Adoption of e-banking in small medium industry

Abstract

The introduction of the auto teller machine in the 80s marked the first electronic banking transaction in Malaysia. However the recent development of the internet has changed the landscape of electronic banking. More products have been offered by banking institutions, in order to lure more customers. Not only constricted to consumer banking products banks are now offering online products to its business customer. W-banking makes it easier for customer to compare bank's services and products, and more importantly, e-banking can increase bank's ability to reach a far wider target market. This will enable banks to expand beyond their geographical reach. In the era of globalization, this is most important in order to stay competitive. Plus, more efficient services can be provided by banks and at cost effective rate. A transaction costing about $1 in a traditional bank, would cost $0.60 through phone banking, however only costs $0.02 online (Nsouli and Schaetler, 2002). The downside of the internet technology is not only is it vulnerable but many insentify some operational.,legal, regulatory, and also reputational risks (Nsouli and Schaetler, 2002). The reliance on new technology to provide services makes security and system availibility the central operational risks of electronic banking (Nsouli and Schaetler, 2002). Being able to operate beyond their geographical boundaries meant banks might not be fully versed in a jurisdiction's local laws and regulations before they begin operations. The implication can be damaging to the bank's reputation. As the internet allows services to be provided from anywhere in the world, regulation and supervision are difficult to implement if not impossible. Therefore, the central question is with all the benefits and drawbacks of internet banking, what is the local SME's entrepreneurs' attitude towards e-banking, particularly for loan acqusition services. In the case of Malaysian SME entrepreneurs, apart from the risks disscussed above the level of knowledge and awareness of the e-banking products greatly influenced the consumption of such services. This paper attempts to examine the above issues by interviewing SME entrepreneur in South Johor region.