Dynamics of Innovation in e-Banking

DYNAMICS OF INNOVATION IN E-BANKING
Shreyan Singh
School Of Computing, National University of Singapore,
3 Science Drive 2, Singapore 117543
(65) 93654304
singhshr@comp.nus.edu.sg
Sohrab Singh Chhatwal
School Of Computing, National University of Singapore,
3 Science Drive 2, Singapore 117543
(65) 90671698
sohrabsi@comp.nus.edu.sg
Taha Mohammed Yahyabhoy
School Of Computing, National University of Singapore,
3 Science Drive 2, Singapore 117543
(65) 7744615
yahyabho@comp.nus.edu.sg
Yeo Chin Heng
School Of Computing, National University of Singapore,
3 Science Drive 2, Singapore 117543
(65) 98574587
yeochinh@comp.nus.edu.sg
ABSTRACT
Technology has introduced new ways of delivering banking to the customer, such as ATMs and
Internet Banking. Hence, banks have found themselves at the forefront of technology adoption for the
past three decades. Banks began to look at e-banking as a means to replace some of their traditional
branch functions. e-banking products/services like ATM and electronic funds transfer were a source of
differentiation for banks that utilized them. This research paper uses the Revised Technology Adoption
Life Cycle model to develop a framework for technology evolution in e-banking.
1.
INTRODUCTION
The evolution of the e-banking industry can be traced to the early 1970s. Banks began to look at e-
banking as a means to replace some of their traditional branch functions, for two reasons. Firstly,
branches were very expensive to set up and maintain due to the large overheads associated with them.
Secondly, e-banking products/services like ATM and electronic funds transfer were a source of
differentiation for banks that utilized them. Being in a fiercely competitive industry, the ability of
banks to differentiate themselves on the basis of price is limited. Technology has introduced new ways
1527
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Shreyan Singh, Sohrab Singh Chhatwal, Taha Mohammed Yahyabhoy, Yeo Chin Heng
of delivering banking to the customer, such as ATMs and Internet Banking. Hence, banks have found
themselves at the forefront of technology adoption for the past three decades. It is imperative for banks
to align their strategies in response to changing customers’ needs and developments in technology.
Our research aims to fill a gap in the current e-banking literature This paper uses the Revised
Technology Adoption Life Cycle model to develop a framework for technology evolution in e-
banking. The following section reviews existing literature on dynamic innovation models and
technological developments in banking. In Section 3, we argue that a modified version of the model
provides a useful blueprint for strategies that constitute success at different stages of a discontinuous
technology’s evolution. Section 4 validates the model by applying it to two such discontinuous
innovations, ATM and Internet Banking. Hypotheses on the next paradigm shift are made in section 5.
2.
LITERATURE REVIEW
In trying to find a framework to explain the evolution of e-banking technology, and some of the
reasons behind successful implementations of e-banking strategies thus far, four models of
technological innovation were reviewed. This section deals with literature on three of these models.
The importance of innovation in the banking sector is discussed. Previous studies on technological
evolution in the banking industry are also summarized.
2.1.
Models of Innovation
Innovation is defined as the use of new knowledge to offer a new product or service that customers
want (Afuah, 1998, pp. 13). The new knowledge here refers to technological or market knowledge.
Technological knowledge is knowledge of components, linkages between components, methods,
processes and techniques that go into a product or service. Market knowledge is knowledge of
distribution channels, product applications and customers’ expectations, preferences, needs and wants
(Afuah, 1998). No matter how the paradigm shifts due to external factors like technology and
environment, the process of innovation cannot be separated from a firm’s strategic and competitive
context.
The Utterback/Abernathy model (1978) was the first attempt at detailing the dynamic processes that
take place within an industry and its firms during the evolution of a technology. The model described
three phases in an innovation’s life cycle – the fluid, transitional and specific phases. In the fluid phase
technology is in a state of flux and firms have no clear idea whether, when or where to invest in R&D.
