DISSERTATION
On
"E-banking vs Conventional Banking in India"
BySaurabh Chawla
Enroll. No. - A0101910209MBA Class of 2012
Under the Supervision ofMr. Vaibhav Gupta
ProfessorDepartment of Finance
In Partial Fulfilment of Award of Master of Business Administration
AMITY BUSINESS SCHOOLAMITY UNIVERSITY UTTAR PRADESH
SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA
AMITY BUSINESS SCHOOL
DECLARATION
Title of Project Report - E-banking vs Conventional banking in India
I declare
(a)That the work presented for assessment in this dissertation Report is my own, that it
has not previously been presented for another assessment and that my debts (for words,
data, arguments and ideas) have been appropriately acknowledged.
(b)That the work conforms to the guidelines for presentation and style set out in the
relevant documentation.
Date: 20th March, 2012. Saurabh Chawla
A0101910209
MBA - Class of 2012.
AMITY UNIVERSITY UTTAR PRADESH
AMITY BUSINESS SCHOOL
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CERTIFICATE
I Mr. Vaibhav Gupta hereby certify that Saurabh Chawla student of Masters of
Business Administration at Amity Business School, Amity University Uttar Pradesh is
doing the Project Report on “E-banking vs Conventional banking in India" under my
guidance.
Mr. Vaibhav Gupta
Professor
Department of Finance
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ACKNOWLEDGEMENT
I owe a great many thanks to a great many people who helped and supported me during
the making of this project report. I would like to thank Mr Vaibhav Gupta, faculty,
Amity Business School, for her guidance throughout the project.
I would also like to thank my Industry mentor Mr. Samik Dasgupta ( Sr. AVP, IFCI
Ltd), who inspired me greatly to work on this project. I would like to thank him for
guiding me with some examples that are related to the topic of the project, for suggesting
alternative solutions & sharing his valuable experience & knowledge with me, and also
for facilitating me in gaining practical knowledge.
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TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION....................................................................................1
CHAPTER 2 :LITERATURE REVIEW......................................................................28
CHAPTER 3: RESEARCH OBJECTIVE....................................................................32
CHAPTER 4: DATA ANALYSIS & INTERPRETATION........................................35
CHAPTER 5: RECOMMENDATIONS AND CONCLUSIONS................................55
REFERENCES................................................................................................................57
ANNEXURE.....................................................................................................................59
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LIST OF FIGURES
FIGURE I: E-BANKING PRINCIPLE...........................................................................2FIGURE II: ELECTRONIC BANKING & ITS COMPONENTS...............................3FIGURE III: TRANSITION FROM TRADITIONAL TO E-BANKING...................4FIGURE IV: E-BANKING TRANSACTION MECHANISM......................................5FIGURE V: E-BANKING IN VARIOUS COUNTRIES.............................................27FIGURE VI: BAR CHART ON AGE GROUP............................................................36FIGURE VII: BAR CHART ON GENDER DISTRIBUTION...................................37FIGURE VIII: BAR CHART ON BANK VISITS PER MONTH..............................39FIGURE IX: PIE CHART ON E-BANKING FACILITIES BANK SHOULD PROVIDE.........................................................................................................................40FIGURE X: PIE CHART ON REASON FOR VISITING BRANCH........................42FIGURE XI: BAR CHART ON EXISTENCE OF INTERNET BANKING ACCOUNT.......................................................................................................................45FIGURE XII: PIE CHART ON USAGE OF E-BANKING SERVICES USED BY CONSUMERS..................................................................................................................47FIGURE XIII: PIE CHART ON CHOICE OF BANK...............................................48FIGURE XIV: BAR CHART ON REASONS FOR OPENING INTERNET BANK ACCOUNT.......................................................................................................................50FIGURE XV: BAR CHART ON IMPORTANCE OF FACTORS RELATING TO E-BANKING....................................................................................................................52FIGURE XVI: PIE CHART ON REASONS FOR NOT OPENING AN E-BANKING ACCOUNT...................................................................................................53
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LIST OF TABLES
TABLE I: LIST OF SOME BANKS OPERATING E-BANKING IN INDIA & THEIR TECHNOLOGY VENDORS........................................................................................13
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EXECUTIVE SUMMARY
“E-banking” means the execution of financial services via internet, reducing cost and increase in
convenience for the customer to access the transaction. E-banking is an umbrella term for the
process by which a customer may perform banking transactions electronically without visiting a
brick-and-mortar institution. The following terms all refer to one form or another of electronic
banking: personal computer (PC) banking, Internet banking, virtual banking, online banking,
home banking, remote electronic banking, and phone banking. PC banking and Internet or online
banking is the most frequently used designations. It should be noted, however, that the terms
used to describe the various types of electronic banking are often used interchangeably.
The ever increasing speed of internet enabled phones & PDA’s, made the transformation of
banking application to mobile devices, this creates a new subset of electronic banking i.e. mobile
banking.
This study tries to analyze the differences in risk perceptions between bank customers using E-
Banking and those not using E-Banking and it shows that risk perceptions in terms of financial,
psychological and safety risks among non-users was more meaningful than those using it.
Customers not preferring to use E-banking thought that they would be swindled when using this
service, and therefore, are particularly careful about high risk expectation during money transfers
from and between accounts.
Although many major banks have started offering E-banking services, the slow pace will
continue until the mass awareness is created.
Private and foreign banks are trying to turn more and more customer towards the usage of
internet for the banking transaction. This study is basically to know the relation of various
independent variables on the customer usage of internet for banking.
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Bank
Information technology
Customer
CHAPTER 1: INTRODUCTION
Electronic banking is one of the truly widespread avatars of E-commerce the world over.
Various authors define E-Banking differently but the most definition depicting the meaning and
features of E-Banking are as follows:
1. Banking is a combination of two, Electronic technology and Banking.
2. Electronic Banking is a process by which a customer performs banking
Transactions electronically without visiting a brick-and-mortar institutions.
3. E-Banking denotes the provision of banking and related service through
Extensive use of information technology without direct recourse to the bank by the customer.
FIGURE I: E-BANKING PRINCIPLE
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NEED FOR E-BANKING
One has to approach the branch in person, to withdraw cash or deposit a cheque or request a
statement of accounts. In true Internet banking, any inquiry or transaction is processed online
without any reference to the branch (anywhere banking) at any time. Providing Internet banking
is increasingly becoming a "need to have" than a "nice to have" service. The net banking, thus,
now is more of a norm rather than an exception in many developed countries due to the fact that
it is the cheapest way of providing banking services.
Banks have traditionally been in the forefront of harnessing technology to improve their
products, services and efficiency. They have, over a long time, been using electronic and
telecommunication networks for delivering a wide range of value added products and services.
The delivery channels include direct dial – up connections, private networks, public networks etc
and the devices include telephone, Personal Computers including the Automated Teller
Machines, etc. With the popularity of PCs, easy access to Internet and World Wide Web
(WWW), Internet is increasingly used by banks as a channel for receiving instructions and
delivering their products and services to their customers. This form of banking is generally
referred to as Internet Banking, although the range of products and services offered by different
banks vary widely both in their content and sophistication.
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FIGURE II: ELECTRONIC BANKING & ITS COMPONENTS
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Traditional bankingGunpowder
Personalized services, time consuming, limited access
Virtual or E-bankingNuclear charged
Real time transactions, integrated platform, all time
access
EVOLUTION OF E-BANKING
The story of technology in banking started with the use of punched card machines like
Accounting Machines or Ledger Posting Machines. The use of technology, at that time, was
limited to keeping books of the bank. It further developed with the birth of online real time
system and vast improvement in telecommunications during late 1970’s and 1980’s.it resulted in
a revolution in the field of banking with “convenience banking” as a buzzword. Through
Convenience banking, the bank is carried to the doorstep of the customer.
