Barclays and Santander

Abstract

The paper examines the impact online banking has had on financial institutions specifically Barclays and Santander banks, the customers and employees. As a result of this innovation there have been many benefits that came and that is the core objective of this paper to examine these benefits and the challenges or disadvantages that came with the technology (Bryman, 2008)

It is clear productivity growth become even more noticeable in these banks especially from the year 2000 but at the same time with an increase of online banking services came and an increase of issues related to online banking. Many of these issues have been overcome with time but up to date Barclays and Santander banks among others in the sector are still struggling with some of those challenges. The trend however is promising because the statistics show the t as time goes by moiré and more of these electronic obstacles are overcame. Investments in is slowly but surely substituting the labor these banks use. The impact of ICT o n the market structure and the safety of this technology on the bank and its customers is also be examined in the paper.

Introduction

For the last 25 years the banking industry has very fast evolved to become one of the leading industries in the world. The frequent checks being written and the many officials charged with the duties of performing money transfers are no longer there. What is remaining is a group of employees mainly IT experts who assist the banks monitor and install technologies that can do what the bank officers could do. Most of the traditional banking jobs have been replaced by money management and electronic money transfers. The changes that have been caused by online banking are enormous for example online money systems are used for payment of online, management sites (Bryman, 2008)

All these started in the early 1980’s when the online banking was first introduced as home banking system. It was very much reliant on phone lines, most of this developments too k place specifically in the US New York to be specific. It was mainly started by city bank and chase bank together with three other financial institution that are nor popular in the US. The system made it possible for users to send pages of texts, which could be displayed in on computer screens. This system however this system could not work effectively and therefore did not last for long.

However, this first experience was a seriously failed case it made it possible for scientists and bankers who were pursuing it to re-look modify and develop a more efficient technique that could assist customers and banks to enjoy online banking. This did not happen only in the US, the study and innovations after this initial trial took place almost all over the world. A large number of consumers started to get connected t o the internet and this made it possible for banks t o offer the services online and In circumstances where the clients accepted to co-operate, with Presidential Savings bank becoming the first financial institution to officially adopt the use of this service. It encouraged its customer’s t o open online accounts to facilitate any transactions between them and the clients. Chase bank and Wells Fargo later followed it in offering online banking services. This took place in1995. This was about ten years since the first trial was made. The reason it took this long was because the banks especially had to be very careful the system could not make them loose their money while at the same time ensuring that the customer money and transactions were confidential and secure (Bryman, 2008)

Most consumers in fact were more worried about the ban transactions than the bankers were. The idea of sending very confidential information t o a big and strange web was very scary around that time. Banks nevertheless continued t o tighten their security and continued to follow up on innovation in the industry with the aim of improving this system further.

The reason banks dedicated a lot of attention to the venture was because its advantages could be foreseen right from that time. The biggest of this advantage could come in the form of reduced costs of operations in the bank. Lesser staff could be needed to perform the all the duties that could not be subject ted to electronic banks. Barclays and Santander banks adopted the technology almost immediately after the first there banks earlier mentioned.

The retail locations that the banks operated were reduced and this meant the expenses on running many banking branches were significantly reduced leading to increase of profits for the banks. Because it is not easy for customers and banks t o over a totally internet base services it became increasingly necessary for the banks to offer electronic check services and pay bill. This is because the purely internet based accounts do not offer paper checks and t his obviously would prompt them to keep their initial accounts in continued operation

Body structure

The paper will be divided into the body six parts. The first part will deal with the background. It will shade some light into the history of internet banking and gives a brief explanation on the research method that will be employed. The second chapter will provide basic information on the developments in the sector that have let to the present state of online banking and examine. The third chapter will examine the benefits of the service top both banks Barclays and Santander it will also examine other innovations and their productivity that have come up in the field.

The fourth chapter will deal with the impact of this technology on the customers of both banks while chapter five will focus on the risks of this technology on both the banks and customers six will look at the effects it has had on the employees and lastly chapter seven gives summary of all what has been studied.

Benefits as a result of this innovation to both Barclays and Santander Banks. They therefore continued to increase the services offered through the internet and encouraged more of their customer’s t o register for internet banking. The e customers embraced this though with a lot of caution. That meant they did not d o much of their banking transactions online to begin with. As a result of the flexibility that came with this new technology banks also started doing their businesses out of the usual banking hours. This meant more transaction and with each additional transaction came the profits. This became even more of a motivating factor towards the enhancement of internet banking.