Custom designs are common, with the new product technology often crude, expensive and unreliable
but able to meet the requirements of some market niches. The evolution then enters the transitional
phase when, as producers learn more about how to meet customer demands through producer-
customer interaction and through product experimentation, some standardization of components,
market needs and product design features takes place. A dominant design emerges, signalling a
substantial reduction in uncertainty, experimentation and major design changes. The design commands
a high percentage of the market share. ATMs represent one such dominant design in the banking
industry. In the specific phase, products built around the dominant design proliferate and there is more
and more emphasis on process innovation, with product innovations being largely incremental. Cost
becomes the basis for competition. The pattern described repeats itself when a new technology with
the potential to render the old one obsolete is introduced. This results in a discontinuity, plunging the
innovation cycle back to the fluid phase.
The Tushman/Rosenkopf Technology Adoption Life Cycle (1992) is similar to the
Utterback/Abernathy model in many aspects. However, it addresses another important and
unanswered question in the dynamics of innovation. To what extent can a firm influence the evolution
of the innovation? For example, to what extent can a firm guide its design to an industry standard, or
dominant design? Tushman and Rosenkopf argue that this depends on the amount of technological
1528
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Dynamics of Innovation in e-Banking
uncertainty which in turn, depends on the complexity of the technology and the stage of evolution.
The more complex an innovation, the greater is the role of non-technical factors such as
complementary assets and organizations in the local environment during the innovation’s life cycle.
Geoffrey Moore built on Tushman and Rosenkopf’s model to come up with the Revised Technology
Adoption Life Cycle. The significant value-add of Moore’s model is the ‘Chasm’ concept. The
Revised Technology Adoption Life Cycle is described in section 3.
2.2. S
Curve
The dynamic models mentioned above state that the evolution of an innovation ends with the arrival of
a technological discontinuity. However, it is difficult to predict when this discontinuity will arrive.
Foster (1986), argued that the rate of advance of a
technology is a function of the amount of effort
Limit of
put into the technology and follows the S curve
technology 2
shown in Figure 1. For a given technology, the
evolution is as follows: Initial efforts result in little
advancement until the technology becomes
Limit of
Technology 2
technology 1
successful. This success point, at the lower knee of
the curve, is where the technology has finally
demonstrated its utility and superiority over the
ress
previous technology. After this point significant
g
ro
Technology 1
progress and improvements are made as several
Rate of technological
p
embodiments are produced and the technology
becomes widely established. Eventually, however,
Effort over
the physical limits of the technology are reached,
and continued effort results in little additional
Figure 1: S Curves
advancement. To go beyond the limits of the top of
a predecessor’s S-Curve, a new alternative must be
Adapted from: Foster, 1986
created.
2.3.
Previous studies of technological innovation in banking
The Inverse Product Life Cycle Model (Barras, 1986) was applied to the banking industry by Barras
(1990). Barras’ model was reversed with respect to Utterback and Abernathy’s (1978) model. While
this model helps understand the innovation mechanisms of the services industry, it “lends itself to a
fundamental criticism, which is manifest when it is applied to the banking industry” (Buzzacchi et al.,
1995, pp. 153). Barras’ model characterizes all banking innovations as incremental, which is not
necessarily correct. The diffusion of network technologies and distributed systems has resulted in
radical innovations like ATMs and Internet banking.
Buzzacchi et al. (1995) proposed a model to analyze innovations resulting from the diffusion of
Information Technologies in the banking sector. This model built on existing work done by Barras,
and the Utterback/Abernathy model. A distinction was made between the ‘mass automation’ regime
and the ‘smart automation’ regime. Mass automation dealt with mechanization of back office
procedures in the 1960s and was a period of incremental innovation, whereas smart automation dealt
with the diffusion of network technologies like ATM and was characterized by radical process
innovations. The theoretical hypotheses were validated through an econometric analysis of the
determinants of innovative behavior in a sample of Italian banks.
