Sanchit Synopsis

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“A study on Adoption of Internet Banking by TricityCustomers”

A Marketing Research Proposal

SUBMITTED BY SUBMITTED TO

GEET SAHNI DR. TEJINDER PAL SINGH

MBA (IB)

SECOND SEMESTER



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Introduction

Over the few decades, Information technology has affected the banking industry highly and has provided a way for the banks to differentiate their products and services. Online banking (orInternet banking) allows customers to conduct financial transactions on a secure website

operated by their retail or virtual bank, credit union or building society . Online bankingsolutions have many features and capabilities in common, but traditionally also have some thatare application specific.

Internet banking (or E-banking) means any user with a personal computer and a browsercan get connected to his bank’s website to perform any of the virtual banking functions . Inother words it is said that it is updated 'on-line, real time' . The system is updated immediatelyafter every transaction automatically.

Internet banking is a system of banking that enables customers to perform various

financial transactions on a secure website via the Internet . There are many banks and creditunion that operate websites for internet banking. Internet Banking is basically conducted via a personal computer connected to Internet. Apart from it, people can also do financial transactionsusing Internet banking on their cellular phones or personal digital assistants.

All one need is a computer, PDA or cell phone with active internet connection to get going withnet banking. Before using net banking, one needs to activate net banking facility with his/her

bank. Bank provides a unique user ID and password for its customers to login into the bank website for conducting financial transactions using net banking. For any transaction, one shouldhave an active bank account, appropriate bank balance for transactions, bank account number,

customer’s user ID, debit/credit card number,and Internet banking PIN number alongwith access to the internet.

Why Internet Banking ?

• Differentiation of products from the others

• A combination of regulatory and competitive reasons Stress on branchless banking.

• Increasing volumes of banking transactions

• Providing customers with cost effective services



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The common features of Internet banking fall broadly into several categories:

• Transactiona l (e.g., performing a financial transaction such as an account to accounttransfer, paying a bill, wire transfer, apply for a loan, new account, etc.)

•

Payments to third parties , including bill payments and telegraphic/wire transfers Fundstransfers between a customer's own transactional account and savings accounts

• Investment purchase or sale

• Loan applications and transactions, such as repayments of enrollments

• Non-transactional (e.g., online statements, cheque links, cobrowsing, chat)

• Viewing recent transactions

• Downloading bank statements , for example in PDF format

• Viewing images of paid cheques

• Transaction approval process Features commonly unique to Internet banking include personal financial management support, such as importing data into personal accountingsoftware.

History of Internet Banking:

Banking in India Started in the year 1786 with “ The General Bank of India ” being the first.Reserve Bank of India came in 1935. Became the central banking authority in 1965. Banking

Companies Act passed in 1949. Formation of State Bank of India in 1955. Nationalization of 14major banks in 1969. Seven more in 1980. Opening up of economy, implementations of recommendations of the Narsimham committee.

Adoption of Internet Banking:

According to Doyle (1998) customers are invariably the best source of ideas. Innovations havecommercial value only if they meet the needs of customers better than the current products.Innovative customers those individuals who are at the forefront in buying new products or applying new ideas are the most valuable sources. This learni ng is called the ―Adoption

Process ‖ and consists of Five stages as follows: Awareness: First, the Individual is exposed to the innovation but lacks complete

information about it

Interest: Next, the individual becomes interested in the new idea and seeks additionalinformation about it.



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Evaluation: Individual mentally applies the innovation to his present and anticipatedfuture situation, and then decides whether to try it.

Trial: The individual makes full use of the innovation

Adoption: The individual decides to continue the full use of the Innovation

Types of Internet Banking

Understanding the various types of Internet banking products will helpexaminers assess the risks involved. Currently, the following three basic kinds of Internet

banking are being employed in the marketplace:

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-aloneserver. The risk is relatively low, as informational systems typically have no path between theserver and the bank ’ s internal network. This level of Internet banking can be provided by the

bank or outsourced. While the risk to a bank is relatively low, the server or Web site may bevulnerable to alteration. Appropriate controls therefore must be in place to prevent unauthorizedalterations to the bank ’ s server or Web site.

