By Madeleine H. Tausk and Carol A. Watson
URL: MHTAUSK@AOL.COM
Carolw@pacbell.net
Email: MHTAUSK@AOL.COM
Carolw@pacbell.net
Madeleine Tausk is employed at Bank of America, NT&SA in San Francisco, California as Assistant Vice President / Project Manager. Carol Watson and Ms. Tausk are both candidates for Doctorate of Business Administration at Golden Gate University in San Francisco, California.
The purpose of this research paper is to examine if there is market demand from retail customers to view pictures of their paid checks through alternative delivery mechanisms.
CONCLUSION:
Our research communicated that retail banking customers are interested in receiving check photos through alternative delivery mechanisms. They are willing to pay a fee of $2.00 or less for this service.
SUMMARY:
Alternative delivery mechanisms include all non traditional means of banking such as ATM machines, banking by telephone, and computer banking. Our research revealed that retail banking customers are interested in receiving check photos through alternative delivery mechanisms. Delivery of this requires digitizing check pictures to transform them to electronic information. Consumers are willing to pay a fee of $1.99 or less for copies of digitized check images.
Although 69.2% of those surveyed indicated that they were interested in viewing check images, many do not currently utilize alternative banking delivery mechanisms other than ATMs. Thus, the transition to computer banking for the retail market may be a slow process. Furthermore, the use of the telephone for this process requires the availability of a facsimile machine to send the image to the customer. ATMs would be the predominant delivery choice to view check images.
We believe that the emphasis on ATMs in this study is because of their convenience. Consumers value convenience. Given the expedience and availability of ATMs, many would prefer to complete virtually all of their banking transactions without even entering the branch. We recommend duplicating this research in the commercial marketplace, where customers needs may be significantly different.
There are several products currently available using alternative delivery mechanisms. Alternative delivery mechanisms include all non traditional means of banking such as ATM machines, banking by telephone, and computer banking. The product which will be studied in our research paper is the ability to view pictures of paid checks. In order to provide pictures of paid checks through these alternative delivery mechanisms, the paper checks must be converted to digital form. This method involves digitizing paper. Digitizing is the process of converting paper information into electronic information. This procedure is performed by electronically scanning paper and turning it into a series of 'ones' and 'zeros.'
Convenience, market forces, and speed are just some of the many reasons that over half of all banking transactions do not take place in a traditional branch. Consumers want instant access, in many different forms. However, there are opportunities to "modernize" banking transactions even further. One of these is the ability to view through alternative banking delivery mechanisms, images (pictures), of checks and deposits made by customers to a bank.
The devices by which consumers can pay for items have increased considerably over the past 30 years. These payment methods include credit cards, debit cards, and "Stored Value Cards." However, even with the advent of a variety of new payment tools, traditional payment methods, such as checks and cash have consistently been increasing each year. This trend of increasing check volume is expected to continue until the year 2021, despite the efforts of the Federal Government to convert all of their payments to electronic form by 1999, (Novack, p. 140).
If these paper transactions do remain a part of the payments system, there remains a potential need to view images (pictures), of paid items. Government regulations require these pictures to be maintained for a period of five to seven years from the date of payment. Conventionally, banks have relied on the pictures taken during processing which have been stored on microfilm for retrieval. When a customer inquires about an item that was paid, a customer service representative will obtain the appropriate film cartridge and take a photocopy of the item to be sent to the customer. This is extremely labor-intensive, as many banks process millions of items per day. As technology has advanced, many banks now rely on digitized images of items to meet this need. Not only do digitized images provide a better quality picture, but they can be stored and retrieved in a more efficient manner. It is the only technologically feasible by which pictures of paid items can be delivered through alternative banking delivery mechanisms.
Digitized image technology is expensive. Do customers want to access these items through alternative banking delivery mechanisms, or are they content utilizing the traditional means by which to obtain proof of payment? If the consumer market demands that all banking products be available through alternative delivery mechanisms, and if they are willing to pay for them, banks must make strategic decisions to stay competitive. Banks must either invest in the proper technology to provide customers what they demand, or risk losing the customer.