1529
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Shreyan Singh, Sohrab Singh Chhatwal, Taha Mohammed Yahyabhoy, Yeo Chin Heng
3.
THE REVISED TECHNOLOGY ADOPTION LIFECYCLE
In trying to explain the changes in the e-banking market as technology evolves, we have built upon
Geoffrey Moore’s Revised Technology Adoption Life Cycle. The Revised Technology Adoption Life
Cycle deals with market responses to discontinuous technological innovations. ‘Truly discontinuous
innovations are new products or services that require the end user and the marketplace to dramatically
change their past behavior, with the promise of gaining equally dramatic new benefits’ (Moore, 1995).
When the marketplace is faced with a new technological paradigm, customers can be segmented into
five major categories according to their propensity to embrace the new technology. These five
segments, in order, are the Innovators, Visionaries, Pragmatists, Conservatives and Skeptics
respectively. The distinct types of customer segments enumerated above form the basis for five
different stages of a technology’s marketplace, namely, the Early Market, the Bowling Alley, the
Tornado, Main Street and End of Life.
Operational Excellence and
Main Street
Customer Intimacy
MASS CUSTOMIZATION
Product Leadership and
Operational Excellence
The Tornado
MASS MARKETING
Early Market
The Chasm
End Of Life
The Bowling Alley
Product Leadership and
Product Leadership
Customer Intimacy
DEAL DRIVEN MARKETING
NICHE MARKETING
Figure 2: Market strategies have to change as technology matures in the marketplace
A company’s product/service strategy depends on the position of its innovation within the Technology
Adoption Life Cycle. According to Moore, the different responses of each of the customer segments to
a new technology means that companies need to continually change their business strategies to cater to
changing market conditions. The strategies that constitute success, according to Moore (1995), at
different phases in the Life Cycle are depicted in figure 2 above.
3.1.
The ‘Chasm’ Concept
“Companies often stumble when it comes to making the transition from the visionaries to the
pragmatists” (Moore, 2001). Most high technology innovations that manage to gain Early Market
support falter beyond this phase, and ‘fall into a chasm’. Since most of the revenue from an innovation
comes from the pragmatists, who make up the bulk of the mainstream market, crossing the chasm is an
organizational imperative. Moore argues that the key to crossing the chasm lies in using the
technology to develop a whole product, tailored to the needs of a specific market niche.
1530
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Dynamics of Innovation in e-Banking
3.2.
Limitations of the Model
1. It is difficult to predict when a technological discontinuity will arrive to displace the old paradigm
2. The model does not provide any information on how a company can successfully make a
transition from the old paradigm to the new one
3.3. Modifications
Proposed
Our research framework applies Foster’s S
Paradigm shifts
Curve (Foster, 1986) in order to predict the
(caused by a
arrival of a technological discontinuity,
technological
which has the potential to displace existing
discontinuity)
Paradigm III
technologies. The S Curve depicts the
diminishing returns from a technology as
the limits of that technology are reached. It
Main Street
is these diminishing returns that indicate the
Paradigm II
arrival of a discontinuous technology. The S
Curve is mapped to the Revised Technology
Adoption Life Cycle as shown in figure 3. It
Tornado
Paradigm I
has been argued that the successful
Rate of technological Progress
transition from the old paradigm to the new
Bowling Alley
one is a function of the type of firm and the
innovation in question – whether radical or
Effort put into technology over time
incremental. A radical innovation differs
from an incremental innovation in that the
Figure 3: Foster’s S Curve mapped to the
capabilities of a firm (either technological
Life Cycle to predict the arrival of a
or marketing) are rendered obsolete by the
technological discontinuity
former, whereas the latter builds on existing
capabilities. Radical innovations destroy either technological or marketing capabilities or both,
whereas incremental innovations are said to be competence enhancing (Tushman et al., 1988).
Market
Technical Capabilities
Abernathy and Clark extended the concept
Capabilities
of the effect of an innovation on the existing
Enhanced
Destroyed
capabilities of a firm as shown in figure 4.
