An Investigation Into The Hindrances To The Development Of E-Banking In Iran

A dissertation submitted in partial fulfilment of the requirements for the Open Universitys Master of Science Degree in Computing for Commerce and Industry

Najla Motameni (U1097647)

06 March 2012
Word Count: 16496 i

Preface
I am heartily thankful to both my supervisors, Dr. Phebe Mann and Dr. Rob Walker, whose encouragements, guidance and support from the initial to the final level enabled me to develop an understanding of the subject. I offer my regards and blessings to all of those who supported me in any respect during the completion of this dissertation. I am also thankful to all the participants who contributed their time and shared their information for this survey.

Contents
Preface ........................................................................................................................................................................... i Table of Figures ........................................................................................................................................................... v Table of Tables ............................................................................................................................................................ vi Abstract ......................................................................................................................................................................vii Chapter 1 ...................................................................................................................................................................... 1 Introduction .................................................................................................................................................................. 1 1.1 Problem domain .................................................................................................................................................. 2 1.2 E-Banking in Iran ............................................................................................................................................... 4 1.3 Aim of research .................................................................................................................................................. 6 1.4 Research question ............................................................................................................................................... 6 1.5 Contribution to knowledge ................................................................................................................................. 7 1.6 Objectives ........................................................................................................................................................... 8 Chapter 2 ...................................................................................................................................................................... 9 E-Banking Literature Review....................................................................................................................................... 9 2.1 Introduction ...................................................................................................................................................... 10 2.2 Factors affecting e-Banking.............................................................................................................................. 10 2.2.1 Technical factors ........................................................................................................................................ 11 2.2.2 Strategic factors ......................................................................................................................................... 17 2.2.3 Behavioural factors .................................................................................................................................... 19 2.3 Summary ........................................................................................................................................................... 24 Chapter 3 .................................................................................................................................................................... 25 Research Methodology ............................................................................................................................................... 25 3.1 Introduction ...................................................................................................................................................... 26 3.2 Research strategy .............................................................................................................................................. 26 3.2.1 Experiment ................................................................................................................................................. 26 3.2.2 Grounded theory ........................................................................................................................................ 26 3.2.3 Ethnography ............................................................................................................................................... 27 3.2.4 Action research .......................................................................................................................................... 27 3.2.5 Case study .................................................................................................................................................. 27
ii

3.2.6 Survey ........................................................................................................................................................ 28 3.3 Population and sample ...................................................................................................................................... 29 3.4 Data collection procedure ................................................................................................................................. 30 3.5 Risks ................................................................................................................................................................. 31 3.5.1 Risks to research ........................................................................................................................................ 31 3.5.2 Risks to interview participants ................................................................................................................... 31 3.6 Limitations ........................................................................................................................................................ 31 3.7 Summary ........................................................................................................................................................... 32 Chapter 4 .................................................................................................................................................................... 35 Data Analysis ............................................................................................................................................................. 35 4.1 Introduction ...................................................................................................................................................... 36 4.2 Research instrument ......................................................................................................................................... 37 4.2.1 Interview guide for service providers ........................................................................................................ 37 4.2.2 Interview guide for bank customers ........................................................................................................... 39 4.2.3 Questionnaire ............................................................................................................................................. 40 4.3 Discussion of data gathered from questionnaire............................................................................................... 41 4.3.1 Telecommunication network ..................................................................................................................... 41 4.3.2 Security ...................................................................................................................................................... 42 4.3.3 Quality of service ....................................................................................................................................... 43 4.3.4 Operating cost ............................................................................................................................................ 44 4.3.5 Customer satisfaction ................................................................................................................................. 45 4.3.6 Customer trust ............................................................................................................................................ 46 4.3.7 Customer training....................................................................................................................................... 46 4.4 Discussion of data gathered from interview with service providers ................................................................ 47 4.4.1 Hardware .................................................................................................................................................... 47 4.4.2 Software ..................................................................................................................................................... 49 4.4.3 Telecommunication network ..................................................................................................................... 49 4.4.8 Culture........................................................................................................................................................ 50 4.5 Discussion of data gathered from interview with e-Banking users .................................................................. 50 4.5.1 Security ...................................................................................................................................................... 51 4.5.2 Sanctions against Iran ................................................................................................................................ 51
iii

4.5.3 Perceived ease of use ................................................................................................................................. 51 4.5.4 Perceived usefulness .................................................................................................................................. 51 4.5.5 Customer satisfaction ................................................................................................................................. 51 4.5.6 Customer training....................................................................................................................................... 52 4.6 Perspective of e-Banking in Iran ...................................................................................................................... 52 4.7 Effects of e-Banking on customers ................................................................................................................... 54 4.8 Research outcome ............................................................................................................................................. 56 4.9 Summary ........................................................................................................................................................... 57 Chapter 5 .................................................................................................................................................................... 58 Conclusion .................................................................................................................................................................. 58 5.1 Overview .......................................................................................................................................................... 59 5.2 Research review ................................................................................................................................................ 59 5.3 Evaluation ......................................................................................................................................................... 60 5.4 Future work....................................................................................................................................................... 61 Glossary ...................................................................................................................................................................... 62 Reference List ............................................................................................................................................................ 63 1 English ................................................................................................................................................................. 63 2 Farsi ..................................................................................................................................................................... 66 Appendix A Extended Abstract ............................................................................................................................... 68 Appendix B - Qur'an Emphasis Against Riba ............................................................................................................ 74 Appendix C - US Sanctions ....................................................................................................................................... 75

iv

Table of Figures
Figure 1- E-Banking factors ....................................................................................................................................... 10 Figure 2- Core Banking in Iran .................................................................................................................................. 12 Figure 3- Consumer behaviour ................................................................................................................................... 20 Figure 4- Rexha bank marketing ................................................................................................................................ 23 Figure 5- T24 hardware spec ...................................................................................................................................... 48 Figure 6- Components of e-Banking .......................................................................................................................... 53 Figure 7- Effects of e-Banking ................................................................................................................................... 55 Figure 8- Major challenges of e-Banking in Iran ....................................................................................................... 57

Table of Tables
Table 1- Iran e-Banking services ................................................................................................................................. 5 Table 2- Objectives ...................................................................................................................................................... 8 Table 3- Iran ICT stats (International Telecommunication Union, 2011) ................................................................. 14 Table 4- Research strategy comparison ..................................................................................................................... 33 Table 5- Interview with service providers .................................................................................................................. 38 Table 6- Interview with bank customers .................................................................................................................... 39 Table 7- Questionnaire for e-Banking users............................................................................................................... 40 Table 8- Telecommunication network analysis.......................................................................................................... 41 Table 9- Security analysis .......................................................................................................................................... 42 Table 10- Quality of service analysis ......................................................................................................................... 43 Table 11- Operating cost analysis .............................................................................................................................. 44 Table 12- Customer satisfaction analysis ................................................................................................................... 45 Table 13- Customer trust analysis .............................................................................................................................. 46 Table 14- Customer training analysis ......................................................................................................................... 46

vi

Abstract
Modern fast-evolving technology is constantly bringing new dimensions to our daily life. Electronic banking systems provide customers with easy access to banking services. The quality of electronic banking services has become a major area of attention among researchers and bank managers due to its strong impact on business performance, lower costs, customer satisfaction, customer loyalty and profitability. ATM, POS, phone banking, Internet banking, mobile banking and more recently kiosk have considerably improved the interaction between user and bank but these services are not widely used in Iran as expected. This paper discusses the reasons for this disinterest. Literature survey shows researchers mostly from other countries have found many factors influencing the adoption of electronic services. In this study we look at all these factors and other factors specifically regarding Iran, from a different angle. To investigate all the factors that may hinder the development of e-Banking in Iran which is the aim of this study, we have categorized the mentioned factors to 3 groups: Technical, Strategic and Behavioural. Questionnaire and interview with the users of electronic banking services and also interview with providers of these services have been used as a primary data collection tools. The analysis of the collected data shows the effect of technical factors is the strongest. To be more specific telecommunication network infrastructure and hardware inefficiency, software capabilities are shown to be the most serious hindrances to the development of e-Banking in Iran. Keywords: Electronic Banking, Strategic Factors, Technical Factors, Behavioural Factors, Iran.

vii

Chapter 1

Introduction

1.1 Problem domain

The development of new technologies in communications and information practices and the emergence of new services and increasing expectations and needs for banking services market caused public and private banks to compete for providing new-banking services. E-Banking in recent decade has been carried out with various implementations in Iran by a variety of public and private banks. Now each bank more or less seeks for efficient use of this new technology. However, it seems the use of e-Banking is still not institutionalized in the culture of our people, and customers still do not use this technology with trust for intense financial transactions. Based on the reports of the Central Bank of Iran (CBI) the penetration rate of e-Banking is still very low, despite the huge amount of investments made by Iranian banks. According to BBC news 60% of Iranians go to banks only to receive or pay cash to the banking network (Engagement Banking, 2011). Iranian banks talk about the spread of e-Banking while Iranians spend a lot of time in a bank branch to pay the bills for water, electricity, gas, phone, or transferring money to other accounts and sometimes they stay in line for hours to receive or pay cash. Paper money, checks and bank documents have important roles to transfer ownership in the banking system but among all, paper money has a special place and Iranians have a certain confidence towards it. Cash transfer is almost impossible without going to the bank and filling a variety of forms and in most cases it takes several days to cash the money order, deposited in another city or even in the same city. Banks computers play the role of calculators and they cannot place orders or transfer cash via Internet which is more or less endemic in these days. Iran's banking system still relies on pen and paper. Computers and ATM are only e-Banking manifestations that customers may withdraw certain amount of money with their banking cards. Iranians cannot transfer considerable sums of money through e-Banking. According to experts the use of electronic cards is not practical without fundamental reform of the banking system and creating the required infrastructure such as a safe and high-speed communication lines, expansion of various debit/credit cards and increase EFT-POS devices in shopping malls. And it does not seem people would easily change colourful money papers with electronic cards.
2

Iranian banks have started programs to join a single network that provides communication layer for various banks. This network is called Shetab and is developed by CBI (Mehr News, 2005). The Mehr News (2005) describes how Shetab Banking System has monopolised the Iranian e-Banking clearance and automated payment system. It also laments on the low patronage of e-Banking and the need for general expansion. The system was introduced in 2002 with the intention of creating a uniform backbone for the Iranian banking system to handle ATM, POS and other card-based transactions. Prior to its introduction, some Iranian banks were issuing cards that only worked on the issuing banks ATMs and POS machines. Since the introduction of Shetab, all banks must adhere to its standards and be able to connect to it. Furthermore, all issued credit or debit cards must be Shetab capable. But still each bank has its own system, and many banks have no connection to the bank next door. Shetab is like a motorway that gives access to all banks and cardholders can withdraw money from their account regardless of the card issuer but this project has its own problems since a bank system may not be compliant with Shetab requirements from software or hardware point of view. Also bank that installed the ATM charges a fee but the card issuer receives no interest. The Department of Labour and Industrial Relations (2010) notes that banking experts say it is not reasonable to expect banks issue cards with no benefits. Another problem is to create payment gateway. A permit is given to all banks to establish a company of its own and reach this goal. Irans banking system is similar to the general trend that is used to define e-Banking, which is given as the usage of new tools to provide banking and monetary services. In conventional banking, the amount of money accumulated in a period of time is important, but in e-Banking cash flow is decisive. E-Banking goal is being able to not to refer to bank branches, but in Iran almost nothing is possible without a visit to the bank. Irans paper currency barely lasts long at the hands of users due to how users handle the currency. However an average of 15 million dollars is spent annually on printing banknotes. 1,200 million damaged banknotes are removed from circulation by the CBI and about 60% of the current banking system is to receive or pay cash. Irans membership request to WTO is accepted but with this situation it cannot be hopeful to be successful in the global market which is equipped with e-commerce.
3

Cash flow has a special place in Irans banking system and banking cards failed to remove burdens from countrys economy and solve money exchange problems. This added a cycle to banking work flow to stuff a device with banknotes for customers to receive limited amounts of money. Some banks have installed EFT-POS in some stores and shopping centres but the quantity is quite limited. According to BIMA (Bank and Insurance Manifest Agency, 2010) latest stats, 17000 ATM and 1 million EFTPOS are installed. Ebinews, (2011) says 128 million cards are issued; none of them is credit card. And if all infrastructures are provided, customers cannot purchase more than their account balance. Current cards are only valid within the country and there is no possibility of using them abroad. Before Irans revolution in 1979, Iranian banks had contracts with large enterprises such as Visa and MasterCard but they terminated after US sanctions were imposed. For example BMI had a contract with Visa to introduce institutions to accept Visa cards. This bank would guarantee the claims of Iranian customers and at the end would receive all its payments from Visa. Now BMI in cooperation with a European bank is implementing a pilot project to accept cards issued abroad except by US or Israel. This pilot project has run in 20 centres such as hotels so that foreigners can use their electronic cards. If this project extends, to some extent it will solve the main problem of tourists coming to Iran to pay certain expenses such as hotel accommodation. And in the second stage, it is predicted that Iranian citizens demand international credit cards from domestic banks and with guarantee of Iranian banks, international card would be issued for them. The final stage of this plan is to resolve disputes with the US to eradicate economic embargo, which with the current status, there is no clear vision to do so. E-Banking has a long way to go for traditional business governing the country and until groceries, small and large store that have the highest volume of purchases/sales at their hand, are not convinced to have POS and until interests of banks, customers and service providers are not ensured, comprehension of e-Banking would remain as a slogan. Although many studies have been conducted in e-Business matter, unfortunately in Iran not many efforts have been done on this issue and regarding to Internet usage, Iranian companies have not made great progress.

1.2 E-Banking in Iran

Toward achievement of modern banking and based on academic studies, an automation plan for the country's banking system was proposed to bank officials and based on Banks General Assembly approval in 92, a comprehensive automation plan was formed. Executive Advisor of President of Central Bank was put in charge of
4

the plan implementation. Subsequently, from the beginning years, Iran Informatics Services Corporation was in charge of this project with the mission of providing the necessary facilities to implement the automation design in the country's banks and financial institutions. During the past years and the gradual development of communications technology and expanding Internet access and possession of PCs by various sectors of society and companies, and increasing awareness and knowledge of people, the country's banks moved toward e-Banking and gradually introduced new e-Banking services. The following table shows the current e-Banking services in the country (CBI, 2011).
Customer No of banking system Penetration rate to relevant subscribers ratio Penetration rate to population of over 20 years ratio Penetration rate to population of over 15 years ratio

Telephone bank 2,266,866 (bill payment) Internet bank Internet bill payment Mobile bank SMS bank 5,190 1,110,023 416,960 708,788

8.99%

5.15%

4.29%

1.81% 3.08%

0.94% 1.61%

0.78% 1.34%

0.02% 4.18%

0.01% 2.52%
Table 1- Iran e-Banking services

0.01% 2.10%

1.3 Aim of research

According to the legal obligation stated in paragraph 4 of Article10-J of Fourth Development Program Action Economic, Social and Cultural, Iranian government is obliged to establish e-Banking systems and procedures for money exchange and other e-Banking services on national and international level in all countrys banks since the first quarter of the program. The need for an efficient banking system in the world markets and membership in organizations like WTO requires e-Banking, not to be considered as an option but a necessity. It is certain, the cost of providing banking services decreases through e-Banking. (The world of economic, 2007) says the cost of e-Banking in the world is 10 cent and traditional banking costs 1 Dollar. This means saving 90 percent. The benefits of e-Banking will not only reduce costs but building its culture, also leads to social and economical benefits. Decreasing printing materials, health and traffic control will be the affects of this culture. In the other hand by living in a complicated and competitive world bankers and even authorities need to use technological facilities to cut cost of money, improvement of services and even in case of authorities finding solutions for traffic jam and pollution. While in many countries government is responsible to provide the necessary infrastructure for banks, in Iran many banks provided themselves their needed satellites. Many laws such as credit card rules still have not been developed. Non-efficient workforce also contributes to the problem. All these factors along with the state system have caused our country not to be successful in e-Banking spread. The key of this lock is in our own hands. Identify factors affecting lack of e-Banking progress, and providing solutions to overcome the obstacles can help bankers to develop appropriate strategies towards e-Banking development. Learning more about e-Business and eBanking are also the prerequisite goals towards identifying the factors avoiding the spread of e-Banking. After knowing the factors measures will be taken to identify their level of negative effect they have on the progress of eBanking also an analysis will be provided alongside with my opinion on solutions.

1.4 Research question

The purpose of this study is to get greater understanding of e-Banking phenomenon and find out its implementation obstacles in Iran. In the conduct of the collection of data; both primary and secondary data, it is important that I have a guide on the kind of data to collect and which ones to ignore. In doing this, the following
6

research questions have been set to guide me on the exact data to go after. Therefore, I try to reach this goal by answering the following question. What are the hindrances to the advancement of e-Banking in Iran? There have been obstacles to stop or delay the growth of e-Banking in any banking market. Banking services in countries with more traditional societies face basic resistances and levels of uncertainties toward electronic transactions. Electronic money has no ground to be compared with physical one when it comes to societys willingness to carry on doing things in traditional ways.

1.5 Contribution to knowledge

From the perspective of some researchers developing a new technology needs providing perfect service with complete security and this process takes time. However we should not forget that currently there is an intense competition among country's banks to attract more customers, providing e-Banking services to some extent. The importance of identifying the factors influencing the spread of e-Banking for managers of the banks now is more than ever, and experiences obtained from this study will serve as an important academic document for future referencing by researchers who may want to undertake further studies in e-Banking in Iran. Other corporations interested to reduce their costs and attract more customers also could benefit from this survey, changing their technical strategies or adjusting them according to findings of this research. Government officials also would reach a better understanding of how to build the required infrastructure and also the necessary culture for e-Banking. If e-Banking would be deeply accepted in Iran, it leads to worldwide businesses, increase income and in general it would help to improve economic crises.

1.6 Objectives

Objective Survey the main known obstacles on the way of Iranian e-Banking progress by the experts opinions.

Task Making questionnaire containing open questions. Choosing one bank from each main banking sector. Choosing experts from each bank. Interview the experts to obtain their opinion, gather information, analysis and categorization of answers. Derive main issues from categories and set them as main factors.

