The Use of Electronic Banking and New Technologies in Cash Management (information science)


The use of new information and communication technologies (ICT) as a business tool has increased rapidly for the past 10 years (Bonson, Coffin, & Watson, 2000; Claessens, Glaessner, & Klingebiel, 2000; Vasarhelyi & Greenstein, 2003). More specifically, financial software, e-banking, and the Internet, as core aspects of the various technologies used, have become driving forces behind the expansion of firms and the development of cash management. New technologies are considered as one of the most attractive ways for businesses to increase revenue and achieve economies of scale that can reduce unit costs (Ballantine & Stray, 1998; Barajas & Villanueva, 2001; Daniel, 1999; Daniel & Storey, 1997; Deyoung, 2001; Downes & Muy, 1998; Faulder, 2001; Jayawardhena & Foley, 2000).

There are different studies about the use of ICT in the management of the enterprise that explain the obtaining of enterprise performance. Brynjolfsson and Hitt (2000) and Najera (2005) have done a review of these works and a classification of these types of researches. Unfortunately, there are not specific works or empirical researches about the use of e-banking in cash management; consequently, this work is focused in this.

The rest of the chapter is structured as follows. The theoretical foundation on which the study is based is explained in Section 2. Section 3 presents the data and the analysis procedure used to conduct the empirical study. The main results of the investigation are shown in Section 4, and Section 5 presents conclusions. The chapter ends with a list of bibliographical references.


Three different periods can be distinguished in the development of ICT in cash management (Williams, Chen, & Russell, 1997). In period one, prior to the 1970s, treasurers engaged in accounting and in managing the cash-flow oftheir companies, and did not use IT tools in their work. Period two, from the 1970s to the 1990s, is characterised by a vision based on corporate relations and integrated systems. Since the 1990s we have moved into period three, the era of networking, in which the responsibilities of cash managers have come to include the use of electronic banking and new technologies to obtain the efficiency in their financial decisions because the great advantages for business management entailed by the development of technology. Internet is a space that can be shared freely at zero expense. However, the introduction of new technologies needs to be analysed thoroughly if business management efficiency is to be maximised (Levinsohn, 2001).

In this context, specifically, electronic banking management becomes an essential function in which information can be obtained electronically on market conditions, financial products, trends, and financial services. Financing and investment of treasury deficit and surpluses is optimised by comparing the terms of the different financial products on the market, and then contracting products online (Mooney & Pittman, 1996; Vasarhely & Greenstein, 2003; Welch, 1999).

In short, financial services based on new technologies use the e-banking as a single communication standard and thus, obtain economies of scale (Barajas & Villanueva, 2001; Eije & Westerman, 2002; Mishkin & Strahan, 1999) and positive synergies at treasury departments that were formerly difficult to achieve.


To draw up the explanatory model of e-banking use in cash management, we used an exploratory factorial analysis of variables with Version 14.0 of the SPSS program.

In the following table, we have described the sample that is considered representative of the population of Spanish firms. This study was conducted on Spanish firms with more than 10 employees. The sample was chosen by proportional allocation according to criteria of company size (defined by the number of employees) and sector of activity. The total number of firms used was 501, and the error is smaller than 5%, necessary in this type of study.

Table 1. Acknowledgements: The sample

501 valid questionnaires. The interviewed person was the finance manager or cash manager. Criteria: company size (defined by the number of employees) and sector activity. ± 3, 52% with a confidence level of 95,5%, p=q=0.5, Telephone’s interview. June of 2005.


The results indicate that the new technologies more utilized by firms to financial practices are financial software, Internet and electronic banking. Furthermore, these results have permitted us to develop an explanatory model of the use of electronic banking to treasury management.

Preliminary Results

The Use of ICT in Cash Management

The ICT’s most widely used in financial operations and more specifically, in treasury management are financial software, the Internet, and e-banking, though it is the introduction of the Internet into all areas of corporate life that has been the major revolution of the past 10 years. All these technologies entail benefits for financial management, so the next step is to analyse their average levels of use and determine which ICT’s are most widely used in this area (see Graph 1).

This analysis shows that e-banking (Internet banking) is the most widely used tool in treasury operations, with treasury managers awarding it an average score of 4.512 out of 5. The second highest score is that of the Internet, with 4.312, followed by financial software with an average of less than 4. Specifically, e-banking is used habitually by 73.1% of the firms analysed, the Internet by 65.5% and financial software by 44.6%.

Graph 1. The level of utilization of ICT in cash management: Averages

The level of utilization of ICT in cash management: Averages

Graph 2: Electronic financial instruments: Averages

Electronic financial instruments: Averages

Electronic Financial Instruments

In this sense, we analyzed electronic financial instruments, the financial instruments via e-banking mostly used by the companies. Concretely, four financial instruments have been analyzed that are emitted via electronic bank; the check, the invoices, the orders, and the request of loans (see Graph 2). The scale has been used starts in 1, which represents the smallest use, and finishes in 5, the most used.

The invoice (2,45) is, on the average, the financial instrument emitted by e-banking that is used more, followed by the orders (2,42) and checks (2,19). The request of loans (1,57) via electronics is considerably inferior. These data, in general, denote that the financial instruments via e-bank-ing are not used habitually in the companies, although the electronic invoices and orders are used.

