2007 Oxford Business & Economics Conference

ISBN : 978-0-9742114-7-3

Determinants of SMEs Perceptions towards Electronic Banking in

Pakistan
Dr Ahmad Kaleem
Associate Professor
Department of Business Administration
Lahore School of Economics,
Lahore, Pakistan.
Email: drkaleem@lahoreschool.edu.pk

Abstract
Electronic distribution channels have gained increasing popularity in recent years. It
provides alternatives for faster delivery of banking services to a wider scope of
customers. This study aims to collect the SMEs owners/executives/managers perceptions
towards the potential benefits and the risks associated to electronic banking in Pakistan.
Data is collected through primary sources which are examined via frequency analysis
and mean score analysis. The results indicate that SMEs use banks mainly for depositing
cheques and cash, withdrawing cash and transferring funds. They least use banks for
transactions related to foreign exchange and credit. SMEs are well aware about the
presence of electronic banking in a country and 62.30% of the respondents regularly use
this facility for financial transactions purposes. The study identifies payment of utility
bills, complaint handling and daily account report as most desired facilities from SMEs.
Which also perceive electronic banking as tools for time saving, facilitates quick
response and minimizes risk of carrying cash. SMEs further believe that electronic
banking increases chances of government access to public data, chances of fraud and
chances of data losses.
The study also segregates the data into electronic banking (EB) users and nonusers basis to identify discrepancies in their perceptions towards the available financial
services or facilities. EB users consider minimizes inconvenience as most desired benefit
while EB non-users consider funds transferring and providing up to date information as
important benefits of electronic banking. Lastly, EB users think heavy costs for services
as an additional risk associated to electronic banking.

June 24-26, 2007

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2007 Oxford Business & Economics Conference

ISBN : 978-0-9742114-7-3

Introduction
Development of electronic distribution channels has attracted both academicians and
practitioners in recent years. IT based distributional channels reduce personal contacts
between the service providers and the customers which inevitably lead to a complete
transformation of traditional bank-customer relationship (Barnes and Howlett, 1998).
Opposite, e-channels allow customers to compare prices across suppliers quickly and
easily (Delvin, 1995) hence increase competition among banks and from non-bank
financial institutions (ECB, 1999). The situation demands an enhance understanding of
why some people adopt one distributional channel and others do not, alongside an
identification of the factors that may influence their decisions (Patricio et al., 2003).
The relationship between SMEs and the banks has not been the subject of much
attention (Binks and Ennew, 1998, Madill et al., 2002). Unlike large businesses that have
ready access to debt and equity markets; SMEs have little or no choice for credit
facilities but the banks (Gerrard and Cunningham, 2000). Even within the banking sector
there is a growing reorganization that SMEs not only represent a viable market segment
in terms of the number and value of accounts but also provide considerable amount of a
retail profit (Carroll, 1999). Thus, it would be in the best interests of banks to attract and
retain this profitable segment and facilitate their growth in the longer term (Gerrard and
Cunningham, 2000).
This study investigates the SMEs owners/executives/managers perceptions
towards electronic banking in Pakistan. The country has 3.2 million registered SMEs
units which directly contribute 78% of non-agricultural employment and 30% of GDP.
SMEs also represent 25% of the total exports and 35% of the total value added goods
manufactured in a country (State Bank of Pakistan, 2005). Realizing the importance,
State Bank of Pakistan (SBP) has setup separate SMEs department and introduced
separate prudential regulations for SMEs.
Objectives
To identify the main types of financial transactions the SMEs in routine perform with
their respective banks.
To explore the sort of facilities SMEs demand from electronic banking.
To find the critical attributes those SMEs believe important when using electronic
banking.
To find the key risks associated to electronic banking in SMEs perception.
To present results and implications that will be insightful to researchers and banks
interested in electronic banking.
Electronic Banking in Pakistan
Electronic banking is the latest in the series of technological wonders. ATM, Tele
Banking, Internet Banking, Credit Cards and Debit Cards etc. have emerged as effective
delivery channels for traditional banking products. In Pakistan, foreign banks took the
lead by introducing ATM and credit cards in mid 1990,s followed by domestic banks in
late 1990s. The government only introduced Electronic Transaction Ordinance in 2002 to
provide legal recognition to digital signatures and documentation. This delayed entry in
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2007 Oxford Business & Economics Conference