The 1990’s saw the birth of distributed computing technologies and Relational Data Base
Management System. The banking industry was simply waiting for these technologies. Now with
distribution technologies, one could configure dedicated machines called front-end machines for
customer service and risk control while communication in the batch mode without hampering the
response time on the front-end machine.
FIGURE III: TRANSITION FROM TRADITIONAL TO E-BANKING
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Intense competition has forced banks to rethink the way they operated their business. They had
to reinvent and improve their products and services to make them more beneficial and cost
effective. Technology in the form of E-banking has made it possible to find alternate banking
practices at lower costs.
More and more people are using electronic banking products and services because large section
of the banks future customer base will be made up of computer literate customer, the banks must
be able to offer these customer products and services that allow them to do their banking by
electronic means. If they fail to do this will, simply, not survive. New products and services are
emerging that are set to change the way we look at money and the monetary system.
FIGURE IV: E-BANKING TRANSACTION MECHANISM
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E-BANKING PRODUCTS
Automated Teller Machine (ATM):
These are cash dispensing machine, which are frequently seen at banks and other locations such
as shopping centers and building societies. Their main purpose is to allow customer to draw cash
at any time and to provide banking services where it would not have been viable to open another
branch e.g. on university campus. An automated teller machine or automatic teller machine
(ATM) is a computerized telecommunications device that provides a financial institution’s
customers a method of financial\ transactions in a public space without the need for a human
clerk or bank teller. On most modern ATMs, the customer identifies him or herself by inserting a
plastic ATM card with a magnetic stripe or a plastic smartcard with a chip that contains his or
her card number and some security information, such as an expiration date or CVC (CVV).
Security is provided by the customer entering a personal identification number (PIN).
Using an ATM, customers can access their bank accounts in order to make cash withdrawals (or
credit card cash advances) and check their account balances. Many ATMs also allow people to
deposit cash or checks, transfer money between their bank accounts, pay bills, or purchase goods
and services.
Some of the advantages of ATM to customers are:-
1. Ability to draw cash after normal banking hours
2. Quicker than normal cashier service
3. Complete security as only the card holder knows the PIN
4. Does not just operate as a medium of obtaining cash.
5. Customer can sometimes use the services of other bank ATM’s.
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Telebanking or Phone Banking:
Telephone banking is relatively new Electronic Banking Product. However it is fastly becoming
one of the most popular products. Customer can perform a number of transactions from the
convenience of their own home or office; in fact from anywhere they have access to phone.
Customers can do following:-
1. Check balances and statement information
2. Transfer funds from one account to another
3. Pay certain bills
4. Order statements or cheque books
5. Demand draft request
This facility is available with the help of Voice Response System (VRS). This
system basically, accepts only TONE dialed input. Like the ATM customer has to follow
particular process, initially account number and telephone PIN are fed for the process to start.
Also the VRS system provides the users within additional facilities such as changing existing
password with the new desired, information about new products, current interest rates etc.
Mobile Banking:
Mobile banking comes in as a part of the banks initiative to offer multiple channel banking
providing convenience for its customer. A versatile multifunctional, free service that is
accessible and viewable on the monitor of mobile phone. Mobile phones are playing great role in
Indian banking- both directly and indirectly. They are being used both as banking and other
channels.
Internet Banking:
The advent of the Internet and the popularity of personal computers presented both an
opportunity and a challenge for the banking industry. For years, financial institutions have used
powerful computer networks to automate million of daily transactions; today, often the only
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paper record is the customer’s receipt at the point of sale. Now that their customers are
connected to the Internet via personal computers, banks envision similar advantages by adopting
those same internal electronic processes to home use.
Banks view online banking as a powerful “value added” tool to attract and retain new customers
while helping to eliminate costly paper handling and teller interactions in an increasingly
competitive banking environment. In India first one to move into this area was ICICI Bank. They
started web based banking as early as august 1997.
TYPES OF INTERNET BANKING OR E-BANKING:
Understanding the various types of Internet banking will help examiners assess the risks
involved. Currently, the following three basic kinds of Internet banking are being employed in
the marketplace.
1. Informational- this is the basic level of Internet banking. Typically, the bank has
marketing information about the bank’s products and services on a stand-alone server. The risk is
relatively low, as informational systems typically have no path between the server and the bank’s
internal network. This level of Internet banking can be provided by the banks or outsourced.
While the risk to a bank is relatively low, the server or web site may be vulnerable to alteration.
Appropriate controls therefore must be in place to prevent unauthorized alterations to the bank’s
server or web site.
2. Communicative- this type of Internet banking systems and the customer. The interaction
between the bank’s system and the customer. The interaction may be limited to electronic mail,
account enquiry, loan applications, or static file updates (name and address change). Because
these servers may have a path to the bank’s internal networks, the risk is higher with this
configuration than with informational systems. Appropriate controls need to be in the place to
prevent, monitor, and alert management of any unauthorized attempt to access the bank’s
internal networks and computer systems. Virus controls also become much more critical in this
environment.
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3. Transactional- this level of Internet banking allows customers to execute transactions.
Since a path typically exists between the server and the bank or outsourcer’s internal network,
this is the highest risk architecture and must have the strongest controls. Customer transactions
can include accessing accounts, paying bills, transferring funds etc.
DANGERS IN E-BANKING
Using the internet in banking is frought with security and customer trust issues. It looks at the
potential risks associated with the provision of retail banking services via electronic channels. It
summarizes the current state of play , and discusses the risks and the options that are available
for dealing with them. It will provide you with an insight into competitor strategies and an
informed view on the world of e-risk, allowing you to take informed decisions on this critical
subject with confidence.
Dangers in E-banking can help you to reduce the level of risks to a minimal level whilst ensuring
that your business is not left behind in the race to retain and win new electronic customers. It
does this in three main ways:
It identifies the major risks which have been encountered so far and pinpoints areas which
are to become big risks for e-bankers in the future - which means that you are informed of the
dangers before you take your decisions
It reveals how some of the banks which have been quick off the mark have approached risk
issues, and what kinds of risk measurement and management techniques have been applied -
allowing you to examine best practice and employ the lessons learned
It reviews the current range of risk mitigation tool and methodologies, such as business
continuity management and insurance market solutions, and looks into the future - ensuring that
you are informed on what is possible now in terms of risk prevention, and allowing you to
develop future strategies too.
Dangers in E-Banking is packed with helpful and informative practical advice and is compiled
using up-to-date research and analysis and informative case studies - an essential guide for
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management within retail banks and other financial institutions which provide or are planning to
provide e-services.
This is intended to be a strategy document for senior management within retail banks and
building societies that provide financial services and information via internet web sites and
email. It will be of particular interest to risk managers, IT managers, marketing managers, chief
executives, sales directors, finance directors, consultants, business development directors,
compliance officers, strategic planners, directors with international responsibility, new product
development managers, e-commerce managers and research and development managers.
Dangers in E-Banking, in a nutshell, will give you a map of existing and potential e-risks,
combined with practical information to help you organise your business to combat the risks. To
help you take decisions more confidently, it also provides you with the current position as
regards internet law and provides you with analysis and examples of how organisations are
currently approaching e-risks. If you are using internet technology in your financial organisation,
make sure that you are taking the most informed decisions - order your copy of Dangers in E-
Banking right now.
ADVANTAGES OF INTERNET BANKING
Convenience- Unlike your corner bank, online banking sites never close; they’re
available 24 hours a day, seven days a week, and they’re only a mouse click away.
Ubiquity- If you’re out of state or even out of the country when a money problem arises,
you can log on instantly to your online bank and take care of business, 24\7.
Transaction speed- Online bank sites generally execute and confirm transactions at or
quicker than ATM processing speeds.