It enabled the customers to receive improved customer service as a result of the technology. The relationship between banks and their customers even grew more. This was possible because the internet offered an opportunity to have a more convenient internet based communications with the customers. Initially this one on one can of service was not very successful because of the many customers who wanted to be served at the same time. The longer hours that banks decided to dedicate t o business meant a more convenient means of communication and freeness.

There were applications that also allowed for budgets, advices, mortgage calculations among other services to be done more efficiently. Indeed online banking made it possible for the account older who had average type of transactions t o make even much easier.

Banks on the other hand improved their finances with many financial institutions deciding to operate only internet based banks. This was a big step within a short prod of time. Barclays and Santander however continued t o operate their business as usual reducing the common physical bank contacts with customers while at the same time increasing internet based transactions and customer service activities.

The duel concept of business means customers will increasingly be performing their own operations using the systems to perform the operations on their own. This mean there will be less activity by the bank employees and this either will mean a reduction of costs, resulting from the hiring of employees or will mean the employees be utilized in other important tasks. Most of these duties are mainly performed by bank tellers who can be retrained t o take up other responsibilities within the bank. Both Barclays and Santander banks have to a big extent, reduced their employees but hired a few more specialists in Information Technology Units.

Management in these institutions has also been improved because the new development requires an adjustment in the manner in which both the systems of the banks and the bank employees are managed. The change of management on its own will mean an improved service from the banks the changes in these posts of management is in line with the new development. Whichever way one looks at it, the change will still positive. Initially the employees also looked at the ne w technology with a lot of apprehension and skeptics. This was because there was the believe that the development would render many of them jobless. This however did not happen in the manner in which h they expected. This required the management to deal with t his apprehension in a manner that would not affect the performance of the employees. The management owned the project and to make sure it succeeds. This was a big boost to both banks.

Most parts of the world today where Barclays and Santander banks have business interests are of a intermediation economy. That means most of the money in circulation goes through banks. This therefore means with the introduction of online banking and its increased transactions resulted to an increase in profits.

The banks have also benefited from an improvement of customer relationship which has led to negligible cases of customers closing their accounts out of disappointment. This is as a result of such technology as Customer relationship Management system This is a system which allows the management of these banks to review their performance and their service to their clients due to use of such interactive system.

The clients lock in their complements, complains and suggestions on banking matters. They can also advice on policies that they think should be improved or introduced to make the services and the bank generally improve. The system provides a broad approach on how the bank management and staff can improve on their services and meet customer interests.

Unlike before, the search for an increased data processing and protection abilities has been improved by both banks. This will therefore mean that the chances of data being lost are rare. The internet and other technological advancements have made it possible for the collection and retention of this data to be improved. Even boost online banking therefore w ill more with this kind of assurance by these two banks. Though the initial investments on equipment that are used to boost data are high, their importance cannot be underestimated. The banks require management to recover these expenses from the profits resulting from more business opportunities and transactions (Bryman, 2008)

The confidence with customers have embraced mobile banking is a big improvement and a boost to the banks. It could be very difficult for this banks to move on if the customers became hesitant to e mm brace this technology. Some few customers interviewed however still little confidence has in the ICT developments in the bank. A continued assessment of those who have embraced mobile banking will ultimately make them change their minds and follow suit.

Methodology

This study done in the US can be a good case study to consider uses an SEM (structural equation model) to manage and create a banking index that is on line for purposes of evaluation. The first step is to identify features of a website that are offered by community banks on line. In a recent survey that was done 97 of the features of websites were identified. These features were deemed important besides being supported by the available literature. Community banks with total assets of less than 1 billion US dollars and operating in Iowa, Montana, Minnesota, South Dakota, and North Dakota were identified after the pilot study was considered acceptable.

