Impact of E-Banking on Chinese Banks

This assignment examines the influence of e-banking and credit cards on the financial performance of commercial banks in China. Students are asked to analyze the benefits, such as reduced labor costs and faster capital flows, and the potential risks involved, including data leakage and credit risk. The assignment also compares traditional banking services with third-party e-payment platforms like Alipay and Wechat Pay, highlighting the competitive landscape and challenges for Chinese banks in adapting to technological advancements.

1
Relationships Between the Application of Banking Technologies and the Performance of
Commercial Banks in China
Yuling Fu
Enrolment number: FUY15615651
Supervised by: Christopher Firth
University of Lincoln
Msc Accounting & Finance
Submission date : 25th sep 2017
Word count: 16132

2
Relationships Between the Application of Banking Technologies and the Performance of
Commercial Banks in China
Yuling Fu

3
Acknowledgments
First of all, I would like to thank my tutor for instructions, MR Christopher Firth . Without
these knowledge and research skills , I would not have finished this research. Without the
patient guidance and modifications, it would be difficult for me to finish this research.
Secondly, I want to thank my friends who have helped me to conduct the two interviews and
questionnaires. I set the study scope in China and some of my friends helped me to collect
primary data. With their help, I could complete my research within limited time and resources.
At last, I want to thank the two interviewees and all the participants who fill in questionnaires.
Without their support, the research could not have conducted.

4
Abstract
Financial institutions in developed countries have applied financial innovations and banking
technologies in order to develop innovative products offerings, cut operational costs, increase
revenues, improve organizational performances. It is it is significant to research the relations
between the application of banking technologies and performances of commercial banks in
China.
Research purpose: The purpose of this study is to identify how does the application of credit
cards as well as the e-banking system influence performances of commercial banks in China.
Research method: This study applies the mixed researching method which contains both the
qualitative and the quantitative researching methods. The case study researching strategy is
applied through collecting information and data from both the primary resource and the
secondary sources. The case study focuses on two important commercial banks in China,
including China Merchants Bank as well as the Bank of Communications. This study applies
the abduct method and the SPSS data analysis tool to analyze data collected.
Key findings: There is a significant positive link between the application of credit cards and
e-banking systems and the performance of commercial banks in China. There is not a positive
link between the application of credit cards and e-banking systems and operational risks for
commercial banks in China.
Recommendations: Commercial banks in China is recommended to enhance commercial
banks’ abilities of risk prevention plus risk control, facilitate innovation ability, as well as
value the potential of both existing clients and rural customers.
Limitations: Secondary data used is not accurate and primary data collected is not
comprehensive.
Table of contents

5
Abstract.......................................................................................................................................4
Chapter 1: Introduction...............................................................................................................8
1.1 Research background.....................................................................................................8
1.2 Research objectives and research questions...................................................................9
1.3 Research design............................................................................................................10
1.3 Structure outline...........................................................................................................10
Chapter 2: Literature review.....................................................................................................11
2.1 The application of credit card and banks’ performances..............................................11
2.2 The application of e-banking systems and performances of commercial banks..........12
2.2.1 The application of e-banking in America and European countries....................12
2.2.2 The application of e-banking in developing countries.......................................14
2.2.3 The application of e-banking in China...............................................................15
2.3 Research gaps...............................................................................................................18
2.4 Critique of the existing literature relevant to this research..........................................18
2.5 Identification of hypothesis..........................................................................................19
Chapter 3: Research methodology............................................................................................20
3.1 Research method..........................................................................................................20
3.2 Research design............................................................................................................20
3.3 Data collection approaches..........................................................................................21
3.4 Data analysis approach.................................................................................................22
3.5 Conceptual framework of this research........................................................................22
3.6 Limitations of this research..........................................................................................23
Chapter 4: Findings...................................................................................................................24
4.1 Case commercial banks in China.................................................................................24
4.2 Hypothesis analysis......................................................................................................25
4.2.1 Respondents analysis.........................................................................................25
4.2.2 Evaluation of hypothesis....................................................................................26
Chapter 5: Discussion...............................................................................................................41
5.1 Enhance commercial banks’ abilities of risk prevention plus risk control...................41
5.2 Enhance innovation ability...........................................................................................42
5.3 Value the potential of both existing clients and rural customers..................................43
Chapter 6: Conclusion...............................................................................................................45

6
6.1 Key findings.................................................................................................................45
6.2 Recommendations........................................................................................................46
6.3 Limitations...................................................................................................................46
References.................................................................................................................................47
Appendixes: Interviews.............................................................................................................53
Appendix 1: The interview of the banking manager from China Merchants Bank...........53
Appendix 2: The interview of the banking manager from Bank of Communications.......55

7
List of tables and figures
Page
1. Figure 1: Conceptual framework of this research 23
2. Table 1: Year (Years) work for commercial banks in China 25
3. Table 2: The application of credit cards and the performance
of commercial banks in China. 29
4. Table 3: The regressions model fitness for the application
of credit cards and the performance of commercial banks in China. 29
5. Table 4: The ANOVA result for the application of credit cards and
the performance of commercial banks in China. 30
6. Table 5: The application of credit cards and operational risks of
commercial banks in China. 32
7. Table 6: The regressions model fitness for the application of credit
cards and operational risks of commercial banks in China. 33
8. Table 7: The ANOVA result for the application of credit cards and
operational risks for commercial banks in China. 33
9. Table 8: The application of e-banking systems and the performance
of commercial banks in China. 36
10. Table 9: The regressions model fitness for the application of e-banking
systems and the performance of commercial banks in China. 37
11. Table 10: The ANOVA result for the application of e-banking systems
and the performance of commercial banks in China. 38
12. Table 11: The application of e-banking systems and operational risks
for commercial banks in China. 39
13. Table 12: The regressions model fitness for the application of credit
cards and operational risks for commercial banks in China. 40
14. Table 13: The ANOVA result for the application of credit cards and
operational risks for commercial banks in China. 40

8
Chapter 1: Introduction
1.1 Research background
The enhancement of commercial banks that could be important financial institutions is
significant for a huge number of countries to promote their economic growth of China (Atay,
& Apak, 2013). In this case, it is important for commercial banks to provide efforts to
improve their organizational performances as well as increase their operation efficiency. With
the increasing development of the informative technologies and the internet, a major segment
of financial institutions in the world have used financial innovations in introducing innovative
product offerings and expanding scopes of services in order to increase operation efficiency in
the long term (Ma, 2012).
The banking system for a country is significant to move the national investments from their
saving units to their spending units. If the system financial system of a country is efficient, the
system should indicate increment in profitability, including raising funds volumes from savers
to borrowers, as well as providing better quality financial services for customers (Turban et
al., 2012).
The legal and financial systems in China are not well developed (Sok-Gee, 2011). In this case,
the banking system in China may be vulnerable in the aspect of banking survivals in the long
term. Meanwhile, the inefficient banking system and banking sector in China, the sick legal
system as well as sick financial infrastructures influenced the economic development in China
negatively (Sok-Gee, 2011). Hence, it is crucial to research approaches to improve the
efficiency of banking system in China with the purpose of making further contributions to the
economic expansion in China. Technologies are widely applied in banking systems for a great
number of countries in order to improve business growth, increase business profitability as
well as gain competitive advantages (Olaoye, & Olarewaju, 2015). The wide applicability of
information and communication technologies in developing countries has promoted
performances and improved the customer services delivering efficiency in banking industry
(Ongori, & Migiro, 2010). A majority of consumers in China can follow up the banking
services and or banking facilities through their electronic devices including their mobile
phones and computers in their daily lives (Kalathil, 2017). With the rapidly increasing internet
bankers in China and the growing application of the banking systems in Chinese banks, China

9
has a potential to grow its banking industry if the banking technologies are implemented
adequately (Atay, & Apak, 2013). In this case, it is significant to research the relations
between application of banking technologies and performances of commercial banks in China
with the purpose of improving high quality customer services delivery, reducing transaction
costs as well as improving performances.
1.2 Research objectives and research questions
The basic objective of this research is to study the relationships and association between
banking technologies and performances of commercial banks in China. In order to achieve
this objective, this research is guided by two sub issues listed as bellow: 1) assessing
influences of credit cards on performances of commercial banks in China; 2). evaluating
influences of the e-banking on performances of commercial banks in China.
Based on the research objective, the following research questions are outlined.
1) How does the usage of credit cards influence the performances of commercial banks in
China?
2) How does the usage of e-banking influence the performances of commercial banks in
China?
3) How does the usage of e-banking influence the operational risk of commercial banks in
China?
4) How does the usage of application of credit card the operational risk of commercial banks
in China?
There are four hypotheses in this research.
Hypothesis 1: There is a positive link between the application of credit cards and the
performance of commercial banks in China.

10
Hypothesis 2: There is a positive link between the application of credit cards and operational
risks of commercial banks in China.
Hypothesis 3: There is a positive link between the application of e-banking systems and the
performance of commercial banks in China.
Hypothesis 4: There is a positive link between the application of e-banking systems and
operational risks of commercial banks in China.
1.3 Research design
DeYoung, Lang and Nolle (2007) collect data from both the primary and secondary resources.
In this case, this study gathered dataset from the primary resources in the forms of interview
and questionnaire, as well as secondary resources in the forms of literature review and the
annual reports from the two case commercial banks in China. Stoica, Mehdian and Sargu
(2015) analyzed data through using the data development analysis method that includes a
wide range of mathematical linear programming models, whereas DeYoung, Lang and Nolle
(2007) analysed their data by applying the SPSS tool. This study analyzed data collected from
questionnaire through using mathematical operations and SPSS tool.
1.3 Structure outline
This research contains seven sections. The first part is the introduction of this research
that outlines the research background, study significance as well as research purpose and
questions. The second part is the literature review section that review reliable articles
collected from reliable resources relevant to the influences of applying banking technologies
on performances of commercial banks in other countries and China. Since there is research
gap and few studies researched the relations between the application of banking technologies
and performances of commercial banks in China, this section reviews articles researching
influences of applying banking technologies on performances of commercial banks in other
countries as references. The third part is the methodology section, which outlines design of
this research, researching approaches, the method of collecting data as well as how to analyze
collected data. The fourth part is the analysis of data, which includes the details of data
analysis and the research results. The fifth part is the discussion and the recommendation part,

11
which provides recommendations for commercial banks in China to enhance their
organizational performances.
Chapter 2: Literature review.
This chapter reviews book and journal articles relevant to influences of applying banking
technologies on performances of commercial banks in other countries and China.
2.1 The application of credit card and banks’ performances
Credit card is a type of electronic payment card that is issued and managed by a specific
commercial bank or other types of financial institutions with part or with full functions in
“individual consuming payment, credit loan, transfer and settlement of account, cash deposit
and withdrawal” (Liu, 2011, p, 371). In this case, consumers can use credit cards in their
general payments, such as the settlements of accounts, cash deposits, cash withdrawals, as
well as daily payments. As an important non-cash payment tool and a part of the credit
service, the application of credit cards provides convenience for consumers in the aspect of
banking transactions and the postponement of payments (Matthew, 2009). With the concept of
over consuming as well as the increasing of household incomes in China, the usage of credit
cards in China has experienced the rapid growth (Yin, Song., & Tang, 2014). The economy of
China has transitioned from the command to the market economy under economic reforms
(Worthington, Thompson, & Stewart, 2011). Driven by the market economy, the consumer
spending in China is increasing while the consumer saving in banks is decreasing (Peng,
2012). The application of credit card and the idea of debt can promote consumer expenditure
and providing opportunities for Chinese people to spend tomorrow's money and borrow from
banks (Worthington, Thompson, & Stewart, 2011). When individuals borrow money from
banks and spend more money through credit cards, banks can increase its performances in the
short term through collecting interests and increasing the cycle of cash flow. Meanwhile,
banks can improve their organizational performances in the long term through meeting
consumers’ demands of borrowing money conveniently (Sharpe, Yao, & Liao, 2012). Chinese
credit cards holders consider that credit cards are more convenient and much easier than using
cash in daily lives, especially when traveling abroad and shopping online (Worthington,
Thompson, & Stewart, 2011).

