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E-Banking - Crafting and Executing Strategy

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Table of Contents


Introduction        1

Financial Inclusion and e- Banking        2

Financial Deepening and e-banking        4

Discussion        6

Conclusion        8

References        9


e-Banking is no stranger to customers of banks nowadays. Back in the olden days, banking requires physical presence of the customer in the bank to conduct essential transactions, whether it is to withdraw, transfer or borrow funds. With the rise of technology in this millennium, an era of e-banking has risen. E-banking offers a simpler way to do banking through Automated Teller Machine (ATM), telephone banking, online banking, debit and credit card, from the comfort of home, anywhere and everywhere. E-banking employs the use of electronic fund transfer (EFT) to transfer funds from one account to another without the physical presences of cash or cheques. The increased use of technology in the financial industry seems to have filled the void of inaccessibility to financial services. These are efforts of financial institutions to pursue financial inclusion and financial deepening across all borders, making financial services affordable and accessible to all individuals and businesses. Through this paper, in-depth discussion on the role of e-banking through the efforts of financial inclusion and financial deepening affects the economic growth is investigated and previous studies were referred. Challenges in the efforts of financial inclusion and financial deepening through e-banking were identified and addressed. Conclusively, financial inclusion and financial deepening through e-banking system has massive impact towards economic growth.

Keywords: e-banking, electronic fund transfer (EFT), financial services, financial inclusion, financial deepening


Money is of utmost importance to the growth of a country. Accessibility to financial services are foreign to bank customers not long before the dawn of the internet. With the rise of internet and technology in the 90’s, electronic banking or e-banking was introduced to the world. E-banking is the use of computers to carry out banking transactions such as withdrawals through cash dispensers or transfer of funds at point of sale. Automated teller machines (ATM) are introduced to users in 1981, subsequently, phone banking was introduced in the 90’s. Maybank was the first bank to introduce internet banking to its customers in the year 2000, subsequently followed by other banks namely Hong Leong Bank etc. E-banking is a vehicle to implement Bank Negara Malaysia’s policy for financial inclusion.

Financial inclusion is the pursuit of making financial services accessible at affordable costs to all individuals and businesses, irrespective of net worth and size respectively. Financial inclusion strives to address and proffer solutions to the constraints that exclude people from participating in the financial sector. Mahadeva (2008), suggests that the financial inclusion, in any economy, is a precondition for achieving industrial growth and overall development. E-banking service provided in local banks portal consists of banking enquiry functions, credit card payment, bill payment, accounts summary, and funds transfer as well as transaction history. In the banks providing internet banking services customer support service is provided via e-mails as well as via telephone lines and it is available daily from morning to mid-night. With e-banking, transactions can be done across borders and even in rural areas. In Sabah for instance, e-banking is actively growing its popularity with its users as telecommunication coverage is expanding to even the most rural areas in Sabah. Consumer to consumer, business to business, business to consumer and consumer to business transactions through the social media spurs the usage of e-banking.

Meanwhile, financial deepening is often referred to as increment of provision of financial services either to individuals or societies so that they have a wider choice of services and better access for every tier of socioeconomic groups. Atieno, Barako and Bokea (2010) observed that increasing access to financial services for majority of the population also requires strengthening the stability of the financial sector and creating an enabling environment for the various parties in the financial system. Financial deepening, similar to financial inclusion focuses more on the process of financial intermediation. It is notable that financial deepening could happen without financial inclusion. Offering a broader financial service does not mean that all tiers of the society would be benefitting from it.  Nevertheless, financial deepening is a catalyst for financial inclusion.

Financial Inclusion and e- Banking

Financial inclusion in Malaysia is driven by Bank Negara Malaysia (BNM). The primary function of Bank Negara Malaysia in promoting a sound, progressive and inclusive financial sector is articulated in the Central Bank of Malaysia Act 2009 further reinforced Bank Negara Malaysia's strategic focus on driving financial inclusion policies.

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Figure 1: Holistic Framework to Further Financial Inclusion by BNM

Based on the figure above, e-banking falls under innovative channel in BNM’s efforts to achieve the vision of financial inclusion. Automated teller machine is one of the first efforts of financial inclusion made available to bank customers. ATMs are not only available in the bank branches in every district but also in shopping malls, petrol stations and 7-11 shops. These efforts are to enable wider financial access to all especially bank customers in rural areas where queuing up in banks are a hassle and discourages customer to go to banks.

Besides that, according BNM’s statistics, electronic payments or card transactions have increased from 22.3 billion to 23.5 billion between 2006 and 2010. Cardholder satisfaction is not a typical driver to ATM management. Selective multi functionality is the ATM business model of the future. The development of other channels such as internet and mobile banking is currently proving complementary to ATM industry and it is far from being a threat to ATMs (Burelli, 2014). The main factor that increases the electronic payment instruments usage among consumers is its convenience. Debit and credit card usage is used nationwide since its introduction in the early 2000. Everyone is eligible to apply for a debit card whereas credit cards require a minimum salary of RM24,000 per annum or RM2,000 per month. Band, et al. (2012) emphasized that, the financial inclusion denotes delivery of financial services at an affordable cost to the vast sections of the disadvantaged and low - income groups. Financial inclusion will strengthen financial deepening and provide resources to the banks to expand credit delivery. Thus, credit card is a form of microfinancing available to the lower income groups so that they are able to increase their spending ability.



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