Introduction

Internet banking refers to the use of the internet as a delivery channel for banking services, which includes all traditional facilities such as balance enquiry, printing statement, fund transfer to other accounts, bills payment and new banking services such as electronic bill presentment and payment (Frust, et al, 2000) without visiting a bank (Mukherjee & Nath, 2003). According to a channel (Chau & Lai, 2003), the rapid growth and popularity of the internet have created great opportunities as well as threats to companies in various business sectors, to endorse and deliver their products and services using the internet as a distribution channel. Banks are crucial in the economic development of every nation, and they are significantly affected by changes associated with globalization and financial liberation. As a reaction to the changes, banks expand the choice of services offered to the customers and increase their reliance on technology (Al-Smadi and A-Wabel, 2011). With the rapid diffusion of the Internet, banking in cyberspace is fast becoming an alternative channel to provide banking services and products. In the Kuwaiti, banks are already providing services on the Internet and the Internet banks, such as Boubyan Bank, are beginning to appear. The Internet is now considered to be a strategic weapon that will revolutionize the way banks operate, deliver, and compete against one another, especially when competitive advantages of traditional branch networks is rapidly eroding (Nehmzow, 1997; Seitz, 1998). As “Business Week” noted, “Banking is essential to a modern economy, banks are not” (quoted in Financial Times, 1996). This statement is supported by a recent report from Booz Allen & Hamilton (Warner, 1996) that claims the Internet poses a dire threat both to the customer base of the traditional banking oligopoly and to its profits. They believe that the Internet Promises a revolution in retail banking of monumental proportions. High street or brick and mortar banks are mostly beginning to disappear as many banking consumers are starting to adopt and become loyal the internet banks.

Research Objectives

To investigate the impact of online banking on customer banking

To understand how Boubyan bank can increase customer loyalty through online banking

Research Philosophy

Many of the banking consumers are beginning to adopt the use of electronic banking systems, and this is because such systems are more convenient as it allows them to access the banking services at any time and anywhere. Due to the many benefits of online banking, the consumers are therefore shifting their operations into the banks which have already adopted the online banking systems. For this reason, all the major banks in Kuwaiti are making efforts to implement the online banking system within their services to maintain the loyalty of their customers.

Purpose of the Research

This study had two primary goals: it will give the necessary information that will be used by the banks in Kuwaiti to understand how online banking influence consumer banking. Secondly, to help in establishing the changes that can be implemented in online banking at Boubyan bank to increase its customer’s loyalty.

Research Approach

The researcher used a descriptive design. A descriptive research design is a scientific method which involves observing and describing the behavior of a subject without influencing it in any way. It measures questions such as what, why, how, when and where (Mugenda, 2005). The descriptive research design helps the researcher to lay out the research questions, implementation procedures, and data collection and analysis for the research project. This study will apply a qualitative approach where interview questions will be used for data collection and analysis.  There will be two sets of questions, one aimed for customers to understand their perceptions about customer loyalty and online bank. The other aim to understand Bank managers perception about the importance of online banking on customer loyalty and what benefits it brings to the bank such as increased profits.

Research strategy

The researcher adopted is stratified random sampling technique. Sampling is a procedure through which some elements are selected from the population to be representatives of the others. The basic idea is that by choosing a sample, a conclusion can be drawn about the entire community. The reason for using the stratified random sampling technique is because it focuses on essential sub-populations and ignores irrelevant ones, improves the accuracy/efficiency of estimation, and permits greater balancing of statistical power of tests (Lucy 2002). For instance, we ignored youth and children below 16 years old, as well as the elderly above 65 years. Stratified random sampling will be used to select respondents in the three population categories. This will make the respondents in the target population to have equal and unbiased chances of participating in the study. The method will be useful because the smaller size is considered. In this study, a qualitative methodology will be used to analyze the responses to the interview questions where a sample of random Boubyan customers is going to be asked a series of questions. Furthermore, some qualitative analysis will be done using the answers of open-ended questions that will be asked to some of the bank’s professionals (managers) aiming to find correlations between internet banking, customer loyalty and its impact on growth.

Data collection method

The research employs a survey as its data collection method. A questionnaire is a research instrument consisting of a series of questions and other prompts to gather information from respondents. This reason for using the survey as data collection instrument is because it assists in the collection of data from the respondents without affecting their schedules in their jobs and answers the questions at their own free time. A distinction is made between open-ended and closed-ended questions. An open question asks the respondent to formulate his answer, whereas a closed-ended question has the respondent pick an answer from a given number of options. The response options for a closed-ended question should be exhaustive and mutually exclusive (Leung, 2001).

In this study, a mixture of both closed-ended and open-ended questions was applied. The questionnaire was designed in such a way that it contains direct questions. The immediate questions will be used in the collection of data because they will make it easier for the participants to respond accordingly. The integration of open-ended questions in the questionnaire will allow the respondents to go beyond the scoop and provide detailed information concerning the application of internet banking at Boubyan bank. Moreover, it is believed that if the researcher could have only used the closed-ended questionnaire, he could have limited the respondents within specific aspects scope of internet banking in Kuwaiti.