Deliverable Two leading banks each from a main banking sector. Filled questionnaires with answers to open questions. Main negative factors influencing e-Banking business in Iran.

Gain insights on e-Banking to have a better understanding on issues raised by the experts.

Review the statistics of e-Banking in Iran.

Statistical data on Iranian eBanking. Categories of e-Banking services in Iran.

Ranking the severity of problems.

Select interviewees from different sectors of society. Make a questionnaire from factors obtained from experts opinions. Interview members of society. Gather data to obtain quantitative results.

List of interviewees opinions. List of questionnaires points.

Assessing practical problems towards eBanking expansion.

Graphical analysis of obtained data. Make a ranking on identified factors. Reach a conclusion.

Ranking on main negative factors. Conclusion.

Table 2- Objectives

Chapter 2

E-Banking Literature Review

2.1 Introduction
The evolution that banking industry faced in two past decades caused major changes in the form of money and funds transferring systems. It initiated notions such as digital money and EFT. These two notions are in fact bases for a new version of banking called electronic banking. In other words, e-Banking could be introduced as using advanced networks and communication technology to transfer funds (cash) within banking system (Sheikhani, 1999). This part of the research project is aimed at reviewing literature that already exists in the area of e-Banking in Iran. By review, I shall qualitatively pass analytical views and opinions on the ideas to be reviewed. The review shall also aim at finding answers to the research question asked early on. This means that the literature review shall be conducted within a specific scope.

2.2 Factors affecting e-Banking

I have categorized the basic factors affecting e-Banking according to the following figure.
E-Banking factors

Technical factors Hardware

Strategic factors

Behavioural factors

Software

Islamic banking principles

Culture

Perceived ease of use Perceived usefulness Customer satisfaction

Telecommunication Network Security Quality of Service

Sanctions against Iran

Operating cost

Customer trust

Customer training

Figure 1- E-Banking factors

10

2.2.1 Technical factors

Transaction Technicalities factor appears to be the leading factor to customer satisfaction (Yang et al., 2003). Deficiencies in technological infrastructure are often the main obstacle in acceptance of e-Banking service channel.

Hardware
Hardware including satellite, optic fibre, ATM, POS, remote controller systems, transaction management equipments and etc. is important criterion in e-Banking and generally e-Business infrastructure. For example database servers have key roles to provide e-Banking solutions. They need powerful CPU and extensive memory, especially for search process. A bank mainframe normally would consist of database servers, application servers, presentation servers, routers, switches and etc. All these instruments should be robust, secure, powerful and liable. Hardware Security Management (HSM) also plays a critical role to ensure the security of data flow through cryptographic protocols. Hardware inefficiency may lead to failure or disruption. A possible system or database compromise, inadequate system capacity, weak system support could result to service failure in e-Banking. Conversely, in order to obtain an integrated system, a set of sophisticated standards are necessary to ensure system consistency. Cost of course is the main drawback of high standard hardware. Following interview questions from service providers may indicate the hardware status of a bank. How many transactions per second could your mainframe support? What is the EAL level of you mainframe? Have you ever faced a major system failure due to hardware malfunction? Do you have a backup data-centre in case of emergencies? Are your issued banking cards ISO 7816/14443 compliant? Are these issued banking cards EMV compliant? Do your POS readers comply with ISO 7816/14443? Do your POS have GPRS capability?

Software
To develop and strengthen the banking system, Iranian government in Article10-J of Fourth Development Program (2005-2009) Action Economic, Social and Cultural, has forced all banks to:

11

Full deployment of centralized banking system (Core Banking) and the conversion of all accounts whether individual deposits or facilities to centralized accounts focusing on CBI standards and guidelines.

Establishment and utilization of CA for e-Banking network in cooperation with CA of CBI in order to increase the security of electronic data interchange. Use electronic signatures to facilitate their intra bank transactions.

Design, implementation and deployment of all the above are the responsibility of banks board members and ICT companies. In order for e-Banking network expansion, all state and private banks have to implement core banking compliant with CBI standards to maintain the integrity of banking system. The following figure shows what is generally required from core bank solution in Iran.

User office (virtual bank)

Admin and Back office

Internet Banking
Personal Internet Banking

Centralized loan system Channel manager Centralized depository system

Paya Satna Taba

Corporate Internet Banking (Web Based)

Corporate Internet Banking (Service Oriented Architecture)

Authenticate & Authorize

Card switch

Shetab

Figure 2- Core Banking in Iran

Many parts of software are required for a successful bank to run e-Banking like back-office, front-office, different channels software, portals, call-centre IVR, CMS and etc. The importance of software application on online banking is quite emphasized by Southard et al. (2004). An efficient background operation can be conducted only
12

when it is integrated by an electronic system and software is one of the essential elements for this system (Auto, 2010). According to Mermod (2011) buggy software causes a bank reputational risk. The below questions from service providers indicate the software circumstances. Does your switch support ISO 8583 or APACS? Do all your ATMs comply with Payment Card Industry Data Security Standards (PCIDSS)? Do all your ATMs have audit trail and logs capabilities? Do you provide mortgage accounting facility on the Internet? Do you use an integrated system for back-office?

Telecommunication network
Universal access to Internet networks has increased customer expectations for services and supports. Among these expectations are increased accuracy and broadband services. So to answer the demands for comprehensive and flexible support, a strong infrastructure is required. The major inhibiting factors to Internet banking adoption in Nigeria is identified as inadequate operational facilities including telecommunications facilities and electricity supply (Chiemeke et al., 2006). Mastoori (2009) analysis also shows one of the main reasons bar customers from using Internet Banking is limitations of Internet services. So in general, ICT plays a significant role in increasing efficiency and effectiveness of business. Benefits of ICT has caused many countries try to implement this technology in their industries. The most important criteria classification for ICT is presented by (International Telecommunication Union, 2007) and contains a comprehensive list of key ICT indicators that are defined in the four following areas: 1- Infrastructure and accessibility 2- ICT usage by individuals and families 3- ICT usage by businesses 4- ICT in specific products International stats and reports shows world countries ranking in terms of ICT indicators, most emphasizes on the infrastructure and accessibility. The following table shows Iran current state in ICT (International Telecommunication Union, 2011).
13

Number of fixed telephone lines(per 100 persons)

Number of mobile subscribers (per 100 persons)

Number of computers (per 100 persons)

Number of Internet users (per 100 persons)

Iran Asia World

27.6 13.6 17.2

10.5 69.2 78

7.5 15.8 29.5

10.8 22.5 29.7

Table 3- Iran ICT stats (International Telecommunication Union, 2011)

As you can see, Iran is behind in all aspects of ICT except the number of fixed telephone lines even in its own region Asia. Similarly, Digital Access Identifier (DAI) is the first criterion to rank countries in term of ICT. It has surveyed 178 countries. This ranking is performed by International Telecommunication Union (ITU). Variables such as education and financial capacity are also considered in this criterion. Iran also reviewed and ranked among these 178 countries and ranked 89th. Obviously the limited spread of Telecommunication network (telephone, mobile, PC, Internet) would lead to customers not using these channels as their primary choice of banking transactions. Internet speed is a major area of concern for the users of Internet channel (Aliaskari et al., 2011). In most of the world the standard technologies in most areas are cable servers and the newer technologies in use include pushing optical fibre connections closer to the subscriber in both telephone and cable plants, this has played a crucial role in enabling telecommunication access by making transmission of information over larger distances much more cost-effective than copper wire technology thats speed is up to 100Mb/s. But in Iran the infrastructure still utilizes the copper wire lines that in the best case offers a speed of 512 Kb/s but mostly around 16 Kb/s- 32Kb/s. Adding some questions to questionnaire, I may assess the telecom network status in Iran. I could seek the users satisfaction level by asking:

The speed of e-Banking services.

14

The availability of different service channel in different places like small towns.

Following additional questions from service providers gives us more in-depth view of e-Banking network in Iran: Are various e-Banking channels such as Mobile, ATM, Kiosk, Telephone and Internet are supported by your telecom network? Do you utilize specific network concentrators/aggregators to create and expand the e-Banking networks or do you use general networking equipments? Do you utilize specific network management system to monitor e-Banking networks or do you use general networking management system? How much your e-Banking operations are affected by network disruptions? Has it ever caused your service a severe breakdown?

Security
Security is one of the major areas of concerns for e-Banking users (Aliaskari et al., 2011) and (Chiemeke et al., 2006). Security may include protection of customers personal information and secure transactions to prevent abuse of the highest growth of any online business, including e-Banking. Vlad (2010) by making a comparative analysis, on concrete situations, over the four banks taken in his study, states one of the problems regarding e-Banking is the risk of fraudulent attacks. Security for transferrable information is considerably emphasized. Many studies have recognized issues related to security as one of the factors affecting development of electronic commerce and e-Banking. Information such as credit card number or money order requires additional security. Perceived security in web environment has a significant and direct effect on the acceptance of e-Banking specially Internet Banking by customers. Therefore, we suggest that banks attempt more to improve the security qualities of their system in order to successfully attract their customers trust regarding existence of security within Internet banking for doing transactions. Furthermore, Security has the highest importance rate in Poons analysis (2008). I could find out the severity of this issue by asking both service providers and users of e-Banking if they have faced any scams? Or if their private data has been used in an unwanted way? Other following questions may also be performed from service providers:
15

Do you follow any standard security model to ensure information safety? Do you have SSL certificate for your Internet banking? Do you use DES/3DES, AES, RSA data encryption standards, Digital signature, PGP, SET, Kerberos? Do you use Public Key Infrastructure (PKI) to provide digital certificates to verify the digital identity of a user?

Some written questions will also provide useful information about the level of satisfaction of users regarding privacy and security of provided services.

Quality of service
Service quality is the ability to deliver what the customer needs and expects (Minocha et al., 2003). Investigating customer preferences useing the customer decision making process, service quality is one of the factors customers use in selecting electronic and traditional banking (Gan et al., 2006). Evidently, the most common factor cited by many in literature, is good customer service (Orr, 2004). In regards with quality of service, Vlad (2010) states some severe problems opened by e-Banking are: The diversity of the operations offered by the application. The rapidity in the information transfer from the payer over the bank. The transfer rapidity between the banks. The rapidity to actualize the information after having finished the transfers. Correction possibility in the case of the introduction of some incorrect information or some possible mistakes. The compatibility with financial-bookkeeping systems, those that belong to the banks and also those that belong to the companies. The way in which this kind of operations answers or folds on the customers needs.

I could assess the level of user satisfaction from provided services by the following written questions: The accuracy of e-Banking services. Presentation of facilities. The customer services section behaviour. Quality and speed of digital money orders.

The reliability of different service channels.

16

2.2.2 Strategic factors

CBI has issued an announcement giving e-Banking a priority to reform the banking financial services. According to this announcement CBI is responsible for policymaking, defining regulations and standards, settlement management between banks, management and supervision of security on electronic exchanges between banks like Shetab, Satna, Paya, Taba and etc. (payment system networks in Iran), preparation and deployment of electronic signature infrastructure, expanding culture of using digital money services. The new core banking should have been up and running by the end of Fourth Development Program in 2009. To facilitate the development of e-Banking, CBI even issued licenses to establish virtual banks (only retail services) to 2 volunteers. But here we are in 2012 and comparing the banking system with the outside world, we could firmly claim there is no real means of e-Banking in Iran and many bank have not even started implementing core software. Furthermore, in case Iranian banks want to use other countries successful experiences regarding core banking software and buy it from foreign companies, there are two set of rules and regulations involved here acting as hindrances: US sanctions and Iranian Islamic banking rules.

Islamic banking principles

The basis of Islamic Banking is quite different from other countries banking. Islamic banking is known as interest-free commercial banking. And appendix B will describe the emphasis of Holly Quran on this issue. After the Islamic Revolution in 1979, CBI was mandated to establish an Islamic banking law which was passed by the parliament. So, Iran switched to Islamic banking in August 1983 with a three-year transition period. This law has limited the choice of buying core banking software for Iranian banks, since not all famous branches of core software support and complies with these Islamic rules. Most core banking software developed by Iranians are also in their novice stage and could not provide the wide ranges of services to attract the customers. Performing the following questions from service providers would indicate us how much this issue effects the spread of e-Banking in Iran. Do you think Islamic banking rules have limited your choice for core banking software? Do you think these rules have any effect on the spread of e-Banking?

17

Sanctions against Iran

Sanctions imposed to Iran by OFAC have affected banking industry severely (Appendix C, US sanctions). These sanctions cover all import/export, international loans/credits and fund transfer. In general any business agreement between Iranian banks and European/American banks is prohibited. For example buying licenses and servers are prohibited. Also debit/credit card terminal acceptance is prohibited. Buying any original hardware/software from US or Europe such as Cisco servers, HP servers, IBM portal and Linux OS would violate this rule. Even if banks buy required instruments via a third party, they would lose the guarantee, support and related trainings. That led them to use old stuff for hardware and cracked or trial version for software. Overall, the sanctions' economic effect on Iran has been significant on e-Banking. This sanction would limit banks for importing standard hardware or buying core software, therefore receiving a desired after sale services and thus providing not qualified services for customers. The following question from e-Banking users will help us assess the amount of effect of the sanction on the penetration of e-Banking in Iran. Are all banking services you need available through e-Banking channels like credit card payments while buying online? Service providers also would be knowledgeable resources to provide us valuable information in this matter. The following questions may be asked them in this regards. Has the sanction affected the e-Banking services you provide in any way? What would you do differently if there was no sanction?

Operating cost
One of the most important factors of customer preferences in the use of electronic banking is operating cost (Gan et al., 2006). Commissions and the taxes that banks perceive for e-Banking applications are one of the e-Banking hindrances for the customers (Vlad, 2010). Fees and charges are thus one of the attributes that determines consumers decision on using e-Banking system (Poon, 2008). Regarding telephone banking, we must say since the usage of automatic answering systems, telephone bank lowers the expenses of banking services and increase of customers deposits leads to high profits of banks. There by, telephone bank services are provided free of charge in Iran (Allahyarifard, 2005).

18

Also for all banks ATMs, card holders can withdraw money from their account regardless of which bank has issued the card but this has its own opponents since the bank that installed the ATM may charge a fee and the card issuer receives no interest. I may find out if operating cost is an important factor for Iranian users by asking their level of satisfaction about the current fees. And I would investigate if not receiving a fee for issuing cards effects on service providers choice of expanding their cards by asking them.

2.2.3 Behavioural factors

Behavioural intention of a person to use a service depends on several factors discussed below.

Culture
While buying a building for opening new branches is not an advantage or capital gain for foreign banks, our banks found high profitability to buy buildings and open new branches as an investment. This issue is not far from any economists mind. Iranian bankers believe that they will not get rich if they do not buy the branch. So the traditional practice in Iran is significant. Iranian consumers have reached a belief on how to invest their money over one hundred years. High demands, low supply, high inflation and industrial recession have caused the real estate prices to go higher and higher each year for the past 30 years in Iran. Branch handling is consistent with our economy and this investment means disregarding benefits of e-Banking. E-Banking is incompatible with the state economy. Kutler et al. (2000) believe there are four aspects affecting consumers behaviour: cultural, social, personal and mental factors.

19

Figure 3- Consumer behaviour

But in this research, I consider all these factors as a hindrance of culture. Cultural factor is the most important determining factor of demands and personal behaviour, which includes value, impression, taste and the behaviour a person learns from family or other entities (Kutler et al., 2000). Cultural subset means culture within culture which has specific values and lifestyles and can be based on everything from age to ethnicity. People with different cultural qualities have different tastes regarding different products and brands. Social factors can also affect on purchasers behaviour. Some reference group such as family, friends, specialized and social organization can affect the choices of a person (Kutler et al., 2000). Therefore, special needs of each group must be considered in marketing planning. Personal factors such as age, level of life cycle, profession, economic status, lifestyle and character can also affect on purchasers decisions. Consumers lifestyle (general pattern of his/her actions and reactions in this world) can have a significant influence on peoples decisions regarding purchase (Kutler et al., 2000). Finally, mental factors including motivation, impression, learning, beliefs and attitudes have an effect on consumers behaviour (Kutler et al., 2000).
20

Each of above factors provides a different attitude and what is happening in customers black box must be realized this way. Acceptance process via customers is divided to five levels (Kutler et al., 2000): 1. Knowledge: consumer gets to know a new product but has no information about it. 2. Interest: consumer attempts to obtain some information about new product. 3. Evaluation: consumer considers the point that if testing new product is reasonable or not. 4. Testing: consumer attempts to test new product in small scale in order to be able to judge it. 5. Acceptance: consumer decides to consume the new product completely and all the time. Asking service providers the following question will indicate if the Iranian culture is ready for e-Banking or it is still a burden. Did you face any cultural set back in offering electronic services? Is electronic money tangible and accepted for your users? How many percentages of your customers perform their transactions electronically? Are you satisfied with the way e-Banking services are reached out to users?

Perceived ease of use

Perceived ease of use is one of the most important factors to determine consumers behaviour and decision to accept a new technology in the field of ICT (Wang et al., 2003) (Pikkarainen et al., 2004) (Yiu et al., 2007) (Cheng et al., 2006) (Ravi et al., 2006) (Moon et al., 2001) (Davis, 1989). Perceived ease of use plays a very important role influencing customers adoption of Internet Banking (Naimi, 2008). Actually regarding whole e-Banking services, one of the important problems is comfort in using the application (Vlad, 2010). The following question from e-Banking users will show us the importance of this factor. Do you find it easy to perform all your banking transactions through Internet, Mobile, Telephone, ATM and POS?

21

Perceived usefulness
Another important factor equally effective to perceived ease of use of a service is perceived usefulness (Wang et al., 2003) (Pikkarainen et al., 2004) (Yiu et al., 2007) (Cheng et al., 2006) (Ravi et al., 2006) (Moon et al., 2001) (Davis, 1989). Perceived usefulness is one of the main factors towards adoption of Internet Banking (Naimi, 2008). The following questions from the users of e-Banking services will demonstrate the importance of perceived usefulness. Comparing traditional banking, do you find Internet banking, mobile banking, telephone banking, ATM, POS and Kiosk more useful? Which electronic service would you prefer the most?