After reviewing this internal analysis, an aggressive strategy as well as a diversification strategy is recommended. In other words, according to the SWOT analysis, the retail banking industry should diversity by adding this new technology. The results of the focus groups and survey influence this decision.
One of our literature sources assisted us in designing and implementing focus groups. The other existing research focused primarily on statistical information regarding the user of checks or the alternative banking mechanisms available today.
Our hypothesis is as follows:
Retail consumers want access to traditional banking products through
alternative delivery mechanisms. This study focuses on the capability to view
pictures of paid checks utilizing alternative banking delivery mechanisms.
Customers will pay a fee for check images in the amount of $1.00 to $2.00 per
check image.
Sub questions:
1. What alternative delivery mechanisms do people utilize for banking functions?
2. What delivery mechanisms would customers utilize to view paid checks?
The results of two separate focus groups and a survey were the sources of our information. One focus group consisted of women, the other of men. Our survey consisted of a convenience sample. One hundred and ten questionnaires were completed and collected. These were utilized in our statistical analysis.
Once again, due to time constraints, a convenience sample was utilized. We distributed the survey as people were available to complete it, (i.e.: friends, family, public locations). Due to the economic and professional diversity of these completing the survey, this methodology was less of a limit than originally thought.
The hypothesis was tested quantitatively based on results from the consumer survey. The final questionnaire was three pages long and contained 21 questions. These 21 questions were coded into ninety-six numeric data fields. The data was entered into an Excel spreadsheet which was then converted for input into SAS. A SAS program was written for use in analyzing the data collected.
What follows is our analysis of the data. A significance level of .05 was selected as our criteria. This yielded a 95% confidence level in the results.
The income breakdown was as follows:
Both the marital status and income distributions are not representative of the general population. We believe this is attributed to our convenience sample.
We found it interesting that every participant answered the education question. Fifty three (48.2%) completed at least a four year college degree. Overall, the frequency of the education question appears to follow the classic bell curve. However, the number of survey participants who had a post graduate degree was high at 29 (26.4%). Several of the surveys were gathered at Golden Gate University (17). Moreover, a substantial number of the surveys were distributed in what is perceived to be a high-income, high-education geographic location.
Question number nine of the survey asked whether or not the respondent had a relationship with a bank or credit union. One hundred and nine (99.1%) did have a relationship with a bank. The most common banking service utilized was a checking account. One hundred and seven (97.3%) have a checking account. This was followed closely by savings accounts; ninety three people (84.5%) have a savings account. Based on the results of our focus group, many employers encourage "direct deposit" of paychecks. As an incentive, banks may offer free checking accounts to those individuals.
Null hypothesis #1 states : customers do not want or need the option of accessing the traditional banking product of check pictures through alternative banking delivery mechanisms. This null hypothesis was tested in number 19 of our survey. Seventy four respondents (69.2%) stated that they would be interested in photos of their paid checks verses 33 (30.8%) of the respondents who said no. Therefore, we reject the null hypothesis and accept our hypotheses.
Null hypothesis #2: Customers will not pay a fee for the check pictures delivered through alternative banking delivery mechanisms. This was tested in question 20 of our survey. Sixty eight respondents (85%) were willing to pay a fee of less than $1.00 for the check photo service. However, only 5 respondents (6.3%) were willing to pay $2.00 to $2.99 for the service. Therefore, we accept the null hypothesis and reject our hypothesis.
The main research question was addressed in question 19 of the survey. Do customers want to view their checks which have paid utilizing alternative banking delivery mechanisms? This includes:
The first subquestion of this paper regarding alternative delivery mechanisms used by people for their banking functions is answered by question number 11 of the survey. One hundred of the respondents (91.7%) use ATM machines, sixty seven (60.9%) of the respondents visit their branch, fifty four (15.6%) use the computer. Four (3.7%) of the survey respondents listed the category ^Óother^Ô for their banking transactions.