ISBN : 978-0-9742114-7-3

electronic banking largely by regulatory hurdles, higher start up costs, on going banking
sectors reforms and lack of technical skills (SBP annual report, 2003: p. 110).
At present, commercial banks in Pakistan are encouraged to setup online
branches, install ATM networks, issue debit and credit cards. According to Kolachi
(2006) Pakistani banks provide the following online banking services and products. (1)
Inquiry; Account statement inquiry; Account balance inquiry; Check statement inquiry;
Fixed deposit inquiry (2) Payment; Funds transfer; Credit cards payments; Direct
payments; Utility bills payments (3) Request; Checkbook request, Stop payment request;
Demand draft request; New fixed deposit request (4) Download; Customer profile;
Statement download; Other information and guidelines downloads. A quick glance at
Table 1 shows that the number of online branches, ATM networks, debit and credit cards
holders have sharply increased since year 2000. It is important to note that domestic
banks are the major supplier of ATM facility while foreign banks mainly Citibank and
Standard Chartered dominate the credit cards business in a country and accounting over
95% of total amount transactions (SBP annual report, 2005: p. 111).
Table 1
Electronic Banking Statistics in Pakistan
Item
2000
2001
2002
2003 2004
No of online branches
322
450
777
1,581 2,475
No of ATMs
206
259
399
552
786
No of Debit Cards Holders (000)
240
415
736
1,257 1,874
No of Credit Cards Holders (000) 217
292
369
397
808

2005
2,897
1,028
2,240
1,041

(Source; SBP annual report, 2005: p. 66)

Literature Review
Earlier literature on bank-customer relationship mainly focuses on bank selection
criterion. Turnbull (1983) found high usage rates for short- and medium-term loans,
Dunkelberg et al. (1984) found personal relationship and the knowledge about your
business was the most important criterion, Buerger and Ulrich (1986) found pricing,
Schlesinger et al. (1987) found accessibility of borrowing, lending rates and wide range
of services, Prince and Schutz (1990) found confidentiality, Lucey (1990) found
personalized and flexible service. Nielsen et al. (1998) who studied a sample mixture of
small, medium and large enterprises in Australia found that long term relationship
following by pricing are the most important selection criterion. Gerrard and Cunningham
(2000) found that Singapore hotels consider pricing, geographical location and accuracy
of bank statements are the main criterion before selecting bank.
Since 1990s, researchers have tended to focus more on the existing relationship
between customers and their bank. Barsky (1994) found that cost of recruiting new
customer is said to be five times more than the cost of retaining an existing customer
Blackwell and Winter (2000) observed that developing relationship with the bank can
prove to be a valuable asset for many small businesses. Thus building of a long term
banking relationship is not only beneficially for small businesses but it can also provide
huge benefits to banks (Carpenter, 1998).
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2007 Oxford Business & Economics Conference

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Chaston (1993) examined whether the banker-customer relationship had