An innovation is regular if it conserves the
Enhanced
Regular
manufacturer’s existing technological and
Revolutionary
market capabilities, revolutionary if it is a
(Incremental)
radical technical innovation but an
Architectural
incremental market innovation, niche if it
Destroyed
Niche
enhances technological capabilities but
(Radical)
obsoletes market capabilities and
Figure 4: Abernathy – Clark
architectural if it is both a radical
terminology
technological and market innovation.
Incumbents possessing well established
market or technological capabilities or both (that are hard to acquire by new entrants) are most likely
to exploit regular, revolutionary and niche inventions. New entrants, on the other hand, have been
more successful in exploiting architectural innovations and, to a lesser extent, niche innovations
(Abernathy, et al., 1985).
1531
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Shreyan Singh, Sohrab Singh Chhatwal, Taha Mohammed Yahyabhoy, Yeo Chin Heng
4.
VALIDATION OF THE REVISED TECHNOLOGY ADOPTION LIFECYCLE
4.1.
The Automated Teller Machine (ATM) Life Cycle
Automated Teller Machines can be considered to be a discontinuous revolutionary innovation. ATMs
required a bank’s customers to dramatically change their behaviors in order to obtain benefits in terms
of faster, more convenient banking. Instead of going to a bank branch, filling out a transaction form
and interacting with a human teller, these customers could log on to the bank’s network and conduct a
variety of transactions on a machine. The Technology Adoption Life Cycle can be applied to ATMs in
order to understand the business strategies adopted by various banks at different stages of ATM
evolution.
Increasing labour costs in the 1960s placed pressure on labour intensive industries like banking to look
towards automating some of their functions. Barclays Bank was the first to envisage the potential of
ATMs, and introduced the first ever ATM in 1967. Initially, ATMs were not very sophisticated, and
served only as cash dispensers. Originally, large banks offering an ATM service achieved an
advantage over their competitors (O’ Hanlon et al., 1993). There was scant understanding of the
customers’ needs or expectations and the role of ATMs in banks’ retail delivery system was vague
(Violano et al., 1992). In the early market stage, the ATM was a product based on a radical
technological innovation, and did not represent a solution to a customer need at that point of time.
Early adopting banks focused on the technological aspects of ATMs in order to gain leverage among
innovators and visionaries.
In order to enable ATM technology to successfully cross the chasm, banks began to focus on specific
customer niches. By penetrating into clearly defined market segments, ATMs began to achieve
acceptance in these segments. Swinyard and Ghee (1985) found that a successful bank strategy during
this phase involved segmenting the customers according to attitudinal variables, and focusing on the
requirements of these customers. This study found that ATM cardholders differed from non-
cardholders in their attitudes towards change, convenience and technology. The findings have been
backed by numerous other studies (Moutinho and Meidan, 1989; Leblanc, 1990; Marr and
Prendergast, 1993; Iversen and Rugimbana, 1994; Rugimbana, 1995; Thornton and White, 2001).
By the mid-1970s, features like cash balance enquiry, deposits and funds transfer extended the original
cash dispensing functionality to cater to the primary requirement of early ATM cardholders, namely,
convenience (O’ Hanlon et al., 1993). This permitted these customers to conduct the majority of their
routine transactions without visiting a bank branch. By leveraging the acceptance of ATMs within
specific customer segments, banks began to ‘bowl over’ other niches, enabling ATM machines
provided by Docutel and NCR to become the dominant design. ATMs began to gain widespread
acceptance among banks’ customers in the late 70s. At this stage most banks began to consider an
ATM as a prerequisite for staying in business. Developments in networking technologies also helped
reduce the costs of setting up and maintaining ATM networks. By 1983, 40000 ATMs were in
operation. The economies of scale necessary for tornado market success were achieved by advances in
digital technology and network consolidation among different banks (O’ Hanlon et al., 1993).
