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Dewan and Seidmann [4] predicted the e-bankingrevolution would lead to two classes of survivingbanks: very large banks and small niche ones. Thisprediction was echoed by Holland and Westwood [6],who also concluded that smaller banks could competeby offering portals to the services offered by largerbanks. Wind [12] emphasized that banks should usee-banking to focus on customer needs in order to gainthe strongest competitive advantage.

This study surveyed two different segments ofthe U.S. retail banking industry to determine if dif-ferences existed between them in the utilization ofonline Web-based technologies, or e-banking. Withthe banking industry appearing to polarize intovery large banking organizations and smaller com-munity banks that serve niche markets, it is impor-tant to determine in what ways each group of

banks is utilizing e-banking technology.The use of large versus small banks was suggested

by the study done by Holland and Westwood [6], whofelt that smaller banks could develop a product-marketstrategy to compete with large national banks throughthe use of technology. This comparison was also sug-gested by Dewan and Seidmann [4], who noted howthe industry is polarizing, with very large banks andsmall niche banks at either end of the spectrum.

A listing of the five largest banks in the U.S wascompiled based on information obtained through theWeb site of the Federal Deposit Insurance Corpora-tion (FDIC). The five banks selected from the com-munity banking sector were chosen randomly. TheWeb sites of these 10 banks were then reviewed forcontent and features. The Web features were classifiedinto five areas: informational, administrative, transac-

By Peter B. Southard and Keng Siau

Both researchers and practitioners in the financial arena have trumpeted the need forfinancial institutions to broaden their delivery systems by incorporating Internet tech-nology and moving to the new e-banking paradigm. The Internet has already revolu-tionized the banking industry yet many banks, particularly in certain segments of theindustry, are not taking full advantage of available technology and are therefore fallingbehind their competition [9].

A Survey of Online E-Banking Retail InitiativesCustomer demand is forcing banks to provide their services online.

There are two successful paths they can take: to grow, or to specialize in providing localized services and information.

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tional, portal, and others. The informational

area consists of generalbank information usuallyobtainable in print format the bank, the “elec-tronic brochure,” con-taining both backgroundinformation and adescription of availableservices. These featuresdo not require the bankto provide interactionwith its internal networkand therefore have lowcomplexity and low secu-rity requirements.

The administrativearea consists of featuresthat allow bank cus-tomers to perform rou-tine relational activitiessuch as obtaining accountbalance information and ordering checks. These fea-tures require a minimum of interaction with thebank’s database and infrastructure. It also includesfeatures, such as mortgage calculators, that not onlyprovide additional information to the customers butalso allowed them to make better financial decisions.

The transactional area consists of features thatallow customers to actually conduct business throughthe Web site. These features require considerableaccess to and interaction with the bank’s internal net-work and require a much higher level of security, sincethese transactions potentially change the bank’s finan-cial statements.

The portal area includes features that link the cus-tomer, through the bank, to other Web sites of inter-est. These sites could provide local information,additional financial information, weather, stock mar-ket information, or other value-added information asdeemed appropriate by the bank.

The “others” area contains features that do not eas-ily fit into the first four categories. These Web fea-tures were derived from past research. The frameworkby Crane and Bodie [2] looked at six core functions:methods of making payments; mechanisms for pool-

ing resources; ways to trans-fer economic resources;methods of managing risk;price information; andways to handle incentiveproblems. Sannes [8] devel-oped a model to explainhow value creation andinformation exchange formthe concepts used in e-banking. That article pre-sented three majorfunctions—transaction, cus-tomer service, and self-help.The customer service andself-help areas were rede-fined as informational andadministrative areas in ourstudy. Added to these threewas the concept of the por-tal, introduced by Holland

and Westwood [6]. A generic listing of features relating to each of these

areas was developed, as depicted in Table 1.

Results of the StudyTable 2 summarizes the features found on the Websites studied. All of the larger banks incorporatedevery informational feature. All of the communitybanks had general information, but the amount ofadditional content they supplied varied. In theadministrative category, all of the national bank Websites again contained all features identified. While allbut one of the community banks provided accountinformation online, only three provided access to orintegration with personal financial software applica-tions, and none provided online applications.

For transactional features, the national bank Websites all contained transfer, bill-paying, and corporateservices as well as online brokerage and trust services.They varied on access to insurance services. All butone of the community banks featured account trans-fer capabilities, and most had bill-paying features.Only one contained corporate services, and none hadany of the remaining services.