Customer satisfaction
Customer satisfaction is very important when establishing new banking services (Rexha et al., 2003). Only by actively persuading customers to use their services will banks be able to expand their e-services (Venus et al., 2000). Customer satisfaction, or lack of satisfaction, is thus a key element in the development of e-banking in Iran. The following questionnaire question from the e-Banking customers enables me to assess their level of satisfaction. How satisfied are you using different e-Banking service channels?

Following interview questions from these users also would be helpful in this matter. Do you ever find it necessary to go to a bank branch? Would you consider doing all your banking transactions to be done electronically?

Customer trust
Service in banking system could be provided by a machine (ATM), a person (consultant) or a mixture of both (cashier). Marketing for services is similar to goods marketing process and all implications of modern marketing could be used to supply services. Moreover, services carry four unique properties, which make them different from goods: intangibility, inseparability, non-storability and non-similarity. Two other properties are also added for banking services: trustworthiness and bidirectional information flow (Venus et al., 2000).

22

In e-Banking field where issues like financial resources and transfer of ownership are quite decisive for customer, study shows customer trust on e-Banking is quite decisive for customer attitude (Rexha et al. 2003). Trust is a prime factor influencing customers adoption of Internet Banking (Naimi, 2008). One of the main reasons bar customers from using Internet Banking is lack of trust in the system (Mastoori, 2009). To expand eBanking transaction further, secure transactions with the trust of consumers are necessary (Haque et al., 2009). Moreover Rexha et al. (2003) in terms of relationship marketing factors affecting the acceptance has reached the conclusion that factors shown in the following figure are effective on acceptance of new provided electronic services by a financial institution.

Figure 4- Rexha bank marketing

As you see on the above figure, all the factors will lead to trust and then willingness to adopt e-Banking. E-Banking users questionnaire including the following question will enable me to determine the level of satisfaction of users regarding this factor. Do you have trust on e-Banking technology?
23

Customer training
Amount of knowledge on e-Banking is another decisive factor for customer attitude (Rexha et al. 2003). Lack of customers' training has the most impact on non-development of electronic banks (Aliaskari et al., 2011). For customers of Internet Banking lack of knowledge about it works as a barrier (Mastoori, 2009). The below interview questions from end users of electronic services could show us if they have received enough information and training about the provided services. What electronic banking means for you? Do you know how to pay your bills via phone banking? Could you tell the main difference of ATM and kiosk?

Following question from e-Banking users will also allow us to find out the level of their satisfaction with the received trainings. Have you received enough information about different e-Banking service channels? Have you received enough information about the advantages of e-Banking?

2.3 Summary
Through the literature review, I was afforded the opportunity to sample data from other reviewers and technical experts on electronic banking. The secondary data collected helped realizing the factors affecting the development of e-Banking in Iran. I have categorized the factors affecting the development of e-Banking services to the following groups: Technical: hardware, software, telecommunication network, security and quality of service. Strategic: Islamic banking principles, sanctions against Iran and operating cost. Behavioural: culture, perceived ease of use, perceived usefulness, customer satisfaction, customer trust and customer training. For each factor several questions are derived to enable us understand whether or not it is an important barrier towards e-Banking spread in Iran and also determine the level of its significance.

24

Chapter 3

Research Methodology

25

3.1 Introduction
In regard to research topic and its nature, in section 3.2 different research techniques are investigated. According to cons and pros of each technique a justification for choosing or refusing it is provided in this chapter. Choosing survey strategy, a population and sample volume would be decided. Then in section 3.4 data collection procedure is discussed. The risks and limitations of this project would be notified in this chapter.

3.2 Research strategy

The research strategy describes the manner in which the researcher is going to go about the data collection process. Saunders et al (2007) explains that there are six research strategies which can be identified in the literature, such as: experiment; grounded theory; ethnography; action research; case study and survey which can all be used by a researcher depending on his or her research aim and research questions.

3.2.1 Experiment
An experimental strategy is generally investigates the effect of changing conditions on a subject. It more involves product or people testing. So it is more suitable to investigate whether certain conditions produce better results. For example it shows if something is bigger, better, faster, more or less productive, etc. This strategy is refused here since it is not fit for our purpose since in this study manipulation, control and randomization of variables, and then measuring the effects are not possible.

3.2.2 Grounded theory

It is a theory resulted inductively from a set of data. Grounded theory takes a case rather than variable perspective. This means the researcher takes different cases to be wholes, in which the variables interact as a unit to produce certain outcomes. The grounded theory approach consists of a set of steps whose careful execution is expected to lead to a theory as the outcome (Borgatti, 2012). Interpreting data gathered is quite a complicated matter and to reach a correct hypothesis we need a large amount of data. The erroneous belief of this approach is most of the time what causes what will be considered as truth. This strategy will not be used in this study for the following disadvantages:

Researchers own induction may interfere the outcome. The highly qualitative nature of the results is difficult to assess and present.
26

3.2.3 Ethnography
Ethnography is a descriptive account of social life and culture in a particular social system based on detailed observations of what people actually do (Johnson, 2000). In this method observer joins the group or community of interest. By participating in the community, the observer develops an understanding of how the community functions, who does what and how the goals are achieved. Data are normally collected via a series of techniques, including interviews and direct observational analysis. Data collection and analysis often occur simultaneously throughout the process (Johnson, 2000). This strategy is not suitable for this study for the following reasons: It is highly dependent on the researchers observations and interpretations. There is no way to check the validity of the researchers conclusion, since numerical data is rarely provided.

3.2.4 Action research

This method is simply learning by doing. It aims to contribute both to the practical concerns of people in an immediate problematic situation and to further the goals of social science simultaneously. Thus, there is a dual commitment in action research to study a system and concurrently to collaborate with members of the system in changing it in what is together regarded as a desirable direction (Gilmore et al., 1986). Action research is used in real situations, rather than in contrived, experimental studies, since its primary focus is on solving real problems. Research work carried out this way is challenging and difficult (Puskur et al., 2008). The disadvantages of this strategy include factors of time, problem seeking, self-perception and the highly dependency on personal knowledge. This method is simply not fit to answer our research question.

3.2.5 Case study

This strategy is useful for trying to test theoretical models by using them in real world situations. Basically, a case study is an in depth study of a particular situation rather than a sweeping statistical survey (Hafeezrm, 2012).

Its advantage is this method could yield information which people are normally unwilling or unable to provide. The disadvantages are in regards to generalization and subjectivity. Since the researcher is studying a limited case or group very deeply, it is hard to apply what is learned to society in general. Subjectivity has to do with the nature of qualitative research itself. Since it involves observation,

27

interaction, interview, or content analysis of a particular case, most of the interpretations are made based on the opinion of the individual researcher. Also, since these types of studies are so random and based on observations of events as they happen, it is very difficult (if not impossible) to replicate them in a different study. When you can't replicate a study, there is no way to determine if your findings are accurate. For the above reasons I have decided not to use this strategy in this research.

3.2.6 Survey
Survey is a method of gathering information from a number of individuals (a sample) in order to learn something about the larger population from which the sample has been drawn (Ferber et al., 2012). It includes Delphi method, questionnaires and interviews. Delphi method: The Delphi method is an iterative process used to collect and distill the judgments of experts using a series of questionnaires interspersed with feedback. This technique begins with the development of a set of open-ended questions on a specific issue (Skulmoski et al., 2007). These questions are then distributed to various experts on the issue. After summarizing and discussing the responses to these questions, a second set of questions will be designed to clarify areas of agreement and disagreement and distributed to the same group of people. And this process continues till all subjects of disagreements are agreed. Advantages of this technique are: It helps generate consensus or identify disagreements among groups hostile to each other. It allows sharing of information and reasoning among participants.

Disadvantages of Delphi Technique are: Information comes from a limited group of people and may not be adequate to reach a conclusion. Forcing to eliminate diversion of ideas. It is more time-consuming than other methods; It requires participant commitment.

So for the above disadvantages I chose not to follow this technique. Questionnaire: It is a written set of questions to gather information from individuals. Its advantages are: It could be used to collect large amounts of information at a low cost per person. Nobody is involved to make an effect on the respondents answers. It is relatively simple to analyze.

28

The important limitation of questionnaires is that they report what people say and not necessarily what they do (Jefferies, 2012). Questionnaire conforms to our goal of finding best the hindrances of e-Banking development since quantitative data can practically answer the research question and enables us to assess the level of importance of each hindrance. Best practice on questionnaire development defines 5 steps for writing a survey questionnaire (Premium Survey Services, 2012): 1. Determine the objective 2. Decide the attributes to measure 3. Identify the audience 4. Choose measurement scales 5. Check reliability Interview: Contrary to the questionnaire which is a structured survey, interview is an unstructured way to probe respondents. The advantages are: It is more flexible as interviewer can explain questions not understood by the respondent. The interviewer can guide the interview according to respondents answer.

The disadvantage of this method is it is time consuming but I indent to use this strategy to gather required data. Interview can be performed via the telephone or in person. I have decided to use this method for this research since face to face interview gives us more in-depth view over the topic and it is a reliable source of information. There is a wide variety of literature regarding best practices for user research interviews. Most of them advise interviewers to avoid asking leading questions, to ask questions that are based on a participants experience, and to avoid overly complex, lengthy questions (Hackos et al., 1998).

3.3 Population and sample

The population of the research refers to all people within the scope of collection of data. It is not all people in the population who shall have access to the researcher because the researcher shall build a sample size, out of which data shall be collected directly. The population for the research shall be made up of two major classes of people and these are end users of electronic banking and technical stakeholders behind electronic banking who provide eBanking services. To achieve valid and reliable result, a service based categorization would be used; people who
29

use the service and people who provide the service. This categorization would enable us to gain views from two different perspectives. By end users, reference is being made primarily to bank customers in Iran and by technical stakeholders, reference is being made to software developers and hardware implementer. Out of this large population, I shall select a sample size. The sample of end users shall be made up of fifty (50) random users of eBanking services. The technical stakeholders sample should be selected purposively and shall be made up of twenty (20) staff from two different banks. This number is chosen since it is not very large and so I could afford interviewing all of them one after the other. The banks to use are Maskan Bank and Saman Bank. Basically there are 2 kinds of banks in Iran: state and private. First chosen bank is a state bank which I have access to its entire staff and may find volunteers to this interview very easily and second one is a premier private bank who presented Internet banking and mobile banking in Iran in 2001. Among all private banks, their developer may be more experienced and knowledgeable. This will tell us if both state and private banks have the same views and strategies. I shall make use of fifty (50) end users from different parts of Iran in order to ensure that data collected shall become a true reflection of what goes on in the whole of Iran. Two different banks have been selected in order to ensure fairness in the collection of data. Such fairness and the need to have true representation of what go on in the whole of Iran rather than just a little portion of Iran will go a long way to influence the reliability and validity of results to be obtained. In all, there shall be seventy (70) people in the sample size.

3.4 Data collection procedure

Primary data collection involved the use of the research methods as described above. Specifically with the use of the questionnaire, I selected ten banks from ten different towns spread across the length and breadth of Iran. All these banks used electronic banking. Five customers who entered the bank at the time of my presence and were willing to be part of the research were included in the sample size. Questionnaires that contained close ended questions were distributed to them. The close ended questions are questions that do not demand written explanation but then demand that respondents select answers from given list. Example Yes, No, True, False, Agree, Disagree and so on. Here we have used scaled questions (See Chapter 4) to be used to generate statistics in quantitative manner. The respondents had to answer questions pertaining to the services they received from the banks through electronic banking. This enabled us to rank the severity of hindrances to the development of eBanking services. With reference to the interview, I scheduled time with the twenty respondents, one at a time. An interview guide is prepared (See Chapter 4) and so almost all the respondents had to answer the same set of questions. Meanwhile,
30

demanding on answers given by the respondents, I asked leading and following questions. I wanted to gather information pertaining the challenges and improvement of the electronic banking system.

3.5 Risks 3.5.1 Risks to research

The main risk here would be that we found no candidate interested to meet with us and answer our interview questions. Therefore we would receive not sufficient data to evaluate and reach an accurate and precise conclusion. The other risk would be that we receive very different answers from different candidates. And thus we cannot reach a conclusion. Some candidates may also give invalid answers which again leads us to poor data to evaluate. Lack of required data to reach a reasonable result due to restricted access to banks data, reports and statistics is another risk we are faced here.

3.5.2 Risks to interview participants

The privacy issue is very important here. Many individuals are very sensitive to give such information, especially when they fill they are not beneficiary in this survey. We have to be very careful to protect their privacy from a third party access, asking them if we could use their name in our survey, asking them to sign an agreement. Some might consider publishing their name in such a survey, as an incentive and be happy to participate in our interview, and some might not want their name to be published in a research for another country and might feel this would violate their privacy. They may even need to get a permit from their boss before any agreement.

3.6 Limitations
Research time and material are limited to the time appointed by the university. As I have limited time, it is important to find out some parameters by literature review. Research budget is curbed by my limitation in spending money in terms of printing and publications. To have the best conclusion coming out of questionnaires they ought not to be too long and time consuming to read and answer. In regard to number of banks and people prepared to take their time and answer questions there was a few number of interviewees. Some feelings, beliefs and attitudes of customers may not be noticed through questionnaires. The respondents may not be completely truthful or have forgotten the correct answer. So the accuracy of the result is limited to respondents answers.
31

Randomization of the sample group may affect the applicability of the result. Reproducing the result of this survey would be nearly impossible with another sample group or even same group but in another time. For example some respondent may change their mind over a period of time. And this issue may affect on the validity of the results.

3.7 Summary
Since the current research intends to use the results of its findings to identify the action needed towards e-Banking development, therefore, methods of this research based on the objective is of course empirical. After a critical study through the various research designs, I chose to use the survey research strategy. In this regards questionnaire and interview were found appropriate. The table below demonstrates the different research strategies discussed.

32

Research strategy
Experiment

Description Investigates the effect of changing conditions. It involves product or people testing. It takes a case rather than variable.

Disadvantage It is not suitable for the purpose of this study.

Grounded theory

It is more suitable to show what causes what. Researchers own induction may interfere the outcome.

The data is difficult to assess.

Ethnography

It observes social life.

It is dependent on the researchers observations. Validity of the researchers

conclusion could not be checked.

Action research

It focuses on solving real problems. It is learning by doing.

Time, problem seeking, selfperception. Dependency on personal knowledge.

Case study

It tests theoretical models.

Generalization is difficult. It is highly dependent on

It yields information which people are normally unwilling or unable to provide.

individual researchers opinion. Replication of the situation is almost impossible.

Survey

It is gathering information from a number of individuals. It could be used to collect large amounts of information at a low cost.
Table 4- Research strategy comparison

Generalization may not be quite valid.

33

Due to the absence of verified factors, I chose to interview chosen group of experts who are main influencers in eBanking products. Since there was a necessity to rank the main factors and outline the most severe ones, users of eBanking services were the best individuals to indicate the prime issues. Some close questions based on factors were designed to be asked from members of society. Written responses are likely to entail conscious effort and not to be repetitive, whilst an interviewer can interactively explore interesting responses in great depth. With primary data collection, there shall be the use of in-depth interview. The responses given to particular survey questions during face-to-face interviews may be valid sources of data in survey studies.

34

Chapter 4

Data Analysis

35

4.1 Introduction
This research work was set out to identify the factors affected the development of electronic banking in Iran. In doing this, I set out a research question that is directed towards finding the right factors, the account for the progress or otherwise electronic banking in Iran. Review of related literature and data collection were conducted around the research question. A questionnaire for e-Banking users and two sets of interview questions from eBanking service providers and service users are designed and provided below acting as the survey instrument. Now to make data analysis comprehensive and well organised, I shall group the data analysis into three major themes. These themes are explained and analysed below.

36

4.2 Research instrument

The questions for this section are derived from literature review in section 2.2 of this study.

4.2.1 Interview guide for service providers

1. How many transactions per second could your mainframe support? 2. What is the EAL level of you mainframe? Hardware 3. Have you ever faced a major system failure due to hardware malfunction? 4. Do you have a backup data-centre in case of emergencies? 5. Are your issued banking cards ISO 7816/14443 compliant? 6. Are these issued banking cards EMV compliant? 7. Do your POS readers comply with ISO 7816/14443? 8. Do your POS have GPRS capability? 9. Does your switch support ISO 8583 or APACS? 10. Do all your ATMs comply with Payment Card Industry Data Security Standards Software (PCIDSS)? 11. Do all your ATMs have audit trail and logs capabilities? 12. Do you provide mortgage accounting facility on the Internet? 13. Do you use an integrated system for back-office? Telecommunication network 14. Are various e-Banking channels such as Mobile, ATM, Kiosk, Telephone and Internet are supported by your telecom network? 15. Do you utilize specific network concentrators/aggregators to create and expand the eBanking networks or do you use general networking equipments? 16. Do you utilize specific network management system to monitor e-Banking networks or do you use general networking management system? 17. How much your e-Banking operations are affected by network disruptions? Has it ever caused your service a severe breakdown?

37

18. Have you faced any scams? 19. Have ever a private data of a customer been hacked? 20. Do you follow any standard security model to ensure information safety? Security 21. Do you have SSL certificate for your Internet banking? 22. Do you use DES/3DES, AES, RSA data encryption standards, digital signature, PGP, SET and Kerberos? 23. Do you use Public Key Infrastructure (PKI) to provide digital certificates to verify the digital identity of a user? Operating Sanctions Islamic cost against Iran banking principles 24. Do you think Islamic banking rules have limited your choice for core banking software? 25. Do you think these rules have any effect on the spread of e-Banking? 26. Has the sanction affected the e-Banking services you provide in any way? 27. What would you do differently if there was no sanction?

28. Do you have any objection not charging customers as a card issuer per transaction?

29. Did you face any cultural set back in offering electronic services? Culture 30. Is electronic money tangible and accepted for your users? 31. How many percentages of your customers perform their transactions electronically? 32. Are you satisfied with the way e-Banking services are reached out to users?
Table 5- Interview with service providers

38

4.2.2 Interview guide for bank customers Security 1. Have you faced any scams? 2. Have ever your private data been abused?

Sanctions against Iran

3. Are all banking services you need available through e-Banking channels like credit card payments while buying online?

Perceive d ease of use

4. Do you find it easy to perform all your banking transactions through Internet banking?

How about other service channels like Mobile, Telephone, ATM and POS? 5. Comparing traditional banking, do you find Internet banking, mobile banking, telephone banking, ATM, POS and Kiosk more useful?
6. Which electronic service would you prefer the most?

