Internet banking preferred due to benefits

Washington: People prefer to use internet banking either because of its benefits or because of peer pressure but rarely because of perceived prestige or celebrity endorsement, a new study says.

The research hints at how banks could improve the spread of internet banking simply by improving the services offered.

From a bank's perspective there are many advantages to persuading their customers to adopt internet banking.

Primarily, there is the reduction in staffing, which can reduce overall costs, even if information technology and online security systems must be put in place and the reduction in buildings infrastructure required to service customers.

There is also the potential for increased revenue through increased transactions and customer activity facilitated by the ease with which they can carry out different tasks online without having to visit a bank's premises.

Internet banking is being adopted by customers as a viable alternative to managing their money with approximately 55 million US households routinely using online banking.

Some banks are already internet only and offer preferential interest rates and terms to their customers.

However, there are many people yet to adopt online banking, which represents a significant challenge to banks that would like to increase their virtual customer base.

Understanding what makes people adopt a particular technology could be crucial to the future success of internet banking, say Weihua Shi and Kenneth Zantow of the College of Business, at the University of Southern Mississippi (USM), Long Beach.

They point out that while there are various research models that have attempted to explain the adoption of new technologies, the majority of these assume that people make a rational choice based on a systematic decision process.

In many cases, this may be entirely contrary to how people behave and they suggest that it is more likely that people simply follow the herd, a USM release says.

If large numbers of people are already using a particular technology, once a tipping point is passed, peer pressure causes other people to adopt the innovation too.

But perceived prestige and celebrity endorsement rarely lure people to internet banking.

The findings were published in the International Journal of Banking, Accounting and Finance.