Almost all of the banks, both community and

I1 General Bank Information and HistoryI2 Financial Education InformationI3 Employment InformationI4 Interest Rate QuotesI5 Financial CalculatorsI6 Current Bank and Local News

A1 Account Information AccessA2 Applications for ServicesA3 Personal Finance Software Applications

T1 Account Transfer CapabilitiesT2 Bill-pay ServicesT3 Corporate Services (e.g., Cash Management, Treasury)T4 Online Insurance ServicesT5 Online Brokerage ServicesT6 Online Trust Services

P1 Links to Financial InformationP2 Links to Community InformationP3 Links to Local BusinessesP4 Links to Non-local Businesses (and/or Advertisers)

O1 Wireless CapabilitiesO2 Search Function

Informational

Administrative

Transactional

Portal

Others

Table 1. Generic list of Web site features.

With the banking industry appearing to polarize into very large bankingorganizations and smaller community banks that serve niche markets,

IT IS IMPORTANT TO DETERMINE IN WHAT WAYS EACH GROUP OFBANKS IS UTILIZING E-BANKING TECHNOLOGY.

national, contained links to additional financialinformation but, except for a simple link found onone national bank, only the community banks pro-vided portals to local information or other relatedWeb sites of interest tothe customer.

The national banksusually had an additionalhelpful feature, a searchfunction, not found onmost of the communitybank Web sites. Coincid-ing with these findingswas that the nationalbank Web sites, in gen-eral, appeared more clut-tered and confusing than those of the communitybanks. This phenomenon is partly the result of theadditional information and services provided by thelarger banks, but it makes the necessity of the searchfunction readily apparent. Three of the national bankssupported wireless access.

DiscussionThe results indicate thesmaller community banksfocused more on externalportals, while the largenational banks focused onmaximizing internal infor-mation and services.Bundling of services wasmuch more important to thelarger banks. Smaller banksconcentrated on offeringlocal accessibility as theirniche advantage, althoughthe use of application service providers also meantthat smaller banks could offer many of the same ser-vices, in effect competing with larger banks, throughtheir own unique bundling strategy. Altinkemer [1]discussed the growth of e-banking and how banksare able to offer services that were formerly out-sourced or offered separately, in bundles made possi-ble by Internet technology.

With mobility becoming more of an issue, thedesirability of wireless services has grown [3, 5, 10]. Itwas surprising that only three of the five nationalbanks and none of the community banks surveyedhad wireless capabilities. The tremendous growth indigital cellular capabilities and use should be an indi-cation that customers are looking to transact theirfinancial business in this manner as well [11].

Community banks, in particular, must be aware of

how technologically advanced their competition hasbecome. While community banks will never have theresources available that large banks enjoy, niche mar-kets still exist. Serving these markets through the use

of the value-added fea-tures of portals that bindthe customer, the bank,and the communitytogether will form thecompetitive advantagethey need to battle thelarge banks’ breadth ofservices.

Although most bankshave some type of Website, they typically use theInternet primarily formarketing purposes.However, e-banking can

provide much more. First, by eliminating physical orgeographic boundaries, it enables the bank to have abranch wherever a customer (or potential customer)

has a computer and a cellphone, even in the cab of thecombine, without the expensesof facilities and labor. Second,the bank can tailor productsand services to individualneeds, satisfying consumerdemand for mass-customiza-tion. Third, self-service allowscustomers to do more forthemselves, providing greatersatisfaction. It also means thatthe bank requires fewerresources, resulting in lowertransaction and productioncosts. Fourth, showcasing com-munity activities and attrac-

tions, offering multilingual sites when appropriate,and displaying links to sites that address local needscan provide public relations and business benefits forbanks.

The study bears out many of the points made bymany previous writers. There appear to be threeclasses of e-banking. There are the large nationalbanks whose Web sites offer the full spectrum ofonline financial services but offer little in the way ofportals to the customer’s immediate local interests orneeds. There are the smaller community banks whoseWeb sites offer basic home banking capabilities, with-out the complex financial services such as online bro-kerage or cash management services, but do offerinformation or links to important and interesting

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Bank Name Informational Administrative Transactional Portal Others

Large Bank 1

Large Bank 2

Large Bank 3

Large Bank 4

Large Bank 5

Small Bank 1

Small Bank 2

Small Bank 3

Small Bank 4

Small Bank 5

I1-6

I1-6

I1-6

I1-6

I1-6

I1, I4

I1, I4, I5, I6

I1, I4, I6

I1-5

I1-6

A1-3

A1-3

A1-3

A1-3

A1-3

A1

A1, A3

A1, A3

A1, A3

T1-6

T1-3, T5-6

T1-6

T1-3, T5-6

T1-3, T5-6

T1, T3

T1, T2

T1, T2

T1, T2

P1

P1

P1, P2

P1

P2

P1, P2

P1, P2, P4

P1

P2, P4

O1, O2

O2

O1

O1, O2

O2

Table 2. Web site features provided.