undergone changes in UK. He looked at the factors influencing opinions about banks and
then compared the responses with his earlier survey conducted in 1987 (Chaston, 1987).
He concluded that the banker/customer relationship has clearly deteriorated. Zineldin
(1995) examined the relationship between banks and the corporate clients in Sweden. He
found that small and medium size firms have more stable relationship with their banks
than do large firms. He also found that confidence and trust, competitiveness on loans
and speed of decision are the most important factors in the bank selection. Personal
contact with the bank and the level of technology bank using are not sufficient reason of
bank selection.
Summarizing the discussion earlier studies argued that strong personal interaction
is beneficial for both customers and the banks. However, increase usage of IT based
delivery systems change the traditional bank-customer relationship. Robinson (2000)
argued that the online banking extends relationship with the customers through providing
financial services right into the home or office of customers. The banks now enjoy the
benefits in terms of increase customers loyalty and satisfaction (Oumlil and Williams,
2000).
Thornton and White (2001) compared seven distribution electronic channels
available for banks in US concluded that customers orientation such as convenience,
service, technology, change, knowledge about computing and internet affected the usage
of different channels. Howcroft et al., (2002) found that the most important factors
encourage consumer to use online banking are lower fees followed by reduce paper work
and human error which subsequently minimize the human disputes (Kiang et al., 2000).
Convenience of conducting banking outside the branch official opening hours has
been found significant in case of adoption. Banks provide customers convenient,
inexpensive access to the bank 24 hours a day and seven days a week. Gerrard and
Cunningham (2003) found positive correlation between convenience and online banking.
They remarked that a primary benefit for the bank is cost saving and for the consumers a
primary benefit is convenience. Multi-functionality of an IT based services may be
another feature to satisfy customers needs (Gerson, 1998).
Decrease in percentage of customers visiting banks with an increase in alternative
channels of distribution will also minimize the queues in the branches (Thornton and
White, 2001). Increase availability and accessibility of more self-service distribution
channels help banks administration in reducing the expensive branch network and its
associate staff overheads. Vacant bank employees and office space may be used for some
other profitable ventures (Birch and Young, 1997).
Internet banking also increases competition within the banking system and from
non-bank financial institution (ECB, 1999). The internet increases the power of the
customers to make price comparison across suppliers quickly and easily. Subsequently,
push the prices and margins downward (Devlin, 1995). Institutional encouragement to
use IT based services and lower service charges are another important dimension to
explore (Zhu at al., 2002). Cantrell (1997) conducted a banking survey in US found that
increase in service fees was one of the main driving forces behind the move of some large
bank customers to smaller community banks.
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Yakhlef (2001) pointed out that banks are responding to the internet differently
and those which see the internet as a complement and substitute to traditional channels,
achieved better communication and interactivity with customers. Moutinho and Phillips
(2002) emphasized that Scottish bank managers considered efficiency and enhancement
of customer service as the two perceived advantages of internet banking. Similarly, faster,
easier, and more reliable service to customers, and improvement of the competitive
position were highlighted to be the most important drivers of online banking among the
banks and IT managers in Kuwait (Aladwani, 2001).
Byers and Lederer, (2001) concluded that it was changing consumer attitude
rather than bank cost structure that determines the changes in distribution channels, they
added that virtual banks can only be profitable when the electronic preferring segment is
approximately twice the size of the street banks preferring segment. Nancy et al., (2001)
argued that customers likely to interact with humans rather than machines. Customers
find more possibilities of asking questions and believe that banks clerks are less prone to
errors. Polatoglu and Ekin (2001) found that low levels of email usage and a preference
of doing over the counter transactions at bank branches are the main reasons of not using
e-banking in Turkey.
The opportunity to conduct trail may confirm how it is easy to use to reluctant
customers (Black et al., 2001). Boon and Ming (2003) concluded that the banks in
Malaysia should concentrate on enhancing their operation and product management
through the mixture of branch banking as well as e-channels like ATMs, phone banking
and PC banking.
Finally, a number of studies also found trust and perceived risks have a significant
positive influence on commitment (Bhattacherjee, 2002; Mukherjee and Nath, 2003).
Reputation of a service provider is another important factor affecting trust. Doney and
Cannon (1997) defined reputation as the extent to which customers believe a service
provider is honest and concern about its customers. Tyler and Stanley (1999) argued that
banks can build close and long lasting relationship with customers only if trust,
commitment and honesty based cooperation are developed between them. Banks overall
reputations combine with reputation in IT based services make banks more or less
attractive (Rotchanakitumnuai and Speese, 2003).
Internet provides many opportunities for the banks but it is a fact that current
banking services through internet are limited due to security concerns, complexity and
technological problems (Sathye, 1999: Mols, 1999). Nancy et al., (2001) study found that
customers complaint about computer logon time which are usually longer than making a
telephone call. Further the respondents felt that they have to check and recheck the forms
filled in online, as they are worried of making mistakes. Frequent slow response time and
delay of service delivery causes customers unsure that the transaction was completed (Jun
and Cai, 2001). Min and Galle (1999) found destruction in operating system and
disruption of information access as common factor related to unwillingness to use
internet channels for commerce.
Liao and Cheung (2002) found that individual expectations regarding accuracy,
security, transaction speed, user friendliness, user involvement and convenience are the
most important attributes in the perceived usefulness of internet based e-retail banking.
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Confidentiality of the consumer data is another important concern in the adoption of the
online banking (Gerrad and Cunningham, 2003). Customers fear that someone will have
unlimited access to personal financial information.
White and Nteli (2004) study focused on why the increase in the number of
internet users in the UK has not been paralleled by increases in internet usage for banking
purposes? Results found that the customers still have concerned with the security and the
safety aspects of the internet.
Lack of specific laws governing internet banking is another important concern
and cover issues such as unfair and deceptive trade practice by suppliers, unauthorized
access by hackers. Larpsiri et al., (2002) argued that it is not clear whether electronic
documents and records are acceptable as sufficient evidence of transactions. Another
issue is the jurisdiction of the courts and dispute resolution procedures in case of using
internet for commercial purpose. Dispute can arise from many issues. For instance,
website is not the branch of the bank. It is difficult for the court to define the location of
the branch and decide whether they have jurisdiction (Rotchanakitumnuai and Speece,
2003).
Other risks associated to electronic banking are job losses, lack of opportunities to
socialize and development of lazy society (Black at al., 2001)
Methodology
The survey was designed and conducted in Lahore which is the second largest city of
Pakistan. SMEs were selected from the yellow pages and every hundredth company was
targeted randomly. A specifically designed questionnaire was used as a tool and SMEs
owners/executives/managers were requested to participate. Computer literacy was
essential for the participants due to specific nature of the survey. Trained students under
the supervision of an author distributed to and collected back the questionnaires
simultaneously. The experience showed that the telephone numbers and addresses used
by many firms in the metropolitan centers were not necessarily locational addresses. In
addition, some of the SMEs refused to participate in the research. Further, some
incomplete questionnaires were also rejected and their names were subsequently
excluded from the list. Overall 221 questionnaires were finally selected for analysis
purpose.
Five points Likert scale was used to measure all the statements (1 = strongly
disagree to 5 = strongly agree). Participants were asked to express the level of their
agreement with attributes/factors identified earlier from the literature. Attributes covered
respondents present business requirements, their awareness towards electronic banking,
their expectations towards the benefits/advantages and risks associated to the electronic
banking. Data was analyzed via frequency analysis and mean score analysis. In
answering the questions, respondents were assured about the confidentiality of their
responses and their names were not published. Finally, a pilot study with ten SMEs was
conducted in order to refine the questions before the field work.