Efficiency-You can access and manage all of your bank accounts, including IRA’s, CDs,
even securities, from one secure site.
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Effectiveness- Many online banking sites now offer sophisticated tools, including
account aggregation, stock quotes, rate alert and portfolio managing program to help you manage
all of your assets more effectively.
DISADVANTAGES OF INTERNET BANKING
Start-up may take time-In order to register for your bank’s online program, you will
probably have to provide ID and sign a form at a bank branch. If you and your spouse wish to
view and manage their assets together online, one of you may have to sign a durable power of
attorney before the bank will display all of your holdings together.
Learning curves- Banking sites can be difficult to navigate at first. Plan to invest some
time and\or read the tutorials in order to become comfortable in your virtual lobby.
Bank site changes- Even the largest banks periodically upgrade their online programs,
adding new features in unfamiliar places. In some cases, you may have to re-enter account
information.
E- BANKING SERVICES
1. Online bill payment service:
Each bank has tie-ups with various utility companies, service providers and insurance
companies, across the country. It facilitates the payment of electricity and telephone bills, mobile
phone, credit card and insurance premium bills.
To pay bills, a simple one-time registration for each biller is to be completed. Standing
instructions can be set, online to pay recurring bills, automatically. One-time standing instruction
will ensure that bill payments do not get delayed due to lack of time. Most interestingly, the bank
does not charge customers for online bill payment.
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2. Fund transfer:
Any amount can be transferred from one account to another of the same or any another bank.
Customers can send money anywhere in India. Payee’s account number, his bank and the branch
is needed to be mentioned after logging in the account. The transfer will take place in a day or
so, whereas in a traditional method, it takes about three working days. ICICI Bank says that
online bill payment service and fund transfer facility have been their most popular online
services.
3. Credit card customers:
Credit card users have a lot in store. With Internet banking, customers can not only pay their
credit card bills online but also get a loan on their cards. Not just this, they can also apply for an
additional card, request a credit line increase and God forbid if you lose your credit card, you can
report lost card online.
4. Investing through Internet banking:
Opening a fixed deposit account cannot get easier than this. An FD can be opened online
through funds transfer. Online banking can also be a great friend for lazy investors.
Now investors with interlinked demat account and bank account can easily trade in the stock
market and the amount will be automatically debited from their respective bank accounts and the
shares will be credited in their demat account.
Moreover, some banks even give the facility to purchase mutual funds directly from the online
banking system.
So it removes the worry about filling those big forms for mutual funds, they will now be just a
few clicks away. Nowadays, most leading banks offer both online banking and demat account.
However if the customer have there demat account with independent share brokers, then need to
sign a special form, which will link your two accounts.
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5. Recharging your prepaid phone:
Now there is no need to rush to the vendor to recharge the prepaid phone, every time the talk
time runs out. Just top-up the prepaid mobile cards by logging in to Internet banking. By just
selecting the operator's name, entering the mobile number and the amount for recharge, the
phone is again back in action within few minutes.
6. Shopping at your fingertips:
Leading banks have tie ups with various shopping websites. With a range of all kind of products,
one can shop online and the payment is also made conveniently through the account. One can
also buy railway and air tickets through Internet banking.
TABLE I: LIST OF SOME BANKS OPERATING E-BANKING IN INDIA & THEIR
TECHNOLOGY VENDORS
Bank Name Technology Vendor Service offeringABN AMRO Bank Infosys (Bank Away) NetBankingAbu Dhabi Commercial Bank Infosys (Bank Away) ADCB NetLinkBank of India I-flex BOIonlineCitibank Orbitech (now Polaris) Citibank OnlineCorporation Bank I-flex CorpNetDeutsche Bank db directFederal Bank Sanchez FedNetGlobal Trust Bank Infosys (BankAway) ibank@gtbHDFC Bank i-flex/ Satyam NetBankingHSBC Online@hsbcICICI Bank Infosys, ICICI Infotech InfinityIDBI Bank Infosys (Bank Away) i-net bankingIndusInd Bank CR2 IndusNetPunjab National Bank Infosys (Bank Away) Internet Banking Standard Chartered Bank In-House Me Standard Chartered OnlineState Bank of India Satyam/Broadvision onlinesbi.comUTI Bank Infosys (Bank Away) I connect
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ISSUES IN INTERNET BANKING
Financial institutions, their card associations, and vendors are working to develop an Internet
payment infrastructure to help make electronic commerce secure. Many in the banking industry
expect significant growth in the use of the Internet for the purchase of goods and services and
electronic data interchange. The banking industry also recognizes that the Internet must be secure
to achieve a high level of confidence with both consumers and businesses.
Sound management of banking products and services, especially those provided over the
Internet, is fundamental to maintaining a high level of public confidence not only in the
individual bank and its brand name but also in the banking system as a whole. Key components
that will help maintain a high level of public confidence in an open network environment
include:
Security
Authentication
Trust
Nonrepudiation
Privacy
1. SECURITY
It is an issue in Internet banking systems. The banks provide a level of logical and physical
security commensurate with the sensitivity of the information and the individual bank’s risk
tolerance. Some national banks allow for direct dial-in access to their systems over a private
network while others provide network access through the Internet.
Although the publicly accessible Internet generally may be less secure, both types of connections
are vulnerable to interception and alteration. For example, hardware or software “sniffers” can
obtain passwords, account numbers, credit card numbers, etc. without regard to the means of
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access. National banks therefore must have a sound system of internal controls to protect against
security breaches for all forms of electronic access. A sound system of preventive, detective, and
corrective controls will help assure the integrity of the network and the information it handles.
2. AUTHENTICATION
It is another issue in a Internet banking system. Transactions on the Internet or any other
telecommunication network must be secure to achieve a high level of public confidence. In
cyberspace, as in the physical world, customers, banks, and merchants need assurances that they
will receive the service as ordered or the merchandise as requested, and that they know the
identity of the person they are dealing with. Banks typically use symmetric (private key)
encryption technology to secure messages and asymmetric (public/private key) cryptography to
authenticate parties. Asymmetric cryptography employs two keys — a public key and a private
key. These two keys are mathematically tied but one key cannot be deduced from the other. For
example, to authenticate that a message came from the sender, the sender encrypts the message
using their private key. Only the sender knows the private key. But, once sent, the message can
be read only using the sender’s public key. Since the message can only be read using the sender’s
public key, the receiver knows the message came from the expected sender.
3. TRUST
It is another issue in Internet banking systems. As noted in the previous discussion, public and
private key cryptographic systems can be used to secure information and authenticate parties in
transactions in cyberspace. A trusted third party is a necessary part of the process. That third
party is the certificate authority. A certificate authority is a trusted third party that verifies
identities incyberspace. Some people think of the certificate authority functioning like an online
notary. The basic concept is that a bank, or other third party, uses its good name to validate
parties in transactions. This is similar to the historic role banks have played with letters of credit,
where neither the buyer nor seller knew each other but both parties were known to the bank.
Thus the bank uses its good name to facilitate the transaction, for a fee.
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4. NONREPUDIATION
It is the undeniable proof of participation by both the sender and receiver in a transaction. It is
the reason public key encryption was developed, i.e., to authenticate electronic messages and
prevent denial or repudiation by the sender or receiver.
Although technology has provided an answer to nonrepudiation, state laws are not uniform in the
treatment of electronic authentication and digital signatures. The application of state laws to
these activities is a new and emerging area of the law.
5. PRIVACY
It is a consumer issue of increasing importance. National banks that recognize and respond to
privacy issues in a proactive way make this a positive attribute for the bank and a benefit for its
customers. Public concerns over the proper versus improper accumulation and use of personal
information are likely to increase with the continued growth of electronic commerce and the
Internet. Providers who are sensitive to these concerns have an advantage over those who do not.
