Impact of mobile banking on service delivery of banking sector in India

Introduction

The growth of technology has changed payment systems in the world over during the past

two decades. More and more innovations are being introduced in both cash payment

systems and noncash payment systems. With the introduction and implementation of the

recent technology in banking, electronic devices are making the job of payments and

transactions easy and efficient.

The wind of liberalization sweeping through India has affected all sectors of the economy

and the centre of all these activities is the Indian banking industry. In such a fast changing

environment, to meet emerging needs, the operations in banks need immediate automation

to provide services comparable to best international standards and to match technological

changes taking place in other countries. Indian banks undertook very little efforts for

modernization in respect of work technologies particularly in the areas of introduction of

computers and communication networks until the early 1980s.

Major objectives of adaptation of technology in banking are to improve

Customer service

House keeping

Decision making

Productivity and profitability

Mobile technology is transforming the banking landscape, as new operators and providers

rush to capitalise on the growing market for mobile services. To avoid becoming bit part

players in the future, established banks need a solid, flexible mobile platform and they need

it fast.

In this fast changing environment, to meet emerging needs, the operations in banks need

immediate automation to provide services comparable to best international standards and

to match technological changes.

The study will help identify the impacts of mobile banking on the service delivery of the

banks from the customer’s point of view. Thus, the research needs to be conducted across

different segments of customers based on the usage and understanding of the functions of

mobile banking which will help us create a holistic picture of the service delivery.

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Literature Review

Technology has given new dimensions to the bank’s service delivery mechanism, and the

banks are enthusiastically absorbing the latest technological innovations for devising new

products and services. It has allowed banks to offer much more to their customers like the

facilities of card and telephone access, anytime and anywhere banking through twenty four

hours ATMs etc. In fact, the technology has made it possible for the customers to have

fingertip access to their accounts worldwide.

The attitude of the customers towards this changing trend in the banking services is the

most valuable information that the bankers require. In reference to this, an extensive study

on the perception of the customers on important aspects of technology in banking was done

and found that banks did not perform at the levels mentioned by the customers for each

aspect (Mathew Joseph, Cindy McClure and Beatriz Joseph (1999)). This implies that bankers

are concerned about losing their customers to others. Though, interest rates offered and

offering of diverse products greatly impacts choosing a new bank to bank with, superior

service quality is what customer looks after while choosing whether to bank with a

particular bank or not.

Gathering quality data and obtaining an insightful understanding of customer perception

and how it is affected by all other factors that occur in the process of service delivery.

Service process designing, in our case, interface of mobile banking application ensures the

perception the customer will carry (Raphael K. Akamavi (2005).

Another article on a similar topic (Minjoon Jun, Shaohan Cai, (2001)), discuss on the various

dimensions on which one can assess the quality of services provided by a bank. It is reported

that all the dimensions of that are normally utilized to assess the traditional banking model

will not be appropriate to analyse the service quality of internet banking. The article gives a

set of 17 dimensions described under three categories of internet banking service quality:

Customer service quality

Online systems quality

Banking service product quality

We have also referred to an article which is focused on consumer acceptance of online

banking in Finland with a model where new variables are derived from the other literature

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and also from the focus group interview with bank managers. The result of this model of

study is that the customers perceive the online banking service as a better mode of useful

service than a mode of ease of use. The customers get more information on the online

service when compared to traditional service which makes them prefer the online service.

Though this article provides many helpful factors it has its own limitations the major one

among them is the data is based on the only Finnish consumers and so cannot be

generalized (Tero Pikkarainen, Kari Pikkarainen, Heikki Karjaluoto and Seppo Pahnila

(2004)).

Tommi Laukkanen, (2007) reported the customer value perception on the comparison

between the internet banking and the mobile banking service. The results in this study

indicated the efficiency, convenience and safety are the most significant aspects which

indicate the difference between the internet and mobile banking services.

In another recent article Shirshendu Ganguli, Sanjit Kumar Roy, (2011) introduced a concept

of service quality and its importance with respect to customer satisfaction and loyalty in

case of technology based banking. The author has reported that the loyalty and customer

satisfaction are very much dependent on the convenience of technology, reliability and

usage easiness of the service delivery of the bank.

An article by Lia Patricio, Raymond P. Fisk and Foao falcao e Cunha (2003), introduces the

idea of focusing on each delivery channel of the services offered to improve the satisfaction

of the customers. The article is about how strongly choice of service delivery system

influences the customer satisfaction.

A study investigating Chinese consumers’ attitude towards online/mobile banking,

education, awareness, possession of debit/credit card and past experience with

computer/new technology and personal banking reports that consumers not using online

banking or having no experience with new technology find it difficult to adopt mobile

banking (Sylvie Laforet, Xiaoyan Li (2005)). This implies that it is important for the banks to

make its customers aware of the ease of availing banking services through the latest

technology (like mobile and online banking) than the traditional methods.

