ICT in Oman's Banking Sector

1. Introduction

The advancements in technology have revolutionized business practices across the world. In order to be competent in the dynamic international business milieu, every industry has adapted itself to the changes in technology. Banking industry is no exception. All social and commercial banks of developed countries have adopted information and communication technology (ICT) in their everyday business operations. Nonetheless, banking industry of developing countries is still in the process of implementing ICT in its business practices. The focal point of this paper is to analyse the implementation of ICT in Omani banks. This chapter discusses the background of this study. The purpose of this research, research objectives and questions related to them, along with overall scope of the study, have been explained in this chapter.

1.1 Background of the study

Information and communication technology (ICT) has offered several benefits to both the consumers and businesses across the globe. It refers to the utilization of computers and digital technology in different business fields to systematise the business processes. Services and manufacturing sectors enjoy benefits of ICT like ease of communication, increased efficiency of operations, etc. Like other service sectors, ICT has positively influenced banking industry. To illustrate, ICT has offered a channel for banks to interact with their clients and solve their problems. In banking sector, ICT is mainly associated with concepts like internet banking, Automated Teller machine (A.T.M) and Debit and credit cards (Martins et al., 2014). ICT has also created e-banking which enables banks to lower their overhead costs and day-to-day expenses. As for the customers, e-banking provides convenience to remotely access their accounts (Chandio et al., 2017;  Chen and Dahlman, 2005).

Initially, ICT was under-utilized in banking sector (Wang et al., 2003). For instance, ICT was only used to market bank’s products and services. But with the passage of time, banking sector was influenced by liberalization, deregulation and competition from global market (Musaev and Yousoof, 2015), which increased the importance and applications of ICT in banking industry manifolds. Correspondingly, banks incorporated the use of ICT in their operations for reducing costs and improving quality of service to remain competitive. Furthermore, ICT has enabled banks to differentiate their services from competitors (Nasri, 2011). It has been predicted that the globalization of financial markets will intensify the competition in banking industry, thereby leading banks to adopt new technologies at a faster pace (Nasri, 2011). Nonetheless, ICT implementation can help banks to sustain competitive advantage in global financial markets.

An interesting application of ICT in banking sector is use of internet banking, which has created a win-win situation for both banking industry and customers, as both parties benefit from its use and accessibility. Internet technology is a medium to access and exchange banking services through World Wide Web (WWW). Internet banking allows customers to perform certain banking transactions electronically. For instance, through internet banking, customer can access accounts, transfer funds between accounts and offer online financial services. Courchane et al. (2002) explained that internet technology assists banks, customers, intermediaries and society in complete banking process.

However, even with these benefits of internet banking, customers and institutions are still wary about its application with respect to the privacy and security issues. Electronic transactions require an internet connection, web-applications and a sound Internet Service Provider (ISP). In order to provide convenience to bank customers, banking institutions have to invest heavily in the development of an internet infrastructure. Apart from privacy and security issues, there are several factors that inhibit the implementation of ICT in banking industry. Some of these include lack of top management’s support for implementing ICT, inadequate training and limited technical knowledge of employees for handling ICT and resistance of employees for shifting to new technologies (Yiu et al., 2007; Al-Somali et al., 2009).  In short, there are certain barriers that hinder ICT implementation in banking sector.

1.2 Purpose of the study

This paper emphasizes on the factors that inhibit the growth of ICT in Oman’s banking sector. Oman has been chosen as the focus of this study because of several reasons. First of all, the banking sector of Oman is growing rapidly amid fall in the price of oil (Times News Service, 2016). Furthermore, banking industry of Oman is stable and is expected to remain steady in the future (Anon, n.d.). Secondly, Oman is a developing country, and in order to support an emerging economy, a vibrant banking sector is imperative (Azad, 2011). Thirdly, Oman is moving towards adoption of electronic commerce (Mustafa, 2011, pp. 192), which increases the importance of ICT for businesses in Oman.  Therefore, the growing importance of ICT for banking sector of Oman make it suitable for this study.

1.3 Research Objectives and Questions

This paper has two research objectives. The first research objective is to identify how ICT is used by the Omani banking sector. The usage of ICT can be in the form of customer services such as e-banking and mobile banking. Moreover, the use of ICT can also be extended towards internal processes of banks e.g. human resource management and marketing. The research questions encompassing first objective are:

1. How is ICT used for customer service initiatives in Oman’s Banking sector, such as e-banking, mobile-banking?
2. Do Omani banks have a software in place for accomplishing operations related to accounting and finance, human resources, etc.?

