Research5

Blekinge Institute of Technology
School of Management
Masters in Business Administration 2006

FEC066 – Thesis (10 p / 15 ECTS)

INTERNET BANKING IN GREECE:
DEVELOPMENT, EVALUATION AND
PERSPECTIVES
______________________________________________

By

Andreas-Nikolaos Papandreou

Supervisor: Anders Hederstierna

INTERNET BANKING IN GREECE: DEVELOPMENT, EVALUATION AND PERSPECTIVES

Dedicated to my dear mother Olga, for all her support during the years of my
studies.

Andreas-Nikolaos Papandreou 2


Executive Summary
Abstract: Revolutionary developments in marketing, information and communications
technology continue to transform the banking and financial industry.
Distribution of banking services through the Internet is an important part of
this transformation. The objectives of this thesis are mainly to examine the
role, which Internet banking can play as a new distribution channel of
banking services for the benefit of both financial institutions and customers in
Greece. The study explores the growth in on-line banking services and the
ways in which financial institutions in Greece can take advantage of Internet
technology to offer successful and cost-effective banking solutions.
Moreover, this thesis addresses the key issues of concern to the banks
regarding their strategic positioning and the products/services they offer or
could offer on the Internet. Technology can help banks build an integrated
delivery strategy for effective multi-channel management. Results identify
the reasons why Greek banks use Internet banking and their effect and place
an emphasis on the strategic impact of Internet technology as a core element
of financial services. Greek banks want to expand their existing distribution
channels using the Internet as another alternative channel. Internet banking in
Greece is on its way to become the centerpiece of direct banking strategies.

Title: Internet Banking in Greece: Development, Evaluation and Perspectives

Author: Andreas-Nikolaos Papandreou

Supervisor: Anders Hederstierna

Institution: School of Management,
Blekinge Institute of Technology, Sweden

Course: Master Thesis in Business Administration

Purpose: The purpose of this thesis is mainly to examine the role, which Internet
banking can play as a new distribution channel of banking services for the
benefit of both financial institutions and customers in Greece. The study
explores the growth in on-line banking services and the ways in which
financial institutions in Greece can take advantage of Internet technology to
offer successful and cost-effective banking solutions.

Method: Research method includes a combination of theoretical analysis (literature
review) and empirical analysis (questionnaires). A structured questionnaire
survey was conducted on 35 banks operating in Greece.

Conclusion: Results identify the reasons why Greek banks use Internet banking and their
effect and place an emphasis on the strategic impact of Internet technology as
a core element of financial services. Greek banks want to expand their
existing distribution channels using the Internet as another alternative
channel. Internet banking in Greece is on its way to become the centerpiece
of direct banking strategies.



Keywords: Internet banking, e-banking, online banking, distribution channel, financial
services, Greece



ACKNOWLEDGEMENTS
I would like to take this opportunity to thank all those who have contributed to this
thesis, directly or indirectly.

I would first like to thank my supervisor Anders Hederstierna for his valuable
comments and patience. Furthermore, I want to thank my fellow MBA students for
our fruitful discussions and critical comments. A special thanks goes to my partner
Helena Svensson for her support during my stay in Sweden.

Last but not least I want to thank my family and friends in Sweden and Greece for
encouraging and supporting me in various ways.


June 2006, School of Management (MAM), Blekinge Institute of
Technology, Sweden



TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION AND BACKGROUND 10
1.1 Introduction 10
1.2 Background 10
1.2.1 Structure of the financial system in Greece 11
1.3 Problem Formulation 13
1.4 Methods 13
1.5 Thesis Outline 14

CHAPTER TWO: AN OVERVIEW ON THE USE OF THE INTERNET 16
2.1 Introduction 16
2.2 Internet Definition and History 16
2.3 How Does the System Work 17
2.4 Strengths and Weaknesses of the Internet 17
2.5 Internet Users in Greece 18
2.6 The Emergence of the Internet in Greece as a New Distribution Channel 18

CHAPTER THREE: BANKING AND FINANCE ON THE INTERNET 20
3.1 Introduction 20
3.2 Defining Net Impact for Banking Services 20
3.3 Areas of Use of the Internet in Financial Institutions 21
3.4 The Growth of Internet Banking 21
3.5 Advantages for the Banks 24
3.5.1 Internet is a cost-effective distribution channel 25
3.5.2 It identifies profitable customers and increases the bank’s economic
profits 26
3.5.3 It increases customer retention, up-sell and cross-sell services 28
3.5.4 Other advantages 29
3.6 Advantages for the Customers 29
3.6.1 Low cost 29
3.6.2 Compelling convenience 29
3.7 Disadvantages and Risks 30
3.7.1 The issues of security and privacy 30
3.7.2 Internet banking might “dehumanise” banking 31
3.8 Internet Banks 31
3.8.1 Functionality of the banks’ web sites 32

CHAPTER FOUR: INTERNET BANKING IN GREECE 34
4.1 Internet Banking in Greece 34
4.1.1 Classification of Internet Banks 35
4.2 The Development of Internet Banking Services in Greece 35
4.3 Greek Internet Banks 36
4.3.1 The case of Piraeus Bank 36
4.3.2 The case of Egnatia Bank 37
4.3.3 The case of Alpha Bank 38



CHAPTER FIVE: DISTRIBUTION OF FINANCIAL SERVICES THROUGH
THE INTERNET 40
5.1 Introduction 40
5.2 Distribution Channel Strategies 40
5.3 Internet Banking as a Strategic Necessity 42
5.4 Reasons for Distributing Banking Services through the Internet in Greece 43
5.4.1 Improvement of bank’s image through innovation 43
5.4.2 Market transparency 43
5.5 The Four Phases of Internet Banking 43
5.5.1 Phase One: Marketing and promotion 44
5.5.2 Phase Two: Light interactivity 45
5.5.3 Phase Three: Full transactions and services 45
5.5.4 Phase Four: Strategic usage 46
5.6 Developing an Internet Banking Offering 46
5.6.1 Step One: Strategy development 46
5.6.2 Step Two: Analysis and design 47
5.6.3 Step Three: Technology development 47
5.6.4 Step Four: Implementation 47

CHAPTER SIX: ANALYSIS AND DISCUSSION 48
6.1 Introduction 48
6.2 Methodology and Questionnaire Development 48
6.2.1 Research methodology 48
6.2.2 Sampling procedure 49
6.3 Findings 49
6.3.1 Data analysis 49
6.3.2 Presentation of data and evaluation of questionnaire sent to banks 49
6.3.3 Presentation of questionnaire that evaluates the respondents’ sites 59
6.3.4 Summary of result 61
6.4 Conclusions 62
6.4.1 Summary and results 62
6.4.2 Final comments and recommendations 62

REFERENCES 65

APPENDICES
A. Questionnaire Sent to Banks 71
B. Questionnaire that Evaluates the Bank Web Sites 74
C. List of Banks where the Questionnaire was sent 75
D. List of Questionnaire Respondents 77
E. Answers of Respondents 78
F. Evaluation of Respondents 79



LIST OF TABLES
Table 1.1: Credit Institutions operating in Greece during 2005 (Hellenic Bank
Association 2006) 12

Table 1.2: Market Shares (%) of Credit Institutions operating in Greece (Hellenic
Bank Association 2006) 13

Table 3.1: Growth of Internet Banking from 2000 to 2004 (ePaynews.com 2006) 23

Table 3.2: European Spending on Electronic Banking Channels (ePaynews.com 2006)
23

Table 3.3: Percentage of banks with Internet banking services that offer the following
features today and plan to offer them in 3 years (Xpressways 2006) 24

Table 3.4: Banking Transaction Costs (Benton 2002) 25

Table 3.5: Framework for Banks’ Classification (Diniz 1998) 33

Table 4.1: Bank Profits of 5 biggest Greek Banks (Ziotis 2006) 35

Table 5.1: The Four Phases of Internet Banking (Dynamic Net 2006) 44



LIST OF FIGURES
Figure 3.1: US Households Banking Online (eMarketer 2004) 22

Figure 3.2: Reasons for Integrating Branches with the Internet (Xpressways 2006) 25

Figure 3.3: Internet Banking’s Relationship to Bank Profitability (Radigan 1996) 28

Figure 3.4: Internet Banking Evaluation Matrix (Hennigan et al 1996) 32

Figure 4.1: WinBank Home Page 37

Figure 4.2: Egnatia Teller 38

Figure 4.3: Alpha Web Banking 39

Figure 5.1: The Distribution Channels Strategies (Mols 1999) 41

Figure 6.1:Population Sample of Thirty-five Banks according to their Functionality 50

Figure 6.2: Population Sample of Thirty-five Banks according to their Type 50

Figure 6.3: Population Sample of Thirty-five Banks according to their Country of
Origin 51

Figure 6.4: The Seventeen Banks that answered according to their Functionality 51

Figure 6.5: The Seventeen Banks that answered according to their Type 52

Figure 6.6: The 17 Banks that answered according to their Country of Origin 52



CHAPTER ONE: INTRODUCTION AND
BACKGROUND

1.1 Introduction
The global credit system has undergone a process of reformation and reorientation,
both at structural and organizational levels. The banking sector has been at the heart
of this procedure. Phenomena of mergers and acquisitions, globalisation and
internationalisation of services and products, changes in organizational structures,
innovation policies and practices, are just some examples of the worldwide changes in
the banking industry.

Banks perform intermediation functions that are vital to a country’s economic growth
and development. Banking services have evolved from an early emphasis on deposit
taking (primarily demand deposits and savings accounts) and short-term loans into a
much wider range of deposits and loans. Operating in a dynamic environment, banks
need to intensify their approach towards service quality in an attempt to increase sales
volume, market share and ultimately their profit. One of the strategies that have been
offered for success in such a business is the delivery of high service quality. As
banking clientele has become more financially sophisticated, so have bank operations
that have expanded from traditional commercial banking services to investment
services, fund management services, insurance brokerage and other financial services.
Moreover, technological developments such as the use of computers and especially
the Internet and the World Wide Web can facilitate these bank operations.

Given the wealth of opportunities that the Internet creates for financial institutions,
having a strong on-line presence is becoming a strategic necessity for most of them
and raises the importance of the Internet as a strategic distribution channel for
providing banking services. According to Mols (2001), there has been a considerable
growth in the segment of consumers preferring Internet banking due to the increase in
computer literacy, the availability of computers and the reduction in the costs of PCs
and Internet access. This fact will change the optimal distribution structure for most
banks and financial institutes.

Especially in Greece, although the use of Internet is not the expected one, Internet
banking continues to increase because of Internet’s easiness in use, its low cost and
the requirement from some public authorities to only receive online payments.

1.2 Background
Due to changes in the European banking sector and expansion plans in the Balkan
region, Greek banks are trying to strengthen their position in the market and improve
their efficiency. Greek banks are trying to find new distribution channels and methods
of providing their services in order to maintain and increase their share in the market.
An appealing method of doing that is through the Internet because it can offer banking
services at cheaper prices to more potential clients and the transactions can be carried
out from anywhere in the world at any time of day or night. This means that by using
Internet technology, financial institutions can establish a direct link to customers and



improve their market shares while increasing their profits, without paying the high
cost of building new branches.

1.2.1 Structure of the financial system in Greece
Until the late 1980s, the financial system in Greece functioned under many
bureaucratic rules and regulations that restricted competition and market development
(Mylonidis and Kelnikola 2005). However, the Greek banking sector in Greece,
which was once dominated by the government, has been transformed in recent years.
There is a recent financial deregulation and market liberalization because of the
convergence with European Union standards, competition and privatisation.
Participation in the European Union has encouraged the convergence of banking
services, while the introduction of the Euro and European integration has increased
competition among banks. The continuous privatisation of public banks has further
restructured the Greek banking industry. These reforms have mostly taken place
through mergers and acquisitions, with ownership remaining in local hands. Such
developments are expected to continue within the new and dynamic international and
domestic financial environment; nevertheless, a bigger role for foreign institutions
(through ownership of Greek banks and/or formation of strategic alliances) is
expected to appear.

The Greek financial system had a remarkable transformation during the 1990s and is
still evolving rapidly as a result of the continuing liberalisation process and its
integration into the European financial market. Consequently, the actual state of the
Greek financial system is best described in the context of the on-going process of
financial reform and restructuring.

The structural changes in the Greek banking system included among others (Gortsos
2005):

• Interest rate deregulation
• Liberalisation of cross-border capital movement
• Abolition of direct credit controls
• De-specialisation of credit institutions
• Modernisation of money and capital markets as well as payments systems
• Rationalisation of monetary policy- adoption of the single European currency

Moreover, the European Union banking Directives and regulations towards the
establishment of a single financial market have led to the following developments
(Gortsos 2005):

• Freedom to provide cross-border financial services within the European Union
• Minimum harmonization of Greek legislation to European standards
• Enhancement of prudential supervisory measures (capital requirements, large
exposures, internal controls, corporate governance)
• Creation of a deposit guarantee scheme
• Enactment of money laundering legislation
• Enactment of extensive legislation on the operation of capital market and
financial intermediaries providing services in them



• Implementation of International Accounting Standards

The liberalisation measures in the Greek financial sector have given the banking
system the following characteristics (Gortsos 2005):

• Being subject to monetary and foreign exchange policies performed at a
European level
• Full integration into the single European financial market
• Universal banking prototype (banks may engage in-house in both commercial
banking and investment banking services- they can also provide bank
assurance services)
• Segmentation of supervisory authorities (Bank of Greece, Capital market
Commission, Supervisory Committee of Private Insurance)

Nowadays, the European economic and monetary union is concentrating Greek banks
on boosting their competitiveness in what will become a much tougher market. Greek
banking is characterised by the strong presence of the Central Bank (Bank of Greece)
which supervises and controls the banking sector, intervening, if necessary, to secure
the smooth operation of the banks. Furthermore, Greek banks are expanding in the
Balkan markets and support strategic cooperation with distinguished international
credit institutions in order to take advantage of synergistic effects and know-how
transfers, to expand distribution networks and to secure a position in major
international financial centers (Mylonidis and Kelnikola 2005).