12
Considering that, there is little literature focus on the influence of application of credit
cards system on the performances of commercial banks in China. This study researched the
influence of application of credit cards system on the performances of commercial banks in
other countries as references. Akers et al., (2005) research the development of the credit card
industry and argue that credit card allow card holders to purchase products and or services on
the basis of their promises, instead of cashes, since credit cards are payment cards that are
issued and promised by specific banks to consumers. Odhiambo and Memba (2012) study
relationships between the application of credit cards and consumer satisfactions of cards
holders with the purpose of assessing whether the application and adoption of credit cards can
lead to the increasing of bank revenues. Their research results indicate that the adoption of
credit cards in commercial banks can increase consumer satisfactions, which can assist
commercial banks to increase their returns on assets as well as raise their revenues
(Odhiambo, Memba, 2012).
Though the application of credit cards can lead to the improvement of the performances
of commercial banks, it may cause in credit risks. Credit risks are the major risks faced by all
financial institutions (Jin, Yu, & Mi, 2012; Wang Gao, & Zhang, 2013). Commercial banks
cannot identify the credit information of each credit card holder. Therefore, they cannot
control the potential credit risks effectively (Li et al., 2014). When credit card holders cannot
repay their debt or meet their liabilities, commercial banks that issue these credit cards have to
undertake the costs.
2.2 The application of e-banking systems and performances of commercial banks
2.2.1 The application of e-banking in America and European countries
The e-banking systems, which also referred as the internet banking or the online banking,
make full use of the information technologies and the internet with the purpose of delivering
banking products and or services to targeted audiences. (Turban et al., 2012). Wells Fargo
introduced the first online banking service in 1995 (DeYoung, Lang, & Nolle, 2007). Furst,
Lang, and Nolle (2002) point that banks tend to operate a transnational internet web site if
these banks are large, operated adequately with high level of return on equity as well as low
non-interest expenses, located in downtown areas, affiliated with bank holding groups with
high branch networking expenses. The significance of the application of electronic based
banking products or e-banking systems is increasing. It is understandable that the application

13
of e-banking systems can lead to low cost and high return for banks (Goh, & Kauffman,
2013). There are a great number of researches addressing the influences of the application of
e-banking systems on the profitability of banks. These researches can be classified into two
groups based on the level of development of countries.
There are studies indicate that the application of advanced technologies, including e-
banking systems can increase the overall profitability of banks in America and European
countries (Ciciretti,, Hasan, & Zazzara, 2009; DeYoung, 2001; DeYoung, Lang, & Nolle,
2007; Goh, & Kauffman, 2013; Hernando & Nieto, 2007; Pigni, Ravarini., Tagliavini,, &
Vitari, 2002; Sullivan, 2000; Weigelt, & Sarkar, 2012). These researches show that it is crucial
for banks to apply e-banking systems and provide e-banking products and services since it has
a prominent positive contribution to the performances of banks and the increase of their
competition in the banking industry. In this case, the application and the range of the e-
banking systems make banks build the orientations of technological innovation up (Ciciretti,,
Hasan, & Zazzara, 2009). Ciciretti, Hasan, and Zazzara (2009) argue that the usage of
technology based products, especially the e-banking systems can help banks to reduce their
operational risks.
DeYoung, Lang, and Nolle (2007) tested influences of internet banking channels on
financial performances, production processes as well as the product mixes at small
commercial banks in America between 1999 and 2001. Their study results indicate that that
the application of internet or e-banking systems in small commercial banks can enhance their
profitability mainly through increasing revenues from depositing service changes (DeYoung,
Lang, & Nolle, 2007). The application of e-banking system can associated with all
movements of depositing from checking accounts to the market depositing accounts, which
can increase the usage of brokered deposits as well as the average salary rates of bank
employees (DeYoung, Lang, & Nolle, 2007). Ciciretti, Hasan, and Zazzara, (2009) research
the use of internet technology in banks and provide evidences for banks’ application of new
internet technologies and relevant innovative banking services and products as they are
relevant to performances of these banks. The research results of Ciciretti, Hasan, and Zazzara,
(2009) indicate that there is a strong positive correlation between the application of internet
technologies and bank returns and there is a negative correlation between the application of
internet banking systems and bank risks.

14
In America, the commercial and retailing banking industry is the most information
technology intensive industry for at least forty years (Goh, & Kauffman, 2013). Goh, and
Kauffman (2013) research the application the internet technology in banking management and
performances of banks in America. Goh, and Kauffman (2013) argue that the application of
the internet technology in banks can cut costs and improve profitability of banks in America,
but it also relates to operational risks as well as opportunism risks. Banking business is
transaction intensive and an important portion of the banking operational cost involves the
handing of information and the process of transactions (Goh, & Kauffman, 2013). The
application of information technologies in commercial and retailing banking industry can
support a wide range of banking operations, from front office services that are consumer
oriented to financial risks management to back office management (Goh, & Kauffman, 2013).
The introduction and the application of the internet banking system to support the online
transactions can help banks to reduce their transaction costs, research new and younger
customers (Berger, 2003).
Hernando and Nieto (2007) research e-banking systems in Spain in order to identify
whether the usage of online banking has impact on banking performances. The result of the
research indicates that the adoption of online banking has positive impact on the profitability
and the overall financial performances of banks in Spain (Hernando, & Nieto, 2007).
Meanwhile, these positive impacts tend to be significant in three years after the adoption of
the online banking system. In other words, the application of the online banking or internet
banking can increase banking profitability but these impacts take time to appear.
2.2.2 The application of e-banking in developing countries
There are researches show that the application of e-banking systems can enhance the
profitability of banks in developing countries, such as Jordan (Khrawish, & Al-Sadi, 2011),
Pakistan (Sumra, Manzoor, Sumra, & Abbas, 2011), India (Malhotra, & Singh, 2009), Kenya
(Kathuo, Rotich & Anyango, 2015), Ghana (Angko, 2013; Leckson-Leckey, Osei, & Harvey,
2011), Nigeria (Ugwueze & Nwezeaku, 2016) as well as Asian countries (Hosein, 2013).
Angko (2013)argues that the adoption of e-banking can bring benefits for commercial banks
in Wa municipality, Ghana. On the basis of his research results, the usage of the internet

15
banking systems makes consumers implement banking activities without limitations of
banking work hours as well as do not visit physical banks (Angko, 2013). Meanwhile, the
usage of online banking or e-banking can help customers to access banking products and or
services flexibly and instantly, which is convenient and effective for customers (Angko,
2013). In this case, commercial banks can increase their customer satisfaction, which may
enhance customer loyalty, increase banking revenues and returns on assets (Angko, 2013).
Similar with Angko’s research findings, research results of Ugwueze and Nwezeaku (2016)
indicate that the adoption of e-banking can improve banking performances in Nigeria since it
can increase consumer satisfaction.
Though the application of the internet banking can provide effectively delivering
channels for traditional banks, as the newest delivering channel applied by banks in several
developed and developing nations, the use of mobile banking tends to have a significant
influence on the performances of these banks (Safeena, Date, Kammani, Hundewale, 2012).
The expansion and the spread of the smart phone usage in the market has increased the
demands for mobile banking products and services, which promote more banks and micro-
finance institutions, e-banking services providers to apply e-banking systems with a wide
range of products (Shaikh, 2013).
Kathuo, Rotich and Anyango (2015) researched the impacts of the application of mobile
banking system on financial performances of banking institutions in Kenya. On the basis of
their research results, there is a positive relations between the adoption of mobile banking and
the financial performances of banking institutions in Kenya since it can reduce banking
transaction time as well as transaction distances. Leckson, Osei and Harvey (2011) research
the influence of adoption and investments in information technologies on banking
performances in Ghana. There research results indicate that investments in information
communications technologies can help banks to increase their profitability and improve their
performances (Leckson, Osei & Harvey, 2011).
2.2.3 The application of e-banking in China
The application of the e-banking system can enable banking customers to conduct
banking transactions and check their banking accounts without going to the brick and mortar
institutions (Kurnia, Peng, & Liu, 2010). E-banking system can bring benefits for banks and

16
improve the performances of banks through providing convenience, fast, low cost as well as
round-the-clock internet banking services (Ma, 2012). Meanwhile, the application of e-
banking system can help commercial banks to improve their productivity gains, reduce
relevant transaction costs, improve customer services and provide better flexibility to fulfill
the ever-changing demands of customers (Turban et al., 2012). The use of e banking can
enable banks to compete with its competitors more effectively in the complicated changing
external environment (Turban et al., 2012).
Ma (2012) researches and evaluates the serviceability as well as the reliability of e
banking to hamper customer satisfaction in China. The application of the e-banking system
can make consumers to take banking transactions whenever, wherever, as well as however
(Ma, 2012). With less consumers visit the physical banks in their daily lives, banks can gain
benefits from lower banking operation costs through providing online banking services that
require less employees and less physical branches (Ma., 2012). Meanwhile, the application of
e-banking system can improve customer satisfaction (Ma, & Zhao, 2012). In other words, the
application of online banking system can lead to mutual benefits as well as win-win outcomes
for both banks and their customers. On the one hand, the use of e banking can meet the
consumers’ needs for fast, convenience and round-the-clock banking services. On the other
hand, the application of online banking system can bring financial benefits for banks through
enhancing consumers’ satisfaction as well as cut banking operation costs through less physical
branches and fewer employees.
Taking consideration of the benefits of applying e-banking system in the banking
industry, commercial banks in China attach great importance to expand their internet banking
networks, raise funds, improve banking technologies, manage human resources effectively
with the purpose of improving their services and performances in the long term (Yuan, &
Seok, 2010). With the fast development of the information technologies and banking
technologies, e banking has played a significant and central role in the aspect of electrical
payment field that offering the online transaction platforms for a wide range of e-commerce
and e-business applications (Ma, 2012).
Though the application of the e-banking system can improve performances of banks,
there are barriers in the process of adopting e-banking systems in China. E banking which is

