Literature Review on Online Banking


The uprising in the internet technology helps in banking revolution in a numerous way and provides the banking sector with many benefits. It also provides innumerable innovation in the banking service, which is beneficiary for both the employees as well as customers. The introduction of utilisation of online banking helps the banking sector in delivering the banking as well as financial service. The change in technology has initiated rapid information transmission, easy marketing methods of the banking products as well as enhances the access and awareness of the customers. Online banking is being characterised as the financial transactions through the website of the bank with the help of Internet.

What is online banking?

Online banking is also termed as Internet banking that is being defined as service which permits the customers for performing the banking transaction by utilising the computer and the internet connection. Internet banking is considered as the system, which enables the customers of the bank in accessing their accounts as well as achieving information regarding the products of the banking as well as services by utilising the website of the bank (Ray and Ghosh 2017). The customers are not needed to travel the branches of the bank for banking purposes.

Functional Types of Online Banking

According to the researchers, there are three functional types of online banking namely, Information, Transactional and Communicative Banking.

  • Informational: It is considered as the fundamental level of internet banking. The bank is having the marketing information regarding the products as well as services that they are providing to the customers (Sikdar et al. 2015).
  • Communicative: This system of Internet banking permits interaction in between the systems of the banking and customers. The interaction in between the banking systems and the customers can take place through electronic mail, application of loan, update of static file and inquiry of the account (Tran and Corner 2016).
  • Transactional: This system of online banking permits the customers in conducting the executions directly through financial implications. Transaction sites permits the fund transfer in between the accounts of the customers and bank. Transactional sites that are advanced provide the mode of generating payments to the third parties that are outside the bank (Dandapani et al. 2016). This transaction can take place through bill payments through transfer of funds by electronic mode.

Importance of Online Banking

Online banking is regarded to be the most significant method of reducing the costs as well as maintaining and enhancing the services for the customers. Online Banking services help in reducing the operational costs, improving the services of consumer banking, retaining customers as well as expanding the customer’s share. Moreover, Internet is considered to be the cheapest channel of delivery for banking products as internet permits the entity in reducing the branch networks as well as downsizing the number of employees, which in turn reduces the operational costs (Tarhini et al. 2015). Website’s navigability is an essential part of online banking as it has the capability in becoming one of the competitive advantages for the financial entity.

Challenges of Online Banking

It has been seen that online banking helps in achieving the satisfaction of the employees as well as customers. It reduces the error that can take place with the manual work. However, the biggest threat that is possessed by the online banking is the security issues. Hackers can easily hack the bank account of the customers and can transact as well. Customers do not have any information of the transaction at the time of hacking. Online banking is also not user friendly and therefore, many people cannot avail this service (Al-Ajam and Md Nor 2015). These are the threats possessed by online banking.

Acceptance of Online banking among the customers

The acceptance of online banking among the customers is considered to be the significant factor. The acceptance of the online banking within the most number of people is not being accepted as the concept of online banking is not that user friendly and moreover, many people do not have the internet connections or the computers for performing online banking. The acceptance of online banking within the customers are being defined with the model of Diffusion of Innovation and Technology Acceptance Model

Explaining Online Banking with the help of Models

In this section, the literature review will concentrate on the model through which online banking can be explained. The model incorporates Diffusion on Innovation and Technology Acceptance Model.

Diffusion of Innovation:

This model provides the view on the adoption of Internet Banking as the social construct. Every individual are having various willingness degree for adopting the concept of online banking. According to the theoretical framework, adoption rate of online banking is being affected by the characteristics like relative advantages, compatibility, trialability and observability. This model is being used for the research of the information system for explaining the user about the adoption of the new technology.

Relative Advantages:

It indicates the degree of the perceived innovation as well as degree to which the benefits are being provided to the forerunners. This factor is having a positive influence on the adaptation of the new technology. Considering the context of online banking, the factor of relative advantage is the belief of the individual that online banking helps in providing more economical benefits than that of the traditional system of banking (Montazemi and Qahri-Saremi 2015). It provides the advantages to the customers of accessing their account at any places and at any time.


This indicates the consistency degree of the service with the values as well as behaviours that exists within the customers. Considering the online banking, it may be defined as the fit in between the customers as well as online banking. It also exhibits the significant effect of the compatibility on the attitude of the customers for adopting the concept of online banking (Martine at al. 2014).