The Greek financial intermediaries include (Gortsos 2005, Hellenic Bank Association
2006): a) Credit institutions such as commercial banks, specialised credit institutions
and cooperative banks, b) Financial institutions such as leasing companies, credit card
issuers, foreign exchange bureaus, venture capital companies and payment
institutions, c) Market intermediaries providing investment services: either on a
collective basis (mutual fund management companies and investment fund
management companies) or on an individual basis (investment firms).

According to the Hellenic Bank Association, at the beginning of year 2005 the credit
institutions operating in Greece consisted of 21 commercial banks incorporated in
Greece (with a steadily increasing participation of foreign institutional investors in
their capital basis), branches of 19 commercial banks incorporated in other member
states of the European Union, branches of 4 commercial banks from third (non-EU
countries), 2 specialised credit institutions and 16 cooperative banks (see table 1.1).

Banks
Greek Commercial Banks 21
Foreign Commercial Banks 23
Specialised Credit institutions 2
Cooperative banks 16
Total 62
Table 1.1: Credit Institutions operating in Greece during 2005 (Hellenic Bank
Association 2006)

Commercial banks in Greece offer all kinds of banking services, at the same time
expanding their activities through the markets operating in Greece and abroad.



However, there is a strong competition among commercial banks and other financial
institutions in Greece.

Assets Loans Deposits
2003 2004 2003 2004 2003 2004
Greek 82.1 80.9 84.5 85.1 82.6 81.8
Commercial
Banks
Foreign 9.3 10 9.4 8.8 7.3 8.2
Banks
Specialised 8 8.4 5.2 5.1 9.4 9.2
Credit
institutions
Cooperative 0.6 0.7 0.9 1.0 0.7 0.8
banks
Total 100 100 100 100 100 100
Table 1.2: Market Shares (%) of Credit Institutions operating in Greece (Hellenic
Bank Association 2006)

The banking sector in Greece is relatively concentrated. The five biggest banks (The
National Bank of Greece, Alpha Bank, EFG Eurobank Ergasias, Emporiki Bank and
Piraeus Bank) accounted for 65% of assets, 67% of loans and 65% of deposits in 2004
(IMF 2006).

Recently, changes took place in the Greek banking system. Credit institutions became
commercial banks; investment banks stopped their operations, new banks have been
established, while some banks have been bought or merged and now operate under
new name and management. However, the Greek banking system needs to consolidate
and strengthen its position in order to survive at the European Monetary Union
playing field. Greece does not need so many banks to operate and future market
conditions will not support the inefficient ones.

1.3 Problem Formulation

The problematic that is going to be investigated in this thesis is the role, which
Internet banking can play as a new distribution channel of banking services for the
benefit of both financial institutions and customers in Greece.

The study aims to explore the growth in on-line banking services and the ways in
which financial institutions in Greece can take advantage of Internet technology to
offer successful and cost-effective banking solutions. Moreover, this thesis will
address the key issues of concern to the banks regarding their strategic positioning
and the products/services they offer or could offer on the Internet.

1.4 Methods

As already mentioned, this thesis aims to examine the impact of Internet banking on
the financial services industry.



Research methodologies will include a combination of theoretical analysis (literature
review) and empirical analysis (questionnaires). Data will be collected from
publications (secondary data) and questionnaires (primary data).

Studying of recent publications will constitute the literature review in this thesis. The
aim of the literature review is to show what has been done in the field and how the
current study relates to earlier research. The review will give an overview of the
findings of various previous studies and identify general patterns of the findings and
the conclusions that can be made. The need for the literature review is to serve as a
foundation for rational reasoning on which the current topic can be built upon. This
will give an insight of the current status of Internet banking and especially marketing
of banking services through the Internet in Greece.

For this thesis, secondary data was collected from various publications to better
understand and explain the research problem. These publications include general
statistics, internal sources, government publications, periodicals and books, online
data sources, business information, commercial data, associations, research reports
and international information (Kotler 2003).

As part of the study, a questionnaire (see Appendix A) was sent to a number of banks
(see Appendix C) operating in Greece, representing a fair share of both banks that
offer some level of interaction with the customers and banks that provide full Internet
banking via their WWW pages. According to Berdie (1986), a questionnaire is a
series of predetermined questions that can be either self-administered, administered
by mail, or asked by interviewers. It is a research method used for many purposes that
vary depending on the type of information sought. During the current study structured
questions were used to generate answers that were meaningfully compared and
analysed. In addition, the author of this thesis tested the bank Web sites that
responded (see Appendix F) and answered a second questionnaire (see Appendix B)
that represents an evaluation of the bank Web sites.

1.5 Thesis Outline

This study is divided into six chapters.

Chapter One gives a short introduction to the subject and the central theme of the
thesis is highlighted. Moreover, the chosen topic is brought in and the aims of this
study are being presented together with their methods. In addition, the structure of the
following chapters is being provided.

Chapter Two defines Internet and gives a brief historical review of it. Moreover, the
strengths and weaknesses of it are listed so that the reader understands its importance.
In addition, the current status of Internet in Greece as a new distribution channel is
being provided.

Chapter Three outlines how the Internet is affecting banks today. It starts by defining
Net impact for banking services. Then it refers to the four types of Internet use in
financial institutions and the growth of Internet banking is being explored. After that,



a detailed analysis of the advantages and disadvantages and risks of Internet banking
is being provided.

Chapter Four has a detailed analysis of on-line banking in Greece. Moreover, there is
a reference in the Greek banking system and the development of Internet banking in
Greece.

Chapter Five explains the role of Internet banking as a distribution channel for
providing banking services. Moreover, a four-phase framework is being introduced
for understanding the different ways banks can get on-line and the advantages of each
level of on-line commitment. Furthermore, some suggestions are being offered for
developing an Internet banking offering.

Chapter Six presents the author’s methodology and questionnaire development. The
data (secondary and primary) and methods used for collecting it, their logic and
limitations are highlighted. Moreover, he explains his findings and concludes with a
summary of result. Finally, there is a review of the objectives of the study and some
last concluding remarks, concerning the research and its results.



CHAPTER TWO: AN OVERVIEW ON THE USE
OF THE INTERNET

2.1 Introduction

Nowadays, when everything is developing rapidly and the power of information plays
a major role in everyday life, technology comes to create new means of
communication that are going to dominate in the following years. These recent
developments are being expressed without any doubt through the opportunities that
the use of computers and especially the Internet offer.

The Internet is the physical network that links computers across the globe (Smith and
Chaffey 2005). It consists of the infrastructure of network servers and
communications links between them that are used to hold and transfer information
between the clients and servers. According to census data from U.S., 62 million U.S.
households, or 55% of American houses, have a computer connected to the Web
(Lieb 2005). Moreover, in the EU the percentage of people that have access to the
Internet is 49% and is growing (Eurostat 2005).

According to the OECD, there are 270.7 million Internet subscribers at the OECD
countries and this number is increasing fast. In addition many more individuals who
do not have their own direct Internet access though their home, are logging on
through other sources, such as the university, workplace, libraries or civic
organisations. Internet World Stats (2006) estimates the Internet users around the
world to 1,018,057,389 people. Given the fact that Earth’s population is about 6.5
billions, approximately 1 out of 6 people has access to the Internet.

2.2 Internet Definition and History

The Internet refers to a large interconnected network of a number of computer
networks that link people and computers all over the world through the use of phone
lines, satellites and other telecommunications systems that help them to exchange
information (Ellsworth and Ellsworth 1995).

Historically, the Internet was a military experiment that started in the early 1970s by
the US Department of Defence. It was called ARPAnet and it was a system originated
by the Advanced Research Projects Agency to improve communication and data
exchange between researchers and scientists.

However, the usage of Internet has increased dramatically during the 1990s. Together
with the World Wide Web (WWW) they can be extremely useful for various
applications of education, commerce, communication or entertainment. As a result,
the original communication standard could not keep up with Internet’s astonishing
rate of growth and changed to TCP/IP standard, which is a group of communication
protocols used to connect hosts on the Internet.



2.3 How Does the System Work

In order for an individual to have access to the WWW, he needs to have the necessary
software installed on his computer (e.g. Web browser, E-mail etc.) and a
communications network. Moreover, Internet usage in home includes a modem,
which is supposed to connect the computer and the telephone line and a public
telephone service. In addition, the user needs to have access to a “service provider”
and his computer must be at least a Pentium-based or other type of processor
machine.

2.4 Strengths and Weaknesses of the Internet

Undoubtedly, the Internet is an extremely important phenomenon with some strong
and some weak points that affect many aspects of the society (Jones 1996). The most
significant ones are:

Strong points:
1) The international impact of the Internet allows communication and exchange of
information 24 hours per day among people of every country in the world using a
universal language.
2) World-wide use of e-mail communication is cheap.
3) Given a sufficient infrastructure, all the computers can communicate with each
other regardless of their operating systems.
4) Increasing demand for advanced Internet services and applications makes the
related companies to invest more funds, which contributes in the development of each
country’s economy.
5) Demand for Internet services makes users to spend more money for better services
and create new opportunities in the market.
6) New approaches of communicating with the customers are created by the ability to
monitor individual domestic lifestyles.
7) New education opportunities are created by a universally low-cost access to the
Internet for all the people.

Weak points:
1) Many people, especially old or less educated, find computers difficult to use and
expensive.
2) When using a slow, dial-up connection, downloading Web pages takes a long time
and can frustrate users, especially when the net is busy.
3) Finding information by using search engines or other software tools can be difficult
because of unnecessary complexity into Web-sites design that can reduce Internet
usage for many people.
4) Probability of network failure that can cause major economic losses.
5) A continuous increase in premium Internet access costs can reduce the entrance of
new customers.
6) Accessing illegal or undesirable material through the Internet can cause restrictions
on its growth due to social or government concerns.
7) Fears for lack of security when using the Internet and possible access to private
information need to be eliminated in order to preserve confidence in the system’s
capabilities.



2.5 Internet Users in Greece

The Internet is now becoming a popular tool in Greece. According to a survey made
by the Observatory for the Greek Information Society, the percentage of Internet users
in Greece was 20.8% in 2005, while the percentage of Internet access (irrespective of
having a personal connection) was 23%. In addition, it was estimated that the
majority of Internet users include men, younger age groups, residents of Athens and
Thessalonica (the two biggest cities), as well as higher education individuals.

Internet access is mainly accomplished through a dial-up connection (67%), while
ISDN follows with 21% and broadband with only 8%. However, according to the
Observatory for the Greek Information Society, there were 167,000 broadband
connections (1.5% of the population) in the beginning of 2006. In addition, there are
over 15,000 new broadband applications every month, which together with the
increasing rate of personal computers sales show great prospects in the future use of
Internet in Greece.

2.6 The Emergence of the Internet in Greece as a New Distribution
Channel

The Internet is fast becoming an important distribution channel for a wide range of
businesses. According to Seitz and Stickel “Distribution channels are physical
capacities to build up customer contracts in a systematic way in order to inform,
counsel and sell products and services”. Distribution channels show or deliver
products and services to the buyers or users and are physical distribution channels
such as warehouses, transportation mediums and also trade channels like distributors,
wholesalers and retailers (Kotler 2003). So the Internet is what we call an electronic
distribution channel.

Managers cannot ignore the impact of Internet on their businesses. According to
Ghosh (1998), in order for a company to deliver new services or bypass the go
betweens, it first needs to construct direct connections with the customers; and this
can be accomplished by using Internet technology.

Providing services through the Internet can be very compelling for the customers
because of the low cost that these electronic exchanges have. By this method, the cost
of traditional sales and marketing are being reduced. However, the biggest advantage
is that it offers clients convenience, personalization and interactive communication
that traditional competitors are unable to offer.

The use of the Internet distribution channel offers economies of scale. With it, there is
no need for having many suppliers in the company, since there is no physical distance
with the clients. Moreover, successful branches that are originated in the Internet can
expand themselves without the high cost and the delay that usually occurs in the
physical world. Furthermore, the Internet can become a concentrating medium by
gathering the buyers to sites that can cover all their needs. Today, businesses all over
the world are using the Web and e-commerce to generate billions in revenues from
on-line trading market.



According to Datamonitor the Internet has a great potential as a distribution channel if
it is used cost effectively and gets integrated with other direct and non-direct
channels. In addition, according to Strategic International SA, Internet penetration is
growing fast in Greece and although 92% of the consumers use the Internet for
information search, 58% uses it for e-mail communication and only 5% for online
purchases, consumption in online shopping is expected to increase. What is mostly
sold online in Greece includes travel tickets, CDs, computer ware, books, mobile
telephony products and flowers.

There are five categories of online customers in Greece (Vrechopoulos et al 2000):
1) Innovators: these are Internet users who first adopt the new product/service or the
innovation. They are not so many in numbers but are interested in trying new products
and services. They are characterised by having higher education and good information
about the new products and services through other innovators and their impersonal
and scientific sources of information.
2) Early adopters: these are Internet users that are less interested to adopt than
innovators. They are generally more integrated in their local communities than
innovators, and are more likely to be opinion leaders. Early adopters are usually
younger, educated, have a high social class and read a lot of specialized magazines
about new products and innovations in comparison to the average consumers. They
often make contact with salespeople of new products and services and play a
fundamental role as opinion leaders who influence other consumers.
3) Early majority consumers: these consumers adopt the innovation just before the
average consumer in the market does. They consider it a lot before taking the decision
to adopt an innovation. They are characterised by a higher age, higher education and
higher socio-economic level than the average members of the society. Finally, they
mostly rely on opinion leaders such as the early adopters.
4) Late majority consumers: these consumers delay the adoption of the innovation
primarily because they are sceptical about new products and services. Generally, they
decide to adopt them after they have felt a strong social pressure. Moreover, they
mainly rely on opinions expressed at an informal level by people they know well.
Finally, they watch electronic media less frequently than others.
5) Laggards: they generally decide the adoption of new products and services when
they are close to their withdrawal from the market or their substitution from others.
Laggards do not trust innovations so much and are socially isolated. They are older
consumers of lower socio-economic status.