By the late 1980s, ATMs were viewed as a generic service, a commodity with no competitive
advantage. In order to succeed, banks needed to adopt main street strategies like product proliferation
and bundling. The advent of shared national networks like Cirrus and Plus (in the U.S.A.) helped
proliferate ATMs further. Banks looked to bundle additional functions like bill payments and
automatic check cashing in order to differentiate their ATM services. These differentiated services,
however, constitute an insignificant percentage of the entire ATM transaction volume. This inability
of banks to differentiate their offerings has resulted in limited success on the ATM Main Street. After
reaching an apex of 930 million transactions per month in 1998, industry ATM volume slipped to 907
million transactions per month in 1999 (Dove Associates). Dove predicts the compound annual growth
rate of ATM transactions over the next couple of years to be 1.3%. Industry analysts claim that a large
1532
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Dynamics of Innovation in e-Banking
reason for this stagnating growth is the saturation of the market. Rising fees per transaction (instituted
when Visa and MasterCard dropped their bans on charges in 1996) have deterred many consumers,
further trimming transaction growth.
Using Foster’s S Curve, it can be argued that stagnating ATM transaction volumes indicates that the
physical limits of ATM technology are being reached. This has prompted banks to begin
experimenting with other e-banking products and services, notably Internet Banking. However, “retail
banking via the Internet has not taken off yet, despite perennial predictions that it is about to” (Orr,
2001). Yet, banks have invested heavily in Internet banking, and the focus is on customizing the entire
banking experience online.
4.2.
Internet Banking and the Life Cycle
The Internet, much like the ATM that came before it, is fundamentally a new distribution channel over
which banks can deliver traditional banking products and services (Young, 2001). Consumers have
developed a high degree of comfort for using remote basic banking services, as demonstrated by the
rapid proliferation of ATMs since their introduction 30 years ago. Initially, banks promoted their core
capabilities, namely, products, channels and advice, through the Internet. Then, they entered the
Internet commerce market as providers/distributors of their own products and services (Rubin, 1998).
The vast majority of the banks that avoided Internet banking in the beginning did so because they
simply did not see the benefits of using it (Sheshunoff, 1999; Slywotzky, 2001).
An extensive study conducted in 2001 by the Consumer Bankers Association indicates that Internet
banking usage remained stagnant from 1996 to 1998, with less than 10% of the market utilizing the
service. This characterizes the early adoption phase where the banking industry, in its striking
transformation, has embarked on an era of ‘anytime, anywhere’ banking (Polatoglu and Ekin, 2001).
Banks that had the capability of implementing such a system became the first movers and focused
primarily on the technological benefits offered by such a setup in order to capture technology
enthusiasts at that time. Examples include Merrill Lynch, Charles Schwab, Citibank and Bank of
Montreal (Holland and Westwood, 2001) that provided services such as cash management, account
statements and transaction receipts.
Since then Internet banking has been able to successfully cross the chasm as a complete service within
the financial services industry. As mentioned above, technologies in the early market provided many
single services and not complete solutions. In Europe, two financial firms stand out for their ability to
effectively target customer niches in order to cross the chasm: Marschollek Lautenschlager and Partner
(MLP) in Germany and Bankinter in Spain (Slywotzky, 2001). Polatoglu (2001) and Young (2000)
have shown instances of niche-based strategies adopted by Garanti, Wells Fargo and Northern Trust
during this period. These examples demonstrate the development of a complete service that becomes
widely used within a small segment of the pragmatic early majority, representing an entry into the
bowling alley.
According to the Gartner Group’s 1999 report, there has been a rapid growth in online PC banking in
the USA; from just over 10 million in 1999 to the projected 35 million by the year 2003 with a rapid
shift to Internet access (Barto, 1999). Consumer growth in some European countries such as Germany,
Norway and Sweden has been similar (Bons, 1999; Slywotzky, 2001). With the current proliferation
of Internet banking, its life cycle is well set in a tornado with many banks instituting strategies for
operational excellence and mass marketing. The economies of scale necessary for tornado market
success are being achieved through account aggregation, multi-channel distribution and Internet bill
payment and presentment (Cline, 2001).