17
on the basis of the internet and information technology is not new for Chinese people, but
some of them still not known to it because of the digital divides and the different levels of
internet experiences and environments in the Chinese context (Atay, & Apak, 2013). In this
case, it is crucial for managers and decision makers in the banking industry to understand how
Chinese people perceive e-banking system with the purpose of facilitate the growth and
prosperity e-banking system (Hua, 2009; Kurnia, Peng, & Liu, 2010). Laforet, & Li (2005)
researched the attitudes of Chinese customers towards e-banking, including internet and
mobile banking, in China. Based on their survey, the adoption and the diffusion of the e-
banking system is not fast thought it could leap frog the technology development phase
through learning from experiences from developed countries. The perceived risks of using e
banking were high, which makes consumers not to adopt and use e-banking products (Zhao et
al., 2008). Their research indicates that the identified risks are impacted by Chinese culture,
which makes Chinese banks cannot follow the pattern of those developed countries. Kurnia,
Peng, & Liu (2010) applied the technology organization environment framework to study the
adoption of e banking in Chinese context to detect the barriers for Chinese consumers to use e
banking. Because of their research, the application can promote the financial growth of
Chinese banks, but there are barriers for consumers to adopt e banking. These barriers include
customers’ security concerns, the issue of limited infrastructure, high uncertainties as well as
lack of trust.
The development of the online banking system applied by commercial banks in China
improves their performances, but the adoption of online banking systems for its competitors,
such as internet financial companies in China threaten their business expansions and financial
performances (Lv, 2016). The establishment and the development of different types of internet
financial platforms and products in China has threatened the performances of Chinese
commercial banks, especially the value-added services provided by lipay and the Celestica
fund (Bai, 2014; Lv, 2016). On the one hand, the fast development of the internet technology
and the online banking system has weakened the financial intermediary role of commercial
banks in China (Lv, 2016). The network technologies reduce the costs of banking transactions
as well as make it easy for organizations to collect information (Ye, 2014). In this case, the
demands for commercial banks to relevant finance intermediary services are declining (Lv,
2016). In the process of traditional financing and banking transactions, the significant
challenge is to communicate information about the supply as well as the demands of funds in

18
the real time (Lei, 2014). Commercial banks, as the major financial intermediaries in daily
economic lives, are the distributing centers of relevant commercial activities in the supply and
the demand of capital information (Lv, 2016). At the same time, Commercial banks have
formed their economies of scale in the practices of management in the long term (Ye, 2014).
However, the capital information transmissions as well as modes of transmissions have
changed because of the development of the internet and the online banking system (Lv, 2016).
The payment intermediary statuses of commercial banks are based on the non-uniformity of
the capital supply and demands in the dimensions of time and space (Lei, 2014). The
development and the popularity of the internet and informative technologies breaks the
restrictions of space as well as time, which treats the payment processes of the central
positions of commercial banks (Lv, 2016). On the other hand, the fast development of internet
payment platforms also influences the income sources of commercial banks in China (Lv,
2016). These third party payment platforms in China attracted a great number of consumers,
which can reduce the profits space of commercials banks (Lv, 2016; Ye, 2014).
2.3 Research gaps
Because of the literature reviewed, it is noted that there are many researches attach great
importance to influences of banking technologies application and improvement on the
operation costs and sales volumes of banks in developed countries and many developing
countries. These banking technologies include credit card services,and e-banking services. For
example, Ciciretti,, Hasan, & Zazzara (2009), DeYoung, (2001), DeYoung, Lang, and Nolle
(2007), Goh, & Kauffman (2013), Hernando and Nieto (2007), Pigni, Ravarini., Tagliavini,
and Vitari (2002), Sullivan, (2000), Weigelt and Sarkar, (2012) research the application of e-
banking systems in banks in America and European countries and argue that e-banking
systems can increase the overall profitability of banks.
However, few of these studies focus on the banking technologies application and
improvement performances of commercial banks in China. In this case, this study researches
the relations between the application of banking technologies and performances of
commercial banks in China.
2.4 Critique of the existing literature relevant to this research
Some researches show that the application of banking technologies can have positive

19
influences on the financial performances of banks, especially commercial banks.
Nevertheless, some studies demonstrate that the usage of banking technologies can have
negative influences on the financial performances of banks. Some studies show that there is
no correlation between banking technologies and financial performances of banks. Ray and
MacMillan (2005) study the relation between innovations and the financial performances. The
research results of Ray and MacMillan (2005) show that there is no direct relation between
the application of informative technologies and the performances of consumer services. Al-
Smadi and Al-wabel (2011) study the influences of online banking services on the
performances of the Jordanian bank. The research results of Al-Smadi and Al-wabel (2011)
show that the application and improvement of online banking systems in Jordanian banks
have negative influences on performances of these banks. Their research results indicate that
most consumers still choosing traditional distribution channels is the most important
determinant of the negative connection between the application of e-banking systems and the
profitability of banks in Jordan (Al-Smadi & Al-wabel, 2011). Khrawish and Al-Sadi (2011)
who researches the influences of e-banking on the profitability of banks in Jordan argue that
there is a negative link between the banks’ profitability and the application of e-banking
systems.
2.5 Identification of hypothesis
Based on the overall literature review, the application of the credit card and e-banking
system has positive influences on the performances of banks in most developed and
developing countries. On the one hand, previous researches show that the application of credit
cards and e-banking systems can help banks to cut costs and increase profitability. On the
other hand, previous researches indicate that the application of credit cards and e-banking
systems may lead to operational risks for banks. In this case, the following four hypotheses
are detected for this research.
Hypothesis 1: There is a positive link between the application of credit cards and the
performance of commercial banks in China.
Hypothesis 2: There is a positive link between the application of credit cards and operational
risks of commercial banks in China.
Hypothesis 3: There is a positive link between the application of e-banking systems and the
performance of commercial banks in China.

20
Hypothesis 4: There is a positive link between the application of e-banking systems and
operational risks of commercial banks in China.
Chapter 3: Research methodology
The purpose of this chapter is to describe how this research is conducted and performed
through identifying researching approaches as well as why these approaches are applied. The
chapter starts with the explanation of the research method and then reasons for chosen
researching strategy. Then this chapter identifies data collection approach as well as the
analysis approaches. Next, this chapter discusses the reliability as well as the validity of this
research. At last, this chapter identifies the limitations of this research.
3.1 Research method
Johnson and Christensen (2008) who researches the education of researching methods
argue that researching methodology includes the qualitative, the quantitative as well as the
mixed researching methods. DeYoung, Lang and Nolle (2007) research how the internet
affects output and performance at community banks and apply the quantitative research
method.
This research aims to answer the questions how the credit cards, the mobile banking as
well as the internet banking influence performances of commercial banks in China.
Considering the characteristics of qualitative researches and the research questions of this
research, the qualitative researching method would be applied to help the researcher to
understand relevant descriptive information and data (Jemna, 2016). In this case, this research
attaches great importance to classifying and summarizing relevant data and information
gathered from different resources in the forms of descriptive language (Johnson &
Christensen, 2008). The quantitative researching method attaches great importance to
statistics or quantifiable data as well as seeks reasonable predictions, or facts, or statistics, or
generalized data (Jemna, 2016). This research also uses mathematics and statistics to analyze
data and information since this study researches performances of commercial banks in China
that is relevant to the analysis of relevant data. This study applies the mixed researching
method, which contains both the qualitative, and the quantitative researching methods.

21
3.2 Research design
In the situation of this study, there is little theoretical backgrounds concerning
relationships between technological banking and performances of commercial banks in China,
it is important to apply descriptive researching design on the basis of the quantitative
researching method first with the purpose of evaluating the relationships between credit cards
and e-banking and performances of commercial banks in China. Meanwhile, this research
applies quantitative data to identify and test these hypotheses based on the descriptive
findings.
Since this study focuses on what questions as well as current issues, the case study
researching strategy and the experiment strategy are suitable (Yin, 2003). Considering that the
experiment strategy focuses on situations that respondents’ behaviors could be maintained and
guided systematically, the experiment strategy cannot be applies since this study cannot
control respondents’ behaviors directly and systematically. In this case, the case study
researching strategy is used with the purpose of identifying relations between credit cards and
e banking and performances of commercial banks in China.
3.3 Data collection approaches
DeYoung, Lang and Nolle (2007) collect data from both the primary and secondary
resources. They observed the population of all American commercial banks at the year-end of
1999 from the reports of condition and income and relied on the historical data from the
Federal Deposit Insurance Corporation. Because of the research questions and the research
method, data and information relevant to advantages of credit cards and e banking, as well as
relevant the relations between credit cards and e banking and performances should be
collected. The primary data is collected through a survey of 100 employees of China
Merchants Bank and Bank of Communications Co., Ltd. Data collected from primary
resources can help the researcher to evaluate the relationships between credit cards and e
banking and performances of commercial banks in China as well as raise research hypothesis.
It is crucial to evaluate relationships between credit cards and e banking and performances of
commercial banks in China first. Then, the secondary information and data is collected
through reviewing annual reports of two well-known commercial banks in China, including
China Merchants Bank as well as the Bank of Communications Co., Ltd. In order to keep the
consistency of data collected from both the primary and secondary resources, the two