Consequently, the World Wide Web represents a remarkable opportunity for
businesses and as we will see in the next chapters, Greek banks and financial
institutions, to market financial services to new and existing customers in a very
integrated way. The Internet is too important to ignore and the companies that
currently do not want to participate in electronic commerce may be forced to do so in
the future either by their competitors or their customers.



CHAPTER THREE: BANKING AND FINANCE ON
THE INTERNET

3.1 Introduction

In modern society, financial institutions such as banks, savings and loan associations
and insurance companies, facilitate economic growth by performing essential
intermediation and distribution functions. When they act as financial intermediaries
they channel funds to productive uses while providing investors with a variety of
outlets for their savings. Through well-developed financial markets, securities brokers
and dealers, they distribute efficiently securities that firms issue to finance productive
investments. Financial institutions accept money and provide services in return. They
take deposits from the public so that they are able to issue loans to a variety of
companies and individuals. Therefore, financial institutions and especially their most
familiar form, the commercial bank, perform an asset transformation both by
providing diversification and liquidity.

However, the role of bank branches as a distribution network of banking services in
international level has changed during the last years with the increase of activities
outside branches. During this decade, the use of a telephone, a mobile, a PC or access
to the Internet is enough to fulfil a variety of banking transactions in the least time and
with the least cost. The high speed in providing a service and the low cost of a
transaction offer a competitive advantage to a bank and contribute to the decrease of
expenditure, the increase of productivity indices, the growth of businesses and
strengthen the relations with the customers.

Today, the use of financial services is characterised by individuality, mobility,
independence of place and time and flexibility. Because of the great international
competition, financial transactions are being held both by traditional banks and non-
traditional banks that are trying to find new methods of providing their services in
order to maintain and increase their share in the market. An attractive way of doing
that is through Internet technology because it can offer complicated products in an
equivalent quality with cheaper prices to more potential clients and the transactions
can be carried out from anywhere in the world at any time of day or night. Because of
the above, it is important for a bank to participate actively in Electronic Banking and
in Electronic Commerce.

3.2 Defining Net Impact for Banking Services

Although most products are of a physical nature, financial products and services have
a completely different nature. Financial services are comprised of two core, non-
physical elements that are ideally suited to on-line interaction: transactions and
information. This happens because the transactions that are being executed through
the computer don’t involve people and all their associated costs, so investors get
significant savings. On the other hand, the vast information that the Web provides
revolutionises both the ability to deliver information and its cost for the benefit of the
customers.



On-line banking through the WWW does not need any special software to buy and set
up. The customer contacts his bank and then he inputs his user id and password at his
bank’s Web site to get full access to his accounts. He just needs to have a secure Web
browser such as Netscape Navigator 8.1 or higher, Microsoft Internet Explorer 6.0 or
higher and others. This way of banking online requires the use of Internet browsers
that support 128-bit encryption, which protects consumers by scrambling all the
personal information transmitted between a consumer’s computer and the bank
(Nixon and Nixon 2000).

3.3 Areas of Use of the Internet in Financial Institutions

There are four types of Internet use in financial institutions (Seitz and Stickel 1998,
Keyes 1999, Nixon and Nixon 2000):
1) Information presentation: it is when a financial institution uses the Internet to
present its products, services, branch locations and hours to the public. This type, not
only announces that the bank exists, but also provides a kind of electronic brochure
that informs the customers about facts concerning the bank. However, financial
institutions that have such a basic Web site do not allow viewing of customers’
accounts or other transactions.
2) Information presentation with two-way communication: it is when the client sends
an electronic mail or fills a feedback form to the bank, requesting further information.
3) Interaction with user: it is when there is a quick exchange of information between
the user and the server because the former is data stored in the databases of the
financial institution. Information on the interest rates for loan and deposit products
can be featured but with the added ability for Web site visitors to complete loan and
new account applications on-line. In this way, the bank directly receives the
applicant’s information.
The interactive type has many advantages and offers real value to the customer. The
customer can price the bank’s products on-line and e-mail back any questions he
might have. The bank can also provide on-line financial calculators so that customers
can use the current rates to see the return on a deposit or the cost and payment of a
loan. Moreover, the bank can offer currency conversions that allow the determination
of different currencies values from one denomination to the other.
4) Transaction banking: this includes various financial transactions, such as opening
and closing of accounts, paying bills, securities transactions, money transfers,
implementation and deletion of standing orders, applications for loans or insurance
acquisitions, credit card applications, financial planning services, information for tax
purposes.

We are going to see these types in detail later on.

3.4 The Growth of Internet Banking

Internet banking is the situation under which an individual performs common banking
transactions over the Internet by using a browser, instead of going to his local branch
to carry them out. Moreover, an Internet bank is a bank that has established a presence
on the WWW to facilitate customers to perform these bank transactions. Some



Internet banks only exist on the web and have no brick-and-mortar branches (Furst et
al 2002).

Internet banking is growing faster today than most financial institutions had ever
expected and the number of banks on the Net is continuously increasing. Yahoo has
reported 4921 banks on the Web. According to the Online Banking Report, online
banking penetration continues to climb reaching 34% of all U.S. households by year-
end 2004. NetBanker defines as a “true Internet bank” one that provides account
balances and some transactional capabilities to retail customers over the Web.

Figure 3.1: US Households Banking Online (eMarketer 2004)

According to the Pew Research Center (2005), in US 53 million people or 44% of
Internet users and one-quarter of all adults, currently say they use online banking,
which corresponds to an increase of 47% over the number of Americans who were
having Internet banking in late 2002. Moreover, on a usual day online, 13 million
Americans are having banking tasks online, a 58% increase from late 2002 (Pew
Research Center 2005).

According to International Data Corporation (2004), in Europe the number of e-
banking accounts will continue to have double digit growth rates over the next couple
of years, especially in Italy, Spain, and the U.K. During 2004, from the 122.3 million
users of Internet banking 57.9 millions came from Western Europe (see table 3.1). It
is expected that over the next 5 years, online banking will be an essential requirement
for European banks that want to add the Internet channel to more traditional channels
for their businesses.



Region
(millions 2000 2001 2002 2003 2004
of users)
Western
18.6 28.0 37.8 47.7 57.9
Europe
United
9.9 14.7 17.1 20.4 22.8
States
Japan 2.5 6.5 11.9 19.6 21.8
Asia-
Pacific
2.4 4.4 6.8 9.8 13.8
(excluding
Japan)
Rest of
1.0 1.7 3.1 5.1 6.1
the world
Total 34.4 55.3 76.7 102.6 122.3
Table 3.1: Growth of Internet Banking from 2000 to 2004 (ePaynews.com 2006)

According to Datamonitor (2005), European banks are going into e-banking
technology to improve the functionality and usability of their websites as well as
levels of integration with other channels. Moreover, as the Internet is becoming an
increasingly effective revenue generation tool, European banks are spending more on
electronic banking channels (see table 3.2).

Country 1999 2004
UK USD 99 bn USD 395 bn
Germany USD 88 bn USD 243 bn
France USD 69 bn USD 271 bn
1999 Banks spent almost $1 million per day on e-banking
2004 4-fold increase in e-banking spend, to $1.4 billion
* $850 million of this total will go on external contractors
Table 3.2: European Spending on Electronic Banking Channels (ePaynews.com 2006)

There are various reasons for the rapid growth of Internet banking. First of all,
Internet usage has become very popular. There are over 1000 million persons that
have Internet access worldwide, a number that is increasing every day. Moreover,
technological developments and customer acceptance encourage electronic
commerce. There is a high number of people that have made a purchase on-line,
which is increasing fast. Finally, more banks and other financial institutions are
realising the advantages that on-line banking offers and are developing a presence on
the WWW that includes both brochureware and transactions.



Offer Plan to offer
today in 3 years
Monitoring of account
52% 91%
balances
Funds transfer between
52% 90%
different accounts
Bill payment (funds
transfer to billing 41% 84%
companies)
Loan applications 22% 81%
Cash management and
other services for small 27% 74%
business
Bill presentment from
business customers to 10% 64%
consumers
Person-to-person
17% 61%
electronic payments
Brokerage accounts 9% 56%
Business-to-business
portal or finders services 6% 47%
(e.g. Net Market)
Aggregation of customers'
financial information from
3% 42%
other service providers
(e.g. "screen scrapers")
Insurance 6% 41%
Table 3.3: Percentage of banks with Internet banking services that offer the following
features today and plan to offer them in 3 years (Xpressways 2006)

3.5 Advantages for the Banks

According to a survey conducted by Forrester Research, banks have various
advantages by using the Internet (see figure 3.2).



Note:
Decrease costs 61% Based on
responses
Improve customer 52% from 23
services
European
Increase revenue 13% banks.
Multiple
Competitive responses
13%
pressure accepted.
Replacing old 9%
branch systems Source:
Forrester
anyway
Research

Figure 3.2: Reasons for Integrating Branches with the Internet
(Xpressways 2006)

Indeed, the Internet is both a marketing communications tool and a new distribution
channel for providing banking services with numerous benefits:

3.5.1 Internet is a cost-effective distribution channel
For the banks one of the most obvious advantages is that it has the lowest cost of any
of the current delivery channels and it is cheaper than mailing information or
providing phone services (see table 3.4). Moreover, banks can have cost savings by
sending e-statements instead of paper statements and accepting online bill payments.

Banking Transaction Costs
Channel Average cost per transaction
Full service branch $ 1.00
Mail $ 0.70
Telephone $ 0.55
ATM Full Service $ 0.28
PC Banking $ 0.015
Internet Banking $ 0.010

Definition: Direct cost of a non-cash payment transaction (excludes set-up,
installation and capital expenditure cost)
Table 3.4: Banking Transaction Costs (Benton 2002)

This is because electronic banking services via the WWW do not need a lot of manual
intervention to process a transaction or to answer a customer’s query so the operations
costs, which are the costs directly associated with the conversion of inputs into
outputs, are being minimised. In that case, the bank supports a single computer system
instead of a multitude of personal finance programs.

Furthermore, there are huge potential cost savings if there is a high percentage of
bank customers that carry out their transactions by using the Internet as a primary
channel. The reason for that is the reduction in the number of branches required to



service an equivalent number of customers. Of course, that can lead the banks to
reduce their employees and use the buildings or the equipment for other purposes and
introduce new activities by taking advantage of the additional revenue that the
utilisation of their resources can bring. Servicing additional Internet customers has a
low cost in comparison to the large cost of opening a new physical branch. Moreover,
the set-up cost for a bank to establish and maintain a site is less than setting up and
operating a traditional branch. In addition, the start-up costs are going down because
technology providers have increased their experience and the market is developing.

Another important issue here is the minimisation of the opportunity cost when using
Internet banking instead of utilising an alternative resource. The banks have to
introduce electronic banking because if they do not, their traditional bank or non-bank
competitors will and they might lose part of the market share.

3.5.2 It identifies profitable customers and increases the bank’s
economic profits
In the modern monetary system, the assets of the balance sheet include two broad
categories (Hellenic Bank Association 2006): loans and investments and defensive
assets. The first one, which is the most important business of every bank, in the short-
run tends to be illiquid or with unpredictable value. So if the bank wants to realise
their full value, it must hold them to maturity. As a result, these assets can be
obtainable to meet deposit withdrawals only at some risk of loss and it might also be
not possible to sell or to borrow against certain loans. On the other hand, defensive
assets have very high liquidity, are reversible and their value can be predictable. Such
defensive assets can be currency, cash, deposits the bank has in the Central Bank or in
other banks, Treasury bills e.t.c. Moreover, bank’s deposits with the Central Bank are
called reserves and can be either primary or secondary. In addition, legislation
requires banks to hold a particular quantity of defensive assets, which are the required
reserves of the bank. Furthermore, bank’s net holdings of defensive assets should
exceed the required reserves (this is the bank’s defensive position) in order for the
bank to be able to cover unexpected deposit withdrawals or extraordinary demand for
loans. In that case, the bank asks for cash from the Central Bank or from other
commercial banks.

Concerning the liabilities of the balance sheet, these include overnight loans, deposits
and shareholders’ equity.

So, the basic accounting identity for the commercial bank’s balance sheet is (Hellenic
Bank Association 2006):
D+E=kD+R+L ,
where D is the deposits, E is the shareholders’ equity, kd is the required reserves
(0<k<1, k is the proportion of deposit required reserves), R is the defensive position
and L is the loans and investments.
In this identity, D+E represent the liabilities and kD+R+L represent the assets of the
balance sheet. If L+I exceed disposable assets, then the defensive position of the bank
is negative.

In order for the bank to grow, it needs to maximise its profits. This can be done if
there is an augmentation in deposits, which will allow the bank to offer more loans.



That’s why the bank tries to acquire additional reserves for lending by selling part of
its asset portfolio, by borrowing and of course by encouraging new deposit liabilities.

Bank profits can be measured in several ways (McCarty 1982):
1) By the ratio of bank income after taxes to its total assets
2) By return on capital
3) By the ratio of capital relative to total assets

As long as the interest earned on assets is higher than the interest paid on interest-
bearing liabilities, the bank can issue more loans and improve its revenue. However, it
can’t use all its cash reserves for loans because it won’t be able to face immediate
withdrawals from its customers and problems of liquidity will appear.

Bank liquidity is an important issue for safety and soundness in the banking system. It
shows “the ability of a bank to meet its current obligations for cash outflow and to
respond to changes in customer demand for loans and cash withdrawals without
selling assets at a substantial loss” (Johnson 1993). Bank assets are liquid to the extent
that they may be easily converted into cash without a loss.

