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Challenges Faced by Consumers of Online Banking

This paper reports on the progress of the dissertation by indicating the steps that have already been undertaken and those that are yet to be done. At the moment, the dissertation is still in the initial stages. There are some background information, statistics, and a literature review of online banking. Basically, the study seeks to discuss the initiation of Internet banking process and how it turned out to be a critical part of our daily lives to the extent that people blindly trust the online banking process regardless of the security threats. Similarly, it has set out the research methods that will be used to gather and analyze data from different sources.

According to the project, by April 2012, there were more than 2.27 billion Internet users, which is a record 566.4% increase since 2000. It is a clear indication that there has been a rapid expansion in the use of the Internet. As a result, a number of online technologies in the educational, social and trade spheres has also increased. Though a great number of people is using online banking, there are many people, who still use usual banking. The questionnaires and interviews are the primary sources of data in the study, while secondary data will be collected by reviewing textbooks, journal articles, electronic sources, and lecture notes.

Aims and Objectives

Basically, the study aims to explore the challenges consumers of online banking face as they conduct their banking activities. There have been no changes in the aim of the study so far. Therefore, the study will stick to the original purpose. Nonetheless, any changes that might arise will be addressed in the subsequent drafts.

It has been realized that cyber criminals started to operate in early 2000, when more people began to use the Internet. It promoted banks to find better ways of protecting not only their customers, but themselves. Unfortunately, as the banks invest in more secure systems, the cyber criminals invest in finding counter actions to tamper with the new security systems. Most of the cyber criminals first obtain the account details of customers, and later transfer money to a different account. Such cases not only increase the cost of operation of financial institutions, but also lower the customers’ trust in online banking.

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Some of the most common methods used by cyber criminals to defraud customers are looking over the shoulder to note the account details, and phishing, where criminals use fake emails to dupe customers into giving out their account details. Although banks are trying hard to prevent these problems, it will take some time before the measures are 100% effective.

There are three objectives that have been set out. The study investigates the background of the process of online banking by reviewing various secondary sources. One of the sources is Howe (2012), who asserts that the Internet was introduced in the 1960 as a way of allowing scientists and the military personnel to share information. During this time, the Internet was primarily controlled by the government. In 1989, Tim Bernes-Lee introduced the World Wide Web which made the Internet a public resource. However, home banking is one of the oldest forms of banking. It was introduced even before there were normal banks, let alone the computers. However, the touch-tone telephone which was mainly used for home banking lacked a visual interface which made the banking process cumbersome and unreliable. Therefore, when the Internet was introduced in the 1990s, banks embraced the technology, and most of the customers considered it as the quickest way to make transactions. It is important to note that this objective has not been fully fulfilled; thus, more sources will be reviewed to expound it. For instance, the Stanford University lecture notes that address the history of online banking are yet to be referred. Moreover, there are many scholarly articles that are yet to be consulted. Some of the issues that are to be addressed to achieve this objective include the country, in which online banking was first introduced, and the bank or financial institution that implemented it first. It is important to note such kind of data in order to recognize the financial institutions that pioneered the whole process. Similarly, the study is yet to address the reasons banks embraced online banking opposed to usual banking, even though there are more risks associated with the whole process.

Another objective of the study is to investigate the security threats of online banking. It is to be achieved by using both secondary and primary sources. So far, the study showed that criminals use two steps in stealing from financial institutions. They start by obtaining the log-in details of the user account, and later, they use this information to access the account and transfer money to an alternative account. To achieve this, the criminals have come up with a number of methods. The first one is referred to as “over the shoulder looking” method. It is the process of observing the victim keying in the online account details in cyber cafes. Once they have acquired the necessary information, they access the victim’s account and transfer the money to a different account.

Another method is “phishing.” It is when criminals use fake websites and email in order to impersonate the financial organizations. Therefore, they are able to obtain the victim’s details using lies such as “for security reasons.” Since the victims are not likely to recognize that the emails are not from genuine financial institutions, they quickly respond to them and, in the process, share their important account information. Another method is the “Trojan horse” scheme. It is a complicated computer virus that takes note of every key stroke that a victim makes on his computer. Immediately, the virus recognizes that a banking page has been opened; it captures all the information entered by the user and transfers it to the criminal. As much as banks are trying hard to find antivirus that can counter this scheme, the criminals get smarter by day and create more sophisticated viruses.

