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Introduction of the Study
Introduction
The rationale of this research is to investigate how online-banking private customers are aware of the risk associated with the services. The pool of online banking customers interacts with their banks using electronic devices such as computers and mobile devices without visiting a bank branch. The term personal customers are used on the main heading to indicate individual customers or private customers and not business customers. It targets personal customers, who interact with banks to access their savings, withdraw money and make payments among other services without human contacts or the presence of bank staff.
The impact of technology has shaped how people live, access information and solve problems in their daily lives. Technology avails modern and advanced portables devices such as computers, tablets and mobile phones to perform certain complex tasks easily. On the other hand, the availability of the internet facilitates instant connections among people and business organizations. Technology empowers many businesses to move their operations from traditional methods into both physical and online shop and store catalogs. Through their physical and online platforms, businesses offer a similar menu to customers.
Banks, like any other business, respond to positive changes and adapt to the new environment. In the 21st century, online banking has been increasing in popularity. It is due to the availability of cheap infrastructures that allow banks to serve their customers wherever they are around the world. In the current context, many banks in the United Kingdom serve their customers in both their local branches and online catalog menu.
The growing popularity of online banking services came after both personal and business customers had started to embrace banking services offered through their electronic interfaces. The power of technology and internet availability across the world enhances greater connections between customers and bank institutions globally. For instance, international banks use online platforms to provide banking services to customers from Africa, Asia, Europe and America and other parts of the world.
Through online platforms, customers can access banking services remotely and 24/7 throughout the year. The technological advancement as opposed to the traditional local bank branches that could not meet the customers expectations to such levels. Because of the growing popularity of online banking services, online security concerns toward banks and their customers have been raised. However, this research focused on personal bank customers who are willing to use online banking services.
Online banking is a new era that bank institutions use to interact with customers and provide services to them. They are still learning how to improve those online banking services and build trust towards their customers. Online services have continued to attract businesses and their customers. The availability of resources and quick adoption of technology to conduct online business has been the key to the success of the online business.
Because of the attractiveness and comfort of online banking services, there are serious threats currently posed to online banking. Fraud has been the main threat that affects customers. Customers are still in the learning process. They are still learning how they can interact with banks online. While learning to use online services to interact with their chosen bank institutions, customers have become a weak target of cybercriminals. It is because a significant number of customers cannot understand the online environment.
Study Hypotheses
The study is based on the null and experimental hypotheses. The main objective of the researcher is to disapprove of the null hypothesis, which tends to reject the experimental outcomes of the study. The following are the hypotheses:
Null Hypothesis
An insignificant difference exists between personal customers who are aware and those who are unaware of online banking fraud in the United Kingdom.
Experimental Hypothesis
Even though the majority of customers are aware of the threats posed by online banking fraud, a significant number do not understand how to deal with fraud.
Research Aim
This research aims to understand online banking personal customers and their risk awareness of fraud using online banking services through their electronic devices such as computers, tablet devices, mobile phones.
Research Objectives
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To understand the nature of online banking and their customers.
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To understand types of online banking fraud which exist at the current time.
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To understand customers awareness of online banking fraud.
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To evaluate the benefit of online customers awareness of the fraud risks they are exposed to when doing banking transactions online.
Research Questions
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What are online banking and its future in the banking industry?
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How do personal customers adopt online banking?
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Our online customers aware of online fraud risk by using online banking?
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What support do the financial institutions give online customers to increase their online fraud risk awareness?
Literature Review
Fraud is an intentional act committed to secure an unfair or unlawful gain (KPMG 2006). Online fraud refers to the crime committed by a person or group of people toward an organization or person. People and organizations are connected through the internet, which enables them to exchange vital information virtual when necessary. Online banking removes traditional banking practices. It enables customers to use services online and virtually through electronic data interchange.
