Online Banking: Why People Are Branching Out

by Michelle Bayles

Summary: Results from a questionnaire designed to query online banking behavior are reported. The most frequent activities reported were checking account balances and viewing or paying bills. Purchasing insurance, CDs, and applying for a loan or credit card were the most infrequent online activities. Respondents indicated that convenience and saving time were the biggest incentives to bank online. Quick access to information, clear feedback, and simple terminology were identified as the most important features of an online banking site. Implications for designers of online banking sites are discussed.

INTRODUCTION

Technological advances in the banking industry have revolutionized how people manage their finances. In 1995, online banking was introduced to the public. This form of banking enables access to financial information via the Internet using personal computers, hand-held devices, kiosks, Web TVs, and cellular phones. Customers now have greater access to information, the ability to receive helpful updates and advice while reaping the benefits of convenience (Business Communications, 2000).

Banking websites offer a variety of information and services including: opening an account; checking account balances; downloading statements; viewing or paying bills online; transferring funds between accounts; transferring funds to accounts outside the bank; purchasing CDs or securities; administering brokerage or retirement accounts (IRA, 401K, etc.); applying for a credit card; checking credit card balances; applying for a loan; checking loan status; and purchasing insurance (Business Communications, 2000).

Online financial activity has increased steadily as more and more Internet-capable households use Internet banking (Powell, 2001). The Pew Internet and American Life Project (2002) reported 37 million Americans banked online in 2002, a significant increase from 14 million in 2000. The current study reports survey results from a group of experienced online banking customers.

METHOD

Participants

Thirty-nine participants (20 Male, 19 Female), ages 18 – 60 volunteered for the study. On average, the participants reported using the internet 4 or more years.

Materials

A questionnaire was developed and administered to individuals who currently bank online. Frequency of online banking behaviors were assessed using a comprehensive list of transactional activities identified by Business Communications (2000). The same list of activities was used for categorizing behaviors typically conducted online or in person/telephone. Reasons for not conducting activities online and factors contributing to initial decision to bank online were also assessed. The last portion of the questionnaire addressed importance ratings of online banking design features. A list of design guidelines generated by Serco Usability Services (2000) along with general usability design guidelines were included (Tullis, 1995; Nielsen, 1996; Nielsen, 1999).

RESULTS

Tables 1 - 8 summarize the results of the questionnaire. The two most important reasons why respondents reportedly decided to bank online were convenience and saving time (Table 2). They also identified several activities that contributed to their decision; these included the ability to look up information on accounts and transfer funds between accounts. This was consistent with individuals reporting the most frequent activity conducted on a weekly basis was checking their account balances (Table 4).

The second most frequent activity conducted on a monthly basis was viewing or paying bills. Gomez (2002) reported similar findings that 66% of online bankers wanted to pay bills/track debits online. Based on reports by Gomez, multiple banks have reevaluated their bill payment strategies and eliminated online billing fees. For example, Bank of America no longer charges customers to utilize online bill payment services (Gomez, 2002). This new strategy was implemented to aid in customer retention. Individuals become highly invested when setting up the billing service; this typically results in increased switching costs and customer retention (Ramsaran, 2003). Sanjay Gupta, an e-commerce executive for Bank of America, reported their banking site received 60 million hits per month and had a 50% growth in online customers in 2003 (Ramsaran, 2003). Banks may be losing potential customers by charging for bill payment services. Several participants indicated a desire to use these services but were reluctant due to fees.

The most important design feature identified in this research was "quick access to information you are looking for" (Table 8). Given the high frequency of users wanting basic account information, it is recommended that account activity and balances should be immediately accessible after login. This recommendation is supported by Gomez (2002), who is recognized by the largest financial institutions in the United States for providing benchmarking information on Internet banking services.

Clear and simple terminology was rated as a very important design element for banking sites. Failure to achieve this can dissuade potential banking customers. A usability study of an online banking site by SURL found users to be confused by the term "Payee" (i.e., users wondered "Is that me or the company I am paying?"). As a result, it is recommended to use more meaningful terminology when setting up an individual or company. For example, “Account number for whom you are paying:" may be more meaningful than “Payee account".

Results from this study showed that "feedback on acceptance or rejection of information", "indicating a function has been completed", and "identifying/fixing mistakes" were rated as very important design features for a banking site. Including these features may avoid confusion related to online forms in the transaction process. Other design recommendations for forms include clearly indicating required fields, placing legible error messages in a highly visible area, and providing feedback on how to proceed when completing a transaction (Diemen, 2000).

Several activities were reported to be preferred to be done in person (or over the telephone) rather than online (Table 6). These included opening an account, purchasing insurance, CDs or securities, administering brokerage or retirement accounts, and applying for a credit card or loan. The most important factors that contributed to conducting activities in person instead of online were preferences for dealing with people face-to-face, sites not offering enough information, perceived risk, and confusing terminology (Table 7). A number of banks have attempted to address these issues by implementing interactive capabilities such as secure chat and e-mail help (Ramsaran, 2003).

