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Factors Affecting Customers Adoption of Online Banking

Info: 4202 words (17 pages) Example Literature Review
Published: 6th Dec 2019

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Tagged: Banking


This research is conducted at Barclays Bank with an aim to identify the factor affecting customer adoption online banking service at the Barclays Bank. This research is conducted on the online banking service of the Barclays Bank The first chapter presents the overview of the organization (Barclays Bank), its offline and online products. Second chapter gives an insight of thorough and in depth study of literature review where the effort is made to highlight contemporary issues, practices, concepts and theories of online banking services. The third chapter described the research methodology adopted by the author that includes the effort which is made to discuss the type of methodology, which includes sampling, research philosophy, approach and design. Fourth chapter provides the analysis and findings along with some interpretations. Fifth chapter depicts the relationship of analysis of findings with aim and objectives, literature review and methodology of this research paper. Sixth chapter discusses the recommendations and conclusion on the basis of analysis of the finding and the literature review.

For the past two decades, there has been a paradigm shift in the banking industry with regard to its amalgamation with the online world/internet. Globalization has made it even more tempting for the companies to go online. When it comes to banking industry, words like customer convenience, trust and accessibility are note-worthy. Going online has for sure its pros and cons. A customer would want nothing more than perfection from his/her point of concern. From stereotypical methodology of banking to the Click banking, the rift has always been there. Convenience has always been the matter of concern for the banking world but the change in trends has made things a lot more complex. Reluctance from customer end is not a surprise anymore with respect to the financial matters across the web. There are a number of factors which clearly depicts the customer reluctance in adopting the online banking services.

The customer has a great influence on the adoption of Internet Banking. The article central focus is on the possible factors which affect customers in adopting the web banking. The needs and wants vary to a great extent with regard to the geographical factors. The customer of Europe would certainly have a completely different need in comparison to the customer of South-Asia. Moreover customers of Europe and US are a lot more internet savvy than the ones in Sub-Continent. The awareness amongst the customer is the first and foremost factor. Secondly customers may encounter poor standards of customer services over the internet because most of the times there is a very intimate and cordial relationship with the banking staff which you wont find over the internet.


This research was conducted by the author on Barclays Bank with an aim to identify that,

Factor affecting customer’s adoption online banking service.


This research has an objective to scrutinize factor which affect customer adoption of Barclays Bank online banking system and how this issue can be resolve. In order to check that the research have the following objectives from which it is easy to know about the effectiveness of the online banking system of the organization.

The objectives of my study are as follow:

  • To establish the key factor of the Barclays Bank online banking system and the extent that it varies.
  • To determine the impact of the online banking service on customer adoption.
  • To examine the extent that implementation of the online banking system strategy has a positive/negative impact on customer adoption.
  • To identify and evaluate factor which affect customer adoption.
  • To determine that what do customer feels in regard to improve online system?

Barclays Bank

Having a history of almost 300 years Barclays plc is now being recognized as one of the UK’s largest financial service group. The company is working in banking, investment banking, and investment management and operates about 2,000 domestic branches and nearly 850 international branches in over 60 countries across the orb. Barclays is structured into seven business units: Barclays Africa, Barclaycard, Barclays Capital, Barclays Global Investors, Barclays Private Clients, and UK Banking. The company has above 4.5 million registered online bankers and over 10.6 million Barclaycard customers in United Kingdom. Barclays was ranked as the world’s ninth-largest bank based on market capitalization in 2003.

Early History

Barclays was symbolized as the spread eagle in1728. With the addition of three new partners James Barclay, Silvanus Bevan and Silvanus Bevan; the bank was given a name that could be used for more than a century: Barclays, Bevan & Tritton. a fair amount of legislative changes were brought in late 19th century that gave rise to a new working climate which made the survival of Barclays and other such banks at stake. The reason was that the Bank Charter Act of 1826 allowed banks with more than six partners to be formed only outside London, geographical restrictions were eliminated, Stockholders of new joint-stock companies were granted limited liability and joint stock associations were allowed to convert to a limited-liability structure.

Barclays Mergers

When these legislative changes took place many limited liability banks merged with private banks. Barclays along with Jonathan Backhouse & Company and Gurneys Birkbeck, Barclay & Buxton and 17 smaller Quaker-run banks merged together so as to form a larger bank that could resist all the takeover attempts. Francis Augustus Bevan the grandson of Silvanus Bevan served as the new Barclays first chairman. He served the bank for 20 years. Frederick Crauford Goodenough worked as first secretary and served the bank for 40 years. Until 1987 the bank remained under the chairmanship of family. Goodenough was the first chairman recruited from United Bank of London. Recruiting an outsider soon proved its merits. he made the member banks independent and eliminated the decentralized approach. this give rise to long term good relationships between partners and Barclay. he also started doing mergers with many more banks and sooner the bank was recognized one of the largest bank of Great Britain. During this period Barclays merged with 45 British banks and its deposit base rose to £328 million. Soon mergers were not approved if they resulted in a overlapping in the constituent banks areas without countervailing benefits to customers

Expansion in International Market

Goodenough attention was grabbed towards international banking operations. He wanted networking of all the Barclays banks across the globe. In 1916 he started working on establishment of world wide banking mechanism.