22
interviewees are banking managers from China Merchants Bank as well as the Bank of
Communications Co., Ltd. At the same time, this study conducts two interviews through the
phone. The populations of interest of the questionnaire are employees who work for the China
Merchants Bank or Bank of Communications.
3.4 Data analysis approach
Generally speaking, data analysis approaches in banking literature can be classified into
five categories, including “data envelopment analysis”, “free disposal hull”, “stochastic
frontier”, “ thick frontier”, as well as “the distribution free method” (Stoica, Mehdian, Sargu,
2015, p, 613). DeYoung, Lang and Nolle (2007) analysis their data through applying the SPSS
tool. Stoica, Mehdian and Sargu (2015) analyze data through using the data envelopment
analysis method that involves a wide range of mathematical linear programming models.
Considering the data collected from the questionnaire, this study applies the SPSS data
analysis tool that involves mathematical models. In the quantitative analysis section, this
study applied the regression statistical analysis technique to test hypothesis and identify
whether the change of one variable has a specific impact on the other variable.
The research applies the abductive analysis approach with the purpose of constructing the
overall research process and analyzing answers for the two research questions. The abductive
analyzing method can help the author to combine both the empirical inductive analysis and
the rationalist deductive analyzing (Dubois, & Gadde, 2002). This research can combine both
the rationalist deductive and the empirical inductive analysis.
3.5 Conceptual framework of this research
This study generalizes the influences of the application of credit cards and the e banking
on performances of commercial banks in China through collecting and analyzing data from
two commercial banks in China, including China Merchants Bank as well as the Bank of
Communications Co., Ltd. This study uses multiple reference resources and provides
evidences to test researching hypothesis. Meanwhile, this study explains the chain of relevant
evidences (refer to Figure 1).
Building Blocks

23
Figure 1: Conceptual framework of this research.
3.6 Limitations of this research
There are limitations in this research. In the first place, this research applies the secondary
data. In this case, the results of this research may not be accurate because secondary data and
information is inaccurate. On the one hand, the data collected from previous researches may
not be appropriate for the practical situation in the scope of China when considering that there
are little theoretical backgrounds concerning relationships between technological banking and
performances of commercial banks in China. On the other hand, the secondary data collected
from annual reports of China Merchants Bank as well as the Bank of Communications Co.,
Ltd. may not be comprehensive and accurate. In the second place, this research collects
primary data through two interviews with unstructured questions and questionnaire with
structured questions. The results of this research may not be comprehensive. However, the
participants of the interview and questionnaire are practitioners of the banking industry and
work for commercial banks in China, their viewpoints may not be comprehensive.
Chapter 4: Findings
This section presents the two case commercial banks in China, including the China
Merchants Bank as well as the Bank of Communications Co., Ltd. This chapter starts with the
overview of the two case commercial banks in China. Then this section analyses data
collected from the primary resources in the form of interview and questionnaire in order to
identify evaluate relationships between credit cards and e banking and performances of
commercial banks in China as well as raise research hypothesis. At last, this section analyses
data collected from the secondary resources in the forms of annual report in order to test the
evaluated influences of the applying of credit cards and e banking on performances of
commercial banks in China as well as test the raised research hypothesis.
Influences of applying e-banking
on the financial performances of
commercial banks in China
Influences of applying credit cards
on the financial performances of
commercial banks in China

24
4.1 Case commercial banks in China
Established in Shenzhen city in 1987, China Merchants Bank is one of the important
national commercial banks in China with sizeable business scale and competitive strength
(China Merchants Bank, 2017). The business of China Merchants Bank focuses on the
Chinese market and its distribution network mainly covers the more economically developed
areas in China, including the Yangtze river delta region (ibid, p, 6). China Merchants Bank
provides a wide range of innovative wholesale and retailing banking products and relevant
services for customers, including credit cards, the multifunctional debit card, all-in-one net,
the comprehensive online banking services platform, mobile banking, CMB life App, as well
as relevant global cash management services (ibid, p, 6). With the purpose of achieving its
organizational objectives and improving its performances, China Merchants Bank makes
efforts to promote the transformation of its business model and strives to combine its business
experiences with its banking technologies to establish a leading digitized and innovative
commercial bank in China (ibid, p, 7). In other words, the application of the banking
technologies is a significant approach for China Merchants Bank to manage its daily
operations.
Started in 1908 and reorganized in 1987, Bank of Communications is the first nationwide
state owned joint stock commercial bank in Chinese market (Bank of Communications,
2017). The development strategy of Bank of Communications is to become “the first class
listed comprehensive banking group focusing on international expansion and specializing in
wealth management” (ibid, p, 1). Its business covers company banking businesses, personal
banking products and services, treasury management businesses as well as other businesses
(ibid, p, 1). One of the core competitiveness of Bank of Communications is its comprehensive
trinity network service channel which connects its featured physical outlets, its e-banking
system, as well as its relationship managers (ibid, p, 19). Bank of Communications makes full
use of innovative banking technologies, especially the e-banking system to deliver a one stop
and comprehensive banking and financial services for customers (ibid, p, 19). In order to
achieve its organizational purpose and increase business revenues, Bank of Communications
attaches great importance to the application of advanced information technologies as well as
the construction of its infrastructures (ibid, p, 20). The application and the development of
information infrastructures can promote its business expansion and improve its organizational
performance.

25
4.2 Hypothesis analysis
The four hypothesis are evaluated through data collected from primary resources in both
the form of interviews and questionnaires.
4.2.1 Respondents analysis
This data was collected through questionnaires that were distributed to employees and
managers of commercial banks in China. The sampling of this research consisted of 102
participants who work for commercial banks in China and were willingly to participate in this
questionnaire. However, the sampling size reduced to 100 when removing incomplete
surveys. The response rate of this research was 100 per cent, which is acceptable. According
to Nulty (2008), it is appropriate for a descriptive research have a response rate that is above
50 per cent. The years of service in commercial banks in China could be analyzed as below.
The application of credit cards can improve the overall performance of our bank
Frequency Percent Valid Percent Cumulative Percent
Valid
Strongly disagee 17 17.0 17.0 17.0
Disagree 24 24.0 24.0 41.0
Neutral 20 20.0 20.0 61.0
Agree 33 33.0 33.0 94.0
Strongly Agree 6 6.0 6.0 100.0
Total 100 100.0 100.0
Table 1: Application of credit in commercial banks in China.
Based on the quantitative data collected, 41 per cent (n=39) of valid respondents were
agreed with the 39 percent (n=39) total sampling of 100 valid respondents were disagreed.
4.2.2 Evaluation of hypothesis
Hypothesis 1 - There is a positive link between the application of credit cards and the
performance of commercial banks in China.

26
Based on two interviews collected from a business manager of China Merchants Bank in
Ningbo and a business manager of Bank of Communications in Ningbo, the application of the
credit cards can promote performances of the two commercial banks. The business manager
of China Merchants Bank in Ningbo emphasizes on the significant positive link between the
application of credit cards and the performance of commercial banks in urban areas.
The application of credit cards can help commercial banks to cut operational costs and
enhance financial earnings. Credit cards holders in China do not need to withdraw money
through physical banks or ATMs. In this case, commercial banks can save labor costs since
less employees are needed to provide relevant withdraw services. Meanwhile, commercial
banks can increase revenues from the application of credit cards through identifying their
customer segments effectively to provide customized banking service, collecting fees and
interests, as well as cooperating with business customer in the long term. For example, China
Merchants Bank collects lower service charges for merchants in retaining industry and higher
service changes in hotel and entertainment industries to maintain long-term cooperation with
these business clients. With more client base and banking transactions, commercial banks in
China can increase their revenue. With higher revenues and lower operational costs, the
overall performances of commercial banks in China can be improved. Therefore, the first
hypothesis is supported and there is a significant positive link between the application of
credit cards and the performance of commercial banks in China.
Based on data collected from the questionnaire, 41 per cent of these respondents consider
that the application of credit cards can improve the overall performance of their bank. While
639 per cent of them believe that, their commercial banks have invested heavily in credit
cards. A minority of them (20 per cent) regard that most of their business clients use credit
cards services while 20 per cent of them consider that their retailing clients use credit cards
services. A majority of them (41 per cent) believe that urban customers tend to use credit
cards services more frequently. Meanwhile, most of these respondents consider that the
application of credit card is a major revenue stream for commercial banks in China (61 per
cent). According to the data collected, most of them believe that credit card can increase
retailing clients (51 per cent), increase urban customers (51 per cent), increase bank income
(51 per cent), major revenue stream (49 per cent), have minimal operation and maintenance
costs (49 per cent). However, less than half of these respondents of human resource cost (44

27
per cent), reducing printing cost (42 per cent) consider that the application of credit cards can
help our bank to reduce human resources costs.
The mean score for the application of credit cards can improve the overall performance of
bank indicates that there was more agreement than disagreement. In other words, there is a
significantly positive link between the application of credit cards and the performance of
commercial banks in China. It is noted that living in urban area has a significantly positive
link between the usages of credit cards. Meanwhile, there is significantly positive links between
the application of credit cards and the increase of bank incomes, the increase of loans, the cut of
operational costs, as well as the reduction of printing costs.
Statistics
The application
of credit cards
can improve the
overall
performance of
our bank
Our bank has
invested heavily
in credit cards
Most of our
business clients
use credit cards
services
Most of our
retailing clients
use credit cards
services
Urban
customers tend
to use credit
cards services
more frequently
N Valid 100 100 100 100 100
Missing 0 0 0 0 0
Statistics
Credit cards can
help our bank to
increase bank
incomes
The application
of credit cards
system can
increase loans
for customers
Credit card is a
major revenue
stream for our
bank.
Credit cards can
help our bank to
reduce
operational
costs.
The application
of credit cards
can help our
bank to reduce
human resources
costs.
N Valid 100 100 100 100 100
Missing 0 0 0 0 0
Statistics
The application of credit cards can
help our bank to reduce printing
costs.
The application of credit cards has
minimal operation and maintenance
costs.
N Valid 100 100
Missing 0 0
Table 1: The table of different factors of credit cards and their performance of commercial

28
banks in China.
We collected 102 responses of the questionnaire and taken into account of 100 valid
responses. As 100 is an exact figure in data mining, we take into account of these data. There
is no missing value in case of all 12 factors of the data.
Frequency Tables:-
The application of credit cards can improve the overall performance of our bank
Frequency Percent Valid Percent Cumulative Percent
Valid
Strongly disagee 17 17.0 17.0 17.0
Disagree 24 24.0 24.0 41.0
Neutral 20 20.0 20.0 61.0
Agree 33 33.0 33.0 94.0
Strongly Agree 6 6.0 6.0 100.0
Total 100 100.0 100.0
Table 2: The application of credit cards and the performance of our banks in China.
The table indicates the frequency and percentage distribution of application of credit
cards. It is similar agreed (39%) (strongly agree = 6% and agree = 33%) with disagreed (41%)
(strongly disagree = 17% and disagree = 24%). The neutral choice is for only 20% of people.
Therefore, we observe the mixed reaction of validity to the fact.
Our bank has invested heavily in credit cards
Frequency Percent Valid Percent Cumulative Percent
Valid
Strongly disagee 6 6.0 6.0 6.0
Disagree 15 15.0 15.0 21.0
Neutral 36 36.0 36.0 57.0
Agree 34 34.0 34.0 91.0
Strongly Agree 9 9.0 9.0 100.0
Total 100 100.0 100.0
Table 3: The application of heavily invested credit cards and the performance of our banks in
China.
The table indicates that the application of heavily invested credit cards can improve