The aim of the commercial banks is to be as profitable as possible within reasonable
limits of liquidity. If the bank isn’t successful in attaining and maintaining liquidity, it
will be at a disadvantage as against other financial institutions and it will lose the
confidence of depositors. This constitutes the rationale behind legislation that obliges
for partial reserve requirements. In addition, the bank should encourage long-term
deposits that have smaller possibilities of withdrawal.

Another aim of the bank is to maintain its solvency, which is a condition where the
value of the assets is greater than the value of liabilities. Solvency and profitability of
the bank, together with a proper management of capital, contribute to the growth of
banks.

The bank’s capital includes preferred and common stock, paid-in surplus and
undivided profits. Moreover, it plays an important role in the growth of banks for
several reasons:
1) It is a measure of the bank’s solvency. Capital protects the depositors by absorbing
temporary operating losses until profitability is restored.
2) Adequate capital inspires public confidence in the bank. If this is present, then the
bank can avoid high deposit withdrawals from its clients.
3) Capital provides constraints on bank growth from a regulatory point of view.
Unlimited deposit taking and lending can be prevented through regulations.
Consequently, if capital is large, the depositors feel more secure in cases of default
risks because the capital will pay the loss. However, capital can’t be invested and thus
can’t give any profit to the bank.

Until recently, bank regulators established capital guidelines. Banks were classified
by size and banks within a given size category were expected to maintain minimum
capital ratios (capital as a percentage of bank assets) in order to grow in the normal
course of operating profitably.



The Internet now, gives the banks the opportunity to capture transactions and
customer information and deliver targeted marketing messages. As a result, they can
use this knowledge to promote special products and new services and use customer
data to find out which Internet banking customers are more profitable. According to
an Internet banking survey (Radigan 1996), there is a close correlation between a
bank’s most profitable customers and Internet users (see figure 3.3). They keep higher
balances on their accounts, carry out more transactions, generate more revenues than
the average and cost less to serve than customers who use branches. Internet banking
brings higher profitability, which is being caused by the more than average financial
needs of on-line banking customers and their attractive demographics and economics.
These customers tend to be younger and more educated than non-Internet users and
have above average incomes that show that they are going to have a close relationship
with their Internet bank both today and in the future. Finally, some banks charge fees
for the services they provide to their Internet banking customers and they get
additional revenue. Depending on the type of the service, number of transactions and
kind of account, these fees range from free to a few dollars per month.

Figure 3.3: Internet Banking’s Relationship to Bank Profitability (Radigan 1996)

3.5.3 It increases customer retention, up-sell and cross-sell
services

Banks’ first objective is to cement ties with their customers. Their aim is to retain and
grow their customer base by providing better customer service and round-the-clock
convenience without increasing their operating expenses (Keyes 1999). However,
when people move from one area to another they usually change their bank because
they desire a branch that provides access and services in their new location. With the
rise of Internet banking, customers can meet all their needs on-line with their current
bank without feeling isolated or having to open an account at a new bank. On-line
banks have been shown to develop high customer loyalty because customers
appreciate the convenience of banking online at any time, not just during bankers’
hours.



Moreover, Internet sites allow banks to monitor their customers’ preferences and
gather useful data for personalised marketing (Orenstein 1998). Then, they use this
information to target banking products and services more effectively to customers.
They know which products the clients have and which they are most likely to buy and
they display them to capture the customers’ attention. As a result, the buyers find
incentives to continue having transactions with the same bank.

3.5.4 Other advantages
Internet banking allows banks to expand product offerings and have a larger
percentage of their clients’ assets (Datamonitor 2005). Nowadays, banks compete
with other financial institutions like insurance companies, investment firms, credit
card companies, securities and mutual fund companies. The Internet offers the banks
the opportunity to provide new advanced services directly or co-branded with special
companies that requires limited marketing attention but provide immediate benefits.
With this method, they maintain and control their relationship with their clients and
offer products or services that they might not otherwise be able to provide.

Another important benefit for the banks is that they can include anyone on the
Internet, even if they are customers outside their home regions. So they can attract
new customers who have never lived in the bank’s home region and extend their
geographic reach outside their territory (Keyes 1999).

3.6 Advantages for the Customers

For the customers the advantages are more obvious:

3.6.1 Low cost
Because of cost savings that Internet banking has for banks, they can charge
customers with lower fees or even eliminate them completely (Bughin 2003). Some
large banks don’t charge fees for on-line banking services and electronic bill
payments, while others charge a few dollars per month for basic electronic banking
services and an additional fee for electronic bill payment (Pew Research Center
2005). However, because of the strong competition between the banks, prices could
fall and clients also save money by stop buying stamps for letters or avoid making
phone-calls to the bank. Moreover, on-line banks offer attractive interest rates.
Consequently, in time consumers should expect savings to be passed along to them.

3.6.2 Compelling convenience

Today, many customers want convenience, they want their banking service to be there
at their own time and in their own space. With Internet banking there is no need for
the customer to rush to the bank before closing or wait for his turn at an ATM. Instead
of the customer leaving his work to go to the branch and do his on-line banking tasks,
with on-line banking he can do almost everything from any place where there is a
computer that has access to the Internet. Internet banking provides fast services that
are available seven days a week, 24 hours a day and customers can choose with
simplicity when and where to conduct their transactions (Nixon and Nixon 2000).



After all, on the Internet, there are no holidays or banker’s hours. Moreover, it
eliminates paper checks and mail. In order for the customers to feel satisfied from a
bank it is necessary that it offers products and services through multiple distribution
channels like branches, ATMs, kiosks, phones, PCs and the Internet. Because of the
Internet banking alternative, customers can be retained to the bank and conduct more
business that increases their convenience. On the other hand, they can switch banks
very easily according to their preferences because continuous competition in
providing Internet banking lowers the barriers between the large banks and the
smaller newcomers. Customers have more choice, which decreases their dependence
on one financial institution to handle all their banking needs. Finally, on-line banking
is a tremendous time-saver and delivers more accurate and timely financial data.

3.7 Disadvantages and Risks

There are also some increasing problems in conducting Internet banking that concern
both banks and customers:

3.7.1 The issues of security and privacy

Despite growing demand for Internet banking services there are many news stories
that provide doubts about security, Web page design and performance of Internet-
only banks (Courchane et al 2002). In addition, security measures and failures have a
tangible impact on Internet banking customer behaviour (Datamonitor 2005).
According to the Consumer Internet Barometer, almost 52% of US online consumers
are extremely concerned about security when banking online, although the level has
fallen from 62% in 2004. The main concern of customers about on-line banking is
security. They have the fear that hackers could access their financial information or
even withdraw money and steal or corrupt their personal data.

A common method to steal financial data from unsuspected customers is called
"phishing". Hackers send e-mails to Internet banking customers asking for their
passwords or advising them to visit a Web site that looks like the site of the
customer’s bank but is actually not, requiring specific bank information (Investor’s
World 2006). Phising is spreading rapidly because according to a survey made by
Infosury, phising is effective for the reason that:
1) 44% of e-banking users use the same passwords for all Internet banking services
that they have with all banks.
2) 37% of e-banking users use the same passwords even at sites with less security.
3) Although 79% of e-banking users check if there is a safety lock in the bottom of a
secure Web page, only 40% click on it to see the details of the digital certificate.
However, hackers can easily fake the lock icon.

Of course, the Internet will never be completely secure but the fears that some clients
have, are sometimes irrational. Recent developments in security technology provide
highly secure transactions over public networks like the ones being held in NASA or
in the military. With the widespread adoption of secure firewalls, 128-bit encryption
schemes and digital certificates that accurately identify authorised users, on-line
purchases and transactions are safer. In addition, although the 128-bit encryption is
usually considered to be strong enough because it's virtually impossible to crack,



some banks even boost that encryption higher to a 256-bit level (Britt 2005).
Moreover, a well-designed Internet banking system is less vulnerable to fraud and
attack than a physical branch or an ATM and the security cost for a complete on-line
system is less than the cost needed to secure a physical location of a bank (Ellis
2005). That’s why banks are trying to inform their customers of the types of security
and privacy they offer, to protect their financial data and provide them written
assurance that their personal information will not be exploited.

However, the high profile that Internet banking has can increase significantly the
operational risk (Ogden and Turner 1998). Since it is a challenge for hackers and
code-breakers, it can have an increased impact of adverse publicity from the press that
can lead to reputational damage. So to avoid consequential financial damage, banks,
must take a proactive approach to fraud prevention and have controls in place to
ensure authenticity of the transaction, confidentiality and integrity of information sent.
Some banks provide a special device (security token) that produces extra PIN
numbers that can only be used once to access bank accounts and more importantly, by
monitoring through electronic reviews of transactions, statements and credit reports
they notice any suspicious transactions and contact directly their customers to confirm
their validity in their effort to detect crime.

3.7.2 Internet banking might “dehumanise” banking

Some people think that Internet banking can “dehumanise” banking activities by
removing the social, human contact aspect of banking (Hennigan and Gourvennec
1996). There are many people, especially older, that see standing in a queue waiting
to have banking transactions at a branch as a great social event where they can meet
their friends or even make new ones. However, banking through the WWW does not
intend to replace completely traditional banks. It just offers an additional service
channel that customers can use together with phone banking, PC home banking,
ATMs and physical branches. Finally, Internet banking is here and sooner or later is
going to change our perceptions and attitudes of managing our money. As a result, it
is important for the people to know its weaknesses but there is not any way of
preventing it since many banks all over the world have either launched an Internet
banking service or announced their intention to do so in the near future.

3.8 Internet Banks

There are four different categories of banks that are currently present on the Internet
(see figure 3.4):



Figure 3.4: Internet Banking Evaluation Matrix (Hennigan et al 1996)

The first category is Internet presence, which is the most basic one because it
describes sites, which focus on providing information but fail to identify the complete
advantages that the Internet gives in comparison to paper-based information.

The second category is interactivity, which is the following step of describing sites
that attempt to be interactive with the user. In this category a feedback form and an e-
mail address are provided. In order for these sites to make the user’s visit more
interesting and useful, they need to be well designed and easily navigable, while
having a combination of features such as Java, Java Script, animated graphics, sound
and video.

The third category is PC Home banking, which is the use of proprietary financial
software running on a computer at home, to perform transactions such as fund transfer
and bill payment.

The fourth category is full Internet banking, which is accessing accounts from a
browser, without the need for proprietary software that PC Home banking requires.

3.8.1 Functionality of the banks’ web sites
Banks are trying to take advantage of three different opportunities that Internet
technology offers (Diniz 1998): i) to provide information, ii) to conduct banking
transactions like the ones held in branches or in ATMs, iii) to improve customer
relationship. However, sometimes these opportunities become blurred, which makes
difficult the classification of the Web sites.

Each of these different categories can be splitted in three levels of interaction to
classify the various kinds of applications of the banks’ Web sites. There are three
levels of interactivity: i) Basic or incremental, where a bank reproduces the way it
works with other media than the Web, ii) Intermediary, where particular features of
the Web are used to improve banking services and activities, iii) Advanced, where



business opportunities are created. The categories of activities and the levels of
interactivity can be seen clearly in the following table:

Basic Intermediary Advanced
(incremental) (improvement) (transformation)
Information • electronic • search engines • customise
delivery brochure • report download • subscription
• institutional • recruitment • advertisement
• promotional forms • discussion
• contact • hot links groups
• offers
Transaction • open account • balance • banking by
• product and • statement service
service request • fund transfer
• investment and • bill payment
credit
application
Customer • e-mail • calculator • product and
relationship • suggestion • investment service
forms advisor development
• software • video
download conference
Table 3.5: Framework for Banks’ Classification (Diniz 1998)



CHAPTER FOUR: INTERNET BANKING IN
GREECE
4.1 Internet Banking in Greece

Internet technology can provide cost-effective banking solutions and Greek banks are
trying to take advantage of the opportunities that this technology and computers offer
by enhancing competitiveness and expanding market base via Internet banking.
Although Internet use in Greece is still not as high as in other European countries,
online banking transactions continue to increase because Greek customers are seeking
for convenience. They are tired of the sometimes-endless queues at the cashiers’
desks and the strikes, they want to minimize their transaction time, they are afraid of
bank robberies and they don’t want to carry cash with them. According to the
Hellenic Bank Association, the daily turnover is about 100 million Euros and the
number of transactions for 2004 was about 7 million. Moreover, there are 20 credit
institutions and 10 branches of foreign banks in Greece with presence on the Internet.
Although the numbers are constantly changing, in the Greek market the Internet offers
an alternative distribution channel, which at the moment only 16 banks are taking full
advantage of with approximately over 500,000 online banking customers. However,
soon more Greek banks are expected to follow, which shows that Internet banking is
poised for rapid growth in the country.

Cyberbanks are advancing all across Europe and online banking represents about 24%
of all European bank customers (European Banker 2006). Greek institutions are
already comfortable in a culture that offers complete financial services, such as loans,
credit cards, insurance and investments under one roof. Greek spending for Internet -
delivered financial services areas will contribute to big changes in Europe’s financial
services industry. Bankers have realised that traditional branches have a high cost due
to the expenses for staff’s salaries, which can be up to two thirds of total running
costs, while the Internet has dramatically cut transaction costs (European Banker
2006). As a result, banking fees and margins are being driven down and the use of the
Euro in the EMU countries make Internet banking across different countries even
easier. This situation puts more pressure to Greek banks to establish or to improve
their Internet banking technology faster and to gain a higher market share in
neighbouring countries, mainly in the Balkan region.

All the Greek sites provide information with or without interactivity, regardless of the
size of the bank. Most of the banks offer addresses, phone numbers etc in order to
make the customers contact with the physical branches. Others have press releases,
newsletters and welcome letters to improve their public relations. Big banks depend
on their brand names so they like to show their successful managers and financial
information concerning assets and profits, while smaller banks provide information on
fees and rates of products and services, where they are more competitive. Moreover,
many banks provide economic information about the financial market, job offers and
promote other channels of providing banking services.