The platform has continued to eliminate the human interactions between the bank and its customers. According to BBC (2014), the UK banks are closing their physical branches and they continue to decline customers the access to their local branches. Customers prefer to use their mobile banking applications to access banking services. However, they use physical services when they want to buy complex products that would require them to visit their local branch. About 2000 bank branches have been shut down for the past five years. Also, McKinsey consultancy focused on 2400 more branches that could be shut down the coming five years. It forecasted that by 2019, complex products such as mortgages would be available through online banking services (Wallace, 2015).
Because of the complexity of electronic data, interchange processes that occur between customers and online banking systems make both banks and customers vulnerable to security threats. Bank institutions are equipped with financial resources and staffs expertise to help in limiting the risk of fraud within their online operations. Personal customers are normal people with limited ability to understand the complexity of using online banking in their daily lives. Even though online banking services have been showing flexibility to its customers in their daily lives, the security of this platform has been questionable for many of their customers (Durisin, 2013).
Financial institutions consider it more vulnerable to fraudulent activities. More than half of the total fraud cases reported in the UK estimated that the cost of £236 million came from online banking fraud (OMurchu, 2015). Online banking fraud figures have risen by 48% in 2014 from 2013. The significant increase has been because of the increasing number of adult customers who use online banking services (Peachey, 2015).
These positive results have been supported by banks through various platforms they use to encourage customers to shift their financial banking needs from traditional banking to online banking interaction. Their emphasis is on the convenience and speed with which they avail online services (Peachey 2015). The shift of banking institutional from traditional banking view to online banking helps the banks to take advantage of cost reduction and innovative services, which can be accessed online by their customers. It enhances effective time management and expands banks operational scopes in a wider geographical location (Hanafizadeh & Khedmatgozar 2012).
Because of the negative impacts of the fraud in organizational operations, reputation, and revenue, banks have to investigate any fraudulent event to recover the loss from their customers. Banks need to emphasize on the fraud risk awareness to its customers as a way of tackling fraud which happened due to lack of awareness (Holley 2014). Fraud can be well planned beyond individual customer and banks should make their customers aware of the online risk.
Many online customers are considered to have general basic skills in using computing technological devices such as mobile phones and computers. Knowledgeable customers have the necessary information to prevent themselves from becoming the targets of fraudsters. With the increased awareness among the online customers, the fraud trap will reduce and hence the negative impact on service users and banking institutions.
Customer adoption of electronic devices for internet use engages them in online activities. This is true, especially for online banking services, which are purely based on individual efforts to adopt the technology. Many customers are not focussed on security issues. The majority of them lack the knowledge needed to prevent the risk of fraud from happening to them. According to Aite Group (2014), for banks to ensure a safe online banking environment for customers, they should educate the consumer on how to protect themselves against online banking fraud.
According to the Action Fraud UK initiated by the National Fraud and Cyber Crime Reporting Centre, customers are vulnerable to several online frauds when using online banking in the United Kingdom. These include account takeover, advance fee frauds, bank card, and cheque fraud. Other sources of fraud include business directory fraud, Business opportunity fraud, charity donation fraud, clairvoyant or psychic frauds, click fraud, domain name frauds, fraud recovery fraud, government agency frauds.
Health frauds, holiday fraud, Identity fraud, inheritance fraud, internet auction fraud, Internet dialler fraud, land banking frauds, loan frauds, lottery frauds, mass-marketing fraud. An additional list of online frauds includes miracle health defrauds, money muling, Online shopping fraud, and Plastic card fraud. The last types of fraud are rental fraud, romance defrauds, vehicle matching frauds, West African or 419 fraud, and work from home frauds.
Research Methodology
Research Philosophy
In terms of research philosophy, this study adopted the pragmatic approach because it uses various methods in data collection, presentation, and analysis (Jolley 2013). To get the basic knowledge about online banking fraud, the study applied the qualitative approach in reviewing the previous literature about the topic. These include articles, journals, books, and online resources. The study used a quantitative approach to collect data from the respondents. The questionnaires were used to collect numerical data for the subsequent analysis. Tables with average percentages and standard deviations were used to present results for each of the questions in the questionnaire template. To test the study hypothesis, the researcher used one-way ANOVA as a statistical tool to test the experimental hypothesis.