Acceptance of mobile banking is one aspect of service delivery while other aspect is how the

service is being offered. Mobile banking can be offered as SMS banking or application based

banking. Most of the banks, these days, offers both sorts of service. In the case of

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application based service offering, user interface of the application is what matters the most

for people who are new to mobile banking.so, in order to add new customer base to mobile

banking services a simple user interface would do the job to make them understand that

this mode of service is as easy to use as ATM or branch banking. For customers, say

corporates, who need advanced features in mobile banking application, bank can offer a

separate tab in the simple UI application only. Those who want advanced features can tap

on the link and download extra features of the application. That way in the same application

all the customers, new and accustomed can be catered.

In this paper we will focus on the impacts of the technology especially in terms of mobile

banking on the service delivery.

Methodology

Conducted a quantitative research by means a questionnaire (refer to the appendix-

1) administered online which assesses the suitability of mobile banking services to

customer’s lifestyle and current needs.

Demographics of respondents:

o A sample size of 50.

o Age groups : 20 to 50 years

Students – dependents

Working professionals

Survey results and analysis

Demographic variables Percentage distribution

Age group2% (15-20 years), 87% (21-30 years),

7% (31-40 years), 4% ( above 40 years)

Gender 83% Male, 17% Female

Occupation 53% Students, 52% Employed, 13% Unemployed, 2% Others

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98% of the respondents have a bank account and they own a smart phone. All the banks

provide mobile banking services but only 57% of the respondents use the mobile banking

services provided by their bank. (Refer appendix 2)

Reasons for not using mobile banking services:

63% of the respondents fear that the banks do have the ability to protect their

privacy through this service.

40% of the respondents believe that the internet connection will disconnect by itself

during a transaction.

Close to 30% of the respondents believe that using mobile banking is not secure.

The major factors that influence the usage of mobile banking service as per the survey are:

Security that the bank promises to its customers.

Reliability

The ability to maintain privacy about the customer transactions.

Ease of use

# Answer Min Value Max Value

Average Value

Standard Deviation

Responses

1 Security 1.00 5.00 4.44 1.01 452 Privacy 1.00 5.00 4.28 1.04 473 Reliability 2.00 5.00 4.36 0.77 454 Cost 1.00 5.00 3.13 1.24 45

5 Perceived usefulness

1.00 5.00 3.70 1.05 46

6 Ease of use 2.00 5.00 4.29 0.82 45

It is very well clear from the analysis table that average value on a 5 point scale of security is

maximum, i.e. 4.44. People are more concerned about security while choosing to use or not

to use mobile banking. Non availability of tangible proof of transaction and pre conceived

fear of being trapped in a scam could be some of the reasons why many are not comfortable

using mobile banking.

The most common transactions performed using mobile banking service are online shopping

and paying bills or recharge.

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Among those who uses mobile banking facility provided by their bank, majority felt that

reliability and ease of access to the services are the most crucial factors of their using mobile

banking. From the above results, it is observed that though security is the major concern for

using mobile banking 70% of the respondents agree that mobile banking is secure to use

and also trust that the banks have the ability to provide for a secure service and protection

to the personal data. There are 44.4% of respondents who do not fear about the

disconnection of the network during a transaction while using mobile banking. 57.4% of the

respondents feel that reliability of the application is very important when considering the

mobile banking service.

More than 50 % respondents considered security and privacy as the most important factor

in the adoption of mobile banking. Cost and perceived usefulness of mobile banking is not a

major factor considered by respondents. Respondents consider reliability of mobile banking

somewhat important factor.

Using SPSS, the extent of association of demographic parameters with the utilization of the

mobile banking services was analyzed. It may be said that the mobile banking usage is not

associated with the demographic variable barring age group and gender as their correlation

coefficients were 0.044 and 0.214. Gender and mobile banking usage are positively

correlated.

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Correlations

Age

Group

Occupation

al Status

Gender Do you use

the mobile

banking

services

provided by

your bank?

Age Group

Pearson Correlation 1 .321* -.241 .044

Sig. (2-tailed) .031 .110 .774

N 45 45 45 45

Occupational Status

Pearson Correlation .321* 1 -.362* .012

Sig. (2-tailed) .031 .015 .939

N 45 45 45 45

Gender

Pearson Correlation -.241 -.362* 1 .214

Sig. (2-tailed) .110 .015 .159

N 45 45 45 45

Do you use the mobile

banking services provided by

your bank?

Pearson Correlation .044 .012 .214 1

Sig. (2-tailed) .774 .939 .159

N 45 45 45 45

Conclusion

The primary objective of the study was to study the impact of mobile banking on service

delivery of banks. The results of the survey conducted shows that customers are diverted

from branch banking because other modes of transactions provide greater reliability

compared to branch banking. People expect mobile banking to be more secure. People also

expect good connectivity while performing a transaction. In short, ease of use and reliability

are the factors which drive people towards using mobile banking while security is the main

factor that is holding some of them back. Banks are now better able to handle customers

coming to branch because branches are not flooded with people these days. People are

willing to avail reliable services provided by mobile banking but banks would have to infuse

confidence in them by making them sure of providing greater security. From the survey we

inferred that people use mobile banking for smaller transactions like online shopping and

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bill payments but they rely on branch mode of banking for transactions involving large

amount of money like fund transfer and trading. Though these problems are there, but

quality of service has improved, it is faster than before, it is better than before, safer than

before and it has overcome geographical barriers too.

