Meaning –

Online banking, also known as internet banking, e-banking, or virtual banking, refers to
carrying out banking operations on the Internet. For example, it may include paying bills,
transferring money, or checking one’s balance online. It also refers to setting up regular
payments online. Online in this context, means on the Internet. Virtually every bank today offers
the service. Customers can conduct their financial affairs through the Internet rather than having
to come into the branch.
You can conduct online banking from your computer, tablet, or smart phone. According to banks
and most customers, the main advantages online banking offers are permanent access to one’s
account. It is also much cheaper and accessible from almost anywhere. If you do not currently
have an internet banking facility and want it, talk to your bank. Most financial institutions will
give you the choice of having a telephoning or internet banking service. In fact, you can have
both. They will give you a password and username. Some banks let you choose them. In some
cases, they may change regularly. In fact, with some accounts, the customer has to enter a
different code each time.
Online banking allows a user to execute financial transactions via the internet. Online banking is
also known as "internet banking" or "web banking." An online bank offers customers just about
every service traditionally available through a local branch, including deposits these are done
online, using ATMs or through the mail and online bill payment.

Online banks do not provide direct ATM access, but they make provisions for consumers to use
ATMs at other banks and retail stores, and they may reimburse consumers for some of the ATM
fees charged by other financial institutions. The reduced overhead costs associated with not
having physical branches typically allow online banks to offer consumers significant savings on
banking fees; they also offer higher interest rates on accounts. Online banks handle customer
service by phone, email, or online chat. Online banking is frequently performed on mobile
devices now that Wi-Fi and 4G networks have become widely available. In the United States,
prominent online banks include Ally Bank, Bank5 Connect, Discover Bank, GE Capital Bank,
and Synchrony Bank.

Define-

According to Oxford Dictionaries, online banking is “A method of banking in which the

The concept of Internet banking has been simultaneously evolving with the development of the
World Wide Web. Programmers working on banking data bases came up with ideas for online
banking transactions, sometime during the 1980s. The creative process of development of these
services was probably sparked off after many companies started the concept of online shopping.
The online shopping promoted the use of credit cards through Internet. Many banking
organizations had already started creating data ware housing facilities to ease their working
staffs. The development of these databases was widely used during the development of ATM's.

Sometime in 1980s, banking and finance organizations in Europe and United States started
suggestive researches and programming experiments on the concept of 'home banking'. Initially
in the 80's when computers and Internet were not so well-developed, 'home banking' basically
made use of fax machines and telephones to facilitate their customers. The widespread of
Internet and programming facilities created further opportunities for development of home
banking.

In 1983, the Nottingham Building Society, commonly abbreviated and referred to as the NBS,
launched the first Internet banking service in United Kingdom. This service formed the basis for
most of the Internet banking facilities that followed. This facility was not very well-developed
and restricted the number of transactions and functions that account holders could execute. The
facility introduced by Nottingham Building Society is said to have been derived from a system
known as Prestel that is deployed by the postal service department of United Kingdom.

The first online banking service in United States was introduced, in October 1994. The service
was developed by Stanford Federal Credit Union, which is a financial institution. The online
banking services are becoming more and more prevalent due to the well-developed systems.
Though there are pros and cons of electronic cash, it has become a revolution that is enhancing
the banking sector
The precursor for the modern home loan banking services were the distance banking services
over electronic media from the early 1980s. The term 'online' became popular in the late 1980s
and referred to the use of a terminal, keyboard and TV to access the banking system using a
phone line. 'Home banking' can also refer to the use of a numeric keypad to send tones down a
phone line with instructions to the bank. Some of the earliest services started in New York in
1981 when four of the city's major banks offered home banking services.