Customer satisfaction

Perceived usefulness

7. Do you ever find it necessary to go to a bank branch?

8. Would you consider doing all your banking transactions to be done electronically?

Customer training

9. What electronic banking means for you? 10. Do you know how to pay your bills via phone banking? 11. Could you tell the main difference of ATM and kiosk?

Table 6- Interview with bank customers

39

4.2.3 Questionnaire
Please indicate your level of satisfaction or rate the followings. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 The speed of Internet banking The coverage of mobile banking The POS transaction time The privacy of your information on Internet The security of data using Internet The security of data using mobile The security of data using telephone The security of data using ATM The security of data using POS The security of data using kiosk The accuracy of Internet banking services The accuracy of mobile services The accuracy of ATM services The accuracy of POS services The accuracy of kiosk services The customer services section behaviour Presentation of facilities Quality and speed of digital money orders The reliability of Internet service channel The reliability of mobile service channel The reliability of telephone service channel The reliability of ATM service channel The reliability of POS service channel The reliability of kiosk service channel The current fee for balance inquiry The current fee for bill payment The current fee for banking statement The current fee for money order Satisfaction from Internet banking Satisfaction from mobile banking Satisfaction from telephone banking Satisfaction from ATM Satisfaction from POS Satisfaction from kiosk Trust on Internet banking technology Trust on mobile banking technology Trust on telephone banking technology Trust on ATM technology Trust on POS technology Trust on kiosk technology Information about different e-Banking service channels Information about the advantages of e-Banking
Table 7- Questionnaire for e-Banking users Telecom network

very low low medium High very high 1 2 3 4 5

Traini ng

Trust

Satisfaction

Cost

Quality of service

Security

40

4.3 Discussion of data gathered from questionnaire

Notwithstanding the fact that respondents have said they benefit from the electronic banking system in Iran, there is no denying the fact that with the large capacity of the electronic banking system in place in Iran, there are technical, strategic and cultural challenges that hinder the growth of electronic banking in Iran. This data was sort from 50 random e-Banking users asking them to rate their satisfaction level.

4.3.1 Telecommunication network

Very low (%) Low (%) Medium (%) High Very high (%) (%) No of Respondents

1 2

The speed of Internet banking The coverage of mobile banking

4 63.6

8 3 6

6 33.3 20

72

10

50 33

3 The POS transaction time

64

10

50

Table 8- Telecommunication network analysis

As we mentioned in section 2.2.1 of this survey, the telecom network has a very important role to build the required infrastructure for e-Banking services. Since 82% (72+10) of respondents to question 1 and 74% (64+10) of respondents to question 3 have selected their satisfaction level high or higher, we must say the speed of Internet banking and the POS transaction time are in satisfactory level. On the other hand 63.6% of respondents were answered their satisfaction level for mobile coverage very low and the rest low or medium . This shows Network coverage for mobile banking in Iran is poor and needs to be improved.

41

4.3.2 Security
Very low (%) Low (%) Medium (%) High (%) Very high (%) No of Respondents

4 5 6 7 8 9

The privacy of your information on Internet The security of data using Internet The security of data using mobile The security of data using telephone The security of data using ATM The security of data using POS

20 12.7 17 60

38 48.9

30 19.1 40

12 2.1

50 47 5

33.4

16.6 38

50 62 4

6 50 50 3

14

26

48

8 100

10 The security of data using kiosk

Table 9- Security analysis

The importance of security as a technical factor is discussed in section 2.2.1 of this study and here we analyse the answers to assess the level of its importance. 80% (38+30+12) of the respondents to question 4 selected their satisfaction level medium or higher. This shows the privacy of information on the Internet is not a major concern for Iranian users and the security of this channel is already assured. The same conclusion applies for question 5 since 70.1% (48.9+19.1+2.1) of users have chosen their satisfaction level medium or higher. Mobile banking is not wildly used since only 5 persons answered the corresponding question and the security of mobile banking is still under question because 60% of respondents have selected low for their satisfaction level. The answers to question 7 show telephone banking is also not used by the majority since only 6 persons answered the question but its security is totally acceptable since all the respondents picked their satisfaction level medium or higher. Answers to question 8 show security of ATM is highly accepted since all users selected high and very high satisfaction level and we could say this channel is the most secure e-Banking service according to respondents of this survey. Question 9 assesses the security of POS. If we do not consider 48% which have rated medium, we see that 40% (14+26) of users have picked low or very low while 12% (8+4) have picked high or very high. This indicates POS security has still long way to go and should be improved. Since only 3 persons have answered the question regarding kiosk (10), we could say this is the least used e-Banking channel in Iran but very secure since all respondents selected high for their satisfaction level.

42

4.3.3 Quality of service

Very low (%) Low Medium (%) (%) High (%) Very high (%) No of Respondents

11

The accuracy of Internet banking services

14 66.6

30 16.7 20

56 16.7 80

50 6 50 50

12 The accuracy of mobile services 13 The accuracy of ATM services 14 The accuracy of POS services 15 The accuracy of kiosk services 16 The customer services section behaviour 10 2.2 10 24 100 58 24 34

42 66.7 46 74 90 18 19.5 33.3 44 4.3

3 50 46 30 50 5

17 Presentation of facilities 18 Quality and speed of digital money orders

19 The reliability of Internet service channel 20 The reliability of mobile service channel 21 The reliability of telephone service channel 22 The reliability of ATM service channel 23 The reliability of POS service channel 24 The reliability of kiosk service channel

50 64 4 42 54 33.3 33.3 6

50 30

6 50 50

33.4

Table 10- Quality of service analysis

Quality of service is another technical factor declared in section 2.2.1. The above table show the questions derived to help us explore this factor through the respondents answers. Users believe in accuracy of ATM (question 11) more than other service channels since they have chosen 86% (30+56) high and very high. The accuracy of mobile services (question 12) is also satisfactory since all respondents have picked medium or higher but this result is not quite trustable since there were few respondents. Accuracy of ATM (question 13) is the most satisfying one comparing to other channels since all the respondents have picked high or very high. The accuracy of POS (question 14) on the other hand has gained the lowest satisfaction level since all users have selected medium or lower. The accuracy of kiosk (question 15) is rated high or very high by all respondents. Regarding question 17, if we do not consider the 46% rated medium, the level of satisfaction of those answered very high is 44% and those answered very low is 10%. So in general customer services section behavior is quite acceptable. The answers to question 17 show we could say the
43

same for presentation of facilities since 97.8% (74+19.5+4.3) have selected medium or higher. Only 30 persons have answered question 18 but 90% of them picked medium satisfaction level and this indicates not many users have tested money order facility but there is no objection to its quality and speed for its users. In question 19 all users picked medium or lower which shows the reliability of Internet channel needs to be improved. In question 20 the reliability of mobile services is heavily criticized by all 5 respondents. The answers to question 21 on the other hand show telephone banking is not commonly used but it is quite reliable for its users since all chose high or very high. All respondents to question 22 have selected medium or higher showing ATM reliability is already met. The answers to question 23 on the other hand reveals POS reliability is not good enough and all respondents have picked medium or lower. The answers to question 24 show kiosk is not quite known and used by customers but the satisfaction towards its reliability is rated medium or higher by all 3 respondents.

4.3.4 Operating cost

Very low (%) Low (%) Medium (%) High Very high (%) (%) No of Respondents

25 The current fee for balance inquiry 26 The current fee for bill payment 27 The current fee for banking statement 28 The current fee for money order

24 20 57.4

34 38 2.1 81.8

40 10 27.6 18.2

2 8

50 50 47 11

Table 11- Operating cost analysis

Operating cost has been introduced in section 2.2.2 as a strategic factor that may bar the customers to use a service. From the answers given to the above questions we see only 2% of respondents to question 25 and 8% of respondents to question 26 have chosen high for their satisfaction level and in general customers have objections towards services costs. Among all fees, cost of money orders and then banking statements is better to be adjusted since the first one has got 81.8% low satisfaction(question 28) and the second one 57.4% very low(question 27).

44

4.3.5 Customer satisfaction

Very low (%) Low (%) Medium (%) High (%) Very high (%) No of Respondents

29 Satisfaction from Internet banking 30 Satisfaction from mobile banking 31 Satisfaction from telephone banking 32 Satisfaction from ATM 33 Satisfaction from POS 34 Satisfaction from kiosk 26 20

8 40

16 20 33.3

28 20 66.6 24

48

50 5 6

4 28

22 46 33.3

50

50 50

66.6

Table 12- Customer satisfaction analysis

Customer satisfaction is a behavioural factor introduced in section 2.2.3. The above questions enable us to assess the seriousness of this factor. 92% (16+28+48) of respondents of question 29 have picked the satisfaction level of medium or higher. This shows users are satisfied with the Internet channel. From the 5 respondents to question 30, 80% (20+40+20) picked medium or lower which again shows dissatisfaction of users from mobile channel. All 6 respondents to question 31 have selected medium or higher showing their satisfaction using this channel. ATM has gained the highest satisfaction level (question 32) with 96% (22+24+50) choosing medium or higher. All the respondents to question 33 on the other hand picked medium or lower confirming their serious dissatisfaction towards POS eBanking channel. Few (3) respondents of question 34 selected medium or high satisfaction level. In general POS and mobile services are still need to be improved to gain the higher satisfaction level.

45

4.3.6 Customer trust

Very low (%) Low (%) Medium (%) High Very high (%) (%) No of Respondents

35

Trust on Internet banking technology 36 24

44 40 11.1 2 52 28

50

50 50

36 Trust on mobile banking technology 37 Trust on telephone banking technology 38 Trust on ATM technology 39 Trust on POS technology 40 Trust on kiosk technology

66.7 50 6

22.2 48 14 100

9 50 50 3

Table 13- Customer trust analysis

Customer trust is another behavioural factor introduced in section 2.2.3. The above questions derived from literature review in section 2.2.3 enable us to investigate the level of gravity of this factor acting as a barrier to the development of e-Banking in Iran. All respondents of question 35 selected medium or higher satisfaction rate. Same applies for question 37, 38 and 40. This shows users have complete trust towards Internet banking, telephone banking, ATM and kiosk technology. But all respondents of question 36 chose medium or lower showing their weak trust to mobile banking. After mobile POS technology has gained the lowest trust. If we do not consider the 28% medium for question 39, 20% (6+14) have rated high and very high but the majority of 52% rated low specifying their mistrust towards this technology.

4.3.7 Customer training

Very low (%) Low (%) Medium High Very high (%) (%) (%) No of Respondents

41 Information about different e-Banking service channels 42 Information about the advantages of e-Banking
Table 14- Customer training analysis

64

18

18

50

42

24

34

50

46

Customer training is also a behavioural factor pointed in section 2.2.3. From the above answers we realize 64% respondents to questions 41 and 42% respondents to questions 42 believe they approximately know the different eBanking service channels and their benefits which need to be improved.

4.4 Discussion of data gathered from interview with service providers

To investigate the purpose of this study and see the challenges of providing e-Banking services, this data was sort from 20 interviewees from Maskan bank (state) and Saman bank (private) authorities. Both of these banks provide e-Banking services through ATM, POS, kiosk, Internet, mobile and telephone channels. Here is a list of their notes.

4.4.1 Hardware
Questions 1-8 of table 5 in section 4.2.1 of this document address the hardware status of both state and private banks. The answers to question 1 determine switch of Saman bank could handle to 500 TPS, but for Maskan bank this number lowers to 320. It was determined switch TPS directly relates to switch hardware and software capability. Here is a provided example: Temenos core banking software (T24) with the following specification could support up to 3000 TPS.

47

Chipset

CPU (Cores)

Memory (Gbyte)

Network Bandwidth (Mbitsper sec)

Presentation Tier Application Tier Data Tier

IBM Power

24 * P7 3.7 Ghz

48

451

IBM Power IBM Power

140 * P7 3.7 Ghz 72 * P7 3.7 Ghz

420 288

4093 4408

STORAGE REQUIREMENTS IOPS (i/o per second) Recommended Stripe Size RAID Oracle Block Size Disk space estimation Current
222,000 1 MB 0+1 8k 10,080 Gigabytes (growth)

Disk Requirements # of Years Size in GB 1 10,080

Figure 5- T24 hardware spec

The answers to question 2 show both mainframes have EAL 4 which is acceptable for the current amount of transactions. Reponses of question 3 confirm a network malfunction almost happen every month during the time government deposits money subsidies to people. The number of TPS goes beyond the capability of their switch and transactions fail for both banks. Question 4 responses explore Saman bank does not have a backup data-centre and Maskan bank is developing one but it is still not functional. The answers to question 5 and 6 determine all issued banking cards are ISO 7816 or 14443(contactless cards) and EMV compliant. The answers to question 7 indicate all POS readers are industry standard and comply with ISO 7816/14443 since all have been imported from famous brands. But contactless technology is in its early stages of development and still not functional. The answers to question 8 say GPRS POS are limited to taxi services only in few touristic islands.
48

A very important note illuminated during interview was that sometimes they use different hardware instruments from different brands and when these instruments are not compliant, a programming code is required to make them compliant.

4.4.2 Software
Questions 9-13 of table 5 discuss the software standing of banks in Iran. Answers to questions 9, 10 and 11 were positive and confirm they have implemented all the industry protocols and standards to provide the maximum security. The answers to question 12 also show both Saman and Maskan banks provide mortgage accounting through Internet. The responses to question 13 explain Saman bank is equipped with an integrated core banking software developed locally but tellers of Maskan bank operate with more than 40 software in their daily activities since this bank does not have an in integrated core software. The level of human mistake is very high and they constantly deal with financial conflict between different databases. But the financial conflicts resulting from high quantity of software on Maskan bank would be paled once they implement standard core software.

4.4.3 Telecommunication network

Questions 14-17 of table 5 investigate the telecom network status. The answers to question 14 were positive. But the answers to question 15 indicate routers, switches and other network instruments are not banking specific due to their high cost and also sanctions towards Iran. Question 16 responses specify Network connectors and network monitoring system are banking specific although very old. Question 17 responses were quite disappointing, saying network disruption happens more than once a day but they have managed to solve it very fast. For example Internet disconnections, mobile coverage being out of reach, busy telephone lines for POS network are a routine.

4.4.4 Security
Questions 18-23 of table 5 in section 4.2.1 refer to security. The majority of answers to questions 18 and 19 were negative and the answers to questions 20, 22 and 23 were positive. Regarding question 21 unlike Saman bank, Maskan bank do not have SSL certificate for their Internet services.

4.4.5 Islamic banking principles

This issue is being addressed by questions 24 and 25 of table 5. The answers to question 24 show Islamic banking rules are not a major concern to all interviewees view since there are still a variety of reliable and famous brands of core banking software companies that support these rules. And the answers to question 25 were either No or a little.
49

4.4.6 Sanctions against Iran

Questions 26 and 27 of table 5 assess the seriousness of this factor. Question 26 responses confirm sanctions act as a severe barrier by the majority of interviewees. In response to question 27, 3 respondents have pointed even if there were no sanctions they would prefer to develop core software internally to reduce the cost.

4.4.7 Operating cost

Operating cost factor is investigated by question 28 of table 5 in section 4.2.1. Charging customers per transaction for issuing cards is suggested only by 2 interviewees. The rest agreed the fee they charge the customers once at issuing/reissuing time not only covers the issuing cost but they will gain a benefit.

4.4.8 Culture
Question 29-32 of table 5 is designed to find out if this factor hinders the development of e-Banking in Iran. The answers to question 29 were half and half, yes and no depending on the interpretation of each person from the cultural set back. The answers to question 30 outlined the concept is mostly acceptable for e-Banking users but not the majority of people. The answers to question 31 were very different and nobody could surely give a number. Answers to question 32 show Saman bank is more successful to attract customer comparing to other banks. Considering Saman bank is now providing trade finance services like swift, LC, facilities in different currencies, buy/sell stocks, currency remittance and etc. their number of customers is rapidly increasing. On the contrary Maskan bank services are quite limited and most of its customers do not trust to use its Internet banking since they do not have SSL certificate. Another important note discovered during the interview is that cultural changes toward understanding the benefits of e-Banking services and introducing these services is started mostly with TV commercials and banks brochures were the second help in this regards. But most effective way of increasing customers knowledge is considered mouth by mouth.

4.5 Discussion of data gathered from interview with e-Banking users

50 bank customers in 10 different towns from different banks were selected for interview. Interview took an average time of 10 min for each person and here are the findings for each factor introduced in section 2.2. The interview questions are explained in table 6 section 4.2.2 of this survey.

50

4.5.1 Security
Most answers to question 1 and 2 of table 6 regarding the security were negative. So, scams and data privacy are not major concerns for Iranian users.

4.5.2 Sanctions against Iran

Question 3 of table 6 is derived to assess the level of importance of this factor according to users view. Sending money orders abroad and procurement of credit cards which work outside the country were the two major services, users were mentioned they need and do not receive but they did not know if this is due to the lack of knowledge of system developers or due to the sanctions against Iran.

4.5.3 Perceived ease of use

The answers to question 4 indicate the level of effects of this factor in spread of e-Banking in Iran. According to younger users (before 50 years) channels are user friendly and easy to perform a desired task but older users do not agree. They prefer to go to a bank branch and ask a teller to perform their desired task. In general, most users are satisfied with the service they receive via different channels of e-Banking since they have used no better service and they do not compare the service they receive with another one.

4.5.4 Perceived usefulness

Questions 5 and 6 of table 6 are meant to assess perceived usefulness of different e-banking service channel through users opinions. The result show they believe all these channels are useful to them allowing them to save their time not going to the bank branch but services provided via kiosk are the least known. And Internet disruption is the most severe issue for the users of this channel. Internet disruption for both Internet and mobile channel is caused by the copper wire lines used for the telecommunication infrastructure in Iran. Answers to question 6 show ATM is the most desirable channel since it is the only channel that gives users money and after that Internet channel gets the highest rate.

4.5.5 Customer satisfaction

The answers to questions 7 and 8 indicate the level of customer satisfaction with the current services. The responses show people still need to go to bank branches especially to cash a check, order/renew banknote, open an account, transfer money from a bank to a different bank and etc. But all users unanimously said they would do all their banking transactions electronically if it was possible. Some interviewees pointed the following notes regarding satisfaction.
51

Financial conflicts often created via POS network make users lose their trust toward the system. In some cases the financial conflicts were lead to customer closing his/her account. Call-centre behaviour is quite critical in these situations.