Table 1: Factors influencing participants choosing a bank

 

Frequency

Percent

The bank offered online banking

10

26

Their website contained the information I was  looking for

7

18

I liked the functionality the banking site offered

6

15

Their website was easy to use

4

10

I liked the way the site looked

1

3

None of the above

27

69

Table 2: Activities most important when deciding to bank online

 

Frequency

Percent

Look up information on checking or other deposit accounts

35

90

Transfer funds between deposit accounts

24

62

Use the bill payment service

15

39

Look up information on a loan, credit card , or line of credit

13

33

Make payments on a loan, credit card or line of credit

12

31

Download account information

11

28

Use Web or email customer service

6

15

Curiosity - no specific use

-
-

Table 3: Importance rating for reasons why people decided to bank online


 

Very Important

Banking online saves me time

80%

I can do my banking when it is convenient for me

62%

Control over finances

44%

Availability of information

26%

Saving money

23%

More bank services available online

21%

Can do my banking in private

18%

Table 4: Frequency of banking activities typically conducted online

 

Median

Check account balance

Weekly

View or pay bills

Monthly

Download statements

Less than once a month

Transfer funds between accounts at the same bank

Less than once a month

Check credit card balances

Less than once a month

Pay credit card bills

Less than once a month

Table 5: Banking activities NEVER conducted online

 

Frequency

Percent

Purchase insurance

39

100

Purchase CDs or securities

37

95

Administer brokerage or retirement accounts

37

95

Apply for a loan

36

93

Apply for a credit card

34

87

Check loan status

32

82

Transfer funds to accounts at other banks

28

72

Table 6: Banking activities most likely to be conducted online and in person/telephone

 ONLINE

Percent

IN PERSON/TELEPHONE

Percent

Check account balance

95

Open an account

92

Transfer funds to accounts at the same bank

92

Purchase insurance

85

Download statement

87

Purchase CDs or securities

82

Check credit card balances

87

Apply for loan

80

View or pay bills

72

Administer brokerage or retirement accounts

72

Check loan status

69

Apply for credit card

69

Table 7: Reasons to conduct banking activities in person/telephone rather than online

 

Frequency

Percent

Prefer to deal with people face to face

28

72

The site does not offer enough information to answer my questions

18

46

Feel it is too risky

13

33

Confusing terminology

12

31

Don't trust giving contact information online

9

23

My online connection is too slow

5

13

It's too complicated and time consuming

5

13

Don't trust accuracy of information

5

13

Length and number of online forms are too much

4

10

I don't know how to use the banking site

3

8

My online connection is unreliable and crashes often

1

3

It is difficult to read online

-
-

Table 8: Importance ratings for online banking features (1 = very important, 6 = least important)

 

M

SD

Quick access to information you are looking for

1.13

0.34

Clearly indicate a function has been completed

1.18

0.56

Clear feedback on status of past transactions

1.23

0.43

Clear and simple terminology

1.36

0.71

Contact information (ex: phone number and address)

1.36

0.54

Clear feedback on acceptance or rejection of information (ex: filling out a form)

1.38

0.78

Easily and quickly identify and fix mistakes (ex: errors when filling out a form)

1.41

0.82

Prompt to indicate successful/unsuccessful logon

1.46

0.85

Indication when information was updated

1.49

0.79

Meaningful messages/instructions when conducting a transaction

1.62

0.82

Extensive functionality and information to answer questions

1.64

0.84

Clear information about security measures

1.64

1.01

Request confirmation prior to executing a potentially negative function (ex: pop-up window)

1.72

0.94

Title on each page to facilitate easy navigation

1.74

0.94

Feedback cues indicating progression through a series of steps (ex: 1 of 4)

1.77

0.90

Clearly indicate required/optional data

1.77

1.06

Forms that minimize entering the same information multiple times by entering it for you (ex: billing information)

1.82

1.07

Short and simple application forms

1.87

1.13

Give the impression of serious business, not an entertainment site

2.23

1.22

Large fonts for easy reading

2.38

1.09

Interactive features (ex: loan calculator)

2.49

1.39

Feeling like the site is targeted to you

2.56

1.17

Graphics such as charts and graphs

4.13

1.49

Include logos of partners with good reputations

4.31

1.63


CONCLUSIONS

In conclusion, the most frequent activities conducted online were checking account balances and viewing or paying bills. These features should be easily accessible upon login and include clear and simple terminology, feedback information, and ability to easily identify/fix mistakes. Site designers should also consider the following design recommendations for a more usable online banking site:

REFERENCES

Business Communications Co. (2000). Online Banking. Retrieved April 26, 2004, from http://www.mindbranch.com/index.jsp

Diemen, D. (2000). Freedom from frustrating online forms. Retrieved April 26, 2004, from http://www.internet-usability.com/ReportDD.htm

Gomez (2002). Market research: Understanding Web banking usage by intention. Retrieved April 26, 2004, from http://www.gomez.com

Nielsen, J. (1996). Alertbox: Top ten mistakes in Web design. Retrieved April 26, 2004, from http://useit.com

Nielsen, J. (1999). Alertbox: Ten good deeds in Web design. Retrieved April 26, 2004, from http://useit.com

Pew Internet & American Life Project (2002). Pew Internet project data memo. Retrieved April 26, 2004, from http://www.pewinternet.org/reports/toc.asp?Report=77

Powell, T.D. (2001). e-Transactions: the impact of the internet on the financial sector. Information Management Journal 35(4) 26-29.

Ramsaran, C (2003). Online banking comes of age. Bank Systems and Technology. Retrieved April 26, 2004, from http://www.banktech.com

Serco Usability Services (2000). How to design on-line banking and insurance services: Usability Guidelines. Retrieved April 26, 2004, from http://www.usability.serco.com/index.html

Tullis, T.S., Boynton, J.L., & Hersh, H. (1995). Readability of fonts in the Windows environment. Proceedings of CHI’95, 127-128.