Explanatory Model: E-banking in Cash Management

Exploratory Factorial Analysis

The basic assumptions underlying factorial analysis, linearity, normality, and homoscedasticity, are conceptual rather than statistical. Therefore, from a statistical point of view, these assumptions can be obviated in the awareness that their fulfilment causes a drop in the correlations observed (Hair, Anderson, Tatham, & Black, 1999). However, these correlations are still sufficient if it is determined that factorial analysis is appropriate. This can be done by analysing the Kaiser-Meyer and Olkin (KMO) measurement and examining the whole correlation matrix, contrasting it with Bartlett’s sphericity test.

The results shown in Table 2 are satisfactory for both tests, so an exploratory factorial analysis can be performed for e-banking.

These results (Table 3) show that the eight variables for the use of e-banking in treasury management can be grouped into two components with minimal information loss. The first component explains 41,728% of the variance, the second 28,725%. In all, this grouping into two factors explains 70,453%1 of the overall variability of the sample.

Saturations lower than 0.6 in absolute value have been eliminated.

An analysis of the sensitivities in Table 4 shows that for the first component, negotiation with financing institutions, management of thefinancing of treasury deficit, management of the placement of treasury surpluses and interest-rate, and exchange-rate risk management have high, positive values. Considering the significance of these variables, this component seems to be reflecting aspects concerned with advances use of e-banking in cash management.

Use of e-banking in collects and payments management, day-to-day control of banking positions, short-term treasury forecasts, and monitoring of banking positions at the value data can be grouped around the second factor as basic use of e-banking in cash management.

Table 2. Determining factor of the correlation matrix, KMO, and Bartlett’s test

Kaiser-Meyer-Olkin simple suitability measure ,806
Bartlett’s sphericity test Chi-square 1004,000
fd 28
p-value ,000

Table 3. Principal component analysis. Final statistics with three components of rotate variables

Communality Comp. Eigenvalue %

of Var.

%Var. Accum.
Collects and Payments management ,638 1 3,343 41,728 41,728
Day-to-day control of banking positions ,648 2 1,494 28,725 70,453
Short-term treasury forecasts ,587
Monitoring of banking positions at the value data ,474
Negotiation with financing institutions ,585
Management of the financing of treasury deficit Management of the placement of treasury surpluses Interest-rate and exchange-rate risks management ,681
Management of the placement of treasury surpluses ,622
Interest-rate and exchange-rate risks management ,602

Table 4. Rotated component matrix; Varimax normalization with Kaiser

Collects and Payments management ,798
Day-to-day control of banking positions ,792
Short-term treasury forecasts ,709
Monitoring of banking positions at the value data ,663
Negotiation with financing institutions ,746
Management of the financing of treasury deficit Management of the placement of treasury surpluses Interest-rate and exchange-rate risks management ,813
Management of the placement of treasury surpluses ,772
Interest-rate and exchange-rate risks management ,764

The Explanatory Model of Use E-Banking in Cash Management

The use of ICT in cash management is expanded in the last decade. The electronic cash management is focused in the use of new technologies and particularly, e-banking in treasurer’s financial practices that permit they obtain more information to select the best financial decision that is conduced to obtain economic scales in the enterprise and reduction of transaction cost with positive synergies. There are two levels to use e-banking, the first level, basic e-banking is only used in the repetitive actions of the cash managers, the second level, we have denominated advance e-banking, and it is used in strategic financial practices (Graph 3). Is important to use e-banking in two levels, but nowadays some enterprises, small and medium principally, have not used advance e-banking to cash management.


The ICT more utilized by firms to financial practices is electronic banking. The principal electronic financial instrument that enterprises use to cash management is the invoice. Furthermore, these embrace not only the most repetitive treasury functions denominated as basic e-banking referred to use of e-banking to collect and payment management, but also they are used in treasury management functions that depend largely on corporate decisions and are strategic rather than operational denominated as advance e-banking.

Graph 3. The different use of e-banking in cash management

The different use of e-banking in cash management


Cash Management: The cash management corresponds to the obtaining of available the necessary one, at the suitable moment, to the smaller possible cost for which the treasury is planned, is decided what short-term financing and investment to make, analyze the relations with the financial organizations and the risks are managed. In addition, the pursuit and the analysis of the management of the circuit of collections and payments are essential, along with the enterprise culture.

E-Banking: The electronic bank consists of the use of electronic channels by means of which the financial institutions can send products or offer the banking services. Between the services and products, they are possible to be included, deposits, financial management of accounts, warnings, payments of electronic accounts, and provision of other products of electronic payments.

Electronic Cash Management: It is possible to be defined as the set of procedures and practices of integrated management of treasury with the developments in the technologies of the information.

Electronic Financial Instruments: They consist of financial products that are contracted, emitted, and paid without the use in paper of financial documents.

ICT in Cash Management: It consists of the use of different techniques, such as Internet, Intranet, software, electronic bank, and the bank by Internet, with object to essentially obtain the efficiency of the management of treasury by means of the reduction of costs.

Information and Communication Technologies (ICT): The ICT has defined as the grouping of the technologies of information, that they are characterized by the technologies of registries of contents (computer science, communications, Telematics), and the technologies of the communication, that essentially group the radio, the television and the telephony.

Internet Banking: From the global concept of electronic bank, we considered that the bank by Internet consists of the use of the Internet channel like communication channel, banking product distribution, and hiring on the part of the financial organizations.

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