Mellat bank has provided immediate settlement facility on its POS and now this is been looked as a necessary requirement and when a bank does not provide this facility, merchants do not use its POS. although this issue is heavily mentioned, it is not difficult to implement and most banks have already started to implement it. They could easily add this functionality changing their POS software.

Mobile banking cost is high according to the majority of the interviewees and the mobile coverage of Internet is very poor and most of users have tried this channel once or twice and stopped using it due to these disruptions.

4.5.6 Customer training

Question 9, 10 and 11 are designed to assess the level of customer training and information they have received. The outlines from question 9 will be discussed in details in section 4.6. Paying bills by telephone banking (question 10) is found easy by the majority since the IVR talks you through it. The answers to question 11 regarding the main difference of kiosk and ATM which is of course the inability of paying cash by kiosk is merely known (only 3 out of 50 interviewees). Some even asked what is kiosk.

4.6 Perspective of e-Banking in Iran

I wanted readers to have a very deep understanding of the subject under discussion, which was electronic banking. For this reason, data was sought from all seventy (70) respondents on what in their opinion constituted electronic banking or what the structure of electronic banking in Iran was. The data below represents results that were received from respondents when they were given the opportunity to define what electronic banking in Iran was.

52

Components of E-Banking
0 22 23 Networking Bank Branches Using IT in Banking Banking Online 25

Figure 6- Components of e-Banking

The seventy (70) respondents were asked what their view of the component of electronic banking was. From the data above, it can be seen that twenty-two (22) of the respondents pointed out that they see electronic banking as the availability of online services. This means that in the view of these respondents, a bank is said to be practicing electronic banking if the bank is able to make room for their customers to transact business with them via the Internet. This means they do not have enough knowledge about other e-Banking channels such as mobile banking, telephone banking, kiosk and they do not consider ATM and POS as part of e-Banking services which is lack of information. Twenty-three (23) of the respondents on the other hand associated electronic banking with the networking of all bank branches of a particular branch. This way, a customer can receive banking services from any bank of the origin of his or her bank even if that bank is not his parent bank. This was different from online banking though they all involve the use of the Internet. In the latter, the Internet service is available only for the use of bank operators and not end users. Finally, twenty-five (25) respondents pointed that any bank that used information technology and tools associated with information technology in their transactions is practicing electronic banking. In the view of these respondents, though the use of Internet or networking may constitute electronic banking, banks may still be regarded practicing electronic banking in the absence of these: provided that use any features of information technology.

53

Interpreting the data above, I can conclude that all three components outlined to respondents are very vital in electronic banking. It is indeed for this reason that no one component out rightly outscored the others. The difference between the highest scoring component and the least scoring component for instance was a difference of only three persons. Again, it is important to note that the collection of this data is very vital for this research work and the problem under study because it is only when the actual components of electronic banking is defined and identified that the factors associated with it can be established. Presently, the results show that in considering the technical factors that constitute electronic banking, things such as the presence, functions and expansion of computers should be used. This is because all three components reviewed by respondents have direct bearing with computers. Going further from the presence of computers, the technical factors that affect electronic banking in Iran can be seen to include sophisticated hardware and software as well as advanced modernity with computers including the use of the Internet. With reference to the literature review, much can be agreed with Allahyarifard (2005) who argues that the major technical factor that could be associated with electronic banking in Iran is the Internet. For this reason, any condition that affects the Internet affects electronic banking in Iran.

4.7 Effects of e-Banking on customers

It will be incomplete to discuss factors that affect electronic banking in Iran without looking at the effects of electronic banking on the customer, who happens to be the end users. This is so said because the effect and transformation of any system is seen in the impact that the system creates on its supposed beneficiaries. Respondents were therefore asked to choose among three factors, the one they believed was the best effect they derived from electronic banking in Iran. The data below represents the answers that were received from respondents.

54

30 30 25 25 20 15 15 10 5 0 Accessibility to Banking Services Expanded Faster services competition and value for money Effects of E-Banking

Figure 7- Effects of e-Banking

The responses from respondents reveal very interesting facts. From the data collected, thirty (30) out of seventy respondents were more enthused about the fact with the coming of electronic banking, banking has become more accessible to them. Clearly such people benefit from the fact that for the sake of features of electronic banking such as networking of branches and the use of online banking services, they do not always have to be in their parent banking halls before they can access banking services. Banking has become accessible because banking can be done on the go. The presence of automated teller machines (ATMs) was indicated as one of the aspects of electronic banking that has made electronic banking has the feature of easy accessibility. With the automated teller machines, banking can go on even outside normal banking hours. Twenty-five (25) of the seventy respondents pointed to the fact that with the coming of electronic banking among as many banks in Iran as possible, there has been positive and healthy competition among the banks to give customers the best of banking services. Out of this competition, customers and end users of electronic banking has had the opportunity to choose between banks whose services will give them the best value for their monies. Another fifteen (15) respondents said that the best effect of electronic banking to them was the fact that it made banking really fast and happy they do not have to take turn in waiting hall of bank branches. Statistically, all three benefits or effects pointed out are highly instrumental in the electronic banking service given in Irans banking industry. Data collected points to the fact that it is not just customers who benefit from Irans
55

electronic banking system but operators as well. For example the operators said that electronic system of banking makes work load less tedious and less stressing though they admit workload has increased.

4.8 Research outcome

By researching through a questionnaire for e-Banking users, an interview with these users and an interview with eBanking service providers, we reach the following outcomes about the factors affecting the development of eBanking in Iran introduced in section 2.2 of this survey. From the technical group, hardware inefficiency, software incapability and telecom infrastructure limitation are the most important ones. Security and quality of service are quite acceptable and all required industry standard are met. From the strategic group, Islamic rules almost has no effect on e-Banking but sanctions against Iran is a critical hindrance affecting both hardware and software choices to provide high quality services. Operating cost is also slightly objected and could be justified to attract more customers. And finally from the behavioural group, peoples level of information about the e-Banking services and their benefits play the key role. Customer perceived ease of use, perceived usefulness, satisfaction and trust are relatively tolerable. The level of importance and seriousness of each factor is scaled from 0 to 5. This level is deduced from both quantitative data gathered through the questionnaire and qualitative data gathered through interview with eBanking users and service providers. The figure below gives a reflection of the major challenges pointed out by participants in this research.

56

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Technical factors Strategic factors Behavioural factors

Hardware inefficiency Hardware being incompliant Software capabilities Telecom copper wires Security Service quality Islamic rules Sanction Cost of service Ease of use Usefulness Satisfaction Trust Knowledge level

Figure 8- Major challenges of e-Banking in Iran

4.9 Summary
In this chapter research instruments including a questionnaire for bank customers, an interview guide for these customers and an interview guide for banking service providers are developed. The questionnaire containing 42 questions took about 25 minutes, the interview containing 11 questions about 10 minutes and the interview with service providers containing 32 questions about 30 minutes per person. Data gathered through these tools is analysed and major factors acting as hindrances to the development of e-Banking in Iran are distinguished and presented. The structure of e-Banking in Iran and its effects on customers is also investigated.

57

Chapter 5

Conclusion

58

5.1 Overview
The main objective of this study was to investigate into the hindrances of e-Banking development in Iran. So in this regards results obtained from researches previously done on e-Banking area were analyzed. More comprehensively other factors like perceived satisfaction of a person with quality, speed and accuracy of performing operations by banks, variety and desirability of banking services and way to behaviour, and trust to the performance of bank and technology used in electronic banking as well as trust to financial security and respect to privacy by bank in electronic banking are investigated and rated by e-Banking users through questionnaires and interviews. Technical factors were also discussed in more depth through interview with service providers.

5.2 Research review

Most barriers on the way of establishment or prerequisites of implementing or supplying electronic banking services stated in previous studies plus the ones I have faced is categorized to 3 groups: technical, strategic and behavioural factors explained in section 2.2. Since the nature of the study is in fact applied empirical and descriptive, the survey strategy of questionnaire and interviews were used to gather data. The sample volume has chosen 50 for the bank customers and 20 for system developers due to the time limitation (refer to section 3.3). The outcome in section 4.8 shows that electronic banking widely spread in Iran, cannot be easily expanded and promoted since the few highlighted problems are quite fundamental. The results show technical factors are the most important factors building the e-Banking infrastructure. From these factors the research shows security risk is something that can be paled but not illuminated, to reduce this risk financial associations ought to form a professional legal entity to set industry standards like what exists in advanced countries, then standards should be taken to legislators and be introduced to follow, otherwise because of number of providers lack of funds and investment in security any of providers are able to ruin the trust of consumers. The quality of services is reasonably acceptable. The areas needed immediate attention are adding immediate settlement feature to POS system and increasing Internet reliability, speed and coverage by improving the telecommunication infrastructure. Hardware and telecommunication infrastructure are in critical situations and need to be addressed by banker if they want to expand their e-Banking services.

59

Strategic factors stands after technical issues in importance degree, since Islamic rules is not considered a barrier to e-Banking development and cost of services is not objected by all the respondents and could be easily justified by bankers. So the main hindrance in this group is the sanctions against Iran which has a severe effect on both hardware and software regarding banking industry. In Iran for the sanctions most of the hardware are out of date or
second handed, the same thing goes among the computer hardwares of the banks. And we hope in the near future this

issue is solved through political discussions. Behavioural factors are the least important but still very effective. Culture and training are the most important hindrances of this group since perceived ease of use, perceived usefulness, customer satisfaction and customer trust are relatively tolerable. The culture and training for example intention of public can be improved by putting financial interest, loyalty (incentive) programs, or even public advertising in place. Although banker should keep in mind that consumers trust and satisfaction could be jeopardised more by the lack in transaction accuracy and availability rather than fraud and exposure.

5.3 Evaluation
According to the ascending trend of electronic banking and advantages resulting from that, which can be summarizes as wellbeing, convenience and reduction of costs, the use of it in Asia and Europe will be more than U.S.A and will turn in to a global phenomenon. From the managerial perspective, the findings of this research will be very helpful to the bankers and policy makers as a tool to investigate the hindrances to the development of e-Banking in Iran and determine the level of its success. Step by step movement of electronic banking, viewing accessible bases is as though bankers from every level have to enhance their customer's satisfaction and decrease costs. The findings of this study suggest that in order to attract more users towards electronic banking, it is not going to be sufficient to merely introduce e-Banking services. They need to develop a system with a robust infrastructure to gain the customers trust and build the belief of usefulness of the system as well. Moreover, it is of prime importance for banks to develop e-Banking systems, which are easy to use, secure, and private for their users. Firstly the findings of this study have to be interpreted considering the limitations of the study. And secondly, there may be many other factors which influence customer adaptation towards e-Banking. It is not practically possible to incorporate all the variables in a single study.

60

Research instrument questions discussed in sections 4.2.1, 4.2.2 and 4.2.3 are derived from the literature review in chapter 2. From overall 85 questions, few added very little to our knowledge like questions 5 and 6 of table 6 and also questions 7 and 29 of table 5.

5.4 Future work

Literature review in chapter 2 illustrates most studies have investigated the hindrances to the development from one angle either technical (Auto, 2010) (Mermod, 2011) (Yang et al., 2003) (Vlad, 2010) (Chiemeke et al., 2006) or customer behaviour (Mastoori, 2009) (Venus et al., 2000) (Aliaskari et al., 2011) (Naimi, 2008). Thus, going by the findings of most studies, we can argue that the literature on the impact of e-Banking is unconvincing especially in developing economies and serve as an open ground for more research in the area of e-Banking. In this survey I have investigated both of the above factors, plus strategic factors which are particular to Iran. The result of this survey is more consistent with Yang et al. (2003) research comparing to other papers discussed in literature review confirming transaction technicalities appears to be the leading factor to success of e-Banking services and finally customer satisfaction. Future research should consider experimental or longitudinal studies so that the causal inferences could be made more confidently and safely. It could make several extensions of the current study. The future researchers could also investigate whether adding new services would affect customer adaptation and loyalty or if it would help to reabsorb a lost customer; whether government pay for the banking infrastructure or subsidies it would have any effect on the quality of the service or not. Future research can also examine whether promotional and communicational issues have any influence on the acceptance of e-Banking service. It could use alternative research methods to capture and analyze a more qualitative or quantitative form of data. Particularly this study designed its questions considering the response time for the respondents but in future researches the number of questions could be increased. For example, how many banking cards do you have? This question will indicate the extent of e-Banking usage.

61

Glossary
APACS ATM BIMA BIS BMI CA CMS CBI DAI DES e-Business e-Banking e-Commerce EDBI EDI EFT EFT-POS EAL EMV GPRS ICT IT ITU IVR Kerberos Mainframe OFAC PC PCI DSS PGP RSA SET Shetab Teller TPS WTO Standard of Association for Payment Clearing Services Automated Teller Machine Bank and Insurance Manifest Agency Bank for International Settlement Bank Melli of Iran Certification Authority Customer Management System Central Bank of Iran Digital Access Identifier Data Encryption Standard Electronic Business Electronic Banking Electronic Commerce Export Development Bank of Iran Electronic Data Interchange Electronic Funds Transfer Electronic Funds Transfer at Point of Sale Evaluation Assurance Level (1-7) Europay, MasterCard, Visa is the global standard that is helping ensure smart (Chip-and-PIN) cards, terminals and other systems can interoperate. General Packet Radio Service Information and Communications Technology Information Technology International Telecommunication Union Interactive Voice Responce A private-key encryption technology Powerful computer used for financial transaction processing Office of Foreign Assets Control Personal Computer Payment Card Industry Data Security Standard Pretty Good Privacy Rivest , Shamir and Adelman key encryption technology Secure Electronic Transaction Interbank Information Transfer Network Bank clerk who deals directly with customer Transactions Per Second World Trade Organization 62

Reference List
1 English
1- Auto Menson Elisha (2010) E-Banking in Developing Economy: Empirical Evidence from Nigeria, Journal of applied quantitative methods, Volume 5, No 2. 2- Ayo C.K, Adeyode J. O. and Oni A. A. (2010) The State of e-Banking Implementation in Nigeria: A Post-Consolidation Review Journal of Emerging Trends in Economics and Management Sciences (JETEMS), pp. 37-45 3- Bank for International Settlement (2003) A glossary of terms used in payment systems, BIS, Issue 1 4- Borgatti Steve (2012) An Introduction to Grounded Theory [online], and settlement

http://www.analytictech.com/mb870/introtoGT.htm (Accessed February 2012) 5- Cheng Edwin T. C., Lam David Y., Yeung Andy C.(2007) Adoption of Internet banking: An empirical study in Hong Kong , International Journal of Information Management, Vol. 27, No. 5, pp. 336-351 6- Chiemeke, S. C., Evwiekpaefe, A., Chete, F.( 2006) The Adoption of Internet Banking in Nigeria: An Empirical Investigation, Journal of Internet Banking and Commerce, vol. 11, No.3 7- Computerworld (2000) The difference between e-business and e-commerce [online],

http://www.computerworld.com/s/article/53015/The_difference_between_e_business_and_e_commerc e (Accessed 19 August 2011) 8- Dauw-Song Zhu Jerome, Lin Chih-Te (2010), The antecedents and consequences of e-service quality for onlinebanking, Social Behavior and Personality, pp. 7 9- Davis Fred (1989),Perceived usefulness, perceived ease of use, and user acceptance of information technology MIS Quarterly no 13, pp 319-340 10- Ebizstrategy (2007) E-Business strategy and design [online],

http://www.ebizstrategy.org/Research/resources/538_Sp02/ERP.htm (Accessed 19 August 2011) 11- Engagement Banking (2011).In the Beginning was the Bank [online],

http://engagementbanking.sapient.com (Accessed November 4, 2011)

63

12- Ferber Robert, Sheatsley Paul, Turner Anothony, Waksberg Joseph (2012) What is a Survey? [online], http://www.whatisasurvey.info/downloads/pamphlet_1980.pdf (Accessed 8 February 2012) 13- Gan Christopher, Clemes Mike, Limsombunchai Visit, Weng Amy (2006) A logit analysis of electronic banking in New Zealand Lincoln University, Commerce Division, no 108. 14- Gilmore Thomas, Krantz Jim, Ramirez Rafael (1986) Action Based Modes of Inquiry and the HostResearcher Relationship Consultation 5.3, pp 161. 15- Hackos, J., Redish, J. (1998) User and Task Analysis for Interface Design, New York: Wiley. 16- Hafeezrm, (2012) Case Study Method 79 [online], http://hafeezrm.hubpages.com/hub/Case-StudyMethod (Accessed 15 Feb 2012) 17- Haque Ahasanul, Hj Ismail Ahmad Zaki, Daraz Abu Hayat (2009) Issues of E-Banking Transaction: An Empirical Investigation on Malasian Customers Perception Journal of applied science, no 9. 18- Inntron (2011) Islamic Banking System Product Guide [online],

http://www.inntron.com/corebank_islamic.htm (Accessed 25 August 2011) 19- International Telecommunication Union (2011) ICT Data and Statistics [online],

http://www.itu.int/ITU-D/ict/statistics/ (Accessed 11 August 2011) 20- International Telecommunication Union (2007) World Telecommunication/ICT indicators Meeting [online], http://www.itu.int/ITU-D/ict/wict05/index.html (Accessed 11 August 2011) 21- Ishan Bhatnagar (2010) Project report on: e-Banking, Standard Chartered, Iss: 1, pp.37 22- Jefferies Stephen C. (2012) Descriptive Research, PEHL 557, [online],

http://www.cwu.edu/~jefferis/PEHL557/pehl557_descript.html (Accessed 22 February 2012) 23- Johnson A.G. (2000) The Blackwell Dictionary of Sociology, Oxford, UK: Blackwell, 2nd Edition. 24- Kutler Phillip, Armstrong Gary (2000) Marketing Management, Prentice Hall, pp 243-251 25- Mehr News (2005). Irans SHETAB system to be connected to Chinese banks [online], http://www.mehrnews.com/en/NewsDetail.aspx?NewsID=236691 (Accessed November 5, 2011) 26- Mermod Asli Yuksel (2011) Customers Perspetives and Risk Issues on E-Banking in Turkey; Should We Still be Online?, Journal of Internet Banking and Commerce, Vol. 16, No.1
64