29
the overall performance of our bank is less in case of agreed (21%) (strongly agree = 6% and
agree = 15%) than disagreed (42%) (strongly disagree = 9% and disagree = 34%). The neutral
response is for 36% of people. Therefore, disagreement of more observed that the agreement.
Hypothesis 1 - There is a positive link between the application of credit cards and
performance of commercial banks in China.
The regression analysis was employed in order to empirically identify whether the application
of credit cards was a statistically important prominent determinant of performance of
commercial banks in China. The equation took from Y1=β0 +β1* X1 + μ, where Y 1 refers to
performance of commercial banks in China, β0 refers to the constant or the intercept, X1
refers to the application of credit cards,β1 refers to the change of coefficient for the
application of credit cards, while μ refers to the error term. The regression result in table 3
shows the goodness of fit for the regression between the application of credit cards and the
performance of commercial banks in China is satisfactory. As the R2 of 0.851, it indicates that
85.1 per cent of the variations in the performance of the financial performance of commercial
banks in China could be explained by the variations in the application of credit cards when
other factors constant. In other words, the the application of credit cards can improve the
performance of commercial banks in China.
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .923a .851 .830 .28992
Table 3: The regressions model fitness for the application of credit cards and the performance
of commercial banks in China.
The linear regression model between application of credit cards and performance of
commercial banks in china indicates a high linear relationship between the two factors with
R-square value = 0.851. The correlation coefficient is 0.923. It shows a strong positive
correlation of these two factors. Therefore, there exists a high linear relationship between
these two factors. The adjusted R-square value is = 0.83. The value of adjusted R-square
measures the goodness of fit. Therefore, the goodness of fit is quite high in this case. The

30
fitting of linear relationship would be good enough.
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 41.777 12 3.481 41.420 .000b
Residual 7.313 87 .084
Total 49.090 99
Table 4: The ANOVA model for the application of credit cards and the performance of
commercial banks in China.
On the basis of the ANOVA statistics (refer to Table 3), there is a significant positive
relation between the application of credit cards and the performance of commercial banks in
China. This was supported by the F statistic of 41.420 and the p value of 0.000. The reported
probability (0.000) was less than the conventional probability of 0.05 (5 per cent) significance
level. Therefore, we reject the null hypothesis of significant association between application
of credit cards and performance of commercial banks in china.
According to the above analysis, hypothesis 1 is not supported that and there is no association
between the application of credit cards and the performance of commercial banks in China.
Hypothesis 2 - There is a positive link between the application of credit cards and
operational risks of commercial banks in China.
Based on the two interviewees who are business managers of two large commercial banks in
China, there are potential risks in the process of applying credit cards to improve their
organizational performances. As stated by a business manager of China Merchants Bank,
there are credit risks, fraud risks, and operational risks. Thought there are potential risks,
China Merchants Bank conducts effective “Credit risk management system” to reduce these
types of risks in issuing and the management of credit cards. Credit risks are risks arising
from the failures of borrowers or counter-parties to perform their commitments or obligations
under agreed terms. In this case, if credit card holders cannot repay their loans in the long

31
term, there will be credit risks for commercial banks. The credit risks of China Merchants
Bank mainly stem from credit businesses, investment businesses, financing businesses, as
well as other businesses (China Merchants Bank, 2017). In order to manage the credit risks
effectively, China Merchants Bank (2017) formulate its credit risk management framework
that has independent functions, balanced and checked risks, as well as three dedicated defense
lines in order to identify, analysis, evaluate, monitor and manage credit risks. Bank of
Communications in China attaches great importance to manage credit risks through the
establishment and improvement of risk management tools, econometric models, as well as
information systems to identify potential risks comprehensively (Bank of Communications,
2017). There are potential risks for commercial banks to apply credit cards to improve their
organizational performances. However, these banks establish and use effective risk
management tools and framework to minimize the negative influence of credit cards on their
organizational operations. Therefore, the application of credit cards cannot lead to operational
risks for commercial banks in China.
According to data collected from the questionnaire, a minority of these participants (32
per cent) consider that the application of credit cards can lead to operational risks for their
banks. However, a majority of these participants (43 per cent) regard that the application of
credit cards can lead to credit risks for their banks. Meanwhile, 57 per cent of these
participants consider that the competition in credit cards is fierce in China.
In this case, hypothesis 2 is not supported that and there is not a positive link between the
application of credit cards and operational risks for commercial banks in China.

32
Figure 1: The application of credit cards and operational risks of commercial banks in China.
The regression analysis was used in order to empirically identify whether the application
of credit cards was a statistically important prominent determinant of operational risks for
commercial banks in China. The equation took from Y2=β0 +β2* X1 + μ, where Y2
represents operational risks for commercial banks in China, β0 represents the constant or the
intercept, X1 represents the application of credit cards,β2 represents the change of coefficient
for the application of credit cards, while μ represents the error term. The regression result in
table 6 indicate that the goodness of fit for the regression between the application of credit
cards and operational risks for commercial banks in China is not satisfactory. As the R2 of
0.918, it indicates that 91.8 per cent of the variations in the performance of the operational
risks of commercial banks in China could be explained by the variations in the application of
credit cards when other factors constant. In other words, the application of credit cards can
result in operational risks for commercial banks in China.

33
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .918a .843 .838 .43305
Table 6: The regressions model fitness for the application of credit cards and operational risks
of commercial banks in China.
The linear regression model between application of credit cards and operational risk of
commercial banks in china indicates a high linear relationship between the two factors with
R-square value = 0.843. The correlation coefficient is 0.918. It shows a strong positive
correlation of these two factors. Therefore, there exists a high linear relationship between
these two factors. The adjusted R-square value is = 0.838. The value of adjusted R-square
measures the goodness of fit. Therefore, the goodness of fit is quite high in this case. The
fitting of linear relationship would be good enough.
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 96.747 3 32.249 171.967 .000b
Residual 18.003 96 .188
Total 114.750 99
Table 8: The ANOVA model for the application of credit cards and the operational risk of
commercial banks in China.
On the basis of the ANOVA statistics (refer to Table 8), there is a significant positive
relation between the application of credit cards and the operational risk of commercial banks
in China. This was supported by the F statistic of 171.967 and the p value of 0.000. The
reported probability (0.000) was less than the conventional probability of 0.05 (5 per cent)
significance level. Therefore, we reject the null hypothesis of significant association between
application of credit cards and operational risk of commercial banks in china.
Hypothesis 2 is not supported that and there is not a positive link between the application
of credit cards and operational risks for commercial banks in China.

34
Hypothesis 3 - There is a positive link between the application of e-banking systems and
the performance of commercial banks in China.
According to the two interviews collected from a business manager of China Merchants
Bank and a business manager of Bank of Communications, the application of e-banking
systems can enhance the performance of commercial banks in China significantly. The
business manager of China Merchants Bank points out that customers in urban areas are more
likely to use e-banking products and service in their daily lives but people who live in rural
areas may not use e banking because of the underdeveloped networks.
From both the two-business manager of commercial banks, the application of e-banking
systems can help banks to cut costs as well as enhance revenues. After applying e-banking
systems, commercial banks can save costs through hiring fewer employees to serve customers
in physical banking branches as well as printing less paper bills. At the same time, the
application of e-banking systems can speed up the mobility capital. With faster capital flows,
the idle funds can be used effectively. Therefore, the application of e-banking systems can
facilitate the performance of commercial banks in China. In other words, hypothesis 3 is not
supported and the application of e-banking systems has positive performance of commercial
banks in China.
Based on the questionnaire, 66 per cent of these respondents consider that the application
of e-banking systems can improve the overall performance of their bank. While 38 per cent of
them believe that, their commercial banks have invested heavily in e-banking systems. A
majority of them (66 per cent) regard that their business clients use e-banking products and
services while 38 per cent of them consider that their retailing clients use e-banking products
and services. A majority of them (66 per cent) believe that urban customers tend to use e-
banking products and services much more frequently. Meanwhile, most of these respondents
consider that the application of e-banking systems is a major revenue stream for commercial
banks in China. Based on the data collected, most of them believe that e-banking systems can
increase credit card in bank incomes (38 per cent), increase credit risk of the bank (32 per
cent) and reduced credit costs in fierce (32 per cent). A majority of these respondents (95.16
per cent) consider that the application of e-banking systems can help our bank to reduce labor

35
costs.
The application of e-banking system can improve the overall performance of commercial
banks in China. In this case, hypothesis 3 is not supported and there is not significant positive
relation between the application of e-banking systems and the performance of commercial
banks in China.
The application of e-banking system can lead to operational risks for our bank
Frequency Percent Valid Percent Cumulative Percent
Valid
Strongly disagee 15 15.0 15.0 15.0
Disagree 17 17.0 17.0 32.0
Neutral 30 30.0 30.0 62.0
Agree 26 26.0 26.0 88.0
Strongly Agree 12 12.0 12.0 100.0
Total 100 100.0 100.0
Figure 8: The table of application of e-banking system with operational risks for our bank
The regression analysis was applied in order to empirically identify and evaluate whether
the application of e-banking systems was a statistically significant prominent determinant of
performance of commercial banks in China. The equation was Y3=β0 +β3* X2 + μ, where Y
3 represents for performance of commercial banks in China, β0 represents for the constant or
the intercept, X2 represents for the application of e-banking systems,β3 represents for the
change of coefficient for the application of e-banking systems, while μ represents for the error
term. The regression result in table 8 shows the goodness of fit for the regression between the
application of e-banking systems and the performance of commercial banks in China is
satisfactory. As the R2 of 0.810, it indicates that 81 per cent of the variations in the
performance of the financial performance of commercial banks in China could be explained
by the variations in the application of e-banking systems when other factors were not
changed. In other words, the the application of e-banking systems can improve the
performance of commercial banks in China. Therefore, hypothesis 3 is supported and there is
a significant positive relation between the application of e-banking systems and the
performance of commercial banks in China, considering the R2 of 0.810.
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate

36
1 .900a .810 .784 .30859
Table 9: The regressions model fitness for the application of e-banking systems and the
performance of commercial banks in China.
The linear regression model between application of e-banking system and performance of
commercial banks in china indicates a high linear relationship between the two factors with
R-square value = 0.810. The correlation coefficient is 0.900. It shows a strong positive
correlation of these two factors. Therefore, there exists a high linear relationship between
these two factors. The adjusted R-square value is = 0.784. The value of adjusted R-square
measures the goodness of fit. Therefore, the goodness of fit is high in this case. The fitting of
linear relationship would be good enough.
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 35.263 12 2.939 30.858 .000b
Residual 8.285 87 .095
Total 43.548 99
Table 10: The ANOVA result for the application of e-banking systems and the performance of
commercial banks in China.
Based on the ANOVA statistics (refer to Table 10), there is a significant positive relation
between the application of e-banking and the performance of commercial banks in China.
This is supported by the F statistic 30.858 and the p value of 0.000. The reported probability
(0.000) was less than the conventional probability of 0.05 (5 per cent) significance level.
Therefore, we reject the null hypothesis of significant association between application of e-
banking and performance of commercial banks in china.
Based on the above analysis, hypothesis 3 is not supported that and there is a significant
positive relation between the application of e-banking systems and the performance of
commercial banks in China. In other words, the application of e-banking systems could not
improve the performance of commercial banks in China significant through reducing costs
and increase revenues.

