of remaining dormant in nationalized period of banking,

they were able to revive its behaviour of leaders in innovation adoption by adopting

Internet banking. Group head of the bank explains by saying, “UBL has the tradition of

pushing the envelope. That’s what UBL was known for in 1960’s and early 1970’s. There

are people in the current management who have seen those times and get inspiration from

their past”.

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The idea of adoption of Internet banking is mutually driven by the e-business and the IT

department and finally was endorsed by the top management. The first challenge in the

implementation of Internet banking for UBL, according to head IT services, was to take

the decision about whether to build or buy the product. The project team went through a

formal requirements engineering process to identify the needs and assess the pros and

cons of each alternative decision choice for the bank. UBL took the decision to build in

house, in consideration of their prior experience in implementing and managing

informational Internet banking services. Head of IT Services said, “UBL has its own

unique requirements and in our opinion a vendor would have taken a long time to

implement it and would have also limited our options and flexibility and thus we decided

to do it ourselves, using or extending with the same technology that was available in

UBL”.

The Head of e-Commerce explained, "For Internet banking we have largely relied on our

internal IT department (in house development) but we have a different mechanism of

working with vendors, for instance, in the product of click and remit we forged

partnerships. We are open and rely on more than one models of development.”

The team initially started with an informational Internet banking product named UB

Online. The product was for both commercial corporate and retail clients and it had some

very useful view only features such as real time MIS; integration with Oracle financial;

swift statements ; integration with SAP.

UBL in parallel started to work on transactional Internet banking product for retail

customers named UFirst net banking. An incremental or spiral software engineering

methodology was followed and incremental versions were released. System architect of

the Internet banking portal explains, “When UBL started working on the product they had

no working model or example to follow. All of the team members got experience and

training by working on the job. Initially a team of six members from the IT department

worked on the project and the ownership of the project rested with IT or Systems

department. Subsequently, as the work progressed the bank formed a separate

department of e-Commerce that took the ownership of the project and whose primary

tasks were to align the business requirements and objectives with the technological

product”.

Internet banking provides the bank a channel through which they can target customers in

the market by offering products that are specific to their needs. At the time of this

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assessment, UBL was offering five different types of Internet banking products or

services namely, Click and remit; Click and bank; UB Online; Net banking; Online

account opening and account management. Each product provides a different service and

is for targeting a different set of customers, however, many of the products complement

each other and lead to cross selling of other products. For instance, the first two products

are for expatriate Pakistanis in USA to open their account online and to send their

remittances in Pakistan online to any branch in Pakistan. UB online is an Internet banking

service that can be accessed through multiple media like: Internet, via mobile phone

services with WAP (Wireless Access Protocol) or SMS (Short Messaging Service). This

service or product provides account statement and tools for graphical analysis. The Net

banking product is to manage one’s own account, send money to anyone anywhere in

Pakistan, pay the utility bills, charge cellular service accounts and also for receiving

customized alert messages. In general the bank sees Internet banking products in

Pakistani market suitable for customers who are relatively young, educated and belong to

working class of professionals.


According to the Team Lead of the project, "delivering a product in time and as per

schedule is something that is unheard of in any IT project. However, in banking Industry

a delay even of a little time in launching a product can create a huge difference for the

bank. So meeting the schedules and launching the versions of the product in time is a big

challenge for the bank”. The head of IT services commenting on this, listed a number of

issues such as timely availability of human resources and technological components, high

turnover rate of employees, problems in scheduling the tasks and events and most

importantly accommodating the continuous changes in the product requirements as a

major challenge in meeting the schedules. With special emphasis he argues, “above all,

because of the innovative nature of the project, the project team had to learn and get

trained on its own”. The lead developer of the team recalls, "Basically we had three to

four people in the team but from time to time it varied from five to six people. At certain

phases of the projects additional manpower was required to develop certain services.

They would join as part of our team, develop their part and leave us after completing

their task to work on projects other than net banking. All of these members acquired

training by working on real projects as at that time there was no expertise available

within the country. In the absence of any prior experience of such developments we set

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for ourselves a challenge of climbing a steep learning curve if we were to succeed. The

project team had a vision and took on piece by piece to build on their vision in an

incremental manner that resulted in releasing improved versions of the same product”.

The core team responsible for the development of portal remained intact during the

Internet banking product development stages. However, the issue of scarcity of skilled

resources was highlighted by all the respondents with varying degree of emphasis. The IT

services head felt it too serious of a challenge for the department. “There is a strong

challenge of shortage of trained HR skills. The country has a real problem and shortage

of real good skilled manpower. Although the bank makes its best effort to hire the best

persons but the overall low availability of skilled HR persons in the country makes it

much challenging for the bank to find good resource persons”. The Head of e-Commerce

has an impression, “it’s an issue for the country but not too limiting an issue for the

bank".

The IT department mentioned the issue of considerable high rate of staff turnover (about

25%). He argues, “It's partly because of growth in industry and partly because of the

bank’s HR policies of offering uniform increment in salary to employees working in all

the departments of the bank. HR policies need to be specific to individual departments

and not uniform to all departments as a same raise may be satisfying for employees of

one department but may not be satisfying for IT professionals who are in high demand”.

The e-Commerce department does not consider the staff turnover rate as too high in their

department and mainly attributes a little higher than normal rate, to the boom in the

banking and IT sector.

UBL has adopted a strategy to introduce Internet banking as an alternate distribution

channel rather than as a substitute channel. This did not lead to revamping the existing

business processes in their entirety. The head of system services considers establishing

new rules and policies for the Internet banking as a challenging task. The Internet banking

product manager argues, "Internet banking is a separate product that is available on 24 x

7 hours basis, for which we introduced or established some additional business

processes. However, as Internet banking is not a substitute channel but is an alternate

delivery channel so the existing business processes for the other channels including the

branch network did not have to be replaced in its entirety but required changes or

additions in few business processes at the branch level. For instance in case of bill

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payments that are made over the portal, the branch employees need to cross examine it

manually and with computer as well".

The Head of e-Commerce maintained, "Internet banking services are offered in a

centralized manner and branch level employees have very little if any involvement in the

process. So it’s very little for the employees to show resistance against and in-fact the

situation has been otherwise that the employees were generally cooperative and

enthusiastic about this change. This perhaps could be in anticipation that the load of

branch would further reduce and branch level employees would be able to focus on other

larger transactions and business objectives".

The senior management interviewed expressed several anticipated benefits that motivated

the bank to adopt and implement Internet banking. They view it as a suitable alternate

delivery channel but not a substitute or replacement of branch or other banking channels

thus ruling out a scenario of having a complete virtual bank with out brick and mortar or

branch network in Pakistan.

They perceive Internet banking results in enhancing operational efficiency and this

perception has been a motivator for the adoption of Internet banking. The SEVP of the

bank expressed in these words, “All the electronic banking channels such as Internet

banking, ATM, phone banking etc are all alternate channels and all contribute in

distributing the work load across different channels. The bank benefits out of this

distribution of work as the same staff at the branch has now more time to address other

business objectives. The additional advantage that Internet banking has over other

alternate delivery channels is that of providing round the clock service from any Internet

enabled premises and without any need to line up for your turn in long queue at the

bank’s branch”. To emphasize how much operational efficiency in terms of reduction in

time has been achieved, the Head of e-Commerce cited the example of their product of

Click and Remit which is targeted at mainly Pakistani origin US customers. He explains

"just with a click of a button, a person in USA can remit funds to Pakistan to any branch

of UBL in the country and the remitted amount is instantaneously available to the

credited party for use, for any purpose including his/her online bill payments. The same

process if carried over traditional banking channels would have taken a number of days.

On top of it, the customers can immediately know whether the transaction has been

successfully completed or not, in minutes. So the process, in contrast to the traditionally

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available funds transfer system, from the bank’s and customer’s perspective, has been

immensely simplified and leads to enhanced operational efficiency".

Introducing services and products that bring convenience and satisfaction to banking

customers is very important for the sustainability of banking business. UBL has a diverse

portfolio of customers and it has a strategy of maintaining multiple delivery channels to

suit the preferences and wishes of its customers. The bank perceives Internet banking as

an additional delivery channel that will provide their customers the most convenient

channel to bank with them. According to the Internet banking product manager, “Internet

banking is all about convenience to customers; no banking time restrictions, no hassle of

standing up in queue for bill payments and much more, all available at your desktop”.

The bank has an expectation of reduction in transaction costs upon implementation of e-

Commerce strategy. However, the e-Commerce head explained that the management in

short term and at this stage of operation, does not expect Internet banking to produce

tangible benefits such as direct reduction in cost or visible contribution to profits. The

realization is there that Internet banking brings many of the intangible benefits that

ultimately contribute in reducing costs of the bank. This is explained by one of the

managers in this way, “Cost reduction is not expected right now. Right now there is not

enough customer base. Awareness is increasing and customers are increasing in number,

but still the number of customers is not so much that we can say that it has resulted in any

cost reduction to the bank. But obviously the bank is doing business and in future when

the customer base will increase it will lead to cost reduction for the bank. In future we

have plans to target cost reduction aspects also, as competition will increase cost factor

will gain importance, but not now”. The Internet banking product manager explains the

intangible benefits by giving an example of issuance of bank statements. "If you see bank

statements process in case of branch banking, a customer has to go to the branch and

sometimes make payment for the issuance of the same. Whereas, in the case of Internet

banking, a customer sitting at home can take the print out of his bank statement, free of

cost. This tangible saving to the customer is also an intangible benefit to the bank in the

form of a more satisfied customer and decrease of branch load for less important tasks".

The management looks at Internet banking as a strategic investment but the e-Commerce

head mentions that when he joined the bank he took it as a personal challenge to prove

that Internet banking can also be profitable and a source of additional revenue generation

in the short term. He argues, “Internet banking facilitates the customer but does it directly

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contribute to profits. I made a promise that I will figure out a way to make money, no

matter how small an amount. My first focus was to show that Internet banking can also be

profitable. To make sure I initiated the product of Click and remit in March 2004. And

that actually has been a major success in US. It’s still growing. If you talk to expatriates

in US and people who come from there, one out of two will know about UBL Click and

remit services. We have been able to generate brand awareness. We have been able to

achieve a significant number of transactions from USA".

Almost all of the interviewees expressed that this new delivery channel will help in

attracting new customers, and expanding reach and range of the business to new markets

that have been difficult to access earlier. Their observation is, “There are a lot of

customers who will open an account because of Internet banking facility. In particular,

the working class employees would like to keep an account with the bank that provides

this channel also. Life for them has become easy. They can pay the bills online, carry out

transactions without coming to a branch. They are not worried that the branch will close

in the evening. Service is available to them all the time. So these factors play their role in

attracting new customers as well. We have been able to extend our reach to the market as

we are getting a high volume and amount of transactions from our new customers in

USA. This has also given an impetus to the bank to expand its operation in Dubai and

Middle East where a sizable population of expatriate Pakistanis is present."

Another perceived benefit of Internet banking is that it increases the loyalty of existing

customers. According to the Head of e-Commerce, “yes I can tell you that it creates a lot

of loyalty and in our banking surveys we have found that Internet banking service has

been welcomed by our customers”. This was further substantiated with these words “our

customers wish to have more than one way to do banking with us and when they find that

their bank is opening up new innovative channels to cater to their needs they certainly

appreciate it and this is reflected in their loyalty to the bank by not switching to other

available options". The Internet banking product manager remarked, “the bank’s strategy

is both to retain existing customers and to bring new customers through Internet banking

channel”

According to the Head of IT services, “to do something which no other bank is doing is

one of the motivations. And we have done that, as you can see that even the banks in

Dubai are not connected to carry out inter-bank fund transfers, but we are providing fund

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transfer facility between all the member banks using the common switch (1-link). You

can transfer funds to and from any banking account of the member banks”.

Head of e-Commerce observed, "Internet banking is in evolution stages and it is a time of

taking leadership position”. The bank perceives that early adoption of Internet banking

would place it in an advantageous position in comparison to other players of the industry

which are still to adopt Internet banking. UBL claims success in creating brand awareness

for their Internet banking products.

All the participants, in their answers to a survey questionnaire, agreed that Internet

banking may lead to image enhancement. However, in interviews, the participants did not

explicitly mention that image enhancement was one of the significant drivers. However,

the banks desire of attaining a leadership position and expecting an initial movers

advantage, logically leads to the conclusion that image enhancement may be one of the

drivers for adoption.

Before the introduction of Internet banking UBL had in place an IT infrastructure capable

of supporting Internet banking. This also motivated UBL to adopt Internet banking. The

Head of banking operational strategy group remarked, “as far as IT infrastructure is

concerned, we had the best infrastructure available in the country. We have right now

800 branches online in the country, which is greater than any other bank in the country.

The core banking system is in place and various channels can access it through a

common middle ware. Thus we found it very satisfying that we had most of the necessary

ingredients in place for adopting Internet banking”.

Regarding the issue of security, the Head of IT Services mentioned that the bank faces

this challenge at two fronts. "We not only need to ensure that our systems are secure but

additionally we need to satisfy and make the customer feel secure while using the Internet

banking services. UBL handles it at both ends. It strictly observes that its IT systems are

using best available measures prescribed by the electronic banking security standards

and then it also keeps its customers informed, to pacify and alleviate their perceived

concerns about the privacy and security of their data and transactions". Ensuring the

security of systems in itself is a big challenge for the banks. Head of e-Commerce

explained, “Security is something which needs continual working by improving security

processes. And security processes can never be adequate for all times to come. These are

always in the process of improvement. Both banking security and criminals are evolving.

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Banks look for improving them and criminals are looking for different ways to break the

security measures”.

Customers perceive Internet banking to be insecure and changing the customers’

perception that it is secure to carry out transactions using Internet banking is quite a big

challenge. The System Aarchitect argues that even those users, who know that all security

processes are in place, still hesitate from carrying out transactions and trust their

perceptions more than reality. The customer is more afraid of his data being hacked over

the Internet medium or at the banking system, where as in reality, the most danger to a

customer is from inside (at home or on his desktop, where he might have placed or shared

his password and log in details).

The System Architect argued, “We made the process so that he (the customer) feels

secure and comfortable. Although the process is not simple, and it is complex because

simplifying it would have made the system not so resilient to intrusion as it is now. For

instance to prevent the phishing attack, in which some one deceptively takes your

personal information, We are using two factor partial token authentication system in

which we require the customer to know his PIN and Password".

The implementation team considers ease of use of their portal and its services to be of

prime importance in successful adoption. The system architect stressing its importance

argues, “Usability or convenience to use for the user is extremely important for Internet

banking. Even if our Internet banking portal is high tech, state of the art, top shot, but if it

is difficult to use for a layman person or a non IT person, then it is a failure or flop

product. And that is why we have made UBL’s Internet banking portal very easy to use

for any one who is slightly literate in English language and personal computer usage”.

At pre launch stage, the product was offered for live use, to selected persons in various

departments of the bank, for their feedback on usability issues. The implementation

project team carried out tests at unit level and also at integration stage to ensure product

performance and ease of use. System architect mentions " We had a very extensive testing

phase in which first we did it on test data, then we moved on to live test where we had

actual twenty test accounts opened and then we moved on the soft launch phase where all

the employees of UBL were allowed gradually to access the portal". The System

Architect argued, “However, all these were the internal customers of the product. The end

users of the Internet banking products are the external customers and the absence of

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trialability feed back of customers, before the final implementation of the product, makes

it a bit more challenging for the development team to incorporate all expected

requirements of customers in the portal”.

The rapid changes and introduction of new and improved technologies and its integration

with the existing technologies is always a challenge for the IT professionals. However,

the bank has had its legacy systems replaced prior to implementation of Internet banking.

It also has a middleware in its architecture that makes it relatively less difficult for

integrating Internet banking with the core banking systems. The Internet banking team

observed that although technology integration issues are of considerable concern but they

had acquired sufficient expertise in handling those issues.

The bank maintains a distributed data base architecture as all of its branches are not

connected online. The data from branches is updated after a lapse of certain time usually

after the day end closing time. According to Internet banking implementation team, this

architecture makes it difficult to offer some of the services in real time. For instance

account statements provide information of the previous day’s closing time. The Head of

IT Services explained, “There are unique problems solutions of which have to be devised

in unique fashion. For instance some branches are online some are offline. Even if a

branch is online and a customer comes and asks for a months statement, and say one

thousand persons at the same time access the database, then in that case if you access the

database on real time basis you cannot do it because it will choke the bandwidth. The

connectivity speed of Internet available to customers in the country is not always

sufficient to carry out transactions over Internet and some times it takes too much time so

that the allocated time for that service to respond expires. It is a great challenge to

develop a portal that provides maximum security to its customers and at the same time is

not too heavy and does not take too much time to load”.


The status of factors comprising the categories of Technological Readiness (external) and

Environmental Readiness reflects the external Readiness dimension and the perceived

conditions of these factors are presented below.


Most of the interviewees observed that necessary ingredients in the external technological

supply side had been available in the country when the bank was contemplating to adopt

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Internet banking. The Head of the group responsible for business process change

considered that technology vendors, solution providers and consultants are available in

the industry. The System Architect argued, “You see, the technology and all the necessary

ingredients were available worldwide ten years ago and are now available in the country

as well. You know TPS is the leading switch provider in the country which has been here

since long. Software technology, Internet had already evolved, so all ingredients were

available and the bank only needed to utilize and assemble all available ingredients into

a banking product”.

However, the Head of IT Services points out that there is an overall lack of education and

skill base in the country. He argues, "As the HR skills are in shortage, therefore, even the

suppliers are also limited in size and skills. Can you imagine the size of the companies

visiting from India under NASCOM umbrella? The smallest company in NASCOM is of a

size much larger than the largest company of our country. It had about five thousand

developers. NETSOL, probably the largest company in our country, has about 3-4

hundred developers".

UBL has a large branch network with some of the branches located at geographical places

where the access to basic ICT infrastructure is non existent or insufficient. Thus

integrating Internet banking services is impossible at those locations. The lack of

appropriate ICT infrastructure and especially the lack of availability of high bandwidth

are considered to be a major barrier in the adoption of Internet banking. UBL observes

that although there have been great improvements in the availability of ICT infrastructure

at nation wide level, however, the quality of service is still not reliable enough and up to a

standard desirable for smooth and seamless Internet banking transactions. Although there

has been a marked increase in cellular telephone density, the increase in the telephone

density of fixed line and that of Internet penetration is still much low. Head of IT Services

argued, "The network support is not enough and requires considerable up gradation not

only to support existing services but also for the future multimedia based net banking

service. Actually the government should throw the network open. Greatest weakness in

the Pakistani environment is the network. VOIP is still illegal in Pakistan. The prices are

still quite high in Pakistan. The worldwide prices of bandwidth have plummeted in

general, and in Pakistan although they have come down but not sufficiently or

comparable to the world trend”.

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UBL finds that Internet banking is at a stage in Pakistan when it is the time for creating

awareness and demand. At the adoption decision stage, the bank was aware of the

segment of overseas Pakistanis who desire to send their remittances through official

banking channels at convenience and without the need to visit their bank. The

management also sees an opportunity in the local market and drawing a comparison

between mobile cellular services and Internet banking, argues that Internet banking would

also become as pervasive as the cellular services are today. The Head of e-Commerce

emphasized, “It is just that people are getting to know about it. Within three to five years

this number will grow to hundreds of thousands of Internet banking users which at

present are tens of thousands. This growth phenomenon will be similar to the geometric

growth in mobile services users, where a few years ago mobile users were in tens of

thousands, now they are in millions”. Head of IT Services explained, “Competition is

lacking, as Internet banking is not looked upon as a profit centre and a potential real

alternate to branch banking by banking organizations. Unless and until the Internet

penetration becomes high, Internet banking is not going to be regarded by banks, as a

real alternate to branch banking”.

UBL, being one of the pioneers of Internet banking, feels that its adoption decision is not

driven because of any external banking regulators pressure or persuasion of any vendors’

marketing efforts. The role of banking regulators is seen as progressive as put by the

interviewee, “we should see whether the regulators are trying to avoid changes or

whether they are trying to do their best in available circumstances. I think it is the latter

case”. The telecom regulators role is below their aspiration as according to them their

concentration is too tilted towards mobile telecom sector. Non existence of secure

electronic transaction laws, cyber crimes law and other electronic regulations were not

seen as influencing or inhibiting the adoption of Internet banking at this stage.

The Head of IT Services held the opinion that the Pakistani environment is not ready for

full scale Internet banking. The Internet penetration is quite low in Pakistan and not a

very significant number of users are net savvy. The primary reason is the lack of

knowledge and awareness. Thus the consumer readiness level is quite low and it is a

barrier or a challenge that needs to be surpassed. The existing market situation can be

described as more of a technology push rather than a consumer pull. The bank sees it as

the time for taking leadership position and creating awareness among its customers. From

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a demographical perspective, awareness and the knowledge for using Internet banking is

increasing in the country’s youth. However, in the absence of a significant demand,

making further investments in launching more products and services is not too attractive a

proposition.

The culture of e-Commerce is still not prevalent in the country and the economy to a large

extent still runs on cash basis. People prefer to carry and exchange transactions in cash

rather than in plastic or electronic money. UBL perceives that national culture and

behaviour, in due course of time, will improve but at the moment it is not helpful in the

growth of Internet banking in the country.

5.3 Case Study II


Meezan bank is the first of its kind of banking organizations in Pakistan, with a license to

establish and operate banking business according to the Islamic principles of accounting

and business. The organization is well known for being pioneers in introducing the

innovative practice of Islamic banking and its enthusiasm for extending quality banking

services by adopting new tools and technologies.

Meezan bank started with a niche proposition with the aim to be a premier Islamic bank,

offering innovative Islamic sharia (law) services to customers, it has now attained a status

of one of the fastest growing Islamic banks. Meezan bank group first established an

Islamic Investment bank in the year 1997 and subsequently, in the year 2002, started its

operations as a commercial bank after receiving the license from the State bank of

Pakistan. It is incorporated as a local private commercial bank that adheres to the Islamic

mode of conducting banking business. Soon after its incorporation, the operations of the

Societe Generale, a French commercial bank in Pakistan, were amalgamated with Meezan

Bank. The bank has a branch network of well over fifty, which are present in the main

cities of all the provinces of the country. In addition to offering consumer banking

services, the bank through its other group of companies, is engaged in offering innovative

banking products and services that are based on Islamic principles (Sharia

compliant)[296] . These products and services range from consumer based to money

market and asset management such as international Sukkuk (Bond), Ijarah (Lease),

Takaful (Islamic Insurance), Meezan Islamic institution deposit account (a checking

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account), Meezan balance fund (fund raising instrument through Initial public offering,

IPO), Musharaka (designed as a export refinance scheme), Murabaha (Rent-to-own

arrangement), Mudaraba (special kind of partnership), and a wide range of personal

savings accounts and mortgage facility.

The bank is listed in the Karachi Stock Exchange and the share holders of the bank

include major Islamic finance companies, public holding ownership shares through the

stock exchange, board of directors who also have ownership interest in the share

holdings.

The fiduciary responsibility regarding the activities of the bank is entrusted with an

external and an internal auditor and the Shariah board. The Shariah board comprises of

leading Islamic scholars from the Islamic world and their responsibilities include

evaluating a financial product for its compliance with the Islamic principles.

The bank offers a rate of return to its depositors that is above the prevalent market

average rate of return. Therefore, its customer base is increasing as the bank has managed

to attract two types of customers. The first type comprises customers who are driven by

religious compulsion to avert ‘riba’ (interest), and the second one comprises customers,

who are attracted by higher profit returns. Its customers profile varies from individuals to

blue chip companies and FMCG’s. The bank is offering services to its clients through a

well functioning IT unit. The bank has a multiple channel strategy to provide services to

its customers and all these delivery channels are sufficiently IT enabled. The organization

was found to have a commitment to exploit IT and Internet technologies and their

response and attitude to this research work was quite encouraging and accommodating.

Hereunder, the findings of the case study carried out to explore the perceived role of

contextual factors, as listed in the research framework, on the organizational decision to

introduce and strengthen Internet as an additional delivery channel for the bank, are

presented.



Meezan bank has a corporate profile and is a relatively new entry to the banking Industry

of Pakistan. The organizational structure is hierarchical and operates on business/product

lines basis. The organization has been growing and the annual financial reports for the last

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two years depict a favourable financial and economic situation [297-299]. The top

management of the bank refers that the bank is thriving well financially and doing good

business.

The Chief Operating Officer (COO) highlighted their banks performance by saying

"Although our existence is only four years but 'Alhamdolillah' (All praise to Allah) we

have been very successful in achieving our projected business and financial growth

targets. We started off with a niche proposition where we introduced Islamic banking as a

substitute to the traditional banking and financial services. Now after four years we can

proudly claim that our performance and success has earned for us a leadership role in

Islamic banking and many of the existing as well as some new entrants in the banking

industry got inspiration from our standings and have started to offer Islamic banking.

Our financial standing is good and the bank has credit rating of A+ for medium to long-

term and A1+ for short-term".

The COO of the bank observed that the financial investment required in establishing

Internet banking as an additional delivery channel is nominal while considering the

financial resource base of the organization. He argued, “Developing an IT infrastructure

capable of supporting multiple IT channels is a resource intense exercise even for a

banking organization, but once an infrastructure is in place, the additional cost of

extending Internet banking over the available IT infrastructure is relatively an

inexpensive choice”. The department responsible for implementation also confirmed that

they face no serious concerns on the availability of financial resources during the

implementation stage as well. Head of IT division explains, "financial constraint is

directly not a problem but obviously a bank is not an NGO or not for profit organization.