Although the implementation of ICT is essential for fastening banking operations in Oman yet research indicates that ICT has not been implemented in the Oman banking sector due to some inhibitory factors like lack of technical support (Khalfan et al., 2006). The second research objective is to discuss factors that inhibit ICT implementation in the Omani banking sector. Questions circulating this research objective are:

1. Which factors hinder successful implementation of ICT in the Omani baking industry?
2. To what extent these factors hamper ICT implementation in banks of Oman?

These questions will be studied in detail and will be explored with the help of surveys. Primary data will be collected via surveys that can help the researcher to explore these questions. Close-ended questionnaires will be used, and questions will be developed on a likert-scale. The methodology of thesis is further discussed in detail in chapter 3.

1.4 Importance and Scope of Research

Banks play a pivotal role in the sustained growth of an economy. Banking sector is important to maintain financial equilibrium and economic stability. Correspondingly, in order to support an emerging economy, a vibrant banking sector is imperative. Banks provide financial services that can help businesses to grow. They also play an important role in non-corporate world. For instance, they provide credit or finance in the forms of loans. These loans are used to purchase goods and services like housing renovation, study loans, to start a new business and buy a new car (Al-Lamki, 2005). Banks also provide financial advice for investment of savings and lockers for saving valuable belongings of people. In past few years, banks have also been helping individuals and businesses to make custom payments. These banks provide payment methods such as telegraphic transfer or electronic funds transfer, ATM and credit cards (Tarawneh, 2006). In short, banking institutions are responsible for receiving, lending, and managing money.

The importance of banking industry for Arab world is further increased by the fact that this sector generates non-oil income. Though the Arab world has been relatively slow to adopt technology for banking services, now the Gulf banks are moving towards modernization. Steps towards reforming banks technologically have been taken due to liberalization and globalization of banking services, transformation of management philosophy and spread of internet banking in the region. With electronic commerce, there has also been an increase in the consolidation of banking institutions (Azzam, 2002, pp. 79).

Oman is categorized as a developing country and its banking sector has shown a robust growth over the past few years. Information and Communication Technology has caused significant changes in the banking sector of Oman. It has changed the ways businesses were conducted in traditional marketplace and has led to a complete transformation in business models. Ali (2004) highlights four advantages of ICT implementation in Oman’s banking industry: (1) Information technology has helped to decrease the transaction costs of doing business, (2) ICT has led to provision of better services to consumers, (3) It has also assisted in meeting consumer demands in an efficient manner and (4) Electronic commerce has created efficient transactions for the Oman’s banking sector

The scope of this research involves the advantages that ICT offers to banking industry of Oman. This study will highlight barriers that inhibit ICT implementation in banking sector of Oman. Management of Omani banks can develop strategies to facilitate ICT implementation, once the barriers are identified. The Government of Oman and policy makers can take steps to reduce these barriers. It will contribute to academic literature, as only few studies have analysed ICT implementation in banking sector of Oman.

This thesis is divided into five chapters. The first chapter discusses introduction of study, its background and scope. The second chapter conducts a review of relevant literature. The methods and design of the study are detailed in the third chapter. The fourth chapter explains findings. The last chapter of this thesis focusses on discussion of findings and leads towards conclusion. The limitations of this research along with recommendations for future studies are also explained in the last chapter.

2. Literature Review

This chapter sheds light on literature that is relevant to the research objectives and questions. It discusses the importance of ICT for businesses generally and banking sector specifically. The structure of Oman’s banking sector is also discussed in this chapter. The factors that inhibit implementation of ICT in banking industry, along with gaps that are present in literature are also explained in this chapter.

2.1 Oman’s Banking Industry

The banking industry of Oman is one of the fast growing and stable industries in the Gulf Cooperation Council (GCC) region. It is growing in such a manner that it is responding to the challenges of globalization and other regional and global issues. An example of a global issue is slumping price of oil. However, despite of decrease in oil prices, banking sector of Oman is witnessing growth (Times News Service, 2016). Some factors that have fostered the growth of banking industry of Oman include infrastructure development, in-flow of Foreign Direct Investment (FDI) and the presence of favourable demographics of population growth such as a high percentage of youth in Oman’s population (Oxford Business Group, 2016; Clarke et al., 2003).