27- Minocha S., Millard N., Dawson L. (2003) Integrating customer relationship management strategies in (B2C) e-commerce environments In human computer interaction Interact, pp 1-5 28- Moon Ji-Won, Kim Young-Gul (2001) Extending the TAM for a World-Wide-Web context, Information & Management, Volume 38, Issue 4, Pages 217-230 29- Orr B. (2004) E-Banking job one: Give customers good ride ABA Bank, J. 96: 56-57. 30- Pikkarainen Tero, Pikkarainen Kari, Karjaluoto Heikki, Pahnila Seppo (2004) Consumer acceptance of online banking: an extension of the technology acceptance model, Internet Research, Vol. 14 Iss: 3, pp. 224 235 31- Poon Wai-Ching (2008) Users adoption of e-Banking services: the Malasian perspective Journal of Business and Industrial Marketing, no 23 pp 59-69 32- Premium Survey Services (2012) Questionnaire Development [online],

http://www.esurveyspro.com/article-questionnaire-development.aspx (Accessed 04 March 2012) 33- Puskur Ranjitha, Ponniah Anandajayasekeram, Workneh Sindu, Hoekstra Dirk (2008) Concepts and practices in agricultural extension in developing countries: A source book International Livestock Research Institute (ILRI), pp. 11 34- Ravi V., Carr Mahil, Sagar N. Vidya (2006) Profiling of Internet banking users in India using intelligent, Journal of Services Research, Vol. 6, No. 2, pp. 6173 35- Rexha Nexhmi, Kingshott Russel Philip John, Aw Audrey Shang Shang, (2003) The impact of the relational plan on adoption of electronic banking, Journal of Services Marketing, Vol. 17 Iss: 1, pp. 53 -67 36- Saunders, M., Lewis, Thornhill P. (2007) Research Methods for Business Students, Harlow, UK: Prentice Hall, 4th edition. 37- Skulmoski Gregory J., Hartman Francis T., Krahn Jennifer (2007) The Delphi Method for Graduate Research, Journal of Information Technology Education, Volume 6 38- Southard Peter B., Saiu Keng (2004) A survey of Online E-Banking Retail Initiatives, Communications of the ACM, Vol. 47, No. 10
39- The Department of Labour and Industrial Relations (2010). Frequently Asked Questions for

Claimants Accessed November 1, 2011 http://labor.mo.gov/DES/Claims/faqs_web.asp#top

40- Turban Efraim (2002) Electronic Commerce: A Managerial Perspective,Prentice Hall, 1st Edition,

pp.35

65

41- Vlad Miranda-Petronella (2010) E-Banking- Modern Banking Services, Christian University Bucharest Faculty of Economic Sciences of Cluj-Napoca, pp. 1-5. 42- Wang Yi-Shun, Wang Yu-Min, Lin Hsin-Hui, Tang Tzung-I (2003) Determinants of user acceptance of Internet banking: an empirical study, International Journal of Service Industry Management, Vol. 14 Iss: 5, pp. 501 519 43- Yang Zhilin, Peterson Robin T., Cai Shaohan (2003) Services quality dimensions of Internet retailing: an exploratory analysis, Journal of Services Marketing, Vol. 17 Iss: 7, pp.685 700 44- Yiu Chi Shing, Grant Kevin, Edgar David (2007) Factors affecting the adoption of Internet Banking in Hong Kong: implications for the banking sector, International Journal of Information Management, Vol. 27, No. 5, pp. 336- 351

2 Farsi
1- Abasinejad Hossein, Mehrnoosh Mina (2006) E-Banking, SematPublications, Vol. 1, pp. 24-75 2- Aliaskari Mahmood, Daei Karimzadeh Saeid, Keivanara Mahmood, Gholizade Azar (2011) Electronic Trading and Necessity of Attention to Development Barriers of Electronic Banking World Academy of Science, Engineering and Technology, pp.326-328. 3- Allahyarifard (2005) Electronic banking services and its executive requirements, Hami Publications, Vol. 1, pp. 4-63 4- Bank and Insurance Manifest Agency (2010) ATM and POS stats [online], http://www.bima.ir/view3855.html(Accessed 11 August 2011) 5- CBI (2011) Data tables [online], http://cbi.ir/simplelist/2546.aspx (Accessed 11 August 2011) 6- Ebinews (2011) news [online], http://ebinews.com/News.asp?nid=15102 (Accessed 11 August 2011) 7- JaliliSaed, Abadi Mehdi (2000) Security mechanisms for electronic payment systems in Internet, TosseSaderat Bank of Iran, Vol. 1 pp. 42 8- Mastoori Yassaman (2009) Reasons Barring Customers from Using Internet Banking in Iran: An Integrated Approch Based on Means-End Chains and Segmentation, Lulea University of Technology, ISSN: 1653-0187.
66

9- Naimi Baraghani Sara (2008) Factors Influencing the Adoption of Internet Banking, Lulea University of Technology, ISSN: 1653-0187. 10- SarmadiSoheih (2004) Electronic Business, Persseman Publication, Vol. 1 pp.157 11- Sharifi Mohsen, Ayat Nasser (2000) Obstacles to use of digital money, TosseSaderat Bank of Iran, Vol. 1 pp. 19 12- Sheikhani Saed (1999) Electronic banking and its strategies in Islamic Republic of Iran, Institute of monetary and banking, Vol. 1 pp. 35 13- Shirkhodai Meisam (2005) Factors affecting consumer confidence in e-Bussiness, Faculty of Humanities- University of teacher training, Vol. 1 pp. 17 14- The world of economic (2007) E-Banking is a necessity not a choice [online], http://www.donya-eeqtesad.com/Default_view.asp?@=45685 (Accessed 11 August 2011)
15- Venus Davar, SafaeiyanMitra (2000) Practical marketing methods of banking services for Iranian

Banks, NegaheDanesh Publication, pp. 27-29

67

Appendix A Extended Abstract

68

An investigation into the hindrances to the development of e-Banking in Iran

Najla Motameni
Extended Abstract of Open University MSc Dissertation Submitted 6 March 2012

1. Introduction Undoubtedly at the beginning of the third millennium contents being raised such as global village, communications, globalization and etc. forces all countries and governments to go with the wave and significantly change their traditional ways. In this pathway, the establishment of e-Banking is a necessity. According to the legal obligation stated in paragraph 4 of Article10-J of Fourth Development Program Action Economic, Social and Cultural, Iranian government is also obliged to establish e-Banking systems and procedures for money exchange and other e-Banking services on national and international level in all countrys banks since the first quarter of the program. This project should have been functional by 2009. But adoption of a new technology has always been a challenge particularly when it comes as a new way of life and tries to confront traditional lifestyle of a society. Banking services are dealt with by every member of a society; obviously they are done in a very traditional way so changing those ways instantly would be a big job. Obviously majority of society like to live in their old ways and bankers and authorities try to get what they want faster, these would take them to collision course unless hindrances to the development of eBanking solutions are known and then appropriate solutions are deployed. This paper particularly inspects the obstacles of e-banking spread and acceptance in Iran. 2. Method In this study a simple but effective survey approach is chosen to identify hindrances. The approach is choosing influencers and architectures of e-banking services from two leading bank from two banking sector, then taking their opinions by the use of open questions. After analysis and categorization of the answers, main issues are picked and then are asked from members of society through a questionnaire then I have assessed the answers to make a ranking on hindrances.

69

Overall 85 questions are asked from 70 respondents (50 users and 20 service providers) through both questionnaire and interviews. All questions were designed to assess the level of seriousness of each factor to the best of capability except 4 of them. 3. Results The following figure shows the basic factors affecting e-Banking according to this survey.

E-Banking factors

Technical factors Hardware

Strategic factors

Behavioural factors

Software

Islamic banking principles

Culture

Perceived ease of use Perceived usefulness Customer satisfaction

Telecommunication Network Security Quality of Service

Sanctions against Iran

Operating cost

Customer trust

Customer training

E-Banking factors

The result of the survey shows technical factors of hardware inefficiency, software capabilities and telecom infrastructure, then the strategic factor of sanctions against Iran and finally the behavioral factor of peoples level of information about the e-Banking services and their benefits play the key roles. The following chart shows the level of and seriousness of each factor scaled from 0 to 5. This level is deduced from both quantitative data gathered through the questionnaire and qualitative data gathered through interview with e-Banking users and service providers.
70

4.5 4 3.5

Hardware inefficiency Hardware being incompliant Software capabilities Telecom copper wires Security Service quality Islamic rules

3
2.5 2 1.5 1 0.5 0 Technical factors Strategic factors Behavioural factors

Sanction Cost of service Ease of use Usefulness Satisfaction Trust Knowledge level

Major challenges of e-Banking in Iran

4. Analysis
The following figure indicates the perspective of electronic banking in Iran which is discovered through the survey questions. 25 from 70 respondents believe e-Banking means using IT in banking industry, 22 counted only Internet banking as eBanking and the rest said e-Banking is networking of bank branches. This statistics tells the knowledge level of people about banking services and their benefits are low.

71

Components of E-Banking
0 22 23 Networking Bank Branches Using IT in Banking Banking Online 25

Components of e-Banking

The effect of e-Banking on peoples life could not be ignored since the 70 respondents of this survey were asked to choose one of the 3 benefits of e-Banking services and this is how they answered.
30 30 25 25 20 15 15 10 5 0 Accessibility to Banking Services Expanded Faster services competition and value for money Effects of E-Banking

Effects of e-Banking

72

5. Discussion
According to my interpretation, the knowledge of the majority of bank customer needs to be approved about electronic services. In this regards TV commercials and video clips are more effective than written catalogue or website how to. Technical infrastructure of e-Banking should be more robust and need to be improved, considering the fact that attracting a new customer is difficult but absorbing a lost customer (due to a system malfunction) is nearly impossible.

The importance of identifying the factors influencing the spread of e-Banking for bankers and providers of these services now is more than ever, and experiences obtained from this study will serve as an important academic document for future referencing by researchers who may want to undertake further studies in e-Banking in Iran. Considering research time and material are limited to the time appointed by the university and research budget is also limited by my constraint, in the future researchers could investigate whether adding new services or promotional issues would affect customer adaptation.

73

Appendix B - Qur'an Emphasis Against Riba

The Noble Qur'an - Al-Baqarah 275-281

275. Those who eat Rib (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitn (Satan) leading him to insanity. That is because they say: "Trading is only like Rib (usury)," whereas Allh has permitted trading and forbidden Rib (usury). So whosoever receives an admonition from his Lord and stops eating Rib (usury) shall not be punished for the past; his case is for Allh (to judge); but whoever returns [to Rib (usury)], such are the dwellers of the Fire - they will abide therein. 276. Allh will destroy Rib (usury) and will give increase for Sadaqt (deeds of charity, alms, etc.) And Allh likes not the disbelievers, sinners. 277. Truly those who believe, and do deeds of righteousness, and perform As-Salt (Iqmat-as-Salt), and give Zakt, they will have their reward with their Lord. On them shall be no fear, nor shall they grieve. 278. O you who believe! Be afraid of Allh and give up what remains (due to you) from Rib (usury) (from now onward), if you are (really) believers. 279. And if you do not do it, then take a notice of war from Allh and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums). 280. And if the debtor is in a hard time (has no money), then grant him time till it is easy for him to repay, but if you remit it by way of charity, that is better for you if you did but know. 281. And be afraid of the Day when you shall be brought back to Allh. Then every person shall be paid what he earned, and they shall not be dealt with unjustly.

The Noble Qur'an - Al-Imran 3:130 O you who believe! Eat not Rib (usury) doubled and multiplied, but fear Allh that you may be successful.

74

Appendix C - US Sanctions

An overview of O.F.A.C. Regulations involving Sanctions against Iran

This fact sheet provides general information about the Iranian sanctions programs under the Iranian Transactions Regulations, 31 C.F.R. Part 560, and the Iranian Assets Control Regulations, 31 C.F.R. Part 535. These sanctions are administered by the US Treasury Departments Office of Foreign Assets Control (OFAC).

Iranian Transactions Regulations - 31 C.F.R. Part 560

As a result of Irans support for international terrorism and its aggressive actions against non-belligerent shipping in the Persian Gulf, President Reagan, on October 29, 1987, issued Executive Order 12613 imposing a new import embargo on Iranian-origin goods and services. Section 505 of the International Security and Development Cooperation Act of 1985 (ISDCA) was utilized as the statutory authority for the embargo, which gave rise to the Iranian Transactions Regulations, Title 31, Part 560 of the US Code of Federal Regulations (the ITR). Effective March 16, 1995, as a result of Iranian support of international terrorism and Irans active pursuit of weapons of mass destruction, President Clinton issued Executive Order 12957 prohibiting US involvement with petroleum development in Iran. On May 6, 1995, he signed Executive Order 12959, pursuant to the International Emergency Economic Powers Act (IEEPA) as well as the ISDCA, substantially tightening sanctions against Iran. On August 19, 1997, the President signed Executive Order 13059 clarifying Executive Orders 12957 and 12959 and confirming that virtually all trade and investment activities with Iran by US persons, wherever located, are prohibited. Effective November 10, 2008, the authorization for U-turn transfers involving Iran was revoked. As of that date, US depository institutions are no longer authorized to process transfers involving Iran that originate and end with non-Iranian foreign banks. Details concerning the revocation of the U-turn authorization and a description of currently permissible funds transfers can be found in the Financial Dealings with Iran section of this document. Effective September 29, 2010, the authorization to import into the United States, and deal in, certain foodstuffs and carpets of Iranian origin was revoked pursuant to section 103 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. The exceptions to the prohibition on importing goods and services are listed in the IMPORTS FROM IRAN section of this document. Criminal penalties for violations of the Iranian Transactions Regulations may result in a fine up to $1,000,000, and natural persons may be imprisoned for up to 20 years. Civil penalties, which are not to exceed the greater of $250,000 or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed may also be imposed administratively.

75

OFAC will provide additional guidance on the implementation of sections 104 and 105 of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 soon. IMPORTS FROM IRAN - Goods or services of Iranian origin may not be imported into the United States, either directly or through third countries, with the following exceptions: Gifts valued at $100 or less;

Information and informational materials; Household and personal effects, of persons arriving in the United States, that were actually used abroad by the importer or by other family members arriving from the same foreign household, that are not intended for any other person or for sale, and that are not otherwise prohibited from importation; and Accompanied baggage for personal use normally incident to travel.

US persons are prohibited from providing financing for prohibited import transactions. There are restrictions on letter of credit transactions involving the Government of Iran (see FINANCIAL DEALINGS WITH IRAN below). EXPORTS TO IRAN - In general, unless licensed by OFAC, goods, technology, or services may not be exported, reexported, sold or supplied, directly or indirectly, from the United States or by a US person, wherever located, to Iran or the Government of Iran. The ban on providing services includes any brokering function from the United States or by US persons, wherever located. For example, a US person, wherever located, or any person acting within the United States, may not broker offshore transactions that benefit Iran or the Government of Iran, including sales of foreign goods or arranging for third-country financing or guarantees. In general, a person may not export from the US any goods, technology or services, if that person knows or has reason to know such items are intended specifically for supply, transshipment or reexportation to Iran. Further, such exportation is prohibited if the exporter knows or has reason to know the US items are intended specifically for use in the production of, for commingling with, or for incorporation into goods, technology or services to be directly or indirectly supplied, transshipped or reexported exclusively or predominately to Iran or the Government of Iran. A narrow exception is

76

created for the exportation from the United States or by US persons wherever located of low-level goods or technology to third countries for incorporation or substantial transformation into foreign-made end products, provided the US content is insubstantial, as defined in the regulations, and certain other conditions are met. Donations of articles intended to relieve human suffering (such as food, clothing, and medicine), gifts valued at $100 or less, licensed exports of agricultural commodities, medicine, and medical devices, and trade in information and informational materials are permitted. Information and informational materials are defined to include publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds, although certain Commerce Department restrictions still apply to some of those materials. To be considered informational material, artworks must be classified under chapter subheadings 9701, 9702, or 9703 of the Harmonized Tariff Schedule of the United States. With certain exceptions, foreign persons who are not US persons are prohibited from reexporting sensitive US-origin goods, technology or services to Iran or the Government of Iran. Foreign persons involved in such reexports may be placed on the US Commerce Departments Export Denial Orders list. US persons may not approve, finance, facilitate or guarantee any transaction by a foreign person where that transaction by a foreign person would be prohibited if performed by a US person or from the United States. DEALING IN IRANIAN-ORIGIN GOODS OR SERVICES - US persons, including foreign branches of US depository institutions and trading companies, are prohibited from engaging in any transactions, including purchase, sale, transportation, swap, financing, or brokering transactions related to goods or services of Iranian origin or goods or services owned or controlled by the Government of Iran. Services provided in the United States by an Iranian national already resident in the United States are not considered services of Iranian origin. These prohibitions apply to transactions by United States persons in locations outside the United States with respect to goods or services which are of Iranian origin or are owned or controlled by the Government of Iran. US persons may not import such goods or services into or export them from foreign locations. A US person may, however, engage in transactions in third countries necessary to sell, dispose of, store, or maintain goods located in a third country which were legally acquired by that US person prior to May 7, 1995 on the condition that the transactions do not result in an importation into the United States of goods of Iranian origin. FINANCIAL DEALINGS WITH IRAN - New investments by US persons, including commitments of funds or other assets, loans or any other extensions of credit, in Iran or in property (including entities) owned or controlled by the Government of Iran are prohibited. While US persons may continue to charge fees and accrue interest on existing Iranian loans, a specific license must be obtained to reschedule or otherwise extend the maturities of existing loans. Payments for licensed sales of agricultural commodities, medicine and medical devices must reference an appropriate OFAC license and may not involve a debit or credit to an account of a person in Iran or the Government of Iran maintained on the books of either a US depository institution or a US registered broker or dealer in securities. Payments for and financing of such licensed sales may be accomplished by cash in advance, sales on open account (provided the account receivable is not transferred by the person extending the credit), or by third-country financial institutions that are neither US persons nor government of Iran entities. Any other arrangements must be specifically authorized by OFAC. US depository institutions may advise and confirm letters of credit issued by third-country banks covering licensed sales of agricultural commodities, medicine and medical devices. Effective November 10, 2008, the authorization for U-turn transfers involving Iran was revoked. As of that date, US depository institutions are no longer authorized to process such transfers, thereby precluding transfers designed to dollarize transactions through the US financial system for the direct or indirect benefit of Iranian banks or other persons in Iran or the Government of Iran. However, US depository institutions are permitted to handle funds transfers, through intermediary third-country banks, to or from Iran or for the direct or indirect benefit of the Government of Iran or a person in Iran, arising from several types of underlying transactions, including: a noncommercial family remittance;

an exportation to Iran or importation from Iran of information and informational materials;

a travel-related remittance;

a payment for the shipment of a donation of articles to relieve human suffering; or

a transaction authorized by OFAC through a specific or general license.