Communicative — This type of Internet banking system allows some interaction between the bank ’ s systems and the customer. The interaction may be limited to electronic mail, accountinquiry, loan applications, or static file updates (name and address changes). Because theseservers may have a path to the bank ’ s internal networks, the risk is higher with this configurationthan with informational systems.Appropriate controls need to be in place to prevent, monitor, and alert management of anyunauthorized attempt to access the bank ’ s internal networks and computer systems. Viruscontrols also become much more critical in this environment.

Transactional — This level of Internet banking allows customers to execute transactions. Sincea path typically exists between the server and the bank ’ s or outsourcer ’ s internal network, this isthe highest risk architecture and must have the strongest controls. Customer transactions caninclude accessing accounts, paying bills, transferring funds, etc.

Internet Banking Risks

Internet banking creates new risk control challenges for national banks. From a supervisory perspective, risk is the potential that events, expected or unexpected, may have an adverseimpact on the bank ’ s earnings or capital. The OCC has defined nine categories of risk for bank supervision purposes. The risks are credit, interest rate, liquidity, price, foreign exchange,transaction, compliance, strategic, and reputation. These categories are not mutually exclusiveand all of these risks are associated with Internet banking.



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Credit Risk

Credit risk is the risk to earnings or capital arising from an obligor ’ s failure to meet the terms of any contract with the bank or otherwise to perform as agreed. Credit risk is found in all activitieswhere success depends on counterparty, issuer, or borrower performance. It arises any time bank

funds are extended, committed, invested, or otherwise exposed through actual or impliedcontractual agreements, whether on or off the banks balance sheet. Internet banking provides theopportunity for banks to expand their geographic range. Customers can reach a given institutionfrom literally anywhere in the world. In dealing with customers over the Internet, absent any

personal contact, it is challenging for institutions to verify the bonafides of their customers,which is an important element in making sound credit decisions. Verifying collateral and

perfecting security agreements also can be challenging with out-of-area borrowers. Unless properly managed, Internet banking could lead to a concentration in out-of-area credits or creditswithin a single industry. Moreover, the question of which state ’ s or country ’ s laws control anInternet relationship is still developing.

Effective management of a portfolio of loans obtained through the Internet requires that the board and management understand and control the bank ’ s lending risk profile and credit culture.They must assure that effective policies, processes, and practices are in place to control the risk associated with such loans. See the ―Loan Portfolio Management,‖ booklet of the Comptroller’s

Handbook for a more complete discussion of credit risk.

Interest Rate Risk

Interest rate risk is the risk to earnings or capital arising from movements in interest rates. From

an economic perspective, a bank focuses on the sensitivity of the value of its assets, liabilitiesand revenues to changes in interest rates.

Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows (repricing risk); from changing rate relationships among different yield curvesaffecting bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options embedded in bank products(options risk). Evaluation of interest rate risk must consider the impact of complex, illiquidhedging strategies or products, and also the potential impact that changes in interest rates willhave on fee income. In those situations where trading is separately managed, this refers to

structural positions and not trading portfolios.Internet banking can attract deposits, loans, and other relationships from a larger pool of possiblecustomers than other forms of marketing. Greater access to customers who primarily seek the

best rate or term reinforces the need for managers to maintain appropriate asset/liabilitymanagement systems, including the ability to react quickly to changing market conditions.



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Liquidity Risk

Liquidity risk is the risk to earnings or capital arising from a bank ’ s inability to meet itsobligations when they come due, without incurring unacceptable losses. Liquidity risk includesthe inability to manage unplanned changes in funding sources. Liquidity risk also arises from the

failure to recognize or address changes in market conditions affecting the ability of the bank toliquidate assets quickly and with minimal loss in value.

Internet banking can increase deposit volatility from customers who maintain accounts solely onthe basis of rate or terms. Asset/liability and loan portfolio management systems should beappropriate for products offered through Internet banking. Increased monitoring of liquidity andchanges in deposits and loans may be warranted depending on the volume and nature of Internetaccount activities.

Price Risk

Price risk is the risk to earnings or capital arising from changes in the value of traded portfoliosof financial instruments. This risk arises from market making, dealing, and position taking ininterest rate, foreign exchange, equity, and commodities markets.

Banks may be exposed to price risk if they create or expand deposit brokering, loan sales, or securitization programs as a result of Internet banking activities. Appropriate managementsystems should be maintained to monitor, measure, and manage price risk if assets are activelytraded.