Omani banking industry is divided into three parts i.e. Central Bank of Oman (CBO), commercialized banks and specialized banks. The central bank of Oman (CBO) is responsible for regulating the national currency i.e. Omani Rial (Hettish and Ayisha Zia, 2016). It also controls the monetary system that is crucial for ensuring fiscal and financial stability in the region. It should be noticed that the central bank of Oman has been deregulated and it belongs to an open financial system (IBP, 2015, pp.271). It was established in 1974 pertaining to the economic development that Oman was witnessing at that time. Since then, there has been a steady growth in the banking sector of Oman. This upsurge has resulted in an increase in number of commercial banks and branches opened in various parts of the country. By end of 2009, Oman had 442 branches of the commercial banks. These branches belonged to seventeen banks. Seven banks are local, and other ten are international banks operating in Oman. Like CBO, the commercialized and specialized banks of Oman are highly efficient and they respond to the regional and international developments and challenges in an effective manner (Al-Busaidi and Olfman, 2005, pp.69). Today, the banking industry of Oman can be characterized as mature and competitive.

2.2 Information and Communication Technology (ICT)

Information and Communication Technology has become unavoidable in almost all spans of life. Nour (2015, pp. 45) explains that though the term is commonly used as a synonym of Information Technology (IT), ICT has a far greater scope than IT. To illustrate, Nour (2015) states that “ICT is a more specific term that stresses the role of unified communication and the integration of telecommunications (telephone lines and wireless signals), computers as well as necessary enterprise software, middleware, storage and audio-visual systems which enable users to access, store, transmit and manipulate information” (pp. 45). This definition implies that ICT is not limited to use of internet, computers and telephone. To illustrate, ICT is composed of four C’s i.e. Computing, Communications, Content and Capacity (Tongia, Subrahmanian & Arunachalam, 2005, pp. 19). Communication technology is related to physical devices and software that can link various computer hardware components and transfer data from one physical location to another (Lucas Jr et al., 2013). Modern day use of ICT encompasses applications and software that are capable of operations without human intervention; in other words, these systems are highly independent of human-handling (Tongia, Subrahmanian & Arunachalam, 2005, pp. 19).

2.3 Significance and Applications of ICT in Banking Sector

ICT has become a fundamental pillar of modern day socio-economic spheres. It has been explained that it serves both as a means and end for economic development (Tongia, Subrahmanian & Arunachalam, 2005, pp. 19).  Electronic-commerce has transformed the way businesses accomplish their operations. Whether it is a manufacturing organization or service entity, ICT has impacted all business enterprises (Meng and Li, 2002).

Like other industries, ICT has exerted an influence on banking sector. The purpose of banks is to provide financial services to individuals, organizations and institutions. The manner in which these services are provided have been revolutionized in recent decade by the impact of Information and communication technology (ICT). A couple of decades ago, most of the work was done manually. For instance, the preparation of cash books, journals, general ledgers, final accounts and reports were all done without the help of specialized ICT tools. Manual work caused delays in the provision of financial service to customers’. For instance, if the customer wanted to withdraw money, he had to wait in long queues (Roztocki and Weistroffer, 2015).  However, in current times, ICT has provided self service facilities such as automated customer service machines, which allow prospective customers to fill their account opening document directly online. These machines also assist customers to validate their account numbers and receive instructions on when and how to receive their cheque books, credit and debit cards (Bloom et al., 2014). Some other examples of bank processes that have been revolutionized by ICT include customer account mandate and transaction processing and recording (Vadlamani, 2007). Similarly, these days, banks have e-branches and ATM galleries with reduced labour-intensive work. Banks are now using computerized systems to monitor custom duties, excise duties, import duty, movement and payment of goods and taxes (Azad, 2011). Decision support systems also enable bank employees and managers to make smart decisions (Lucas Jr et al., 2013).

The following sections will describe the services that ICT renders to banking industry and will elaborate how ICT is used for customer service initiatives in Oman’s Banking sector, such as e-banking, internet banking, etc. The advantages of using these forms of ICT in banking industry will also be elucidated. This will establish what potential benefits ICT can offer to Omani banks if they set up ICT properly and remove obstacles that hinder its implementation.

2.3.1. Electronic Banking (E-banking)

One of the major applications of ICT in banking industry is electronic banking or e-banking. E-banking has become increasingly useful for both the customers and banking institutions. It has emerged as a delivery channel that does not require personnel serving their customers physically (Alhinai et al., 2013). Through e-banking, customers can execute their bank transactions in a faster manner, anytime and anywhere. Correspondingly, with e-banking, processing periods of payments have decreased, flexibility and speed of the overall business transactions have increased (Chandio et al., 2017). E-banking has grown with the arrival of internet technology. Online banks are now providing e-payment solutions in which the customer is given an online transaction platform to do online shopping, online auction and internet stock (Chen and Dahlman, 2005). Hence, E-banking has become a profitable channel for banks, where they can not only save costs but also make bank dealings more convenient for customers.