From the above discussion, it is clear that the study has tackled the objective based on information from secondary sources. It is yet to capture information from the primary sources. Therefore, the study plans to conduct interviews with at least one bank personnel, most likely someone from the security department, and an online bank user. This set of people is better placed to give information on the security threats because they are involved first hand. For instance, the security manager will be able to give information on how many times the customers have complained of unauthorized transactions and the kind of steps financial institutions are taking to prevent the recurrence of the problem. Similarly, he/she will be able to paint a clear picture of what are the most common methods criminals use today. On the other hand, the online customers are better placed to tell whether or not they have fallen victims to online criminals, and why they continue to use the system if they still do.

The third objective of the study is to find out why consumers use online banking. This objective has not been achieved yet. Nonetheless, there are plans to interview at least five consumers of online banking to understand why they use the system. Some of the information that will be captured in the interview includes the age of the user, how long they have been using the system, the security threats they have encountered, and the kind of response they got from their financial institution after being defrauded. The respondents will also be questioned on whether they intend to continue using online banking despite the insecurities.

Literature Review

This section reviews what different authors say about the challenges of online banking. It mainly focuses on scholarly articles because they have certified information that is reliable, unlike other sources such as web pages that could be people’s opinion. Not much has been done in this section yet. Some of the information that has already been reviewed indicates that Internet was commercialized in early 90s (Howe 2012). In addition, David & Amy (2002) allege that home banking existed before Internet technology. For instance, in 1970s, the touch-tone telephone was used for banking needs. Unfortunately, this technology was not reliable because it did not have a visual interface. Therefore, when the Internet technology was introduced, consumers quickly switched from touch-tone telephone banking.

Nonetheless, Internet banking has also improved by lips and bounds. For instance, according to Online Banking Security Information (2006), online banking in the late 90s was restricted to logging into a customer’s bank account and checking the balance. However, technology has improved and consumers can transfer money from one account to another, apply for loans, or pay bills online. This improvement in technology has benefited both the financial institutions and the customers. In general, online banking can be conducted in several ways. The figure 1 below gives a glimpse of different online banking services.

However, as the technology improves, so do the security threats. According to Nilsson et al (2005), cyber crime was introduced in early 2000. It prompted banks to invest in security measures to protect their clientele and themselves. Thus, the cost of operation of financial institutions in the UK has increased tremendously. A research conducted by Aladwani (2001) about adoption of online banking is based on security and trust. 

Likewise, financial institutions are quickly adopting online banking for retail banking services. However, the idea of introducing online banking does not have to come from the managers. For instance Aladwani (2001) found out that the idea could come from the IT department, senior manager, or even the customers of a bank as indicated in the figure 2. below.

Other issues that have already been addressed in this section include the most common methods used by cyber criminals. They include "Trojan horse," “phishing,” and “looking over the shoulder.” However, there is much to be done. Other information that will be added in this section includes the following:

  • Technological issues (security, privacy, authentication, divisibility)
  • Security issues
  • Implementation issues
  • Challenges to the regulator(regulatory risks, legal risks, operational risks, reputation risks)
  • Regulatory tool (adaptation, legalization, harmonization, integration)

Research Methods

Data is a critical tool of any research. Researches can be conducted in different fields using different tools of data collection, but one common thing is that they are based on some data that is later analyzed and interpreted. To achieve credible results, the study plans to use both primary and secondary sources of data. While primary data is first hand, secondary data is based on information that has already been published.

Some of sources that are already being used include textbooks, scholarly articles, and electronic sources. Although secondary data is sometimes considered less valid, it is still very important. Sometimes, it is not easy to collect primary data. In such an instance, secondary data come in handy. For instance, in this instance, it is not possible to find background information on online banking through primary sources of data. This is why periodicals and journals that were published in the past are used. Moreover, with the availability of the Internet, secondary data has become easily available. However, not all information on the Internet is reliable. Therefore, the study is mainly focused on scholarly articles. It is fortunate that books and journals can be easily found online. To avoid plagiarism, all information from secondary sources is appropriately cited.