Banks have begun to differentiate their Internet offerings as basic online banking becomes a
commodity, signaling the imminent arrival of main street. Strategies like bundling and whole product
offerings targeted at specific +1 niches need to be adopted in order to retain customers in this phase.
For example, Bizzed.com (a Citigroup site) has started offering payroll, retirement accounts, office
1533
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Shreyan Singh, Sohrab Singh Chhatwal, Taha Mohammed Yahyabhoy, Yeo Chin Heng
supply shopping, accounting services and a variety of other services (Altinkemer, 2001). In an attempt
to solidify and expand customer relationships and to stay ahead of the competition, banks are turning
to the next generation of personalized online services – Internet banking portals and Mobile banking
(Fonseca et al, 2001; Saatcioglu, 2001). Early Internet banking portal providers include Chase
Manhattan Bank, Citigroup and Wells Fargo. Engen (2000) and Schmerken (2000) argue that as
network speeds and devices improve, wireless will become the preferred channel for providing
financial services. A July 2000 Forrester Research report stated that 47% of the firms surveyed said
that customer retention was the number one reason for adopting wireless. The move by a few banks
into providing integrated financial portals (as a bundle of financial services) and mobile banking
which is targeted primarily at the higher-end mobile customer base indicate that banks recognize the
importance of differentiation of their online banking products.
5.
THE NEXT PARADIGM SHIFT?
As Internet and Mobile Banking technology become generic services, a stage of technological
discontinuity will prevail again, with a multitude of new technologies and services fighting to become
the next paradigm. The most promising of these will be a strategic shift towards a “customer-centric
business model”. The current state of the financial industry, our modifications of Moore’s model and
the study of Foster’s S Curves for Internet Banking substantiate our hypothesis.
5.1.
Current State of the Financial Services Industry
Deregulation – Changes in government regulation of the industry has caused traditional firms to
expand their offerings (Llewellyn, 1996). Competition is multiplying as these institutions fight for
customers in new arenas.
Disintermediation – Non-traditional entrants are competing with recognized financial institutions.
These new players are forming stronger relationships with financial service firms’ consumers than the
firms themselves are able to form (Daniels, 1999; Holland et al, 2001; Holliday, 2001). For example,
programs such as Quicken or Microsoft Investor are accessed more frequently than Citigroup’s
offering. With equivalent products available from a number of sources, consumers are not induced to
frequent one product provider. Thus, firms will lose intimacy with their customers (making it harder to
cross-sell), and customers will lose loyalty to their financial service providers (increasing customer
acquisition cost). Furthermore, the Internet allows consumers to analyze costs and performance
themselves, capturing real-time market data with their own computers. These consumers are thus able
to access information and services that were previously mediated by financial service firms.
Wealth Transfer – Over the next ten years, the largest and wealthiest demographic group will begin
transferring wealth (Daniels, 1999; Bielski, 2000; Holliday, 2001). Research at Arthur Anderson and
Gartner predict that this transfer will be around $41 trillion in assets. In this way, a significant share of
each firm’s best customers will be leaving them. The customers who will be transferring wealth are, in
general, older, brand-loyal customers who have maintained significant amount of money with
particular firms for a long time. In many cases, those receiving the money will be younger, less brand-
loyal individuals who lack existing financial relationships. Therefore, they are significantly less
predictable than the older customer base. The shift between this long-standing customer base and the
emerging wealthy is accelerating, and a financial service firm needs to manage this shift properly for
its customers.