According to Ahmad and Al-Zu’bi (2011), electronic banking is comprised of four different channels including PC banking, internet banking, managed network and TV-based banking. PC banking calls for applications that can help customers to take advantage of banking services from their homes. As for internet banking, recent decades have seen a shift from wired internet connections to wireless mobile technologies (Osabuohien, 2008). With the advent of wireless mobile technologies, electronic banking is not limited to the computer screens. E-banking can now fit into tiny mobile screens or any other wireless device. Customers can now consult their account balances and transaction histories, view pie-charts of their holdings in a portfolio, initiate payments or send e-mail to their banks (Ahmad and Al-Zu’bi, 2011). As for managed networks and TV-based banking, they are not playing a big role in banking.

2.3.2 Internet banking

Internet banking is most general type of electronic banking that banks are using these days (Martins et al., 2014). Just like e-banking, internet banking services have revolutionized the banking sector. It should be noticed that though internet banking is a type of electronic banking, both of these are different. To illustrate, electronic banking includes a wide range of banking services like telephone banking, credit and debit cards, Automated Teller Machines (ATM), mobile banking and digital computer banking, etc. However, internet banking is limited to use of banking services through internet, which has created a huge universe for information sharing, collaboration and commerce. The main benefits of internet banking include increase in efficiency, enhancement in bank’s reputation, reaching new segments of population and offering better customer service and satisfaction. On the other hand, with internet in place, customers can easily pay their utility bills, recharge their cards, transfer funds to numerous accounts and make payments via their visa cards on commercial websites (Elbeltagi, 2007). Moreover, they can keep a real-time check on their finances. It enables consumers to manage their money and see their incomes and transactions clearly (Galliers and Leidner, 2014, pp.60). Therefore, internet banking facilitates accomplishment of banking operations for both banks and customers.

2.3.3 Mobile banking

Over a decade, mobile and wireless technology markets have been growing at a faster rate in the world. Mobile phones have become an important communication tool for every individual. As a result, m-commerce has emerged to take mobile on next level (Hanafizadeh et al., 2014). M-commerce signifies the use of wireless handheld devices such as mobile phones, tablets and laptops for doing commercial transactions (Luarn and Lin, 2005). This created even more convenience for the customers as they can carry out their transaction with just a swipe or click of a button. As a result banks have started using this means to deliver their quality service with the help of mobile-related applications (Laforet and Li, 2005).

Electronic banking, internet banking and mobile banking are the applications of ICT that have been designed for facilitating customer services. On the other hand, there are some applications of ICT that assist bank employees and managers for their daily operations. These include electronic human resource management, decision support systems and social media outreach. The following sections explain the use of these systems in banking industry.

2.3.4 Electronic Human Resource Management

Owing to the globalization and complex business dynamics, human resource management no longer remains a simple process; In fact, human resource management has become a multi-faceted phenomenon (Parry, 2011). The main purpose of HRM is to align the capabilities of workforce with the strategic goals of an organization. Now-a-days, ICT is used in various industries to facilitate HRM. Banking industry has also realized the importance of using ICT by developing automated HRM systems to enhance its functionality. Electronic human resource management (e-HRM) is used in banking industry to automate human resource management systems and to systemise intranets and electronic doorways. Electronic human resource management is a cost-efficient way of improving human resource services in the banks. Several banks have gone ahead of the conventional functions and improved human resource management systems that support recruitment, selection, hiring, job placement, performance appraisals, employee benefit analysis, health, safety and security (Parry, 2011).

2.3.5 Decision Support Systems

Decision support systems are another important application of ICT that help bankers to deliver services to customers. Banks are investing in information systems, to remain competitive and provide fast service to their customers; however, such investments yield intangible benefits and the paybacks are realized in long run only (Davis and Karim, 2008). Banks use different types of decision support systems to fulfil tasks of different departments (Elbeltagi, 2007). These include decision models, data bases, data mining and sub systems.

2.3.6 Social Media Outreach

Social media outreach is a relatively new marketing application that is widely used in banking industry. Banks have realized the potential of social media in enhancing public relations and building strong rapport with prospective customers. The use of social media allows marketing at a larger scale and facilitates the interaction between stakeholders (Brixi, Lust, & Woolcock, 2015, pp. 27). Conventionally, banking industry mainly served educated and wealthy middle-aged people. Nonetheless, the use of social media in marketing has brought a paradigm shift in the clientele of banking industry. Banks have now started to expand their customer base involving more young and vibrant generation. In this way, banks are amassing more profits by marketing through a relatively cheaper medium than electronic and print media (Brixi, Lust, & Woolcock, 2015, pp. 29).