Concerning the transaction channel, banks are trying to create an alternative method
to deliver products. Customers can open accounts and request products and services.
They can ask for credit cards and apply for investments. They can have access to bank



databases to look up account balances and statements or transfer funds between
accounts and pay bills (electricity, water, fixed phone, mobile, insurance premiums).
At the advanced level of interactivity, full-fledged transactions are being handled.
However, some transactions (transfers within the same bank) are being executed in
real time while others (transfers to other than the customer’s bank or remittances)
occur late at night depending on the bank. In addition, corporate customers can pay
VAT and social security contributions, personnel’s salaries, suppliers and co-
operators fees, while setting different levels of Internet banking access and
transactions execution for various users.

Concerning improving customer relationship, all the banks provide e-mails and
feedback forms to the clients, so that they can make suggestions, complaints or
general queries. Electronic communication can eventually save banks money because
it is cheaper than mailing information or providing phone services. With this method,
the banks get structured information from their customers in order to find out what the
clients want and build a better relationship with them. Once they identify the
investment profile of the customers, they can offer them specific products and
services tailored to their needs.

Regarding security, Greek banks are very concerned, especially after the phising
attack towards the customers of Alpha Bank, Emporiki Bank and the National Bank
of Greece that took place during autumn 2005 and they use firewalls and special
software such as IDS-Intrusion Detection System.

4.1.1 Classification of Internet Banks

Generally, there are two categories of full Internet banks. First, there are some
traditional banks that decided to expand their activities in the field of Internet
banking, including respectable Greek banks like the National Bank of Greece, Alpha
Bank or EFG Eurobank-Ergasias. Second, there are pure Web banks, which exist only
in the cyberspace and have no physical branches. However, in Greece only the first
category of banks exists.

4.2 The Development of Internet Banking Services in Greece

Greece has a concentrated banking sector, where the five biggest banks dominate the
market. During 2005 their profits exceeded 2.1 billion Euros, which accounts to 1.5%
of the Greek GNP- see table 4.1 (Ziotis 2006).

Bank Profits
(Biggest 5 in million Euros)
2004 2005
National Bank of Greece 441.2 715
Alpha Bank 408 502.2
EFG Eurobank Ergasias 368 501
Piraeus Bank 127.3 263.8
Emporiki Bank -67 90
Table 4.1: Bank Profits of 5 biggest Greek Banks (Ziotis 2006)



Due to high competition between banks, banking institutions in Greece are seeking to
expand market base via Internet banking. On-line banking is evolving rapidly because
of the low operating and maintenance costs that are associated with the Internet.
Although most Greek banks use static Web sites, which are simply interactive
brochures that promote services and products, they can make the banks to close user
groups according to their preferences, offer specific products to them and result in a
more intense customer commitment.

During the first period of Internet expansion in Greece, most Greek banks had static
or interactive Web sites. E-banking first appeared in the Greek market in 1997 but it
was adopted by major Greek banks after 1999 (Lymperopoulos et al 2004). For
example, Alpha Bank launched a Web site in December 1995, Emporiki Bank in
December 1997, Egnatia Bank in February 1998 and EFG Eurobank-Ergasias in May
1998 (Alimonos et al 1998). Nevertheless, Egnatia Bank was the first bank to
introduce full Internet banking in 1998. In addition, Alpha Bank started offering full
Internet banking services in November 1998, EFG Eurobank-Ergasias in February
2000 and Piraeus Bank in April 2000.

4.3 Greek Internet Banks

Internet banking has become an area of great interest in the Greek banking sector.
Some examples follow.

4.3.1 The case of Piraeus Bank

Piraeus Bank (http://www.piraeusbank.gr) has developed an autonomous site for its
Internet banking services called Winbank (https://www.winbank.gr) - see figure 4.1,
which allows several bank transactions from home.



Figure 4.1: WinBank Home Page

To access their accounts, online customers use a user ID and a PIN, which changes
every 2 months. Moreover, the "Winbank for cards" service allows Piraeus Bank
credit card holders to access information about their credit cards very easily and with
full support.

Navigation is easy through the menu in the left. Winbank supports a variety of
banking services, such as bank accounts, credit cards, payments, remittances, loans
and cheques. In addition, customers can see their balances and details for their
transactions, download them and print them. Furthermore, customers can pay their
bills online and send remittances to other banks in Greece or abroad at their
convenience but at a rather high commission of 7.5 Euros. Moreover, Winbank
permits alerts sent to its clients by SMS or e-mail that inform them about their
executed transactions. Finally, Visa Direct allows transfer of money from one credit
card to another or to a bank account at a specified fee.

4.3.2 The case of Egnatia Bank

Egnatia Bank (http://www.egnatiabank.gr) through its Egnatia Teller e-banking
platform supports a digital signature with unique numbers that are being produced by
a small device (security token) that customers get from the bank. By pressing one
button, these unique and single use numbers are being produced by algorithms that
make them impossible to get cracked. This electronic transaction signature is used in
all monetary transactions.



Figure 4.2: Egnatia Teller

Egnatia Teller supports customers’ accounts, credit cards, remittances, and alerts by
SMS or e-mail. Moreover, it allows showing analytical data (statement) of
transactions (date, description, balance etc) and the possibility of saving this data at
Excel or Money format. However, it does not support loans and cheques.

Egnatia Teller offers remittances to other accounts in the same bank or other banks in
Greece and abroad at a fee of 2.50 Euros. In addition, customers can pay their debts to
the government (VAT, income tax, social security contributions) and other bills
(water, electricity, telephony).

4.3.3 The case of Alpha Bank

Alpha Bank (http://www.alpha.gr) provides e-banking services through the
application of a user ID and a password. However, customers can buy a special device
that costs 7 Euros and creates additional single use 5-digit numbers for extra security.



Figure 4.3: Alpha Web Banking

Alpha Bank has an easy menu that offers access to bank accounts, credit cards, loans
and payments in Web interface. Moreover, it allows viewing of information related to
the 10 last transactions. In addition, it supports various payments including insurance
premiums, cable TV and tolls. Execution of monetary transactions requires an
additional password for extra security.



CHAPTER FIVE: DISTRIBUTION OF FINANCIAL
SERVICES THROUGH THE INTERNET

5.1 Introduction

National economies are undergoing rapid transformations due to globalisation and
technological developments. The explosive growth of global trade and international
competition together with the remarkable advances in the availability of information
and the speed of communication emphasise the need for the banks to search for new
opportunities in the marketplace. The Internet can play a major role in economic
development by making exchange easier and allow greater time for production,
consumption and other activities.

The Internet is a vast, global network of other computer networks that in turn are
comprised of individual computers. The WWW is the easy to use, graphic, click and
point part of the Internet that is already an effective means of delivering financial
products and services to the marketplace. More important, it will dramatically change
the distribution channel structure in the retail-banking sector as it continues to grow
and evolve as a primary channel for banks in the future. There are major strategic
challenges that financial institutions must address now in order to get prepared for
future growth. Banks must reassess opportunities for adding value in the open
environment to defend their positions and to compete on the basis of superior
capabilities.

Given the wealth of opportunities that the Internet creates for companies dealing with
financial services and the accelerated pace with which banks are going on-line, having
a presence on the Internet is becoming a strategic necessity for most banks and other
financial institutions.

Internet’s possibilities for delivering enhanced services with emerging, cost-effective
technologies are palpable in the financial technology community. For those banks that
have already have some program in the pipeline, there are four phases in developing
an Internet presence and four steps involved in deploying an Internet banking
offering.

Porter considers the Internet technology as an extremely important strategic tool for
doing business that can contribute in a company’s sustainable competitive advantage.
He thinks that Internet technology can be used in all industries and as part of any
strategy. However, he explains that the Internet should not replace all conventional
ways of doing business but be used as a supplementary tool to traditional methods of
competing.

5.2 Distribution Channel Strategies

With the use of the Internet a variety of financial services are being offered from the
banks that make it a new and possibly the most important distribution channel of the
future.



According to Mols (1999), the ideal distribution channel is determined by what
services customers want and at what they cost, the way these services can be provided
to them and the costs of alternative distribution channels.

Previous studies have identified various bank customer segments. However, Mols
(1999) assumes that there exist two important ones, an Internet banking segment and a
branch-banking segment. The first one includes the bank customers that are familiar
with computers and the use of Internet and they value the convenience that Internet
banking’s distribution channel of financial services offers. The second one includes
the bank customers that are mostly old or computer-illiterate persons and value
personal relationships at the bank branches’ distribution channel of financial services.

The two customer segments give the banks a choice of which segment to focus and
what distribution channel decision to take. There are three options of both or either
one of the customer segments. Moreover, another significant decision is related to the
geographical area that the banks target, which can be local, national or multinational.
These four different pure strategies and a dual channel strategy where two of the pure
strategies are combined are illustrated in figure 5.1.

Figure 5.1: The Distribution Channels Strategies (Mols 1999)

The local/national branch banking strategy is characterized by a rather dense branch
network in a limited geographical area in one country. This a distribution channel
structure that can lead to a decreasing number of customers and the closing of
branches if the banks fail to keep branches costs low. However, this strategy can be
combined with the offering of Internet banking services if they manage to find the
necessary resources and suitable partners.

Another option is the international branch banking strategy, which is characterised by
a rather dense branch network in a large geographical area, covering two or more



countries. Some banks have managed to become international by establishing only a
few branches in neighbouring countries. This strategy has a significant growth
potential if it is possible to acquire suitable banks, otherwise it can lead to exhaustion
of resources and reduction of customers. In that case, a better decision for the banks is
to pursue a dual strategy offering both branch and Internet banking services.

The local/national Internet banking strategy only requires one single branch, as all
regular transactions are controlled through the Internet and it has the advantage that it
aims at serving the fastest growing customer segment and try to get a larger market
share. In addition it is a low cost strategy because the Internet is a much cheaper
distribution channel than the traditional branch network.

The international Internet banking strategy only requires a centrally situated branch in
each country to serve customers in case of unexpected problems and to handle contact
with the national authorities.

The dual channel strategy or hedge strategy is a combination of the previous branch
network and Internet banking strategies that gives the banks a gentle transition from a
branch banking strategy to an Internet banking strategy. However, dual channels may
lead to conflicts between Internet banking departments and branch banking
departments.

5.3 Internet Banking as a Strategic Necessity

Internet banking has three strategic objectives, none of which has a customer focus: i)
to create new opportunities for the bank, ii) to defend the bank against competitors
and iii) to reduce costs. While opportunities and defence came out nearly even as
strategies, costs were far behind. This suggests that the bankers who pioneered
Internet banking consider it as either a justifiable investment or an unavoidable
necessity.

This can be realized by thinking about the effect of the ATMs on the banking industry
(Dynamic Net 2006). When Citibank introduced ATM technology in 1977 and until
1988, it tripled its market share in New York just because the ATM was a source of
strategic differentiation for Citibank and other early adopters. However, as the
technology was deployed more widely, the value of having ATM shifted. Today,
ATM technology does not differentiate a bank because consumers expect it as a basic
service offering. Consequently, ATMs have migrated from a differentiator to a
strategic necessity.

In the same way, the American banks that introduced Internet banking first got the
competitive advantage in comparison to their opponents. It took ATMs about 10 years
to reach acceptance. Today, technology is progressing very rapidly and Internet
banking has followed the same path as ATMs, migrating from a strong competitive
differentiator to a basic and expected service. Consumers expect to transfer funds and
pay bills from anywhere in the world at their convenience, in the same way they can
retrieve cash wherever they go in the world.

Especially in Greece, Internet banking is on its way to become a “strategic weapon”
for all financial institutions in the next few years. If a bank wants to remain



competitive and properly service the needs of its most attractive customer base, it
must plan and deploy an on-line banking strategy that will distribute financial services
through the Internet.

5.4 Reasons for Distributing Banking Services through the Internet
in Greece

5.4.1 Improvement of bank’s image through innovation
Electronic banking can help banks to improve their image through innovation
(Hennigan and Gourvennec 1996). They realise that they must be pioneers to offer
new services through alternative distribution channels and in order to keep their
customers from competitors and maintain their market position they have to be
innovative. In addition, multiple distribution channels offer effective market coverage
by enabling different products to be targeted at different demographic segments
(Lymperopoulos Chaniotakis 2004). Innovation builds a reputation for the banks that
customers learn to trust and comment positively to other people.

5.4.2 Market transparency
In comparison to traditional channels of distribution, Internet banking allows the
clients to search and compare the financial services of competing firms faster and in a
more efficient way.

5.5 The Four Phases of Internet Banking
There are four phases for a bank that wants to develop a presence on the Internet
(Dynamic Net 2006): i) Marketing and promotion, ii) “Light” interactivity, iii) Full
transactions and services, iv) Strategic usage. Most of the banks move from one phase
to another in the order given. However, there are some banks that pass over phases
one and two and move directly to the third one.



Phase One: Phase Two: Phase Three: Phase Four:
Marketing Light Full Strategic Usage
and Interactivity Transactions
Promotion and Services
Focus Marketing Customer Banking Strategic change
Web site acquisition functionality
Primary • Published • Loan • Account • Sophisticated
Services information calculators look-up, cross-selling
on bank • Credit card balances, of new
services applications transfers services
• Branch / • Savings, • Bill payment • Customer
ATM map checking • Car loans, profitability
• Customer account credit cards, analysis
service e- applications mortgages • Bill
mail • Financial • Statement presentment
Planning review and payments
articles, • Cleared check
advice presentment

Primary • Provide • Reducing • Retention of • Increased
Benefit information paperwork existing service
to • Low-cost customers offerings
customers ways to • Attracting • New revenue
and attract and high-value opportunities
prospective impress customers • Increased
customers customers • Reduction in margins
service costs
Table 5.1: The Four Phases of Internet Banking (Dynamic Net 2006)

In the above table we can see some of the key distinctions of the four phases. The
resources that are needed to pursue these phases are highly dependent on the bank’s
back-end processing system and technology infrastructure. Moreover, there is not
necessarily a connection between bank size and the phase in which the bank is
presently functioning.