6. AVAILABILITY
It is another component in maintaining a high level of public confidence in a network
environment. All of the previous components are of little value if the network is not available
and convenient to customers. Users of a network expect access to systems 24 hours per day,
seven days a week.
Among the considerations associated with system availability are capacity, performance
monitoring, redundance, and business resumption. National banks and their vendors who provide
Internet banking products and services need to make certain they have the capacity in terms of
hardware and software to consistently deliver a high level of service.
In addition, performance-monitoring techniques will provide management with information such
as the volume of traffic, the duration of transactions, and the amount of time customers must wait
for service. Monitoring capacity, downtime, and performance on a regular basis will help
management assure a high level of availability for their Internet banking system.
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FUTURE OF E BANKING
Internet banking is the way of the future. In the future, consumers will have many of their
banking needs met through computer access.
Internet banking is the transfer of funds, payment of bills or purchase of goods or services
through electronic means using e-cash or conventional payment methods such as deposit account
balances or credit cards. At this stage there are only a few banks operating fully on the internet.
Consumers can bank on the internet in two different ways; either through banks that have set up
internet networks, such as the Commonwealth and Advance Banks, or internet banks set up to
develop and use e-cash, such as the Mark Twain Bank and Cyberbank.
The banks which have set up internet networks do not use virtual cash, that is, e-cash methods.
All these transactions are denominated in currency. They offer services such as bill paying,
transferring of funds, reviewing of accounts, statement requests and issuing and approval of loan
applications. All this occurs in real time. The Internet can also be used as a shopping complex
where purchases can be completed using credit cards, which the banks then settle.
Expansion of MICR technology. It is a widely recognised fact that the usage of paper based
cheques would continue for many more years to come. In order to hasten the clearing process,
the Reserve Bank has taken upon itself the developmental role of expansion of the coverage of
the MICR based clearing system to many more cities from the earlier implementation at the four
major metropolitan centres. While today there are 39 MICR based cheque processing centres, the
plans for the immediate future would see the opening of 10 more MICR processing centers,
thereby brining almost more than 70% of the country's cheque volumes to be cleared through the
MICR process.
Imaging and Cheque truncation. While MICR based processing would benefit the banks in
terms of better control over the clearing process and in better reconciliation, the benefits to
customers would accrue only if the cheques deposited by payees are credited quickly. The
demand for quick cheque collections has been for long a requirement, especially for outstation
cheques. To take care of this requirement using the latest advancements in technology, cheque
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truncation based on imaging is being implemented by the Reserve Bank. The project would be a
pilot project in the initial stage covering the National Capital Region of Delhi and would be
extended to other cities after stabilization.
National EFT: In order to expand the coverage of EFT, a National EFT using SFMS as a
standard message interfacing system is to be introduced by the Reserve Bank.
E-Cheque: The electronic cheque is a new payment instrument combining the security, speed
and processing efficiencies of all electronic transactions with the familiar and well developed
legal infrastructure and business processes associated with paper cheques. ECheque leverages the
cheque payment system, a core competency of banking industry. It fits within current business
practices, eliminating the need for expensive reengineering. It works like a paper cheque, but it
does so in a purely electronic form, requiring less manual process. IDRBT has taken up a pilot
project on e-Cheques.
Point of Sale transactions: Today there are many online POS terminals for credit authorization.
A point of sale system can eliminate float, reduce credit risk, and require the merchant to keep
less cash on hand. The POS system enables merchant to verify the availability of funds in a
customer's account or his access to credit before completing the sale.
All these would ensure that a wide array of products and services are available for the common
man to use electronic based payments. The major impact of e-payments would, however, be felt
for small value, retail payments. While Automated Teller Machines (ATMs) have provided relief
to customers for cash withdrawals on an 'anytime, anywhere' basis, thanks to sharing of ATMs
by banks, the future however, lies on low cost but large penetration oriented technologies. Smart
cards hold the key to the future in this area.
The usage of smart cards: for financial transactions is a safe, secure and efficient method to
perform transfer of value for small value transactions. It was with this objective that the Reserve
Bank partnered a pioneering effort towards use of smart cards for financial transactions, way
back in 1998 in the form of a pilot project at the IIT, Mumbai, which resulted in the development
of standards. With technological advances in the area of smart cards, a new Multi Application
Smart Card project has been launched. This time too, the project is being conducted at the IIT
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Mumbai, and is jointly conducted by the IDRBT, banks, industry players and by associating the
Ministry of Communications and Information Technology of the Government of India. The multi
application smart card project aims at the usage of smart cards for multiple applications such as
for national id, driving licence, health card, insurance, e-cash transactions and as an e-purse for
storage and transfer of value. The initial reports on the progress of this project have been very
encouraging and I am sure that this would be the future for the country, where paper based
transfer of money would be replaced by transfer of funds using low cost yet secure smart cards
across the length and breadth of the country. This I feel, would be a path breaking innovation
which would change the very way of transfer of value by consumers.
In all the initiatives for e-payments, standardization is the key to the long-term benefits of
efficient electronic payment systems. The goal should be to allow products and services from
different vendors to work together, by means of inter-operable and seamless interfaces. This will
allow for competition and reduce uncertainty in the market place and enhance easy acceptability.
There is also the need to define privacy rules since transaction trails could pose other risks to
consumer.
Banks are increasingly developing Internet banking applications for better customer service and
to cut operation cost. No queue, no holidays, any time/any where banking operation. Pay
electricity bill, telephone bill, credit card bill, and insurance premium. Check account status,
transfer of funds etc. However, there is a critical concern on security when Internet is used for
business communication/transaction. The security feature need to be built into the system,
application level as well as network level with effective use of secure socket layer protocol
(SSL), encryption/decryption, digital signature, data integrity etc.
Banks in India started to take full advantage of IT in the early nineties. In the last 15 years or so
there have been systematic improvement and up-gradation of IT infrastructure for modernizing
business operations. It is the high-speed real time processing, high volume processing and
analytical capabilities that have helped in operational efficiency.
Reserve Bank of India has taken up an important role as facilitator of payment system
developments. Also RBI is the catalysts for e- and m-commerce (through e-government: e- and
m-payment), stimulating further migration of cash (bank notes and coins) to digital payment 19
instruments, increasing the efficiency of payment systems, Governance of e-commerce -
customer protection, security of transactions, privacy of records and oversight of payment
systems.
The advantage of electronic payments system is that the transactions can be processed quickly,
more cheaply and they also offer a much more convenient method of effecting settlement of
transactions. In the past few years, Indian banks and generally the financial service industry,
have embraced ePayments in a large way. Given the competitive financial environment of this
21st century, I do not think banks have any choice but to join the bandwagon. Indeed,
technologically advanced banks enjoy competitive advantage over others, through cost effective
delivery systems.
INTERNET BANKING VERSUS TRADITIONAL BANKING
In spite of so many facilities that Internet banking offers us, we still seem to trust our traditional
method of banking and is reluctant to use online banking. But here are few cases where Internet
banking will turn out to be a better option in terms of saving your money.
'Stop payment' done through Internet banking will not cost any extra fees but when done through
the branch, the bank may charge you Rs 50 per cheque plus the service tax.
Through Internet banking, you can check your transactions at any time of the day, and as many
times as you want to.
On the other hand, in a traditional method, you get quarterly statements from the bank and if you
request for a statement at your required time, it may turn out to be an expensive affair. The
branch may charge you Rs 25 per page, which includes only 30 transactions. Moreover, the bank
branch would take eight days to deliver it at your doorstep.
20
If the fund transfer has to be made outstation, where the bank does not have a branch, the bank
would demand outstation charges. Whereas with the help of online banking, it will be absolutely
free for you.