2.4 Factors Hindering the Growth of ICT in Banking Industry

There are certain factors that hinder the growth of ICT in the banking industry. In the following sub-sections, these factors are discussed in detail and lead to derivation of a hypothesis for this study. It should be noticed that some of these factors are related to consumers, while others are linked to internal characteristics of banks like its organizational culture and training of staff members.

2.4.1. Characteristics of Consumers

When banks implement ICT in their processes, they expect consumers to be able to understand and adopt different networking channels. Customer’s educational background and sound information processing skills help them to understand banking processes and transactions accomplished through ICT. This can be understood through an example: if a certain bank introduces internet banking, but its customers don’t respond to this delivery channel, it might be because the customers lacked an aptitude for computers or mobiles to use electronic banking. With this example, it can be learned that there is a direct link between consumer’s characteristics – like aptitude and education – and ICT adoption by a consumer.

Researchers have established the importance of demographic and psychographic characteristics of consumers for adopting new technologies. For example, Akinci et al. (2010) argued that mid-aged consumers are more likely to adopt ICT than younger or older consumers. Regarding gender distribution, Akinci et al. (2010) stated that women are less likely to conduct their bank activities online. Also, consumers belonging to upper middle class or those that have high-level occupations are more likely to use internet banking (Akinci et al., 2010). These particular revelations show that demographic characteristics such as gender, age and occupation can affect consumer adoption of electronic banking, which in turn influences ICT adoption by banks (Kuisma et al., 2007). This is because banks can only offer customer services facilitated by ICT, only when customers are able to use technologies offered by bank. Resistance from customers can have a profound impact on the adoption of ICT in the banking sector (Al-Somali et al., 2009; Gerrard 2003). Therefore, if customers are incompetent to use ICT, it will become a barrier for banks. This leads to the formulation of following hypothesis:

Demographic characteristics of consumers like education and age influence Omani banks when they launch innovative customer services

Banks use electronic banking and internet banking to stay connected with their online consumers. However, this may not have been possible if the consumers did not have prior experience of technologies especially related to computers (Musaev and Yousoof, 2015). This means that consumers should have a particular know-how about the use of PC, internet and e-mail. Al-Somali et al. (2009) suggests that for a successful ICT adoption, there has to be awareness of online banking and its benefits, computer self-efficacy and the perceived ease of use of online banking. This implies that if customers don’t perceive new technologies and mediums for conducting banking transactions, this perception will become a barrier for banks when they try to launch new technologies for customers.

Nasri (2011) determined some factors that influenced the adoption of ICT by consumers in banking sector of Tunisia. Tunisia is a populated country whose demographic features are similar to that of Oman (Ciment & Ness, 2014, pp. 860), which is why the findings of this study can provide useful insights about Oman. Nasri (2011) indicated that internet banking is strongly affected by convenience, prior internet knowledge of consumers and the demographics of country, specifically occupation of people.

Psychographic characteristics of consumers like perceived ease of new technology influence Omani banks when they launch innovative customer services

2.4.2 Security Perception of Consumers and Security Risks

Security plays a vital role in determining the behaviour of a consumer towards ICT adoption. In the context of internet banking, security comprises of reliability, safety and privacy. If consumers don’t perceive a medium to be safe, they will not be willing to use it. Correspondingly, Chandio et al. (2017) mentions that security improvement will attract households to use internet banking and make their transactions online. It is noteworthy that for some countries, “security concerns” pose a major barrier for adoption of internet banking by consumers. For instance, USA banking sector had to continuously revise its security applications, so that hackers and viruses do not enter their system. As a result, USA is ranked number four in the world to create ‘cybersecurity’ for its financial industry (SecurityScorecard, 2016). This factor is among the major obstacles that can wipe out the efforts of a bank who wishes to introduce ICT tools for consumer market.

Risk can be defined in terms of uncertainty and consequences associated with a consumer’s action (Polatoglu and Ekin, 2001). The degree of risk that a consumer can perceive and the way consumer tackles it influences consumer’s attitude. Perceived risks by consumers directly affect their purchasing strategies and the way they are exposed to such risks. For instance, if a consumer has a higher perception of risks associated with internet banking, he/she is less likely to use it. Akinwumi (2017) investigated the determinants of financial innovation adoption by bank customers and reported that ‘fraud risk factors’ have an effect on the choice of consumer to use online banking. Similarly, lack of security became a major barrier in adoption of e-commerce in Malaysia (Mukti, 2000). These studies imply that financial institutions should take measures to secure data availability, its authority and accountability.