The second subquestion inquires what delivery mechanisms customers would like to utilize to view checks which have paid. If available, 10% of those surveyed would request check photos through ATM machines, 16.4% would request check photos through their personal computer, and 6.4% of the requests would be made via telephone.
The second part of the second question regarding how much a customer would be willing to pay for this service was answered by question number 20 of the survey. Forty two (52.5%) would pay less than $1.00, twenty six (32.5%) would pay between $1.00 and $1.99, five (6.3%) would pay between $2.00 and $2.99; the remaining respondents were willing to pay more for this service or did not respond to the survey question.
The next Chi-Square test conducted concluded that there is no correlation between age and interest in check photos. The Chi-Square value is 6.198 (extremely high), DF =4, and Probability is .185. Again, we would accept a Probability value of .05 or less in order to assure a 95% confidence level in our results.
Next, a Chi-Square test was conducted to test the relationship between income and interest in check photos. The Chi-Square value is 2.574, DF = 4, and Probability is .631. We would accept a probability value of .05 or less in order to assure a 95% confidence level in our results, Therefore, we ascertain that there is no direct correlation between income and interest in check photos.
Another Chi-Square test was conducted to determine potential correlation between education and interest in check photos. The Chi-Square value is 13.488 (extremely high), DF = 3, and Probability is .004. We would accept Probability value of .05 or less in order to assure a 95% confidence level in our results. Therefore, we ascertain that there is a correlation between education and interest in check photos. This may be due to the fact that people who are more educated are less afraid of new technology.
Lastly, a Chi-Square test was performed to study the relationship between the number of times copies of checks were requested in the past twelve months and interest in check imaging. The Chi-Square value is 5.946, SF = 4, and Probability is .203. We would accept a probability value of .05 or less in order to assure a 95% confidence level in our results. Therefore, we ascertain that there is no direct correlation between the number of times during the past twelve months that check copies have been requested and interest in check imaging.
NOTE: On four of the five Chi-Square tests performed, a warning was listed. This warning states that the Chi-Square test is not valid due to the high percentage of cells with expected values less than five. This is most likely dye to the small sample size for this research project. Further survey testing could be added to these results to assure better accuracy.
We were interested in whether or not the fees consumers have paid in the past for copies of their paid checks would determine the fees they would be willing to pay in the future for check imaging. Therefore, we conducted a Chi-Square analysis of Question 18 and Question 20 of the survey. The Chi-Square value is 11.545, DF = 15, and Probability is .713. We would accept a probability value of .05 or less in order to assure a 95% confidence level in our results. Therefore, we ascertain that there is no direct correlation between fees paid in the past and willingness to pay fees in the future.
Next, we performed several General Linear Models Procedures to test for correlation between interest in check imaging and gender, and, income, and education. The dependent variable used was question number 19 of the survey. On all tests performed, we found no significant correlation between interest in check imaging and the independent variables listed above.
It would be interesting to duplicate this research study with corporate banking customers. We suspect that response may differ significantly.
Some additional interesting information was gathered during the two focus group sessions. Although personal computers are quickly becoming more common, it is important to remember that a large percentage of U.S. households still do not have or use a personal computer for non-academic purposes. Moreover, the rapidly growing Internet user base is still a low percentage of this population. Approximately 14% of the U.S. population has even tried the Internet. "According to an Intelliquest survey, the number of adults on-line in the United States totaled approximately 47 million at the end of 1996, representing a 34% increase in growth in the on-line population from January of 1996." However, the transition to computer banking for the retail market may still be a slow process.
Convenience is key. This is evident by the number of ATM users in our survey. When ATM machines were initially introduced to the consumer, they were not popular. Slowly over time, however, they have become the foremost vehicle by which to perform banking transactions. Much of this is due to the varied transactions available at ATM machines today. Consumers value convenience. Given the convenience of ATM^Òs many would prefer to complete virtually all of their banking transactions without even entering the branch. Banking by telephone also offers many opportunities, however, check images must be faxed if requested through a telephone. Many retail consumers do not have the facility to accept such a transmission. As personal computer use becomes more popular, banking by telephone may also become more popular. It will be interesting to see what the future holds.