The bottom line for a bank is profitability. So a product has to remain within cost

constraints to keep it profitable”.

The banks limited historical existence means that it has been able to hire human resource

that is generally comfortable in a working environment where IT is the key driver of

business processes and services. The head of operations argues that this trait or attribute

of their employees has been a facilitating factor in successfully deploying IT driven

processes across the organization. The degree of sophistication of use of IT among

employees in the head office is high which drops off at branch level employees. The

implementation of Internet banking is the responsibility of the IT division that has an

approximate strength of twenty persons which are placed in four sub departments, namely

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IT operations: It handles the day to day operational issues and manages the operation of

core banking application, organizational MIS and also provides IT service to branch

operations

Automation department: It manages the requirements related to the IT hardware and also

procures the same for the organization

Alternate Delivery Channels (ADC) department: This department looks after the call

centre, ATM’s, and Internet banking

Wide Area Networking (WAN) department: This department is responsible for ensuring

the secure network connectivity between the various branch networks of the bank.

The bank claims to patronize a culture of best professional Islamic banking services

supported by modern banking technologies and tools. The management informed that

they had a call centre the day they started the operations, whereas, at that time most of the

big banks did not have call centres. The bank operates on product lines and sees the role

of Internet banking as of a delivery mechanism and per se and not as a product by itself.

Its product and market strategy is to use Internet banking as an alternate delivery channel

to the already existing channels of branch, Phone banking, and ATM. According to head

of operations, "ideally our objective would be to provide all our products and services

that are delivered by the branch delivery mechanism, through Internet banking”.

Meezan bank’s Internet banking provides Informational Services such as credit/debit

alerts through email and basic Transactional Services like allowing a customer to view

balance amount in his account and transfer funds to other accounts held in his name in

Meezan bank. Internet channel is also used by the bank to promote cross selling of other

delivery channels.

The service mission of Meezan bank, as mentioned in the marketing documents of the

bank is, "to develop a committed service culture which ensures the consistent delivery of

products and services within the highest quality service parameters, promoting Islamic

values and ensuring recognition and a quality banking experience”.

The COO remarked “we recognized very early that the availability of alternate delivery

channels (ADC) including Internet banking would be critical to the realization of the

service mission of the bank”. Thus from the very beginning the top management of the

bank aggressively supported deployment of IT based core banking solutions and

establishment of ADC's including Internet. The Head of ADC maintained that their CEO

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and COO, both are tech savvy, and are highly supportive of e-business initiatives in the

bank. The COO argued that the top management support is critical for successful

adoption of innovation in the organization.

Elaborating on this the COO said "see if you don’t have the top management supporting

you, nothing can happen. I think the top management must have the vision and also the

courage to push through technology initiatives within an organization. As regards

Internet banking, we consider that Internet banking in future would become the first

choice as a delivery channel amongst a certain segment of our customers”.

The COO, who also has an important role in the Strategic Business Planning of the bank,

along with the Head of the IT division, are responsible for aligning IT with the business

objectives of the organization. The COO and the Head of IT division championed the

cause of Internet banking adoption from its initiation, to all the later stages in its

implementation.

The person heading and managing the business aspects of ADC reported that the decision

to adopt Internet banking is the prerogative of the top management and is exercised

through a rational process of decision making, however, the decision to adopt Internet as

one of the banking channels is mainly an outcome of the coordinated efforts of the IT

department and top management. The Head of IT division in the organization, however,

maintained that it was mainly an initiative of the IT department. According to him,

“I wish that the initiative and proposal of adoption had come down to us through the top

management, as then our job (IT department’s) to push and implement the solution

becomes a lot easier. As it was proposed by the IT department, therefore, it became our

responsibility to prepare a sound case, justifying the technical and business viability of

the channel. Fortunately for us, our CEO and COO possess sound business as well as IT

knowledge, and being aware of the modern Internet enabled developments in the

international and national banking arena, are very receptive to the idea of moving the

banking services on the web”.

The Head of IT division informed that their job is to align IT with the organizational

objectives and to perform this role, they continuously look for introducing IT enabled

services of strategic importance, like Internet banking. He argues that with this mind set

they proposed to the management for the adoption of Internet banking. A local consultant

was engaged to carry out market and product survey and to establish the product/service

business need and service functionality that was being offered by other banks. After

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receiving a go ahead signal the project was assigned to the IT division. According to the

head of ADC and project leader, "the first thing after assigning of a project is to evaluate

whether we need to go for in-house development or outsource it. For this, we evaluate

our own resources, time frame, and budget for its completion. Then we work on how we

can achieve the objective within the budget and time. For comparison of in-house

development and outsourcing, we start by inviting quotations from vendors. We

technically evaluate the vendor provided quotations, the basis of which are, the

specifications of the solution, its cost, time frame of deployment, its modularity that is

ease of customization and integration and deployment with our existing platform/

solutions or services. Technical evaluation comprises, cost evaluation, customization

feature and the effort needed for customization, available features in the solution and

synchronization to our existing platforms. On this basis we select two to three solutions

and perform detailed comparative analysis on the strengths and weaknesses of these

solutions and their suitability to our requirements. Then we make a proposal for approval

before the management, which contains the details and summary of our findings. After

the final proposal is approved from the management, we formulate a project plan which

is the first stage in the implementation."

The IT division chose the option of outsourcing the Internet banking development.

According to the Head of IT division, “we outsource the development work as we believe

that we need to keep the banking function and the software development function separate

from each other. The core competence of our organization lies in banking and not in

software development. We believe the option of developing the IT applications in-house will

distract us from our core business of banking and will cost us more, in comparison to the

option of outsourcing the work to qualified vendors or a software house”.

The development work was outsourced to Avenza Solutions, a software development firm

that specializes in e-banking solutions. Avenza is an ISO certified company and is going

for CMM level II certification. The company has over a hundred employees. Avenza

Solutions has two departments namely, e-banking and customized development.

Customized development covers all the portal related things where as e-banking

department handles ATM related products and solutions, middle wares, Customer

Relationship Management (CRM) call centre solutions and Internet banking solutions.

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The IT division of Meezan bank worked in close collaboration with Avenza solutions.

The application development was carried out by the Avenza team, while the interface to

connect the application to the core banking data base was developed and provided by the

team members of Meezan bank’s IT division.

A number of common issues and concerns in developing and implementing Internet

banking project were highlighted, both by the interviewees in the IT division and the

Project Manager of Avenza Solutions. These issues were ranging from deficiency in

project management skills such as in defining project scope, project and product

requirements, capturing and gathering and freezing requirements, coordinating between

different stake holders, users and vendors, schedule offshoots, data migration, and

changing business requirements.

Meezan bank has no complaint regarding availability and retaining of technically skilled

manpower. The Head of IT division informed that “Overall there is not much lacking in

technical skills but management skills are lacking. Individuals are good technical

workers but then managing them in a team is difficult and important. We are not a

software house and don’t need too many technical staff. The turnover rate is not much in

our bank. I have been in the bank for the last three years and only three persons left

during that period”.

However, Avenza Solutions have a different experience. According to the Project

Manager, “retaining human resource has become a very big challenge for the IT

companies these days. The industry and the economy are in boom and consequently better

employment opportunities for skilled human resource are in plenty. So everyone is trying

to switch from one place to another. As far as Avenza Solutions is concerned, it is a good

name in the IT industry of Pakistan and is financially quite a stable company, having well

known investors from the gulf region as its share holders. The company is offering

different benefits to its trained human resources in an effort to retain them. But people do

leave since you can not stop them”.

According to Head of IT division, “for successful implementation we needed to change

the mindset and perceptions of the employees”. He explains "Success of any delivery

channel depends on a large extent on the satisfaction and acceptance of all of the

stakeholders and users of that channel. Internet as a delivery channel does alter the roles

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and workloads of the employees working in internal banking departments like operations,

front office, marketing etc. The major problem faced was in changing the mindset of the

branch level employees. For example, the branch level staff and management needed a

lot of convincing to accept the service idea where a customer would not be required to

come to a branch to sign in. They had all sorts of apprehensions such as loosing their

control and power, audit difficulties, security and non repudiation issues, etc. Changing

the perceptions and scares of the people is very important. But once you convince them

then interestingly they come up with more improvement ideas. Bringing them to a

situation where their input starts coming is challenging and time consuming".

Unanimity of views of all the interviewees was found regarding the perceived benefits of

Internet banking in the operations and long term business profits. Participants argued that

the business objectives of adopting Internet banking could be either to save money or to

enable opportunities to make more money.

The COO elaborated, “you know here brick and mortar banking is very expensive,

organic growth for any bank is very difficult and time consuming, therefore your ability

to reach your customer through electronic channels is the obvious answer especially now

with the bandwidth costs coming down”.

Meezan banks COO further argued, “The decision to incorporate Internet as a channel

for banking has strategic importance in the long term business objectives of the bank and

it won’t be prudent to quantify and expect rewards from this service in the short term.

With the use of Internet technology we can provide banking services at the doorstep of the

customer and the convenience of 24 hours banking and with this in parallel with the

customer Internet usage the growth is exponential. And once this happens then we can

expect tangible benefits such as of lowering of operational cost, reduction in

transactional costs…………..".

The Business Manager cited an interesting benefit of Internet banking that is specific to

Islamic banking only, “one of the things that you learn about an Islamic bank is that we

can’t promote our profit rates in advance. Therefore our rates for the previous month are

announced at the end of the month, and not at the beginning of the month. Meaning our

website is a crucial point of contact for our customers who want to find out what was

their return on investment for the last month”. He further mentioned, “the purpose of

alternating channels is to take the load away from our physical infrastructure and put it

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on to the virtual arena and in essence you need to offer those services that people do on a

regular basis”.

The Head of ADC conveyed, “We are in a competitive business and would not adopt any

technological innovation without being convinced of its anticipated benefits — the case of

Internet banking is no different and one does not have to be a rocket scientist to predict

that Internet banking as a delivery channel would bring many rewards. Some of these

anticipated rewards are becoming visible even though the service is just in nascent

stages. For instance, even the customers who primarily bank with us because of Islamic

Shariah compliance banking services, and do not use our Internet banking services, feel

more satisfied when they find out that their bank is offering services that are at least in

par, if not better, than the services available at other reputable banking organizations.

Thus a customer loyalty is cultivated which helps in retaining the customer”.

The Head of IT division informed that in order to enhance the customer loyalty and

satisfaction, they carry out a thorough user acceptance testing called soft launch, in which

the internal banking employees are invited to use and experience a service in live

environment and give their feedback. According to him, “since the customers are the

ultimate users, thus user testing in live environment is relatively difficult to achieve and

although some of the customers can be requested to do it, however, on a broader scale it

is difficult to perform trial test before offering the service”.

The interviewees argued that Internet banking is comparatively riskier than the traditional

branch banking, from the banks perspective. Head of IT division expressed, “definitely

Internet banking is relatively riskier then branch banking and has increased the risk for

the bank. In branch banking you know your customer entirely; his face, his habits and

nature are all known. However, Internet banking has brought more opportunities,

avenues and convenience but at the same time the element of risk is greater as compared

to branch banking”.

The Head of Operations considered that investment in technology, including Internet

banking, enhances the image of the organization. The bank at a pre launch stage

sponsored a market research study to understand the expectations of prospective

customers, from an Islamic bank. The results of the study were very encouraging and

interesting and they found that there is a high demand of Islamic banking and an average

customer response was reported as, “yes they want Islamic banking services with

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professional excellence and reflecting a modern culture and unlike an environment where

only a ‘molvi’ (religious authority) with a ‘topee’ (hat) and a ‘dari’ (beard) works. They

wanted to see a technologically advanced and modern looking bank. Thus our

prospective customers also shared our philosophy and vision of extending Islamic

banking services that meet the best in class service requirement”.

The Project Manager developing the portal considers that from a developer's perspective,

Internet technologies are quite complex and a number of issues and challenges are faced

in the integration of these technologies. He argues, “Banks have multiple host systems

needing to be integrated with our system for which we have to implement their protocols.

So that is a challenge we have four systems we need to integrate with four different

systems and all are talking in different ways. Incorporating right security techniques and

at appropriate level and stage is another … then there are problems arising out of

network limitations or failures for instance host problems, controller problems”.

Head of IT division observed, “When you start a project, you get very little input from the

end users. But once the end users are delivered the product, they come up with a lot of

objections and requirements which they never communicated earlier. This creates

difficulties in managing schedules and deadlines. Unfortunately it is embedded in our

culture that people do not plan effectively and later fall in a panic situation to complete

the project. Then all sorts of communication problems between vendors and sponsors begin,

especially when you encounter live errors that had not come up at the soft launch stage”.

All the interviewees suggested that their banking portal is quite user friendly, secure and

easy to use. On the aspect of security, the Head of the IT division, commented, “there are

always security issues in IT. It is being improved but the efforts to breach it are also

improving. Hacking is a possibility that cannot be entirely ruled off but then there are

different levels of security; Security at base line, intermediate and advanced level. Our

bank has adopted a very good base line security and has also adopted versions of

applications that are state of the art, at all other levels of security. But as an IT person I

cannot claim that security at the advanced level cannot be breached. The risk element

cannot be eliminated entirely”.



The operation and growth of Internet banking service in the country relies heavily on the

availability of ancillary assets and complementary technologies. The open system nature of

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Internet has encouraged the vendors, suppliers, developers and other participants in the

value chain of Internet banking services, to contribute in the development and availability

of a more reliable, secure, robust and economical infrastructure and network to the banking

industry.

The Head of the IT division commented, “The Internet with its open architecture has

minimized the limitations of proprietary networks/systems and has thus reduced the

severity of the concerns/issues like interoperability, security and access. This has created

opportunities and space for a number of intermediaries to strengthen the commerce

services on the web. As a result, alliances and partnerships are being forged between

these intermediaries and the banking organizations to offer additional innovative services

on their banking portals”.

All the participants expressed that an adequate number of vendors offering their

development services are available in the industry. However, concern was expressed on

the availability of vendors having the right capability, to deliver quality products at a cost

effective price. The same observation was made on the availability of suitable consultants

in the industry. The Project Manager of Avenza Solutions informs, “beside Avenza

Solutions, there are 2 or 3 local vendors and a few foreign origin companies are also

represented in Pakistan. But the problem with them is that the banks can not afford them.

Actually the banks can afford them, but the customers can not afford them (as the cost

will be transferred to them). Their product is charged at the international level and it is

very much expensive if you compare it with a product developed by a local vendor”.

There was a mixed response on the issue of access and capacity of the external networks.

The Head of IT division said, “we feel that the overwhelming development and growth in

the IT and Telecom Industry worldwide as well as in the country, particularly in the

Internet technologies, has created an opportunity for the banking industry, to exploit them

for achieving business objectives. The prevailing IT and telecom infrastructures of the

country may not be as elaborate and efficient as one would desire them to be, but

nevertheless the Internet and its supporting technologies have reached a stage where they

are available to be successfully used for delivering business objectives”.

However, the COO observed, “ICT infrastructure has improved a lot, costs have gone

down, but it is still not satisfactory, it is not at all satisfactory, because every day we have

downtime issues. In fact if I show you now, here it says ‘this is to inform you that the link

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to Mezaan bank is down’, you know I got this report for today’s date, seven of our

branches went down because some idiot at PTC had done something. It is completely

unsatisfactory and it’s a problem because downtime is unacceptable, even though the

customers are used to it, it is not what they deserve”.

The Business Manager also expressed dissatisfaction with the overall reliability of the

ICT infrastructure. He argued, “Alternate channels rely completely on infrastructure, a

branch can continue to run with a generator somehow in the absence of electricity, but if

our links are down alternate channels are useless, you know you can't use Internet

banking, you can’t use your credit card, you can’t use the call centre, you can’t use

anything. So infrastructure especially telecom infrastructure is very important for

alternate delivery channels including Internet banking”.

The management of the bank perceived that Internet has become quite secure- Thanks to

the advances in data encryption techniques and availability of online security systems.

The COO remarked, “ I personally am very reluctant to use the credit card on the

Internet, you know at the moment the infrastructure of credit card payment is very secure,

but my mind set is that I am apprehensive about the misuse of the credit card on an online

medium as I belong to the older generation. But you know my children or the new

generation that comes in to this bank for example, they have a different mind set. So I see

a radical change over the next five years. Persons of my age are still wary of the idea of

using credit cards and undertaking transactions on line, but the younger generation has

no such scare and trusts this medium”.

Interviewees had a mixed opinion on the issue of available band width. Head of IT

division expressed, “there are a big number of ISPs in the country that have flat and

customized connection and service access charges depending upon the choice of

technology. The data pipe or the bandwidth capacity has also improved and the charges,

although still on a little higher side, are coming down.”

The Manager looking after ADC expressed his concerns on the issue saying , “it is not

only an issue of bandwidth availability. One is, it is very expensive and the other is the

quality of connection and speed.”


One of the implicit drivers of adoption of Internet banking was the desire to remain

competitive in the Industry. One of the interviewee argued that banking is a competitive

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business and the adoption decision is also influenced by the initiation of this service by

some of the other banks in the Industry. The Manager looking at the business aspects

argued, "there is not necessarily a bandwagon attitude but a market demand in the sense

if one bank does it, and another bank does it, an another and so on and so forth, you can

say we are jumping the bandwagon but more importantly we are just giving our

customers whatever the other bank is giving them and if we don’t do that with banking

becoming a very competitive industry………”.

The participants informed that the laws and policies on electronic transactions are in the

making and their temporary non existence is not of special concern to them. One of the

interviewee however argued that the charges levied by the authority issuing security

certificates are an inhibitor to adoption. Head of IT division expressed, “our legal

department looks after these aspects (electronic transaction and regulation laws). We do

take clearance and information from our legal department whether a service is allowed

by the regulator or not. For instance, if you take the example of VOIP telephony, almost

half of the country is using it but actually it is illegal. So sometimes, even if something is

not legal, still it is being used.”

The COO saw no specific role of the regulator in the bank’s decision to adopt Internet

banking. The management praises the efforts of the legislators and banking regulators in

making policies and laws on electronic transactions, which, according to them, would

build more trust of the customers in electronic services. The COO stated, “They don’t

really have a role in our decision of initiating Internet banking but the statement I would

generally like to make is that the government is very good, supportive and encourages the

initiatives of the Industry to adopt technology and modern banking practices”.

The Project Manager of the Avenza Solutions however, observed that there is an

instruction from the banking regulator to adopt Internet banking by a certain date.

The interviewees considered that on overall country level, the consumers’ readiness for

adoption is low, however the urban population and especially the younger generation

feels comfortable in using the Internet based services.

The Project Manager argued, “awareness is increasing but certainly not up to the desired

level because customers don’t feel comfortable doing transactions through Internet. They

are not accustomed with the electronic payment systems. Even for those who are Internet

users, perhaps the level of usage is too basic”. Manager ADC argued, “awareness is

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increasing but the customer has some fears, some of which are real and some are… For

instance, real time gross settlement systems are not in place that creates issues in

settlement of transactions. Customers have security concerns like that of fake websites,

spoofing, password protection and other security breach possibilities”.

Some of the interviewees, while accepting that Internet banking is being pushed to the

customers and their education about this delivery channel is underway, feel that

awareness of Internet banking already exists, in some segments of their target market.

The Manager Business Operations argued that besides the bank’s strategy to push and

create demand for the service, they also find evidence of some demand from the

customers. He exclaimed “many corporate customers have phoned and told us ‘look we

want your Internet banking, we don’t want to send our person to our branch every few

days to find out our balance, we don’t want him to come and fill out a form and request a

pay order, we would like to do it online. You know our director could be in Beijing or

Tokyo it doesn’t make any difference, he should be able to see whether the money has

been transferred into his account,’ so that means, yes, there is definitely a pull aspect”.

However, the COO reported that Internet banking is initiated not in response to demand,

but because of their aspirations to deliver the best possible services to their valued

customers. The COO remarked, "at the moment there is no customer demand, we are

pushing the customers. I have not had a customer insisting on Internet banking”.

The apparent contradiction between the perceptions of the business manager and the COO

of the bank was possibly because the business manager was referring to the demand from

corporate clients whereas the COO was referring to the demand from individual

customers.

5.4 Case Study III


ABN AMRO group is a prominent name in international banking, having a worldwide

presence, with over 3,500 branches and a staff of 111,000 and total assets of EUR 597.7

billion. The bank evolved to its present name as a result of a merger of two individual

banks of Holland namely ABN and AMRO in the year 1991. ABN AMRO group traces

its origin in the banking history to the year 1824 in Holland.

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ABN AMRO group established their operations in Pakistan in 1948 and was the first

foreign bank to be granted a license by the State Bank of Pakistan. The bank enjoys the

status of one of the largest foreign banks in the country, with a physical network of

twelve branches geographically located in six populous cities of Punjab and Sind

provinces of the country.

ABN AMRO's country operations in Pakistan span over consumer banking, corporate

banking, investment services, treasury, cash management services and correspondent

banking. The bank has a market reputation of a premier banking institution and an

attractive choice of banking for the corporate clients, large financially stable business

organizations and wealthy individuals.

The bank provides 24 hours banking facility via telephone banking and a network of

ATMs installed at the physical branch locations. The ATM card named as Relationship

card, entitles the card holder to access his funds over any of the nationwide network of

ATMs. The Relationship card entitles one to use the card across the globe on any of the

machines with Cirrus facility.



ABN AMRO is a corporate entity and its supervisory board and managing board are

responsible for the corporate governance structure of the company. The country account

of Pakistan is included in the portfolio of ABN AMRO's Asia Pacific banking region. The

operations in Pakistan are headed by an executive, designated as the Country Head, who

reports to the ABN AMRO's Asia Pacific regional head quarters. The organizational

structure of the bank shows that Internet banking development, operations and business

aspects are looked after by an Alternate Distribution Channel (ADC) and e-business unit

that lies under the consumer banking division. The head of the e-business unit reports to

the head of consumer banking who directly reports to the country manager. According to

the Head e-business, the role of their unit is more of a consultancy and product

management of e-business products like SMS banking, web banking, call centres and

ATMs. E-business unit works on product development in synergy with the external

vendors and the bank’s internal Information Technology (IT) department. The IT

department’s role in the organization in the first place is to extend support services to the

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various banking functions and thereby contribute in supporting as well as advancing the

business vision of the bank.

ABN AMRO has staff strength of 511 employees, out of which, ten employees work for

the e-business and ADC unit. The IT department has strength of about fifty employees to

manage the organization's IT infrastructure and the INTRANET. They also extend

technological support to the e-business department in keeping all the distribution channels

up and running. The bank has an informational website and only corporate clients have

access to transactional banking through secure networks. According to the e-business

head the bank is in the planning phase of initiating Internet banking for retail consumers.

The bank earned pre-tax profits of nearly PKR 2.2 billion in the last available annual

report with a return on equity (ROE) of almost 51% that is amongst the highest in its peer

group of foreign banks[300-302]. The bank is contemplating to adopt Internet banking

and has not yet taken a decision on its implementation.

ABN AMRO bank enjoys a reputation of being a technologically advanced bank with one

of the best possible IT infrastructure and IT enabled banking processes and products in

place. The Vice President (Head ADC) mentioned, "ABN AMRO has been playing a very

significant role in the implementation of e-Commerce and e-banking in the country. We

are one of the two banks who first set up an ATM transaction switch, commonly known

as 'One link switch', which has now grown in membership to twenty one banking

organizations”. Likewise the bank has been an early Adopter of the sophisticated 32 K

programmable chip technology that enables secure and convenient access to multiple

e-business applications and products to their customers. ABN AMRO's reputation of

being leaders in technology adoption is so strong that even though the bank has not yet

implemented Internet banking, many of the other stakeholders in the banking industry

take it for granted that the bank already has a transactional Internet banking service.

The e-business product strategy is formulated by taking into consideration the needs and

requirements of their valued customers and the policy guidelines from the regional

headquarters of ABN AMRO. According to the Vice President (Head ADC) “we in ABN

AMRO have an entirely different kind of customer profile—besides corporate clients, we

have elite individuals belonging to the aristocracy and highly successful individuals

having extremely high earnings in their professions. We call them Van Gough. These are

wealthy individuals; even I don’t qualify for having such an account. Now their

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requirements are entirely different. A typical Van Gough would expect personalized

services. He would come, sit and exchange complimentary greetings by saying how are

you? I would like coffee today. The officer knows what type of coffee the person likes. It’s

what my customer is looking for in banking channels too; personalized and efficient

services with a human touch. And that is one reason our Internet banking services are

informational only and not more than this i.e. transactional”.

The Country Head of the bank has a reputation of pushing the technology adoption

decisions within the bank and also enjoys a position to influence adoption of technology

at the Industry level. He also heads the ECH (Electronic Clearing House) task force

constituted by the State Bank of Pakistan to establish guidelines, policies and

implementation of technologies for electronic clearing and banking in Pakistan. The

Country Head informed, “we, in various capacities and advisory roles, are partners to all

such national stature initiatives to make progress towards e-economy. The first and the

foremost essential element to make e-Commerce a reality in this country is to establish

and put in place all the necessary prerequisites for enabling e-Commerce and e-banking

in the country. We share the vision of policy makers of Pakistan for revamp; there have

been favourable developments and significant achievements in the provision of

infrastructural and technological platforms to support electronic payments and

transactional e-Commerce”.

The bank is in the planning stage of the adoption process and a formal decision of

adoption is still to be made. The Head of the e-business informed that "we are in the

planning phase. We are working on it. We are trying to figure out what kind of service we

should offer to the customer? Who will be the potential users? What will be the potential

targets? What are the costs and benefits associated with this service? And these are

things which we are working on”. Elaborating further on the process of adoption he

argues, "There are certain initiatives which the regional office takes and they guide us to

move in particular direction and we have to implement those things. Originally we were

waiting for certain solution to come in from the region. But as we anticipate, it won't be

3 to 4 years before which the solution from the region would come. So for the interim

period of 3 to 4 years, we are proposing to deploy a local solution over here until the time

we get the final solution”.