There has been a cautious use of information technology in the Omani banking sector. Khalfan and Alshawaf (2004) mentioned that security risks hinder ICT implementation in Oman’s banking industry. Issues to secure private data in financial sector imply that financial institutions keep their data confidential and private, thereby they should have security of data availability, authority and accountability. Hence, banks should have a secure network in place, to safeguard the information of their consumers. This discussion leads to the formulation of following hypothesis:

Customer perception about security risks hinder ICT implementation in Oman’s banking sector.

2.4.3 Culture of Country/Region

Culture and societal factors can have a profound impact on the adoption of information technology (Twati, 2014). This is further illustrated by the fact that different cultures have varying attitudes towards innovation adoption. While some cultures tend to resist innovation, others embrace it. Culture barrier can be further broken down into factors such as linguistic barriers that may cause communication hurdle between banks and customers and generational barriers i.e. young people are more likely to adopt new technologies than the adult ones (Mukti, 2000). Nonetheless, cultural support is necessary to implement ICT in banking sector. Cultural support means that both customers and businesses should be willing to conduct business on-line and communicate with each other. In the context of Oman, Khalfan and Alshawaf (2004) revealed that most of the executives in Omani banks are not comfortable with ICT implementation in the bank and do not adopt new technologies easily. This implies that a major chunk of Omani Banks believes in traditional ways of doing their business and do not support the use of technology. The following hypothesis can be derived from this discussion:

Culture of Oman hinders ICT implementation in Omani banks

2.4.4 Lack of Support from Top Management and Power Relationships

Academic literature mentions the importance of top management support in facilitating and obstructing ICT implementation in banks (Yiu et al., 2007). Khalfan and Alshawaf (2004) pointed out several factors that can hinder ICT implementation and adoption in banking sector of Oman. They carried out a survey and semi-structured interviews. Evident barriers included a lack of support from top management and power relationships. Power relationships pertain to conflict that can emerge among managers during the process of electronic commerce adoption (Wu et al., 2016l Khalfan and Alshawaf, 2004). Following hypothesis can be derived from the above discussion:

Lack of support from top management hinders ICT implementation in Omani banks

Power relationships hamper ICT implementation in Omani banks

 2.4.5 Lack of Technical Knowledge

Limited technical knowledge is also an impediment to ICT implementation (Al-Somali et al., 2009). ICT adoption in banking sector has to be mature and complex. In order to help banking professionals to use IT services, they should be well trained. Training is an essential component which helps staff members to develop technical knowledge about software they use (Rana, 2013). Failure to do so may result in loss of benefit that the organization can gain from ICT implementation. Since the technological industry constantly introduces new products it becomes challenging to train employees with the latest programming software. However, training employees, especially new entrants for using technology is a determinant of diffusion of Information Technology in banks (Hatem & Metwally in Salam, 2010, pp. 144). This leads to the formulation of following hypothesis

Lack of technical knowledge of employees hinders ICT implementation in Omani banks

Lack of employee training obstructs ICT implementation in Omani banks

2.5 Gaps in Literature

In order to establish the scope of this study, it is necessary to highlight the gaps in academic literature that justify the research objectives. A review of relevant literature shows that the adoption of ICT in banking sector of developing countries remains understudied. Ferro at al., (2010) mention that in the area of ICT applications in banks operating in developing countries ‘very little academic literature’ is present (pp. 468). Oman was chosen as the focus of this research as it is a developing country with a growing and stable banking industry. In the context of Oman, few studies have been carried out to analyse the barriers that hinder ICT implementation in banks. These studies include Khalfan et al. (2006) and Khalfan and Al Alshawaf (2004).

Khalfan et al. (2006) focussed on identifying factors that inhibit banks to adopt ICT in Omani Banking sector. Data was collected via semi-structured interviews, survey questionnaire and by reviewing bank documents.  This study focussed on both internal and external factors that can create barriers for ICT application in banking sector. It found out that security and data confidentiality were the major barriers, as management of Omani banks feared that their data will be subject to viruses and hackers if they make transactions through public network. Moreover, it was stated that there was lack of top management support. The upper management did not support the use of ICT unless they were convinced that ICT installation will reduce their company overheads. A mixture of customer insecurities, technology investment costs and a lack of market readiness made Omani banking sector quite slow to adopt and implement ICT (Khalfan et al., 2006). Nonetheless, Khalfan et al. (2006)’s study did not focus on the individual factors like demographic and psychographic of consumers that may inhibit implementation of ICT in Oman. The current study will consider the individual-related factors that can hinder the implementation of ICT in banking industry.