37
Hypothesis 4 -There is a positive link between the application of e-banking systems and
operational risks of commercial banks in China.
According the two interviews, there are potential risks in the process of applying e-
banking systems to improve their organizational performances and the major risk is the
leakage of customers’ personal information. However, both of the two banks attach great
importance to the management of insider information to avoid the leakage of customers’
personal information as well as the improvement of their security of their e-banking systems
(Bank of Communications, 2017; China Merchants Bank, 2017). In this case, safety is the
competitive advantage for commercial banks when comparing with emerging online payment
platforms in China. Therefore, hypothesis 4 is not supported that and there is not a relation
between the application of e-banking systems and operational risks for commercial banks in
China.
On the basis of the data collected from the questionnaire, less than one tenth of these
participants (38 per cent) consider that the application of e-banking systems can lead to
operational risks for their banks. Less than a half of these participants (32 per cent) regard that
customers are afraid of using e-banking services because of the fear of hacking of their
accounts by web hackers. However, 68 per cent of these participants consider that the
competition in e-banking products and services is fierce in China.
Therefore, hypothesis 4 is not supported that and there is no link between the application
of e-banking systems and operational risks for commercial banks in China.
The application of e-banking system can improve the overall performance of our bank
Frequency Percent Valid Percent Cumulative Percent
Valid
Strongly disagee 11 11.0 11.0 11.0
Disagree 20 20.0 20.0 31.0
Neutral 14 14.0 14.0 45.0
Agree 36 36.0 36.0 81.0
Strongly Agree 19 19.0 19.0 100.0
Total 100 100.0 100.0
Table 11: The application of e-banking systems and overall performance for commercial

38
banks in China.
The regression analysis was applied in this study to empirically identify whether the
application of e-banking systems was a statistically prominent determinant of operational
risks for commercial banks in China. The equation was: Y4=β0 +β4* X2 + μ, where Y4
represents for operational risks for commercial banks in China, β0 represents for the constant
or the intercept, X2 represents for the application of credit cards,β4 represents for the change
of coefficient for the application of e-banking systems, while μ represents the error term. The
regression result in table 12 indicates that the goodness of fit for the regression between the
application of e-banking systems and operational risks for commercial banks in China is not
satisfactory. As the R2 of 0.848, it indicates that 84.8 per cent of the variations in the
performance of the operational risks of commercial banks in China could be explained by the
variations in the application of e-banking systems when other factors constant. Therefore, the
the application of e-banking systems can not result in operational risks for commercial banks
in China.
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .921a .848 .843 .42930
Table 12: The regressions model fitness for the application of e-banking system and
operational risks for commercial banks in China.
The linear regression model between operational risk of commercial banks and e-banking
system of commercial banks in china indicates a high linear relationship between the two
factors with R-square value = 0.848. The correlation coefficient is 0.921. It shows a strong
positive correlation of these two factors. Therefore, there exists a high linear relationship
between these two factors. The adjusted R-square value is = 0.843. The value of adjusted R-
square measures the goodness of fit. Therefore, the goodness of fit is high in this case. The
fitting of linear relationship would be good enough.
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 98.417 3 32.806 178.005 .000b
Residual 17.693 96 .184

39
Total 116.110 99
Table 13: The ANOVA result for the application of e-paying system and operational risks for
commercial banks in China.
Based on the ANOVA statistics (refer to Table 13), there is a significant positive
relation between the application of e-banking and operational risk of commercial banks in
China. This is supported by the F statistic 178.005 and the p value of 0.000. The reported
probability (0.000) was less than the conventional probability of 0.05 (5 per cent) significance
level. Therefore, we reject the null hypothesis of significant association between application
of e-banking and operational risk of commercial banks in china.
Based on the above analysis, hypothesis 4 is not supported that and there is a significant
positive relation between the application of e-banking systems and the operational risk of
commercial banks in China. In other words, the application of e-banking systems could not
improve the operational risk of commercial banks in China significant through reducing costs
and increase revenues.

40
Chapter 5: Discussion
Based on the two interviews and the questionnaire, the application of credit cards can
result in credit risks for commercial banks. Meanwhile, commercial banks in China have to
face fierce competition in areas of credit cards and e-banking products and services. What is
more, most of existing clients of commercial banks in China have not adapted to credit cards
and e-banking products and services and rural customers are considered as customer segment
that tend to not use credit cards and e-banking products and services in China. Considering
these findings, this study discusses these issues further and provides recommendations to
improve the performances of commercial banks in China.
5.1 Enhance commercial banks’ abilities of risk prevention plus risk control
According to both the two interviews and the questionnaire, the application of credit cards and
e-banking systems cannot lead to operational risks for commercial banks, but the application
of credit cards can result in credit risks for commercial banks. Since 1994, the credit cards
issued by commercial banks in China have entered the fast development and innovation phase
because of the change of financial environment and policy environment in China (Yin, Song,
& Tang, 2014). Though the fast developments of the credit cards bring revenues for
commercial banks, it also leads to operational risks, credit risks and fraud risks (Li, 2011).
From the perspective of commercial banks in China, it is difficult to completely acquire and
understand the consumer's real financial situations. From the perspective of consumers, the
development of online credit services provided by commercial banks can provide convenience
for them, but they may have inappropriate operations because the limitation of knowledge and
familiarity with credit cards risks. These inappropriate operations may result in operational
risks for commercial banks. Because of the dispersion and complexity of credit businesses as
well as the imperfect credit systems in China, the application of credit cards may lead to
financial losses for commercial banks when credit card holders can not repay their loans (Yin,
Song, & Tang, 2014). Commercial banks also face fraud risks which is caused by the
information asymmetry between borrowers and banks (Li, 2011). There are several issues in
the credit card risk management of commercial Banks in China, including the deficiency of
legal systems of credit card, the imperfection of personal credit information system in China
(Li, 2011; Yin, Song, & Tang, 2014).
In order to use the credit card and the e-banking systems effectively, the following

41
recommendations for Chinese commercial banks are given. In the first place, it is crucial for
commercial banks in China to enhance their abilities of risk prevention plus risk control
through improving their credit card information database as well as the information exchange
systems to identify credit risks and ensure the credit limits of credit card holders effectively
(Li, 2011; Yin, Song, & Tang, 2014). For example, commercial banks can cooperate with
other financing institutions in China to perfect the detail of customers’ credit information,
including both business and individual client. In the second place, it is vital for the
government to enforce relevant law strictly to reduce and eliminate credit card frauds under
Chinese criminal law (Li, 2011; Yin, Song, & Tang, 2014). In the third place, it is crucial to
apply effective rewards for customers who have great credit as well as punishment measures
to prevent credit risks for commercial banks. For example, publicizing the information of
customers who can not perform their repayment obligations under contracts.
5.2 Enhance innovation ability
On the basis of the data analysis, 98.39 per cent of these participants consider that the
competition in credit cards and the e-banking products and services sectors is fierce in China.
There are many online payment platforms in China. As stated by the two interviewees, these
online payment platforms provide more favorable terms and more types of e-banking products
and services, which threaten the financial performance of commercial banks in China. For
example, the net leading products and services can affect the spread incomes of commercial
banks since these networking lending products and services provided by third party online
payment platforms in China have more extensive coverage (Lv, 2016). In this case, the
effective competition with commercial banks in the areas of individual payment services,
small and micro businesses lending. Meanwhile, with the further innovation and application
of these network payment products and services, the profits of commercial banks in China
may decline with less payment transactions and less customers (Lv, 2016).
In order to create and maintain competitive advantages of commercial banks in China, Lv
(2016) argues that it is crucial for commercial banks in China to adhere to the market oriented
and customer centered strategy in the process of applying and promoting their credit cards and
e-banking products and services. On the one hand, it is vital for commercial banks in China to
integrate their existing varieties of credit cards and e-banking products and services, their plan
products, as well as eliminate products and services with low profits and high cost (Lv, 2016).