5.5.1 Phase One: Marketing and promotion
Beginning a Phase One presence has a very low risk. For banks Phase One is a
learning experience (Dynamic Net 2006). They use existing marketing and
promotional material, adjust it for the Internet and form a Web site, which is their
brochure on the Internet. Online promotion uses communication through the Internet
to raise awareness about an attractive Web site and drive traffic to it. This phase
requires least investment, restricted maintenance and limited resources. Usually, not
many employees are responsible for creating and maintaining the Web site, therefore
reducing the cost on the bank. Actually, many banks outsource the creation and
management of the Web site to qualified specialists, who take care of the context and
content factors (Kotler 2003). A Web site should not be one long page. On the
contrary, it should have a central or “home page”, from which other pages of the site
emanate. When banks allocate funds for Web site development and maintenance they



do it because they consider the return on their investment. Engaging in Phase One
gives the banks the chance to learn more about the Internet and the WWW and to
make customers understand the importance of the Internet while promoting customary
services to a broad audience.

5.5.2 Phase Two: Light interactivity

Phase Two involves light interactivity with useful tools for banks’ clients. In this
phase, banks develop their public Web sites in an effort to offer more value to existing
and future customers. Examples of services or functions offered in this phase include
financial calculators, currency converters, credit card and loan applications, and
information concerning stock or mutual funds. Banks regularly provide economic
articles about financial planning, statistics as well as explanations of financial terms
and products. These services aim to maintain existing customers and keep them
coming back to the Web site on a regular basis.

Moreover, providing well-designed free services on the Internet give banks a chance
to promote their services to new customers who visit the Web site to make use of
these free tools. What differentiates Phase Two from Three is that in the last phase
there is no connection from a bank's back-end processing system to its Internet Web
site. A Phase Two assembly requires a bigger investment than a simple marketing site
but does not require the larger systems integration investment of a full Internet
banking system.

5.5.3 Phase Three: Full transactions and services

This phase provides full Internet banking transactions, such as balance transfers,
account statement access, bill payment services, account applications, customer
service mechanisms etc.

Deploying a Phase Three can offer considerable advantages and there are many
incentives for pursuing this phase. Some banks move to Phase Three to keep key
customers; others to attract new ones. Some banks think of it as a defensive move
because they fear they will lose their best customers if they do not offer on-line
banking. Other banks are trying to find alternative methods to reduce overhead costs
either in physical branch operations or customer support resources. Furthermore,
others think Phase Three an opportunity to create fee income and to offer services
they otherwise would not be able to offer, such as credit cards, mortgages and mutual
funds.

Phase Three deployments are considerably more complicated than those of Phase One
and Two, because of the systems integration requirements in connecting a public Web
site to existing transaction systems. Moreover, Phase One and Two deployments do
not have the security concerns of Phase Three, since actual account and customer
information is unavailable.

Luckily, because of standard protocols and security products that are now available, a
Phase Three banking deployment costs only a part of what it did even a few years
ago, while offering all of the benefits described before.



5.5.4 Phase Four: Strategic usage
In this phase, banks modernize transaction processing and customer interaction. They
substitute "bricks and mortar" investments with investments in advanced Internet
services and Web technology. They build up sophisticated customer databases to
facilitate advanced customer segmentation to increase cross-sell and up-sell
opportunities and customer retention. They construct well-organized targeted
marketing campaigns that give greater success rates than direct mail campaigns. Web-
enabled decision support systems within the organisation advance the creation of both
targeted on-line and direct mail campaigns by giving bank marketing departments
access to critical information, such as spending and saving habits and the ability to
query and run simulations against these sophisticated customer databases. Such
advances allow banks to test with new ways of exceeding their customers'
expectations.

The leaders in this area are beginning bill presentment options and electronic
commerce solutions, and they are experimenting with electronic payment systems like
smart cards. They are generating intelligent agents that watch for particular trends in a
customer's banking habits, or changes in financial or family situation, and then make
recommendations for how to reorganize investments or take advantage of new
services appropriate for that particular customer's needs. They are using the various
capabilities of the Internet and sophisticated databases for dealing with their
customers in ways that are not possible with the traditional banking model.

For some American and Western European banks, Phase Four is a sight of the present.
Yet, it will also be the battlefield of competition among Greek financial institutions in
the near future. The banks that make the best use of the sophisticated data they have,
can service their clients better while improving their operating margins and they can
be the winners in the battle for customer assets. Investments in tracking, database and
decision support systems to manage, analyse and use this data beneficially are wise
investments for financial institutes.

5.6 Developing an Internet Banking Offering

Regardless of which phase of electronic banking is suitable for a particular financial
institution, the development and deployment of a solution involves four key steps
(Dynamic Net 2006): 1) Strategy Development, 2) Analysis and Design, 3)
Technology Development and 4) Implementation.

5.6.1 Step One: Strategy development

In composing a strategy, it is important for a bank to clearly clarify the goals of its
Internet presence. The financial institution should decide if it is aiming to increase
margins, reduce costs, attract new customers, broaden its geographic presence or
increase customer retention. Moreover, it should find out if it seeks to expand its own
offerings to clients or co-operate with appropriate organisations to offer these
services. The bank should know its most profitable customers and those customers’
needs and expectations from an on-line banking solution. It is also necessary at this
stage to carefully analyse the strategic landscape of the marketplace and identify the
bank's real competitors and their offerings. A good Internet strategy clearly defines



the business reasons for developing a Web site focusing specifically either on
customer and product targets or on international growth potential and possible
strategic alliances. In addition, it helps choose which phase of Internet banking to
consider.

5.6.2 Step Two: Analysis and design

With a strategic basis in place, a bank can be prepared to discover technology
requirements and plan the system architecture that supports those requirements. In this
phase, the bank will need a detailed comprehension of the competing hardware
platforms, linked solutions and financial transaction protocols used in the marketplace
today. If the operation is a Phase Three offering, much of the time and costs at this
phase will be in the areas of connectivity with existing transaction systems and in the
careful planning of security and customer authentication systems.

A crucial step often disregarded at this stage is the plan for how the system will be
rolled out to existing customers and marketed to prospective customers. Problems
such as the general graphic look of the site, the on-line support and training
information that will be essential and the marketing plan for attracting users to the
system must all be contained in the roll-out plans.

At the end of Step Two, the project team will have detailed technical documents that
outline the overall system architecture and the functional specifications of the system
to be deployed, as well as a comprehensive plan of how the system will be announced
and introduced to the market.

5.6.3 Step Three: Technology development

When the functional specifications and system architecture plans are in their final
form, the system is ready to be built. At this stage, systems and hardware are obtained
and deployed. This may take place either on site at the bank, at its transaction-
processing vendor's location or at a third-party hosting centre, depending on the
strategy laid out in Step Two. The appropriate systems integration code will be
written, tested and deployed to make sure that the relevant systems can communicate
effectively with each other. The security and authentication systems will be deployed
and thoroughly tested. At the completion of this step, partially or fully functional
versions of the major components of the system will allow the solicitation of feedback
and the identification of problems before the institution moves on to Step Four.

5.6.4 Step Four: Implementation

In the final step, the project team assembles and tests the full production system from
the technology elements obtained or built in Step Three. Workers are trained in the
use and support of the system. Moreover, the bank initiates the execution of the
rollout strategy developed in Step Two to help customers understand the new
offering. Finally, the bank will adopt systems for measuring the success of the project
and evolve a plan for maintaining and updating its Web site.

Web sites are hardly static. Once Step Four is finished, it is probable that the bank
will return to Step One to update its Web site or to add functionality.



CHAPTER SIX: ANALYSIS AND DISCUSSION

6.1 Introduction
It is the author’s intention to identify the impact of Internet banking as a method to
provide financial services. Thus, attempts were made to find out the views of various
banks that either offer full Internet banking or not in Greece. These views will help
the readers to understand how the Internet is affecting banks today and also what
some of the opportunities will be in the future. Then, a comparison will be made on
how the opinions of the respondent banks are connected with the evaluation of the
banks’ Web sites from the author’s point of view.

6.2 Methodology and Questionnaire Development

6.2.1 Research methodology
In order to establish a strong support for this thesis topic the author included in his
methodology a literature review and a questionnaire that can help him achieve a
critical analysis of this thesis.

The literature review was the first research analysis to be used by the author in
chapters two, three, four and five and it provided an insight into the approaches and
methodologies adopted by different researchers. The author was able to enlist the
support of relevant contributions in the fields of international banking, information
technology and strategic marketing. Through the analysis of recent writings and
publications from various sources of information relevant to the subject matter (see
references for details), he was able to gain the needed support for the thesis topic he
studied. The need for the literature review is to serve as a foundation for rational
reasoning on which the thesis topic can be built upon. This gave an insight of the
current status of Internet banking in Greece.

The questionnaire (see Appendix A) was administered on a sample population of
banks in Greece (see Appendix C), representing a fair share of both banks that offer
some level of interaction with the customers and banks that provide full Internet
banking via their WWW pages. By administering this survey questionnaire on the
sample population, the author believed he could obtain effective information with the
intention of receiving the views of financial institutions on a large scale concerning
how they use Internet technology benefits to distribute banking services. The method
that the author used to distribute the questionnaire was by sending e-mails that had the
questionnaire attached for feedback. The advantage of this method is that it could be
sent concurrently, ensuring that data collection is less time consuming. In addition,
the confidentiality of the questionnaire makes respondents more comfortable in giving
more detailed information and data. In the cases where the author could not find the e-
mail of the banks, he faxed them the questionnaire, although it was a more time
consuming method.

By researching this topic, the author believes that he will find out the reasons why the
Greek banks use the Internet and generalize the findings to the Greek banking
industry. That is why he carried out a questionnaire on the sample population of



thirty-five (35) banks with at least basic Net presence, of which seventeen (17)
answered (see Appendix D for a list of respondents) and also a questionnaire that
represents an evaluation of the bank Web sites by the author (see Appendix B).

As far as these methodologies are concerned, the author has decided to combine both
theoretical analysis (literature review) with empirical analysis (questionnaires) to
arrive at a desired conclusion.

6.2.2 Sampling procedure

A sample population of banks (public, private, Greek and foreign branches in Greece)
was chosen to represent financial institutions that have static Web pages, interactive
Web sites and banks that offer true Internet banking in Greece. So the author chose 35
banks (out of the total of 62 mentioned at table 1.1) that have a Web site and at the
same time have transactions with their clients through traditional channels like
branches, ATMs or telephone. However, this sample of 35 banks represents over 80%
of the banking market share in Greece as among others it includes the 5 biggest banks
mentioned at table 4.1.

6.3 Findings

6.3.1 Data analysis

The data collected from the questionnaire was analysed to show the various responses
given by the banks. The responses to each question were arranged to show the various
degree of respondents. By noting the trend of answers, the author was then able to
analyse each response with the conclusions gathered from previous research analysis
from earlier chapters. Thus making it easier to arrive at a summary review and
implication of the result on the thesis topic.

6.3.2 Presentation of data and evaluation of questionnaire sent to
banks

As earlier mentioned, the author desired to give a broader view of the strategic
implications of providing Internet banking services that led him administering a
questionnaire to a sample population of thirty-five banks with Web sites. This was
done by using their e-mail addresses (see Appendix C for names of the banks and e-
mail addresses). Although questionnaires were sent out to thirty-five banks, there
were only seventeen that answered (see Appendix D). Therefore, the number of
responses were 17 out of 35 or 48.5%.



Sample of banks according to their functionality

Non-true IB
True IB
49% True IB
Non-true IB
51%

Figure 6.1: Population Sample of Thirty-five Banks according to their Functionality

Sample of banks according to their type

Mostly Public
17%
Mostly Public
Private
Private
83%

Figure 6.2: Population Sample of Thirty-five Banks according to their Type



Sample of banks according to their country of
origin

Greece
Germany
3% 6% 3%
U.K.
8%
3% France
3% Holland
Italy
6% 59% U.S.A.
6%
3% Spain
Cyprus
Albania

Figure 6.3: Population Sample of Thirty-five Banks according to their Country of
Origin

Banks that answered according to their
functionality

Non- true IB
35%
True IB
Non- true IB
True IB
65%

Figure 6.4: The Seventeen Banks that answered according to their Functionality



Banks that answered according to their type

Mostly Public
35% Mostly Public
Private Private
65%

Figure 6.5: The Seventeen Banks that answered according to their Type

Banks that answered according to country of
origin

Cyprus Albania
U.S.A. 6% 6%
6%
U.K. Greece
6% U.K.
U.S.A.
Cyprus
Greece Albania
76%

Figure 6.6: The Seventeen Banks that answered according to their Country of Origin

The results of the questionnaire were as follows:

Section One:
The first section of questions contains “closed ended” questions where respondents
have a choice of alternative replies. These questions are designed to get precise and
factual information concerning the banks. Questions (1),(2),(4),(5) show the profile of
the bank. Questions (3),(6) refer to Internet banking, while (7) has to do with
communication.

Question (1):
Your bank's assets are:
(a) More than Euro 10 billion
(b) Between Euro 500 million to Euro 10 billion
(c) Less than Euro 500 million



Option Response
(a) 7
(b) 9
(c) 1

Comment :
The first question was meant to find out the size in assets of the banks that replied in
the questionnaire to obtain a profile of the bank. We can see that most of them have
their assets between Euro 500 million to Euro 10 billion.

Question (2):
Approximately, how many people visit your site per day?
(a) More than 5000
(b) Between 1000 to 5000
(c) Up to 1000

Option Response
(a) 5
(b) 8
(c) 4

Comment :
The second question was intending to check how popular is the bank’s site to people
that browse in the Internet. We can see that the majority of banks in the sample are
quite popular since they attract between 1000 to 5000 visitors per day.