In addition to the secondary data, the study plans to use primary tools of data collection even though none is yet to be used as at now. The two main primary sources of data that will be used are questionnaires and interviews. Questionnaires refer to a list of questions that respondents answer. For this study, questionnaires will be administered through email. On the other hand, face to face interviews will be conducted with security personnel in financial institutions to understand the trend of online banking and the related security threats including the measures that have been taken to counter the threats.


Task Number


Date &

Starting Time

Date &

Finnish Time

Dependant    (Task number)



Supervisor meetings 

23 Oct

10 AM

23 Oct



Weekly meeting/Emails



27 Oct

2 PM

28 Oct

4 pm




Research Topics

29 Oct

9 AM

2 Nov

6 PM




Aims & Objectives

3 Nov

1 PM

4 Nov

7 Pm




Literature Review

5 Non

11 AM

6 Nov

1 PM




Write Proposal

6 Nov

4 PM

8 Nov

8 PM




Review & Submit

9 Nov

8 AM

9 Nov

3 PM




Interim Report






Document/Summarize literature research

15 Nov

11 AM

1 Dec

4 PM




First Draft Interim Report

2 Dec

10 AM

19 Dec

2 PM




Create Questionnaire questions

20 Dec

2 PM

28 Dec

6 PM




Conduct Questionnaire

2 Jan

1 PM

8 Jan

5 PM


Must be completed on time


Amend Draft interim Report

9 Jan

9 AM

11 Jan

8 PM


Must be completed on time


Research areas suggested in questionnaires 

12 Jan

9 AM

19 Jan

2 PM


Must be completed on time


Complete Final Interim report

20 Jan

11 AM

1 Feb

3 PM


Must be completed on time

Structure, Layout, and Chapter Summaries

In the final report, the study will adopt the following structure:

Abstract – It will give an overview of the study.

Table of contents – It is a layout of all the sections in the dissertation.

Acronyms and abbreviations – All the acronyms and abbreviation in the study will be expounded.

Definition of terms – Any key term that requires definition will be listed and defined.

Chapter One – It will be divided into the following sections.

1.1. Introduction – It will include a brief introduction of the definition of online banking and different transactions that can be conducted using online banking.

1.2. Background of the Study – This section will address some history of online banking and how it has evolved into what it is in the modern world. It will also discuss the online banking trends as well as give a brief overview of online banking challenges and regulation.

1.3. Aims and Objectives – This section will maintain the same information as in the first draft of the interim report, unless it is necessary to make any changes. As mentioned before, the aim of the study is to find out the challenges faced by customers of online banking. It will be achieved by addressing the three objectives mentioned before.

Chapter Two

2.1. Literature Review- This chapter will solely focus on the review of secondary data. The data will be obtained from scholarly articles, textbooks, electronic sources, and Sanford University lecture notes.

Chapter Three (Research Methodology) – It basically contains the methodology of the study that comprises of the following sections.

3.1. Sample Size And Sampling Procedure – It refers to the number of respondents that will be used for collecting primary data and the how they will be selected. Ideally, the respondents will be selected randomly but they will include both male and female to avoid gender biasness.

3.2. Instruments Of Data Collection – Questionnaires and interviews will be used for collecting primary data, while scholarly articles, textbooks, and websites will be used to collect secondary data as mentioned above.

3.3. Data Analysis and Presentation – The data will be analyzed by SPSS computer package and presented using graphs and charts.

4.0. Chapter Four (Results and Discussion) - The findings of the study will be presented in this section, and the discussion will be provided.

5.0. Chapter Five (Summary and Recommendations) – The proceedings of the entire study will listed in brief and recommendations on how to improve further studies provided.

References - All the sources of data will be listed in this section.

Appendices - Any tools of data collection or pictures that will be used in the study will be listed in this section.


The interim report clearly indicates that the study has made commendable steps towards achieving the objectives of the study. Nonetheless, there is much to be done. However, at the moment, the study has provided some background information about online banking. It has also reviewed a number of secondary sources that address the security problems related to online banking. Questionnaires and interview guide have been developed and will be used to collect primary data before a subsequent report is presented. These tools are listed in the appendices section. Therefore, the study will focus on reviewing more sources, conducting interviews, and administering questionnaires to obtain more information that will help in achieving the set objectives.

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