To conclude, the importance of ICT in streamlining the business processes of Omani banking industry cannot be denied. When it comes to rendering quality services at lower costs, ICT has no parallel. ICT is helping banking industry in every aspect, be it enhancing consumer experience through electronic banking, ATM, M-banking or increasing the efficiency of internal operations through e-HRM and social media outreach. Nonetheless, it has been hypothesized from literature that there are several factors which can potentially inhibit the implementation of ICT in Omani banking industry. These factors include consumer characteristics, cultural dynamics, security concerns, lack of support from top management, insufficient technical knowledge and inefficient business strategy. Further chapters of this paper will analyse quantitative data to test these hypotheses.

3. Methodology

This chapter discusses the methodology of this research. It begins by giving a brief overview of research. The philosophical assumptions behind this study, the type of research, methods and tools are covered in this chapter. Furthermore, the limitations of selected methods are also covered.

3.1 Overview of research

The purpose of this research is to study the barriers that inhibit implementation of ICT in Oman’s banking sector. There are two objectives of this research. The first research objective is to explore the use and scope of ICT in the banking sector of Oman. This objective will see how ICT is used in banking sector of Oman for facilitating in-bank operations and providing services to customers. The second research objective is to identify the factors that hinder implementation of ICT in Oman’s banking industry. These factors can include lack of support from top management, inadequate training of employees and hesitance of customers to adopt new technologies. The research methodology has been designed to accomplish these two objectives.

3.2 Research Philosophy and Approach

This research is based on the philosophy of positivism. Positivist ontology relays that the world has one objective reality to any situation which is irrespective of the researcher’s opinion or belief system (Robson and McCartan, 2016, p.21). From ontological perspective, positivism tends to explain external reality and has direct access to the real world. In this scenario, the reality will be the barriers that obstruct ICT application in Oman banking sector. The employees of banks will be reporting the reality they encounter like inadequate support from top management. From an epistemology viewpoint, positivism aims to obtain hard and impartial knowledge. With respect to this paper, the researcher will be able to gain a fair knowledge of the use of ICT in the banking sector and factors that hinder its application of Oman.

Positivism’s thought process is governed by hypothesis and stated theories (Hoque et al., 2017, p.317), and it follows the principal of observation. By observation, it is meant that the researcher will be using all his senses to gain factual knowledge, so that the information obtained is trustworthy and objective from a positivist point of view (Catalano, 2017). Positivist style in this research has adopted a deductive approach. Deductive approach calls for reasoning from the particular to the general, whereby hypothesis is derived from theory.  (Babones, 2016). Hypothesis have already been deduced in the second chapter after studying factors that inhibit ICT implementation in the banking industry.

Another feature of positivism is that it calls for the researcher to play an independent role. In this study, ‘independent’ means that the researcher will maintain minimum interaction with the respondents when they will fill a survey or a questionnaire, as suggested by Woo et al. (2017). Therefore, in this study, the researcher will only play the role of data collector and interpreter through objective approach. The researcher will be using quantifiable observations that would lead to statistical analysis. Correspondingly, the research findings will be observable and quantifiable in nature.

3.3 Quantitative research

This research is quantitative in nature. The objective of quantitative research method is to predict and control social phenomenon (Barnham, 2015). In this study, the researcher is going to determine the factors that serve as barriers to ICT implementation in Oman’s banking sector; a quantitative approach suits this objective, as the aim of research is not to obtain an in-depth understanding of these factors, rather it is to identify and predict them. Another reason for adopting a quantitative approach is that it allows generalizability of findings. In this research, the researcher will be measuring and evaluating his findings to generalize the findings obtained from selected sample to entire banking industry of Oman.

Quantitative research calls for hard facts and objective data (York and Barclay, 2016). The facts are usually generated by a series of ‘what’ or ‘yes/no’ questions (Park and Park, 2016). In this case, such questions can be (1).  Does the top management encourage employees to learn the use of ICT? Are the customers educated enough to use internet banking? Furthermore, this method uses hypothesis testing to achieve research related goals from sample of employees working in banks. Therefore, the research will be carried out in an organized manner. Questionaries’ will be filled by bank managers and supervisors to get their insight about ICT. As a result, the researcher will have to get in touch with these respondents as the nature of research doesn’t call for random people to fill the questionnaire. This help the researcher to study variables and identify a relationship among those specified variables.