Question (3):
How long has your bank been providing Internet banking?
(a) More than 5 years
(b) Between 1 to 5 years
(c) Less than a year
(d) Not provided at the moment

Option Response
(a) 9
(b) 2
(c) 0
(d) 6

Comment :
This question was aiming to find out which of the financial institutions are true
Internet banks and also their experience in on-line banking. The answers show that
from the ones that offer true Internet banking most of them are old in the field.

Question (4):
How frequently do you update your Web site?
(a) Daily
(b) Weekly



(c) Monthly
(d) More than one month for every update

Option Response
(a) 9
(b) 5
(c) 2
(d) 1

Comment :
The fourth question shows that most of the banks update their Web site often, since
the majority updates it daily. This means that the banks show importance to the
Internet as an information delivery tool that can also be a significant business tool for
distributing their services.

Question (5):
Which is the bank's level of interaction?
(a) Basic
(b) Intermediary
(c) Advanced

Option Response
(a) 2
(b) 5
(c) 10

Comment :
This question aims to identify the bank’s level of interactivity. Some of them are at
the intermediary level, where some specific features of the Web are used to improve
services and activities done by the banks. However, most of them are at the advanced
level, which opens the possibilities for business transformation and the creation of
new business opportunities.

Question (6):
What was the reason behind introducing Internet banking?
(a) Because of competition
(b) Pre-planned reason

Option Response
(a) 6
(b) 11

Comment :
Question six was intending to identify the reasons the banks have to introduce full
Internet banking if they have not already done so. Some of them chose (a) because
fear of losing market share to other bank or non-bank competitors is forcing banking
institutions to speed up plans for offering on-line financial services. However, most of
them have a pre-planned reason for introducing Internet banking, such as a strategic
decision taken by the top management.



Question (7):
How do you make your potential customer aware of your location on the Net?
(a) Advertising on the Net
(b) Conventional news media
(c) Banks’ publications
(d) Other

Option Response
(a) 7
(b) 6
(c) 3
(d) 1

Comment :
In this question the objective was to see how the banks announce to the public their
Internet presence. Most of them use advertising on the Internet, which shows what a
major promotional tool Internet can be for the banks.

Section B:
Section B contains questions of “observation scales”, which are specifically designed
to find out how important a particular factor is to the respondents. The use of numbers
to determine importance is useful as they tell the questioner just how much weight a
respondent attaches to the factor and also the order of significance that each factor
has. In this case, we have numbers from (1) to (7), where (1) represents “strongly
disagree” and (7) “strongly agree”. Questions (8)-(15) are related to the use of the
Internet by the banks. Questions (16)-(23) deal with the impact of Internet banking.

Question (8):
Your bank uses the Web as an information delivery tool.

Option 1 2 3 4 5 6 7
Response - - - 2 2 4 9

Comment :
Question (8) aimed to identify how banks use the Internet. All of them agree that it is
mainly an important means of providing information.

Question (9):
Your bank uses the Web as a tool to improve customer relationship.

Option 1 2 3 4 5 6 7
Response - 1 - - 4 6 7

Comment :
Question (9) shows that according to most of the banks the Web can help them
improve customer relationship for their benefit.



Question (10):
Your bank gives information to encourage contact with customers in physical
branches.

Option 1 2 3 4 5 6 7
Response - 1 - 1 2 8 5

Comment :
In this question, we see that banks use the Internet to make people go to physical
branches because they want to use all their distribution channels. The only exceptions
are Alpha Bank and Emporiki Bank, which aim to reduce the long queues at their
branches through the use of Internet banking.

Question (11):
Your bank uses the Internet as an important business tool for marketing and
communication.

Option 1 2 3 4 5 6 7
Response - - - 1 1 7 8

Comment :
This question shows that all the banks have realized the importance of Internet for
marketing their services and communication with their customers.

Question (12):
Your bank uses the Internet as a cost-effective distribution channel.

Option 1 2 3 4 5 6 7
Response 1 - - 2 2 6 7

Comment :
This question shows that most of the banks agree that the Internet can help them
reduce their distribution costs.

Question (13):
Your bank is interested in becoming a total Web bank in the near future.

Option 1 2 3 4 5 6 7
Response 7 6 3 - 1 - -

Comment :
Here there is a clear unwillingness from the banks to become total Web banks in the
future. That shows that they are using the Internet as an alternative distribution
channel to their existing channels for delivering their products and services.

Question (14):
Internet helps you to identify profitable customers.



Option 1 2 3 4 5 6 7
Response - 3 2 3 6 3 -

Comment :
In this question many of the banks agree that the Internet can help them find the more
profitable customers.

Question (15):
Internet contributes to the increase of your bank's profits.

Option 1 2 3 4 5 6 7
Response - 2 2 4 8 1 -

Comment :
In this question the majority of the banks agree that Internet banking can contribute in
the increase of their profits.

Question (16):
Internet banking customers carry out more transactions than traditional customers.

Option 1 2 3 4 5 6 7
Response 2 1 2 1 3 8 -

Comment :
In this question many banks agree that Internet banking customers carry out more
transactions than traditional customers.

Question (17):
Internet banking customers keep higher balances on their accounts.

Option 1 2 3 4 5 6 7
Response 1 - 4 2 5 5 -

Comment :
Here it seems that there is a small balance in the banks’ answers.

Question (18):
Internet banking can increase customer retention.

Option 1 2 3 4 5 6 7
Response - 1 - 2 6 7 1

Comment :
In this question, most of the banks agree that on-line banking can increase customer
loyalty.

Question (19):
Internet banking is helpful for expanding product offerings.



Option 1 2 3 4 5 6 7
Response - - - 1 4 10 2

Comment :
Here banks agree that Internet banking facilitates the expanding of product offerings.

Question (20):
Your operating and maintenance cost has been reduced since you introduced Internet
banking.

Option 1 2 3 4 5 6 7
Response 1 2 7 4 3 - -

Comment :
In this question, many banks disagree on the view that Internet banking contributes in
reducing operating and maintenance costs.

Question (21):
Internet banking can help you offer more complex products of an equivalent quality
with lower costs to more potential customers.

Option 1 2 3 4 5 6 7
Response - - - 2 6 9 -

Comment :
Here most of the banks agree that Internet banking facilitates offering many
complicated products.

Question (22):
The number of your clients has increased since you introduced Internet banking.

Option 1 2 3 4 5 6 7
Response - 1 4 1 3 8 -

Comment :
In this question, most of the banks agree that Internet banking attracts more clients.

Question (23):
The productivity of your bank has increased since you introduced Internet banking.

Option 1 2 3 4 5 6 7
Response - 1 2 4 5 5 -

Comment :
Concerning the productivity the banks seem to agree that it has increased after
introducing Internet banking.



6.3.3 Presentation of questionnaire that evaluates the
respondents’ sites
Question (1):
The home page of the site motivates me to continue browsing.

Option 1 2 3 4 5 6 7
Response - - - - 3 9 5

Comment:
Here the results show that all the banks have interesting Web sites to attract the
visitors’ attention.

Question (2):
The bank’s site is user friendly.

Option 1 2 3 4 5 6 7
Response - - - - 1 12 4

Comment:
Here we see that all the banks have easy to use sites so that everybody can browse in
them easily, regardless of his knowledge, age, etc.

Question (3):
The site helps the bank introduce new products & services.

Option 1 2 3 4 5 6 7
Response - - - - 1 5 11

Comment:
The answers here show that banks use their site to improve the sales of new products.

Question (4):
The site gives information to encourage contact with the physical branches.

Option 1 2 3 4 5 6 7
Response - - - - 1 11 5

Comment:
All banks encourage contact with traditional branches, so that they make use of all
available distribution channels.

Question (5):
The site provides financial information about the bank.

Option 1 2 3 4 5 6 7
Response - - - - 1 8 8



Comment:
All financial institutions provide information concerning their financial profile to
convince the public about their reliability and solvency.

Question (6):
The site releases information about staff and board of directors.

Option 1 2 3 4 5 6 7
Response - - 1 2 8 3 3

Comment:
Here we see that financial institutions reveal information about their successful
employees and board of directors.

Question (7):
The site provides information on fees and rates.

Option 1 2 3 4 5 6 7
Response - - - 1 8 7 1

Comment:
All the banks give extensive or some information concerning fees and rates to attract
customers from their competitors.

Question (8):
The site provides economic information about the financial market.

Option 1 2 3 4 5 6 7
Response 5 3 2 1 2 1 3

Comment:
Only the sites of the biggest banks in Greece give financial information about the
market to inform the public about the current economic issues. The small banks do
not provide so much of this information.

Question (9):
The site provides job offers.

Option 1 2 3 4 5 6 7
Response - 3 - - 2 7 5

Comment:
Only private banks give the opportunity for people to find a job through their site.
Public financial institutions such as Postal Savings Bank and Deposit and Loans Fund
follow a different recruitment procedure through an independent governmental
authority and prefer to use their site mainly to promote their services.

Question (10):
The site provides application forms to request the most common banking products.



Option 1 2 3 4 5 6 7
Response 2 2 2 1 3 3 4

Comment:
Here we see that many banks give more information when requested and that most
true Internet banks offer application forms for products and services on-line.

Question (11):
The site provides options where customers can make complaints, right opinions, and
request services in a generic way.

Option 1 2 3 4 5 6 7
Response 1 1 2 2 2 4 5

Comment:
Here we see that most of the banks allow their customers to communicate with them.

6.3.4 Summary of result
It should be stated that the questionnaire response rate, although adequate, is lower
than anticipated. Thus, it should be noted that this would have a direct effect on the
conclusions drawn from them. The conclusions would only be a general
representation of the banks’ views on Internet banking. However, there is no reason to
assume that other banks that did not or chose not to participate would have answered
very differently from the ones who did.

The results from the questionnaire firstly show that banks of all sizes have placed
themselves on the Internet, regardless of the phase they are functioning. More
importantly, the results reveal that banks want to expand their existing distribution
channels using the Internet as another channel for delivering banking services. They
see the Internet as a means of targeting more customers. In addition, the costs of
going on-line are cheaper in comparison to traditional forms of banking.

The Internet is a mainstream trend, which requires a strategic response. Some banks
consider it as a vector for future growth and development and have adopted
aggressive technology and marketing strategies. It is no surprise that Web advertising
is the most common method of attracting more clients. Virtually all the financial
institutions verified that they receive more than a thousand hits per day (Question 2).
This may show that they are indeed making new customers. Moreover, while non-true
Internet banks have informative sites, true Internet banks focus aggressively in full
banking transactions.

From all indications, the above result has been able to explain the reasons why Greek
banks adopt Internet banking. Although there were some deviations in the apparent
ways that the various banks intend to use the Internet to market the services they
provide. But in general, all respondents agree that it is an essential distribution
channel for delivering banking services that can help them to annex their potential,
particularly in the South European and Balkan market.



6.4 Conclusions

6.4.1 Summary and results

From all indications, it is safe to say that most financial institutions in Greece have
realised the important role of Internet banking for developing alternative distribution
channels of banking services. This is supported by the fact that there is a change in
their distribution channel structure through an increase in the number of banks setting-
up a Web site or even becoming true Internet banks. The Internet is becoming an
important distribution channel for the banks offering an extensive range of services
and it can help customers execute and monitor their transactions cost-effectively. In
addition, the methodology used in the course of this research work (literature review
and questionnaire) have all contributed immensely to support the belief that Internet
banking in Greece has a strategic importance for the banks and the development of the
financial services industry. The results of the questionnaire showed that more and
more banks are becoming aware of the strategic potentials of the Internet. The
majority of the respondents agreed that it is indeed an effective new medium for
marketing financial products and services as well as a strategic tool for expanding
market base.

What can be understood from the questionnaire is that Internet banking in Greece has
been more of a success than a failure and it is concluded that online transactions will
continue to grow and expand while the Greek financial services market matures.
There are constant developments in the areas of security, protocols and Net marketing
techniques that will strengthen the case for banking on-line.

Banks see the Internet as the latest cheap, fast and convenient way of selling and
distributing their products. They view it as a supporting tool to increase value-added
service. Some banks will find the Internet and WWW more serviceable and beneficial
than others but the Internet will not revolutionise banking services offering. It is
merely an alternative distribution channel that cannot replace completely existing
traditional distribution channels.

6.4.2 Final comments and recommendations

The Internet and the WWW have attracted a great deal of attention during the last
years because they are superb channels of displaying information cheaper and more
effectively than any other traditional channel. The Net involves communication
between computers on networks that allows the users direct communication with each
other regardless of time or place factors. As a result, it has become a popular
distribution channel. To compete successfully in today’s dynamic marketplace and
manage the complexities of diverse banking operations, Greek banks must deliver
superior value to target customers and be able to adapt in a continuously changing
marketplace through market-oriented strategic planning. Fear of losing market share
forces financial institutions that do not provide on-line banking to speed up online
Internet banking plans. Internet banking is finally progressing in Greece fast. With its
low-cost structure, attractive demographics and innovative services, the Internet is
going to present a real challenge to traditional forms of banking. Internet banking
offers a great deal of advantages both to the banks and to the customers. Clients are



becoming more and more demanding and they are expecting even higher levels of
service from their bank. On the other hand, Internet banks by offering ease of use,
ease of access, choice and competitive pricing, they add depth and breadth of
functionality to meet the expanding needs of their diverse customer base. They
increase customer loyalty and cross selling by targeting smaller and smaller groups
until ultimately the banks offer tailored products for individual customers.