In the survey it was also realized that out of a total of 1183 banks only 797 had a functional and running website as of November 2004. The step that followed was to identify how many websites of the 797 banks had some or all of the 97 features that had been shortlisted. Then using the business 2 business (B2B) and bank website layout ecommerce literature as a guide, these 97 variables were grouped together in ten different classes (Bryman, 2008). Every item in these classes was added up to come up with an aggregate index. These indices were later used in the structural equation model as latent indicators for 3 latent constructs which were identified as: banking services: general information, and core banking services. The structural equation model used in creating the online banking index is summarized in the next section of the description variables included in the (ROA) return on asset equation. Nevertheless to mention two variables namely: proportion of consumer loans to total loans and proportion of business loans to total loans – were not included from the model system to avoid a simultaneity problem. This is well illustrated in table 5 and table 1.

Just as anticipated, the online banking index is negative in the overdue asset ratio equation AND positive in the (ROE) return on equity equation. For instance, a unit rise in the online banking index would make ROE rise by 0.16 units. Alternatively, online banking also assists community banks to lower assets that are considered poor. Since banks get better information about their clients’ financial practices, they are able to make better tailor made lending decisions. In the near future online banking is anticipated to provide better information since all transactions are stored in digital forms for easy referencing and analysis.

The problem of some customers taking long to embrace the new technology is an issue that the banks will have to take head on. The banks will be forced to educate these customers on the need to embrace this new technology and give them the assurance that all will be well if they practice the basic mobile banking practices. This may take time and commitment. From previous events Barclays, has particularly shown a lot of potential in organizing forums through its business clubs on the need for as many of them as possible to join internet banking and explaining to them how they are bound to benefit besides letting them know of the importance of security of their money. The customers in many of the cases that were investigated will accept the idea of registering for mobile banking.

The automated teller machines still cannot perform many operations except some deposits and withdrawals. This is a hindrance to the online banking technology because it will mean customers not rely on the machines and will be forced to visit the banks in cases where they have a particular transaction which needs the services of the bank teller machines if they were further improved. There is however a development which has not reached standard levels but which may change this situation in the near future. The visits to the bank will be reduced further. The newly developed ATMs will have t he ability to authenticate a customer through the face, fingerprints and iris. It uses a technology called biometrics 45. This will reduce customer dependency on the retail branches of banks.

Anti money, laundering is another problem that the new technology will have to deal with. The branch services are very effective though not fully but to a large extent in dealing with ant-money laundering. Mobile banking unfortunately does not need a customer to go to the bank and getting “dirty” money into the system is a possibility. This is the kind of money, whose origin cannot be authenticated and maybe used for illegal activities such as terrorism.

As earlier, stated customers are however becoming increasingly confident with the use of this technology to effect their banking operations. The case studies reveal that mobile banking is very much being adopted in the checking of balances, account transactions, among many other transactions. The linkage to mobile phones will become even more appealing to many customers because they can perform their operations from anywhere conveniently as long as they are taught how to go about.

The adoption on mobile banking has made the work of banks easy to run. Internal networks within the Barclays and Santander banks have made it possible for communication between the various branches and customers very easy. Local area networks are a very good facilitator of mobile banking. LAN is an easy to install and therefore these two banks use it to extent their coverage. By doing so, they are enhancing the ability of employees and customers to interact and make business easy. Today there are forms of wireless LAN and this is even much easier to connect and use (Bryman, 2008)

Both Barclays and Santnder use intranet communication systems. It is a safe way of doing business. It has made it possible for the bank employees to communicate with their supplies or customers.

The introduction of mobile banking has reduced the costs of sending postal mails. Electronic mails are increasingly being used in this two banks. There are a few cases however where some customers preferred to pick their own mails from the banks especially the customers who are not connected to mobile banking. The banks however still prefers t o send postal mails to its supplies or customers who have a pending transactions like those with loans and those who need to be reminded on various developments.

Banking is very much based on trust especially from its customers.

Barclays and Santander banks have never had much problems of hacking denial of major technological failures or a breach of privacy . There were isolated cases though in both banks but to a level that can be neglected. Digital fraud can be very expensive for a business the reason why these banks to enhance their security. Customers who are not registered should be encouraged so that as the rest move on in technological advancements they are not left behind. Online customers on the other hand should learn to be careful and ethical in the way they handle mobile banking. The passwords for instance should be well kept and never shared with any one> this will make it easy for them to give track of their own accounts and never become victims to internet schemes. If they find themselves in such a situation they also endanger other users.

Ant I virus technologies are majorly used by this banks and customers should be allowed to have such technologies installed in the computers they use or any other machine or gadget that they use to access mails. This measure will make it easy for detection to be done and therefore infection of computer viruses can be avoided.