While the Iranian Transactions Regulations do not contain any blocking provisions, several Iranian banks have been separately designated under the Nonproliferation of Weapons of Mass Destruction (NPWMD) or Specially Designated Global Terrorist (SDGT) programs for their involvement in the financing of either WMD or ballistic missile proliferation or of terrorism, respectively. Such banks property and interests in property that are in the United States or in the possession or control of US persons,

77

wherever located, are blocked. US persons are prohibited from engaging in any transaction or dealing in property or interests in property of these designated Iranian banks. Please see the brochures on Nonproliferation and Terrorism for further information on these programs. "PRE-ZERO CONTRACTS" - Letters of credit and other financing arrangements with respect to trade contracts in force as of May 6, 1995, may be performed pursuant to their terms provided that the underlying trade transaction was completed prior to June 6, 1995 (February 2, 1996 for agricultural commodities), or as specifically licensed by OFAC. Standby letters of credit that serve as performance guarantees for services to be rendered after June 6, 1995, cannot be renewed and payment may not be made after that date without authorization by OFAC. OTHER BANKING SERVICES - US depository institutions, including foreign branches, are prohibited from servicing accounts of the Government of Iran, including banks owned or controlled by the Government of Iran or persons in Iran. However, they are authorized to pay interest, deduct reasonable and customary service charges, process transfers related to exempt transactions, such as the exportation of information or informational material, a travel-related remittance, or a payment for the shipment of a donation of articles to relieve human suffering or, at the request of an account holder, effect a lump sum closure of an account by payment to its owner. They may not otherwise directly credit or debit Iranian accounts. US depository institutions and US registered brokers or dealers in securities initiating or receiving payment orders involving Iran on behalf of customers must determine prior to processing such payments that they do not involve transactions prohibited by the Iranian Transactions Regulations. TRAVEL - All transactions ordinarily incident to travel to or from Iran, including the importation of accompanied baggage for personal use, payment of maintenance and living expenses and acquisition of goods or services for personal use are permitted. INTERNATIONAL ORGANIZATIONS Under a general license issued by OFAC, effective August 22, 2006, US persons that are employees or contractors for the following international organizations - the United Nations, the World Bank, the International Monetary Fund, the International Atomic Energy Agency, the International Labor Organization or the World Health Organization - are authorized to engage in transactions for the conduct of official business in or involving Iran. Authorized transactions may include leasing office space or purchasing Iranian-origin goods necessary to carry out official

78

business, provided that the funds transfers to and from Iran do not involve a debit or credit on the books of a US financial institution. The exportation or the re-exportation of US-origin or non- US-origin goods or technology listed on the Commerce Control List in the Export Administration Regulations is not authorized. OVERFLIGHT PAYMENTS - Payments to Iran for services rendered by the Government of Iran in connection with the overflight of Iran or emergency landing in Iran of aircraft owned by United States persons or registered in the US are authorized. PERSONAL COMMUNICATIONS, INFORMATION AND INFORMATIONAL MATERIALS - The receipt or transmission of postal, telegraphic, telephonic or other personal communications that does not involve the transfer of anything of value between the United States and Iran is permitted. The importation into the United States from Iran and the exportation from the United States to Iran of information and informational materials, whether commercial or otherwise, regardless of format or medium of transmission, and any transaction incident to such importation or exportation is permitted. TRANSACTIONS INVOLVING US AFFILIATES - No US person may approve or facilitate the entry into or performance of transactions or contracts with Iran by a foreign subsidiary of a US firm that the US person is precluded from performing directly. Similarly, no US person may facilitate such transactions by unaffiliated foreign persons. IRANIAN PETROLEUM INDUSTRY - US persons may not trade in Iranian oil or petroleum products refined in Iran, nor may they finance such trading. Similarly, US persons may not perform services, including financing services, or supply goods or technology that would benefit the Iranian oil industry. PERSONS DETERMINED TO BE THE GOVERNMENT OF IRAN, AS DEFINED IN 560.304 OF THIS PART
AGRICULTURAL COOPERATIVE BANK OF IRAN (a.k.a. BANK TAAVON KESHAVARZI IRAN), No. 129 Patrice Lumumba Street, Jalal-Al-Ahmad Expressway, P.O. Box 14155/6395, Tehran, Iran [IRAN] ASCOTEC HOLDING GMBH (f.k.a. AHWAZ STEEL COMMERCIAL & TECHNICAL SERVICE GMBH ASCOTEC; a.k.a. ASCOTEC GMBH), TersteegenStrasse 10, Dusseldorf 40474, Germany; Registration ID HRB 26136 (Germany); all offices worldwide [IRAN] ASCOTEC JAPAN K.K., 8th Floor, Shiba East Building, 2-3-9 Shiba, Minato-ku, Tokyo 105-0014, Japan; all offices worldwide [IRAN] ASCOTEC MINERAL & MACHINERY GMBH (f.k.a. BREYELLER KALTBAND GMBH), Tersteegenstr. 10, Dusseldorf 40474, Germany; Registration ID HRB 55668 (Germany); all offices worldwide [IRAN] ASCOTEC SCIENCE & TECHNOLOGY GMBH, Tersteegenstrasse 10, Dusseldorf D 40474, Germany; Registration ID HRB 58745 (Germany); all offices worldwide [IRAN] ASCOTEC STEEL TRADING GMBH (a.k.a. ASCOTEC STEEL), Tersteegenstr. 10, Dusseldorf 40474, Germany; GeorgGlock-Str. 3, Dusseldorf 40474, Germany; Registration ID HRB 48319 (Germany); all offices worldwide [IRAN] BANK KESHAVARZI IRAN (a.k.a. AGRICULTURAL BANK OF IRAN; a.k.a. BANK KESHAVARZI), PO Box 141556395, 129 Patrice Lumumba St, Jalal-al-Ahmad Expressway, Tehran 14454, Iran; all offices worldwide [IRAN] BANK MARKAZI JOMHOURI ISLAMI IRAN (a.k.a. BANK MARKAZI IRAN; a.k.a. CENTRAL BANK OF IRAN; a.k.a. CENTRAL BANK OF THE ISLAMIC REPUBLIC OF IRAN), 213 Ferdowsi Avenue, Tehran 11365, Iran; PO Box 15875/7177, 144 Mirdamad Blvd, Tehran, Iran [IRAN] BANK MASKAN (a.k.a. HOUSING BANK (OF IRAN)), PO Box 11365/5699, No 247 3rd Floor Fedowsi Ave, Cross SarhangSakhaei St, Tehran, Iran; all offices worldwide [IRAN] BANK MELLAT, Head Office Bldg, 327 Taleghani Ave, Tehran 15817, Iran; 327 Forsat and Taleghani Avenue, Tehran 15817, Iran; PO Box 375010, AmiryanStr #6, P/N-24, Yerevan, Armenia; Keumkang Tower - 13th & 14th Floor, 889-13 Daechi-Dong, Gangnam-Ku, Seoul 135-280, Korea, South; PO Box 79106425, ZiyaGokalpBulvari No 12, Kizilay, Ankara, Ankara, Turkey; CumhuriyetBulvari No 88/A, PK 7103521, Konak, Izmir, Turkey; Buyukdere Cad, CicekSokak No 1 - 1 Levent, Levent, Istanbul, Turkey; all offices worldwide [IRAN] [NPWMD] [IFSR]

BANK MELLI IRAN (a.k.a. BANK MELLI; a.k.a. NATIONAL BANK OF IRAN), PO Box 11365-171, Ferdowsi Avenue, Tehran, Iran; 43 Avenue Montaigne, Paris 75008, France; Room 704-6, Wheelock Hse, 20 Pedder St, Central, Hong Kong; Bank Melli Iran Bldg, 111 St 24, 929 Arasat, Baghdad, Iraq; PO Box 2643, Ruwi, Muscat 112, Oman; PO Box 2656, Liva Street, Abu Dhabi, United Arab Emirates; PO Box 248, Hamad Bin Abdulla St, Fujairah, United Arab Emirates; PO Box 1888, Clock Tower, Industrial Rd, Al Ain Club Bldg, Al Ain, Abu Dhabi, United Arab Emirates; PO Box 1894, Baniyas St, Deira, Dubai City, United Arab Emirates; PO Box 5270, Oman Street Al Nakheel, Ras Al-Khaimah, United Arab Emirates; PO Box 459, Al Borj St, Sharjah, United Arab Emirates; PO Box 3093, Ahmed SeddiquiBldg, Khalid Bin El-Walid St, Bur-Dubai, Dubai City 3093, United Arab Emirates; PO Box 1894, Al Wasl Rd, Jumeirah, Dubai, United Arab Emirates; Postfach 112 129, Holzbruecke 2, D-20459, Hamburg, Germany; Nobel Ave. 14, Baku, Azerbaijan; Unit 1703-4, 17th Floor, Hong Kong Club Building, 3 A Chater Road Central, Hong Kong; all offices worldwide [IRAN] [NPWMD] [IFSR] BANK OF INDUSTRY AND MINE (OF IRAN) (a.k.a. BANK SANAD VA MADAN; a.k.a. "BIM"), PO Box 15875-4456, Firouzeh Tower, No 1655 Vali-Asr Ave after Chamran Crossroads, Tehran 1965643511, Iran; No 1655, Firouzeh Building, Mahmoudiye Street, Valiasr Ave, Tehran, Iran; all offices worldwide [IRAN] [NPWMD] [IFSR] BANK REFAH KARGARAN (a.k.a. BANK REFAH; a.k.a. WORKERS' WELFARE BANK (OF IRAN)), No. 40 North Shiraz Street, Mollasadra Ave, VanakSq, Tehran 19917, Iran; all offices worldwide [IRAN] [NPWMD] [IFSR] BANK SADERAT IRAN (a.k.a. IRAN EXPORT BANK), Ground Floor Business Room, Building BankeKhoon Road, Harat, Afghanistan; No. 56, Opposite of Security Department, Toraboz Khan Str., Kabul, Afghanistan; 5 Lothbury, London EC2R 7HD, United Kingdom; Postfach 112227, Deichstrasse 11, 20459, Hamburg, Germany; PO Box 4308, 25-29 Venizelou St, Athens, Attica GR 105 64, Greece; PO Box 15745-631, Bank Saderat Tower, 43 Somayeh Avenue, Tehran, Iran; 16 rue de la Paix, Paris 75002, France; Postfach 160151, Friedenstr 4, D-60311, Frankfurt am Main, Germany; 3rd Floor, AliktisadBldg, Ras El Ein Street Baalbak, Baalbak, Lebanon; Saida Branch, SidaRiadElsoleh St, Martyrs Sq, Saida, Lebanon; BorjAlbarajneh Branch - 20 AlholomBldg, SahatMreijeh, Kafaat St, Beirut, Lebanon; 1st Floor, AlroseBldg, Verdun - Rashid Karame St, Beirut, Lebanon; PO Box 5126, Beirut, Lebanon; 3rd Floor, Mteco Centre, Mar Elias, Facing Al HellowBarrak, POB 5126, Beirut, Lebanon; Alghobeiri Branch AljawharaBldg, Ghobeiry Blvd, Beirut, Lebanon; PO Box 1269, Muscat 112, Oman; PO Box 4425, Salwa Rd, Doha, Qatar; PO Box 2256, Doha, Qatar; 2nd Floor, No 181 Makhtoomgholi Ave, Ashgabat, Turkmenistan; PO Box 700, Abu Dhabi, United Arab Emirates; PO Box 16, Liwara Street, Ajman, United Arab Emirates; PO Box 1140, Al-Am Road, Al-Ein, Al Ain, Abu Dhabi, United Arab Emirates; Bur Dubai, Khaled Bin Al Walid St, Dubai City, United Arab Emirates; Sheikh Zayed Rd, Dubai City, United Arab Emirates; PO Box 4182, Almaktoum Rd, Dubai City, United Arab Emirates; PO Box 4182, Murshid Bazar Branch, Dubai City, United Arab Emirates; PO Box 316, Bank SaderatBldg, Alaroda St, Borj Ave, Sharjah, United Arab Emirates; all offices worldwide [IRAN] [SDGT] [IFSR] BANK SADERAT PLC (f.k.a. IRAN OVERSEAS INVESTMENT BANK LIMITED; f.k.a. IRAN OVERSEAS INVESTMENT BANK PLC; f.k.a. IRAN OVERSEAS INVESTMENT CORPORATION LIMITED), 5 Lothbury, London EC2R 7HD, United Kingdom; PO Box 15175/584, 6th Floor, SadafBldg, 1137 ValiAsr Ave, Tehran 15119-43885, Iran; UK Company Number 01126618 (United Kingdom); all offices worldwide [IRAN] [SDGT] BANK SEPAH, Imam Khomeini Square, Tehran 1136953412, Iran; 64 Rue de Miromesnil, Paris 75008, France; Hafenstrasse 54, D60327, Frankfurt am Main, Germany; Via Barberini 50, Rome, RM 00187, Italy; 17 Place Vendome, Paris 75008, France; all offices worldwide [IRAN] [NPWMD] [IFSR] BANK TEJARAT, PO Box 11365-5416, 152 Taleghani Avenue, Tehran 15994, Iran; 130, Zandi Alley, Taleghani Avenue, No 152, OstadNejatOllahi Cross, Tehran 14567, Iran; 124-126 Rue de Provence, Angle 76 bdHaussman, Paris 75008, France; PO Box 734001, Rudaki Ave 88, Dushanbe 734001, Tajikistan; Office C208, Beijing Lufthansa Centre No 50, Liangmaqiao Rd, Chaoyang District, Beijing 100016, China; c/o Europaisch-IranischeHandelsbank AG, Depenau 2, D-20095, Hamburg, Germany; PO Box 119871, 4th Floor, c/o Persia International Bank PLC, The Gate Bldg, Dubai City, United Arab Emirates; c/o Persia International Bank, 6 Lothbury, London EC2R 7HH, United Kingdom; all offices worldwide [IRAN] BANK TORGOVOY KAPITAL ZAO (a.k.a. TC BANK; a.k.a. TK BANK; a.k.a. TK BANK ZAO; a.k.a. TORGOVY KAPITAL (TK BANK); a.k.a. TRADE CAPITAL BANK; a.k.a. TRADE CAPITAL BANK (TC BANK); a.k.a. ZAO BANK TORGOVY KAPITAL), 3 Kozlova Street, Minsk 220005, Belarus; Registration ID 30 (Belarus); all offices worldwide [IRAN] BIMEH IRAN INSURANCE COMPANY (U.K.) LIMITED (a.k.a. BIUK), 4/5 Fenchurch Buildings, London EC3M 5HN, United Kingdom; UK Company Number 01223433 (United Kingdom); all offices worldwide [IRAN] BREYELLER STAHL TECHNOLOGY GMBH & CO. KG (f.k.a. ROETZEL-STAHL GMBH & CO. KG), Josefstrasse 82, Nettetal 41334, Germany; Registration ID HRA 4528 (Germany); all offices worldwide [IRAN] EUROPAISCH-IRANISCHE HANDELSBANK AG (f.k.a. DEUTSCH-IRANISCHE HANDELSBANK AG; a.k.a. EUROPAEISCH-IRANISCHE HANDELSBANK; a.k.a. EUROPAESCH-IRANISCHE HANDELSBANK AKTIENGESELLSCHAFT; a.k.a. GERMAN-IRANIAN TRADE BANK), Hamburg Head Office, Depenau 2, D-20095 Hamburg, P.O. Box 101304, D-20008 Hamburg, Hamburg , Germany; Kish Branch, Sanaee Avenue, PO Box 79415/148, Kish Island 79415, Iran; Tehran Branch, No. 1655/1, Valiasr Avenue, PO Box 19656 43 511, Tehran, Iran; all offices worldwide [IRAN] [NPWMD] [IFSR] EXPORT DEVELOPMENT BANK OF IRAN (a.k.a. BANK TOSEH SADERAT IRAN; a.k.a. BANK TOWSEEH SADERAT IRAN; a.k.a. BANK TOWSEH SADERAT IRAN; a.k.a. EDBI), Export Development Building, Next to the 15th Alley, Bokharest Street, Argentina Square, Tehran, Iran; Tose'e Tower, Corner of 15th St., Ahmad Qasir Ave., Argentine Square, Tehran, Iran; No. 129, 21's KhaledEslamboli, No. 1 Building, Tehran, Iran; No. 26, Tosee Tower, Arzhantine Square, P.O. Box 15875-5964, Tehran 15139, Iran; No. 4, Gandi Ave., Tehran 1516747913, Iran; C.R. No. 86936 (Iran) issued 10 Jul 1991; all offices worldwide [IRAN] [NPWMD] [IFSR] IFIC HOLDING AG (a.k.a. IHAG), Koenigsallee 60 D, Dusseldorf 40212, Germany; Registration ID HRB 48032 (Germany); all offices worldwide [IRAN] IHAG TRADING GMBH, Koenigsallee 60 D, Dusseldorf 40212, Germany; Registration ID HRB 37918 (Germany); all offices worldwide [IRAN] INDUSTRIAL DEVELOPMENT AND RENOVATION ORGANIZATION OF IRAN (a.k.a. IDRO; a.k.a. IRAN DEVELOPMENT & RENOVATION ORGANIZATION COMPANY; a.k.a. SAWZEMANE GOSTARESH VA NOWSAZI SANAYE IRAN), ValiAsr Building, Jam e Jam Street, ValiAsr Avenue, Tehran 15815-3377, Iran; all offices worldwide [IRAN] INTRA CHEM TRADING GMBH (a.k.a. INTRA-CHEM TRADING CO. (GMBH)), Schottweg 3, Hamburg 22087, Germany; Registration ID HRB48416 (Germany); all offices worldwide [IRAN] IRAN FOREIGN INVESTMENT COMPANY (a.k.a. IFIC), No. 4, Saba Blvd., Africa Blvd., Tehran 19177, Iran; P.O. Box 193956947, Tehran, Iran; all offices worldwide [IRAN]