Foreign Exchange Risk

Foreign exchange risk is present when a loan or portfolio of loans is denominated in a foreigncurrency or is funded by borrowings in another currency. In some cases, banks will enter intomulti-currency credit commitments that permit borrowers to select the currency they prefer touse in each rollover period. Foreign exchange risk can be intensified by political, social, or economic developments. The consequences can be unfavorable if one of the currencies involved

becomes subject to stringent exchange controls or is subject to wide exchange-rate fluctuations.Foreign exchange risk is discussed in more detail in the ―Foreign Exchange,‖ booklet of theComptroller’s Handbook .

Banks may be exposed to foreign exchange risk if they accept deposits from non-U.S. residentsor create accounts denominated in currencies other than U.S. dollars. Appropriate systems should

be developed if banks engage in these activities.

Transaction Risk

Transaction risk is the current and prospective risk to earnings and capital arising from fraud,error, and the inability to deliver products or services, maintain a competitive position, and



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manage information. Transaction risk is evident in each product and service offered andencompasses product computing systems, complexity of products and services, and the internalcontrol environment.

A high level of transaction risk may exist with Internet banking products, particularly if those

lines of business are not adequately planned, implemented, and monitored. Banks that offer financial products and services through the Internet must be able to meet their customers ’ expectations. Banks must also ensure they have the right product mix and capacity to deliver accurate, timely, and reliable services to develop a high level of confidence in their brand name.Customers who do business over the Internet are likely to have little tolerance for errors or omissions from financial institutions that do not have sophisticated internal controls to managetheir Internet banking business.

Likewise, customers will expect continuous availability of the product and Web pages that areeasy to navigate. Software to support various Internet banking functions is provided to the

customer from a variety of sources. Banks may support customers using customer-acquired or bank-supplied browsers or personal financial manager (PFM) software. Good communications between banks and their customers will help manage expectations on the compatibility of variousPFM software products.

Attacks or intrusion attempts on banks ’ computer and network systems are a major concern.Studies show that systems are more vulnerable to internal attacks than external, because internalsystem users have knowledge of the system and access. Banks should have sound preventive anddetective controls to protect their Internet banking systems from exploitation both internally andexternally. See OCC Bulletin 99- 9, ―Infrastructure Threats from Cyber - Terrorists‖ for additional

information. Contingency and business resumption planning is necessary for banks to be surethat they can deliver products and services in the event of adverse circumstances. Internet

banking products connected to a robust network may actually make this easier because back upcapabilities can be spread over a wide geographic area. For example, if the main server isinoperable, the network could automatically reroute traffic to a back up server in a differentgeographical location. Security issues should be considered when the institution develops itscontingency and business resumption plans. In such situations, security and internal controls atthe back-up location should be as sophisticated as those at the primary processing site. Highlevels of system availability will be a key expectation of customers and will likely differentiatesuccess levels among financial institutions on the Internet. National banks that offer bill

presentment and payment will need a process to settle transactions between the bank, itscustomers, and external parties. In addition to transaction risk, settlement failures couldadversely affect reputation, liquidity, and credit risk.



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Compliance Risk

Compliance risk is the risk to earnings or capital arising from violations of, or nonconformancewith, laws, rules, regulations, prescribed practices, or ethical standards. Compliance risk alsoarises in situations where the laws or rules governing certain bank products or activities of the

bank ’ s clients may be ambiguous or untested. Compliance risk exposes the institution to fines,civil money penalties, payment of damages, and the voiding of contracts.

Compliance risk can lead to a diminished reputation, reduced franchise value, limited businessopportunities, reduced expansion potential, and lack of contract enforceability.

Most Internet banking customers will continue to use other bank delivery channels. Accordingly,national banks will need to make certain that their disclosures on Internet banking channels,including Web sites, remain synchronized with other delivery channels to ensure the delivery of a consistent and accurate message to customers.

Federal consumer protection laws and regulations, including CRA and Fair

Lending, are applicable to electronic financial services operations including Internet banking.Moreover, it is important for national banks to be familiar with the regulations that permitelectronic delivery of disclosures/notices versus those that require traditional hard copynotification. National banks should carefully review and monitor all requirements applicable toelectronic products and services and ensure they comply with evolving statutory and regulatoryrequirements.