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Empirical Results
Table 2
Respondents Profiles
N = 221

Designation

Owners
Executives
Managers

22
76
123

9.95%
34.39%
55.66%

Annual Sales

Less than 5 million

Between 5 to 10 million
Between 10.01 to 20 million
More than 20 million

11
101
85
24

4.98%
45.70%
38.46%
10.86%

Working Experience

Less than 1 year

Between 2 to 5 years
Between 6 to 9 years
More than 10 years

29
65
47
80

13.12%
29.41%
21.27%
36.20%

Professional Degree
Part of Degree
Short Courses
Self Learning or from Friends

24
21
71
105

10.86%
9.50%
32.13%
47.51%

Trading
Manufacturing
Services
More than one sector

13
47
114
47

5.88%
21.27%
51.58%
21.27%

Level of Computer
literacy

Sector Belonging

The characteristics of the sample SMEs are outlined in table 2. The data shows that
34.39% and 55.66% of the respondents are either executives or managers at SMEs while
9.95% owners participate in the survey. Annual sales based classification of SMEs
includes less than 5 million (4.98%), between 5-10 million (45.70%), between 10.01- 20
million (38.46%) and more than 20 million (10.86%). 29 respondents hold less than 1
year work experience, 65 respondents fall in category between 2-5 years, 47 respondents
fall in category between 6-9 years and 80 respondents hold more than 10 years of work
experiences. The data also shows that 32.13% and 47.51% of the respondents have either
attended computing short courses or self learning or from friends respectively. Lastly, 13
participating firms belong to trading sector, 47 firms from manufacturing and 114 firms
from the services sector. The figures clearly indicate the dominance of services firms in
metropolitan areas of Lahore which is quite expected.

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Table 3
No

1
2
3
4
5
6
7
8
9

What level of business transactions do you have with banks in routine work?
Type of Business Transactions
Mean
S.D
Cheque deposits in routine work are
4.66
0.80
Cash deposits in routine work are
4.61
0.78
Cash withdrawals in routine work are
4.54
0.90
Salary transfer in routine work is
4.46
0.94
Domestic funds transfer in routine work are
4.13
1.35
International fund transfers in routine work are
4.06
1.43
Paying utilities bills in routine work are
3.98
1.36
Foreign exchange related transactions in routine work are
3.09
1.37
Credit related facilities in routine work are
2.88
1.52

Table 3 presents SMEs current routine level and type of transactions with their
respective banks. Respondents preferences are computed in terms of mean scores and
mentioned in ascending order. The highest preferences go to cheque depositing (4.66)
followed by cash deposit (4.61) then cash withdrawal (4.54) and salary transfer (4.46).
SMEs least preferences are credit related facilities (2.88) and then foreign exchange
related transactions (3.09). Table 3 concludes that SMEs contact their banks mainly for
business related transactions. They do not frequently utilize credit related facilities and
their involvements in international businesses are also low.
Table 4
Have you ever accessed to your bank website for financial purposes?