None of the interviewees expressed the cost of implementing Internet banking as of

having any decisive impact on their decision of adoption. They perceive that the cost of

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implementing Internet banking is not excessive, considering the budget of the IT

department.


ABN AMRO Pakistan has outsourced the entire work of development, hosting and

maintenance of its website. The architecture, design and appearance of its banking portal

hosted in Pakistan have the same template as that of ABN AMRO’s international

corporate website of www.abnamro.com. The website in Pakistan has domain registration

address of .com.pk and is relatively simple in comparison to its international .com

registered site and provides information about the banks products and services. The

website has a provision to request some offline informational services such as mini

statement and balance enquiries, transaction details etc which are transmitted to the

customers registered e-mail address. The bank’s e-business departmental staff coordinates

with the external firm for content management and information updating. The

interviewees expressed their overall satisfaction to the arrangement of outsourcing

website operational and maintenance function, as it lessened some of the project

management issues and challenges. The Head e-business clarified that they have

outsourced this work, not because they do not have sufficient internal capability to

perform it, but because of other considerations. He argued, “we already have our

Intranet, featuring a website portal for internal organizational purpose, which is

developed, managed and maintained ‘In house’ with our own internal resources. And you

can see that it’s much more elaborate, sophisticated and richer than the website on the

Internet. The decision to outsource Internet website operations is primarily because of the

security concerns- i.e. to avoid unnecessary traffic of Internet users to arrive at our

systems. Initial consideration was also on the cost and effort involved in running and

maintaining the site at local system. Overall, our experience shows that it’s much less of

a hassle for us as we don’t want unnecessary traffic from Internet users as well”.

Information technology is well embedded into the bank’s internal business processes and

the employees are well exposed to IT tools and techniques. Official internal

communication is all done via electronic correspondence and even basic approvals are

also processed on electronic mail system. A Customer Relationship Management (CRM)

system is in place, that is well integrated with all the existing delivery channels and the

requests registered or sent through e-mail interface at website of the bank are handled and

processed through the CRM system. Presently not much activity is through the Internet

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delivery channel as that channel is being used only for informational purposes. The Head

e-business informed that 'PHOENIX' the middleware being used by their bank, has

beautifully made the front end processes transparent from the back end processes and has

enabled a capacity to interface and integrate different delivery channels in a seamless

manner. He argued, "well one major advantage enjoyed by us is that our data

consolidation is almost complete ………Even our operational systems, which are used on

day to day routine, are also centralized and not distributed. We don’t have that problem

which is normally in other local banks, that branch is not available and you have to pull

data from different branches. We don’t have those issues, because we have a central

database for all the branches………and have the flexibility through our reliable

middleware to integrate different services”.

The fact of being a unit of an international commercial bank, the management has the

advantage of having first hand information on the benefits of Internet, derived by ABN

AMRO’s international operations in other countries or regions of the world. The country

Head argued that historically large international banks have been pioneers in adopting

new technologies to gain or retain their market leadership niche. With Internet

technologies, which were initially seen with mistrust for their ability to ensure secure

communication, large banks like theirs, adopted a phase wise strategy of first rolling this

technology for inter and intra organizational communication and information

management. A basic informational website, primarily serving the marketing and

customer relationship function, also featured in the first phase. The second phase of

exploiting Internet for transactional and more advanced services received boost firstly due

to the amazingly rapid developments in the Internet technologies and applications for the

financial industry, which incorporated features to enhance trust, security and

confidentiality of information exchange over the Internet. Secondly, there was a growing

business need, shaped by increasing consumer awareness and requirement, to have better

payment mechanisms available for participating in the enormously expanding e-

Commerce. The tremendous growth in e-Commerce activities on the web moved the

banks to take advantage of the growth potential of e-Commerce. He informed that the

operations in Pakistan are currently at the first stage of their bank's e-business strategy

and the head of Asia Pacific e-banking developments is working on bringing consistency

across the platforms and making a much larger presence than what they have today in

Internet banking.

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The Head ebusinees and Vice President (Head ADC) while acknowledging about the

suitability of Internet as a medium to be used for offering complete consumer banking

services, argued, “any senior executive at a strategic decision making position in a bank

would take no time to agree on the potential benefits of having such a flexible medium

that has such a widespread reach and range. There cannot be any two opinions on the

merits of Internet banking as the Internet has already driven many changes to the global

financial services and it’s only a matter of time of few years when all banking

organizations, including the ones in developing countries like Pakistan, would be using it

for transactional financial services. The important decision for the bank is only to decide

upon the opportune time to adopt. It is mainly a business decision that is taken on the

assessment of the existing business drivers for their bank to push ahead with early

adoption and whether the envisaged benefits outweigh the risks associated with it………

Yes it reduces the cost of transaction and in that sense it is attractive to the banks. But the

investment required, to be able to get into this thing … you need to build the

infrastructure and your existing infrastructure needs to be re examined to ensure that

there are no gaps, because now you would be open to the world. The biggest concern of

Internet banking is the risk in terms of consumer’s informational security. We want to be

sure. Once you go for Internet banking you actually are opening up your entire network

which is very risky. You need to have a technological infrastructure and base in order to

meet that challenge and that is why banks are a little bit conservative in launching

Internet banking. Internet poses a very special set of risks. You are open to the world and

all kind of people are out there whose only business is to keep trying to break the security

of systems. So you need to be very very careful about what you do. I know a number of

instances in Pakistan where security has been breached. Once you open it up, you don’t

have any clue what’s going on. What traffic is coming, what they are doing? If they are

entering what they will do after entering. For those things there is problem. Moreover,

the market does not give you sufficient return for the investment. You can put money into

some other opportunity and make it more productive for the bank and the customer”.

The Head e-business, who is working on the feasibility study of Internet banking,

expressed more positive views about the benefits as compared to the risks of adoption. He

argued, “the most direct benefit of Internet banking to the bank would be in terms of

convenience in service and lower cost of maintaining a delivery channel as compared to

other delivery channels”. The e-business unit does not see Internet banking as a profit

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centre in near future but expects that it could be, on increase in customer usage, as more

new products would become available on the web. The main reason given by the Head e-

business for not integrating and utilizing Internet in ABN AMRO Pakistan's operations at

par with its operations in other countries is the delay in the solution to arrive from the

regional office. Although the Head e-business unit felt that their bank’s technological

infrastructure is quite advanced and would have no issues to support Internet banking, the

Vice President(Head ADC) did not reciprocate the same sentiments and conveyed that

they needed to re-examine their internal infrastructure in order to be sure that all known

risks have been mitigated. He remarked, “You know a security breach can hurt the image

and reputation of the bank”. The Head e-business head argued, “generally breach of

security or authentication issues have been cited as a primary concern. Well mostly all

the Internet banking websites are protected through secured layers. And obviously you

are not giving full access to the customer. You are providing certain areas to the

customer and certain kind of services to the customer. It’s not that the customer can do

anything on the website. First of all you are restricting him to the functionality; secondly,

you are taking all the necessary measures to ensure security. That is part of processing

the legal framework, the terms and condition and everything. So the security aspect is

always there but it’s how you protect, how you ensure that there is no loop hole in the

complete process. That can be ensured if you put in sufficient effort. The technology and

the procedures to ensure security have advanced a lot. Earlier, the user was asked to

provide his login and password to access the website. Now you can issue him different

tokens, different one time passwords. He uses the password once, and the next time a new

password is issued. You can restrict the use by allowing access to a certain window only.

If someone calls and says that I want to use the website for the next 2 hours, then you can

restrict the usage. If you follow that mechanism it’s very much secure”.

5.4.3. External e-Readiness Dimension


ABN AMRO acknowledged and appreciated the closing gap in the digital divide which

has encouraged some of the national banks to start offering Internet banking albeit at

basic level of service. However, the Vice President (Head ADC) is of the opinion that the

solo efforts of these banks are handicapped because of the lack of availability of an

external environment conducive for the diffusion of Internet banking. While applauding

the efforts of some of these large retail banks having a large customer base, he

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commented, “if you see the statistics, the usage of their services is quite low and an

implementation of Internet banking by one or few individual banks would not

automatically lead to widespread usage, unless the whole essential building blocks

forming the e-Commerce value chain are sufficiently strengthened. The e-Commerce

strategy of the bank needs to be developed in alignment to the national e-Commerce

strategy and national infrastructural capacities and capabilities. ABN AMRO feels that a

lot of progress has been made towards building these capacities; however, it is still not at

a level convincing enough to take a jump start on launching Internet banking on a full

scale”. The Vice President and head ADC exclaimed by citing the example of the

merchant accounts in the country“….Where are the merchant accounts? Habib bank is

the only bank offering this service, but even then I don’t think they have a significant

number of Internet banking customers.”

The executive of the Vendor Organization argued, "at the industry level, banks are trying

that people use Internet. But it is obvious that even if the banks have secure systems,

overall in the industry, there are many loopholes in security. Because of this, people do

not feel comfortable while doing transactions on Internet especially when they have to

use their credit card number in a transaction. Until these things are improved, the

customer will feel uncomfortable in doing transactions or even in using Internet

banking”.

He continued expressing that for ABN AMRO or any other modern bank there is not

much of an issue on the availability of vendors and consultants, as according to him, "If

the primary objective is to extend convenience and service to the customers, then vendors,

consultants etc can come from overseas. Infact, most banking systems are from overseas

market, particularly core banking solutions. Even the system related to credit cards is

also from overseas. Most of these vendors operate remotely and have come here to

provide just services where as there are a few others who are maintaining their office

here. So if a bank wants to introduce some service, vendor support is a secondary issue.

The main issue is, up to what level that service is to be provided, and at what price.”

The interviewees also informed that the Pakistani market is not a very mature market and

there are not an enough number of firms available to take up the job, but at the same time

the vendors that are available are capable of delivering the solution. This is a typical

situation not necessarily for Internet banking but in all types of specialized banking

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solutions, where only a few firms or consultants have expertise in a particular specialized

area or domain.

Lack of confidence on auxiliary facilities is also one of the reasons for delaying the

adoption decision. The Vice President (Head ADC) expressed, "We need sufficient capacity

in this network to support Internet banking. One of the problems in this country is to have

sufficient bandwidth and then the other problem is of course the ability to recover in case of

disaster. There are limitations; can you shift your network and keep it running so that the

Internet user is not affected. For instance, I have call centre running. In the call centre I

need a large bandwidth. There are hundreds of calls for the bank…there are different lines.

In case of a disaster I need to move from this building. What is the procedure to move the

network? If someone calls on our UAN, how will that call be transferred to the new

premises? How long do you think the service provider, PTCL, would take to shift the

UAN to the other premises? Do you think this country has infrastructure to support these

projects. Here organizations are not created to react for emergency or disaster

situations”.

Elaborating further on the deficiencies the Vice President added that every bank wanting

to enter into Internet banking has the same standard challenges. "Do we have the

manpower?. Do we have defence in our systems, in our networks to open up to the

Internet? And then how do we manage it. Problem is we don’t have the trained manpower

who can train. We also need experienced people. I can’t take some body that is just out of

the school and says, ‘I have done this course, give me responsibility’. How can I do that?

What we are looking for is not a general IT resource person but a person with very

special skills that have to do with Internet security. And there is insufficient availability of

these personnel here. Some very good people are available and they are working out of

Pakistan for many international corporations. They are very well qualified. But the thing

is they are very few”.

ABN AMRO anticipated more potential for mobile banking and considered that mobile

operators are very well positioned to get into traditional banking domain. Mobile operators

are issuing prepaid cards, which infact is a deposit, and if they are deposit takers they can

also allow electronic transaction of that deposit to any one. According to the Vice President

(Head ADC), “If they start doing that, there is nothing to prevent them. It is very easy for

them to do basic banking. To provide payment services and I see this happening in the near

future. I see this happening with in the next few years. People are willing to do this; people

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have the technology and infrastructure. And what's important, they will do the payment

services where the banks can not. Reason is its very cheap to do on their networks and you

can do small ticket payments which is a problem for us. They can do small ticket payments

at a very low cost. For instance if I want to buy a newspaper I can use my mobile phone to

instruct that 20 Rupees be given to this person. Which the banks can not do, because banks

will charge them 20 Rupees to pay 20 Rupees”.


ABN AMRO has a target market of customers which have their unique requirements and

preferences for which they would not go to most of the other available banks. There is no

imminent threat of loosing the existing customers, although the head of e-business

informs that the bank has started to receive enquiries from some of their new generation

customers about the availability of transactional facility on the Internet. Similarly at this

stage this deficiency in the delivery channels is not likely to distract its potential new

customers. The positioning of the bank in the industry is such that very few banks of its

type exist in Pakistan and thus there is relatively no or very less competitive pressure

from the industry.

The bank finds that electronic banking laws are not as strong and comprehensive and are

still in the making. The electronic act of 2005 exists, which is relatively brief and needs to

be further elaborated in much more detail. The Vice President (Head ADC) argued, “we

as a country are evolving. I think that would take some time. It would not be that quick.

In America and Europe you have virtual banks which do not have any physical branch at

all… they are all virtual. But that thing is going to take some time especially in the

current changing world scenario where you can’t simply just open an account. The bank

needs to know about the customers, who they are where they are from and somehow you

have to do documentation and paper work. So for that you need a bank with a mortar.

The virtual bank, whether or not Pakistan is ready for it that is a totally different story.

But I don’t think with the passage of time virtual banking is pre-empting the regular

banking”. The banker further informs that cyber laws are definitely under consideration

and experts are working on these laws but as very few people exist who are trained and

have genuine expertise in drafting these laws, therefore, it is taking a little longer time.

Similarly they feel that it will take a while before things like accepting electronic

signature, accepting PIN as a signature and electronic documents as a legally acceptable

record, become a reality.

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The Vice President (Head ADC) informs, “The country’s culture also is a big

consideration in taking a decision to adopt. The country has a huge population of over

150 million people but the number of bank accounts in the country is not even 30 million.

And considering that on an average, a person holds three bank accounts, either in

different banks or different categories of accounts in a single bank, we can safely assume

that not even 10 percent of the population has a bank account. People prefer to transact

in cash and even those who do have bank accounts prefer to write a cheque and send

someone to the counter instead of going themselves to get it en-cashed”. The Vice

President (Head ADC) questioned “How many of these are technology users, or ATM, or

Telephone banking or SMS users? I’m not sure…how many of them are using technology

channels”.

He argued that transition from this culture is an evolutionary process and requires

education, awareness and training. The banks that have started transactional banking are

investing for creating awareness and push the technology to their customers. "Once the

customer gets aware of new things and gets used to the channel, he will after some time,

switch and prefer to use that channel e.g. ATM. Customers, who are used to drawing

money from an ATM, hardly ever visit the branch.”

The Head e-business felt that their banks customer base and profile is quite different

from that of the local banks and their needs are changing and evolving. Regular surveys

and opinions that are gathered by their bank indicated that a select profile of customers

expect them to offer transactional Internet banking services. Although, it’s a very small

number of customers that wants this service but in the longer run the bank expects it will

be something of critical importance. Citing the example of ATM’s he remarked, “five

years ago ATM card was not such a great deal and there was a very little volume of

transactions from ATM. People didn’t trust that channel as much. But now, the trend of

the transaction volume through ATM’s, is exponential. It’s beyond the imagination what

was earlier and what we see right now”.

5.5 Conclusion

In this chapter, the three cases studied were narrated. The analysis of the data collected in

these three cases is presented in the next chapter.

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Chapter 6. Analysis of Case Studies

6.1 Introduction

In this chapter an analysis is carried out on the data collected in the case studies. The

analysis is carried out by factor addressed and categorization of banks. The objective is to

understand the role or behaviour of the factors in shaping the ability to adopt Internet

banking by the banks. First, a relative assessment is carried out about the extent to which

Internet has been integrated by these banking organizations, categorized as Adopter and

Planner banks, for offering banking products and services. Second, a cross category and

within category comparison between Adopters and Planner banks is performed. Third,

based on the data collected in the individual cases studied, the behaviour of each factor is

assessed. The factors are then classified into three groups according to their assessed role

in the adoption of Internet banking. Fourth, an analysis and classification of the factors is

performed and the role of each factor in each group is assessed and its influence in

shaping the decision of adoption is discussed.

6.2 Assessment of the Level of Adoption

Adoption of Internet banking can take various forms or levels depending upon the extent

to which Internet is integrated with other banking applications and processes. An

increasing level of adoption enables a bank to offer more advanced and sophisticated

banking products and services over the Internet channel. The three cases exhibit

differences in the level of adoption and use of Internet. The two banks that have

implemented Internet banking at least to an extent that their customers can access and

view their accounts over the Internet, are considered as Adopters. The other bank is

considered as a Planner as it is considering adopting Internet banking but has not finalized

its decision. The Adopters and Planner banks are assessed based on the level of adoption

of Internet and its use in offering banking products and services.

According to Gartner group [303] the evolution or use of Internet as a delivery channel

passes through four stages. Each stage, starting from basic use to extremely advanced use

of Internet, corresponds to a certain level of functionality or facility available at the

banking website. This study adapts the model of Gartner group and defines these stages as:

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Advanced Informational

An Internet banking website having provision of customized contact with the customer:

Online communication through email

Basic Transactional

An Internet banking website or portal through which at least three core Internet banking

services of balance inquiry, funds transfer, and bill payment can be carried out.

Advanced Transactional

Advanced transactional Internet banking website, in addition to the Basic Transactional

services, extends some additional services such as brokerage, mobile or SMS alerts, and

remittance facility from abroad.

Electronic Customer Relationship Management (eCRM)

eCRM level depicts a stage or level of adoption where the bank has considered the use of

or is already applying the following technologies/functions:

• All customer information consolidated in a single database

• Complete view of individual customer’s relationship with the bank

The assessment of the level of adoption of Internet was made by a) enquiring from the

respondents about the degree of integration of Internet with the business processes of the

banks, and b) by actually testing and experiencing the functionality extended through

their website.

The figure 6.1 maps the banking organizations studied and assessed according to their

category and on defined levels of adoption. The map depicts the relative level of adoption

of Internet banking achieved by the Adopter (UBL and Meezan) and Planner (ABN

AMRO) banks.

The dotted arrows in the figure suggest the dynamic nature of the adoption process and

indicate the tendency of the banking organization i.e. what the firm intends to do and

where is it likely to be in near future. This is because adoption is a dynamic process and a

perception of higher readiness is likely to motivate banks to advance towards higher level

of adoption.

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Level of adoption Advanced

Informational Basic

Transactional Advanced

Transactional

eCRM

Plan

ner

Ad

opter

Ad

opter

Figure 6.1 Assessed and Projected Level of Adoption of each of the Bank

ABN AMRO bank at the time of carrying out of this study was only extending limited

Advanced Informational facilities through their website, such as providing offline account

statement and balance information through electronic mail and SMS. According to the

e-business head the bank is waiting for the solution to arrive from the regional

headquarters and until then they are considering to deploy a local solution. The solution

already deployed by ABN AMRO in other regions of the world has features of CRM

level of integration, whereas the local solution that the bank is considering has features of

advanced transactional stage. Thus the two different dotted arrows sprouting out and

terminating at two different stages or levels of adoption accommodate the above two

scenarios of local and regional solution deployment. On the other hand, there is a strong

perception of the vice president that the status of most of the factors shaping the external

e-Readiness as well internal e-Readiness like infrastructure, access, demand, consumer

behaviour and internal security risk, complexity of technology, and security aspects, is

not conducive enough to encourage the bank to adopt Internet banking in the near future.

In that scenario the bank will stay at the existing Advanced Informational level at least for

some period of time (And by the time of this thesis write up, the bank had not adopted

Internet banking).

The Meezan bank at the time of this study was at the Basic Transactional stage. However,

Meezan bank had intentions to move towards the eCRM level of adoption and was

ABN AMRO

ABN AMRO

ABN AMRO

UBL UBL

Meezan Meezan

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planning to deploy features of eCRM level of integration where the customer will have a

unified view of all the delivery channels under his use.

UBL had an Advanced Informational site in the year 1999. By the year 2003, the website

had improved to such an extent that the customers were able to view their account

balances online. In the year 2004 UBL launched its first transactional banking service

named Click and Remit for expatriate Pakistanis. In the same year the Internet banking

service for the retail customers was launched, which initially provided Basic

Transactional services in which the customers were able to transfer funds from their

account to another of their own account within the bank. UBL is now offering Advanced

Transactional services. The bank is planning to move ahead in the near future, to the

eCRM level of functionality.

6.3 TheStructureoftheAnalysisThe framework employed for data analysis carries out the assessment of three aspect of

organization’s context namely organization; technology (internal and external); and

environment. The assessment of these contexts of the banking organizations makes up the

internal and external e-Readiness dimension. These dimensions and the sub dimensions

are not independent of each other and are infact interrelated. Exchange of information

within and among these two broad e-Readiness dimensions and their sub dimensions is a

continuous process like an open system. Each and every factor included in the individual

dimension affects the readiness; however, no factor by itself is able to explain the

readiness for Internet adoption. Both the internal e-Readiness dimension and the external

e-Readiness dimension may individually, or in interaction and combination with each

other, influence and shape the initial decision of adoption and the subsequent decisions of

moving on to next higher levels of adoption. Even some factors that are classified under

different sub dimensions are related amongst themselves. Some of these factors enable or

act as motivators for adoption, whereas some of these factors inhibit or offer challenges to

the adoption.

The data analysis is carried out first on category basis in which within category and cross

category comparison is made. The analysis is carried out by analyzing the internal

e-Readiness dimension and the external e-Readiness dimension as well as their

sub-dimensions for Adopters and Planner banks. Secondly, based on the data collected in

the case studies, the relative role of individual factors in shaping the decision to adopt

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Internet banking is identified and classified into three different groups. These groups are

labelled as motivating factors, inhibiting factors and situational factors and are explained

later.

6.4 Assessment of Adopter Category of Banks

6.4.1 Internal e-Readiness of Adopter Category of Banks


These banking organizations, while differing from each other in terms of ownership, size,

financial resources, number of branches and hence the geographical coverage, have

similarities in their management function as both the banks are corporate entities. The

relative position of the department responsible for implementation of Internet banking is

different in these banks. The management function is headed by members of the board.

UBL is a large bank established long ago. Meezan is relatively a small bank with a

history of just over five years. The boards of these banks approved the initial decision of

introducing a new delivery channel of Internet banking. The top management in these

banks demonstrated their commitment for the adoption of Internet banking by sanctioning

and authorizing the requisite resources. The commitment and support of UBL’s

management is visible in a more pronounced way. They have a separate department

responsible for e-Commerce developments in the bank. The Head of e-Commerce group

reports directly to the president of the bank. Whereas, in Meezan bank, the reporting

structure or communication channel with the president of the bank is through an

intermediate management layer.

The Adopter banks consider that the adoption of Internet banking is a rational decision

and an outcome of the continuous strategic planning process of the bank. They perceive

that the availability of financial resources does not surface as an important factor in the

decision to adopt and implement Internet banking. These banks perceive that while

favouring a cost effective solution, it is not that the cost of adopting Internet banking

would deter them from initiating a new delivery channel for serving their customers. The

adoption strategy of these banks is to establish Internet banking as an alternate delivery

channel so as to facilitate and provide a choice to the customers to bank through any of

their preferred channels. UBL followed a strategy to develop and implement the channel

largely using in-house resources, whereas Meezan bank, to a large extent, outsourced the

development and implementation work to a vendor organization. UBL is an early Adopter

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of Internet banking. The bank has continued to commit resources to achieve an increased

level of integration of Internet with its business processes and other delivery channels.

The timing of early initial adoption has been helpful for the bank in migrating to the next

higher level of advanced transactional stage. Meezan bank is a relatively newly

established bank and has integrated Internet to an extent of offering basic transactional

services.


These organizations had a number of similarities as well as a few differences in internal

Technological Readiness. The issues faced in project implementation from the banks’

perspective were largely related to project coordination and communication between the

vendor and the sponsor. The issues faced in the development by UBL and Meezan bank

are quite similar. The issues in project initiation and implementation communicated by

them were mainly: project management issues involving defining and freezing of project

scope; issues in retaining skilled human resource; issues in capturing, gathering and

freezing requirements; issues in managing change requests; issues in the integration of

technology with the other banking information systems; issues in ensuring security of

Internet banking without compromising on usability and ease of use aspects.

The internal technology infrastructure maintained by these banks was non trivial and IS

applications employed heterogeneous technologies in terms of computing power and

capacity, development language, databases, operating system and the platform. The

deployment of a common middleware by these banks brought the convenience to

interface Internet banking applications and hide the back end limitations and

complications of technology. The Adopters consider that their existing technology

installed in the bank is compatible with the Internet technologies. They also consider that

the acceptability of Internet banking by the employees is generally positive and any initial

resistance to change, from the employees, is minimal. The explanation of this little

resistance in accepting Internet banking at employee level is that Internet banking does

not altogether replace the existing processes as it is an alternate channel and not a

substituting channel. This is also because Internet banking is expected to lessen the load

at physical branch channels.

These banks perceived that the use of Internet for transactional banking is prone to greater

security threats and consequently, to more operational risks. However, they also

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acknowledge that methods and techniques of risk mitigation are available that have made

Internet banking feasible and suitable as an alternate channel of delivery. The banks

consider that Internet banking offers more benefits as compared to risks. These benefits

motivated these banks to implement Internet banking. These included, customer

convenience and satisfaction; operational efficiency; to retain the existing and attract new

customers; extended ability to deal with customers; to reduce operational cost; to gain

access to new market and customers; to enhance the image and reputation of the bank; to

enhance business and profitability.