When the clicks-and-bricks euphoria hit in the late 1990s, many banks began to view web-based
banking as a strategic imperative. Stanford Federal Credit Union was the first financial
institution to offer online internet banking services to all of its members in October 1994. In
1996 OP Financial Group, also a cooperative bank, became the second online bank in the world
and the first in Europe. The attraction of banks to online banking are fairly obvious: diminished
transaction costs, easier integration of services, interactive marketing capabilities, and other
benefits that boost customer lists and profit margins. Additionally, online banking services allow
institutions to bundle more services into single packages, thereby luring customers and
minimizing overhead.
A mergers-and-acquisitions wave swept the financial industries in the mid- and late 1990s,
greatly expanding banks' customer bases. Following this, banks looked to the Web as a way of
maintaining their customers and building loyalty. A number of different factors are causing
bankers to shift more of their business to the virtual realm.

While financial institutions took steps to implement e-banking services in the mid-1990s, many
consumers were hesitant to conduct monetary transactions over the internet. It took widespread
adoption of electronic commerce, based on trailblazing companies such as America Online,
Amazon.com and eBay, to make the idea of paying for items online widespread. By 2000, 80%
of U.S. banks offered e-banking. Customer use grew slowly. At Bank of America, for example, it
took 10 years to acquire 2 million e-banking customers. However, a significant cultural change
took place after the Y2K scare ended. In 2001, Bank of America became the first bank to top 3
million online banking customers, more than 20% of its customer base. In comparison, larger
national institutions, such as Citigroup claimed 2.2 million online relationships globally, while
J.P. Morgan Chase estimated it had more than 750,000 online banking customers. Wells Fargo
had 2.5 million online banking customers, including small businesses. Online customers proved
more loyal and profitable than regular customers. In October 2001, Bank of America customers
executed a record 3.1 million electronic bill payments, totaling more than $1 billion. In 2009, a
report by Gartner Group estimated that 47% of United States adults and 30% in the United
Kingdom bank online.

The early 2000s saw the rise of the branch-less banks as internet only institutions. These
internet-based banks incur lower overhead costs than their brick-and-mortar counterparts. In the
United States, deposits at most direct banks are FDIC-insured and offer the same level of
insurance protection as traditional banks.

Operation

To access a financial institution's online banking facility, a customer with internet access will
need to register with the institution for the service, and set up a password and
other credentials for customer verification. The credentials for online banking are normally not
the same as for telephone or mobile banking. Financial institutions now routinely allocate
customers numbers, whether or not customers have indicated an intention to access their online
banking facility. Customer numbers are normally not the same as account numbers, because a
number of customer accounts can be linked to the one customer number. Technically, the
customer number can be linked to any account with the financial institution that the customer
controls, though the financial institution may limit the range of accounts that may be accessed to,
say, cheque, savings, loan, credit card and similar accounts.
The customer visits the financial institution's secure website, and enters the online banking
facility using the customer number and credentials previously set up.
Each financial institution can determine the types of financial transactions which a customer may
transact through online banking, but usually includes obtaining account balances, a list of recent
transactions, electronic bill payments, financing loans and funds transfers between a customer's
or another's accounts. Most banks set limits on the amounts that may be transacted and other
restrictions. Most banks also enable customers to download copies of bank statements, which can
be printed at the customer's premises (some banks charge a fee for mailing hard copies of bank
statements). Some banks also enable customers to download transactions directly into the
customer's accounting software. The facility may also enable the customer to order a cheque
book, statements, report loss of credit cards, stop payment on a cheque, Advise change of
address and other routine actions.

Technology Acceptance Model:

The technology acceptance model is an information system theory that models how to
users come to accept a technology and how they use that technology. Developed by Fred Davis
in 1989.
User acceptance is the biggest barrier to the success of new Information Technology –IT -
(Gould, et al., 1991). Davis suggested that adopting an application happens primarily because of
the functions it performs and secondarily for how easy or hard is it to make the system perform
these functions. Moreover TAM provides bases for tracking the impact of the external factors on
internal beliefs, attitude and intention.
TAM has proved valid both inside and outside the organization context. It is capable of
explaining user behavior across a broad range of end-user computing technologies and user
populations. Because of its parsimony and the wealth of recent empirical support for it, TAM has
become popular suggested that TAM’s robust and parsimonious structure allow applications in
other technological adoption situations with the right adjustments. The model specifies the casual
linkages between the key beliefs: Perceived Usefulness and Perceived Ease of Use, and also
users' attitudes, intention and adoption Behavior
Background of Technology Acceptance Model.

