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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