As per the Internet and Mobile Association of India's report on online banking 2006, "There are
many advantages of online banking. It is convenient, it isn't bound by operational timings, there
are no geographical barriers and the services can be offered at a miniscule cost."
IMPACT OF E-BANKING ON TRADITIONAL SERVICES
One of the issues currently being addressed is the impact of e-banking on traditional banking
players. After all, if there are risks inherent in going into e-banking there are other risks in not
doing so. It is too early to have a firm view on this yet. Even to practitioners the future of e-
banking and its implications are unclear. It might be convenient nevertheless to outline briefly
two views that are prevalent in the market.The view that the Internet is a revolution that will
sweep away the old order holds much sway. Arguments in favor are as follows:
E-banking transactions are much cheaper than branch or even phone transactions. This could turn
yesterday’s competitive advantage - a large branch network - into a comparative disadvantage,
allowing e-banks to undercut bricks-and-mortar banks. This is commonly known as the "beached
dinosaur" theory.
E-banks are easy to set up so lots of new entrants will arrive. ‘Old-world’ systems, cultures and
structures will not encumber these new entrants. Instead, they will be adaptable and responsive.
E-banking gives consumers much more choice. Consumers will be less inclined to remain loyal.
E-banking will lead to an erosion of the ‘endowment effect’ currently enjoyed by the major UK
banks. Deposits will go elsewhere with the consequence that these banks will have to fight to
regain and retain their customer base. This will increase their cost of funds, possibly making
their business less viable. Lost revenue may even result in these banks taking more risks to
breach the gap.
21
Portal providers are likely to attract the most significant share of banking profits. Indeed banks
could become glorified marriage brokers. They would simply bring two parties together – eg
buyer and seller, payer and payee.
The products will be provided by monolines, experts in their field. Traditional banks may simply
be left with payment and settlement business – even this could be cast into doubt.
Traditional banks will find it difficult to evolve. Not only will they be unable to make
acquisitions for cash as opposed to being able to offer shares, they will be unable to obtain
additional capital from the stock market. This is in contrast to the situation for Internet firms for
whom it seems relatively easy to attract investment.
There is of course another view which sees e-banking more as an evolution than a revolution.
E-banking is just banking offered via a new delivery channel. It simply gives consumers another
service (just as ATMs did).
Like ATMs, e-banking will impact on the nature of branches but will not remove their value.
.Traditional banks are starting to fight back. The start-up costs of an e-bank are high.
Establishing a trusted brand is very costly as it requires significant advertising expenditure in
addition to the purchase of expensive technology (as security and privacy are key to gaining
customer approval).
E-banks have already found that retail banking only becomes profitable once a large critical mass
is achieved. Consequently many e-banks are limiting themselves to providing a tailored service
to the better off. Nobody really knows which of these versions will triumph. This is something
that the market will determine. However, supervisors will need to pay close attention to the
impact of e-banks on the traditional banks, for example by surveillance of:
1. Strategy
2. Customer levels
3. Earnings and costs
22
4. Advertising spending
5. Margins
6. Funding costs
7. Merger opportunities and threats.
Customers, both corporate as well as retail, are no longer willing to queue in banks, or wait on
the phone, for the most basic of services. They demand and expect to be able to transact their
financial dealings where and when they wish to. With the number of computers increasing every
year, the electronic delivery of banking services is becoming the ideal way for banks to meet
their clients’ expectations.
Online banking or e-banking can be defined as online systems which allow customers to plug
into a host of banking services from a personal computer by connecting with the bank’s
computer over the telephone wires. Technology continues to make online banking easier for the
average consumer. Banks are using a variety of names for online banking services, such as PC
banking, home banking, electronic banking or Internet banking.
“Internet banking” refers to systems that enable bank customers to access accounts and general
information on bank products and services through a personal computer (PC) or other intelligent
device. Internet banking products and services can include wholesale products for corporate
customers as well as retail and fiduciary products for consumers. Ultimately, the products and
services obtained through Internet banking may mirror products and services offered through
other bank delivery channels.
Some examples of wholesale products and services include:
Cash management.
Wire transfer.
Automated clearing house (ACH) transactions.
Bill presentment and payment.
23
Examples of retail and fiduciary products and services include:
Balance inquiry.
Funds transfer.
Downloading transaction information.
Bill presentment and payment.
Loan applications.
Investment activity.
Other value-added services.
Other Internet banking services may include providing Internet access as an Internet Service
Provider (ISP). The OCC has determined that a national bank subsidiary may provide home
banking services through an Internet connection to the bank’s home banking system and,
incidental to that service, may also provide Internet access to bank customers using that service.
Historically, banks have used information systems technology to process checks (item
processing), drive ATM machines (transaction processing), and produce reports (management
information systems). In the past, customers rarely noticed the computer systems that made the
information systems operate. Today, Web sites, electronic mail, and electronic bill presentment
and payment systems are an important way for banks to reach their customers. National banks
have experimented with various forms of online banking for many years. Some of the early
experiments involved closed systems where the customers accessed banks through a dial-in or
cable TV connection. These systems limited a bank’s potential customer base because they
required out-of area customers to either incur long-distance charges on their phone bills or
subscribe to a particular cable TV service to access the bank. With the widespread growth of the
Internet, customers can use this technology anywhere in the world to access a bank’s network.
The Internet, as an enabling technology, has made banking products and services available to
more customers and eliminated geographic and proprietary systems barriers. With an expanded
24
market, banks also may have opportunities to expand or change their product and service
offerings.
25
THE INDIAN SCENARIO
Drivers of change
Advantages previously held by large financial institutions have shrunk considerably. The Internet
has leveled the playing field and afforded open access to customers in the global marketplace.
Internet banking is a cost-effective delivery channel for financial institutions. Consumers are
embracing the many benefits of Internet banking. Access to one's accounts at anytime and from
any location via the World Wide Web is a convenience unknown a short time ago. Thus, a bank's
Internet presence transforms from 'brouchreware' status to 'Internet banking' status once the bank
goes through a technology integration effort to enable the customer to access information about
his or her specific account relationship. The six primary drivers of Internet banking includes, in
order of primacy are:
1. Improve customer access
2. Facilitate the offering of more services
3. Increase customer loyalty
4. Attract new customers
5. Provide services offered by competitors
6. Reduce customer attrition
From the perspective of banking products and services being offered through Internet, Internet
banking is nothing more than traditional banking services delivered through an electronic
communication backbone, viz, Internet. But, in the process it has thrown open issues which have
ramifications beyond what a new delivery channel would normally envisage and, hence, has
compelled regulators world over to take note of this emerging channel.
26
Some of the distinctive features of E-banking are:
1. It removes the traditional geographical barriers as it could reach out to customers of different
countries / legal jurisdiction. This has raised the question of jurisdiction of law / supervisory
system to which such transactions should be subjected,
2. It has added a new dimension to different kinds of risks traditionally associated with banking,
heightening some of them and throwing new risk control challenges,
3. Security of banking transactions, validity of electronic contract, customers’ privacy, etc.,
which have all along been concerns of both bankers and supervisors have assumed different
dimensions given that Internet is a public domain, not subject to control by any single authority
or group of users,
4. It poses a strategic risk of loss of business to those banks who do not respond in time, to this
new technology, being the efficient and cost effective delivery mechanism of banking services,
5. A new form of competition has emerged both from the existing players and new players of the
market who are not strictly banks.
FIGURE V: E-BANKING IN VARIOUS COUNTRIES
CHAPTER 2 : LITERATURE REVIEW 27
Title: Product and Technology group, ICICI Bank ,
In its paper “Corporate banking using technology in transactions” it was inferred that
Information Technology has revolutionized the services and mode of services offered by the
banks to their corporate clients. The emergence of E-Banking has enabled the banks to offer real-
time transactions and integrate all customers’ related functions. Indian Banks are utilizing the
new technology to provide better technology and convenient access to its customers and India is
thus poised to for a huge growth in the world of electronic banking.