The theoretical framework selected for the study was the TAM model, which was originally
developed by Davis (1986) to predict user acceptance of computer technology in the workplace.
It has the advantage of being well grounded in established social psychology theory, being based
on the Theory of Reasoned Action (TRA) (Ajzen and Fishbein, 1980). The model specifies key
linkages between two key belief constructs (i.e. perceived usefulness and perceived ease of use)
and users’ attitudes, intentions and adoption behavior. It is posited that attitude towards using a
new information system is determined by users’ perceptions of usefulness and ease of use of the
system. Attitude towards using the system, in turn, is the key determinant of behavioral intention
to use, which ultimately determines actual system use. In addition, the effects of external
variables such as individual differences or situational constraints are expected to impact on user
acceptance only as far as they are mediated by the two key belief constructs of perceived
usefulness and perceived ease of use.
In addition, Davis et al., (1989) found that perceived usefulness may impact on actual use
irrespective of attitude, provided that the use of the system offers direct benefits to the user. As a
result of several applications and replications, TAM is considered to be well-established and
robust (see Venkatesh and Morris, 2000) and consistently explains a substantial proportion of the
variance (i.e. around 40%) in usage intentions and behavior (Venkatesh and Davis, 2000). The
original model was developed to predict user acceptance of computer technology within the
workplace, latterly, the TAM framework has been considered to be suitable as a theoretical basis
for understanding the use, behavior and acceptance of new Internet-based technologies

TAM has been applied in a range of recent studies to understand consumers’ adoption of a
variety of forms of business-to-consumer (B2C) e-commerce. For example, Jiang et al. (2000)
used TAM to explore the usage of the Internet by college students, while Pavlou (2003) saw its
practical utility in understanding the key drivers for consumer acceptance of web-based retailing.
More recently, in the context of m-banking, Kleijnen et al.’s (2003) examination of consumer
acceptance of wireless finance treated consumer characteristics as moderators of attitude.
The current study applies TAM in the context of web-based retailing of FS in order to explain
the extent to which consumers make use of the Internet as a distribution channel. Extent of
usage, as we define it, represents a continuum that captures information search and the number
of purchases. The bulk of past research investigated adoption a technological system in terms of
a binary outcome and ignored other stages of the buying decision-making process. There have
been a few exceptions. One study that has distinguished between adoption at information search
and purchase was not based on TAM; instead its conceptual underpinning was derived from
Klein’s (1998) Interaction Model of pre-purchase information search and the Theory of Planned
Behavior (Ajzen, 1991) (see Shim et al., 2001 and their Online Pre purchase Intentions Model).
A further study that accommodates the stages of the buying decision making process is the
Extended Web Assessment Model, an evaluation tool designed for the assessment of e-
commerce applications by Schubert (2002/3), who modified TAM to examine consumer
perspectives of websites across the three classic transaction phases of electronic markets (i.e.
information phase, agreement phase and settlement phase), followed by the after-sales phase Our
definition of extent of use represents a continuum that integrates those transaction phases and
in addition accounts for the variety of FS purchases over the Internet.
A recent literature review generally relating to the adoption of technology-based channels of
distribution by Hewer and Howcroft (1999) notes the importance of factors such as convenience
and ease of use to adopters (e.g. Moutinho and Meidan, 1989; Rugimbana, 1995; Marr and
Prendergast, 1993; Lockett and Littler, 1997). Conversely, reasons for non-adoption have
included preference for dealing with a real person (Zeithaml and Gilly, 1987), concerns about
safety and risk (Lewis, 1991) and complexity (Leblanc, 1990). More recently, studies
specifically relating to the Internet (Black et al., 2001; Bradley and Stewart, 2002; Kerem, 2004)
and the adoption of mobile banking (Kleijnen, et al., 2003; Suoranta, 2003) have highlighted the
significance attached to attributes such as convenience, flexibility and accessibility.