Internet usage and on-line transactions are two different aspects in the Internet world. Usage of the Internet can be for any purpose whereas on-line transaction is when people order, purchase or even manage (e.g. on-line banking) products and services using the Internet. If the usage of the Internet is increasing rapidly it does not necessarily mean that the on-line transactions and money management are also increasing. The most commonly cited reason is security, which affects the consumers’ attitudes and creates barriers for on-line banking (Sathye, 1999). Other factors have not been considered so fully. The value of such a facility, and the role that it can play in day-today life need to be explored. Consumer perception, attitudes and behaviour towards Internet adoption for their daily banking has not been the subject of much research. Three areas of literature of potential relevance have been identified:

a) Technology and Internet adoption by the banking and financial sectors.
b) General models of consumer behaviour, market segmentation and specific application to financial services.
c) Personal financial management.

a) Technology and Internet adoption by the banking and financial sectors:

Adoption of technology such as ATM, phone banking, PC banking and Internet banking to reduce cost for financial product and information delivery to the customers, communicating with them, and to gain competitive advantage have been discussed in many studies (Joseph and McClure, 1999; Daniel, 1999; Moles, 1998; Devlin, 1995). According to Daniel (1999), the Internet banking delivery system is the most effective for both the bank and the customer as it does not have any barrier for time and location (Baldock, 1997) and moreover customers can have sufficient control while receiving service or operating banking transaction over the Internet. Mols (2000) pointed out in his Danish retail banking case study that, compared to other distribution channels, Internet banking will become more important in the future and banks are using the Internet for providing self-service channel, communication media for establishing one to one marketing and cost effective distribution channel. Foley and Jayawardhena (2000) have carried out research on Internet banking in the UK and noted that ‘cost savings, increased customer base, enable mass customisation, marketing and communication, enable innovation and development of non-core business’ are the key factors for the banks to adopt Internet as their ideal delivery medium. It can also enhance a bank’s reputation. Stickel and Seitz (1998) have also invesigated the reasons for banks to use the Internet and those are: information presentation, establishing two way communications, interaction with users and banking transaction.

Electronic banking services were first started in the UK in the early 1980s with the ‘homelink’ service provided by the Nottingham Building Society and Bank of Scotland (Tait and Davis, 1989). With the rapid growth of other types of electronic services such as the Internet, many banks have started to adopt on-line Internet base services (Daniel, 1998). “Online banking is presented as an answer to many of the inherent disadvantages of a traditional branch” (Foley and Jayawardhena, 2000). Internet is more than a delivery channel for the existing products and existing customers and therefore the usage of it is increasing day by day.

b) General models of consumer behaviour, market segmentation and specific application to financial services:

Models of buying behaviour, varying in complexity and orientation, have been developed since the 1940s (Chisnall, 1997). Two aspects of models, purchase decision and adoption decision for diffusion of innovation, have been considered. Most of the consumer buying behaviour models have been formulated as a decision process consisting of a number of discrete but inter-linked stages. One of the best examples of this is the Engle-Kollat-Blackwell model (Engle, Kollat and Blackwell, 1978) which breaks the decision making process into five stages: problem recognition, information search, evaluation of alternatives, purchase decision and post-purchase behaviour. A similar approach was adopted in Nicosia’s (1966) model of consumer decision making and also the Howard- Sheth (1969) model. These models are useful for Extended Problem solving (ESP) situations (Engle, Blackwell and Miniard, 1986) as they are based on the assumption that, buyers will pass through a cognitive, affective and behavioural stage when there is a high degree of involvement with a product category which is perceived to have a high degree of differentiation within it (Kotlar, 1997). In relation to diffusion of innovation, Robertson (1971) presented a six stage interlinked adoption decision model: Awareness; Comprehension; Attitude; Legitimation; Trial and Adoption are a sequence of events which individual consumers pass through over a period of time.