Chandana R, Unnithan, Paula M.C., Swatman
In their research paper titled “E-Banking Adaptions and Dot.Com viability: A comparison of
Australian and Indian experiences in the Banking sector” a comparative study of Australian and
Indian experiences in eBusiness was done, which seeks to identify the effectiveness of dot.coms
as indicators of eBusiness uptake and success on a sector-by-sector basis was undertaken. It was
concluded that the banking industry is now a very mature one and banks are being forced to
change rapidly as a result of open-market forces such as the threat of competition, customer
demand, and technological innovations such as the growth of the Internet. E-Banking is a
successful strategic weapon for banks to remain profitable in a volatile, and competitive market
place of today in both Indian and Australian Economies despite the differences of IT usage.
G. Kannabiran and P.C. Narayan
They discuss in their article the experiences of a private-sector bank in deploying Internet
banking and eCommerce in India. Strategic alignment of business and IT strategies, planning and
implementation of e-banking initiatives, and management of benefits have been captured, along
with key contributions to development.
Huggins
28
He points to the fact that traditional boundaries in banking are disappearing. Using eBusiness
methods, major retailers and telecom providers are starting to offer financial services to their
clients. Extending the value chain and offering versatile services seems to be the key to retaining
competitiveness in the sector. Attitudes are also shifting from direct transactions to savings and
investments, as the baby boomers reach their fortis and fifties, and prepare for retirement.
Mario Martinez Guerreroin
His paper titled “Profiling the adoption of Online banking Services in the European Union”
offers an empirical investigation on the adoption of online banking services among European
citizen. The use of e-banking services is explained on the basis of socio-demographic and
Internet –specific behavioral indicators. The performed analyses provide support for the
influence of country, age, profession and several Internet behaviors on the use of E-banking.
Title: The Indian Internet Banking Journey
In 2001, a Reserve Bank of India survey revealed that of 46 major banks operating in India,
around 50% were either offering Internet banking services at various levels or planned to in the
near future. According to a research report,( India Research, Kotak Securities, May 2000.) while
in 2001, India's Internet user base was an estimated 9 lakh; it was expected to reach 90 lakh by
2003. Also, while only 1% of these Internet users utilized the Internet banking services in 1998,
the Internet banking user base increased to 16.7% by mid- 2000.
Customers usually perceive risks in conducting transactions electronically and particularly if the
transactions involve money. Risk perception can be of six different types: time risk, finacial risk,
performance risk, psychological risk and safety/confidentiality risk. It is generally considered
that risk perception could be higher for electronic banking services. This study aims to
understand extent to which whether this is consideration is valid as well as to determine the
levels of risk perception differences among those using Internet Banking and those not using it.
Title: Banking Industry vision 2010
29
By: IBA COMMITTEE, CHAIRMAN S.C GUPTA Chairman and Managing Director, Indian
Overseas Bank
The vision of the study is to evolve into a strong, sound and globally competitive
financial system, providing integrated services to customers from all segments, leveraging on
technology and human resources, adopting the Best accounting and ethical practices and
fulfilling corporate and social responsibilities towards all stakeholders.
Title: E-Banking: An Emerging Perspective of the regulation and taxation issues
By: Madhu Vij, University Of Delhi
Study of the changes in the business needs in the corporate sector due to technological
innovations. I.T significance in the new business paradigms and in improving the services in the
banking industry has been discussed.
Title: Any-where Money – Internet Banking Systems
With the rapid advances in the telecommunication systems and digital technology, it is difficult
to predict how Internet banking will improve and expand over coming years. However, with the
number of computers increasing every year, the electronic delivery of services is rapidly
becoming popular in the banking sector. The private sector and multi-national banks have been
first and expeditiously adopting Internet technology in client servicing, there is a gradual trend
towards the major public sectors and numerous co-operative units to move in the same direction
Title: Smart Cards and RFIO solutions from Rolta
It explains that in the electronic world, there is need to secure mechanism and reliably identify
and authenticate the user’s assessing data and information within their physical and IT
infrastructure.
Title: E-Government for the new millennium
30
This explains the e-Government concept. With the description of real government services, the
needs to embrace new technologies have been discussed. Implication of e-Government has been
explained.
Title E-Learning in Banking: Perspectives and Initiatives
By:V.P. Gulati and M.V. Sivakumaran
This reveals thathe Internet has revolutionized the concept of distance education.
However, there are certain factors that differentiate the good and the better from the mediocre
and the average Industry
CHAPTER 3: RESEARCH OBJECTIVE
31
Each research study has its own specific purpose. This research study has the following
objectives:-
To study the awareness level of people regarding E-Banking.
To find out the factors that influences the adoption of E-Banking services.
To find out the differences in risk perception between those using E-Banking and those
not using E-banking.
To know the causes why customers are not using internet banking.
To find out the main reasons for which people use internet banking.
RESEARCH METHODOLOGY
TITLE JUSTIFICATION:
This study mainly deals with the analysis of the differences in risk perceptions between bank
customers using Internet Banking and those not using Internet Banking and it showed that risk
perceptions in terms of financial, psychological and safety risks among customer not using the
internet was more meaningful than those using internet banking. Customers not preferring to use
internet banking thought that they would be swindled when using this service, and therefore, are
particularly careful about high risk expectation during money transfers from and between
accounts.
SCOPE OF THE STUDY:
32
Although many major banks have started offering E-banking services, the slow pace will
continue until the critical mass is achieved for PC, internet connections and telephones.
However, the upsurge of service class with growing demands is pressurizing the government and
bureaucracy in the country to support and develop new initiatives for a faster spread of E-
banking. But then to there is a fear in the mind of customer using internet as a medium for the
banking transaction.
Private and foreign banks are trying to turn more and more customer towards the usage of
internet for the banking transaction. This study is basically to know the relation of various
independent variables on the customer usage of internet for banking.
RESEARCH DESIGN
RESEARCH TYPE
We use descriptive research and exploratory research design in our studies. Descriptive research
is also called Statistical Research. The main goal of this type of research is to describe the data
and characteristics about what is being studied. Descriptive research is used to obtain
information concerning the current status of the phenomena to describe "what exists" with
respect to variables or conditions in a situation.
Here we also tried to find out the main cause why there is perceptual blocking of the Indian
customers towards internet banking. The methods involved range from the survey which
describes the status quo, the correlation study which investigates the relationship between
variables, to developmental studies which seek to determine changes over time.
DATA COLLECTION
Primary Data: Structured Questionnaire
Secondary Data: Online Database, Journals, Surveys
SAMPLING
33
We have used convenience sampling technique. It is also called haphazard or accidental
sampling. Members of the population are chosen based on their relative ease of access. To
sample friends, co-workers, or shoppers at a single mall, are all examples of convenience
sampling. Sometimes called grab or opportunity sampling, this is the method of choosing items
arbitrarily and in an unstructured manner from the frame. Though almost impossible to treat
rigorously, it is the method most commonly employed in many practical situations.
Sample Technique: Convenience sampling
Sample Area: NCR
Sample Size: 120
LIMITATIONS OF THE STUDY:
The survey was done in the NCR region and may not truly express the opinion of the
whole country.
There is lack awareness on the part of people about E-banking.
Most of the people are not techno-savvy. Though internet penetration is growing still it is
not at that level.
Sample Size of the research may not be substantial.
There was a lack of time on the part of respondents.