42
In this case, commercial banks in China can assign their limited available resources and
ensure their product structures are design effectively and reasonably. On the other hand, it is
crucial for commercial banks in China to increase their intensities of product and development
of new products in areas of credit cards and e-banking products and services, especially
financial products (Qi, 2014). Lv (2016) points out that it is significant for commercial banks
in China to research and develop innovative products and services which are suitable for
different demands of customers in the market. It is necessary for commercial banks in China
to provide more innovative, comprehensive as well as personalized services in the market to
gain competitive advantages (Qi, 2014).
5.3 Value the potential of both existing clients and rural customers
According to the data collected and analyzed, 36 per cent of these participants consider that
their business clients use credit cards services while 44 per cent of them consider that their
retailing clients use credit cards services. On the contrary, 70 per cent of them regard that
their business clients use e-banking products and services while 85.48 per cent of them
consider that their retailing clients use e-banking products and services. Considering that there
is a significant positive link between the application of credit cards and e-banking systems
and the performance of commercial banks in China, it is crucial to promote their credit cards
and e-banking systems products and services. With low level of client penetration about their
credit cards and e-banking systems, commercial banks in China is recommended to promote
and communicate their advantages in credit cards and e-banking systems with existing
business clients, including both business and retail clients. For example, commercial banks in
China can actively adjust their marketing concepts to enrich their marketing methods and
communicate their advantages to customers with the purpose of facilitating their current
clients to adopt their new products (Lv, 2016). If more existing clients can use the innovative
credit cards and e-banking products and services, commercial banks in China can enhance
their organizational performance future through reducing operational costs and increasing
revenues.
Besides the huge potential of existing clients, it is significant for commercial banks in China
to value and explore the rural market in China. According to both the interviews and the
questionnaire, a majority of these participants (88 per cent) believe that urban customers tend
to use credit cards services more frequently and

43
85.48 per cent of them consider that urban customers tend to use e-banking products and
services much more frequently. According to China Internet Network Information Center, the
number of Chinese rural netizen reached 201 million by the end of 2016, which accounted for
27.4 per cent of the national total (CNNIC, 2017). With the fast development of the internet
and the e-commerce in rural areas in China, the demands for credit cards and e-banking
products and services will increase (CNNIC, 2017).
Chapter 6: Conclusion
With the fast development of the technologies, a great number of financial institutions have
applied financial innovations in the process of designing and developing innovative product
offerings as well as expanding their range of services in order to improve performances. If the

44
banking technologies are implemented adequately, China has a potential to grow its banking
industry. In this case, it is significant to research the relations between the application of
banking technologies and performances of commercial banks in China. This study researched
the relations between the application of banking technologies and performances of
commercial banks in China through two aspects, the application of credit cards as well as the
application of e-banking systems.
This study applies the mixed researching method which contains both the qualitative and the
quantitative researching methods. The case study researching strategy is applied through
collecting information and data from both the primary resource and the secondary sources.
The case study focuses on two important commercial banks in China, including China
Merchants Bank as well as the Bank of Communications. The secondary information and data
is collected through reviewing annual reports of the two commercial banks while the primary
data is gathered through questionnaire and two interviews and This study applies the
abductive method to analysis data collected. The SPSS data analysis tool is applied to
evaluate four hypothesis.
6.1 Key findings
Hypothesis 1 is not supported and there is not significant positive link between the application
of credit cards and the performance of commercial banks in China. Hypothesis 2 is not
supported that and there is not a positive link between the application of credit cards and
operational risks for commercial banks in China. Hypothesis 3 is not supported that and there
is not significant positive relation between the application of e-banking systems and the
performance of commercial banks in China. Hypothesis 4 is not supported that and there is no
relation between the application of credit cards and operational risks for commercial banks in
China. In other words, the application of credit cards and e-banking systems in China can
enhance the organizational performances of commercial banks in China as well as not lead to
operational risks. The application of credit cards can result in credit risks for commercial
banks. Commercial banks in China have to face fierce competition in areas of credit cards and
e-banking products and services. Most of existing clients of commercial banks in China have
not adopted to credit cards and e-banking products and services. Rural customers are
considered as customer segment who tend to not use credit cards and e-banking products and
services in China.

45
6.2 Recommendations
Considering that the application of credit cards and e-banking systems in China can
enhance the organizational performances of commercial banks in China, it is vital to improve
the application of these banking technologies. Commercial banks in China is recommended to
enhance commercial banks’ abilities of risk prevention plus risk control, facilitate innovation
ability, as well as value the potential of both existing clients and rural customers.
6.3 Limitations
In the first place, this study used secondary data, which is not accurate. In the second
place, this study applied the case study research method and focused on China Merchants
Bank as well as the Bank of Communications. In this case, the research result is not
comprehensive.
References
Akers D., Golter J., Lamm B., & Solt M., (2005), Overview of Recent Developments in the
Credit Card Industry, FDIC Banking Review, 17(3), 23-35.
Al-Samadi, M. O., & Al-Wabal, S. A. (2011). The impact of e-banking on the performance of
Jordanian banks. Journal of Internet Banking & Commerce, 16(2), 1-10.

46
Angko, 2013, Innovation in Bank Payment Systems and Related Services among
Selected Commercial Bank Branches in Wa Municipality, Information and Knowledge
Management, 3(9), 40-55.
Atay, E., & Apak, S. (2013). An Overview of GDP and Internet Banking Relations in the
European Union versus China. Procedia - Social and Behavioral Sciences, 99(6), 36-45.
Bai, J.Z. (2014), Study on the Financial Development of the Internet and Its Impact on
China’s Commercial Banks. Chengdu: The Southwestern University of Finance and
Economics.
Bank of Communications, (2017), Annual Report 2016, Available from
http://www.bankcomm.com/BankCommSite/shtml/zonghang/en/
3182/3195/3196/82769.shtml?channelId=3182 [assessed 4 August 2017]
Berger, A.N. (2003), The economic effects of technological progress: Evidence from the
banking industry. Journal of Money, Credit, and Banking, 35(2), 141-176.
China Merchants Bank, (2017), China Merchants Bank Annual Report 2016, We are here Just
for you, Available from http://quote.morningstar.com/stock-filing/Annual-Report/2016/12/31/
t.aspx?t=:CIHKY&ft=&d=d10bc107fb9e1ecdb3508236f357a091 [assessed 8 August 2017]
Ciciretti, R., Hasan I., & Zazzara C., (2009). Do Internet Activities Add Value? Evidence from
the traditional banks. Journal of Finance Services Research, 35, 81-98.
Creswell, J.W., (2003), Research design: qualitative, quantitative, and mixed method
approaches, Thousand Oaks: Sage Publications.
DeYoung, R. (2001). The financial performance of pure play Internet banks. Federal Reserve
Bank of Chicago, Economic Perspectives, 1, 60-75.
DeYoung, R., Lang, W. W. & Nolle, D.L., (2007). How the Internet affects Output and

47
Performance at Community Banks, Journal of Banking & Finance, 31,1033–1060.
Dubois A., Gadde L.A. 2002. Systematic combining: an abductive approach to case research,
journal of Business Research. 55(7), 553-560.
Furst, K., Lang, W. W., & Nolle, D. E. (2002). Internet Banking. Journal of Financial
Services Research, 22, 95-117.
Goh, K. H. & Kauffman, R. J.. (2013), Firm Strategy and the Internet in U.S. Commercial
Banking. Journal of Management Information Systems. 30(2), 9-40.
Hernando, I., & Nieto, M. J., (2007). Is the Internet Delivery Channel Changing Banks’
Performance? The Case of Spanish Banks. Journal of Banking and Finance, 31(4), 1083‐
1099.
Hosein, S. S. M. (2013). Consideration the effect of e-banking on bank profitability; Case
study selected Asian countries. Journal of Economics & Sustainable Development, 4(11),112-
117.
Hua, G. (2009). An experimental investigation of online banking adoption in China, Journal
of Internet Banking and Commerce, 14(1),, 1-12.
Jemna L. M., (2016),Qualitative and Mixed Research Methods in Economics: the Added
Value When Using Qualitative Research Methods, Journal of Public Administration, Finance
and Law, 9, 154-167.
Jin, J., Yu, Z., & Mi, C. (2012) Commercial bank credit risk management based on grey
incidence analysis, Grey Systems: Theory and Application, 2(3),385-394,
Johnson, B., & Christensen, L. (2008). Educational research: Quantitative, qualitative, and
mixed approaches (p. 34). Thousand Oaks, CA: Sage Publications.
Kalathil S., (2017), Beyond the Great Firewall: How China Became a Global Information
Power, Available from https://www.linkedin.com/pulse/beyond-great-firewall-how-china-

48
became-global-power-shanthi-kalathil [assessed 15 July 2017]
Kathuo S., Rotich G., & Anyango W., (2015), Effect of mobile banking on the financial
performance of banking institutions in Kenya, The Strategic Journal of Business & Change
Management, 2(98), 1440-1457.
Khrawish, H. A., & Al-Sadi, N. M. (2011). The impact of e-banking on bank profitability:
Evidence from Jordan. Middle Eastern Finance & Economics, 13, 142-158.
Kurnia S., Peng F., & Liu Y. P. (2010), Understanding the Adoption of Electronic Banking in
China, Proceedings of the 43rd Hawaii International Conference on System Sciences, pp, 1-
10.
Laforet, S. & X. Li, (2005), Consumers' attitudes towards online and mobile banking in
China. International Journal of Bank Marketing, 23(5), 362-380.
Leckson L., G. T. Y. Osei, K. A. & Harvey, S. K. (2011), Investments in Information
Technology (IT) and Bank Business Performance in Ghana, International Journal of
Economics and Finance, 3(2), 133-142.
Lei, H.G. (2014), Research on the Development of Intermediate Business of Commercial
Banks in the Process of Interest Rate Liberalization. Chengdu: The Southwestern University
of Finance and Economics.
Li L., (2011), Analysis of China’s Credit Card Risk Management and Preventive Measures
Based on Game Theory. Economic Research Guide ,2(4),418-424.
Li, S., Chao, X. Hui, L., & Zhou, Z. F. (2014), Research on Simulation of Credit Risk of
Credit Card Based on Multi-Agent, Information Technology and Quantitative Management,
31, 517-522.
Liu, M. (2011). Credit card fraud under chinese criminal law. Frontiers of Law in China, 6(3),
369-386

49
Lv M., M., (2016), Discussion on the Trend of China’ Commercial Banks Management:
Based on the Influence of Financial Market Development, Modern Economy, 7, 833-840.
Malhotra, P., & Singh, B. (2009). The impact of Internet banking on bank performance and
risk: The Indian experience. Eurasian Journal of Business & Economics, 2(4), 43-62.
Ma, Z. (2012). Assessing serviceability and reliability to affect customer satisfaction of
internet banking. Journal of Software, 7(7),1601-1608
Ma, Z., & Zhao, J. (2012). Evidence on e-banking customer satisfaction in the China
commercial bank sector. Journal of Software, 7(4), 927-933.
Matthew, T. L. (2009). Do credit card redemption reward programs work in china? an
empirical study. The Journal of Consumer Marketing, 26(6),403-414.
Nulty, D. D. (2008). The adequacy of response rates to online and paper surveys: What can be
done? Assessment and Evaluation in Higher Education, 33(3),301-314.
Ongori, H. & Migiro, S.O., (2010), Information and Communication technology adoption: a
literature review, Journal of Chinese Entrepreneurship, 2(1), 93-104.
Peng, H. (2012). 2011 Blue book of China’s Credit Card Industry, Special Report. China:
China Financial Publishing House.
Pigni, F., Ravarini, A., Tagliavini, M., & Vitari, C. (2002). Bank strategies and the Internet:
An interpretation of the banking industry on the Italian retail market. Journal of Information
Technology Case & Application Research, 4(3), 8-37.
Qi, H.L. (2014) Study on the Impact of Financial Disintermediation on the Business Model of
Commercial Banks in China. Beijing: Capital University of Economics and Business.
Safeena, R., Date, H., Kammani, A., & Hundewale, N., (2012). Technology adoption and
Indian consumers: study on mobile banking. International Journal of Computer Theory and