After World War I Goodenough also began to negotiate with the National Bank of South Africa Ltd. and the Anglo-Egyptian D.C.O irrespective of all the opposition from the Bank of England which feared that Barclays would become overextended. Domestic growth of the bank remained limited however the bank expanded globally. Despite the stagnation and later the Great Depression Goodenough’s plan did not result in a terrible overextension of the bank’s resources. Goodenough was replaced by William Favill Tuke in 1934 that was in turn replaced by Edwin Fisher in 1936. Fisher worked with Barclays through the boom years of World War II. When Fisher died in 1947, he was replaced by William Macnamara Goodenough.

After the retirement of William Macnamara Goodenough in 1951, Anthony William Tuke, the son of William Favill Tuke, became the chairman. A.W. Tuke encouraged innovations even those he personally disliked but which were potentially beneficial to the bank. Under his leadership Barclays became the Britain’s largest bank. It surpassed the Midland Bank in the late 1950s. Barclays was also a pioneer to introduce new banking technology. In 1959 Barclays was the first British bank to use a computer in its branch accounting. It also introduced world’s first automatic cash-dispensing machine and started a plastic mutiny in Britain by introducing the Barclay cards in 1966.

Barclays in U.S.

When the competitor banks were working to strengthen their international operations Barclays was enjoying a splendorous head start. Barclays entered US market to offset its high exposure to international market. At first it established Barclays Bank of California in 1965 then in 1971 Barclays Bank of New York was formed. These two banks gave Barclays the sole benefit of having retail banking operations on both U.S. coasts. Another advantage Barclays enjoyed was the exemption from legislation of 1978 which exempted foreign banks from operating branches in more than one state. When the National Board for prices ad incomes allowed mergers to rationalize existing networks, Barclays quickly took advantage and merged with the venerable Martins Bank in November 1968. it raised Barclays 700 branches in Northern England.

A.W. Tuke became chairman in 1973 by Anthony Favill Tuke, William F. Tuke’s grandson. A.F. Tuke served until 1981 when he left Barclays to serve a British mining company. His tenure was most vital for Barclay’s expansion in North America. In the late 1970s, a series of Barclays branches were opened in major U.S. cities. In the early 1980s, Barclays Bank International diversified itself into commercial credit by acquiring the American Credit Corporation and was renamed as Barclays American Corporation (BAC) in May 1980.

Barclays Restructuring

Timothy Bevan set about restructuring domestic operations in1981 with the chairman of UK Deryk Weyer. Senior manager roles and responsibilities were also needed to be revised. Weyer was inclined to establish a strategy of making three basic devisions to represent main markets of Barclay. These three divisions include he large corporate market, the middle market of small-to medium-sized businesses and the traditional individual-customer and mass-consumer market. Barclays converted from a joint-stock bank to a public limited company in 1981 and its present name in was finalsied in 1984. In 1985 Barclays became a holding company and all of its assets were transferred in exchange for stock, to its operating subsidiary. Barclays Bank International Ltd. was simultaneously converted to a public limited company and renamed Barclays Bank plc. In 1986, Barclays acquired Visa’s traveler’s check operation and became the third largest issuer of the world with 14 percent of the market share.

Challenging Environment

Chairman John Quinton faced a number of challenges in the late 1980s. Domestic banking always remained Barclays’ strength but the bank faced increasing competition in late 1980’s. National Westminster Bank had an edge of assets over Barclay. The building societies threatened base deposits of banks by offering high interest on savings. American and Japanese banks entered the commercial lending market and pose a threat to British banks. The bank continued to rationalize its branches to better serve the three major banking service markets. Barclays also planned to spend more than £500 million on technological advancement including the introduction of the first electronic debit card in the United Kingdom.

Barclays faced uncertainty in international banking. It faced a disastrous drop in the subsidiary’s earnings from 1984 to 1986 and loosed the lucrative student market in Britain as Barclays’ presence in South Africa became more unpopular at home. The continuous drop of African economies also posed a hazard. In addition, Barclays Hong Kong and Italian operations both suffered large losses in 1980s and performance of Barclays American operations was consistently disappointing. In the early 1980s Barclays expanded rapidly and tried to build earnings quickly through an aggressive lending policy. Consequently, branches picked up a large volume of low-quality loans. Bad-debt ratios were very high, costs were difficult to control and American operations only started to show a profit in the late 1980s. As a result, Barclays began offering specialized services in the US in an attempt to improve its position. Nevertheless, after years of continuous struggle to make it profitable Barclays sold its California banking subsidiary in 1988 to Wells Fargo. The following year, Barclays also sold its U.S. consumer finance unit to Primerica.