6.4.2 External e-Readiness of the Adopter Category of Banks


The Adopter banks use VeriSign as a Trusted Third Parties (TTP) or certification

authorities (CA), as there is no other CA in the country. VeriSign has worldwide

recognition and is trusted for its role in enabling Secure Electronic Transactions (SET).

These banks consider that the technology required in bundle or in component form for

developing Internet banking portal is readily available and there are not much issues

involved in obtaining licensed software and warranted hardware. Meezan bank hired the

services of an external consultant in the product development and perceives that qualified

consultants are available in the local market. UBL has developed expertise within their

bank and they proudly mention that many of the banks who are in the planning stages

seek their opinion and advice. The capacity of the national communication networks, on

which relies the Internet connection speed and access, is looked upon with concern by

these banks, however, they anticipate that the ongoing ICT infrastructural developments

at the country level, will gradually improve the capacity, access and connectivity.


The customer base of these banks belongs to all segments of the society. There is no

pressure to adopt on these banking organizations and the market situation is not

competitive. These banks believe that early adoption does enhance the image of the bank

in the market. The immediate target market segment of these banks is quite similar and

mainly comprises of young educated working professionals. There is relatively very little

demand of Internet banking. These banks consider that it’s a time of creating awareness

about the service in the market and the banks at this stage are pushing the technology so

that usage of this service gains acceptance by a larger customer base. However, the

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demographic, economic, educational, and cultural influences are considered as inhibitors

to the diffusion of Internet services. The Adopter category considers that laws and

regulations for enabling e-Commerce activities in the country are still in the making.

They consider existence of appropriate laws and regulations as desirable but at the same

time absence of these at this point of time is not considered to be inhibiting Internet

banking.

6.5 Assessment of the Planner Category of Bank

6.5.1 Internal e-Readiness of the Planner Category


The bank in the Planner category has an organizational structure similar to the banks in

the Adopter category. However the bank is not incorporated in Pakistan and is

categorized as a foreign bank and it is represented by a country head who reports to the

head of Asia Pacific region. The bank enjoys an international fame and has Internet

banking services available in most of the regions of its operations. The top management

managing the operations in Pakistan is quite instrumental at a national level, in the

promotion of e-Commerce. The country manager is also considered as a firm believer in

deploying technology enabled banking solutions. However, in case of Internet banking

adoption the initiative from top management appears not in line with their general

reputation. One of the reasons provided by the bank was that they are waiting for the

initiative to arrive from their banks regional Asia Pacific office. The bank, while having

enough resources to implement Internet banking, does not see the case of initiating

Internet banking as a viable business proposition at this time, under the existing state of

readiness of various factors related to adoption.


The Information system deployed in the Planner bank, in contrast to the Adopter banks, is

more advanced and has a centralized data base architecture in comparison to the

distributed data base architecture. The core banking solution is also an internationally

renowned banking solution (GLOBUS), which can be configured to enable Internet

banking application through an Application Program Interface (API). The bank has

outsourced the complete task of development, maintenance and operation of its

Informational portal. The bank offers offline interactive services such as transmitting

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bank statements to the email address or to the mobile device through short message

services.

The significant difference between the Adopter and the Planner category of banks is in

their perceptions and assessment about the suitability and benefits of using Internet for

transactional banking. Internet is perceived to be a highly insecure medium and the banks

consider that opening up of internal Information systems to the outside world through the

Internet raises the risks considerably. The Planner bank considers that the efforts,

preparations and investments required to safeguard the internal systems do not match up

with the expected benefits from the adoption of Internet for transactional banking. The

bank observes:

"Yes Internet reduces the cost of transaction because the customer himself comes for self

service. In that sense it is attractive to the banks. But the investment required, to be able

to get into this thing you need to build the infrastructure and your existing infrastructure

needs to be re examined. To ensure that there are no gaps, because now we are open to

the world where some body some where is always ready to break into your system…so

you need to be very careful about what you do".

The bank considers that at present it lacks the skill set and competencies to manage

Internet banking operations, as it requires a very special kind of skill set that has to do

with Internet security.

6.5.2 External e-Readiness of the Planner Category


In the aspect of Technological Readiness there exist a number of similarities of

perceptions between the Adopters and the Planner bank. The bank considers that the

expertise and technological know how to implement Internet banking is readily available.

They expressed that there could be some delays in procuring the technology but otherwise

one can easily have it from the market. The bank considers that the risk of illegal

authorization has also been mitigated to some extent with the availability of certification

authorities. However, reducing this risk entails cost and increased cost then itself

increases the risk. Similarly the bank considers that the network capacity and access is

insufficient and limited. They also consider that ICT infrastructure and services are not

planned to cater for disaster situations and business continuity cannot be assured with the

current level of services.

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The Planner category targets a very limited but financially highly influential segment of

the market. Its customers belong largely to the aristocracy class along with well educated

and well placed professionals and entrepreneurs. The bank observes that it attracts its

customers on its reputation of delivering highly personalized services. The bank considers

that Internet is not a very suitable medium for extending personalized touch in

comparison to physical . The bank considers that there exists no pressure either from the

industry or from the regulators, for the adoption of Internet banking.

The bank considers that the market and the general population in Pakistan are not yet

ready for Internet banking services. The interviewee observed that in a population of over

150 million, there are approximately only 30 million bank account holders. And after

discounting for the fact that a person on average maintains at least two accounts, this

leads to suggest of even less than 15 million persons or entities having a bank account.

Many of these people are not IT literate and do not feel comfortable in using even

ATM’s. The Planner category considers that the business drivers do not favour the

adoption of Internet banking at this stage of market.

6.6 Analysis and Classification of Factors

The analysis of data led to the identification of three groups of factors according to their

perceived influence or role in the adoption of Internet banking. The influence and role of

most of the factors presented a similar pattern as all the cases studied were banking

organizations. These groups were termed the motivating factors, inhibiting factors and

situational factors. Table 6.1 presents these groups and the associated set of factors that

will be subsequently explained.

Motivating Factors

Motivating factors are the factors whose role or influence was perceived by the bank(s) as

enabler for adoption of Internet banking. These factors are the one’s which explain the

perceived drivers for adoption of Internet banking.

Inhibiting Factors

These are the factors whose role or status was perceived to be non conducive or non

supportive for adoption of Internet banking. These factors explain the perceived

barriers/impediments/issues in the adoption and implementation of Internet banking.

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Situational factors

The factors considered in this group are of two types. Firstly, it contains those factors that

are considered as pre-requisites, but not critical, for adoption. Secondly, it contains those

factors that are helpful in understanding the possible reasons for attaining a higher level

of adoption i.e. explanation to why a certain level of adoption is attained in a particular

situation or context. Here under is analyzed the role of these contextual factors in shaping

the perceived ability of banks to adopt Internet banking.

6.6.1 Motivating Factors

6.6.1.1 Commitment

All of the interviewees in these banks, responsible and involved in any stage of the

adoption process and in any capacity, highly stressed upon the importance of the top

management's support and commitment for successful implementation.

In UBL's case, the top management after taking a decision to adopt Internet for

transactional banking services, created a special e-Commerce department in the bank and

selected a highly qualified expatriate Pakistani as its functional head. According to the

e-Commerce head of UBL, the president of the bank is the champion of e-Commerce

adoption in the bank and has delegated all necessary powers and resources to the

e-Commerce department to implement Internet banking and establish it as a valuable

channel of delivery.

In Meezan bank, the IT department initiated the idea of adoption of Internet banking that

was immediately taken up by its COO, who subsequently championed the cause of

adoption of Internet as an additional delivery channel. The head of ADC argued,

“Although we proposed to implement it, we would not have made it to this stage without

the full support of the top management, as what determines the pace of progress is the

support from the rest of the organization, especially the top management”.

The case of ABN AMRO presented an interesting scenario where its country head

evidently supports and leads some of the national level initiatives to promote and develop

an enabling environment for the uptake of e-Commerce in the country. However, ABN

AMRO, in spite of having the most sophisticated internal IT infrastructure, has not taken

the decision to offer Internet banking services.

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Table 6.1 Grouping of factors according to their perceived role

MO

TIV

AT

ING

FA

CT

OR

S

e-Readiness (Internal and External) Commitment

Top management support and vision The investment of adequate financial and other resources

for development and operationAwareness of Attributes of Innovation

Relative advantage Compatibility

Availability of Complementary Assets Technology tools, vendors, consultants/solution providers Online security and trust services, real time payment

systems

INH

IBIT

ING

FA

CT

OR

S

Awareness of Attributes of Innovation Complexity Security risk

Access Technology and Infrastructure Penetration of Internet Access speed Access type, capacity and infrastructure

Market, and Society Readiness Consumer readiness (considering national culture,

behavior and awareness) Demand/Competitive pressure

SIT

UA

TIO

NA

L F

AC

TO

RS

Organizational Structure Organizational size Positioning of Internet banking channel in the

organizational structureAdoption strategy

Process of Adoption Timings of Adoption

Resources Financial & HR

Policy Readiness Factors Policies, legal framework and role of regulators

6.6.1.2 Awareness of Attributes of Innovation

Relative advantage

The analysis of all the cases reveals that the interviewees anticipate a number of benefits

out of their Internet banking implementations. They all communicated that banking is a

business and all of their decisions are driven by business benefits which may be tangible

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or intangible. The advantages anticipated by the banks were articulated in different words

but they all expect almost a similar sort of benefits. The observations made by the top

management of Meezan bank, quite comprehensively express the anticipated advantages

in these words. “Internet banking will be a key alternate channel for delivering the full

range of our services and products at any time and any place on the globe. Our strategy

is to 'reach', 'transform', and 'extend' the core services in a manner that is most

convenient and satisfactory for our customers. First we have enabled the basic services

so that the customers can reach their bank at their leisure and preferred time. Transform

means that the channel will be integrated to an extent that tangible business benefits

would start accruing to the organization. Extend means that we will be able to extend our

services to new markets, new customers and even to new products”.

The Common benefits that were perceived by the banks that have adopted Internet

banking aare mentioned as under.. ABN AMRO, although in the planning stage, also

perceives similar benefits from Internet banking implementations, however, they are

assessing the security risk cost viz a viz these benefits.

Increased customer convenience and satisfaction

All the banks expressed that the facility and the choice of having access to the banking

products and services from any where and at any time of the day is of immense

convenience for the customers. One of the Interviewees expressed, “What else can be

more convenient and satisfying for a customer who can have a banking service available

to him at any time and any place. Whereas, prior to 'Net banking’ the same customer for

the same service had to come physically to the branch and wait and stand in queues for

long durations and finally drive away back to his work place or home braving the rush

hours of traffic”.

Operational efficiency

All of the interviewees perceived that Internet banking may lead to operational efficiency

in their internal banking operations. One of the Interviewees expressed, “Yes Internet

banking has the potential to reduce the branch level work load of an employee and the

same employee would be able to devote his time to other operational activities”.

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To retain customers Loyalty

The interviewees expressed that Internet banking can benefit the bank not only in

retaining the existing customers but also attracting new customers to utilize their banking

services. An interviewee at UBL expressed, “Customer loyalty is of utmost importance

for the bank. And in order to retain customer loyalty, the bank needs to be sensitive to the

continuous evolving needs of the customers. Internet banking is and will become a

preferred choice of channel for a certain segment of existing and potential customers”.

Extended ability to deal with customers

This benefit was specifically highlighted by UBL and Meezan bank as according to one

of the interviewees, "Internet banking provides an opportunity to the bank to attract and

serve customers through new ways and with new products. This new channel of Internet

is flexible enough and allows us to continuously enhance the system as the needs of our

customers change”.

To reduce operational cost

All interviewees expressed that their bank anticipates a reduction in transactional and

operational cost to the bank. An interviewee at one of the banks specifically mentioned

that certainly the transaction cost has reduced considerably. However, the operational cost

at the current level of demand and usage is still on the higher side but once a threshold

level of customers is attained then operational cost will also come down for the bank.

To gain access to new market and customers

All of the banks agree that Internet provides an opportunity to have access to new markets

and customers. UBL and Meezan bank shared their experiences. UBL through their

product of ‘Click and Remit’ was able to tap the potential market of expatriate Pakistanis

in North America by providing them a cost effective, efficient and legalized banking

channel to send their remittances to their homes in Pakistan. Prior to the incidence of 9/11

terrorists attack in New York, people preferred to send their money through money

changers as they used to provide personalized services at lower rates. This mode of

transmission of money was considered illegal in Pakistan. However, after the 9/11

incidence, the risks involved in transmitting money through non approved channels

increased considerably and thus customers needed some other approved and risk free

mechanism. The product of Click and Remit fulfilled that need.

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Likewise Meezan bank expressed that Internet has extended their reach to new markets.

According to them, “being the premier Islamic bank we were getting enquiries from

overseas Pakistanis residing in the Middle East, Western Europe, and North America

about the ways through which they could bank with us. At that time we did not have

Internet banking but now as we have got it these customers can operate their accounts

regardless of where they are in the world".

To enhance the image and reputation of the bank

None of the banks explicitly mentioned that image enhancement was one of the factors

that influenced upon their adoption decision; however it implied from their statements

that technology (Internet banking) adoption contributes in building reputation. For

instance Meezan bank's interviewee stated, "Yes they (the customers) want Islamic

banking services with professional excellence and reflecting a modern culture and unlike

an environment where only a molvi (clergy) with a topee (hat) and a dari (beard) works.

They wanted to see a technologically advanced and modern looking bank. Thus our

prospective customers also shared our philosophy and vision of extending Islamic

banking services that meet the best in class service requirement”.

To enhance business and profitability

Strategic and operational business benefits may be expected from this channel which

would mostly be intangible. None of the banks expect it to be financially profitable in the

short term, but perceive that as the level of usage may grow, the bank would be able to

launch newer products and services that would lead to direct measurable financial

profitability. For ABN AMRO, the case of business profitability is not so evident in the

immediate future. Meezan bank being an Islamic bank also mentioned one additional

benefit that was specific to them. They expressed that according to Islamic principles of

finance their bank cannot specify the interest or profits in advance. Therefore, Internet

banking provides their customer an easy access to see their account earnings or profits at

the end of each day or month.

Compatibility

The banks under study perceive that changes introduced through the adoption of Internet

banking are compatible with the existing working procedures and value systems. Internet

banking is adopted by these banks as an alternate delivery channel rather than a

replacement of other electronic or branch based delivery channels. The experience of

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these banks with other delivery channels has already trained a manpower that understands

the need and importance of alternate delivery channels to the bank and even to their own

self.

UBL's Head of e-Commerce maintained that “Internet banking services are offered in a

centralized manner and branch level employees have very little, if any, involvement in the

process. So it’s very little for the employees to show resistance against and in fact the

situation has been otherwise that the employees were generally cooperative and

enthusiastic about this change. This perhaps could be in anticipation that the load of

branch would further reduce”.

UBL management demonstrated an aggressive attitude towards pursuing of technology

deployment strategy. The bank revamped most of its earlier generation technology that

has enabled it to shift over eighty percent of its branch network online. This has also

enabled the bank to lessen the issues of compatibility of Internet banking systems with the

technology deployed in the branches.

Meezan bank is relatively a new bank and that has provided it an opportunity to hire

employees who are comfortable in using IT. However, their head of IT still felt, "Internet

as a delivery channel does alter the roles and workloads of the employees working in

internal banking departments like operations, front office, marketing etc. …….. Changing

the perceptions and scares of the people is very important. But once you convince them,

then interestingly, they come up with more improvement ideas".

The vendor who provided the middleware solution to the Mezan bank also provided

them the Internet banking solution. Therefore the vendor was pre aware of the details of

the systems available with Meezan bank and their experience guided them in managing

the compatibility issues of technology. The bank has no issues of having legacy systems.

It has a relatively small branch network all of which have online connectivity.

ABN AMRO's management observes that whenever there is a change, resistance to that

change is inevitable. However, the bank ensures that any change is not introduced

abruptly and the affectees of that change are systematically trained before hand. They

consider their INTRANET is quite sophisticated and switching on to Internet banking,

when it is adopted, will not invite any compatibility issues.

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6.6.1.3 Availability of Complementary Assets

The operation and growth of Internet banking service in the country relies heavily on the

availability of ancillary assets and complementary technologies. The open system nature

of Internet has encouraged the vendors, suppliers, developers and other participants in the

value chain of Internet banking services, to contribute in the development and availability

of a more reliable, secure, robust and economical infrastructure and network to the

banking industry. All banks in our study consider that there is a limited choice of

available service providers, vendors and consultants that can be trusted for acquiring

secure and reliable services. However, this limited choice is not considered to be of too

much of a problem for them. The banks offering transactional services are using the

services of VeriSign for security certification. They expressed their confidence and trust

in the online secure services of VeriSign as a digital certifying authority.

UBL seems to be comfortable with the availability of intermediate service providers such

as security certifying service provider, technology vendors, solution providers and

consultants. UBL argues that the relative quantity and size of these companies is thin but

otherwise their capability is alright. “You see the technology and all the necessary

ingredients were available worldwide ten years ago and now these are available in the

country as well. You know TPS is the leading switch provider in the country which has

been here since long. Software technology, Internet had already evolved, so all the

ingredients were available and it only requires the bank to utilize and assemble all

available ingredients into a banking product”.

Meezan bank also uses VeriSign as an intermediary security certifying authority. They

expressed concern on the stability of local vendors and software houses as they are

relatively quite small in size in terms of financial and human resources. This situation

creates problems in the selection of a vendor for them, as foreign vendors are expensive

and with local vendors there is a risk that the company may not be there long enough to

provide maintenance services in future. They also expressed, “there are vendors out there

but not all of them are good, some of the good ones are very expensive and cannot be

afforded. So there is a shortage of good and nominally priced vendors out there. But

there is not exactly a shortage of people who can get the job done, I mean you can call

IBM to do it, but obviously that is beyond our need and there is no reason to spend so

much".

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ABN AMRO considers that all technology ingredients and expertise exist in the

international as well as the local market. They are relatively few in number but it is

always like this with any of the other category of high end or specialized applications.

6.6.2 Inhibiting Factors

6.6.2.1. Awareness of Attributes of Innovation

Security and complexity are the two attributes of Internet that are classified under

inhibitors

Security Risk

The risk factor has a dual influence on the banks, enabling as well as inhibiting. It is

being discussed under inhibiting factors because of the inherent meaning associated with

risk and security. It is enabling as the perceptions, particularly of the banks that have

adopted, was that the risk associated with using Internet for transactional purposes is

manageable. The bankers termed Internet banking, in comparison to traditional branch

banking, prone to higher business and operational risks for the organization. The use of

Internet as a transactional delivery channel is relatively a new phenomenon and

introduction of any innovation is prone to more risks. Internet was considered as

relatively an insecure delivery channel by all the cases studied. The risk was associated

with the security attribute of Internet and the interviewees mentioned that opening up of

internal computer systems for access from outside increased the overall business and

operational risks for the bank. UBL observes, “all remote electronic delivery channels

are prone to security issues that increase the risk to the system and to the business--- and

certainly transacting over Internet carries more risk and it is very important to have the

mechanisms and procedures in place to mitigate such risks to the business”. UBL’s IT

team member made an interesting observation that it is more challenging to make the

customers feel secure and satisfied about the privacy and security of their data and

transactions, than to actually keep the system secure. Therefore one of the greatest

challenges for the bank is to offer a service that is easy to use and is perceived secure by

the customers as well.

The teams implementing Internet banking in UBL and Meezan bank were fully confident

that their banks had adopted a multi layered security strategy based on the best electronic

banking security standards and practices, to ensure the security of their systems and

processes.

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One of the interviewee at Meezan bank observed, “The risk of a security breach is more

at the customers interface. Technological solutions are available that can almost

eliminate the possibility of financial frauds through the Internet but enforcing such

security strategies would reduce the usability of the system and increase the risk of

loosing customers because of usability issues”. Meezan bank communicated that the

possibility of a breach of a system cannot be eliminated entirely and it’s a risk that has to

be lived with. It is a challenge for the IT department to keep that risk from not activating.

ABN AMRO attributes the breach of security or inadequate readiness of the organization

with regards to security of its systems, as a major inhibitor in the adoption of Internet

banking. Their vice president mentions, "The biggest concern of Internet banking is the

risk in terms of consumer's informational security. We want to be sure. See once you go

for Internet banking you actually are opening up your entire network and that is very

risky. You need to have a technological infrastructure and base in order to meet that

challenge and that is why banks are a little bit conservative in launching Internet

banking. Internet poses a very special set of risks. You are open to the world and all kind

of people are out there whose only business is to keep trying to break the security of

systems. So you need to be very very careful about what you do.”

Complexity

The teams involved in the implementation pointed out many difficulties when enquired

about the issues faced by them during project implementation. A few common problems

pointed out by them are; difficulty in freezing the scope of the project, difficulty in

gathering requirements, difficulty in accommodating continuous change requests in the

requirements, retention of qualified and skilled manpower, and difficulty in integration of

technological components. There was a mixed response on the availability and existence

of skill set and competencies to handle these complexities; however, in all the cases

studied, the management looking after the business aspect was satisfied with the available

skill set and competencies to implement Internet banking.

UBL had gone for in-house development and implementation of the project. They took

the services of external consultants for the designing of their front interface. UBL being

an early Adopter of the technology had to additionally face the steep learning curve, as at

that time no specific knowledge and training on product development was available in the

market. UBL’s Head of e-Commerce considered the availability of skill set and

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competencies as an issue of concern for the bank but not too serious an issue as the bank

has enough financial resource to hire specialists having relevant skill set and

competencies. However, head of the IT department considered it as too serious issue,

especially the high turnover rate of employees, as it seriously inhibits the project

progress.

Meezan bank considered that their core competency was not in developing IT solutions

and therefore, outsourcing the work was seen by the bank as a more suitable business

option.

The Project Manager of Avenza solutions (the company developing Internet banking

systems for Meezan bank) observed from the developer's perspective that Internet

technologies are quite complex and there a number of issues and challenges that are faced

in the integration of these technologies. As he explained, “banks have multiple host

systems needing to be integrated with our system for which we have to implement their

protocols. So that is a challenge we have four systems we need to integrate with four

different systems and all are talking in different ways. Incorporating right security

techniques and at appropriate level and stage is another … then there are problems

arising out of Network limitations or failures for instance host problems, controller

problems”.

ABN AMRO also operates on the outsourcing model for its Informational website and

considers the outsourcing strategy to be more suitable for the banks business model.

6.6.2.3 Access Technology and Infrastructure

All interviewees, while acknowledging the developments and growth in the ICT

infrastructure in the country, desired and wished for a much better Internet service quality

and access. They complained that relatively low bandwidth availability, low Internet

penetration, low country wide network capacity put a lot of constraints in offering and

expanding Internet banking service.

UBL mentioned that low Internet connectivity, speed, and access bandwidth, limit their

capability to offer services that require a high bandwidth. Moreover they consider that

the network support is not enough and requires considerable up-gradation, not only to

support existing services but also for the future multimedia based net banking service.

They have made special design provisions to keep the architecture of their site less heavy

so that the bandwidth is not choked. However, if someone uses relatively cheap rate

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access services then problems do occur in accessing the site. UBL considers the Internet

penetration rate as too low in the country which it attributes to lack of awareness of IT

and low literacy rate in the country. It also considers that the cost of bandwidth is still on

the higher side in the country and that the advantage of low international bandwidth cost

has not been fully passed to the customer.

Meezan bank observes that Internet access is non existent in the rural areas of Pakistan

but it is not an issue for their bank as their target customers are middle and upper middle

class individuals, residing in the urban areas of the country. Meezan bank has all of its

branch network online. This makes them heavily reliant on the back bone network

connectivity which, according to them, is getting better but is still not up to a mark of

satisfaction for the bank. They consider that the availability of broad band DSL

connection is the solution to the access issue but it is still not widely used by their

customers. The customers, who use fixed telephone lines and modems to connect, face

problems because of noise in the telephone cables. The bank considers the country

network infrastructure to be unreliable. The bank has to face downtime in services

because of regular interruptions or failures in the country's backbone connectivity and

access network. Network failures or latency delays lead to several problems for the banks.

Sometimes the problem becomes too serious when connectivity is lost while a transaction

is under process and not yet completed. These unfinished transactions at times are not

reversed in the database, which creates problems for the bank and the customers.

Most of the customers connect through dial up modem connections. The bank considers

that the access speed is low and frequent connection break-ups are faced by the

customers. The breaking of connections during the process of funds transfer may

sometimes cause issues in reversing incomplete transactions. One of the interviewees

argued “I think DSL might be much better. For people who are working through DSL,

they might have good facility. But upto now DSL users are not enough in the country as

perhaps it’s still expensive for the customers”.

ABN AMRO has significant reservations on the availability of ICT infrastructure and

provision of related services in the country and mentions that banks need to look at all the

aspects of existing availability of services, prior to starting a service. Their Vice Presided

emphasized this by asking a question and then explaining it himself. “Do you think this

country has infrastructure to support these projects and services? For instance, I have a

call centre running. In the call centre I need a large bandwidth. There are hundreds of

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calls for the bank…there are different lines. In case of a disaster I need to move from this

building. What is the procedure to move the network? If someone calls on our UAN, how

will that call be transferred to the new premises? How long do you think the service

provider, PTCL, would take to shift the UAN to the other premises?”.

