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nd communication technologies by the banking sector are – “cost-reduction, mergers and acquisitions, strategic alliances, competition, globalization, operational risks, cost reduction, time to market, surging volumes, e-commerce, enhancing flexibility, business diversification such as non-financial services and becoming ‘‘service aggregators’’, etc” (Centeno, 295). Holding a desirable market share, enhancement of cost efficiency and expanding the reach to customers are the main reasons why banks use the Internet banking facility.
On an overall basis, IT investment in banks especially in hardware, software and IT related services are assumed to bring about improvement in bank performance. However a research shows that despite the banks being one of the key investors in IT, there is little association between IT related investment and the efficiency of bank operations. This gives rise to a contradiction in profitability. However the impact is mixed for different products. For instance, investment in IT services seems to bear a positive impact on accounting profits and profitability. On the other hand, investment in hardware and software related products tend to reduce the performance of banks. There might be certain factors working behind it. For instance, there could be lowering of entry barriers, which lead to loss in market power. (Beccalli, 2007, p.2229) Technology of Internet banking is changing pretty fast. Essentially the technologies in rural markets have been lagging behind and therefore community banks are slow in taking on this technology. For such banks cost of adoption of Internet banking itself might be expensive. Internet banking helps the banks to compete across a large spread of demography and facilitates the access of modern technology by the customers. Therefore community banks need to adopt such technologies in order to be at a competitive advantageous position. (Sullivan, 2000, pp.12-13)
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One of the reasons for adoption of newer and more sophisticated technologies is cost reduction. This is however based upon the idea that gains in…
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