Advertising and record-keeping requirements also apply to banks ’ Web sites and to the products

and services offered. Advertisements should clearly and conspicuously display the FDICinsurance notice, where applicable, so customers can readily determine whether a product or service is insured.

Application of Bank Secrecy Act (BSA) requirements to cyber banking products and services iscritical. The anonymity of banking over the Internet poses a challenge in adhering to BSAstandards. Banks planning to allow the establishment of new accounts over the Internet shouldhave rigorous account opening standards. Also, the bank should set up a control system toidentify unusual or suspicious activities and, when appropriate, file suspicious activity reports(SARs).

The BSA funds transfer rules also apply to funds transfers or transmittals performed over theInternet when transactions exceed $3,000 and do not meet one of the exceptions. The rulesrequire banks to ensure that customers provide all the required information before acceptingtransfer instructions. The record keeping requirements imposed by the rules allow banks to retainwritten or electronic records of the information.



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The Office of Foreign Asset Control (OFAC) administers laws that impose economic sanctionsagainst foreign nations and individuals. This includes blocking accounts and other assets and

prohibiting financial transactions.

Internet banking businesses must comply with OFAC requirements. A bank needs to collect

enough information to identify customers and determine whether a particular transaction is prohibited under OFAC rules. See the FFIEC Information Systems Examination Handbook ( IS Handbook ) for a discussion of OFAC.

Strategic Risk

Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industrychanges. This risk is a function of the compatibility of an organization ’ s strategic goals, the

business strategies developed to achieve those goals, the resources deployed against these goals,

and the quality of implementation. The resources needed to carry out business strategies are bothtangible and intangible. They include communication channels, operating systems, deliverynetworks, and managerial capacities and capabilities. The organization ’ s internal characteristicsmust be evaluated against the impact of economic, technological, competitive, regulatory, andother environmental changes.

Management must understand the risks associated with Internet banking before they make adecision to develop a particular class of business. In some cases, banks may offer new productsand services via the Internet. It is important that management understand the risks andramifications of these decisions.

Sufficient levels of technology and MIS are necessary to support such a business venture.Because many banks will compete with financial institutions beyond their existing trade area,those engaging in Internet banking must have a strong link between the technology employedand the bank ’ s strategic planning process.

Before introducing a Internet banking product, management should consider whether the productand technology are consistent with tangible business objectives in the bank ’ s strategic plan. The

bank also should consider whether adequate expertise and resources are available to identify,monitor, and control risk in the Internet banking business. The planning and decision making

process should focus on how a specific business need is met by the Internet banking product,rather than focusing on the product as an independent objective. The bank ’ s technology experts,along with its marketing and operational executives, should contribute to the decision makingand planning process. They should ensure that the plan is consistent with the overall businessobjectives of the bank and is within the bank ’ s risk tolerance. New technologies, especially theInternet, could bring about rapid changes in competitive forces. Accordingly, the strategic visionshould determine the way the Internet banking product line is designed, implemented, andmonitored.



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Reputation Risk

Reputation risk is the current and prospective impact on earnings and capital arising fromnegative public opinion. This affects the institution ’ s ability to establish new relationships or services or continue servicing existing relationships. This risk may expose the institution to

litigation, financial loss, or a decline in its customer base. Reputation risk exposure is presentthroughout the organization and includes the responsibility to exercise an abundance of cautionin dealing with customers and the community.

A bank ’ s reputation can suffer if it fails to deliver on marketing claims or to provide accurate,timely services. This can include failing to adequately meet customer credit needs, providingunreliable or inefficient delivery systems, untimely responses to customer inquiries, or violationsof customer privacy expectations. Internet banking services that are poorly executed or otherwisealienate customers and the public can damage a bank’s reputation. Well -designed marketing,including disclosures, is one way to educate potential customers and help limit reputation risk.

Customers must understand what they can reasonably expect from a product or service and whatspecial risks and benefits they incur when using the system. As such, marketing concepts need to

be coordinated closely with adequate disclosure statements. A national bank should not marketthe bank ’ s Internet banking system based on features or attributes the system does not have. Themarketing program must present the product fairly and accurately.

