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1. Background
1.1 Introduction
Currently business environment is dynamic and going through rapid changes as a result of creativity, innovation, technological changes and diversity of customers’ preferences. Almost all the business organizations, especially the banking industry operates in a complex and competitive environment characterized by highly sensitive economic climate with information and Communication technology (ICT) (Agbolade, 2011). This has gradually changed the way and banks organize their corporate relations worldwide by adopting cutting edge technology and innovative approach in uplifting and delivering a service blended with high accuracy and speed.
Electronic banking is the latest distribution channel of banking services and facilitates in different platforms including Internet Banking, Tele-banking, and Mobile phone banking (M banking) etc. Usage of each of these services is differed from country to country due to several reasons. The products and services and facilities provided by different banks vary according to their policies and strategies.
In Sri Lanka, stimulating with effective implementation of the Banks IT strategies, Banks digital vertical drives transformation, enhancing the customer experience as customer migration to electronic payment channels accelerates supported by growth in mobile penetration in country of 126%, mobile broadband penetration of 21% and fixed broadband penetration of 4.7%. (Annual Report-HNB , 2017).

1.2 Internet Penetration in Sri Lanka
Figure 1 Internet ; Email Subscribers (Fixed; Mobile)

Source – Telecommunications regulatory commission of Sri Lanka –Statistics ( 2017)
Figure 01 indicates the trend in the growth patterns over the past years , in the usage of fixed and mobile internet subscribers in Sri Lanka. It has been observed that the number of mobile internet subscribers has been increasing drastically, especially from 2009. Considering this speedy growth in number of mobile internet users as an opportunity, industry players / banks can capture this opportunity to increase their outreach by promoting their Internet Banking strategies to the general public by adopting cutting edge technologies and user friendly approach. (TRC of Sri Lanka – Statistics , 2017)

1.3 Sri Lankan Banking Landscape

By the end of 2016, the banking sector consisted of 25 licensed commercial banks (LCBs) and 7 licensed specialised banks (LSBs). There were 12 branches of foreign banks within the
total number of LCBs. By end 2016, there were 6,659 banking outlets and 3,843 ATMs installed for the purpose of providing efficient banking operations (Annual Report – CBSL,2016).

1.4 Digital Integration in Sri Lankan Banking Industry
According to the Central Bank Annual Report (2016) , Sri Lanka’s Internet Banking usage was less than 10 % of the banking customers in general, which is a significantly lower usage than the developed countries. However due to the broadband services and reduced cost, internet usage in Sri Lanka increased rapidly during the last 5 years, from 8.3% of the population in 2010 to 30 % in 2016 (Annual Report CBSL, 2016).
When it comes to Sri Lanka, the number of public and private banks providing the E- banking facility is considerably high. Suraweera et al. (2011) emphasized that although ATM services are extensively used, the usage of other information technology driven services such as Internet Banking is almost insignificant.
However almost all commercial banks in Sri Lanka, have been developing their digital strategies to on boarding customers to digital platforms. This eagerness will be further evidenced by insights made by several CEOs’ from Leading banks in Sri Lanka.

Table 1 – Retail Value Payment System through Electronic Banking

Source – Payment Bulletin of CBSL (3Q/2017 )
As mentioned Table 1, volume and value of financial transactions effected through Electronic Banking continued to increase from 2012. This growing momentum may be due mainly to customer convenience, time saving benefits and various promotional measures and awareness programmes carried out by the banks to enhance the usage of Internet Banking.
According to the Table 1, it pertaining to note that almost all the payment instruments have been increased significantly from 2012 to 2016. This digitalization trend in the finance industry could be treated as an opportunity to them.

1.5 Resons for popularity in E Banking in emrging and developed countries
Traditional banking was restricted by time, space and accessibility. But with e-banking these barriers were removed. Customers were able to access bank services twenty four hours a day, and seven days a week (Rubino, 2000)
From a bank’s perspective, efficient use of Internet Banking can increase the customer base more than using other distribution channels(Pikkarainen et al.,2004). Sadeghi et al. (2010) emphasized rapid spread of technology has made Internet Banking the best channel to provide banking services and products to its demanding customers. In current business scenario, banking industry has become highly competitive. Banking is extensively used in this competitive environment to deliver banking services to the customers. Therefore it is important to identify factors affecting customer’s Internet Banking usage.
In a fastest growing bank, ongoing digitalization is a key a function and treated as a one of main strategic imperatives. This will further illustrate as follows.
Figure 2 – Strategic imperatives of a modern bank

Source – Annual Report – Commercial Bank of Ceylon (2017)