6.6.2.3 Market and Society Readiness

Consumer Readiness

At the country level the bankers perceive that consumer readiness and awareness for the

Internet is very low and this is a barrier for initial adoption and subsequent moving on to

higher levels of adoption or in initiating more sophisticated applications of Internet

banking.

UBL observes that Internet banking in Pakistan is at a stage when it’s the time for

creating awareness. UBL considers that awareness comes with education about a

particular service. They consider that education is something that comes naturally by

usage, by word of mouth, by people observing other people using it. And usage can come

by availability of a service with decent bandwidth. They mentioned that readiness and

awareness can be improved by providing Internet connections of sufficient bandwidth at

schools, colleges, homes and work places.

The bank also listed a number of issues that are inhibiting the readiness for Internet

banking. They explained certain pre-requisites for carrying out Internet banking; First of

all to bank through Internet a person must be semi IT literate and capable of using the

Internet. Secondly he must have some Internet enabled computing device and lastly he

must have Internet connectivity that is served through a good Internet service provider.

And most importantly he must not be estranging to electronic banking culture. The bank

perceives that most of the customers prefer to transact through cash rather than the

documented electronic banking channels because of several cultural and societal reasons.

Meezan Bank also endorses the view that readiness and awareness about the Internet at

the country level is low. The younger generation living in urban areas is never the less

ready to adopt Internet but their usage is also at a basic level. Their manager ADC argues,

“awareness is increasing but the customer has some fears some of which are real and

some are ..... For instance customers have security concerns like that of fake websites,

spoofing, password protection and other security breach possibilities”.

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ABN AMRO serves the needs of a specific segment of the market. Their target customer

base is the affluent class of the society. The bank perceives that consumer readiness does

not exist at a larger scale, and that their customers rather value the personalized services

delivered to them though an element of human interface.

Demand and/or Competitive pressure

The cases studied consider that as the readiness and awareness is quite low, therefore at

present there is no real demand of Internet in the banking sector. The service has been

started by the Adopter banks in anticipation of the future expected growth and demand. A

perception among the Adopter banks was that the demand for Internet banking services

may grow in future as the customers’ needs are evolving and continuously changing with

the ongoing developments in technology and improvements in the capacity and access to

use Internet services.

UBL offered the service on realizing the need of expatriate Pakistanis who were well

aware of Internet banking. In the context of Pakistan, UBL foresees a future potential

market and considers that at this moment the bank is more involved in pushing the

technology to increase the number of customers.

UBL and Meezan bank perceive that with the increase in awareness, the demand will

grow. These banks consider that within their customer base they have a sizable segment

of customers who can be considered as right potential customers.

ABN AMRO exclaim and enquires where are the customers for this service?. They

consider that the demand will increase when other e-Commerce activities start to take

place on the Internet in Pakistan. At present there are hardly any merchant accounts

which are an essential ingredient of e-Commerce. They consider that the demand may be

present for small ticket payments or bill payments and that, compared to the banks, the

mobile phone companies are better placed to extend such services as they can afford to

charge small amounts.

All three cases studied confirmed that the market is at the stage of technology push.

Which is to suggest that banks are rolling these services not based on the existing demand

in market but rather it’s a time of creating awareness in potential customers? There is not

much competition in the supply side as well but the two banks that have started Internet

banking services hope to gain competitive advantage by being placed amongst the early

adopters in the market.

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6.6.3 Situational Factors

6.6.3.1 Resources

All the interviewees in the these banks pointed out that the investment required on

introducing Internet banking services is not exorbitant for the bank and thus there is no

question of lack of financial resources as a constraint for the adoption of Internet banking.

Similarly the banks expressed their reservations on supply side of qualified and skilled

manpower in the market. However, at the same time the banks expressed that scarcity of

competent and qualified manpower is not limiting issue for the bank as banks can afford

to attract and hire rightly qualified and skilled person by offering him competitive market

based salaries.

The UBL's management perceived that their decision to adopt Internet banking is an

outcome of a rational decision making process. They explained that while cost of product

also forms one of the consideration in any rational decision making process, but for a

bank as large as UBL in all aspects of resources, it will always find itself willing and

capable to make investments for strategic gains. UBL considers that under the existing

market dynamics retaining a qualified person is more of an issue rather then that of

finding and hiring a suitably qualified workforce. The reason cited for this was that the

bank can attract some good resource person on good salary but afterwards the career

progress path is similar for all cadres. The demand of experienced and qualified IT

professionals in the market is high and hence the staff turnover ratio for qualified IT

professionals is relatively on higher side.

Meezan bank's interviewees also expressed similar views and elaborated that “the

management preferred to have a cost effective solution but that does not mean that a

higher cost would have put any unbearable burden on the bank's balance sheet”. Meezan

bank has no complaint regarding availability and retaining of technically skilled

manpower. The turnover rate of employees in the IT division was also not high. One

obvious reason for this is that the bank has a strategic partnership with its IT vendors for

e-banking developments including Internet banking. Their Partner IT vendor for Internet

banking however considered that retention of qualified manpower is big challenge for

their organization.

ABN AMRO views that opening a new delivery channel is a business decision which is

taken after considering its need and expected reward. If the management foresees higher

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rewards in introducing a certain channel then provision of resources including financial

resources would not be an issue. ABN AMRO considers that highly skilled and

specialized IT related manpower is required to implement and manage the Internet

banking operations. According to them ordinarily untrained but qualified manpower is

available rather easily but finding and retaining specialists in their fields is rather difficult

as such professionals are in high demand in middle east and other economies of the globe.

6.6.3.2 Adoption Strategy

The cases studied consider Internet banking to be suitable as an additional delivery channel

and take it as part of their bank’s strategy of serving their customers through multiple

channels. They consider opening of a completely virtual bank or transformation of their

banks’ business model to an entirely virtual banking model, as a highly unlikely situation.

The timing of adoption is a critical distinguishing factor in the adoption strategy of the

cases and can be considered as one of the reasons for the existence of difference in the

level of adoption amongst the cases.

UBL's attainment of higher level of adoption is an outcome of the early timing of its

decision for initial adoption and it has also benefited by adopting an in-house

implementation strategy. It is logical to expect that the bank that had an earlier exposure

to web technologies would be ahead in its learning curve. This expectation seems to be

correct when it is seen that UBL leads in the extent or level of adoption. It can be argued

that the extended experience of using and serving through the Internet channel, coupled

with it’s in- house development capability, enabled the bank to develop knowledge and

skills to offer more customizable and sophisticated products for its customers.

Meezan bank works with its vendors as strategic partners to their e-banking initiatives.

They consider that the strategy of outsourcing allows them to focus more on their core

business without distracting on the jobs which are core specialties of their partners.

Meezan bank adopted Internet banking, a couple of years after UBL and some other

banks in the industry, who had already offered Internet banking services (e.g. ABL

studied in the pilot study). Thus entering the market after some early Adopters had

provided an opportunity to match or even exceed the level of adoption and the services

offered by their competitors. However, their existing level of adoption shows that they do

not perceive the readiness conditions to be conducive enough for their bank to jump start

from a higher level of adoption.

ABN AMRO has not finalized its adoption strategy for Internet banking.

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6.6.3.3 Organizational Structure

The cases studied represent large, medium, and small size banks in terms of number of

branches or geographical coverage or presence. The large and medium size has adopted

Internet banking. The reason for the smaller bank to not adopt cannot be attributed to size

as foreign banks usually have no resource constraints in expanding their branch network.

And the bank itself did not attribute their decision of not adoption on scarcity of

resources. The organizational structure in these banks is formal and based on the product

lines. In all banks the responsibility or ownership of Internet banking is with the

department concerning business function of alternate delivery channels (ADCs). The

positioning of ADCs department in the organizational hierarchical structure of each of the

banks is not the same. A relatively higher positioning, in the organizational hierarchical

structure, reflects the importance attached to a certain department by its top management.

In UBL there is an independent e-Commerce department responsible for all electronic

delivery channels, including Internet banking. The Head of the e-Commerce department

reports directly to the president of the bank. Within this department, the Internet banking

project is handled by a team of six members, led by the head of e-Commerce department.

With regards to its Internet banking project, one factor, which has greatly contributed to

the bank’s attaining a higher level of adoption so far, has been the relative positioning of

the e-Commerce department within the organization’s hierarchy, which gives it a power

to requisite all necessary resources from allied departments.

In Meezan bank the ADC was under the operations department and not directly under the

chief executive of the bank.

The situation in ABN AMRO was also similar as the head of ADC was under the

consumer banking department.

6.6.3.4 Policy Readiness

All banks in general perceive that the legal and regulatory framework concerning

electronic payments are not well developed and need further structuring and enactment in

compliance with the evolving international and local regulatory standards and practices.

On an overall basis, the banks expressed their satisfaction with the ongoing efforts of the

policy making institutions for promotion and implementation of a robust legal

infrastructure catering to the needs of Internet banking and other electronic banking

services. The role of SBP has been termed as positive, progressive and evolving in the

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right direction with signs of consistency in policy and regulatory affairs. They did express

reservations on the existing legal framework and desired of incorporating further

reinforcement of these laws with measures to build customer awareness, trust, confidence

and sense of security and protection. The bankers perceive that at this stage of growth of

industry such deficiencies are not of immediate concern as with the evolution and

diffusion of services the missing elements in policy matters would be addressed to

considerable extent.

UBL being one of the pioneers of Internet banking, appreciated the efforts of SBP in

bringing about the necessary changes at the policy level in these words “we should see

whether the regulators are trying to avoid changes or whether they are trying to do their

best in available circumstances. I think it is the latter case”. UBL while acknowledging

the role of Telecommunication Regulatory Authority (PTA) observed that their

concentration is more on mobile telecom sector than on addressing the issues of Internet

in the country.

The management of Meezan bank had a word of praise praises the efforts of the

legislators and banking regulators in their efforts of enacting policies and laws on

electronic transactions, which upon implementation, according to them, would build more

trust of the customers in electronic service. They perceive the attitude of policy

institutions as supportive and encouraging towards the initiatives of the industry to adopt

technology and modern banking practices. Meezan bank wanted to see the

implementation of real time gross settlement systems by the State Bank as its absence

creates issues of immediate settlement of transactions and sometimes take considerable

time and effort to resolve or rectify. Moreover, in their opinion the charges levied on the

arrangement of issuing trust and security certification are on higher side and hence needs

revision.

ABN AMRO informed that the working groups formulated by SBP are in the process of

formulating cyber laws that are needed to develop the security and trust in e-banking

services. According to them experts are working on these laws but as very few people

exist who are trained and have genuine expertise in drafting these laws, therefore, it is

taking a little longer time. Similarly they feel that it will take a while before things like

accepting electronic signature, accepting PIN as a signature and electronic documents as a

legally acceptable record, become a reality.

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6.7 Discussion on the Initial Propositions Generated in the Pilot Field

Study.

In the pilot field study, chapter 4, several propositions were identified for consideration

and study through the main case studies. The answers to many of these propositions are

apparent from the analysis already presented in this chapter. However, as these have not

been addressed specifically, so these are briefly discussed in this section, in the light of

the data collected in the case studies.

1. Top management support, although vital for Internet banking adoption, does not

necessarily lead to adoption if the external e-Readiness conditions are perceived as less

conducive.

The evidence for this proposition is more prominent in the case of ABN AMRO, whose

country head leads the task force set up at the highest political level of the country, to

steer the efforts for e-Commerce uptake in Pakistan. However, the bank perceives that the

market, society and infrastructure are yet not developed to a level, to justify the business

case of adoption of Internet banking.

Similarly, UBL and Meezan bank, although having the necessary Organizational

Readiness to move on to the next level of adoption, perceive many of the factors shaping

the external e-Readiness dimension such as consumer readiness, demand, access and

infrastructure related factors as not conducive enough, hence affecting their decision to

move on to the next level of adoption

2. Despite the need to commit substantial investments for developing infrastructure and

capacity, to provide a platform to support Internet banking applications, the cost of

introducing and strengthening of Internet banking is not seen as a major inhibitor

The study of three banks revealed that the decision to introduce Internet banking is a

business decision that is considered on the basis of assessments including cost benefit

assessment. Thus, if a bank expects more benefits in adopting it, then arranging finances

for a profitable proposition is not difficult for a banking organization.

The findings of all three case studies support the proposition mentioned above. UBL

considers that the cost of introducing and strengthening Internet banking is not at all

prohibitive. Meezan bank did indicate its preference for acquiring the solution from a

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local firm rather than from an international firm, as it anticipated substantial price

difference in the two solutions with the local one being a lot cheaper.

ABN AMRO while not having taken a formal decision of adoption, does not see the

financial cost of introducing Internet banking, as a decisive factor.

3. Legacy systems are a common issue that creates problems of systems integration.

The requirement of integrating systems operating on multiple technological platforms was

perceived to increase the complexity. However, the issues of legacy systems were not

considered as too challenging, because of the development of middle ware interfaces that

are effective in handling Internet banking applications, with the other banking channels.

4. Awareness of attributes of innovation profoundly influences the adoption of Internet

banking.

All three cases analyzed support this proposition. Some attributes of innovation were

found to motivate or drive the banks for adoption while some of the other attributes were

observed to inhibit the adoption of Internet banking. The Adopter banks and the non

Adopter banks anticipate that Internet banking adoption offers several relative advantages

and the changes arising as a result of integrating Internet are compatible to the values and

work procedures.

All three cases studied perceive Internet to be inherently insecure and prone to risks. UBL

and Meezan bank perceive this risk as challenging but manageable, whereas ABN AMRO

considers it too high and not warranted to be taken in the existing state of environmental

conditions.

5. Policy Readiness, although identified as important, is not seen at this stage of market

as a major inhibitor in the adoption of Internet banking.

The analysis of the cases carried out supports this proposition and the bankers considered

that since the industry is at initial stages of adoption so it is assumed that existing

deficiencies in the legislation and laws would be plugged in due course of time . The

bankers expressed their confidence to the positive role and ongoing efforts of the policy

making bodies of the county in promoting an enabling environment which also includes

formulation and enactment of detailed legal framework for facilitating electronic banking.

The banks perceived that existing laws and regulations for enabling e-Commerce

activities in the country do not provide enough coverage or mechanisms to avoid or

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resolve issues of trust, security, and some other unwarranted legal scenarios or issues that

may be specific to e-banking.

6. The support for implementing Internet banking, in the form of availability of skilled

human resource, vendors, consultants, technology solution providers, is not fully

developed in the country and is affecting the adoption of Internet banking.

All three cases studied provided some evidence of relative scarcity of skilled human

resource, qualified vendors, consultants, and technology providers in the country.

However, the scarcity of these supporting factors was not perceived to affect their

decision to adopt. On the contrary, banks considered that the local vendor market is

developing and a few of the local firms have already developed to a level where they are

already catering to the needs of the regional banking industry of Middle East as well.

Further the banks do not see the above proposition of much importance as they perceive

that for a bank obtaining the above mentioned resources from international market is

easily possible. UBL having implemented the solution in-house now have enough

expertise and knowledge. Meezan bank, however, perceive that scarcity of the available

support is not influencing their development strategies.

6.8 Understanding this research in the light of IS Theories and

Literature

In this section, the findings of this chapter are further examined and compared with the

extant literature and organizational theories that are commonly used in the field of IS.

Undertaking this exercise is useful since it provides analytical validation of results with

existing generally accepted theories that point to the existence of similar mechanisms in

related knowledge streams. Moreover, it also leads to the application and extension of

already well established theory(ies) into a new research context.

Diffusion of Innovation Theory

Diffusion of Innovation (DOI) theory [44] is the original work of Roger Clarke in

sociology knowledge domain. Subsequently, researchers belonging to wide range of

knowledge disciplines applied this theory for understanding the adoption of

innovation/technology in different social systems including organizations. According to

Rogers (1995), “Diffusion is the process by which an innovation is communicated

through certain channels over time among the members of a social system”. This theory

considers that adoption by multiple members of a social system over a period of time

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leads to diffusion. The difference in adoption and diffusion related studies thus lies in its

focus; in adoption related research the focus is on individual entity whereas in diffusion

related studies the focus is across the population of Adopters. Each adopting entity

exhibits different degrees of propensity to adopt innovations. However, with increase in

diffusion over a period of time, it is possible to identify and segregate the Adopters on the

basis of continuum of timings of their adoption (early Adopters to late Adopters). Each

segregated unit typically exhibits some unique characteristics on the basis of which the

units are distinguishable from each other. Moreover, the theory observes that the likely

pace of adoption by an entity(ies) is impacted by the perceived attributes of an

innovation. Five attributes of innovation namely (1) relative advantage, (2) compatibility,

(3) complexity,(4) trialability, and (5) observability. were identified by the original

theory.

Adaptation of DOI theory in Information Systems Research

IS researchers have applied and tested the DOI theory on different types of IS

innovations [43, 61, 130, 198]. Moore and Benbasat [88] in IS research context found out

that eight factors instead of five factors as originally identified by Rogers are identifiable

as impacting the adoption of technological innovations. However, in subsequent synthesis

of IS literature only three factors namely compatibility, complexity, and relative

advantage were consistently observed to be of importance in influencing the adoption of

innovations [186]. Figure 6.2 shows the general adapted model of diffusion of innovation

theory in IS context.

Figure 6.2: Adaptation of Diffusion of Innovation Theory in IS Context

Complexity

IS Diffusion/ IS Adoption

Compatibility

Relative Advantage

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Institutional Theory

The adoption of innovations is seen as initiatives to bring strategic organizational change.

An important message that comes out of ICT enabled change studies is that organizations

influence the environment and at the same time they are influenced by the environment in

which they conduct business. Institutional theory mainly sees much greater influencing

role of environment, rather than that of organization, in shaping or dictating

organizational structure and actions. The message that comes out from institutional theory

perspective is that organizational actions and decision making are not only dependent on

the degree and type of resources available with the organization but also more so on the

symbolic and cultural attributes that create institutional pressures on the organization to

behave in conformance to the socially acceptable norms and ways of conducting business

in a particular business sector.

DiMaggio & Powell [304] have identified three mechanism of spreading institutional

pressures. And these are 1) the mimetic pressures, 2) the coercive pressures, and 3) the

normative pressures.

An example of mimetic pressure is the adoption of innovation in response to seeing the

business competitors doing the same. Coercive pressures are suggestive of the mandatory

compliance of the organization to the rules, policies, and instructions from regulatory and

other government agencies. Normative pressure develops as a result of working in close

professional collaboration with one’s stakeholders in a networked environment in which

ideas, suggestions, promotional or awareness campaigns creates a motivational

impression or influence to act or perform in a certain manner.

Translating institutional theory to Internet banking adoption would imply as if adoption

by banking organizations is driven less by rational goals and more because of the role of

change agents residing in environment outside of the organization. And the reason of

adoption of Internet banking can be tied with the symbolic behavior of organization under

the coercive, mimitec , or normative pressures for attainment of status of legitimacy or

acceptability in the overall banking sector.

TOE Framework

Technology-Environment-Organization (TOE) framework of Tornatzky and Fleischer

[45] has a sound theoretical basis and consistent empirical evidence and has been applied

on various types of IS innovations like EDI, e-Commerce and e-Business[53, 147, 148,

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305]. Researchers have applied the TOE framework to evaluate and explore the effect of

these three aspects of organizations on the adoption and implementation of IS

innovations. Organizational context describes the structural characteristics of the firm.

Technological context refers to the internal as well as external technologies and

infrastructure relevant to the organization. Environmental context encompasses the

settings in which an organization conducts its business.

Comparison of this work with Literature

The findings of this study correlate well with the literature. Table 6.2 shows some of the

related work in ICT/IT adoption that have used the above mentioned theory(ies).. For this

study, DOI and Institutional theories as well as TOE framework are relevant for

developing a better understanding on the phenomena of interest. The chapter 2, literature

review section mentions some additional research work as well where these theories have

been used to explore or explain the phenomena of adoption in respective contexts.

The findings of this study largely conforms with the DOI theory and Institutional theory

also illuminates some of its findings. This study found relative advantage, compatibility,

and technological complexity as important factors influencing the adoption of Internet

banking. The technological compatibility and perceived relative advantage was observed

for its positive influence on adoption. Whereas, Internet banking was confirmed for its

perception of being technologically complex, however, the banks perceived of having

enough resources and expertise to handle the issue of technological complexity.

The following quote of a bank clearly illustrates the affect of mimetic pressure on the

adoption of Internet banking in context of banks in Pakistan. The statement quoted is of

Chief Operating officer of Meezan bank who was enquired whether adoption of Internet

banking by the bank is influenced by the initiation of this service by some of the other

banks in the Industry. On this the COO observed:

"there is not necessarily a bandwagon attitude but a market demand in the sense if one

bank does it, and another bank does it, an another and so on and so forth, you can say we

are jumping the bandwagon but more importantly we are just giving our customers

whatever the other bank is giving them and if we don’t do that with banking becoming a

very competitive industry……..”.

In the case studies, the existence of Institutional normatic pressure is observable to the

extent of promotion and awareness campaigns of policy making and regulating bodies.

No indication of any sort of Institutional coercive pressure was mentioned by any of the

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banks, however one of the vendor organization did mention of some sort of deadline date

given by the regulating bank, however, it was not confirmed by the banks

From the above comparison of literature and theory it can be seen that the little work that

exists have either applied the individual theory or have partly incorporated DOI theory

and institutional theory into the holistic approach of the TOE framework. However, as

per researcher knowledge, no other work has explored the adoption of Internet banking

innovation by using TOE framework and by incorporating the constructs of DOI and

Institutional theory. Also the other available studies on other types of innovations have

not been carried using an as holistic approach as has been adopted in this research.. And

importantly, the adaptation of the TOE framework to explore adoption of Internet

banking using the lens of e-Readiness in context of developing country Pakistan is a

unique contribution to sophisticate the existing knowledge in its focused field domain.

The employment of an e-Readiness perspective to understand the relationships amongst

the factors influencing Internet banking adoption and between the categories of

Organizational Readiness, Technological Readiness, and Environmental Readiness, is an

addition to the literature. Internet banking adoption has not been explored from the lens of

e-Readiness in this manner.

Table 6.2: Comparison with IS theories and Literature

Type of ICT Adoption

Main Theory /Framework

Methods Data, and context

Author(s)

Grid Technology

Institutional Survey North America Wolf Martin, 2010 [306]

Internet based IS

DOI Survey Organizations in Korea

Lee et al, 2007[130]

Open Source OS

TOE Case Studies

organizations using open

standards OS

Jason and Joel, 2006[305]

e-business TOE Survey European Countries

Zhu et al. 2003[53]

EDI TOE Survey Organizations in Hong Kong

Kuan & Chau, 2001 [147]

Internet DOI and Institutional

Case studies

SME’s in Newzealand

Mehrtens, J., et al. 2001,[110]

EDI DOI and Institutional

Case studies

SME’s in British Columbia

Iacovou et al. 1995 [83]

MRP DOI Survey organizations in USA

(Cooper and Zmud 1990) [198]

IT DOI Survey Organizations Thong & Yap [141]

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6.9 Conclusion and Summary

This chapter presented an analysis and interpretation of the data collected in case studies.

The banking organizations were grouped into two categories of Adopters and Planners.

The banks offering Internet banking services were considered as Adopters. The other case

was considered as a Planner as it was contemplating to adopt and had not taken a formal

decision. First, Adopter and Planner banks were assessed for their existing level of

adoption and use of Internet for offering banking products and services to their customers.

Based on the perceptions of these banks about the readiness of contextual conditions and

considering the dynamic nature of the adoption process, a projection of the level of

adoption likely to be attained by these banks in future, was identified.

Moreover, a within category and cross category analysis was also performed. The results

reflect that the Planner and adopter banks differ in their perception on the degree of

Organizational, Technological and Environmental Readiness. A within category analysis

found that both of the Adopter category banks are affected more from the Environmental

and external Technological Readiness as compared to the internal Technological and

Organizational Readiness. Thus this study interprets that the decision of these banks to

move on to next higher levels of adoption is related more with the perceived external e-

Readiness dimension. A cross category comparison of the planner and Adopter banks

shows that the Planner bank has more apprehensions regarding the conduciveness of the

factors that shape its ability to pursue Internet banking. The planner bank perceives that in

existing contextual conditions the adoption of Internet banking entails much higher risk in

comparison to the envisaged benefits.

An analysis of data led to the identification of three groups of factors according to their

perceived influence or role in the adoption of Internet banking. Analysis and

classification of each of the factors arranged according to the defined grouping of

motivational factors, inhibiting factors and situational factors was conducted and

discussed. Motivating factors included factors whose role was found conducive or

favourable for the adoption of Internet banking. Inhibiting factors included those factors

whose role in the adoption was observed as retarding. Situational factors included the

factors whose role was either perceived as non critical for adoption or they were

considered to provide an explanation for the difference in the relative level of adoption in

the individual case settings.

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The findings show that the major difference in the behaviour between the banks that have

adopted Internet banking and the one that has not adopted, is the perception of realization

of business benefits. The major contributing factor in this perception was the assessment

of the security risk factor, inferior infrastructure, societal, and market factors which were

perceived as too limiting and according to the Planner bank were still not within

acceptable business risk limits. The factor wise analysis found that most of the factors

have the same direction of influence, in all the individual cases studied. These results are

not surprising considering the nature and the phenomena under study belonging to a

similar industry. The analysis of the situational group of factors shows that, some of the

factors like financial resources, policy and legal regulations, which were found to be

significant in literature survey, were observed as less significant in context of this

particular study. Finally, the analysis also provided an explanation to the contribution of

factors, in context of a specific case where higher level of adoption had been achieved.