5.2. Customer-Centricity
The state of the industry requires that organizations rethink their traditional methodologies or risk
obsolescence. Financial service firms will need to shift to a customer-centric, rather than a product-
1534
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Dynamics of Innovation in e-Banking
centric business model. They see the profit in forming value-added relationships with their consumers
and cross selling new products into those relationships (Wind, 2001). Electronic Customer
Relationship Management (eCRM) will thus represent the next paradigm shift. Lemon and Rust
(2001) depict that customer expectations of personalization will escalate with the continued
enhancement of technological capabilities and that customers will expect to be truly “known” by the
firm. eCRM in this sector will not just be about implementing the right technology and software; It
will be a matter of fundamental change, involving the re-engineering of processes throughout the
financial institution. It must not be a web solution or an advisor solution or a call center solution or a
wireless solution. Enterprise-wide eCRM must be all of the above. Beyond the ability to deploy across
multiple channels, the solution must have consistency and collaboration across all channels.
The above description represents a new way of looking at the customer where current marketing
abilities are rendered potentially obsolete and existing technological capabilities are enhanced.
Drawing on our modification of Moore’s model and using the Abernathy-Clark terminology as
explained in section 3.3, the predicted paradigm shift is a niche innovation. Consequently, incumbents
with established technological abilities and, to a lesser extent, new entrants may be most successful in
exploiting the opportunities made available by the eCRM innovation. Banks that are able to
understand their customers and re-assess their strategies accordingly will be the most successful in the
banking environment of the future.
6.
CONCLUSION AND SUGGESTIONS FOR FUTURE RESEARCH
Changes in banks’ external environment, including globalization and deregulation, have made the
banking sector highly competitive. Banks find it hard to compete on price, and need to look at other
ways to retain customers. As customers become more sophisticated, it becomes imperative for banks
to consider the use of technology to respond to their continuously changing requirements. A number of
previous studies have highlighted the importance of technology to a bank’s success.
By applying the Revised Technology Life Cycle to two discontinuous e-banking innovations – ATMs
and Internet Banking, we have established that the Life Cycle provides a useful outline for successful
strategies that can be adopted by banks and other financial institutions as technology evolves.
According to the Life Cycle, banks’ marketing strategies need to change as the technology matures in
the marketplace. Certain limitations of the Life Cycle have also been highlighted, and modifications
are proposed. These modifications are, in turn, used as the basis of our hypotheses on the next
technological discontinuity.
Our study drew from existing research material in e-banking technology and models of innovation.
Future research avenues include validating this study on a set of banks in different geographical
regions as a case study, in order to confirm its level of representativeness. In addition, the study could
be replicated using other e-banking technologies like EFTPOS, SWIFT or smartcards.
REFERENCES
1. Allan, A., “Innovation Management”, Oxford University Press, 1998.
2. Altinkemer Kemal, “Bundling E-Banking Services”, Communications of the ACM, Volume 44 No. 6, June
2001.
3. Barras, R., “Towards a Theory of Innovation in Services”, Research Policy, Volume 15, 1986, pp. 161-173.
4. Barras, R., “Interactive Innovation in Financial and Business Services: the Vanguard of the Service
Revolution”, Research Policy, Volume 19, 1990, pp. 215-237.
5. Barto, G.L., “e-Banking 1999: New Model of Banking Emerges”, Gartner Group, 1999.
6. Bielski Lauren, “Mellon’s tech strategy and ideal lab”, American Bankers Association, ABA Banking
Journal, Nov 2000.
1535
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---

Shreyan Singh, Sohrab Singh Chhatwal, Taha Mohammed Yahyabhoy, Yeo Chin Heng
7. Bodi, A., Zeleznikow, J., “Software Design for Electronic Banking: Managing the User-computer
Interface”, Communications of the ACM, 1988.
8. Bons, A., “Internet Banking: Early Stage Experiences”, University of Rhode Island, Kington, RI, 1999.
9. Buzzachi, L., Colombo, M.G. and Mariotti, S., “Technological Regimes and Innovation in Services: the case
of the Italian Banking Industry”, Research Policy, Volume 24, 1995, pp. 151-168.
10. Cline Kenneth, “The Next Level”, Banking Strategies, Chicago, Jan/Feb 2001.
11. Daniels Mark R., “The future of the Canadian financial services sector: A life and health insurance industry
perspective”, Journal of Internet Banking and Commerce, April 1999.