CHAPTER 4: DATA ANALYSIS & INTERPRETATION
34
1) Age group:
1).18-25__,
2). 26-35__,
3).36-45__,
4).46-60__,
5).60 +____Years
Agegroup
Frequency Percent Valid Percent
Cumulative
Percent
Valid 18-25 40 33.3 33.3 33.3
26-35 42 35.0 35.0 68.3
36-45 16 13.3 13.3 81.7
46-60 17 14.2 14.2 95.8
60+ 5 4.2 4.2 100.0
Total 120 100.0 100.0
35
FIGURE VI: BAR CHART ON AGE GROUP
INTERPRETATION
From the above graph we can see that the maximum no. of respondents are in the age group of
26-35 with a frequency of 42. The second highest no. of respondents lie in the age group of 18-
25.
36
2) Gender : 1) Male 2) Female
Gender
Frequency Percent Valid Percent
Cumulative
Percent
Valid male 81 67.5 67.5 67.5
female 39 32.5 32.5 100.0
Total 120 100.0 100.0
FIGURE VII: BAR CHART ON GENDER DISTRIBUTION
INTERPRETATION:
The above graph shows another demographic variable of the respondent set i.e gender. From the
above bar chart we can see that the maximum no. of respondents were male with a frequency of
80% and the rest were females.
37
3) Frequency of visiting your bank branch per month?
agegroup * Frequency of visiting your bank branch per month? Crosstabulation
Count
Frequency of visiting your bank branch per month?
TotalLess than 1 1 to 3 times 3 to 8 times 8 to 12 times over 12 times
Agegroup 18-25 15 4 7 0 14 40
26-35 10 10 5 7 10 42
36-45 1 0 4 8 3 16
46-60 0 9 0 2 6 17
60+ 0 4 0 0 1 5
Total 26 27 16 17 34 120
38
FIGURE VIII: BAR CHART ON BANK VISITS PER MONTH
INTERPRETATION:
Here we have plotted a cross tab between the two variables i.e age group and frequency of visit
to the branch. The cross tab helps us to find that whether there is any association between the
two variables. Pearson Chi-square test statistic value of .000 shows that there is an association
between the two variables. We can see from the chart that maximum no. of respondents in the
age group 18-25 visit less than 1 and maximum no. respondents in the age group 26-35 visit over
12 times.
4) Which of the following e-banking facilities do you think should be provided by your
bank?(please choose the single most important one)
39
1. Internet banking
2. Telephone banking
3. Mobile banking
4. SMS banking
FIGURE IX: PIE CHART ON E-BANKING FACILITIES BANK SHOULD PROVIDE
INTERPRETATION:
40
The above pie chart shows that 40.8% of the respondents thought of Internet Banking as a must
to be provided by there bank. The second most important E-banking facility was the M-banking
with a percentage of 26.7%.
5) The main reason that you typically visit your bank branch (please choose the single
most important reason)?
1. To make a deposit
2. To get advice for investment options
3. To inquire about a balance
4. To withdraw cash
5. Others
41
The main reason that you typically visit your branch for?
Frequency Percent Valid Percent
Cumulative
Percent
Valid To make a deposit 25 20.8 20.8 20.8
To get advice for investment
options18 15.0 15.0 35.8
To inquire about a balance 35 29.2 29.2 65.0
To withdraw cash 35 29.2 29.2 94.2
Others 7 5.8 5.8 100.0
Total 120 100.0 100.0
FIGURE X: PIE CHART ON REASON FOR VISITING BRANCH
42
INTERPRETATION :
The above pie chart shows the most important reason for which a person visits the bank branch.
As we can see from the graph that 29.2% of the respondents said that they visit the bank to
withdraw cash. Another 29.2% of the respondents visited to inquire about the balance whereas
20.8% respondents visited bank for making a deposit to there account.
6) Do you have an internet banking account?
a) Yes
b) No
Do you have an internet banking account?
Frequency Percent Valid Percent
Cumulative
Percent
Valid Yes 89 74.2 74.2 74.2
No 31 25.8 25.8 100.0
Total 120 100.0 100.0
43
agegroup * Do you have an internet banking account? Crosstabulation
Count
Do you have an internet banking
account?
TotalYes no
Agegroup 18-25 34 6 40
26-35 39 3 42
36-45 14 2 16
46-60 12 5 17
60+ 1 4 5
Total 100 20 120
Chi-Square Tests
Value df
Asymp. Sig. (2-
sided)
Pearson Chi-Square 19.451a 4 .001
Likelihood Ratio 15.045 4 .005
Linear-by-Linear Association 8.342 1 .004
N of Valid Cases 120
a. 4 cells (40.0%) have expected count less than 5. The minimum expected
count is .83.
44
FIGURE XI: BAR CHART ON EXISTENCE OF INTERNET BANKING ACCOUNT
INTERPRETATION:
The above graph shows the association between age group and user- non-user status. The
Pearson chi-square value of .001 shows that there is an association between the two. As we can
see that the most of the respondents in the age group 26-35 have an internet banking account and
very few of the respondents in the age group 60+ have an internet account.
45
7) What banking services do you use which your Internet bank offers? (Please check all
those which you are currently using)
1. Seeking product and rate information
2. Calculate loan payment information
3. Download loan applications
4. Download personal bank transaction activity.
5. Check balances on-line
6. Apply for consumer loans or credit cards online
7. Inter-account transfers
8. On-line bill payments
9. Others
46
prodinfo12%
loaninfo12%
Down_loanapp11%
Trans_activity10%Chk_balance
12%
Apply_loan7%
Acc_transfer16%
Bill_payment15%
others5%
Banking Services
prodinfoloaninfoDown_loanappTrans_activityChk_balanceApply_loanAcc_transferBill_payment
FIGURE XII: PIE CHART ON USAGE OF E-BANKING SERVICES USED BY CONSUMERS
INTERPRETATION:
The above graph shows the type of services that most internet account holders use. As we can
see from the graph that most of the internet bank users use there internet account for making
transfer of funds, followed up by payment of bills online with a percentage of 15%.
47
8) What was the single most important reason that you choose your current bank as
your Internet bank? (please choose one)
1. I have a traditional bank account with the same bank
2. The brand name of the bank
3. The excellent service offered by this bank
4. Other
FIGURE XIII: PIE CHART ON CHOICE OF BANK
48
INTERPRETATION:
The pie chart above shows for what reason the respondents choose there current bank as there
internet bank. Most of the respondents had an internet bank account because of the brand name
of the bank. 32% had an account in the bank in which they had a traditional account. 28%
opened because of the excellent services provided.
9) In addition to your Internet bank account, do you also have a traditional bank
account?
1. Yes
2. No
Do you also have a traditional bank account in addition to an internet account?
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 100 83.3 100.0 100.0
Missing System 20 16.7
Total 120 100.0
INTERPRETATION
The above table shows that all the respondents who had an internet banking account also had a
traditional banking account.
49
10) What are the reasons for which you opened an Internet bank account? (Please
prioritize the following list in the order of importance).
(Rank on a scale of 1-6 where1 being the most important & 6 being the least important)
1. Convenience (24 hours service, anywhere connectivity) ______________
2. Curiosity______________
3. Safe and secure______________
4. Low service charge______________
5. Easy to maintain my banking transaction activity______________
6. Online shopping ___________________
FIGURE XIV: BAR CHART ON REASONS FOR OPENING INTERNET BANK ACCOUNT
50
INTERPRETATION
The above graph shows the ranking of the reasons why respondents had opened an internet
banking account. We rated the factors on a 6 point rating scale ranging from most important to
least important. Most of the respondents gave convenience as rank1. The second most important
factor was ease of maintenance.