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Chapter 7. Analysis of Online Survey

7.1. Introduction

This chapter presents and describes the results of an online survey conducted at the last

stage of the research study to investigate the influence of perceived e-Readiness (internal

and external) on the adoption of Internet banking by banking organizations in Pakistan.

This it does by exploring the perceptions of authorized IT and e-banking officials of

seventeen banking organizations on the four e-Readiness dimensions or factors namely

Organizational Readiness, Internal Technological Readiness, External Technological

Readiness and Environmental Readiness. This online survey also explored the reasons of

adoption of Internet banking and how far the banking organizations have been able to

integrate other related banking systems and services with their Internet banking channel.

The results of this survey are expected to reveal the perceptions of banks in Pakistan

about their contextual e-Readiness conditions and the manner in which these are affecting

the adoption of Internet banking by banking organizations in Pakistan.

This chapter unfolds in the following manner. Section 7.2 briefly outlines the research

process. Section 7.3 presents the data and results of discriminant and descriptive

statistical data analysis carried out using SPSS software. Section 7.4 contains detailed

discussion on the findings. Chapter summary is provided at the end.

7.2 Research Process

The research process has been elaborately outlined and discussed in chapter 3 under the

research design (see section 3.4.3) and other succeeding sections of the same chapter

(3.5.1 and 3.6). However, a brief outline of the same is presented to help in better

understanding of the data analysis presented in this chapter The figure 7.1 shows the

research process which broadly proceeded through these steps, each of which is listed

below.

I. Design of survey questionnaire

II. Hosting of survey questionnaire Online on Comsats IIT official Website.

III. Invitation to all population of listed banks for online filling of survey

IV. Online collection of data

V. Analysis of data

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Figure 7.1: Research process for the survey

7.3 Analysis of Data

Eighteen banking organizations provided the data for this analysis by filling online survey

questionnaire. These banking organizations were broadly categorized as Adopter and

Planner banks. Six of these eighteen banks were offering Internet banking at the time of

this survey and were placed in the Adopter category. The other twelve responding

banking organizations that had not adopted Internet banking were placed under Planner

category. One of the responding Planner category bank was ABN AMRO. Its data was

distinctly out of classification of Planner category. The preliminary discriminant analysis

E-Readiness Dimensions in accordance to this study

Development of Questionnaire

Hosting of Questionnaire on official CIIT website http://csr.comsats.edu.pk/

Requests (through email, FAX, and Telephone) to fill online questionnaire

Online Data Collection (participation of 18 banks )

Analysis of Data

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test run on SPSS software identified the case of this bank as a misclassification in Planner

category. The detailed case study on ABN AMRO bank in chapter five and six had also

identified it to be a special odd case. Hence, observations received from eleven banks in

the Planner category and six banks in the Adopter category were considered for further

statistical analysis. Before presenting the results of statistical analysis, we first present the

existing status of Adopter banks in their success in integration of Internet with other value

adding web based Information Systems.

7.3.1 Integration of Value Adding IS with Internet Banking Channel.

The banks having adopted Internet banking were enquired about their existing status in

terms of integration of various other value adding IS with Internet banking channel of

their bank. Nine IS were identified in the questionnaire and the respondents were asked to

identify their existing situation from the given four (1 to 4) choices. Respondents were

also provided the option of adding any other IS system in addition to the already included

nine IS. A. The choice of 1 meant that the system is not in use at this time, choice of 2

meant that the system is not currently integrated and the bank has no plan of integrating it

with Internet banking channel in next 12 months, choice of 3 meant that the system is not

currently integrated but is planned to be integrated during the next 12 months, and 4 being

that the system is fully integrated with the web already. The figure 7.2 shows the relative

success of the six Adopter banks in terms of integration of other value adding IS with

Internet banking channel. The figure 7.2 shows that Saudi-Pak bank ranks first as they

have successfully integrated six other value adding IS with their Internet banking channel.

Meezan bank ranks second by successfully integrating five other value adding IS with

Internet banking channel. ABL and MCB share the third rank, however, the systems

integrated by them with Internet banking channel are not exactly identical. HBL and

ACBL have yet to reach a stage of successful integration of any of the nine systems with

their Internet banking channel. However, they have plans to integrate most of these

systems in next twelve months. Table 7.1 shows detailed existing status of all banks in

Adopter category. The Table 7.1 presents data on whether the bank is using the system in

offline mode . And if they are using it in offline mode then whether the bank has any plan

of integrating it in next twelve months or not. The last column of Table 7.1 shows the

names of the banks having already integrated the mentioned systems with the web.

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Figure 7.2: Success in Integration of other value adding IS with Internet banking

7.3.2 Relative Advantage of Adoption of Internet Banking

The banks that have adopted Internet banking were also asked to check or identify the

reasons or perceived anticipated advantages of adoption of Internet banking. Table 7.3

shows the list of benefits expected by each of these individual banks on adoption of

Internet banking. It can be seen from the table that HBL, ABL and ACBL expect to reap

all nine listed benefits from Internet banking. Saudi Pak bank checked eight out these

nine listed benefits or reasons for adoption. This bank does not expect that the adoption of

Internet banking will result in increased revenues for the bank. MCB and Meezan banks

checked on seven out of nine listed reasons for adoption. These two banks do not see

Internet banking as source of profit generation for their banks as in their opinion Internet

banking will neither reduce their banks operational costs and nor will it result in

increased revenues for the bank.

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Table 7.1 Integration of other value adding IS with Internet banking

Table 7.2 Perceived benefits of adoption of Internet banking

Perceived Benefits/ Relative Advantage HBL Meezan ABL ACBL

Saudi Pak MCB

Enhance ability to deal with customers to improve bank image

Yes Yes Yes Yes Yes Yes

To gain competitive advantages Yes Yes Yes Yes Yes Yes

To attain operational efficiency Yes Yes Yes Yes Yes Yes

To gain access to new market d

Yes Yes Yes Yes Yes Yes

To deal with customer demand Yes Yes Yes Yes Yes Yes

To retain customers Yes Yes Yes Yes Yes Yes

For customer convenience Yes Yes Yes Yes Yes Yes

To increase revenue Yes No Yes Yes No No

To reduce operational cost Yes No Yes Yes Yes No

Value Adding IS for Banks

LEVEL OF INTEGRATION WITH THE WEB

Not in use at this time

Not integrated and No Plans to Integrate in next 12 months

System is not currently integrated but is planned to be integrated during the next 12 months

System is fully Integrated with the Web already

Customer Relationship Management (CRM) - -

HBL, ABL, MCB, ACBL

Saudi Pak, Meezan

Bill Payment

HBL, ACBL ABL, MCB Saudi Pak, Meezan

ERP Meezan

HBL, ABL, MCB Saudi Pak, ACBL

Third Party Services (Purchasing Airline tickets etc)

HBL, ABL, MCB, ACBL, Meezan

Saudi Pak

Interactive Customer Service Support

MCB Meezan HBL, ABL, ACBL Saudi Pak

Real Time Financial Information

HBL, ACBL ABL, MCB, Saudi Pak, Meezan

Interbank Clearing House

MCB HBL, ACBL ABL, Meezan Saudi Pak

On-line Security Trading

ABL, MCB Saudi Pak

HBL, ACBL Meezan

Cell Phone Banking Meezan ABL HBL, ACBL MCB Saudi Pak

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7.3.3 Statistical Analysis

Statistical analysis was carried out on the collected data in two steps. In the first step, a

preliminary discriminant analysis determined which factors differentiated between

banking organizations that have adopted Internet banking (Adopters Category) and those

that have not adopted Internet banking (Planner Category). In order to obtain more

insights into the perceptions of IT and e-banking officials on the influence of contextual

conditions on the adoption of Internet banking, we compared the mean score of both the

Adopter and Planner banks by using Independent Sample T-test to identify the items

within each main factor on which the perceptions of the two category of banks

significantly differ from each other. This test is useful in suggesting possible areas where

the gap between perceived e-Readiness is wide enough between the Adopter and Planner

banks. The items identified as significant are also suggestive of critical areas of concern

on which these banking organizations and other stake holders need to pay more attention.

7.3.3.1 Discriminant Analysis

The discriminant analysis conducted using SPSS software showed major differences

between Adopter and Planner banks on adoption of Internet banking at the factor level.

The cases of all seventeen banks with their scaled responses on all items measuring the

four different factors were included. The dependent variable, adoption of Internet

banking, was a dichotomous variable measured by Adopters and Planners. A set of four

major independent factors, Organizational Readiness (OR), Internal Technological

Readiness (ITR), External Technological Readiness (ETR) and Environmental Readiness

(ER) in accordance with the research framework of this study were considered in this

survey. Each independent factor represented the average of their respective items.

Estimation of the Discriminant Model

Table 7.3 shows the category means, standard deviations, and the test for equality of the

category means of the factors respectively. It can be seen from the test for the equality of

category means (Table 7.3 ) that

Organizational Readiness (OR) and

Internal Technological Readiness (ITR)

Showed significant univariate differences between the two categories (p<=.05).

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Table 7.3 Analysis of Adopter and Planner Category Banks

Category means for Independent Variables

Category OR ITR ETR ER

Planners 2.98 3.30 3.27 2.87

Adopters 4.11 4.03 3.16 2.79

Standard Deviations Category Means for the Independent Variables

OR ITR ETR ER

Planners 1.02 0.73 0.99 0.34

Adopters 0.49 0.29 0.45 0.36

Test for the Equality of the Category Means

OR ITR ETR ER

Wilks' Lambda 0.70 0.74 1.00 0.99

F ratio 6.26 5.24 .07 0.21

Significance level 0.02 0.03 0.81 0.65

OR = Organizational Readiness ETR = External Technological Readiness ITR = Internal Technological Readiness ER = Environmental Readiness P <=.05, Significant factors are marked in bold font

In addition, the mean from the Adopter category is markedly higher than the mean from

the Planner category on the two identified significant factors of Organizational Readiness

and Internal Technological Readiness. This result indicates that the Adopter category, in

comparison to Planner category, perceive that internal contextual e-Readiness conditions

within their banking organizations are more on the higher state of satisfaction for these

banks. On the contrary the Planner category demonstrates a relatively lower state of

satisfaction on existing contextual e-Readiness conditions within their banks. The

standard deviation for the Planner category is larger than the Adopters indicating greater

dispersion among Planners than Adopters. This finding conforms well with studies on

other IT innovations [307] and intuitively, one can confer with this finding as one would

expect more variance among banking organizations that have not yet adopted Internet

banking from those banking organizations that have already adopted Internet banking.

The two main factors identified as significant discriminators reflect the Internal e-

Readiness dimension of banking organizations. Hence, these two factors are important

contributors in understanding the difference in perceived state of Internal e-Readiness of

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Adopter and Planner categories and its affect on the adoption of Internet banking in

context of banks in Pakistan. The other two factors namely External Technological

Readiness and Environmental Readiness, both of which reflect the external e-Readiness

dimension of banks, were not found as significant discriminator between the Adopter and

Planner categories.

7.3.3.2 Independent Sample T-test

The discriminant analysis described above helped us in identifying the main factors that

differentiate Adopter and Planner category of banks in context of adoption of Internet

banking. As we also wanted to know which specific items within each main factor

contributed in making this difference. Therefore, using SPSS software we carried

independent sample T tests for each individual item. This test is helpful in analyzing

whether Adopter and Planner banks differ in their perceptions on individual readiness

items. The difference in mean scores on individual items is also helpful in shedding more

light on the role of individual items in adoption of Internet banking and thereby enabling

us to put the results of discriminant analysis in a more meaningful manner. Table 7.4

shows the results of the independent sample T-tests across Adopters and Planner

category. The T test was carried on all items and the results of all items are discussed

below.

Table 7.4: Independent Sample T-tests across Adopters and Planners of Internet banking

(significant items are marked in bold font)

Item Description t df Sig.

(2-tailed) Mean

Difference

Organizational Readiness (OR) (Number of items 6)

OR1 Our bank is well aware of the Internet banking adoption by competitors

3.12 15 0.007 1.40

OR2 Most of bank employees are IT literate and have access to computers and Internet in office

0.67 13 0.948 0.03

OR3 Our bank is investing sufficiently in projects related to Internet banking and/or e-Commerce

4.16 15 0.001 1.86

OR4 Our bank has adequate business resources for adoption of Internet banking

2.48 15 0.026 1.18

OR5 In general there exists a clear vision on Internet banking/e-Commerce

2.58 15 0.021 1.34

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(2-tailed)

Mean Difference

OR6 In our bank the top/senior management

champions Internet banking adoption/ implementation

2.37 13 0.033 1.01

Internal Technological Readiness (ITR) (Number of items 5) ITR1 Our bank in general is aggressive in

experimenting with new technologies 1.75 10 0.111 0.63

ITR2 Our bank has sufficient experience with computer based network applications

1.53 13 0.150 0.71

ITR3 We have the necessary in-house technical, managerial and other skills to implement Internet banking

1.62 15 0.126 0.80

ITR4 Our bank has high bandwidth network connectivity to support applications requiring high bandwidth

1.59 14 0.134 0.78

ITR5 We have difficulty in bringing the changes required in the organization as a result of introducing Internet banking/e-Commerce services

2.13 15 0.05 0.86

External Technological Readiness (ETR) (Number of items 3) ETR1 The telecommunication infrastructure of

country is reliable and efficient -0.70 10 0.497 -0.46

ETR2 Secure electronic transaction (SET) or secure electronic banking environment services are easily available and affordable

-0.53 15 0.599 -0.25

ETR3 There exists efficient and affordable support from the local IT industry to adopt Internet banking

1.05 15 0.306 0.40

Environmental Readiness (ER) (Number of items 8) ER1 Customers have fear of security in doing

electronic banking transactions -0.56 15 0.582 -0.21

ER2 There is less awareness or IT awareness among customers

0.09 13 0.926 0.04

ER3 In general, customers have preference for traditional way of doing business

0.09 13 0.923 0.04

ER4 There is lack of trust of customer on electronic services

1.01 13 0.328 0.44

ER5 The legal environment is conducive to conduct business on the Internet

0.81 12 0.429 0.35

ER6 There are effective laws to protect consumer privacy in the country

-0.85 15 0.408 -0.33

ER7 Do you agree that Internet banking is a developed world trend not yet appropriate for our society

-1.02 10 0.331 -0.80

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(2-tailed)

Mean Difference

ER8 The government demonstrates strong

commitment to promote e-Commerce including Internet banking

-0.27 12 0.786 -0.121

7.4 Discussion

This study in previous chapters (chapter 2 and 4) has advanced the framework that

stipulates that the adoption of Internet banking, in context of banking organizations in

Pakistan, is affected by the factors that shape the internal and external e-Readiness

dimensions of an organization. These two dimensions of an organization are influenced

by four main factors.

Internal e-Readiness Dimension



External e-Readiness Dimension



The items or questions in the survey questionnaire were designed to assess the perceived

e-Readiness (internal and external) of the bank on these four main factors. The discussion

below is on which of the above factors and their sub items are significant contributors in

differentiating between the two categories of Adopter and Planner.


The Organizational and Technological Readiness of the Adopter and Planner categories is

discussed below.


The factor of Organizational Readiness, as perceived by the IT and e-banking officials of

banking organizations, emerged as the most significant discriminator between Adopters

and Planners of Internet banking. The independent sample T test carried out item wise

also authenticated this finding and out of six items of this factor five were found to be of

significance in differentiating between the two categories. Thus Organizational Readiness

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at both factor and item level emerged as the best discriminator between Adopter and

Planner banks. These results are in line with literature [53, 276].

The results suggest that level of preparedness of banks in Adopter category in terms of

human, financial and business resources, commitment and support of top management in

terms of making sufficient investments, vision/plan for adoption of Internet banking, and

awareness of adoption strategies is statistically significant and higher than the Planner

category banks.

The responses to question items were ranked in a descending order on their difference of

means between the two categories of banks and hence are discussed in the same order

within each factor

Sufficient Investments

The Independent Sample T-test carried on this item confirmed its position as top ranking

contributing item in discriminating between the two categories of banks. A prominent

difference between mean score of these two categories of banks (1.86) is suggestive that

Adopter banks in comparison to Planners, are contributing sufficient investments for the

success of Internet banking allied projects. The figure 7.3 shows that all six banks of

Adopter category agree or strongly agree to this statement. This perception reflects that

the management of these banks consider Internet banking projects as of high priority and

importance. On the contrary, six of the Planner banks disagree or strongly disagree with

the statement. These six of the Planner banks need to pay attention on this important issue

of not investing sufficient funds for initiating Internet enabled services. This disinterest of

Planner category in investments related to Internet enabled services can be seen as an

important issue to address by these banks. One reason for not investing in Internet

banking projects could be that the top management of these banks do not consider

Internet banking as an important channel for their banks. Lack of commitment of top

management has been found in literature as an important factor that has hampered the

adoption of e-banking in other regions of the world as well [276] The other two banks in

the Planner category have expressed their slight agreement and the remaining three

agreed or strongly agreed with the statement. These Planner banks perhaps are in the

organizational capacity building stage and would be moving in accordance to their

adoption strategies.

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Figure 7.3: Comparison on investing in projects related to Internet banking

Awareness of Adoption strategies

This item received second highest position as a significant contributing item in

discriminating between the two categories of banks. The difference in the mean score

between the two categories of banks (1.40) shows relatively increased awareness of banks

of Adopter category, in comparison to banks of Planner category, about the Internet

banking related developments in industry. The awareness forms an important pre step

towards adoption of an innovation [103]. Awareness about technology adoption

developments in a banking sector can be helpful in informed decision making by a

banking organization. The figure 7.4 shows that Adopter banks are pretty well aware of

the Interent banking developments in the banking sector. This is likely to give advantage

to these banks in advancing and expanding their adoption strategies.

Figure 7.4: Comparison on awareness of Adopter and Planner banks

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Three banks of Planner category disagree or strongly disagree on this item. Three other

banks of this category also slightly agree with the statement. Awareness is also very

important for Planner banks in planning an appropriate adoption strategy. This enables

them to learn from the role and positioning of new entrants and incumbents in the

adoption of Internet banking. These banks need to enhance their awareness so that they

can adjust with the changes in the. In this way they can position themselves to take better

advantage of the opportunities arising as a result of Internet banking market

developments.

Vision/Plan for adoption of Internet banking

Clarity of vision of management enables it to plan and take proactive decisions that are

most desirable to be introduced in the organization during and prior to adopting a new

technology based service such as Internet banking. Literature [34] suggests that the

chances of more successful adoption can be enhanced by introducing the needed changes

in the organizational processes and structure before introducing the technology. This item

on application of Independent Sample T-test was confirmed as third most significant item

contributing towards the factor of Organizational Readiness. The difference in mean

scores between the two categories of banks (1.34) shows that Adopter category of banks

have relatively much clear vision on the need and importance of Internet banking for their

banks. The bar chart in figure 7.5 clearly indicates the difference in perceptions of the two

categories on this aspect. Four banks of Planner disagree or strongly disagree with the

statement and three other Planner banks slightly agree with the statement. Thus the

relatively low score of banks of Planner category reflects that most of these banks

perceive that their bank considerably lacks clarity of vision on Internet banking. .

Figure 7.5 : Comparison on vision of Adopter and Planner banks

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Clarity of vision has been found to be an important and dominant factor that facilitated

and led to the priority development of Internet banking products and services in earlier

discussed case study of UBL in chapter 5. Clarity of vision of management enables it to

take proactive decisions that are most desirable to be introduced in the organization prior

to initiating a new technology based service such as Internet banking. Literature [34]

suggests that that the chances of more successful adoption can be enhanced by

introducing the needed changes in the business processes and structure before

introducing the technology.

Resources

The item of adequacy of business resources was confirmed as the fourth most significant

item contributing towards the factor of Organizational Readiness. The banks in the

Adopter category obtained a mean score of 4.0 on this item whereas the banks of Planner

category obtained a mean score of 2.82. The figure 7.6 depicts that banks in the Adopter

category are more confident and satisfied on the aspect of adequacy of business resources

that are needed by their organization for adoption of Internet banking. On the contrary,

five banks in the Planner category either disagreed or strongly disagreed with the

statement. This suggests that these organizations are considerably deficient in business

resources needed to successfully adopt Internet banking.

Figure 7.6: Comparison on resources of Adopter and Planner banks

Literature suggests that forming strategic partnerships between banks to share costs

associated with bringing about the needed Organizational and Technological change can

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be helpful for banks facing business resource constraints [171]. The Planner banks facing

scarcity of resources can also benefit by following the above mentioned strategy.

Top Management Support

Support of top management, the fifth ranking item, as intuitively expected, was also on a

higher scale (Mean 3.83) in the case of Adopter category. This item was also confirmed

by T test to be of significance differentiator between the two categories of banks. Most of

the banks in the Planner category (Mean 2.82) found top management support on the

lower side. It is observed that push or keen participation of top management in

technology adoption initiatives is useful in many ways for the timely and successful

completion of IT projects [47]. Top management support results in swift decision making,

especially in matters that warrant top management consent, and thereby can clear many of

the barriers in the process of adoption.

Figure 7.7: Top Management Support at Adopter and Planner banks.

The figure 7.7 depicts the trend of two categories of banks. In various studies on Internet

enabled services adoption, top management support has been found to be important for

attaining relatively successful adoption [109, 217, 227].

Information Technology Literacy and Internet Access

The figure 7.8 shows that most of the bank employees in both categories of banks on an

average are reasonably IT literate and have access to computers and Internet in their

offices.

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Figure 7.8: IT literacy and Internet Access in Adopter and Planner banks.

Adopters with a mean score of 3.64 and Planners with a mean score of 3.67 are on a

same note as far as this item is concerned. As obvious from the figure 7.8 above, this

item is not discriminator between the two categories. . This also suggests that most of

the employees in both the categories of banks are familiar and reasonably comfortable

with the use of Internet and Information Technology. This type of work force is more

likely to adopt the change with little or no resistance.

7.4.1.2 Internal Technological Readiness

The discriminant analysis identified Internal Technological Readiness as a significant

factor that differentiates Adopter banks from Planner banks. However, its statistical

significance in discriminating between the two categories of banks is less than that of

Organizational Readiness factor. The independent sample T tests conducted on the five

items of this factor found only one item to be of significance in differentiating between

the two categories. The T test results substantiate the findings of the discriminant analysis

as well.

The results suggest that perceived level of preparedness of Adopter category in terms of

compatibility to accommodate change, possession of appropriate technical, managerial

and other relevant skills to manage complexity, experience in experimenting with new

technologies, capacity to support applications requiring high bandwidth, and experience

with network applications is better then that of Planner category.

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Compatibility with Change

This item was found as significant discriminator between the Adopter and Planner

category. The difference in mean scores between the two categories of banks (0.86)

shows that the Planner category in comparison to Adopter category banks are having

more issues of compatibility to change. Successful adoption of Internet enabled services

including Internet banking requires special attention on the organization’s business

processes with the existing technology. It also necessitates introducing fundamental

changes in organizational structure, policies, established norms and practices.

Figure 7.9: Compatibility with change of Adopter and Planner Banks

From figure 7.9 it can be seen that that five banks of Planner category checked the option

of agree to strongly agree. This shows that these banks are facing much higher resistance

or difficulty in bringing about the needed change. This issue of Planner category is easy

to comprehend because adoption of Internet banking is expensive requiring considerable

changes in the IT infrastructure and the internal processes of an organisation. Most

Planner category of banks as already seen in discussions on many of the above items are

not putting enough of the needed ingredients such as business resources, support of top

management, investments etc that are essential to bring about the change. In the absence

of all this it is very difficult to upgrade and migrate to new Technological innovations.

Compatibility issues have been cited in literature [194] to be a significant concern in the

way of growth of online financial services.

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Technical, Managerial and other Skills (for handling Complexity of Technology)

Internet banking is an advanced IS application that like other Technological innovations

has its own set of intrinsic complexities that requires specific technical skills set as well

as greater implementation, operational and managerial efforts for its successful adoption.

This item ranked second on basis of mean score difference between the two categories of

banks. The T test does not identify it as a significant differentiating item

Figure 7.10: Assessment of perceived technical, managerial, and other skills.

It can be inferred from the figure 7.10 that five Adopter and six Planner category banks

perceive of having necessary technical, managerial and other skills that are required to

implement Internet banking. One Adopter and two Planner category banks slightly agree

to the statement. Three banks of the Planner category perceive that they severely lack the

technical, managerial and other skills to implement Internet banking.

Support for Internet banking applications requiring high bandwidth

No matter how large a bandwidth is available, the developers and designers of Internet

banking portal are always faced with the gigantic task to manage the huge traffic that

sometimes tries to access the portal at the same time. It is a great challenge to design and

develop an Internet portal service that provides completely secure access to multiple

customers at the same instant without getting overloaded and slow in response time. The

Adopter category with a mean score of 4.33 felt much more comfortable on this aspect.

The Planner category response with a mean score of 3.58 is indicative of their relatively

low readiness on this item.

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Figure 7.11: Assessment of capacity to support applications requiring high bandwidth.

However, as seen in figure 7.11 only two banks of the Planner category perceive that their

capacity to support applications requiring higher bandwidth is very limited. Five Planners

banks expressed their satisfaction on this aspect with two banks slightly agreeing to it.

Experience in Managing Computer based Network Applications

Internet banking is an advanced network based application that has to remain available on

24 hours basis all around the year. Only those banking organizations that have business

processes and systems integrated to a certain acceptable level of electronic networked

banking can consider adoption of Internet banking. Typically, banking organizations,

before initiating Internet banking, have sufficient experience with other network based

delivery channels like ATM and online branch network.

Figure 7.12: Assessment of experience in computer based network applications.