On the other side Barclays investment banking operations remained good. BZW expanded its operations by purchasing 50 percent of Mears and Phillips an Australian brokerage firm. Barclays also formed a new bank in Geneva Barclays Bank S.A., to develop capital markets with BZW.

Change in Strategy

Although in earlier 1990’s Barclays was expanding but the bank was soon forced to withdraw its efforts. Extended recessions on both sides of the Atlantic led to various bankruptcies, and many banks including Barclays suffered huge losses from bad loans. Barclays was forced to set aside £1.55 billion in 1991 and £2.5 billion in 1992 against the bad debts. Profits were already less due to continuous high operating costs. Barclays actually posted a pretax loss of £244 million in 1992.

The bank’s difficulties led to the earlier departure of Quinton who was expected to stay on for a couple more years. Andrew Buxton who was a descendant of one of the company founders became CEO in April 1992 and then added the chairmanship at the beginning of 1993.

Amongst all management changeovers, Barclays began a retrenchment which continued into the mid-1990s. It reduced its far-flung operations in selected countries and regions which undertook a massive cost-cutting program. Barclays dramatically reduced its troubled U.S. operations. it started with the exit from U.S. retail banking in May 1992, through the sale of its remaining branches and assets to Bank of New York Co. The most visible aspect of the cost-cutting program was the abolition of 18,000 jobs between 1990 and 1995. The majority of these cuts were made in the UK. By 1994, Barclays domestic branch network had been cut to 2,080. the reduction was of 21.5 percent since 1989.

Like most U.K. banks, Barclays benefited from the improved economic conditions of the mid-1990s. As a result the bank was able to enhance its loan portfolio. Barclays had to set aside only £396 million in 1995 and £215 million in 1996 for bad debts. Barclays continued to restructure and concentrated on its Asset Management Group. In 1995 the bank bolstered its presence in the Asia-Pacific region by purchasing Wells Fargo Nikko Investment Advisers, which was integrated into the Asset Management Group. Barclays neared the turn of the 21st century in its strongest position in years. The bank’s restructuring of domestic retail banking network seemed to be a success. As Europe slowly moved toward integration Barclays smartly separate from many of its non-European operations while seeking opportunities for continental expansion.

Late 1990s and Beyond

Many Large mergers including the tie up of Morgan Stanley and Dean Witter and the merger of Salomon Brothers and Smith Barney left Barclays unable to compete in the global investment banking industry. The company opted to sell off parts of its BZW unit in 1997. Credit Suisse First Boston purchased the European and Asian investment banking portion of the business while ABN Amro snatched up its Australian and New Zealand operations. Barclays decided to keep BZW’s debt business and renamed it as Barclays Capital. Barclays strived to retain the market share over the next several years. Several managerial changes also took place. Selling off BZW was considered as highly controversial among Barclays’ shareholders. Matthew W. Barrett was named CEO in 1999 while Middleton remained chairman. With a stable management team now in place, Barclays continued to revamp its organization. In 1999 announcement was made that 6,000 jobs would be eliminated from U.K. workforce and to shutter up, up to 200 rural branches by 2000 so as to focus on online banking. The company continued to eye growth and moved to acquire Woolwich plc in a $7.96 billion deal. Barclays has more online customers than any other bank in the U.K., Woolwich’s Internet service was considered far more advanced.

Chairman Middleton announced that he would retire at the end of 2004, leaving Barrett to take over as chairman. for the post of CEO John Varley was to be considered. The company targeted on increasing revenues, controlling costs and maintaining a cautious approach to risk management. While it looked to organic growth to bolster sales and profits, Barclays did not rule out the possibility of future merger activity. Pre-tax profits rose by 20 percent in 2003. This indicated that Barclays actions were paying off.

Chapter 2:

Literature Review

Use of internet being popular among the masses it has developed the new market for buyers, sellers and intermediaries. Technology changes the modes of doing business and now industries are moving toward online market. Use online banking is used for the payment of bills, transfer money and analyzing your budget. It takes 10-20 minutes to set up vendors’ lists of payees, addresses, and account information.  After that, it takes sheer seconds to set up a bill payment. Big business houses may also be offered ‘PC banking’. This may become possible by installation of particular banking software on the computer you use to manage your account. It offers more effectual solution if you have a fat degree of transactions and if your accounting system linked with your bank.