1.6 Brief Description of the Hatton National Bank

Hatton National Bank PLC (HNB) has been a leader in the banking industry in Sri Lanka
for 129 years from 1888, supporting the economic growth of the country. HNB team consists of 4,348 employees serve over 2.5 Mn customers through our 251 branches and digital platforms.
HNB is amongst the Top 1000 Banks in the World as published by The Banker Magazine.
HNB has been at the forefront of technology in the banking sector and technology will continue to be a key strategic route for sustained profitability and leadership in the future where digital banking would see a rapid proliferation (HNB Annual Report, 2016).
1.7 Business Rationale and Significance
Even though advancement in technology has played an important role in improving service delivery standards in the banking industry; yet, the usage of IB in Sri Lanka is still at the minimum, compared to the increase in the number of Internet users (Annual Report-CBSL, 2016).
Majority of the customers in the country are aware about IB facilities, but most of them had not been used such facilities by themselves. In Sri Lanka, banks as the IB service providers and customers as the beneficiaries are still not making the real use of IB adequately in spite of a relatively good quality infrastructure for communication and high literacy rate among people (Sivapragasam et al., 2014).
Despite the recent improvements in IB, some constraints, mainly security related issues and certain other factors have made some individuals reluctant to adopt IB. Even in 2017, online banking activities are well below the acceptable level in Sri Lanka and this study attempts to identify specific reasons behind this backwards mentality in general.
Therefore it is very much essential to carry out a timely study on the impact of Internet Banking on customer adoption of HNB and address recommendations for the limitations to be identifies with the view of achieving competitor edge over its competitors.

1.8 Personal Interest
I have worked for one of the premier commercial banks in Sri Lanka for 12 years. With the rapid ongoing development taking place currently in Sri Lanka and the constantly growing influence getting through the globalization have taken the demand for Internet Banking up to the sky. Since I have had my hands on E banking as a bank employee for HNB, my knowledge on the same , my desire to learn E Banking ; the fact that banking through the internet being the upcoming trend, have driven me to a research on factors affecting Internet Banking of HNB.
1.9 Problem Statement
According to the recent reviews on usage of online banking in country as well as in HNB, indicating that customer satisfaction is still low for online banking applications . Usage of online banking services is very low percentage even 18 years passed it has been introduced. Many researches focused on analyzing the factors affecting the usage of online banking and most of them utilized TAM and TPR models. Perceived benefits’ and ‘perceived risks’ were the most common factors to impact on usage of online banking. Among several models, author has widely used TAM and TPR in this study since their close relevance with the research questions.
1.10 Research Questions and Objectives

According to the review`s background of the topic and the Review of the Literature, this study focuses on below Research questions and objectives: Further this study attempts to predict the Internet Banking (IB) adoption with possible factors derived from different sources of literature with an objective to find out the customer adoption of IB.
Research Questions
? Which factors determine the use of E banking services among banking customers in Sri Lanka?
? What are the factors affecting positively and negatively towards use of Internet Banking services among the banking customers in Sri Lanka?
? What is the current state of Internet Banking adoption by HNB banks’ customers?
? How HNB uses digital banking to deliver different types of E-banking services in more efficient and effective ways that correspondent to today’s needs. ?
? What are the new marketing strategies to popularize E banking among both existing and potential customers of HNB?
Research Objectives
Research objectives derived for this study are as follows:
? Critically analyze the previous researches and case studies to determine the factors which affect the use of Internet Banking in Sri Lanka.
? Infer the main determinants of positive usage of Internet Banking in Sri Lanka.
? Infer the main determinants of negative usage of Internet Banking in Sri Lanka.
? To examine the moderated effect of demographic characteristics (only considered age factor) on the level of adoption of Internet Banking.
? Critically evaluate the current state of usage of IB using case study of HNB.
? Critically analyze the strategies of using knowhow technologies adopted by HNB to deliver different types of E-banking services in more efficient and effective ways.
? To provide recommendations to build up new marketing strategies to popularize its Internet Banking among both existing and potential customers.
1.11 Delimitations of the Study

Since our study is analyzing on Internet Banking adoption factors- special reference to HNB bank, authors’ aim is to identify several factors in the literature, which are important for Internet Banking adoption in HNB as well as Sri Lanka. But, due to time constraint and lack of information, only several factors which are most frequently cited by different authors were analyzed with the help of secondary data. Within a limited time and limited resources, it is not possible to analyze factors which are less frequently mentioned, though they would have gained broader perspective concerning IB adoption. A separate analysis needs to be conducted for evaluating other factors.
Further when analyzing HNB scenario, E banking strategy is scrutinized parallel with digitalization strategy, since HNB approaching its digital vision with broad holistic approach rather than implementing single Internet Banking strategy.

1.12 Chapter Summary
According to the chapter 1, author could able to address justification for selecting this particular topic while making the foundation for the study. Further it highlighted the country readiness for adopting the IB banking as well. Author will construct the body of this white paper from here onwards.