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The mean score difference of 0.71 on this item was not found to be statistically

significant. Figure 7.12 shows that all the banks in the Adopter category confirm of

having experience on favourable side with computer based network applications. The

Planner category shows some what mixed trend. Six banks of Planner category consider

that their banks have sufficient experience computer based network applications.

However, three Planner banks slightly agrees on this item and two banks of this category

strongly disagreed to this statement thus showing strong deficiency in relation to their

experience with network based applications. The banks that have not been sufficiently

exposed to the ICT enabled networking environment are likely to face much more

challenges and complexities in upgrading their systems.

Attitude in Experimenting with New Technologies

This item was not found as statistically significant as the mean score difference between

the two categories was relatively less (0.63). However, the bar chart in figure 7.13

presents an interesting picture of the perceptions of two categories of banks. Interestingly,

no variations in choice of response were observed in Adopter banks as all six banks of

this category chose the same scale of agreement. The banks belonging to Planner category

showed variations and checked on all five scales of Lickert to obtain a mean score of 3.5.

Five banks of the Planner category have checked the option of agree and strongly agree.

Figure 7.13: Assessment of attitude in experimenting with new technologies

One reason of this could be that these banks might be gearing up for adoption of new

technologies including Internet banking. An aggressive attitude in experimenting for new

technologies is an expression of the banks policy of developing the ability to quickly

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adopt appropriate Technological change with the changing business environment. It also

reflects the attitude and preparedness of the bank on taking calculated and planned

business risks. The banks that have such traits are expected to be following an adoption

strategy of early Adopters or leaders in introducing technology enabled change in their

industry.


The two factors of Technological Readiness and Environmental Readiness that reflect the

External e- Readiness dimension of Adopter and Planner categories of banks are

discussed below.

7.4.2.1 External Technological Readiness

The discriminant analysis found that the factor of External Technological Readiness does

not discriminate between Adopters and Planners. It seems that IT and e-banking officials,

of both categories of banks i.e. those who have already adopted Internet banking and

those who have not yet adopted it, more or less have similar perceptions on the

conduciveness or otherwise of this factor. None of the items tested using independent

sample T test emerged as significant differentiator either.

The results suggest that the perceptions of the two categories of banks are not much

different on Internet access technology and infrastructure, availability of complimentary

assets like vendor industry to support Internet banking development, and availability of

services to ensure secure electronic transactions.

Access and Infrastructure

The adoption and success of Internet banking is tied to the availability of reliable,

efficient and secure telecommunication infrastructure with enough capacity to

Figure 7.14. Perceptions on availability of reliable and efficient infrastructure

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support high bandwidth network applications. The figure 7.14 shows that the Planner

category with a mean score of 3.67 has a relatively better perception about the readiness

of telecommunication infrastructure in comparison to the Adopter category (mean score

3.17). One reason for this could be that the requirements and expectations of Adopter

banks are more stringent and are on a higher side than that of the requirements of Planner

banks.

Availability of Complementary Assets/Efficient and Affordable Support from IT Vendors

Availability of efficient and affordable support from the local IT industry is very much

desirable from the perspective of banking organization as this adds another dimension to

the organizations business freedom This enables them to be more flexible in exercising

their choice in selecting among the available models of technology adoption. This

provides them an option of forming a strategic partnership with local technology vendors.

In this arrangement the technology specialists take responsibility of technology related

matters of the bank thus allowing the bank to keep its focus on its core business of

banking. It has been observed in a case study on a US bank that organizations involved

in only banking or only IT will not be able to develop systems which are as effective for

Internet banking as an alliance between organizations which are individually specialized

in each of these industries [217].

Figure 7.15: Perceptions on support from local IT industry

The bar chart in figure 7.15 shows that three banks of the Adopter category are in

agreement about the existence of efficient and affordable support from the local IT

industry for adoption of Internet banking. The other three banks of the Adopter category

slightly agree to it. The banks in the Planner category although have a lower mean score

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on this item but eight out of eleven banks of this category have a similar perception as

that of banks of the Adopter category. Three banks of Planner category perceive

otherwise on this aspect.

Availability of Complementary Assets/ Secure Electronic Transaction Environment

Effective, efficient and secure electronic payment systems are very important for online

financial exchange between two entities. One way to judge the importance of payment

systems to the banking organizations is to note that out of the total worldwide bank

spending on information technology, about ten to fifteen percent are spent on the

payments processing technology [218].

Figure 7.16. Perceptions on secure electronic transaction environment

The Adopters and the Planner category of banks obtained a mean score of 2.83 and 3.17,

respectively on this item. Interestingly, the Planner category banks have less reservation

to this issue. Figure 7.16 shows that nine out of eleven banks of this category checked the

options of slightly agree to agree and strongly agree. On the other hand two of the

Adopter banks disagreed with this statement and three others only slightly agreed on the

availability of affordable secure electronic transaction environment.


The discriminant analysis showed that the factor of Environmental Readiness also does

not discriminate between the Adopter and Planner categories. It seems that IT and e-

banking officials, on a category basis of Adopters and Planners more or less have similar

perceptions on the conduciveness or otherwise of this factor. None of the item tested

using independent sample T test emerged as significant differentiator either.

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The results suggest that the perceptions of the two categories of banks are somewhat alike

on readiness indicators like readiness of market and society, issues or matter of trust on

electronic channels, satisfaction with the existing laws and conduciveness of legal

environment to support, protect and facilitate the online conduct of business, customers

perceptions about security, and privacy of electronic channels, perceptions on the policy

level role of government in promoting electronic channels, awareness of customers, and

their culturally preferred ways of carrying out financial transactions.

Although none of the items of this factor were identified to be statistically significant

differentiator between Adopters and Planners. However, the trend shown by the bar charts

on these items are quite helpful in developing a better understanding on how these items

are perceived by the two categories of banks and the likely influence of these items on

adoption of Internet banking in Pakistan.

Our Society is not yet ready for Internet banking

It is said that scope of e-banking is in such societies where there exist virtual market

space, users with Internet connection, wide customer base, and active participation of the

customers[221].

Figure 7.17: Perceptions on suitability of Internet banking for Pakistani society

The figure 7.17 shows that banks in the Adopter category, in comparison to Planner

category, are in more agreement to the statement that Internet banking is a developed

world trend not yet appropriate for our society. The mean score difference (0.8) between

the two categories came out as highest for this factor. These results are interesting in the

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sense that the banks that have started Internet banking have a relatively higher perception

of low society readiness, in comparison to Planner banks that have not adopted Internet

banking. One possible reason for this behaviour is the fact that Internet banking is in the

nascent stages in the country and Adopter banks at this stage of market have not been able

to attract many customers. In this survey, a question was placed to enquire about the

number of customers of each individual bank who are using Internet banking. None of the

banks provided the numbers of customers who are using Internet banking services. One

reason for not revealing the number of customers could be that the number of users is still

quite less because of relatively low readiness of society and are not attractive to reveal

from the marketing aspect.

Lack of Trust

The figure 7.18 shows that four banks of the Adopter category perceive low readiness of

society on this item. The Planner category of banks overwhelmingly (nine out of eleven

banks) have a similar perception as that of the above mentioned four Adopter banks. Lack

of trust among customers on the use of electronic services indicates that on overall basis

the society is not ready enough to embrace these electronic services. The growth of

electronic banking initiatives has linkage to the element of trust in the use of electronic

services among customers [219]. Literature suggests that trust of customers on online

transactions plays an important role in their usage of Internet [308].

Figure 7.18: Perceived trust among customers on the use of electronic services

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The issue of trust becomes more important in case of conducting transactions over

Internet channel because customers are afraid of unauthorized access to their personal and

sensitive data available with the bank [308, 309]. Customers lack of trust on Internet

banking channel and preference for face-to-face personal banking have been identified in

literature as major inhibitors of Internet banking adoption [310].

Conduciveness of Legal Environment

The figure 7.19 shows that most of the banks of the Adopter as well as Planner category

selected the choices of slightly agree and agree on this statement. Five banks from both

the categories showed their agreement to this statement and seven banks choose the

option of slightly agree

Figure 7.19: Conduciveness of the legal environment to conduct business on the Internet

It can be interpreted from this figure that while seven of the banks belonging to both the

categories of Adopters and Planners would like to see further improvements in the legal

environment however, at the same time they do not consider that the legal environment is

a critical impediment in conducting business online. The conduct of business over

Internet requires a certain necessary level of readiness to create and implement regulatory

and institutional frameworks. And the trend as seen in the bar chart is indicative that

majority of banks are seeing the ongoing efforts at the policy level in implementing the

regulatory and institutional framework to be moving in a positive direction. Only one

Adopter bank and four Planner banks perceive that the existing environment is not

conducive to conduct business on the Internet.

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Effective Laws to Protect Consumer Privacy

The figure 7.20 shows that the four of the Adopter banks and five of the Planner banks

slightly agree to this statement. Two banks from each category disagreed that effective

laws exist to protect consumer privacy in Pakistan. Two banks of Planner category

selected extreme choices of strongly agree to that of strongly disagree respectively.

Figure 7.20: Perceptions on effective laws to protect consumer privacy

These perceptions of bankers suggest that much more concerted efforts are needed to

develop the confidence of banks as well as their customers on this aspect. The

implementation of effective laws to protect consumer privacy is very essential for

transparent, effective, and dispute free conduct of business over the Internet channel in a

trusting environment.

The contemporary research on e-Commerce and Internet banking found that the usage of

Internet for conducting online business may grow provided customers feel confident

about enforcement of built in easily accessible and cheap mechanisms to effectively

address issue like consumer privacy and consumer protection in cases of fraud or

technical problems. [119, 224].

Security

The figure 7.21 shows that twelve out of seventeen banks (Adopter 4, Planner 8) agree

that customers have serious security concerns and fear of security breach in conducting

electronic banking transactions over the Internet. Three other banks (Adopters 2, Planners

1) also slightly agreed to this view.

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Figure 7.21: Perceptions on security in conducting electronic banking transactions

This issue has been cited in many studies as a major concern for the banks and their

customers [109, 125, 126]. Studies point out that Internet has increased the risks in terms

of security [196]. All these security risks can potentially create financial, legal and

reputation implications for the bank. It is, therefore, very important for the banks to not

only adopt a proactive approach to information security by implementing best possible

security controls but also by enhancing the awareness of customers and to make them feel

that Internet banking is secure and safe for carrying out electronic transactions. Negative

perception on security in conducting electronic banking transactions may have serious

affect on the demand of Internet banking as well.

Role of government

The conduct of business over Internet requires a certain necessary level of readiness from

policy making and regulating institutions to create, implement and monitor

Figure 7.22: Perceived role of government in the promotion of Internet banking

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regulatory and institutional framework. This is very essential for ensuring smooth,

transparent, effective and dispute free conduct of business over the Internet channel. The

response on this item from the majority of participating banks in the survey is quite

encouraging for the policy making and regulating bodies having the responsibility of

facilitating and promoting an enabling environment in the country for Internet banking

and other e-services. The figure 7.22 shows that ten out of seventeen banks ( Adopters 3,

Planners 7) agree that the government of Pakistan demonstrates strong commitment to

promote e-Commerce including Internet banking. Moreover, five other banks (Adopters

2, Planners 3) are also in slight agreement to the statement.

Customer’s awareness and Demand

The figure 7.23 shows that there is not much difference in perceptions of the two

categories of banks on the existence of little awareness especially IT awareness among

banking customers. Internet banking is a sophisticated application of Internet and for its

use a certain level of IT awareness and literacy among customers is needed. This less

awareness of customers is suggestive of low market readiness that cannot be helpful in

the growth of Internet banking. In an environment of less awareness among customers,

existence of a sizable demand of Internet banking is a highly unlikely proposition.

Figure 7.23: Perceptions on awareness among customers

Literature also suggests that the demand and usage of Internet for conducting online

business is linked with the awareness, education and IT literacy among customers [119,

224]. The case studies carried out on three of the Adopter banks in chapter 4 and 5 of this

study indicate that the banking organizations in Pakistan are concentrating on niche

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segment of market that exists in the main urban areas of the country where a sizable

customer base of IT aware and literate customers are available to these banks.

Customers Prefer Traditional Ways of doing Business

Both the categories of banks as seen in figure 7.24 are inclined to agree with this

statement with some degrees of variations. Four of the Adopter banks slightly agree to the

statement that customers prefer to conduct business by following traditional ways. This

option chosen by the four Adopter banks is perhaps suggestive that while the preference

among customers, to a large extent, exists for traditional way of banking, however, this

trend is gradually changing.

Figure 7.24: Perceptions on preference for traditional way of doing business

Traditional ways of banking in Pakistan are paper based transactions and according to the

statistics of the regulatory bank in Pakistan, over ninety percent of the transactions in

terms of value are conducted through traditional banking ways. However, by following

the statistics of last few years it can be seen that the share of electronic channels is slowly

and gradually improving. These gradual improvements can be linked, besides admitting

to the role of other factors, to the changing in cultural ways of customers and society.

[78], Information systems adoption has been found to be significantly dependent on

environmental characteristics like national cultures, laws, and business conditions It is

also well known that change in culture is linked with the awareness and education of

society and customers. Improvements in these areas would be helpful in the growth of

Internet banking in Pakistan.

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7.5. Chapter Summary

This chapter presents and describes the findings of the online survey conducted to explore

the influence of perceived internal and external e-Readiness on the adoption of Internet

banking by banking organizations in Pakistan. This was done by exploring the

perceptions of authorized IT and e-banking officials on the four e-Readiness factors

namely Organizational Readiness (OR), Internal Technological Readiness (ITR), External

Technological Readiness (ETR) and Environmental Readiness (ER). This online survey

also explored how far the banking organizations have been able to integrate other related

banking systems and services with their Internet banking channel.

All banks in Pakistan were sent invitations to participate in the online survey. Forty banks

in actual received the invitation. Out of these forty banks, eighteen banks actually

participated in the online survey. Data provided by seventeen banks was found usable for

meaningful analysis.

Statistical analyses were conducted using Discriminant analysis and Independent sample

T tests. Discriminant analysis determined which factors differentiated between banking

organizations that have adopted Internet banking (Adopters Category) and those that have

not adopted Internet banking (Planner Category). Independent Sample T-tests were

conducted to identify the items within each factor on which the perceptions of the two

categories of banks significantly differed from each other.

The discriminant analysis applied to test for the equality of category means found

Organizational Readiness (OR) and Internal Technological Readiness (ITR) as significant

factors in differentiating between Adopter and Planner category. Both of these two factors

are reflecting the Internal e-Readiness dimension of banking organizations. Hence, these

two factors are important contributors in understanding the difference in perceived state

of Internal e-Readiness of Adopter and Planner categories and its affect on the adoption

of Internet banking in context of banks in Pakistan. The other two factors namely

External Technological Readiness and Environmental Readiness, both of which reflect

the external e-Readiness dimension of banks, were not found as significant discriminator

between the Adopter and Planner categories. The results of Independent sample T test

carried on the items of the Organizational Readiness factor suggest that level of

preparedness of banks in Adopter category in terms of financial and business resources,

commitment and support of top management, banks vision on e-Commerce and Internet

banking, and awareness of market developments is significantly higher than the Planner

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category banks. Only one item of Internal Technological Readiness factor was found as

statistically significant. The T test results on this item suggest that the Planner category of

banks are having difficulties of much higher order in comparison to Adopter category in

bringing the changes required in the organization as a result of introducing Internet

banking/e-Commerce services.

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Chapter 8. Summary and Conclusions

8.1 Summary

This dissertation began with the discussion of motivation for conducting this research. It

presented an outline of the problem (to analyze the role of key factors in shaping or

influencing the adoption of Internet banking) and its context, the banks in a turbulent

environment of a developing country, Pakistan. The banking industry was considered to

be an important example of technological change to study because of its inherent role in

the changing fortunes of Pakistan towards embracing electronic economy. The banking

industry in the world, including in Pakistan, is the leading investor in new technology.

The extent of the industry's domination of the market for new technology projects means

that findings from an industry study also have a wider relevance in the context of

technological change in the economy as a whole. The later part of the chapter presented

the scope and objectives of the research followed by a central research question which

this research sought to explore using a qualitative research approach.

The second chapter presented a conceptual framework built upon what is already known

about the subject area of this research. The opening pages of the chapter provided the

definitions of the terms used in this dissertation followed by the description of the

electronic landscape of the country and the status of electronic banking in Pakistan. The

comparison of the last few year’s data highlighted that despite a gradual increase in the

usage of electronic delivery channels, the value and volume of transactions conducted

using electronic channels has remained a fraction of the total value and volume of

transactions conducted through all available channels. Next, a summary of key literature

related to the topic was tabulated and was used to operationalize the research framework.

The review found not enough empirical field research in this area, and the ones that were

available, had been mostly conducted in contextual settings of organizations in developed

countries. Most of the existing research on Internet banking conducted in contextual

settings of developed countries has explored Internet banking adoption by using internal

organizational lens of enquiry. And in which external issues or factors like access and

infrastructures at national level, societal, cultural, and institutional factors such as policy,

governance and legal aspects have received little attention. Whereas, the review found

that studies in the developing countries have identified that many of the external

environmental and technological factors have not developed enough to encourage the

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businesses to adopt ICT innovations. This chapter concludes by adapting an existing

framework that accommodates the factors from the internal as well as external

environment of an organization and which might be important for adoption in Pakistan.

The third chapter examined and described the research methodologies used in the field of

information systems and in this study together with a justification for their use. This

chapter also discussed the ontological and epistemological assumptions of fundamental

methodologies and the way they influence the process of research. The chapter discussed

the two main paradigms within the information systems field (positivism and

interpretivism. Next a justification is provided on employing a mixed method or

pluralistic research strategy for this research in which standards from both Interpretive

and Positivist perspectives are incorporated to suit the requirements of the research. Next,

the overall strategy and the research design of this study along with the descriptions of the

research methods, tools, techniques of data collection and analysis used to conduct this

study came under discussion.

The fourth chapter opened up by presenting and discussing the findings of the survey

conducted to assess the type and extent of services available at and through the websites

of the entire population of banking organizations in Pakistan. Next, the results of a study

conducted to explore the internal organizational issues faced by two banks, of a

developed country, in their efforts to implement Internet banking were presented. This

was followed by a field study conducted to identify the key factors related to Internet

banking adoption by banks in Pakistan and hence provide answer to the first research

question of this study. The factors were identified through a field survey and a separately

conducted case study on a bank in Pakistan. Participants in the field survey included IT

and strategic management personnel of banks and representatives from regulatory bodies,

technology vendors and solution providers. The field survey led to the identification of

key factors recognized for influencing Internet banking adoption in context of Pakistani

banks. The factors, identified in the field survey, were categorized under three aspects of

an organization’s readiness namely Organizational, Technological, and Environmental

Readiness, and were further tested for their relevance through an exploratory case study.

Based on the empirical evidence, the structure and contents of the initially proposed

framework were refined and organized for better data collection and analysis. And in the

light of findings of the field study, some initial propositions that appeared relevant for

examination were generated for further investigation in the main case studies.

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Chapter five described and narrated the information gathered through the cases studied.

The first case of adoption of Internet banking studied is of United Bank Limited (UBL)

which is relatively a large size bank and an early Adopter of Internet banking. The second

case studied is of Meezan bank which at the time of this study had just introduced Internet

banking and the last case presented is of ABN AMRO bank which had not adopted

Internet banking.

Chapter six provided answer to the central research question of this study. It presented an

assessment of the level of adoption and analyzed the influence of contextual factors or

conditions on the adoption of Internet banking in the three cases studied. First, a relative

assessment is carried out about the extent to which Internet has been integrated by these

banking organizations, categorized as Adopter and Planner banks, for offering banking

products and services. Second, a cross category comparison between Adopters and

Planner banks is performed. A within category comparison of Adopter banks is also

carried. Third, the influence of each factor is assessed based on the data collected in the

individual cases studied and the factors are classified into three groups according to their

assessed role in the adoption of Internet banking. Fourth, through analysis and

classification of factors involved, the role of each factor in the adoption of Internet

banking in each individual case is discussed. And lastly, a comparison of the findings of

the case studies with the literature and IS theories was carried for analytical validation of

case studies by generalizing the results with IS theories.

Chapter seven further explored the role of main e-Readiness factors and sub items in

affecting the adoption of Internet banking by banking organizations in Pakistan. This it

does by carrying out statistical analysis on the data collected from eighteen banking

organizations in Pakistan through online web based survey method. The main factors and

their sub items found as statistically significant in discriminating between the two

categories of banks (Adopters vs Planners) have been highlighted in this chapter. The

perceived role of each factor and its sub items in influencing the adoption of Internet

banking has been explored, discussed and graphically highlighted within this chapter. The

data gathered through online survey also enabled us to make an assessment of how far the

individual banking organizations in Pakistan have been able to integrate other related

banking systems and services with their Internet banking channel.

The results of the analysis and assessment are provided under the discussion of key

research findings that follows.

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8.2 Key Research Findings

In this section, the research findings will be analyzed in relation to the research questions.

There was a single central research question for this research, however, a pre-requisite for

answering the central research question is to first answer the research question1.

Research question 1:

What are the key factors influencing the adoption of Internet banking by bank(s) in

Pakistan?

The first research question pursued the following objectives:

1) check the validity of the factors identified in the literature as related to Internet

banking adoption by banks in Pakistan;

2) explore some new factors related to Internet banking adoption that might not have

been documented in the literature, some may be particular to Pakistani banking

industry;

The answer to research question 1 was established through literature, field surveys, and a

case study on a banking organization. The following factors and their constituent sub

factors were identified by the experts, interviewed in the field survey and in the case

study, as the key factors influencing the adoption of Internet banking.

1. Organizational Readiness and its constituent factors namely Organizational structure;

Resources; Commitment; Adoption strategy; 2. Internal Technological Readiness and its

constituent factors namely Relative advantage, Security Risk, Compatibility, Technology

complexity); 3. External Technological Readiness and its constituent factors namely

Access Technology and Infrastructure; Availability of complementary assets; 4.

Environmental Readiness and its constituent factors namely Policy Readiness; Market

Readiness; and Society Readiness.

This study finds that the factors identified as key factors influencing the adoption of

Internet banking by banks in Pakistan relate well with the factors identified in literature.

Research question 2:

How do these factors influence the adoption of Internet banking by bank(s) in Pakistan?

This research question was pursued with the aim to provide a better understanding on the

adoption of Internet banking by banks in Pakistan, by exploring the relationship between

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Internet banking adoption and the contextual factors or forces in a way, to classify and

relate the different factors that were identified by the important actors, (strategic and

operational management of the banks responsible for adoption and implementing of ICT

enabled change initiatives in the bank, members of the regulating organizations,

technology consultants and solution providers) as the key factors influencing the Internet

banking adoption by Pakistani banks.

The key findings of the research related to the second question are:

i) A cross category comparative analysis of case studies found that Planner and

Adopter banks differed in their perception on the degree of Organizational, internal

Technological, external Technological and Environmental Readiness. The findings

showed that the Planner bank perceived low conduciveness of above four main factors

and many sub factors that shape its ability to pursue Internet banking. The Planner bank

perceives that in the existing contextual conditions, the adoption of Internet banking

entails much higher risk in comparison to the envisaged benefits. And this mainly

accounts for its reason of not adopting Internet banking. In particular, the Planner bank

perceives the status or condition of many of the factors shaping the external e-Readiness

dimension such as market Readiness, society Readiness, and external Technological

Readiness, as unfavourable. This in turn constrains the bank’s Organizational and internal

Technological Readiness.

These findings are well augmented by the analysis of the data collected from eighteen

banks through web based online survey. The discriminant analysis of data found

Organizational Readiness as a factor of high significance in distinguishing or

discriminating between the Adopter and Planner category of banks in their perceived e-

Readiness for adoption of Internet banking. The Internal Technological Readiness was

found as next important factor in discriminating between Adopter and Planner category

banks in their perceived e-Readiness for adoption of Internet banking. The External

Technological Readiness and Environmental Readiness were not found to be statistically

significant differentiating factors between Adopter and Planner categories of banks. The

results show that Planner category banks perceive low internal as well external e-

Readiness for adoption of Internet banking in comparison to Adopter category banks.

However, their perception on internal e-Readiness dimension is considerably lower then

that of Adopter banks. Thus the reasons of adoption in case of Adopter banks and non

adoption in case of Planner banks can be related with the significant difference in their

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perceptions on internal e-Readiness conditions. Moreover, while no statistical

significance was observed in differentiating between the two categories of bank on the

basis of external e-Readiness, the pattern of data shows that the Adopter category of

banks, while immersed and operating under similar set of Environmental and External

Technological Readiness (external e-Readiness dimension) perceived these conditions as

not too limiting for them to adopt Internet banking. However, as apparent from data

analysis, the conditions that shape their external e-Readiness dimension are not

conducive enough for them to move on to next higher levels of adoption at that point in

time.

One of the implications of this finding is that non Adopters or Planners perceive low

internal and external e-Readiness for adoption. Whereas, Adopters have less issues with

their internal e-Readiness but conduciveness of external e-Readiness is of concern and

forms more important consideration in their decision or efforts of attaining next higher

level of adoption.

ii) A within category comparative analysis of Adopter banks found variations in their

perceived external e-Readiness. The analysis of case studies show that the bank having a

perception of higher external e-Readiness was observed to have attained a relatively

higher level of adoption than the bank which perceived relatively less external e-

Readiness.