In banking industry clicks and mortar is being adopted by banks rapidly. There are several modes for online banking but each of them is not fully satisfactory, they have pros and cons

Firstly the advantages of online banking are contending. Convenience is at foremost priority for bank’s customer in online banking. Customer can access their account 24 hours a day, 7 days a week. With the use of online technology the bank working hours are no more restricted, as the customer can access their account , check balance, transfer money by using laptop, PDA, notepads etc.

Secondly Time saving is another factor to be considered because online banking is very agile and swift it can produce efficient and effective results. Now the customers are not compelled to visit bank for payments of bill, transfer of funds, ordering cheque books, and for account information as well


You are not bound to wait in queue.

You are not compelled to follow bank’s hours.

You can look at your balance whenever you want, not just when you get a statement

By keeping close tabs on your funds, you’ll remained informed about your bank account tractions

Thirdly online banking is cost-effective. Online banking tractions charges are often lower than for regular accounts and these accounts may offer higher interest rates. Banks offer online banking services at no additional cost. By using online banking we can avoid ourselves from worry of searching for perpetually lost dishonored checks and bank statements we can also save our money. Now a days most credit unions offer online banking services and online statements, etc. to their client without any charges with direct deposit or a qualifying account.

Fourthly online banking is considerably more convenient than waiting for your bank statement manually. Tractions record in maintained automatically and account holder can check it easily. By using online banking system you are better able to track and keep an eye on your cash flows. You may find yourself easier to follow avoid overdraft charges w because you have a detail of your banks tractions and your spending.


Fifthly in Online banking system the banker do t have to bear expenses like location; personnel and energy. Which mean it is cost effective from banker point of view .consequently the benefits driven from that will be transferred to consumer in form of high interest rate. the hidden benefit of high interest rate and cost effectiveness will result in economy development through different modes of investment.

Online banking helps to control and manage your account efficiently and effectively it will make you to feel running your accounts like a small business which can be controlled at any time wherever you are, the location does not matter. Once you get started, you’ll be hooked. Soon enough you’ll be checking your bank account as often as your e-mail.


To get loan it is not necessary to visit bank branch it can be applied though modern technology. By using online bank account you can buy and sell securities and shares. Trough online banking Even new accounts can be opened; old accounts can be closed without doing tiresome formalities. With the acceptance of digital signature internet banking has become more secure faster and easier all over the globe. It is not mere favorable for customers but for bankers as well.


When your business falls under clicks and mortar category you have to spend too much time on internet such type of business will not allow you to visit bank branch time to time in such a case internet banking is the best tool to save your time and enhance your business. There are no more geographical boundries in virtual business you can operate your business in all over the world for business purpose by using e banking. This will blossom your business yield


Frustration has caused depression among the masses which leads to the illicit and deceptive activities if you have an internet banking account you can check your debits and deposits and if your account is accessed by an unauthorized person you will most likely notice it immediately. You can take precautionary measures to prevent such activities


according to Melissa Wilt ” Although the benefits of online banking are undeniable, there are some inconveniences and concerns of which customers should be aware. Many people have difficulty relying on the security of online transactions, fearing the very real possibility of identity theft. If you have these concerns, obtain safety information and guarantees in writing before beginning an account. There may be a waiting period between signing up for online banking and receipt of the ID and password necessary for account activation. Make other arrangements in case you are temporarily denied access to you bank account. Remember that it may take some time acclimate yourself to the bank’s website and set up account information. Have at least an hour available to complete the process. If you choose to pay bills online, make sure that recipients are capable of processing electronic payments. Otherwise, it may take several days for the payment to be credited to your account, which could result in accumulated late charges. You can also avoid this problem by making all payments several days in advance of the due date. For these and any other online money transactions, remember to print out a hard copy. In the event of errors, this will be your only proof. Obviously, you will not be able to make deposits or withdraw cash from your account unless you go to a bank branch. Another occasional problem with online banking occurs when the website is down, either for scheduled maintenance or because of technical problems. Make sure that you are provided with a bank phone number in case you cannot access your account.

Clearly, the choice of whether or not to bank online depends on many variables. Even if a person can see the benefits, they may be unwilling if they do not trust or have much experience with the internet. On the other hand, people may only sign up for limited services like account viewing. This will save them from safety concerns but will still give them daily access to account activity. If you decide that online banking is right for you, be sure to review the offers of several banks. Each has different fees and benefits that can make a big difference in how much online banking costs you. By comparing deals and educating yourself, you will find an online banking service that suits your needs.

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Banking can be defined as the business of a bank or someone employed in the banking industry. Used in a non-business sense, banking generally means carrying out activities related to the management of one’s bank accounts or finances.

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