Research Approach
The study is based on the deductive approach in which the researcher developed an experimental hypothesis. The study hypothesized that the majority of people living in the UK are aware of online fraud, although a significant number have not had personal experience with it. Based on Shroeder et al. (2011), the researcher used one-way ANOVA as a statistical data analysis to test this developed hypothesis. To conclude the investigative study, the researcher collected the data from the selected sample using quantitative methods.
Data Collection Method
The study relied on both primary and secondary data collection, analysis and discussions. The secondary data was used in the literature review, analysis, and discussion sections. The researcher used qualitative techniques to collect relevant information from books, journals, articles and online resources (Gramatikov et al. 2010: Bamberger 2000). The literature content has studies and information, which had been previously done. To provide new ideas and information to the field of study, the researcher conducted online research to gather primary information (Saunders et al. 2009). One hundred respondents were identified as the study sample size. The researcher used quantitative methods to collect the raw, numerical data from them (Fitzpatrick & Kazer 2012).
Population and Sampling
The population of this study represented the geographical context of London. The researcher believed that sample selected in London would represent the views of the entire people living in the UK. The research targeted a maximum of 100 participants as the study sample size. It included a total of 52 males and 48 females. The study applied a probabilistic sampling method that gave all the 100 participants equal opportunities to participate in the study. All respondents were served with the same questionnaires, which were to be filled as directed by the researcher. The questionnaires were systematically structured to gather information about the correspondents awareness of online banking fraud in the UK context. The questionnaires covered various elements of online banking fraud.
Data Analysis
The study applied both logical and statistical approaches to condense both primary and secondary information gathered during the study research. The logical technique was used to analyze the questionnaire-based results. It has been used to integrate the reviewed literature with the study results to establish the relationship between the existing and new ideas. The researcher used one-way ANOVA as the statistical tool to test the significance of the hypothetical framework developed for the study topic: the majority of people living in the UK are aware of online fraud, although a significant number have not had personal experience with fraud.
The validity of the Results
To ascertain the reliability of the data, the intended respondents were contacted 24 hours before the questionnaires were sent to them. The prior communication to the respondents through their email addresses and social media platforms was to inform them about the study intent. That way, they were prepared psychologically and physically to provide the most accurate information. The researcher only served those who replied to the cover letter with the questionnaires. Specifically, the researcher provided the questionnaire to the respondents who were willing to participate in the study. People who are willing to participate in the study have a high probability of giving accurate information.
Reliability
Before sending the final template of the questionnaire to the target population, the researcher presented them to the supervisor for assessment. Upon submission, the supervisor thoroughly evaluated the questionnaire template to ensure they meet the research standards. Several aspects of the originally formulated questionnaire were revised until they met the expected standards before submitting them to the respondents. That way, the results obtained followed the required guidelines and provided the most accurate information.
Results of the Study
The study results are based on 100 respondents who were contacted through social media and the internet. The survey was conducted twice within one week. During the first period, 64 respondents were reached upon which they received questionnaires that were to feel and returned within 24 hours. Only 46 (71.87%) of the sample size returned filled questionnaires. In the second round of the survey, 75 respondents were served with questionnaires.
Out of this number, 64 (85.33%) of the sample size returned filled questionnaires within 24 hours. It implies that the total number of respondents who filled in and returned the questionnaires were 110. The target of the study was to collect data from 100 respondents. To ensure the resultant data is of high quality, the received questionnaires were further scrutinized to eliminate 10 questionnaires, which were not filled. The results obtained were presented in the following tables.
Importance of Online Banking Services
In terms of the importance of online services to customers, which prompted the first question, responses were divided into three categories. Many of them filled in very important , fairly important and not important boxes. Less than 10 respondents filled in the remaining parts as shown in the table below.
Table 1: Extent of the importance of online banking services to personal customers.