All the above models are operationalised effectively on ‘consumers as individuals’ (Solomon, Bamossy and Askegaard, 1999) which has been categorised under four main different typologies of market segmentation such as: demographic; geodemographic, psychographic and life-style (Chisnall, 1997; Solomon, 1996; Solomon, Bamossy and Askegaard, 1999; Loudon and Bitta, 1993; Evans, Mountinho and Raaij, 1999). In relation to these typologies, studies of consumer behaviour models’ application in practice, specifically in financial services, have been conducted. Ramaswami, Strader and Brett (2001), carried out a research on ‘on-line channel use for purchasing financial services’ and their findings show that on-line users do not usually undertake on-line purchase transactions until they become familiar and comfortable with the medium. According to Dorsch, Grove and Darden (2000) research on ‘consumer intentions to use a service category’, decisions on customer-service category are influenced by the amount of benefit expected from the service category in question and also the amount of experience the customers had with that service category and his or her financial status. Rust and Lemon (2001) have examined changes in consumer expectations regarding service strategies and identified three specific areas which have shifted the consumers’ expectations towards emerging e-service industry. Rust and Lemon (2001) have also considered whether individual customer’s behaviour can be segmented and whether the consumers construct multiple personalities, characters or schemas as they interact on the web.

Consumer behavior, acceptance, attitude and perceptions as key issues for banks in developing the Internet as their distribution channel have also been highlighted (Foley and Jayawardhena, 2000; Daniel, 2000; Devlin, 1995; Mols, 1998; Stickel and Seitz, 1998; Joseph and McClure, 1999) but very little empirical research has been conducted with UK Internet banking consumers. Sathye (1999) has conducted a survey on Australian consumers on the adoption of the Internet banking. The survey showed that security concerns and lack of awareness about Internet banking and its benefits were the main obstacles for the adoption of the Internet in Australia. Sathye (1999) also suggested that Internet should be part of overall customer service and distribution strategy and thus rapid growth in customer base will be achieved and banks can save considerable operating costs.

So, there are issues related to the Internet usage by the consumers with regards to familiarity and comfortability, expectation and experience, and overall the perception, attitude and acceptance for this new form of service media. From the above research findings it is clear that banks are adopting Internet in order to obtain all the possible benefits such as cost effectiveness for distribution, advertising and promotions, time saving and marketing communications. It is important to know what are the different categories of people for on-line banking and how do they manage their finances? If these questions can be answered, banks will be able to target their customers more adequately within marketing strategies.

c) Personal financial management:

A clear area of theory in the present research concerns general differences between consumers (ie. Segmentation). It is also clear that the use of the internet in personal financial management will be influenced by people’s stance on control and self-management of finance. Research on persona financial record keeping, control and management issues in relation to individual’s characteristicsis limited. Very little published research has been found on peoples’ perception and attitude regarding their financial management and control. Emphasis on why people fall in debt and how to overcome the debts, ways, plans and necessity to manage finance have been explored in many studies (McQueen, 1985; Credit and Debt- National Consumer Council, 1990; Rowlingson and Kempson, 1994, Llewellyn and Walker, 2000). How people manage their finance or their expenditure and what type of characteristics do they possess were not the focus of these studies.

However, some issues have been highlighted in Rowlingson and Kempson’s (1994) study in which secondary analysis was carried out for ‘credit card debts’ on the findings by PSI (Policy Studies Institute) in 1989. According to Rowlingson and Kempson’s (1994) analysis, the majority of account holders paid off as much as they had available and this method of finance management was chosen by people who had above average incomes, were in full time work and owned their homes. 20% people had set up budget plans where they paid a set amount each month. This plan was chosen by people who were in fear of running up higher bills they could not afford and also people with below average income.

Whyley, Kempson and Herbert (1997) explored approaches to money management and attitudes to bill payment. In their findings, five different groups of people were identified with regard to approaches to money management. Each of them has their own characteristics. Five different identified segments of customers are: Moral planners, Pragmatic planners, Flexible planners, Muddlers, and Pay-as-you-go.

Doolin and Northcott (2000) conducted a study to explore the everyday financial management of a number of ‘home accountants’ and reveal the nature and effects of their accounting practices. The interviewees adopted different kinds of record keeping. Some kept all the receipts including cash withdrawals and also kept the bank statements to check weekly or monthly spending to keep track of their outgoings. They also monitored their savings account and current account balances. Many interviewees conducted regular updates and reconciliation of each salary or wage payment or weekly grocery shopping. There was a strong perception among interviewees of the need to maintain control over their personal finances. By keeping regular records, individuals could see their income, financial position and this helped them for their economic decisions. It helps them to realise how much or how little money they have got. It generates a sense of comfort and security.

Overall it would seen that customer segments can be identified, these particular segments and their money management approaches may not be apparent for any system or situation and this research will, therefore, focus on developing a new typology of consumers for on-line credit card customers in relation to their account and money management over the Internet.