Because competition across the European countries and across different banks has
been intensified, the growth of Internet banking seems to continue for the following
years. Although it is difficult to forecast the future in such a volatile environment, the
amount of activity in the area means that the situation will evolve extremely quickly.
Greek banks and branches of foreign banks in Greece will soon understand that the
Internet can take them beyond their own borders in order to expand their customer
base. Nevertheless, they will have to link that with a geographical strategy which, by
targeting specific neighboring countries, will help them minimize risk as well as they
maximize revenue. As a matter of fact, this is already happening now with banks such
as the National Bank of Greece, Alpha Bank, EFG Eurobank-Ergasias and Piraeus
Bank, which are trying to gain awareness outside their frontiers and have positioned
themselves in the Web. This might force other institutions to reconsider their Internet
strategies sooner rather than later. Some banks view Internet as a cost-reduction
measure for transaction services, while others try to provide information and advisory
services. Nevertheless, financial institutions across Europe are seeking opportunities
to enhance cost competitiveness and to expand market base via Internet banking.

Electronic banking does not essentially alternate the underlying trends of the
competitive environment: intense competition, need to reduce costs and the critical
role of information technology. Rather it broadens and strengthens them. Banks will
have to decide whether to fully ride the Internet wave, reduce quickly and
dramatically their distributions costs and pass on the savings to the customers and to
adopt a more careful and gradual attitude. The choice will be largely determined by
the perceived intimidation of newcomers attracted by the economics of Internet
banking.

Internet banking can perform a significant role in the development of the banking
system, as on-line banking becomes a standard way of life. On-line banking in Greece
has finally reached the point at which it is being accepted by consumers and is
financially successful for the institutions that offer it. In fact, banks are discovering
that a comprehensive on-line banking strategy is the key for success in the
increasingly competitive financial services market. In designing an on-line banking
presence, a bank needs to think about various options, ranging from a simple
marketing presence on the Internet to an advanced on-line banking system that
changes the way in which the financial institution works and the consumer carries out
financial transactions. Whatever the type of offering a bank decides to follow, it is
essential that the bank undertake a comprehensive analysis and planning process up
front to ensure the success of the project.

To conclude, the potential for on-line banking is present for all banks to utilize. This
thesis has shown that the Internet is a unique opportunity and a major channel for
distributing banking services in Greece. The banks that stand to gain full advantage of
this are the ones who have done their marketing and demographic research and who



are able to attract their targeted group by devising interesting and memorable
homepages to benefit from the increase in e-banking services.



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Banking and Commerce, Vol.5, No. 2. Accessed 12.03.2006.
http://www.arraydev.com/commerce/jibc/0012_02.htm

Xpressways. Accessed 20.03.2006. http://www.xpressways.com/2005-
03/product_statistics.htm

Yahoo. Accessed 15.03.2006. http://www.yahoo.com/

Ziotis C. (March 4th, 2006), "1,5% του ΑΕΠ τα κέρδη 5 µεγάλων τραπεζών " (written
in Greek), translated in English as "1.5% of GNP the Profits of 5 Big Banks",
Eleftherotypia, published March 4th 2006, page 22



APPENDIX A:
Questionnaire

To: The Marketing Department

Dear sir/madam,

I am an MBA student, studying Business Administration at Blekinge Institute of
Technology in Sweden. I am currently working on a thesis that researches Internet
Banking in Greece and I am distributing the attached questionnaire to Greek banks.

I would appreciate it if you would answer this questionnaire and e-mail it back to me
until March 31st, 2006. Please be assured that your answers will be treated with the
strictest confidence.

If you feel that you are not the correct person to fill in this questionnaire, please could
you pass it on to the person in your bank that is.

If you have any questions, please do not hesitate to e-mail me at:
paad04@student.bth.se

Thank you in advance for you co-operation,

Sincerely yours,




QUESTIONNAIRE

Please fill this questionnaire and send it back to Andreas-Nikolaos Papandreou
(paad04@student.bth.se) before March 31st, 2006.

Section one:

Please type the letter of your answer in the last column. If for example, the answer to
the first question would be “more than Euro 10 billion” i.e. choice “A” then please
type “A” in the last column labelled “Choice” and so on.

# Question A B C D Choice

1 Your bank's assets are: More than Between Less than -
Euro 10 Euro 500 Euro 500
billion million to million
Euro 10
billion
2 Approximately, how many More than Between Up to 1000 -
people visit your site per day? 5000 1000 to 5000
3 How long has your bank been More than 5 Between 1 to Less than a Not
providing Internet banking? years 5 years year provided at
the moment
4 How frequently do you update Daily Weekly Monthly More than
your Web site? one month
for every
update
5 Which is the bank's level of Basic Intermediary Advanced -
interaction?
6 What was the reason behind Because of Pre-planned - -
introducing Internet banking? competition reason
7 How do you make your Advertising Conventional Banks’ Other
potential customer aware of on the Net news media publications
your location on the Net?



Section two:

For the following questions, number (1) would represent ‘strongly disagree’ while (7)
represents ‘strongly agree’.

Please type “X” in the appropriate column, which would represent your feelings for
every question.

# Questions 1 2 3 4 5 6 7
8 Your bank uses the Web as an information delivery tool.
9 Your bank uses the Web as a tool to improve customer relationship.
10 Your bank gives information to encourage contact with customers in physical
branches.
11 Your bank uses the Internet as an important business tool for marketing and
communication.
12 Your bank uses the Internet as a cost-effective distribution channel.
13 Your bank is interested in becoming a total Web bank in the near future.
14 Internet helps you to identify profitable customers.
15 Internet contributes to the increase of your bank's profits.
16 Internet banking customers carry out more transactions than traditional
customers.
17 Internet banking customers keep higher balances on their accounts.
18 Internet banking can increase customer retention.
19 Internet banking is helpful for expanding product offerings.
20 Your operating and maintenance cost has been reduced since you introduced
Internet banking.
21 Internet banking can help you offer more complex products of an equivalent
quality with lower costs to more potential customers.
22 The number of your clients has increased since you introduced Internet
banking.
23 The productivity of your bank has increased since you introduced Internet
banking.

You have now completed the questionnaire. Thank you very much for your time
and help!

Best Regards,




APPENDIX B:

Questionnaire that Evaluates the Bank Web Sites

# Questions 1 2 3 4 5 6 7
1 The home page of the site motivates me to continue browsing.
2 The bank’s site is user friendly.
3 The site helps the bank introduce new products and services.
4 The site gives information to encourage contact with the physical branches.
5 The site provides financial information about the bank.
6 The site releases information about staff and board of directors.
7 The site provides information on fees and rates.
8 The site provides economic information about the financial market.
9 The site provides job offers.
10 The site provides application forms to request the most common banking
products.
11 The site provides options where customers can make complaints, express
opinions, and request services in a generic way.



APPENDIX C

List of Banks where the Questionnaire was sent

# Bank True Type Country Contact
I.B. of Origin
1 National Bank Yes Public Greek homebank@nbg.gr
of Greece
2 Alpha Bank Yes Private Greek marketing@alpha.gr
3 Emporiki Yes Public Greek ebankingsupport@emporiki.gr
Bank
4 EFG Yes Private Greek marketing@eurobank.gr
Eurobank
Ergasias
5 Piraeus Bank Yes Private Greek support@winbank.gr
6 Geniki Bank No Private Greece marketing@geniki.gr
7 Egnatia Bank Yes Private Greece ebanking@egnatiabank.gr
8 Agricultural No Public Greece ategt@ate.gr
Bank of
Greece
9 Bank of No Public Greece marketing@bankofattica.gr
Attica
10 Laiki Bank Yes Private Greece marketing@laiki.gr
11 Nova Bank Yes Private Greece Webinfo_Banker@novabank.gr
12 Omega Bank Yes Private Greece marketing@omegabank.gr
13 Probank No Private Greece marketing@probank.gr
14 Panellinia Yes Private Greece marketing@paneliniabank.gr
Bank
15 First Business Yes Private Greece info@fbbank.gr
Bank
16 Marfin No Private Greece info@marfingroup.gr
Bank
17 Aspis Bank Yes Private Greece marketing@aspisbank.gr
18 Postal No Public Greece webmaster@ttbank.gr
Savings Bank
19 Deposit and No Public Greece Fax
Loans Fund
20 Proton Bank No Private Greece customer@proton.gr
21 Bayerische Yes Private Germany marketing@hvbeurope.com
Hypo- Und
Vereinsbank
22 HSBC Bank No Private U.K. marketing@hsbc.gr
23 BNP Paribas No Private France marketing@bnpparibas.gr
24 ABN-AMRO No Private Holland Fax
Bank
25 CETELEM No Private France Fax
26 Royal Bank of No Private U.K. sylvia.gouloumis@rbos.com
Scotland



27 SANPAOLO No Private Italy Fax
IMI S.p.A
28 CITIBANK Yes Private U.S.A
marketing.greece@citigroup.co
m
29 Union de No Private Spain Fax
Creditos
Immobiliarios
30 Bank of Yes Private Cyprus marketing@bankofcyprus.gr
Cyprus
31 Hellenic Bank Yes Private Cyprus marketing@hellenicbank.gr

32 Bank of No Private U.S.A. Fax
America
33 American No Private U.S.A. Fax
Express
34 American Yes Private Albania abaathens@ambankalb.com
Bank of
Albania
35 Pancretan Yes Private Greece mail _ info@pancretabank.gr
Cooperative
Bank



APPENDIX D:

List of Questionnaire Respondents

1. American Bank of Albania
2. Alpha Bank
3. Emporiki Bank
4. Agricultural Bank of Greece
5. National Bank of Greece
6. Bank of Cyprus
7. Piraeus Bank
8. Postal Savings Bank
9. EFG Eurobank-Ergasias
10. CITIBANK
11. Deposit and Loans Fund
12. Egnatia Bank
13. HSBC Bank
14. Bank of Attica
15. Probank
16. Aspis Bank
17. Laiki Bank



APPENDIX E:

Answers of Respondents

Agricultural Bank of Greece
American Bank of Albania

Deposit and Loans Fund
National Bank of Greece

EFG Eurobank-Ergasias
Postal Savings Bank
Bank of Cyprus
Emporiki Bank

Bank of Attica
Piraeus Bank

Egnatia Bank
Alpha Bank

HSBC Bank

Aspis Bank
Laiki Bank
CITIBANK
Question

Probank

Average
Mode
1 3 1 1 1 1 2 1 1 1 2 2 2 2 2 2 2 2 2 2
2 3 1 2 2 1 1 1 3 1 2 3 2 2 2 3 2 2 2 2
3 1 1 1 4 1 1 1 4 1 1 4 1 4 4 4 2 2 2 1
4 2 1 1 2 1 1 1 3 1 2 4 1 2 3 2 1 1 2 1
5 2 3 3 2 3 3 3 2 3 3 1 3 2 1 2 3 3 2 3
6 2 2 1 1 2 2 2 2 1 2 1 2 1 2 2 2 1 2 2
7 2 3 1 2 2 1 1 2 3 1 4 1 2 3 2 1 1 2 1
8 4 6 4 7 7 7 7 6 7 7 5 7 7 5 6 6 7 6 7
9 6 5 5 6 6 7 7 6 7 7 5 7 6 5 6 7 7 6 7
10 6 2 4 6 5 6 6 7 6 7 7 6 6 6 7 5 7 6 6
11 5 6 4 7 6 7 7 6 7 7 6 7 7 6 6 6 7 6 7
12 4 7 6 6 6 7 7 6 7 7 5 7 6 4 5 7 6 6 7
13 1 1 5 1 2 3 3 1 2 1 1 2 2 1 2 2 3 2 1
14 2 4 5 2 3 6 6 2 5 6 3 5 5 4 5 4 5 4 5
15 5 2 4 3 4 6 5 2 5 5 3 5 4 4 5 5 5 4 5
16 1 6 6 1 4 6 6 2 6 6 3 6 3 5 5 5 6 5 6
17 3 4 5 1 5 6 6 3 6 6 3 6 3 5 4 5 5 4 5
18 5 7 6 2 5 5 6 4 6 6 4 6 5 5 5 6 6 5 6
19 5 4 6 6 5 6 7 5 6 6 5 6 6 6 6 7 6 6 6
20 5 3 2 1 3 4 4 3 5 3 2 5 4 3 3 3 4 3 3
21 6 4 6 5 5 6 6 5 6 5 4 6 5 6 6 5 6 5 6
22 6 2 3 3 6 6 6 5 6 5 3 6 4 3 5 6 6 5 6
23 6 3 6 2 5 6 6 4 5 4 4 5 4 3 5 6 5 5 6



APPENDIX F:

Evaluation of Respondents

Agricultural Bank of Greece
American Bank of Albania

Deposit and Loans Fund
National Bank of Greece

EFG Eurobank-Ergasias
Postal Savings Bank
Bank of Cyprus
Emporiki Bank

Bank of Attica
Piraeus Bank

Egnatia Bank
Alpha Bank

HSBC Bank

Aspis Bank
Laiki Bank
CITIBANK
Question

Probank

Average

Mode
1 6 7 7 6 6 6 6 6 7 7 5 7 6 5 5 6 6 6.1 6
2 6 7 7 6 6 6 6 6 7 7 5 6 6 6 6 6 6 6.2 6
3 7 7 7 7 7 7 6 7 6 7 5 7 6 6 6 7 7 6.6 7
4 7 5 6 7 6 6 6 7 6 7 6 6 6 7 6 6 6 6.2 6
5 7 6 6 7 7 7 7 6 7 6 6 7 5 6 6 6 7 6.4 7
6 6 5 7 5 5 5 6 5 5 4 4 7 3 5 5 6 7 5.3 5
7 5 6 5 5 7 6 5 5 5 4 6 6 5 6 6 5 6 5.5 5
8 2 7 7 6 7 5 3 2 5 1 1 4 2 1 1 1 3 3.4 1
9 6 7 6 5 2 6 7 2 7 7 2 6 5 6 6 6 7 5.5 6
10 2 5 7 3 2 7 6 3 4 6 1 6 5 1 7 5 7 4.5 7
11 3 6 6 5 7 7 7 6 7 3 2 4 4 1 6 5 7 5.1 7


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