The main concern among all mobile internet users is the issue of identification. The use of digital signatures is improving the situation but not as fast as the two banks would have wished it be used. It is the problem of authentication that has made difficult for band to manage fraud and avoid losing millions of money to the wrong people or having accounts for people who are not suppose to have any because of their negative background as a result of being associated with banking malpractices. Some bankers are against the use of these digital signatures for identification mainly because of the expense involved but at the long run it will be useful to have them. The reason why the two banks are keen in introducing them is because it will eventually safe the banks a lot of money resulting from frauds (Bryman, 2008)

Mobile banking has facilitated marketing and sales in Santander and Barclays bank especially in the former, which takes very seriously the mobile marketing. The bank homepage in the internet can be used as an avenue to inform customers on various developments, products available and how best they can benefit from their banking. This should be in fact a much cheaper way to advertise. The customers can market some of those products in some cases unknowingly. They access this information from their homes or workplaces and someone else is likely to notice and recommend. Other websites can be used too to advertise. The mere fact that the customers and many other people are accessing internet is enough to motivate this banks to post adverts. So far the internet has been very successful tool in marketing.

The interaction between bank officials and the public is made much easier. Such activities like tendering processes and filling of forms for whichever reasons do nor have too involve bank visits. Members of the public are urged to feel the forms online and submit them. The rest the bank official tender board s or officials will carry out. This has several advantages on its own. One such advantage is the ability to save time and minimize on the costs incurred processing physical forms.

The second advantage is in some parts of the world were the two banks has businesses and where corruption is rampant tendering online can to a very big extent reduce the chances of bribery among the staff or members of the public. Public local authorities can also feel free to interact with bank officials on any concerns t hey have and which they have, concerning the Barclays or Santander businesses that are located in their area of jurisdiction .The general banking landscape has changed significantly. The time spent on banking activities has generally been reduced. There are fewer errors involved than ever before. This means utilization of economies of scale.

Both banks Barclays and Santander are financially able to accommodate the large investments needed to finance this especially the high cost retail products. These banks also have the ability to finance what are referred to have internet kiosks. The customers are able to get assistance on their internet banking challenges. Generally, branch operations are costly to conduct and may need t o the development of this technology has therefore assisted the operations of these banks.

The challenges of ICT in the sector today are still disturbing to the two banks. Broadening the scope and quality of online services is a major concern to the banks. The lack of security measure will impact seriously on the in banks developments and is likely to lead to major losses if not taken care of. Taking concrete measures to improve this situation therefore will be a big hurdle to most banks Barclays and Santander included.

The other challenge will be the continued and gradual development of user interface. The increased experience of users the simplicity with which internet services are being modified and the changing mindsets in as far as technology is concerned is a major issue which has to be dealt with by the banks. As stated earlier dealing with this challenges will require the commitment of the bank customers the banks and the society gene rally, The governments will have t o enact proper laws to check against malpractices in information technology areas and tin the process assist to avoid future technological failures. (Bell, 1989)

The communities where this bank operates in will be affected significantly. An interesting observation is that community bank competition has been centered geographically in some commuinty. This has enabled the financial institutions to establish a good knowledge base of local business operations thus come up with services and products that are tailor made with local communities in mind. Furthermore the well defined Business and lending practices brought about relationship-banking environment that continues to develop the local comparative advantage. This is a fundamental component of a strong rural infrastructure that augments community development. Given that the profiles of the customers of these banks tended to be that of small to medium sized enterprises and sometimes agricultural firms within a relatively underserved location of capital markets. Comparative advantage was evident given the unique aspects of local business, relative lack of strong competition and overall economic performance within the local community.

Relationship banking tends to allow the community finanacial institutions to evaluate the financial requirements and needs of local firms that appear to support community development activities. In the recent past there has been changes within the banking sector and in particular the community bank segment. Some of this changes are fostering a different view of community banks given the fact that internet banking continues to expand. The finishing of banking deregulation, innovative use of electronic banking products, reducing costs in lending applications, and a shift in competitive focus beyond geographically isolated financial markets have set the ball rolling for structural changes. This has spurred competition in the small business lending markets, which used to dominated by the local banks. (Beck, 2001; Foster, 2001).