Hence, quantitative method will also help the researcher to accumulate facts and reasoning behind factors that inhibit the growth of ICT in Oman’s banking sector. Moreover, quantitative methodology will deduce its understanding from a large sample of people, thereby leading to generalizability of research findings.

3.4 Research Methods and Tools

3.4.1 Data Collection

To accomplish the research objectives, the researcher will collect data through survey method. In applied social sciences, survey research holds a high level of importance to measure essential areas (Szalai et al., 2016, p.45). The measurement procedure of survey is to ask questions from respondents (Case and Given, 2016, p. 236). These questions can be close-ended or open-ended in nature. This research paper will be using questionnaires containing close-ended questions to collect data for statistical analysis. The respondents will be asked to rate answers on a likert scale. Questionnaires constitutes of pencil and paper instruments that needs to be completed by the respondent.

There are several benefits of questionnaires that are relevant to this study. Questionnaire survey is relatively an inexpensive way to collect data, as compared to other methods like observations and experiments. Another benefit of using questionnaire is that it will take less time to fill and the respondents will not be hesitant to fill the survey form. As the data has to be collected from employees of banks, it should be considered that these busy professionals might have limited time. Furthermore, survey questionnaires are relatively easy to administer, as quantitative research calls for the researcher to be independent (Case and Given, 2016, p. 241), and the physical distance between the researcher and the respondent can be shortened by the use of mobile devices, mail, email, kiosk or a telephone. In this study, if the researcher is unable to get an appointment of a senior manager, then he can ask him to fill his survey form online. This will make it easier for the researcher to collect data and gather responses. Correspondingly, the researcher will be able to collect data from a large number of respondents.

3.4.2 Sampling

As the objective of this research is to identify barriers that hinder implementation of ICT in banking sector of Oman, the sample will constitute of employees working in this particular sector of country. Agarwal et al. (2016) mentions that when the research work calls for particular group of people, the researcher has a greater chance to get a higher response rate as he knows where to target his questionnaire; the researcher is expecting a high response rate for this study. Convenience sampling technique will be used to reach the target audience. The sample size has been determined by using the following formula:

Necessary Sample Size = (Z-score)² * StdDev*(1-StdDev) / (margin of error)²……(1)

Where,

• Z-score is 1.645 for 90% confidence interval
• Standard deviation is 0.5
• Margin of error is 7%

Putting these values in equation (1) yields the following result

Necessary sample size 138.06 or 138

Therefore, the researcher will collect data from 138 employees of Omani banks.

3.5 Reliability and Validity of Research

One of the main requirements of a research process is to establish the validity and reliability of the study, data and findings. For a research to be valid, it should follow all the scientific research method during the process of research findings (Winter, 2000). It calls for the generation of questions that can be synchronized with the research objective, so that the questions can actually measure what they should measure. In this study, there are two sets of questions. The first set of questions inquires about applications of ICT in Omani banks. It inquires about the mediums and software used for completing in-bank operations. It also inquires about ICT applications that are designed for consumers like the use of online banking, ATM, etc. The second research objective is to identify barriers that hinder ICT implementation. Correspondingly, the second set of questions asks respondents to rate the level to which a certain factor inhibits ICT implementation. All questions have been designed after extensive study of relevant literature.

Reliability deals with the consistency, dependability and replicability of results, thereby, it calls for the generation of same results by using the same research methods under similar conditions. Obtaining a similar results in quantitative research is rather straightforward because the data will be in numerical form (Zohrabi, 2013). In this study, the reliability of questionnaire will be determined by the Cronbach Alpha.

3.6 Limitations of Research Methods

A limitation of a survey is that the respondent may not feel motivated enough to provide true answers (Porter et al., 2017). Another drawback of a survey is the random selection of an answer by the respondent. Sometimes, the respondent just selects an option from the Likert scale without actually understanding the meaning of that question. This may happen due to the inability of the respondent to appreciate the use of ICT or they might do it out of boredom. Moreover, survey questions can also confuse the respondent on a Likert scale. If the respondent wants to answer the question from his own opinion i.e. not choosing from a Likert scale than that can create statistical errors for survey results (Menold et al., 2017). This paper will use Likert scale that asks respondents to rate an answer on 1-5 scale. Overall, these limitations of methods will be considered as limitations of this study.

This chapter has studied the methods used in this study. The objective of this research is to identify barriers that inhibit ICT implementation in Oman’s banking sector. A positivist philosophy has been embedded in this research, and a quantitative approach has been taken. Data will be collected through questionnaires containing close-ended questions on a likert scale.

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