Yes

No

64.80%

35.20%

Has your firm given taken special access to your bank website for financial affairs?

Yes

No

62.30%

37.70%

How frequently do you visit your banks website for financial purposes?

Daily

Weekly

Monthly

Never

33.60%

26.40%

3.30%

37.70%

Table 4 presents the sample respondents views towards their access to banks
websites for financial purposes. 64.80% of the respondents accepted that they have
accessed their bank websites. 62.30% of the total respondents confirmed that they have
taken special access to their banks websites for financial transactions purposes. When
asked, how frequently do you visit your bank website for financial purposes? 33.60% and
26.40% respondents visited on daily and weekly respectively. Table 4 also indicates that
overall 37.70% respondents did not use their banks websites for transactions and
information purposes. The figure also includes 35.20% of the total respondents who had
not even once visited their banks websites. Based on findings, it may suggest that banks
at initial level can launch special awareness campaign to introduce their websites and
online facilities to existing non users.

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Table 5
What sort of services/facilities do you mostly demand through electronic banking system?
EB Users
EB Non-Users
Statements
Mean
Ranking Mean Ranking
Utility bills payments through electronic banking are
4.80
1
4.04
1
Complaints handling through electronic banking is
4.79
2
4.04
2
Daily account reports through electronic banking are
4.75
3
3.98
4

Availability of request forms (demand draft, Cheque

book, etc.) through electronic banking are
Stop payment request through electronic banking is
Bank reconciliation through electronic banking is
Direct payments through electronic banking are
Funds transferring through electronic banking is

4.71
4.54
4.49
4.43
4.41

4
5
6
7
8

3.96
3.89
3.93
3.83
4.02

5
7
6
8
3

Table 5 segregates the data into electronic banking (EB) users and non users. It
covers various types of services/facilities which respondents demand from electronic
banking. Results are computed in terms of mean scores and presented in ascending order.
Table 5 shows that both EB users and non users rank statement utility bills payments
through electronic banking, complaints handling through electronic banking and daily
account reports through electronic banking among the most demanded facilities. In case
of least demanded facilities, both EB users and non-users agree on the statements bank
reconciliation through electronic banking and direct payments through electronic banking.
The main discrepancy in opinion between EB users and non users exist in
statement funds transferring through electronic banking. EB users rank this statement
on last position while EB non users rank the same statement on third position. Transfer of
funds through electronic banking is a relatively new facility in Pakistan. Presently the
service is not free of cost and the banks charge their customers on per transaction basis.
Bank can attract existing EB non users once the transaction costs are reduced.
Table 6
What sort of advantages/benefits electronic banking system can provide you regarding
your business?
EB Users
EB Non-Users
Statements
Mean
Ranking
Mean Ranking
Electronic banking minimizes inconvenience
4.55
1
4.43
6
Electronic banking saves the time
4.52
2
4.65
1
Electronic banking facilitates quick response
4.51
3
4.48
4
Electronic banking minimizes risk of carrying cash
4.49
4
4.50
3
Electronic banking provides up to date information
4.48
5
4.59
2
Electronic banking increases operational efficiency
4.40
6
4.26
7
Electronic banking improves service quality
4.26
7
4.46
5
Electronic banking reduces H.R requirements
4.25
8
3.74
9
Electronic banking minimizes cost of transaction
3.85
9
4.07
8

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Table 6 shows SMEs perceptions towards the advantages/benefits of electronic

banking. Separate mean scores for EB users and non users are computed and presented.
Results show that statements electronic banking minimizes inconvenience, electronic
banking save the time and electronic banking facilitates quick response appear with the
highest mean scores of 4.55, 4.52 and 4.51 in case of EB users. EB non-users show
highest preferences for the statements electronic banking saves the time (4.65), electronic
banking provides up to date information (4.59) and electronic banking minimizes risk of carrying
cash (4.50).