To this end it means the financial providers will have to be innovative and come up with products that appeal to their changing clientele needs. Online banking will undoubtedly be one of these methods (Simpson, 2002;Brewer, 2001).

Presently most of the electronic banking services are provided by large national and regional banks. on the other hand, Community banks, have not been that aggressive in implementing this new way of doing business (Emmons and Greenbaum, 1996). An important facet of internet activities within the banking sector should be driven by service quality that augments the traditional banking relationship, as we know it today. This places more pressure upon community banks to be more efficient in delivering Community development applications (Bell, 1989).

Effects on customers

The customers of the two banks have greatly benefited from the innovations. It is true we live today in a society governed by science. Many of these customers therefore were left with no choice but to embrace the new technology. The growing role of science and technology has made it almost impossible to avoid learning and using the various innovations. It is even worse for those who are slow to embrace it because almost all institutions financial to otherwise are using technological advancement many times because it has improved services and still help them to increase their profits.

Information technology is changing the way financial institutions communicate with their customers. A single draft of a massage can be sent to as many customers as possible through the web. This therefore means the bank customers get updated on every development in the bank that it is important to them. The information on what is going on with t he I various deals on the market stock brokerage resources and the development of the coming up of profitable ventures will assist the customers know what is required of them. This communication devices have also become cheaper what that therefore means is that all customers willing to connect themselves from there homes or offices can do so confidently knowing they can be served right from the places they choose to operate from. This phenomenon is likely to continue in future. (Bell, 1989)

Barclays and Santander banks have businesses internationally. What that therefore means is that three customers can be served from several locations around the world without feeling discriminated. Barclays for instance has had branches in Asia and Africa. These are parts of the world where banking has not been easy because there infrastructural developments are not has well has those of developed countries for example Europe and America. The options available to these customers are therefore very encouraging. They can travel t o any parts of the world and feel secure. (Bell, 1989)

Some parts of the third world have some of the best tourist destinations; the presents of the two banks and the facilitations through mobile banking has made it possible for their respective customers to benefit enormously. They can plan their times and for as long as they are connected to the bank they can enjoy their trips from wherever they go.

As a result of the developments in information technology communication unlike in the first two decades has become cheaper. The electronic commerce initiative has become a reality. The customers can use the innovations and get t o t he banks the banks as many times as possible to try and get a much information as possible on the many issues that they feel should be addressed. The advantage with this is some of the information they need ma y not need a bank offi8cial to respond top directly they can got the websites of the respective banks and check on the information that the y need. The banks are very efficient in updating these websites and rarely will a customer lack any form of information from their websites. These range from general credit enquiries money deposits withdrawals overall transactions on the accounts anything new that the banks have to offer, the availability of particular services in any branches or outlet, among several other sources of information, which a customer may be interested with. Most of this information again does not need any bank official to respond to. The customers have a full time access. More importantly is the availability of new information on virtually anything in the market.

There is the increased ability to customize products by the banks. What this therefore means is that the banks can have a specific group of customers en joy a specific product and depending on their line of business or profession. For example those in business can register to be updated on the goings on in their respective areas of operations or in an y changes in as far as the commodities they are dealing with is concerned. The development has become a great booster to businesses around the areas the two banks have representations because their customers are always ahead in the knowledge of the recent developments on almost all sectors of the economy.

This development has also assisted the customers is unnecessary expenditure in dealing with commodities or goods that their business feel may not be wise dealing with art any particular banks.

The kind of interaction between these banks and the customers is a mutual one because it enables both the banks and the customers to deal with the issues very easily without fewer. The second advantage to the customer that comes with this frequent interaction is the ability of the customer to check on the developments in the bank on many issues without feeling intimidated in any way. For example once a rapport is developed between the banks and its customers the customers can always feel free to interact with they and tell them anything that is of concern to them financially or business wise. This in turn will assist the banks re strategize and change their policies where necessary to suit the needs of their customers. The development has been greatly viewed as on that is likely to boost the growth of this banks even more while at the same time ensuring that the customers get the best that is available to them.

In a number of occasions Santander bank has lost quit some money has a result of law suits s from customers who either feel their rights have been infringed or their mutual agreement has not been honored. The mobile banking technology centrally help the bank to improve upon the relationship with such customers because their e will rarely be bad blood between t