Frequency and Mode of Accessing Banking Services
The second set of questions was used to assess how respondents accessed banking services. The questions were created to determine how often the respondents use online banking to access their bank accounts, visit their local branches, and access online banking. From the results, a higher percentage of people used the listed services daily, once a week and once a month respectively. Few people use the services once in 3 months, six months or one year. An average of 48.67%, 33.33%, and 17% used the listed services once a day, once a week and once a month respectively. Approximately 1.0% of the respondents used the services once in three months while less than 1.0% use once in 6 and 12 months. Therefore, the results were filled in as shown in the table below.
Table 2: Results showing the respondents frequency and modes of accessing banking services.
Types of Transactions
In this section, the question tended to explore the types of transactions respondents engage when interacting with their banks online. The total (n) in the following table represents those who used the online transaction services indicated in the first column.
Table 3: Types of transactions done.
Perception
In terms of perception, the set of questions was used to collect the participants views about the risks associated with online banking. In terms of awareness, some respondents could not choose between slightly aware and moderately aware . Some of them ticked both boxes. The same case was witnessed in moderately not aware and slightly not aware boxes. The first case had four respondents while the second case had three respondents, which were among those eliminated from the study. The following table shows the results.
Table 4: Respondents awareness about risks associated with online banking.
The Influence of Computer Literacy Level
The objective of the question was to determine the influence of computer literacy on fraud awareness. The level of peoples computer literacy determines the way they respond to online risk factors. The risk factors selected for this study are security checks, software updates, insecure websites, and malicious online advertisements. The respondents had no problem checking in the boxes for each category of the question. The results were as shown in the table below.
Table 5: An illustration of how computer literacy helps in curbing risks associated with security, insecure websites, vulnerable software, and malicious advertisement.
Online Fraud
Risks associated with online banking come from the fraudulent activities of cyber and online criminals. Peoples awareness of fraud depends on their understanding of the various ways in which cybercriminals engage in fraud. Some of the common ways in which fraudsters use to steal money from their victims include e-mails, website advertisements, text messages, website back-links, phone calls, and downloaded software. The participants were asked to state their awareness of the listed factors. The results obtained were presented in the table below.
Table 6: Respondents awareness about forms of online fraud.
Fraud Terminologies
The question investigates the knowledge of respondents about the terminologies related to online fraud. There are various business activities done over the internet, which constitute fraud. When asked to state other terminologies apart from those listed in the questionnaire, no respondent suggested another terminology. As a result, that section was removed when presenting the results. The majority of the respondents did not understand most of the terminologies. A mean of 72.3 of the total respondents was aware of the fraud terminologies listed in the questionnaires with a standard deviation of 14.64.
Table 7: Knowledge of respondents on online fraud terminologies.
Online Fraud Related Losses
The question was formulated to investigate the respondents knowledge about online fraud in terms of the amount of money lost. In this case, 23% believed that between 100 and 200 pounds were lost in 2014 while 25% believed that banks lost 60-99 million. On the other hand, 37% stated that banks lost 10-50 million while 11% believed they lost 1-9 million. The remaining 4% had different opinions regarding the number of money banks lost to fraudulent activities over the internet. Among those who had different opinions, 3 (75%) of them thought that banks lost more than 200 million pounds on online fraud while one respondent (25%) believed that money lost to online banking fraud is less than 1 million. The results were shown in the table below.
Table 8: Losses banks made because of online fraud.
Impact of Online Fraud on Personal Lives
Customers also incur losses when they engage in fraudulent acts. Such losses have impacts on the mental, physical and social lives of customers. The question is framed to investigate the different impacts that online fraud has on the respondents. The listed impacts included service dissatisfaction, emotion, depression, social life, sleep, and physical well-being. Respondents who were not aware of any of the listed impacts were asked to provide their specific impacts.
Approximately 28.5% of the total respondents were strongly aware of the listed personal impacts, 20% are moderately aware while 19% are slightly aware with the standard deviations of 14.32, 9.09 and 2.90 respectively. Approximately 4.29%, 8.67%, and 8.5% were slightly not aware, moderately not aware and not aware respectively. These include standard deviations of 4.15, 5.5 and 6.35 respectively. The results were presented in the table below.
Table 9: Impacts of fraud-related losses on customers.