Area of Oblivion

Mega- Banks

FullBundledServices

BankSize

Large

Small

PartiallyBundledServices

LocalPortalAccess

Web site usage/features

WebLobbyBrochure

None

Niche Banking

Figure 1. E-banking continuum.

community information or specialized customerinformation. Finally, there are the small communitybanks that either have no Web presence whatsoever ormerely provide an electronic lobby brochure.

It appears that many smaller banks are findingtheir niches in the second category, using Web por-tals to enable them to compete. In particular, threeof the smaller banks surveyed offered most of thesame services found at the larger banks. While noneof them offered, as yet, the range of corporate ser-vices available from the “big five,” each focused onattracting and keeping local customers through por-tals that linked to information and Web sites ofimportance to their particular markets. A uniquefeature of the Small Bank 3 Web site was direct linksto local agricultural market information, a particu-larly critical information source for its agriculturallyoriented customers. It is this type of market cus-tomization to which the community banks are moreattuned, and it is here that their capabilities may bemost advantageous.

ImplicationsThe implications of these findings for IT managerscan be viewed in several ways. In the short term,companies need to evaluate their strategic position,deciding which direction they want to proceed inand then evaluating the features contained in theircompetitors’ Web sites. In the long term, and withcompetition stiffening in a mature market, compet-itive advantage will come from providing innovativeservices, or services that are uniquely bundled,through the Web site [1, 7]. The innovations to con-sider should not be limited to the banking industry.Just as companies are advised to look beyond theirown industries in benchmarking other facets ofoperations, banks should examine other technologi-cally advanced industries for ideas. Successful Web-based companies, such as eBay and Priceline.com,have established profitable business models that mayinclude features that banks could adapt, such asmortgage applications and transactional processes.

These findings indicate three paths for the future.First, a company can continue or attempt to growitself into a megabank, like Citicorp or J.P. Morgan,marketing itself to the financially sophisticated orlow-cost-oriented customer. Second, it can use por-tals and bundling to fill a market niche for customerswho desire a hometown atmosphere and services.The path of the third group appears to lead either tooutright purchase by a bank in one of the first twogroups or to oblivion as their customer base is grad-ually eroded. These concepts and findings are illus-trated in Figure 1.

Future of E-BankingAs Figure 1 illustrates, banks will need to focus theirInternet technology strategy along this continuum.Movement along the continuum is only toward theupper left. This restricted movement foretells thefuture of e-banking. Banks will either maintain theirpositions or they will be forced, through acquisition ormerger, toward the upper-left segment of the contin-uum. The largest banks will continue to innovate inbundling their services, finding new ways to offerthose services, including the use of new technologies.Wireless communication and mobile banking willcontinue to increase, making e-banking even moreubiquitous.

There will continue to be, at least in the foreseeablefuture, a need for brick-and-mortar facilities. Thecurrent generations of customers still require, inhuman terms, the personal contact provided by face-to-face contact so, while e-banking will continue togrow and mature, customers still need to know thereis a human face behind the screen. In addition, thereare still some functions of the bank, such as cash with-drawals, safety deposit boxes, and other legal func-tions, which require a physical facility and personnel.The future of e-banking depends heavily on thefuture development of technology. The one certaintyis that it will continue to offer new delivery methodsfor banking services.

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(June 2001), 45–47.2. Crane, D. B. and Bodie, Z. Form follows function: the transformation

of banking. Harvard Bus. Rev. 74, 2 (1996), 109–117.3. Davis, S., Siau, K. and Dhenuvakonda, K. A fit-gap analysis of e-business

curricula vs. industry need. Commun. ACM 46, 12 (Dec. 2003), 167–177.4. Dewan, R. and Seidmann, A. Current issues in e-banking. Commun.

ACM 44, 6 (June 2001), 31–329.5. Erickson, J. and Siau, K. E-education. Commun. ACM, 46, 9 (2003),

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strategies in banking. Commun. ACM 44, 6 (June 2001), 53–57.7. Katerattanakul, P. and Siau, K. Creating a virtual store image. Com-

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Lessons from history. J. Comput. Inf. Syst. 44, 1 (2003), 33–39.10. Siau, K., Lim, E. and Shen, Z. Mobile commerce—promises, chal-

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Peter B. Southard (pbs11@psu.edu) is an assistant professor inthe School of Business at Pennsylvania State University, Erie, PA.Keng Siau (ksiau@unl.edu) is an associate professor in the College ofBusiness Administration at the University of Nebraska, Lincoln, NE.

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