Adopting Internet Banking Services in a Small Island State: Assurance of Bank Service Quality

This paper aims to examine the factors affecting the adoption of internet banking services by domestic commercial banks in a sparsely populated small island. Being one of the smallest island economies in the world, North Cyprus was chosen as a case study to explore the factors that affected the penetration of internet banking services in North Cyprus over a two year period. The managers of 23 banks operating in North Cyprus were interviewed first in 2004 and later in 2006. Furthermore, the web sites of these banks were also examined both in 2004 and in 2006 in order to measure the progress made in adopting internet banking services between these periods. Evidence from survey studies and from banks’ web sites indicated that banks in North Cyprus have been consistently moving towards providing internet banking services despite a very small potential market to share. In 2004, the majority of commercial banks claimed that the potential market was too small to adopt internet banking services in North Cyprus. Yet, in 2006, the same banks were in the process of introducing internet banking as an assurance to their customers that they would be able to maintain a competitive quality of service in the future, hence avoid losing their customers to the branches of foreign banks.