Next, EB users give average importance to statements electronic banking

minimizes risk of carrying cash (4.49), electronic banking provides up to date information
(4.48) and electronic banking increases operational efficiency (4.40). EB non-users rank
statements electronic banking facilitates quick response (4.48), electronic banking improves
service quality (4.46) and electronic banking minimizes inconvenience (4.43) on fourth, fifth
and sixth positions respectively.
Lastly, EB users allocate least mean scores to statements electronic banking
improves service quality (4.26), electronic banking reduces H.R requirements (4.25) electronic
banking minimizes cost of transaction (3.85). While, EB non-users show least preferences
for the statements electronic banking increases operational efficiency (4.26) electronic
banking minimizes cost of transaction (4.07) and electronic banking reduces H.R requirements
(3.74).

Table 6 overall concludes that the main discrepancies in the perceptions of EB

users and non-users come up in case of statements electronic banking minimizes
inconvenience and electronic banking provides up to date information. EB users consider
minimizes inconvenience as the main benefit while the same attribute EB non-users rank on
sixth position. Alternatively, EB non-users consider providing up to date information as second
most important benefit of electronic banking. The same attribute EB users rank on fifth position
in terms of mean score.

Table 7
What sort of risk/disadvantages you think from electronic banking system
EB Users
EB Non-Users
Statements
Mean
Ranking
Mean
Ranking
Electronic banking has the chance of government access
4.57
1
4.20
1
Electronic banking has the chance of frauds
3.69
2
3.83
2
Electronic banking charges heavy cost for services
3.04
3
3.15
7
Electronic banking has the chance of data loss
3.02
4
3.52
3
Electronic banking lacks information security
2.97
5
3.28
5
Electronic banking has many legal and security issues
2.67
6
3.26
6
Electronic banking has less operational reliability
2.61
7
3.37
4
Electronic banking lacks required expertise and training
2.60
8
3.07
8