79

IRAN INSURANCE COMPANY (a.k.a. BIMEH IRAN), Abdolaziz-Al-Masaeed Building, Sheikh Maktoom St., Deira, P.O. Box 2004, Dubai, United Arab Emirates; P.O. Box 1867, Al Ain, Abu Dhabi, United Arab Emirates; 107 Dr Fatemi Avenue, Tehran 14155/6363, Iran; P.O. Box 3281, Abu Dhabi, United Arab Emirates; P.O. Box 1666, Sharjah, United Arab Emirates; P.O. Box 849, Ras-Al-Khaimah, United Arab Emirates; P.O. Box 417, Muscat 113, Oman; P.O. Box 676, Salalah 211, Oman; P.O. Box 995, Manama, Bahrain; Al-LamiCentre, Ali-Bin-AbiTaleb St. Sharafia, P.O. Box 11210, Jeddah 21453, Saudi Arabia; Al Alia Centre, Salaheddine Rd., Al Malaz, P.O. Box 21944, Riyadh 11485, Saudi Arabia; Al Rajhi Bldg., 3rd Floor, Suite 23, Dhahran St., P.O. Box 1305, Dammam 31431, Saudi Arabia; all offices worldwide [IRAN] IRAN PETROCHEMICAL COMMERCIAL COMPANY (a.k.a. PETROCHEMICAL COMMERCIAL COMPANY; a.k.a. SHERKATE BASARGANI PETROCHEMIE (SAHAMI KHASS); a.k.a. SHERKATE BAZARGANI PETRCHEMIE; a.k.a. "IPCC"; a.k.a. "PCC"), INONU CAD. SUMER Sok., ZitasBloklari C.2 Bloc D.H, Kozyatagi, Kadikoy, Istanbul, Turkey; Topcu Ibrahim Sokak No: 13 D: 7 Icerenkoy-Kadikoy, Istanbul, Turkey; No. 1339, ValiNejad Alley, Vali-e-Asr St., Vanak Sq., Tehran, Iran; 99-A, Maker Tower F, 9th Floor, Cuffe Parade, Colabe, Mumbai 400 005, India; No. 1014, Doosan We've Pavilion, 58, Soosong-Dong, Jongno-Gu, Seoul, Korea, South; Office No. 707, No. 10, Chao Waidajie, Chao Tang District, Beijing 100020, China; all offices worldwide [IRAN] IRANIAN MINES AND MINING INDUSTRIES DEVELOPMENT AND RENOVATION ORGANIZATION (a.k.a. IMIDRO; a.k.a. IRAN MINING INDUSTRIES DEVELOPMENT AND RENOVATION ORGANIZATION; a.k.a. IRANIAN MINES AND MINERAL INDUSTRIES DEVELOPMENT AND RENOVATION), No. 39, SepahbodGharani Avenue, Ferdousi Square, Tehran, Iran; all offices worldwide [IRAN] IRANIAN OIL COMPANY (U.K.) LIMITED (a.k.a. IOC UK LTD), Riverside House, Riverside Drive, Aberdeen AB11 7LH, United Kingdom; UK Company Number 01019769 (United Kingdom); all offices worldwide [IRAN] IRASCO S.R.L. (a.k.a. IRASCO ITALY), Via Di Francia 3, Genoa 16149, Italy; Registration ID GE 348075 (Italy); all offices worldwide [IRAN] KALA LIMITED (a.k.a. KALA NAFT LONDON LTD), NIOC House, 4 Victoria Street, Westminster, London SW1H 0NE, United Kingdom; UK Company Number 01517853 (United Kingdom); all offices worldwide [IRAN] KALA PENSION TRUST LIMITED, C/O Kala Limited, N.I.O.C. House, 4 Victoria Street, London SW1H 0NE, United Kingdom; UK Company Number 01573317 (United Kingdom); all offices worldwide [IRAN] MACHINE SAZI ARAK CO. LTD. (a.k.a. MACHINE SAZI ARAK COMPANY P J S C; a.k.a. MACHINE SAZI ARAK SSA; a.k.a. MASHIN SAZI ARAK; a.k.a. "MSA"), Arak, Km 4 Tehran Road, Arak, Markazi Province, Iran; No. 1, Northern Kargar Street, Tehran 14136, Iran; P.O. Box 148, Arak 351138, Iran; all offices worldwide [IRAN] MAHAB GHODSS CONSULTING ENGINEERING COMPANY (a.k.a. MAHAB GHODSS CONSULTING ENGINEERING CO.; a.k.a. MAHAB GHODSS CONSULTING ENGINEERS SSK; a.k.a. MAHAB QODS ENGINEERING CONSULTING CO.), 16 Takharestal Alley, Dastgerdy Avenue, P.O. Box 19395-6875, Tehran 19187 81185, Iran; No. 17, Dastgerdy Avenue, Takharestan Alley, 19395-6875, Tehran 1918781185, Iran; Registration ID 48962 (Iran) issued 1983; all offices worldwide [IRAN] METAL & MINERAL TRADE S.A.R.L. (a.k.a. METAL & MINERAL TRADE (MMT); a.k.a. MMT LUXEMBURG; a.k.a. MMT SARL), 11b, Boulevard Joseph II L-1840, Luxembourg; Registration ID B 59411 (Luxembourg); all offices worldwide [IRAN] MINES AND METALS ENGINEERING GMBH (M.M.E.), Georg-Glock-Str. 3, Dusseldorf 40474, Germany; Registration ID HRB 34095 (Germany); all offices worldwide [IRAN] MSP KALA NAFT CO. TEHRAN (a.k.a. KALA NAFT CO SSK; a.k.a. KALA NAFT COMPANY LTD; a.k.a. KALA NAFT TEHRAN; a.k.a. KALA NAFT TEHRAN COMPANY; a.k.a. KALAYEH NAFT CO; a.k.a. M.S.P.-KALA; a.k.a. MANUFACTURING SUPPORT & PROCUREMENT CO.-KALA NAFT; a.k.a. MANUFACTURING SUPPORT AND PROCUREMENT (M.S.P.) KALA NAFT CO. TEHRAN; a.k.a. MANUFACTURING, SUPPORT AND PROCUREMENT KALA NAFT COMPANY; a.k.a. MSP KALA NAFT TEHRAN COMPANY; a.k.a. MSP KALANAFT; a.k.a. MSPKALANAFT COMPANY; a.k.a. SHERKAT SAHAMI KHASS KALA NAFT; a.k.a. SHERKAT SAHAMI KHASS POSHTIBANI VA TEHIYEH KALAYE NAFT TEHRAN; a.k.a. SHERKATE POSHTIBANI SAKHT VA TAHEIH KALAIE NAFTE TEHRAN), 242 SepahbodGharani Street, Karim Khan Zand Bridge, Corner Kalantari Street, 8th Floor, P.O. Box 15815-1775/15815-3446, Tehran 15988, Iran; Building No. 226, Corner of ShahidKalantari Street, SepahbodGharani Avenue, Karimkhan Avenue, Tehran 1598844815, Iran; No. 242, ShahidKalantari St., Near Karimkhan Bridge, SepahbodGharani Avenue, Tehran, Iran; Head Office Tehran, SepahbodGharani Ave., P.O. Box 15815/1775 15815/3446, Tehran, Iran; P.O. Box 2965, Sharjah, United Arab Emirates; 333 7th Ave SW #1102, Calgary, AB T2P 2Z1, Canada; Chekhov St., 24.2 , AP 57, Moscow, Russia; Room No. 704 - No. 10 Chao Waidajie Chao Yang District , Beijing 10020, China; Sanaee Ave., P.O. Box 79417-76349, N.I.O.C., Kish, Iran; 10th Floor, Sadaf Tower, Kish Island, Iran; all offices worldwide [IRAN] NAFTIRAN INTERTRADE CO. (NICO) LIMITED (a.k.a. NAFT IRAN INTERTRADE COMPANY LTD; a.k.a. NAFTIRAN INTERTRADE COMPANY (NICO); a.k.a. NAFTIRAN INTERTRADE COMPANY LTD; a.k.a. NICO), |41, 1st Floor, International House, The Parade, St Helier JE2 3QQ, Jersey; Petro Pars Building, Saadat Abad Ave, No 35, Farhang Blvd, Tehran, Iran; all offices worldwide| [IRAN] NAFTIRAN INTERTRADE CO. (NICO) SARL (a.k.a. NICO), 6, Avenue de la Tour-Haldimand, Pully, VD 1009, Switzerland; all offices worldwide [IRAN] NAFTIRAN TRADING SERVICES CO. (NTS) LIMITED, 47 Queen Anne Street, London W1G 9JG, United Kingdom; 6th Floor NIOC Ho, 4 Victoria St, London SW1H 0NE, United Kingdom; UK Company Number 02600121 (United Kingdom); all offices worldwide [IRAN] NATIONAL IRANIAN OIL COMPANY (a.k.a. NIOC), Hafez Crossing, Taleghani Avenue, P.O. Box 1863 and 2501, Tehran, Iran; all offices worldwide [IRAN] NATIONAL IRANIAN OIL COMPANY PTE LTD, 7 Temasek Boulevard #07-02, Suntec Tower One 038987, Singapore; Registration ID 199004388C (Singapore); all offices worldwide [IRAN] NATIONAL PETROCHEMICAL COMPANY (a.k.a. "NPC"), No. 104, North Sheikh Bahaei Blvd., MollaSadra Ave., Tehran, Iran; all offices worldwide [IRAN] NICO ENGINEERING LIMITED, 41, 1st Floor, International House, The Parade, St. Helier JE2 3QQ, Jersey; Registration ID 75797 (Jersey); all offices worldwide [IRAN] NIOC INTERNATIONAL AFFAIRS (LONDON) LIMITED, NIOC House, 4 Victoria Street, London SW1H 0NE, United Kingdom; UK Company Number 02772297 (United Kingdom); all offices worldwide [IRAN]

NPC INTERNATIONAL LIMITED (a.k.a. N P C INTERNATIONAL LTD; a.k.a. NPC INTERNATIONAL COMPANY), 5th Floor NIOC House, 4 Victoria Street, London SW1H 0NE, United Kingdom; UK Company Number 02696754 (United Kingdom); all offices worldwide [IRAN] ONERBANK ZAO (a.k.a. EFTEKHAR BANK; a.k.a. HONOR BANK; a.k.a. HONORBANK; a.k.a. HONORBANK ZAO; a.k.a. ONER BANK; a.k.a. ONERBANK; a.k.a. ONER-BANK), UlitsaKlaryTsetkin 51, Minsk 220004, Belarus; Registration ID 807000227 (Belarus) issued 16 Oct 2009; SWIFT/BIC HNRBBY2X (Belarus); all offices worldwide [IRAN]

80

PARS OIL AND GAS COMPANY (a.k.a. POGC), No. 133, Side of ParvinEtesami Alley, opposite SazmanAb - Dr.Fatemi Avenue, Tehran, Iran; No. 1 ParvinEtesami Street, Fatemi Avenue, Tehran, Iran [IRAN] P.C.C. (SINGAPORE) PRIVATE LIMITED (a.k.a. P.C.C. SINGAPORE BRANCH; a.k.a. PCC SINGAPORE PTE LTD), 78 Shenton Way, #08-02 079120, Singapore; 78 Shenton Way, 26-02A Lippo Centre 079120, Singapore; Registration ID 199708410K (Singapore); all offices worldwide [IRAN] PETROCHEMICAL COMMERCIAL COMPANY (U.K.) LIMITED (a.k.a. PCC (UK); a.k.a. PCC UK; a.k.a. PCC UK LTD), 4 Victoria Street, London SW1H 0NE, United Kingdom; UK Company Number 02647333 (United Kingdom); all offices worldwide [IRAN] PETROCHEMICAL COMMERCIAL COMPANY FZE (a.k.a. PCC FZE), 1703, 17th Floor, Dubai World Trade Centre Tower, Sheikh Zayed Road, Dubai, United Arab Emirates; Office No. 99-A, Maker Tower "F" 9th Floor CuttePavade, Colabe, Bumbai 700005, India; all offices worldwide [IRAN] PETROCHEMICAL COMMERCIAL COMPANY INTERNATIONAL LIMITED (a.k.a. PETROCHEMICAL COMMERCIAL COMPANY INTERNATIONAL LTD; a.k.a. PETROCHEMICAL TRADING COMPANY LIMITED; a.k.a. "PCCI"), P.O. Box 261539, Jebel Ali, Dubai, United Arab Emirates; 41, 1st Floor, International House, The Parade, St. Helier JE2 3QQ, Jersey; Ave. 54, Yimpash Business Centre, No. 506, 507, Ashkhabad 744036, Turkmenistan; No. 21 End of 9th St, Gandi Ave, Tehran, Iran; 21, Africa Boulevard, Tehran, Iran; Registration ID 77283 (Jersey); all offices worldwide [IRAN] [ISA] PETROIRAN DEVELOPMENT COMPANY (PEDCO) LIMITED (a.k.a. PETRO IRAN DEVELOPMENT COMPANY; a.k.a. "PEDCO"), National Iranian Oil Company - PEDCO, P.O. Box 2965, Al Bathaa Tower, 9th Floor, Apt. 905, Al BuhairaCorniche, Sharjah, United Arab Emirates; P.O. Box 15875-6731, Tehran, Iran; 41, 1st Floor, International House, The Parade, St. Helier JE2 3QQ, Jersey; No. 22, 7th Lane, Khalid Eslamboli Street, ShahidBeheshti Avenue, Tehran, Iran; No. 102, Next to Shahid Amir SoheilTabrizian Alley, ShahidDastgerdi (Ex Zafar) Street, Shariati Street, Tehran 19199/45111, Iran; Kish Harbour, BazarganFerdos Warehouses, Kish Island, Iran; Registration ID 67493 (Jersey); all offices worldwide [IRAN] PETROPARS INTERNATIONAL FZE (a.k.a. PPI FZE), P.O. Box 72146, Dubai, United Arab Emirates; all offices worldwide [IRAN] PETROPARS LTD. (a.k.a. PETROPARS LIMITED; a.k.a. "PPL"), Calle La Guairita, Centro ProfesionalEurobuilding, Piso 8, Oficina 8E, Chuao, Caracas 1060, Venezuela; No. 35, Farhang Blvd., Saadat Abad, Tehran, Iran; P.O. Box 3136, Road Town, Tortola, Virgin Islands, British; all offices worldwide [IRAN] PETROPARS UK LIMITED, 47 Queen Anne Street, London W1G 9JG, United Kingdom; UK Company Number 03503060 (United Kingdom); all offices worldwide [IRAN] SINA BANK (f.k.a. BFCC; f.k.a. BONYAD FINANCE AND CREDIT COMPANY; f.k.a. SINA FINANCE AND CREDIT COMPANY), 187 Motahhari Avenue, P.O. Box 1587998477, Tehran, Iran, Iran; Kish Financial Centre, Kish Island, Iran; SWIFT/BIC SINAIRTH (Iran); alt. SWIFT/BIC SINAIRTH418 (Iran); all offices worldwide [IRAN] WEST SUN TRADE GMBH (a.k.a. WEST SUN TRADE), WinterhuderWeg 8, Hamburg 22085, Germany; Arak Machine Mfg. Bldg., 2nd Floor, opp. of College Economy, Northern Kargar Ave., Tehran 14136, Iran; MundsburgerDamm 16, Hamburg 22087, Germany; Registration ID HRB 45757 (Germany); all offices worldwide [IRAN]

Iranian Assets Control Regulations - 31 C.F.R Part 535

Separate Iranian sanctions regulations appear at 31 C.F.R. Part 535. On November 14, 1979, the assets of the Government of Iran in the United States were blocked in accordance with IEEPA following the seizure of the American Embassy in Teheran and the taking of US diplomats as hostages. Under the Iranian Assets Control Regulations (Title 31, Part 535 of the US Code of Federal Regulations), some US$12 billion in Iranian Government bank deposits, gold, and other properties were frozen, including $5.6 billion in deposits and securities held by overseas branches of US banks. The assets freeze was eventually expanded to a full trade embargo, which remained in effect until the Algiers Accords were signed with Iran on January 19, 1981. Pursuant to the Accords, most Iranian assets in the United States were unblocked and the trade embargo was lifted. The US Government also canceled any attachments that US parties had secured against Iranian assets in the United States, so that the assets could be returned to Iran or transferred to escrow accounts in third countries pursuant to the Accords. This action was upheld by the Supreme Court in 1981 in Dames & Moore v. Regan. Although greatly modified in scope, the old Iranian Assets Control Regulations remain in effect. Many US nationals have claims against Iran or Iranian entities for products shipped or services rendered before the onset of the 1979 embargo or for losses sustained in Iran due to expropriation during that time. These claims are still being litigated in the Iran-United States Claims Tribunal at The Hague established under the Algiers Accords. Certain assets related to these claims remain blocked in the United States and consist mainly of military and dual-use property.

81

This document is explanatory only and does not have the force of law. The Executive Orders and implementing regulations dealing with Iran contain the legally binding provisions governing the sanctions. This document does not supplement or modify those Executive Orders or regulations. The Treasury Departments Office of Foreign Assets Control also administers sanctions programs involving the Balkans, Burma (Myanmar), Cuba, Diamond Trading, Iran, Iraq, Lebanon, Liberia, North Korea, Somalia, Sudan, Syria, Zimbabwe as well as highly enriched uranium, designated Terrorists and international Narcotics Traffickers, Foreign Terrorist Organizations and designated foreign persons who have engaged in activities relating to the proliferation of weapons of mass destruction. For additional information about these programs or about sanctions involving Iran, please contact the: OFFICE OF FOREIGN ASSETS CONTROL US Department of the Treasury 1500 Pennsylvania Avenue, N.W. - Annex Washington, D.C. 20220 http://www.treas.gov/ofac 202/622-2490 5-24-11

82