Academic journal article Informing Science: the International Journal of an Emerging Transdiscipline

Self-Service Banking: Value Creation Models and Information Exchange

Academic journal article Informing Science: the International Journal of an Emerging Transdiscipline

Self-Service Banking: Value Creation Models and Information Exchange

Article excerpt

Introduction

The growth in the number of PCs and Internet users has not been followed by a corresponding rapid adoption of banking services on the Internet. International estimates of Internet users range from 35-50 percent of the population in countries with the highest adoption rate (ITU, 2001). These numbers may be underestimated as other surveys report an Internet adoption rate above 70 percent in Scandinavia (Tjostheim & Solheim, 2001) and the US ("How Consumers View Banks: ABA Consumer Survey Results," 2001) compared to 45-50 percent for the same countries by the International Telecommunication Union (ITU). Estimates of how many customers use Internet banking range from 8 percent (Cocheo, 2001) to 22 percent ("How Consumers View Banks: ABA Consumer Survey Results," 2001) for the US and around 30 percent in Scandinavia (Tjostheim & Solheim, 2001). In other words, less than half of the Internet users in Scandinavia have used the Internet for banking services, and less than one out of three in the US. Banks are reporting steady growth of Internet banking users, but for the top five Internet banks in the US only 40-60 percent of the adopters are active (Furst, Lang, & Nolle, 2000). They may have found the relative advantage of Internet banking compared to other distribution channels to be smaller than the cost or effort of changing their behavior.

Self-service technologies are technological interfaces that enable customers to produce a service independent of direct service employee involvement (Meuter et. al., 2000), i.e. person-to-technology service delivery (Dabholkar, 1994). Self-service technologies are viable for banks and other financial intermediaries because information processing is essential to their services. Automation of standard services is expected to reduce the need for financial intermediaries while there will be continued demand for nonstandard, differentiated transactions and services (Emmons & Greenbaum, 1998). The technology holds great promise of future simplification and automation. For instance, the next generation of international payment systems (e.g. electronic funds transfer networks) based on smart card technology (for use in e.g. bank cards, credit cards and electronic purses) with embedded digital IDs can be expected to simplify use of self-service and cross-border transactions by global standardization. In a few years we will have mobile terminals with high capacity mobile communication; potentially these will be individualized, pocket size bank terminals.

The current consolidation in banking (Davis, 2000; Mishkin, 1998), together with an expected technology driven globalization of banking infrastructure, threaten to marginalize the parties who choose not to participate in the game. Use of information technology and self-service has the potential for order-of-magnitude reductions to the cost of processing and transmitting information (Emmons & Greenbaum, 1998). Self-service banking is the use of self-service technologies in banking. Examples of self-service banking include banking by telephone and the Internet, EFTPOS (Electronic Funds Transfer at Point Of Sale) terminals, automated teller machines and other interactive kiosks. In this paper, self-service banking is limited to the retail segment which is very different from electronic integration in corporate segments. (Retail banking is defined as banking services for small and medium sized enterprises (SMEs) and private customers.)

This paper explores some implications of increased self-service banking. In particular it focuses on the relationship between value creation and information exchange. The paper is divided into four sections. First, the theoretical background includes a review of topics that are central to self-service banking. Second, a framework for self-service banking provides a framework for analysis of self-service banking initiatives. Third, the section current business models applies the framework for analyzing the existing practices and trends in self-service banking, particularly for Internet banking. …

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