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References:

1. Mathew Joseph Cindy McClure Beatriz Joseph, (1999),"Service quality in the banking sector: the impact of technology on service delivery", International Journal of Bank Marketing, Vol. 17 Iss 4 pp. 182 – 193http://www.emeraldinsight.com/doi/pdfplus/10.1108/02652329910278879

2. Minjoon Jun, Shaohan Cai, (2001) "The key determinants of Internet banking service quality: a content analysis", International Journal of Bank Marketing, Vol. 19 Iss: 7, pp.276 – 291http://www.emeraldinsight.com/doi/pdfplus/10.1108/02652320110409825

3. Tero Pikkarainen Kari Pikkarainen Heikki Karjaluoto Seppo Pahnila, (2004),"Consumer acceptance of online banking: an extension of the technology acceptance model", Internet Research, Vol. 14 Iss 3 pp. 224 – 235http://www.emeraldinsight.com/doi/pdfplus/10.1108/10662240410542652

4. Tommi Laukkanen, (2007),"Internet vs mobile banking: comparing customer value perceptions", Business Process Management Journal, Vol. 13 Iss 6 pp. 788 – 797http://www.emeraldinsight.com/doi/pdfplus/10.1108/14637150710834550

5. Shirshendu Ganguli, Sanjit Kumar Roy, (2011) "Generic technology based service ‐quality dimensions in banking: Impact on customer satisfaction and loyalty", International Journal of Bank Marketing, Vol. 29 Iss: 2, pp.168 – 189http://www.emeraldinsight.com/doi/pdfplus/10.1108/02652321111107648

6. Raphaël K. Akamavi , (2005) "Re‐engineering service quality process mapping: e‐banking process",International Journal of Bank Marketing, Vol. 23 Iss: 1, pp.28 – 53http://www.emeraldinsight.com/doi/full/10.1108/02652320510577357

7. Lia Patrício, Raymond P. Fisk, João Falcão e Cunha, (2003) "Improving satisfaction with bank service offerings: measuring the contribution of each delivery channel", Managing Service Quality: An International Journal, Vol. 13 Iss: 6, pp.471 – 482 http://dx.doi.org/10.1108/09604520310506531

8. Sylvie Laforet, Xiaoyan Li, (2005) "Consumers’ attitudes towards online and mobile

banking in China", International Journal of Bank Marketing, Vol. 23 Iss: 5, pp.362 –

380 http://dx.doi.org/10.1108/02652320510629250

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Appendix-1

Impact of Mobile Banking On Service Delivery of Banking Sector in India

Q1 Age Group

15-20 21-30 31-40 40+

Q2 Occupational Status

Student Employed Unemployed Others

Q3 Gender

Male Female

Q4 Do you own a mobile phone?

Yes No

Q5 Is it a smart phone?

Yes No

Q6 Do you have a bank account?

Yes No

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Q7 Does your bank provide mobile banking services?

Yes Maybe No

Q8 Do you use the mobile banking services provided by your bank?

Yes No

Q9 Mobile banking perception

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Strongly Disagree (1)

Disagree (2) Neither Agree nor

Disagree (3)

Agree (4) Strongly Agree (5)

Using mobile banking is

not secure.

Overall matters of

security have an influence on my using

mobile banking.

I fear that banks do not

have the ability in mobile

banking to protect my

privacy.

Overall matters of

privacy have an influence on my using

mobile banking.

I fear that while making

a mobile banking

transaction the

connection will

disconnect by itself.

Overall reliability is the factor

influencing

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my use of mobile

banking.

Q10 Which factors do you think are the most important in the adoption of mobile banking?(1 star - least important to 5 star - most important)

______ Security ______ Privacy ______ Reliability ______ Cost ______ Perceived usefulness ______ Ease of use

Q11 How often do you make the following transactions using mobile banking ?

Never (1) Rarely (2) Sometimes (3)

Quite Often (4)

Very Often (5)

Transferring funds

Online shopping

Trading

Paying bills or recharge

Q12 Rank the following based on the preference of use

______ Branch Banking ______ Net Banking ______ Mobile Banking ______ Debit / Credit Cards

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Appendix-2

1. Proportion of respondents using mobile banking

# Answer Response %1 Yes 27 57%2 No 20 43%

Total 47 100%

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Statistic ValueMin Value 1Max Value 2Mean 1.43Variance 0.25Standard Deviation 0.50Total Responses 47

2. Perception about mobile banking

3. Factors influencing mobile banking service usage

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# Answer Min Value Max Value

Average Value

Standard Deviation

Responses

1 Security 1.00 5.00 4.44 1.01 452 Privacy 1.00 5.00 4.28 1.04 473 Reliability 2.00 5.00 4.36 0.77 454 Cost 1.00 5.00 3.13 1.24 45

5 Perceived usefulness

1.00 5.00 3.70 1.05 46

6 Ease of use 2.00 5.00 4.29 0.82 45

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