Electronic banking brings inadequate information on the

website

2.57

3.07

Table 7 computes SMEs perceptions towards the risks associated to electronic

banking in terms of mean scores. It again covers both EB users and non users. The results
conclude that both EB users and non-users consider statements electronic banking has
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the chance of government access and electronic banking has the chance of fraud
highest, in terms of mean scores, among the risks associated to electronic banking.
However, the main discrepancies in opinions exist between EB users and non
users in case of statements electronic banking charges heavy cost for services and
electronic banking has less operational reliability. EB users rank these statements on
third and seventh positions respectively in terms of risks associated to electronic banking.
The same statements appear on seventh and fourth positions respectively in case of EB
non users.
Table 7 does not show differences in opinions in case of remaining statements.
Both EB users and non users rank statements electronic banking has the chance of data
loss, electronic banking lacks information security and electronic banking has many
legal and security issues among the average risks associated. Again, both groups show
least preferences for the statements electronic banking does not have the required
expertise and training and electronic banking brings inadequate information on the
website.
Conclusion and Discussion
This study aims to collect the opinions of SMEs owners/executives/managers towards
electronic banking in Pakistan. Computer literacy was the primary condition for the
participants due to technical and specific nature of the study. The results indicate that
SMEs in routine use banks for depositing cheques and cash, withdrawing cash and
transferring funds. They least contact banks for foreign exchange and credit facilities
related transactions. Results further indicate that 62.30% of the total respondents use their
banks websites for financial transactions purposes. Out of this figure 33.60% use on daily
basis, 26.40% on weekly basis and 3.30% on monthly respectively. Strangely 35.20% of
the respondents, who are though computer literate, have not visited their banks websites
even once. It clear highlights the need of special awareness campaign for the introduction
of banks websites and available online facilities to existing accounts holders.
The study then segregates the data collected into electronic banking (EB) users
and non-users basis. It asks the respondents the sort of services/facilities they mostly
demand from electronic banking. Results are compiled in terms of mean scores. Both EB
users and non-users identify payment of utility bills, complaint handling and daily
account report as most desired facilities through electronic banking. These facilities are
generally both times consuming and require frequent banks visits. SMEs demand for
these facilities can be more understandable under present Pakistani banking setup where
five large banks dominate more than 60% of total banking sector deposits. These banks,
except one public bank, were previously under government control and are only recently
been privatized. Their middle and lower management still hold the mentality of old
public sector. They are also lag behind from private and foreign banks in terms of
technology adoption. At present, private banks mainly offer online utility bills payment
services and toll free helpline services to its customers. Results further indicate that EB
non-users consider electronic funds transfer among important features of electronic
banking. Efficient funds transfer facility considers necessary for any bank to attract or to
retain its business clients. Pakistani banks have only recently been introduced online
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funds transfer services. The facility allows customers to transfer funds from one account
to another account within the bank and to accounts in other banks from their personal
computers. Thus, results conclude lack of awareness among EB non users which again
highlight the importance of effective media campaign.
The study also identifies eighteen potential attributes from the literature review
which cover benefits and risks associated to electronic banking. Using these attributes,
the author tries to investigate SMEs perceptions towards electronic banking. At the first
level, mean scores of benefits of electronic banking are computed and ranked. SMEs
consider time saving, facilitates quick response and minimizes risk of carrying cash as
important benefits of electronic banking. These results are similar to earlier studies such
as (Aladwani, 2001) in case of Kuwait and Moutinho and Phillips (2002) in case of
Scotland. However, statement minimizes the risk of carrying cash rejects Laforet and Li
(2005) study who found habit of carrying cash as the main hurdle in promoting electronic
banking in China.
The results also indicates that SMEs consider reduces HR requirements and costs
of transactions as least expected benefits of electronic banking. The findings are
important for policy makers as it contradict earlier studies which consider cost
effectiveness as the main advantage of electronic banking. Howcroft et al., (2002)
concluded that institutional encouragement to use IT based services and low IT services
fees are important factors to encourage customers to use online banking. Second, low
mean score for the attribute reduces HR requirement may associate to recent penetration
and high growth rate of electronic banking in a country as highlighted in table 1.
The outcomes also highlight the discrepancies in opinions between EB users and
non users. EB users consider minimizes inconvenience as important benefit of
electronic banking which EB non-users consider among average important benefits.
Alternatively, EB non-users rank provides up to date information as second most
important advantage of electronic banking which EB users do not consider important.
Results conclude that EB users responses are similar to earlier studies such as Thornton
and White (2001), Howcroft at al., (2002) and Gerrad and Cunnigham (2003). However,
EB non users responses need further investigation. They do not consider electronic
banking as tool of reducing inconvenience and demand more information on banks
websites. In short, EB non users are not satisfied with the present electronic banking
facilities.
This study at a further level rank the mean scores of risks associated to electronic
banking. The findings conclude that chances of government access to data, chances of
fraud and chances of data losses appear as most expected risks while lack of require
training and expertise and bring inadequate information on the website as least expected
risks associated to electronic banking. The findings are similar to Gerrad and
Cunningham (2003) study in case of Singapore who emphasized that the confidentiality
of the consumer data is an important concern in the adoption of the online banking.
Customers fear that someone will have unlimited access to their personal financial
information. Further, steps should be taken to develop trust among SMEs towards the
issues like information security and chances of fraud. A number of studies found trust and
perceived risks have a significant positive influence on commitment (Bhattacherjee,
2002: Mukherjee and Nath, 2003: White and Nteli (2004). Lastly, EB users also consider
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Oxford University, UK

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2007 Oxford Business & Economics Conference

ISBN : 978-0-9742114-7-3

heavy costs of services as additional risk associated to electronic banking. The finding
is important for the management for decision purposes. Cantrell (1997) conducted a
banking survey in US and found that increase in service fees was one of the main driving
forces behind the move of some large bank customers to smaller community banks.
Further James at al., (1998) concluded that business firms have experienced to control
cost in recent years to survive in global competition. It is natural for them to expect their
bank to be efficient. When banks operate efficiently, there is less pressure on them to
raise customer service charges and fees.
At the end it can be concluded that this study has significant contribution towards
the theory especially in case of EB non users perceptions and expectations from
electronic banking. However, it has some limitations. First, it is conducted in one city,
Lahore. Replication in other cities help to cross validates the findings. Second, this
research is restricted to small sample of SMEs. Larger sample will multiple industries
would be fruitful in making in-depth investigations. Third, this study only concentrates
on owners/executive/managers perceptions towards the benefits and risks associated to
electronic banking. Other factors such as family own business structure, close links with
vendors who are also sometimes family members and political considerations may
influence the choice process and should be incorporated in future studies. Last but not
least, electronic banking advocates contact less form of interaction between banks and
customers to reduce their costs. However, the main element of relationship marketing is
contact and commitment. It seems that both strategies cannot be run concurrently in
successful manners (Ibbotson and Moran, 2003). Thus raises the issues of customers
retention and maintaining their loyalty for future investigation purposes.
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