50
Engineering, 4(6),1020–1024.
Shaikh, A.A., (2013). Mobile banking adoption issues in Pakistan and challenges ahead.
Journal of the Institute of Bankers Pakistan, 80(3), 12-15.
Sharpe, D. L., Yao, R., & Liao, L. (2012). Correlates of credit card adoption in urban china.
Journal of Family and Economic Issues, 33(2),156-166.
Sok-Gee, C. (2011), "Technical Efficiency of Commercial Banks in China: Decomposition
into Pure Technical and Scale Efficiency", International Journal of China Studies, 2(1), 27-
38.
Stoica O., Mehdian S., & Sargu A., (2015), The impact of internet banking on the
performance of Romanian banks: DEA and PCA approach, Economics and Finance, 20, 610 -
622.
Sullivan, R. J. (2000). How has the adoption of Internet banking affected performance and
risk in banks? Federal Reserve Bank of Kansas City, Financial Industry Perspectives, pp, 1-
16.
Sumra, S. H., Manzoor, M. K., Sumra, H. H., & Abbas, M. (2011). The impact of e-banking
on the profitability of banks: A study of Pakistani banks. Journal of Public Administiration &
Governance, 1(1),31-38.
Turban, E., King, D., Lee, J.K., Liang, T.-P., & Turban, D.C., (2012), Electronic commerce: a
managerial and social networks perspective. 7th Edition, America: Prentice Hall.
Wang Y, Gao S., & Zhang J., (2013), “Credit Risk Management in Rural Commercial Banks
In China”, The 7th International Days of Statistics and Economics, Prague, September, pp,
19-21.
Weigelt, C., & Sarkar, M.B. (2012). Performance implications of outsourcing for
technological innovations: Managing the efficiency and adaptability trade-off. Strategic

51
Management Journal, 33, 189-216.
Worthington, S., Thompson, F. M., & Stewart, D. (2011). Credit cards in a Chinese cultural
context—the young, affluent Chinese as early adopters. Journal of Retailing and Consumer
Services, 18, 534–541.
Ye, F.F. (2014) The Influence of the Development of Internet Banking on the Commercial
Banks in China. Kaifeng: Henan University.
Yin, R. K., (2003), Case Study Research: Design and Methods, 3rd edition, Thousand Oaks,
CA: Sage.
Yin Y., Song L.R., & Tang H. X., (2014),The Risk Management and Business Development of
the Credit Card, Technology Economy and Management Studies, 2, 62-66
Yuan, X., & Seok, H. (2010). Present and future of internet banking in China, Journal of
Internet Banking and Commerce,15(1), 9-39.
Zhao A L., Hanmer-Lloyd S., Ward P., & Goode, M.H. (2008), Perceived risk and Chinese
consumers' internet banking services adoption", International Journal of Bank Marketing,
26(7),505-525.
Appendixes: Interviews
Appendix 1: The interview of the banking manager from China Merchants Bank
Question 1: What is your position in China Merchants Bank?
Answer: I am a business manager of China Merchants Bank in Ningbo, Zhejiang province,
China.
Question 2: Do you thinking the application of credit cards can promote performances of
China Merchants Bank in Ningbo area? Why or why not?
Yes, absolutely. The application of credit cards can promote performances of China
Merchants Bank in Ningbo area, especially in the urban area. In urban area, people are more

52
likely to use credit card in their daily lives. The usage of credit cards can save costs and
increase financial benefits for China Merchants Bank.
Question 3: How can China Merchants Bank save costs from the application of credit cards?
Consumers can use credit cards to save their time and trouble because they do not have to
search for ATMs or keep cash on hand. At the same time, they do no have to go to the
physical banks. In this case, China Merchants Bank does not have to hire many employees in
its physical banks.
Questions 4: How can China Merchants Bank gain financial benefits from the application of
credit cards?
China Merchants Bank can gain financial benefits from the application of credit cards through
many channels in both the long term and the short therm. In the first place, China Merchants
Bank can track the consumption custom of credit cards holders to identify high quality
customers with the purpose of expand our other businesses, especially financial products. In
the third place, the merchants have to pay service charges for each credit card transaction. The
service charge is always from 1 per cent to 3 per cent. In most of the cases, China Merchants
Bank collects lower service charges for merchants in retaining industry and higher service
changes in hotel and entertainment industries. These service changes can be revenue of China
Merchants Bank. In the third place, some credit card holders may overuse their credit cards.
The interests of overuse and overdraft can be incomes for China Merchants Bank. In the
fourth place, China Merchants Bank charges annual fee from credit cards holders.
Question 5: What kind of activities China Merchants Bank provide for its credit holders to
increase membership?
China Merchants Bank cooperate with many merchants to provide attractive discounts to
increase our credit card membership.
Question 6: Do you thinking the application of e-banking can promote performances of
China Merchants Bank in Ningbo area? Why or why not?
Yes. Of course. The usage of e-banking can can save costs and increase financial benefits for
China Merchants Bank. In urban area, people are more likely to use e-banking products and

53
service in their daily lives. While people who live in rural areas may not use e-banking
because of the underdeveloped networks.
Question 7: How can China Merchants Bank save costs from the application of e-banking?
When using e-banking, consumers can get the overview of their financial situations and
conduct bank trading activities without going to the physical banks. In this case, China
Merchants Bank does not have to hire many employees in its physical banks. At the same
time, e-banking system can provide electronic transport records for consumers. In this case,
China Merchants Bank can save piles of paper or paper bills.
Question 8: How can China Merchants Bank gain financial benefits from the application of
e-banking?
Besides saving costs for the bank, the application of e-banking system can help China
Merchants Bank to spare more investment and energy on its front desk sales, such as the sales
of funds, financial products, insurance products. The sales of these banking products can
improve the overall income for the bank. At the same time, the application of the e-banking
system can faster the capital flows for the bank. In other words, there are greater amount of
idle funds can be used, which can create economic benefits for the China Merchants Bank.
Question 9: Are there any challenges or risks for your bank to improve the financial benefits
through the application and usage of credit cards.
Yes.
Question 10: What kind of risks?
Credit risks, fraud risks, and operational risks. But our bank applies effective credit risk
management system to reduce these types of risks in issuing and the management of credit
cards.
Question 11: Are there any challenges or risks for your bank to improve the financial benefits
through the application and usage of e-banking system.
Yes.
Question 12: What kind of risks?
The risk of customer information disclosure is a big challenge for our bank.

54
Question 13: There are many online payment platforms in China. Do you think the growth of
these e-payment institutions threatens the financial performance of your bank? Why?
Yes. They provide more favorable terms and more types of e-banking products and services.
Question 14: When comparing with these e-payment institutions, what kind of advantages do
your bank have?
The safety of using our bank.
Question 15: When comparing with these e-payment institutions, what kind of disadvantages
do your bank have?
Lack flexibility and less innovative customized products.
Appendix 2: The interview of the banking manager from Bank of Communications
Question 1: What is your position in Bank of Communications?
Answer: I am a business manager of Bank of Communications in Ningbo city, Zhejiang
province.
Question 2: Do you thinking the application of credit cards can promote performances of
Bank of Communications in Ningbo area? Why or why not?
Yes. Bank of Communications attaches great importance to its credit card department since it
can bring financial benefits for Bank of Communications. It can help Bank of
Communications to cut operation costs as well as increase revenues.
Question 3: How can Bank of Communications save costs from the application of credit
cards?
The application of credit cards can save labor costs for Bank of Communications. Credit cards
holders do not need to withdraw money through physical banks or ATMs. Then less
employees are needed to provide relevant withdraw services.
Questions 4: How can Bank of Communications gain financial benefits from the application
of credit cards?
Bank of Communications can increase revenues from the application of credit cards. For

55
example, Bank of Communications can charge commissions from merchants for each credit
card transaction. Bank of Communications can charges annual fee from credit cards holders as
well as interests from credit cards holders who overuse or overdraft their credit cards. What is
more, Bank of Communications can track the consumption custom of credit cards holders to
identify and select high quality customers to recommend them with our other banking
products.
Question 5: What kind of activities Bank of Communications provide for its credit holders to
increase membership?
Bank of Communications use joint promotions with other merchants, such as airlines, movie
theaters, restaurants and so on.
Question 6: Do you thinking the application of e-banking can promote performances of
China Merchants Bank in Ningbo area? Why or why not?
Yes. The reason is the same as the application of credit cards. With less costs and more
incomes, performances of Bank of Communications in Ningbo area are improved.
Question 7: How can Bank of Communications save costs from the application of e-banking?
The application of e-banking can cut labor costs and the spending of purchasing special
papers. Bank of Communications does not need many employees in its physical banks.
Meanwhile, China Merchants Bank can save piles of bills because the application of e-
banking can provide electronic transport records and overview of this financial situations for
consumers.
Question 8: How can Bank of Communications gain financial benefits from the application
of e-banking?
The capital flows of Bank of Communications can be faster if more consumes choose to use
e-banking. With faster capital flows, the idle funds can be used effectively. In this case, the
revenues of Bank of Communications can increase.
Question 9: Are there any challenges or risks for your bank to improve the financial benefits
through the application and usage of credit cards.
Yes.

56
Question 10: What kind of risks?
The credit risks and the operational risks can result in financial losses for the bank. If the
credit card holders can not repay their debts, the bank has to undertake economic losses.
Question 11: Are there any challenges or risks for your bank to improve the financial benefits
through the application and usage of e-banking system.
Yes.
Question 12: What kind of risks?
The leakage of customers’ personal information.
Question 13: There are many online payment platforms in China. Do you think the growth of
these e-payment institutions threatens the financial performance of your bank? Why?
The third party e-payment institutions in China develop very fast, such as Alipay and the
Wechat Payment. These online payment platforms provide e-banking services, financial
services or even loan services with more favorable terms. So a great number of our clients
choose to use these third party e-payment institutions.
Question 14: When comparing with these e-payment institutions, what kind of advantages do
your bank have?
It is much safer for consumers to use e-banking services. So a great number of individuals,
especially in rural areas prefer to choose our bank when they want to use e-banking services.
At the same time, large and medium sized enterprises are more likely to establish and
maintain good relationships with our bank. These enterprises value the safety of e-banking
transactions.
Question 15: When comparing with these e-payment institutions, what kind of disadvantages
do your bank have?
The operation and management model of these e-payment institutions is much flexible, so
they can introduce a wide range of innovative products. This is a challenge for our bank. It is
supplicant for our bank to promote technology innovation and introduce more innovate
products for our customers.

57