Iii) The analysis of data in case studies led to the classification or arrangement of the

factors in groups as per their perceived role or behaviour in influencing the adoption of

Internet banking. These groups of factors were designated as Motivational, Inhibiting and

Situational factors. The group of motivating factors included commitment of the top

management; compatibility; availability of complementary assets; and awareness of

attributes of innovation. The attribute of relative advantage was perceived by all the banks

as the strongest motivating factor for adoption of Internet banking. A number of

perceived advantages of introduction of Internet banking included increased customer

convenience and satisfaction; operational efficiency; to retain customers loyalty; extended

ability to deal with customers; reduced operational cost; enhanced image and reputation

of the bank; and enhanced business and profitability.

Table 8.1 presents the factors grouped as per their perceived role in the adoption of

Internet banking. The factors whose role was perceived as inhibiting included, security

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risk; complexity; access technology infrastructure factors; market and society readiness

factors. The situational factors as per the adopted grouping were the organizational

resources, adoption strategy, policy readiness, and structure of the organization.

The research findings of case studies show that the major difference in the behaviour

between the banks that have adopted Internet banking and the one that has not adopted is

the perception of realization of business benefits. The major contributing factor in this

perception was the assessment of the security risk factor, inferior infrastructure, societal,

and market factors which were perceived as too limiting and according to the Planner

bank were still not within acceptable business risk limits.

8.3 Contribution to knowledge

Research Subject:

This academic contribution to knowledge made by this thesis has been to identify,

understand and provide a detailed and original explanation of the factors and

combinations of factors that are likely to affect the adoption of Internet banking by

banking organizations in Pakistan.

This study explores the adoption of Internet banking using the notion of e-Readiness.

However, unlike most other e-Readiness studies that have considered only those factors

which form the external dimension of an organization, this study used a co-evolution

approach. Co-evolution approach enabled the researcher to structure the framework by

incorporating factors that are perceived importantly relevant for understanding the

adoption of Internet banking in Pakistan. And thus it provided an opportunity to develop a

holistic understanding. This is unlike most other studies conducted using the notion of

e-Readiness, having focus on developing countries, which consider that only the country

level indicators or factors which form the external e-Readiness dimension of an

organization are the key factors that influence the adoption of innovations.

This study identifies and classifies the motivators and inhibitors of adoption which as per

the knowledge of the researcher have not been explored earlier by using a co-evolution

based e-Readiness approach.

Although, most of the banking organizations in Pakistan have been increasingly investing

in their delivery channels, their decisions to adopt innovations are not based on some

elaborate and structured assessment frameworks. This research provides a framework

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which enables the firm to assess internal and external e-Readiness for adoption and to

further use it for studying organizational differences in adopting Internet banking. And

then based on the assessment, take specific action to mitigate or lessen the inhibiting

influence of some of the factors to the possible extent.

Research Context

Previous research in Information systems has stressed upon the importance and need of

understanding adoption of information systems in their proper contexts. This study is a

step in the direction of fulfilling this need, as to the best of the author’s knowledge,

adoption of Internet banking from the perspective of banking service providers in

Pakistan has not been studied in a rigorous and detailed manner. This study explores,

arranges, and validates factors influencing the adoption of Internet banking within a

specific context- the Pakistani banking industry. Internet banking is an innovation for the

banks in Pakistan and there is a lack of research in Pakistan about this topic and, as

empirical evidence demonstrates, banks have encountered difficulties in developing and

implementing Internet banking. The findings can be of help to many of the Pakistani

banking organizations that are planning to adopt or to reach higher levels of adoption of

Internet banking

Methodological Contribution

This research has contributed to the field of methodological literature through the use of

the interpretive approach incorporating mixed methods of survey and case study for

developing an understanding of the contextual forces on the adoption of Internet banking

by banks in Pakistan. As Galliers [39] points out regarding American research in the field

of Information Systems, usually following a positivist approach, is very rigorous but with

limited practical relevance..

This research was designed from an interpretivist perspective and the selection of

pluralistic or mixed research strategy not only resulted in a better understanding of the

research interest but also helped in identifying the benefits of using this type of approach

for similar studies. The core analysis in this research is undertaken through interpretive,

qualitative case studies supplemented by quantitative analysis of data collected through web

based surveys. Both, survey and case study method has been used extensively within the

field of information systems and its usefulness has been proven over time. This

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dissertation once again reiterated the use of interpretivism perspective and mixed method

approach in providing valuable insights for a research project.

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Table 8.1 Grouping of factors according to their perceived role

MO

TIV

AT

ING

FA

CT

OR

S

e-Readiness (internal and external) Commitment

Top management support and vision The investment of adequate financial and other resources

for development and operationAwareness of attributes of innovation

Relative advantage Compatibility

Availability of complementary assets

Technology tools, vendors, consultants/solution providers Online security and trust services, real time payment

systems

INH

IBIT

ING

FA

CT

OR

S

Awareness of attributes of innovation

Complexity Security risk

Access technology and infrastructure

Penetration of Internet Access speed Access type, capacity and infrastructure

Market, society readiness factors

Consumer readiness (considering national culture, behavior and awareness)

Demand/Competitive pressure

SIT

UA

TIO

NA

L F

AC

TO

RS

Organizational structure

Organizational size Positioning of Internet banking channel in the

organizational structureAdoption strategy

Process of adoption Timings of adoption

Resources

Financial & HRPolicy readiness factors

Policies, legal framework and role of regulators

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8.4 Limitations of the Study and Areas for Further Research

The limitations of this study, and the outcomes that have emerged, suggest a number of

areas for further research:

As already pointed out in this research that this research has been restricted to current or

existing perceptions of respondents of this study at a certain point in time and there may

therefore be an issue of stability of these perceptions with the ongoing improvements in

the e-readiness conditions. Thus it implies that it will not be possible to repeat this study

and replicate the findings. However, the process that has been adopted does provide a

basis for continuing research on Internet enabled innovation adoption in the same sector

or extending it to other sectors.

This research was by design exploratory and some of the findings were inducted from

empirical evidence. This provides an opportunity for other researchers to extend and test

the validity of this research using other research approaches and methods.

Although the number of responses received in the online survey shows that eighteen out

of total population of forty nine banking organizations participated in the survey. This

response rate increases further to fifty percent (50 %) when one considers that only thirty

six banking organizations are in actual business of retail and commercial banking. and

remaining 13 banks belong to the category of specialized banks (see Table 4.3).

However, with only one delegated respondent from each bank filling the survey, the

possibility of biasness of respondent in filling the questionnaire cannot be ruled out.

Moreover, as the survey questions were answered un-administered so possibility of

misunderstanding a particular question or even filling of the survey by non intended

respondent cannot be ruled out. Similarly, qualitative case studies underpin a major part

of this research and the issues of validity and reliability are sensitive ones for research

orientations that reject positivism’s implied methodological correctness. By making these

explicit, the limitations of the research methods become transparent, and thus opens up

suggestions on ways in which the research approach can be improved and can indicate

directions for future research.

A significant limitation is one of generalisability. This study was conducted in the context

of Pakistani banking industry i.e a single national context and in a single sector.

Although, the same findings are expected to be found in other banking organizations

operating in similar contexts, further research needs to be conducted, in other developing

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countries, using the same approach, in order to understand variations due to differences in

the national culture or in the economic environment. National culture and economic

conditions exerts a delicate influence on individuals and organizations and cultural issues

can only be studied through specifically designed cross cultural studies. Further research

might address the large scale extrapolation of cross cultural differences in adoption of

Internet banking by banking organizations.

In conclusion, this research achieved its objectives by exploring Internet banking

adoption in the turbulent contextual settings of a developing country, Pakistan, using

survey and four case studies (3 main case studies and 1 pilot study). The findings are not

only of importance in the particular research context but also add new insights to the

existing literature on Internet banking adoption in the contextual settings of Pakistan. It is

hoped the results of this work will be a contribution to literature and of academic and

practical value for academicians and practitioners.

241

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Questionnaire for Semi Structured Interviews APPENDIX -I General structure of the questionnaire used as an aide by the researcher in semi structured interviews. The questions were asked not necessarily in the order listed. The questions were also tailored according to the type of respondent (Strategic Management, IT/e-Bbanking officials, Vendors, Member of Regulating Body) and the phase of Study. 1. General Business Data about the Bank/Organization (Some of general data was also collected prior to the Interview from secondary sources of Information such as annual financial reports, institutional website, newspapers, and other relevant literature).

Organization’s Mission and objectives History of the organization Ownership structure of the organizations/ Organogram/

Type of Internet banking services and products launched by the organization

Financial and economic performance of the Bank/organization in last 2-3 years.

Size of the organization (Branch Network, approx number of employees

General lT Usage/awareness within the organization.

Financial products and Internet banking services being offered

2. Role and responsibilities of the Interviewee in the organization

Perspective about the role of electronic delivery channels and in particular Internet banking for the business and Industry? (In national and International perspective)

Initiatives and Strategy of the organization in introducing Internet banking What are the motivators of Adoption of Internet banking? Constraints that you think are also applicable to your banks business model regarding

adoption of Internet banking systems.

Vision / Inertia Lack of vision/ lack planning/preoccupied in existing projects that you don’t have time to consider other things

Affordability The cost is too high for usProfitability/ Sustainability Internet banking does not fits into our profitable business

model Resources Issues of HR/Finance/Technology (For instance; culture of

resistance to change; lack of management skills; Lack of technical skills; Technology costs; Benefits not demonstrated; IT systems integration

Risk/Security Internet banking increases the risk for bank

3. What is your opinion on potential inherent risks and benefits of adopting/ not adopting Internet banking

4. What is your bank’s strategy for adoption of Internet banking? (Enter early in the market/ wait and see others/never etc.)

5. What is the role of incumbent banks and the possibility of entering of non traditional entrants (mobile companies, PSO etc doing banking business) in banking business. Do you

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see any possibility of a complete virtual bank as are in existence in developed world. For example. egg bank plc.

6. Does your bank have a detailed Strategic Plan? While making this plan do you incorporate inputs from the related IT/IS strategy.

7. What is the process of adoption of new technology initiatives in your bank. In case of Internet banking, whether the top management pushed the vision/plan to adopt Internet banking or it was initiated from IT department/other group.

8. Whether the decision of adoption is an outcome of rational and rigorous planning exercise or is it influenced by other factors like persuasion by regulators, market forces, vendors etc..

9. How important do you think is the role of top management in the decision of adoption of internet banking and subsequent implementation? Do you think top management commitment towards Internet banking initiatives is visibly obvious in your bank?

10. Have you formed any strategic partnerships with the IT technology vendors companies to cater your banks technology needs and solutions. Do you prefer One vendor supplier relationship or multiple vendors as suppliers? Which one and Why?

11. Would you like to identify an individual or entity that can be considered as a champion, campaigning this course of adoption of internet banking in your bank?

12. Does introduction of Internet banking warrants changes in the organizational structure and business processes. What are the steps taken/need to be taken to achieve greater success in the organization?

13. Did your bank introduced the technology first and then changed the business processes accordingly or vice versa. Which way is better?

14. .Did your bank met resistance to change while implementing new processes. How significant was this resistance and what initiatives were made to manage it.

15. Did your bank introduce some systematic training and awareness campaigns for acceptance of this initiative?

16. Does the size of your banks put you in some advantageous/disadvantageous position as far as Internet banking channel is concerned.

17. How satisfied are you with the capacity and capability of existing IT assets of your bank. How has the IT/IS Assets of your organization enabled the success or failure of the system under study?

18. What is your opinion on risks of Internet as a medium of exchange for banking business?. Do you agree that security is an important factor affecting Internet banking adoption?. Do you think that Internet banking is secure enough for your banking business and customers?

19. What are the relative advantages/potential benefits of Internet banking innovation for your bank. /. For example; enhance ability to deal with customers, To improve bank image, To gain competitive advantage, To attain operational efficiency, To gain access to new market and customers, To deal with customer demand, To retain customers, For customer convenience, To increase revenue, To reduce operational cost

20. In comparison to other delivery channels how do you find the complexity of Internet banking product from implementation and Users perspective?

21. What are your views on the capacity of ICT infrastructure, Internet services, Internet Access and connectivity situation in the country? How are these influencing your efforts?

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22. Stake holders influence on Adoption/non adoption (Vendors role, Solution Provider, Regulators role, Market forces, Consultants, champions)

23. What is your level of satisfaction about e laws and regulations in the country for e-commerce/Internet banking services?. What is your impression about role of Regulators e.g SBP and PTA in promoting electronic banking?

24. What are the major external barriers (for instance customers culture of resistance to change, customers lacking in literacy, high technology cost for customer, customers culture—preferences for traditional ways of cash handling, customers apprehensions about security of transactions, Trust issues etc, regulatory issues, cyber laws, Pressure from competitors local and international, pressure from state bank,).

25. Does the demand of Internet banking exists. Has it played any role in your decision to adopt/not adopt Internet banking?

26. Whether Internet banking adoption by Pakistan’s banking Industry at present is a result of technology Pull/Push factor.

27. Do you see any competition to banks from any non banking organizations such as Mobile phone companies, PSO etc in taking your role of a bank?

28. Supplier Industry developments (national and International).

29. Your views on availability of complementary assets like security and Trust services needed for Internet banking.

30. In our discussion we have discussed many factors which are affecting the Adoption of Internet banking. I have maintained a checklist of factors identified through literature (checklist attached). Now, after seeing this checklist, do you think that the factors identified in this list or covered in our discussion adequately covers all key or notable factors influencing the adoption of Internet banking in context of your Banking organization?. Are there any other factors which you think should be added in this list?.

Additional Questions for Heads of e- banking/IT Department and their Staff members

1. Structure and function of the department and its role in adoption and operation of Internet banking.

2. With which department lies the ownership of Internet banking Product?.

3. Groups or persons involved in the process of Adoption/implementation/operation? Time for the whole process from awareness to implementation.

4. .Size of IS/IT/e-banking department ?How many employees are working in IS/IT/e-banking department

5. Brief mentioning of ICT resources owned by the bank (IT Systems, Ownership of private Networks, Available Human resource used for operational and maintenance activities and for implementation and development activities, qualification and skills of IS/IT resources)

6. Corporate culture in terms of ICT usage (use of groupware tools, video conferencing or virtual conferencing tools)

7. How much of IT/IS/e-banking function is outsourced to other organizations?

8. For your IS/IT development and deployment do you rely on: Contractual development, Internal Development, Joint Ventures (inter companies cooperation) and Acquisition / Purchase

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9. Are you satisfied with the human resources available in the market? And in your bank. What is the IT staff turnover ratio in your organization?

10. What is the level of satisfaction with your current Internet banking implementations?

11. How do you acquire an Internet banking solution (Develop it in house, outsource the work, Obtain turnkey solution from the vendors). Challenges in the decision of buy or build.

12. What are typical stages in the process of developing/acquiring Internet banking product?.

13. Type of problems faced in obtaining hardware/software equipment for Internet banking Systems

14. Is the supplier market of Internet banking solutions competitive enough.(you have many supplier quotations while selecting a solution)

15. How much time span was involved in the whole process of initiation of the idea to formal development and implementation of Internet banking?

16. What is the architecture of Internet banking product of your bank. i.e. in terms of front end middle ware and back end etc.

17. What is the extent of Integration of various distribution channels with your back end?.

18. What security measures are available and which of these measures have been incorporated for security of Internet banking transactions.

19. Do you have centralized or distributed data base architecture.

20. Tell me something about your Network. Does your network has enough capacity to cater to the future coming services. For example providing CRM on video

21. Does the legacy systems of the bank offer complexity/ challenge in integration with new technologies and Internet.

22. Do you think that Internet banking product is compatible with your bank’s base IS/IT infrastructure and assets.

23. Can you list down any complexities/project management challenges encountered in the development of IB solution

24. Don’t you think that multiple vendors introduce some problems such as integration of different technologies?

25. Your views on availability of complementary assets (online security systems, advances in encryption, technology, Bandwidth and connectivity issues and increased Internet access for individual users

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261

Check list Used for Data Collection APPENDIX-I 1. Factors related to the internal e-Readiness dimension

1.1 Organizational Readiness 1.1.1 Organizational structure

1.1.1.1 Organizational size 1.1.1.2 Positioning of Internet banking channel in the organizational structure

1.1.2 Resources 1.1.2.2 Financial & HR

1.1.3 Commitment 1.1.3.1 Top management support and vision 1.1.3.2 The investment of adequate financial resources for development and

operation 1.1.4 Adoption strategy

1.1.4.1 Process of adoption 1.4.1.2 Timings of adoption

1.2 Technological Readiness (internal) 1.2.1 Awareness of attributes of innovation

1.2.1.1 Relative advantage 1.2.1.2 Security risk 1.2.1.3 Compatibility 1.2.1.4 Complexity

2. Factors related to the external e-Readiness dimension 2.1 Technological Readiness (external)

2.1.1 Access technology and infrastructure related factors 2.1.1.1 Penetration of Internet 2.1.1.2 Access speed 2.1.1.3 Access type, capacity and infrastructure

2.1.2 Availability of complementary assets 2.1.2.1 Technology tools, vendors, consultants/solution providers 2.1.2.1 Online security and trust services, real time payment systems

2.2 Environmental Readiness 2.2.1 Market, Society and Policy Readiness Factors

2.2.1.1 Demand, competitive pressure 2.2.1.2 Consumer readiness (considering national culture, behavior and

awareness) 2.2.1.3 Policies, legal framework and the role of regulators

APPENDICES

262

Appendix-II

Internet Banking Questionnaire for Online Survey

1. Name________________________________________

2. Bank Name____________________________________

3. What is the level of your agreement with the statements below? Please choose 1 if you

strongly disagree, 2 if you disagree, 3 if you slightly agree, 4 if you agree and choose 5 if you

strongly agree with the given statements.

1= Strongly disagree, 2= Disagree, 3= Slightly Agree, 4= Agree, 5 = Strongly Agree

4 Do you agree that Internet banking is a developed world trend not yet

appropriate for our society

1 2 3 4 5

5 Our banking organization is well aware of the Internet banking

adoption/implementations by its competitors

1 2 3 4 5

6 Most of bank employees are IT literate and have access to computers and

Internet in office

1 2 3 4 5

7 We have the necessary in-house technical, managerial and other skills to

implement Internet banking

1 2 3 4 5

8 Our bank in general is aggressive in experimenting with new technologies 1 2 3 4 5

9 Our bank has sufficient experience with computer network based applications 1 2 3 4 5

10 Our bank is investing sufficiently in projects related to Internet banking and e-

Commerce

1 2 3 4 5

11 Our bank has high bandwidth network connectivity to support applications

requiring high bandwidth

1 2 3 4 5

12 Our bank has adequate business resources for Internet banking

adoption/implementation

1 2 3 4 5

13 In general there exists a clear vision on e-Commerce applications such as

Internet banking

1 2 3 4 5

14 In our bank the top/senior management champions Internet banking adoption

and implementation

1 2 3 4 5

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263

1= Strongly disagree, 2= Disagree, 3= Slightly Agree, 4= Agree, 5 = Strongly Agree

15 We have difficulty in bringing the changes required in the organization as a

result of introducing e-Commerce services

1 2 3 4 5

16 The telecommunication infrastructure of country is reliable and efficient 1 2 3 4 5

17 The government demonstrates strong commitment to promote e-Commerce

including Internet banking

1 2 3 4 5

18 Secure electronic transaction (SET) or secure electronic banking environment

services are easily available and affordable

1 2 3 4 5

19 There exists efficient and affordable support from the local IT industry to adopt

Internet banking

1 2 3 4 5

20 Customers fear of security of doing electronic banking transactions 1 2 3 4 5

21 There is less awareness or IT awareness among customers 1 2 3 4 5

22 In general, customers have preference for traditional way of doing business 1 2 3 4 5

23 There is lack of trust of customer on electronic services 1 2 3 4 5

24 The legal environment is conducive to conduct business on the Internet 1 2 3 4 5

25. When did you start offering Internet banking? . Please fill the remaining questions

only if your bank has started offering Internet banking.

26. How many customers were using internet banking in following quarters of years?

Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 2003 2004 2005 2006 2007

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264

27. What was your reasoning for offering Internet banking. ? Please check the option(s) that

apply in your case.

Enhance ability to deal with customers to improve bank image To gain competitive advantages To attain operational efficiency To gain access to new market and customers To deal with customer demand To retain customers For Customer convenience To increase revenue To reduce operational cost

28.. How Integrated is each of the following systems with the Internet in your organization?

(scale 1–4), with 1 being that the system is not in use at this time, 2 being that the system is not

currently integrated and has no plan to be integrated during the next 12 months, 3 being that the

system is not currently integrated but is planned to be integrated during the next 12 months, and

4 being that the system is fully integrated with the web already.

Customer relationship management

(CRM)

Bill Payment,

Enterprise resource planning (ERP) Third Party Services (Purchasing

Airline tickets etc)

Interactive customer service support Real Time financial Information

Inter bank Clearinghouse On-line securities trading

Cell-phone banking Any other?

Thank you for your valuable participation.

APPENDICES

265

APPENDIX-III LIST OF PARTICIPANTS IN THE PILOT AND MAIN CASE STUDIES

S# Name of the Participant Designation of the Participant Name of the

Organization

1. Mr. A. Saeed Saddiqui Senior Executive Vice President

(SEVP) and Head of Risk Management

Bank Al Habib Ltd

2. Mr. Muhammad Mairaj Yousaf

Principal Software Engineer (Product Manager Internet Banking)

Avenza Solutions

3. Mr. Hashir Ahmed Software Engineer (Member of Internet Banking Development Team)

Avenza Solutions

4. Mr. Nasir Rizvi Vice President Senior Business Development Manager - Applications

ORA-TECH Systems

5. Mr. Syed Muhammad Nabeel

Senior Business Development Manager

INFOTECH

6. Mr. Muhammad Saleem Rehmani

Director Payment Systems Department

State Bank of Pakistan (SBP)

7. Kazi Abdul Muqtadir Managing Director, National Institute of Banking and Finance

State Bank of Pakistan (SBP)

8. Mr. Bahauddin Khan Group Executive, Global Operations and Technology

United Bank Limited (UBL)

9. Mr. Adnan Masood Senior Vice President (SVP), Head Systems Services Department/IT Division


10 Mr. Manzoor System Architect, IT Division United Bank Limited (UBL)

11 Dr. Arif Ahmed Executive Vice President (EVP), Global Head E-Commerce


12 Mr. Kashif Gaya Product Manager e-Banking United Bank Limited (UBL)

13 Mr. Talha-Bin-Hafeed Assistant Product Manager e-Banking


14 Mr. Ammar Waheed Management Associate e-Commerce


APPENDICES

266

S# Name of the Participant Designation of the Participant Name of the

Organization

15 Mr. S. Shahid Raza Senior Executive Vice President (SEVP), Chief Operations, Head Business Transformation Team

Allied Bank Limited (ABL)

16 Mr. Iqbal Zaidi Senior Vice President (SVP) Head e-Commerce Working Group


17 Mr. Tanveer Hussain Group Head Alternate Delivery Channels


18 Mr. Hameed Chughtai Assistant Vice President, Head Internet banking Product Development


19 Mr. Junaid Ahmed Siddiqui Software Developer Allied Bank Limited (ABL)

20 Mr. Abad Officer, Internet Banking Operations Team


21 Ms. Kanwal Javed Officer, Internet Banking Operations Team


22 Mr. Naveed A. Khan Country Executive Pakistan ABN-AMRO

23 Mr. Shabbir Buxamusa Vice President-II (VP), Head Alternate Distribution & e-Business

ABN AMRO

24 Zia ul Haq Ansari Head e-Business ABN-AMRO

25 Mr. Ariful Islam Chief Operating Officer Meezan Bank

26 Mr. Faiz ur Rehman Head Information Technology Meezan Bank

27 Mr. Kamal Hussain Deputy Manager, IT Meezan Bank

28 Mr. Azeem Pirani Head e-Commerce Meezan Bank

29 Software Engineer Transaction Processing System

30 Mr. Ehtasham Monitoring Officer State Bank of Pakistan (SBP)

APPENDICES

267

Appendix-IV

LIST OF PARTICIPANTS OF ONLINE SURVEY No. Name of Bank Name of Bank official Website of Bank

1 Habib Bank Ltd Mr. Qasim Shahzad www.habibbankltd.com

2 Bank of Punjab Ltd Mr. Nadeem www.bop.com.pk

3 Muslim Commercial Bank

Ltd

Mr. Mazher Hussain www.mcb.com.pk

4 Allied Bank of Pakistan Ltd Mr. Muhammad Najmul www.abl.com.pk

5 PICIC Commercial Bank Ltd Mr. Adeel Dar www.picicbank.com.pk

6 Mybank Ltd Mr. Afaq M. Khan www.mybankltd.com

7 Askari Commercial Bank Ltd Mr. Bakhtiar Mumtaz www.askaribank.com.pk

8 Faysal Bank Ltd Mr. Rehan Hameed www.faysalbank.com

9 Saudi Pak Commercial Bank

Ltd

Mr. Javed Edhi www.saudipak.com

10 Meezan Bank Ltd Mr. Jahan Zaib Javed www.meezanbank.com

11 ABN Amro Bank N.V Mr. Khurrram Sikander www.abnamro.com.pk

12 The Bank of Khyber Mr. Fasih Ur Rehman www.bankofkhyber.com.pk

13 SME Bank Mr. Syed Mudassir Zaidi www.smebank.org

14 Al-Baraka Islamic Bank Mr. Ayaz Hussain

15 Atlas Bank Ltd Mr. Imtiaz Hussain www.atlasgrouppk.com

16 CresBank (Mashreq Bank

P.S.C)

Mr. Muhammad Waqar

Khan

www.cresbank.com

17 Habib Metropolitan Bank Ltd Mr. Imtiaz Ahmad www.hmb.com.pk

18 JS Bank Ltd Mr. Mohsin Javed www.js.com