11) For your choice of an Internet bank, please indicate how much each of the following
factors are/were important to you:
(Rate on a scale of 1-6 where 1 being most important & 6 being least important)
1. Better rate and lower service charge______________
2. Bank familiarity______________
3. Security of Transaction______________
4. Convenience (24 hours service from anywhere) ______________
5. Quick service (transaction completed in seconds instead of minutes)
______________
6. Variety of features and services that are offered(for example; bill payment,
account reconciliation, electronic bill payment) ______________
7. Integrated value-added services using other on-line services and resources (for
example; other brokerage account summary) ______________
51
FIGURE XV: BAR CHART ON IMPORTANCE OF FACTORS RELATING TO E-BANKING
INTERPRETATION:
The above graph rates the decisive factors when opening a internet banking account. Most of the
gave rank 1 to convenience(24 hour service from anywhere).
The second most important factor was security of transaction.
The third most important factor was the familiarity with the bank.
52
12) The main reasons that you might fear for while opening an Internet bank account ?
(check all that apply)
1. Never heard of Internet banking
2. Concerned about security
3. Haven't taken time to open an account
4. Don't see any real value in having this type of account
5. Too new. I would like to see how it works, then I may open an account
6. Not available through my bank
7. Others
Var_unaware17%
Var_security21%
Var_timeconst10%
Var_novalue9%
Var_new22%
Var_unavailable12%
Var_others9%
Reasons for not opening an account
Var_unawareVar_securityVar_timeconstVar_novalueVar_newVar_unavailableVar_others
FIGURE XVI: PIE CHART ON REASONS FOR NOT OPENING AN E-BANKING ACCOUNT
53
INTERPRETATION:
The above graph shows why most of the people are afraid of opening an internet banking
account and what are the reasons behind it.
Most of the respondents were concerned about the security of transactions-21%.
The second constraint was that people are still unaware about it-17%.
The third major constraint was that the bank doesn’t have such a service-12%
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CHAPTER 5: RECOMMENDATIONS AND CONCLUSIONS
CONCLUSIONS
The study tries to figure out what are the factors that affect the usage behavior of the customers
towards E-banking services and what are the reasons for perceptual blocking towards E-banking.
The conclusions that can be drawn are:
1. Most of the people use E-banking because of the ease and convenience of doing
transactions 24 hours from anywhere.
2. Most of the people in the age group of 18-35 i.e the youth are familiar with the concept of
E-banking and are among the prominent users of this facility.
3. Most of the people open an internet banking account with a bank because of the brand
name of the bank and also due to the fact that they have a traditional banking account with the
same bank.
4. Most of the people in the age group of 46+ are either unaware or have a disinterest in the
service. They are more satisfied with traditional system of banking.
5. The reasons for not opening an internet account are mainly due to unawareness or due to
security concerns.
6. Most of the people who do internet banking do so for online transaction of money and for
shopping purposes.
7. The masses are still not using the services thoroughly due to various hurdling factors like
insecurity and fear of hidden costs etc.
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RECOMMENDATIONS
E-banking would drive us into an age of creative destruction due to non-physical exchange,
complete transparency giving rise to perfectly electronic market place and customer supremacy.
We can see the time is changing and with the passage of time people are accepting technology
but there is still a lot of perceptual blocking still to be removed.
The banks need to increase the penetration of E-banking to the masses. This can be achieved
through increasing the awareness levels of the customers towards E-banking. Some of the ways
to do this are:
1. Give proper training to customers for using E-banking.
2. Create a trust in the mind of customers towards security of there accounts.
3. Provide a platform from where the customers can access different accounts at single time
without extra charge.
4. Make the site more user friendly.
5. Customers should be motivated to use E-banking facilities more.
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REFERENCES
BOOKS
1. Marketing Research by Malhotra N.K. , fifth edition
2. E-banking: the global perspective by Gupta Vivek
3. E-Commerce in Indian banking by Bhasin
WEBSITES AND WEB REFERENCES
http://www.icmrindia.org/free%20resources/casestudies/banking1.htm#b1
www.banknetindia.com
www.google.com
www.news.google.co.in
www.rbi.org.in
V. Radha, V. P. Gulati and K. R. Ganapathy “Technology Based Distance Learning – New
Vistas for Banks”, IDRBT Working Paper No. 1 (1999).
Cohen, Stephen S., J Bradford DeLong & John Zysman. (2000). Tools for Thought: What is
New and Important about the E-economy? BRID working Paper # 138, Berkely, CA.
Committee of Fiscal Affairs. (1998) Electronic Commerce: Taxation Frame work Conditions.
Paris: OECD, Directorate for Financial, Fiscal and Enterprise Affairs, October 8.
Cornin, Mary J (1998) Defining Net Impact: The Realignment of banking and Finance on the
Web, Banking and Finance on the Internet, John Wiley and Sons, New York.
57
David Carse (1999) The regulatory Framework of E-banking Available (online) http;//wow-
banking.
David LT (Interview) in 'The Future of Banking' by Anglers, H and Essinger, J. Reuters Ltd.
2000.
Davies, Howard. The uncertain but exciting future for banking, Vol. 8, No.6, Balance Sheet:
pages 11-16.
Denny, Stephanie (2000) The Electronic Commerce Challenge, Journal of Internet Banking and
Commerce, November, vol .3 no.3
E-business, June 2002.
SOFTWARE’S USED
1. SPSS
2. MS-EXCEL
3. MS-WORD
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ANNEXURE
QU ESTIONNAIRE :
1. Frequency of visiting your bank branch per month?
1. Less than 1
2. 1 to 3 times
3. 3 to 8 times
4. 8 to 12 times
5. over 12 times
2. The main reason that you typically visit your bank branch (please choose the single most
important reason)?
a) To make a deposit
b) To get advice for investment options
c) To inquire about a balance
d) To withdraw cash
e) Others
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3. Which of the following e-banking facilities do you think should be provided by your
bank?(please choose the single most important one)
a) Internet banking
b) Telephone banking
c) Mobile banking
d) SMS banking
4. Do you have an internet banking account?
a) Yes
b) No
If the answer to the previous Question is Yes, please answer Item no.5 to 9. Otherwise
please skip Item no.5 to 9.
5. What are the reasons for which you opened an Internet bank account? (Please prioritize
the following list in the order of importance).
(Rank on a scale of 1-6 where1 being the most important & 6 being the least important)
a) Convenience (24 hours service, anywhere connectivity) ______________
b) Curiosity______________
c) Safe and secure______________
d) Low service charge______________
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e) Easy to maintain my banking transaction activity______________
f) Online shopping ___________________
6. What banking services do you use which your Internet bank offers? (Please check all
those which you are currently using)
a) Seeking product and rate information
b) Calculate loan payment information
c) Download loan applications
d) Download personal bank transaction activity.
e) Check balances on-line
f) Apply for consumer loans or credit cards online
g) Inter-account transfers
h) On-line bill payments
i) Others
7. What was the single most important reason that you choose your current bank as your
Internet bank? (please choose one)
a) I have a traditional bank account with the same bank
b) The brand name of the bank
c) The excellent service offered by this bank
d) Others
8. In addition to your Internet bank account, do you also have a traditional bank account?
a) Yes
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b) No
9. For your choice of an Internet bank, please indicate how much each of the following
factors are/were important to you:
(Rate on a scale of 1-6 where 1 being most important & 6 being least important)
1. Better rate and lower service charge______________
2. Bank familiarity______________
3. Security of Transaction______________
4. Convenience (24 hours service from anywhere) ______________
5. Quick service (transaction completed in seconds instead of minutes)
______________
6. Variety of features and services that are offered(for example; bill payment,
account reconciliation, electronic bill payment) ______________
7. Integrated value-added services using other on-line services and resources (for
example; other brokerage account summary) ______________
10. The main reasons that you might fear for while opening an Internet bank account ?
(check all that apply)
1. Never heard of Internet banking
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2. Concerned about security
3. Haven't taken time to open an account
4. Don't see any real value in having this type of account
5. Too new. I would like to see how it works, then I may open an account
6. Not available through my bank
7. Others
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