This factor is defined as an extent to which the innovation of online banking is being considered as difficult for comprehending as well as utilising as compare to the traditional banking system. This factor is being considered to have negative correlation with the adoption rate.


This factor helps in indicating the degree up to which the individual can experiment with innovation on the context of online banking prior to adapting it. However, in limited number of study it exhibited that trialability is having connection with online banking. However, some researchers stated that trialability is important but this factor cannot be examined for the people who are not having the internet connections as well as computers (Martrins et al. 2014).


It indicates the degree to which extent utilising of the innovative technology is visible to the members of the social system. The advantages of utilising the online banking may be observed as well as communicated. Considering the case of online banking, this factor is being considered as very much irrelevant. This is being considered as irrelevant as online banking takes place with privacy and therefore, it will not be possible to observe other people utilising the online banking.

Technology Accepted Model (TAM):

Technology Acceptance Model helps in describing the determinants for the acceptance of the computer that is consider as general as well as the capability of explaining the behaviour of the users. This model helps in constructing the perceived usefulness (PU) as well as perceived ease of use (EU) for explaining the usage behaviour of the technology (Marangunić and Granić 2015).

Perceived Usefulness (PU) is defined as degree up to which the person believes in utilising the specific system that can enhance the performance of the job. Perceived Ease of Use (EU) is being defined as a degree up to which the individual believes that utilising the particular system will be effortless. The intention for utilising the technology leads to actual usage of the technology. TAM also recommends that the impact of EU (ease of use) on the intention of behaviour is essential during the utilisation at the early stages. TAM is considered to be the influential tool of theory in order to explain the technology acceptance among the user. Technology Acceptance of Model was being utilised for examining the adaptation of online banking within the customers. The post acceptance of the TAM applications was being examined for comprehending the expectation role in the adoption of online banking as well as continued utilisation of the concept of online banking among the customers (Wallace and Sheetz 2014).

Gap in the literature

There exists a potential gap in the literature of online banking on factors, which can minimises the initial resistance of the customers as well as maximising the acceptance as well as utilisation of online banking. For instance, TAM, which is the widely utilised model for online banking literature is lacking factors that can enhance perceived usefulness and ease of use. It is not providing adequate systematic guidance to the practitioners on the way that can have impact on the perceptions which can lead for increase in adoption.


The traditional system of banking was slow and more hectic for both customers as well as employees. Online banking system transforms the system of traditional banking and reformed the banking sector in an entirely new way. However, this system of banking is not easily accessible for all the people as it is not user friendly. The acceptance of this concept is being described with the help of model like Diffusion of Innovation and Technology Acceptance Model.

Reference List

  • Al-Ajam, A.S. and Md Nor, K., 2015. Challenges of adoption of internet banking service in Yemen. International journal of bank marketing, 33(2), pp.178-194.
  • Dandapani, K., Lawrence, E.R. and Rodriguez, J., 2016. Determinants of Transactional Internet Banking. Journal of Financial Services Research, pp.1-25.
  • Marangunić, N. and Granić, A., 2015. Technology acceptance model: a literature review from 1986 to 2013. Universal Access in the Information Society, 14(1), pp.81-95.
  • Martins, C., Oliveira, T. and Popovič, A., 2014. Understanding the Internet banking adoption: A unified theory of acceptance and use of technology and perceived risk application. International Journal of Information Management, 34(1), pp.1-13.
  • Montazemi, A.R. and Qahri-Saremi, H., 2015. Factors affecting adoption of online banking: A meta-analytic structural equation modeling study. Information & Management, 52(2), pp.210-226.
  • Ray, N. and Ghosh, D., 2017. Online Banking Service: A Boon or Bane?. Asian Journal of Research in Banking and Finance, 7(5), pp.179-194.
  • Sikdar, P., Kumar, A. and Makkad, M., 2015. Online banking adoption: A factor validation and satisfaction causation study in the context of Indian banking customers. International Journal of Bank Marketing, 33(6), pp.760-785.
  • Tran, H.T.T. and Corner, J., 2016. The impact of communication channels on mobile banking adoption. International Journal of Bank Marketing, 34(1), pp.78-109.
  • Wallace, L.G. and Sheetz, S.D., 2014. The adoption of software measures: A technology acceptance model (TAM) perspective. Information & Management, 51(2), pp.249-259.
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