Online Banking

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Running head: Online Banking

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Problem

Banks that offer online banking are likely to gain market share in the U.S., among 18-60 year olds, because of a growing increase in computer literacy.

Sub-problems:

1. The first problem is to determine if the level of computer literacy in the U.S. has risen since 1990.

2. The third problem is to determine if the ratio of computer usage among genders has decreased for Americans, ages 18-60, since 1990.

Hypothesis

Banks that offer online banking are likely to gain market share in the U.S., among 18-60 year olds, because of a growing increase in computer literacy.

Delimitations

Only Americans, ages 18-60, were studied.

No other age group or nationality was studied.

Education levels were not considered.

No analytical studies concerning identity theft were conducted.

Marketing strategies for the industry were not analyzed.

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People with income levels below 25,000 USD were not studied.

Definitions of terms

Online Banking- It is the use of the internet to correspond with a financial institution and perform basic banking functions, such as paying bills and monitoring account balances.

Gender-Gap- It is a term used specifically used by researches to define the ratio between males and females.

Generation-Y- People 18-28 years of age.

Generation-X- people 29-40 years of age.

Baby Boomers- people 41-59 years of age.

Seniors- people 60 years or older.

Internet - is the worldwide, publicly accessible network of interconnected computer networks that transmit data by packet switching using the standard Internet Protocol (IP). (Wikipedia, 2006)

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Email - Electronic mail, abbreviated e-mail or email, is a store and forward method of composing, sending, storing, and receiving messages over electronic communication systems. (Wikipedia, 2006)

Broadband - In general, electronics and telecommunications is a term, which refers to a signaling method, which includes or handles a relatively wide range of frequencies, which may be divided into channels or frequency bins. Broadband is always a relative term, understood according to its context. The wider the bandwidth, the more information can be carried.

Assumptions

Computer literacy has risen since 1990. This has shortened the gender-gap in computer use among Americans, ages 21-60, and heightened the demand for financial institutions to provide online banking programs.

Households with income levels of 25,000 USD or more have higher use of computers.

Educational attainment and computer usage are not correlated.

Final assumption is person using online banking can read and write.

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The importance of the study

The importance of this study is to explain how the increase in computer literacy and decrease in gender-gap among Americans, ages 21-60, have heightened the demand for online banking and impacted the market shares of financial institutions.

REVIEW OF LITERATURE

This literature review will include three areas: (a) computer literacy within the age group of 18 to 60 years old has increased from 1990 to 2006; (b) the gender gap in computer usage between men and women, and (c) the adoption of computers has made on-line banking expandable

Computer literacy within the age group of 18 to 60

Since 1990, information technology has become a very more important part of the U.S. economy. As the internet becomes more accessible, people ages 18 - 60 are more likely to use the internet and other computer accessories, such as email, as a vehicle for conducting everyday business. Individuals in generation Y (18-28 years of age) and generation X (29-40 years of age) are more likely to engage in chat room discussions and other computer activities, rather than email correspondence. Members of generation Y are also more likely to play online games, download music, and search for school information.

Generation Y users (18-28 years of age) tend to be more likely than Generation X

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(29-40 years of age) to have high speed internet and carry on instant message sessions. Members of generation Y have less enthusiasm for playing online games and normally engage in internet access to search for such things as travel reservations and online banking. In support of this, it was stated that 50% of Generation X computer users participate in online banking verses the 30% of Generation Y users.

Baby boomers (41-59 years old) and seniors (60 and over) are finding it increasingly necessary to be able to use computers. Though seniors are more reluctant to use the internet, baby boomers are more likely to use the internet to communicate with their children and grandchildren (Quinn, 2001).

In conjunction with this, The American Association of Retired peoples (AARP) found that 81% of the 1002 computer- using respondents age 45 and above have access to the Internet. Half of the seniors responding described themselves as "experienced" computer users; 8% said they were "experts"; and 38% said they were "novices". Those who proclaimed to be novices were mostly over age 65 and reported having less education (Quinn, 2001).

Those individuals in the mature category can learn to use computers, but require much more repetition and practice for new skills to become automatic. Some organizations such as the Rotary Club of Santa Monica and Center of Healthy Aging offer articles entitled