The questionnaire was adopted as the most appropriate method for collecting data in this study because of several reasons. Some of the ideas that influence this decision are; Questionnaires ensured high response turnout since each participant was issued with a copy of the questionnaire which they were to fill and hand back to the researcher. Surveys save the researcher more time since they can be administered faster and efficiently. The respondents were not required to provide their identities and other personal information. Hence they offered a high possibility of anonymity and reduced biasness as they were presented consistently. In spite of the advantages of the questionnaire listed above, its use was also limited to certain factors which could have affected the reliability of the data. Some of the challenges associated with the use of questionnaire during this study were: the data might have lacked validity and accuracy since some of the respondents do not give real opinions. Instead, they could have given the answers that they thought could be pleasing to the researcher. Some of the respondents gave brief answers, hence, leaving out some information.

The interview method will also be used to help in gathering more information during the study. A few managers at the Boubyan bank were interviewed on various aspects of online banking at the institution and their perception concerning the use of internet banking in the institution.

Data Analysis

According to Kothari (2004), data analysis procedure includes the process of packaging the collected information putting in order and structuring its main components in a way that findings can be efficiently and effectively communicated. After the fieldwork, before analysis, all questionnaires will be adequately checked for reliability and verification. Editing, coding, and tabulation will be carried out. The data collected will be analyzed using simple qualitative and quantitative methods and will be presented in the form of tables, figures, and charts. The findings from the study will be qualitatively elaborated.

Research Limitations

Some of the customers at Boubyan bank who participated in the research were not well versed with the application of internet banking at the institution and therefore could not offer adequate information to the investigation. All the participants in this study were customers at the Boubyan bank, and consequently, they could not provide a perfect sample that can be generalized to the entire banking industry in Kuwaiti as the mode of internet banking varies from bank to bank. The study used a small sample population, and therefore it was difficult to generalize the findings from the small sample to represent all the customers at Boubyan bank. Taking part in this study was voluntary, and therefore the participants were not compensated for their time; hence, some of the respondents did not participate wholeheartedly due to lack of motivation.

Sampling Method

Sampling is a procedure through which some elements are selected from the population to be representatives of the others. The basic idea is that by choosing a sample, a conclusion can be drawn about the entire community using the representative population. In this research, the stratified random sampling technique was adopted. Layered random sampling technique was used in the selection of the participants for this study because it focuses on essential sub-populations and ignores irrelevant ones, improves the accuracy/efficiency of estimation, and permits greater balancing of statistical power of tests of differences between strata by sampling equal numbers from layers varying widely in size, Lucy (2002). For example, in this study, only the customers and the managers at the Boubyan Bank were selected to take part in the study because they have a greater understanding of the internet banking system offered at the institution.

Pilot and study

The online banking is a type of technical service that enables the financial companies and their customers to carry on economic transactions over the internet. Internet banking has got numerous advantages to both financial consumers and banks. For example, the banks can cut their cost while maximizing operations, the customers enjoy increased convenience and flexibility. Because of the many benefits which are attributed to internet banking, it has played a more significant role of retention and commanding the consumer’s loyalty.

Nevertheless, internet banking is also endowed with certain disadvantages that make some consumers reluctant in its adoption. Some of these challenges attributed to the use of internet banking can also be used to justify why there is no significant increase in the number of internet banking consumers in Kuwait and Boubyan bank.

In the most recent period, Boubyan bank has registered a significant amount of growth in its revenues and consumers, and this can be linked to the bank’s decision to invest in the implementation of technology within its system. This considerable turnout is, therefore, an indication that internet banking system can thus be applied to command a substantial consumer loyalty within the banking institutions in Kuwaiti. Moreover, internet banking can also help companies in the acquisition of new customers for their services. The Kuwaiti banks such as Boubyan should, therefore, expand their technological investment as most banking consumers are fast adopting the use of internet banks.

Ethical Consideration

The ability to come up with reliable results from this was not only dependent on diligence and expertise, and therefore, but integrity and honesty were also maintained to recognize and protect the rights of all the participants in the study. Before any participatory service was offered in this study, the researcher was bound to seek the consent of the participants before involving them in the research. Moreover, the respondents were not required to provide their identification details to maintain anonymity and confidentiality. The participants were allowed to withdraw from taking part in the study at any time that they felt they could no longer be part of it. The filled questionnaires were correctly kept by the researcher and then destroyed after analysis of the result.

Summary

The purpose of this study is to find out ways in which the use of internet banking can be applied to increase consumer loyalty in Boubyan bank and other financial institution in Kuwaiti. A descriptive design was used to help in coming up with the relevant research questions, data collection criteria and the methods of analysis. Stratified sampling technique was used in the selection of the research participants because it focuses on essential sub-populations and ignores irrelevant ones, improves the accuracy/efficiency of estimation, and permits greater balancing of statistical power of tests. The research employed the use of a survey as a means of collecting the data. After the collection of data, qualitative methods were used to analyze the information that was obtained from the field. Even though this study was mostly successful, it was also limited by certain factors such as small sample size and many others.