12. Engen John R., “Banking on the run”, Banking Strategies, Chicago, Jul/Aug 2000.
13. Fonseca Isabella, Hickman Meredith and Marenzi Octavio, “The future of wholesale banking: The portal”,
Commercial Lending Review, Boston, Summer 2001.
14. Foster, R., “Innovation: The Attacker’s Advantage”, Summit Books, New York, 1986.
15. Holland, Christopher P., Westwood, John B., “Product-Market and Technology Strategies in Banking”,
Communications of the ACM, Volume 44 No. 6, June 2001.
16. Holliday Karen Kahler, “Wrestling for new wealth”, Banking Strategies, Chicago, June 2001.
17. Iversen, P. and Rugimbana, R., “Perceived Attributes of ATMs and their Marketing Implications”,
International Journal of Bank Marketing, Volume 12 No. 2, 1994, pp. 30-35.
18. Leblanc, G., “Customer Motivations: Use and Non-use of Automated Banking”, International Journal of
Bank Marketing, Volume 8 No. 4, 1990, pp. 36-40.
19. Lemon Katherine N. and Rust Roland T., “E-Service and the Consumer”, International Journal of
Electronic Commerce, Vol. 5, No. 3, Spring 2001, pp. 85-101.
20. Llewellyn, David T., “Banking in the 21st century: the transformation of an industry”. Reserve Bank of
Australia, The future of the Financial System (proceedings of a conference), Kirribilli, July 2001, pp. 141-
79.
21. Marr, N. and Prendergast, G., “Consumer Adoption of Self-service Technologies in Retail Banking: is
Expert Opinion Supported by Consumer Research?”, International Journal of Bank Marketing, Volume 11
No. 1, 1993, pp. 3-10.
22. Moore, Geoffrey, “Inside the Tornado”, Harper Collins, 1995.
23. Moutinho, L. and Meidan, A., “Bank Customers’ Perceptions, Innovations and New Technology”,
International Journal of Bank Marketing, Volume 7 No. 2, 1989, pp. 22-27.
24. O’ Hanlon, J. and Rocha, M., “Electronic Banking for Retail Customers”, Banking Technology Ltd., 1993.
25. Polatoglu Vichida Nui, Serap Ekin, “An empirical investigation of the Turkish consumers’ acceptance of
Internet banking services”, The International Journal of Bank Marketing, Volume 19 No. 4, 2001, pp.156-
165.
26. Reidenbach, R.E. and Grubbs, M.R., “Developing New Banking Products: A Manager’s Guide”, Prentice-
Hall, 1987.
27. Rugimbana, R., “Predicting ATM Usage: the Relative Importance of Perceptual and Demographic Factors”,
International Journal of Bank Marketing, Volume 13 No.4, 1995, pp. 18-31.
28. Saatcioglu Kemal, Stallaert Jan and Whinston Andrew B., “Design of a Financial Portal”, Communications
of the ACM, Volume 44, No. 6, June 2001.
29. Sahal, D., “Technological Guideposts and Innovation Avenues”, Research Policy, Volume 14, 1985, pp. 61-
82.
30. Schmerken Ivy, “Where is wireless headed?”, Wall Street & technology, New York, Dec 2000.
31. Schumpeter, J.A., “Capitalism, Socialism and Democracy”, Harper, New York, 1950.
32. Sheshunoff, Alex, “The wait is over for Internet banking”, American Bankers Association. ABA Banking
Journal, New York, Jun 1999.
33. Slywotzky, Adrian J., “Revving the engines of online finance”, MIT Sloan Management Review,
Cambridge, Summer 2001.
34. Swinyard, W. and Ghee, L., “Adoption Patterns of New Banking Technology in Southeast Asia”,
International Journal of Bank Marketing, Volume 5 No. 4, 1985, pp. 35-48.
1536
ECIS 2002 • June 6–8, Gdańsk, Poland
— First — Previous — Next — Last — Contents —

---