National banks should carefully consider how connections to third parties are presented on their Web sites. Hypertext links are often used to enable a customer to link to a third party. Such linksmay reflect an endorsement of the third party ’ s products or services in the eyes of the customer.It should be clear to the customer when they have left the bank ’ s Web site so that there is no

confusion about the provider of the specific products and services offered or the security and privacy standards that apply. Similarly, adequate disclosures must be made so that customers candistinguish between insured and noninsured products.

National banks need to be sure that their business continuity plans include the Internet banking business. Regular testing of the business continuity plan, including communications strategieswith the press and public, will help the bank ensure it can respond effectively and promptly toany adverse customer or media reactions.

Risk Management

Financial institutions should have a technology risk management process to enable them toidentify, measure, monitor, and control their technology risk exposure. Examiners should refer toOCC Bulletin 98- 3, ―Technology Risk Management‖ for additional guidance on this top ic.

The risk planning process is the responsibility of the board and senior management. They needto possess the knowledge and skills to manage the bank ’ s use of Internet banking technology andtechnology-related risks. The board should review, approve, and monitor Internet banking



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technology-related projects that may have a significant impact on the bank ’ s risk profile. Theyshould determine whether the technology and products are in line with the bank ’ s strategic goalsand meet a need in their market. Senior management should have the skills to evaluate thetechnology employed and risks assumed.

Periodic independent evaluations of the Internet banking technology and products by auditors or consultants can help the board and senior management fulfill their responsibilities.

Implementing the technology is the responsibility of management. Management should havethe skills to effectively evaluate Internet banking technologies and products, select the right mixfor the bank, and see that they are installed appropriately. If the bank does not have the expertiseto fulfill this responsibility internally, it should consider contracting with a vendor whospecializes in this type of business or engaging in an alliance with another provider withcomplementary technologies or expertise.

Measuring and monitoring risk is the responsibility of management. Management should havethe skills to effectively identify, measure, monitor, and control risks associated with Internet

banking. The board should receive regular reports on the technologies employed, the risksassumed, and how those risks are managed. Monitoring system performance is a key successfactor. As part of the design process, a national bank should include effective quality assuranceand audit processes in its Internet banking system. The bank the performance standards.

Internal Controls

Internal controls over Internet banking systems should be commensurate with an institution ’ slevel of risk. As in any other banking area, management has the ultimate responsibility for developing and implementing a sound system of internal controls over the bank ’ s Internet

banking technology and products. Regular audits of the control systems will help ensure that thecontrols are appropriate and functioning properly.

Technology: In-House or Outsourced?

The different levels of complexity associated with certain areas involving security, operations, planning, and monitoring have caused many national banks to outsource all or parts of their Internet banking operations. Banks should periodically reassess their sources of technologysupport to determine whether a given solution continues to fit their business plan and is flexibleenough to meet anticipated future needs. Regardless of whether technology services are providedin-house or through a third-party servicer, national banks need to have a strong link betweentheir technology provider and their strategic planning process. This will enable the bank to link new products and services with the existing technology and product mix.



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There are pros and cons to offering technology-based products and services in house versuscontracting with a vendor. Larger national banks with substantial resources may choose to

purchase computer hardware and operating systems and/or develop the necessary applicationsoftware in-house. This option may provide the greatest flexibility to customize productofferings.

Other banks may choose to purchase a ―turnkey‖ system from a vendor. In this arrangement thevendor typically provides the hardware, operating systems, and applications software necessaryto enable the bank to offer the particular product or service to its customers. The vendor willtypically provide the service and maintenance for the turnkey system. A variation is to outsourcethe service. Using this option, national banks contract with a vendor to operate their Internet

banking Web sites at the vendor ’ s location. This option may be especially well suited for banksthat do not have the technical expertise to develop this service in-house. However, such banksneed to place additional emphasis on their due diligence to ensure that security is notcompromised.

Several companies are responding to the developing markets for Web pages, Internet bankingapplications, and bill presentment and payment services. some are start-up companies withunproven products, services, or track records. National banks need to perform due diligence

before selecting a vendor to provide Internet banking services. They should have a formalservice agreement with the vendor that clearly addresses the duties and responsibilities of the

parties involved. National banks need to monitor their vendor ’ s operational performance,financial condition, and capability to stay current with evolving technologies. National bankstypically fulfill their responsibility to assure their vendors have sound internal controls byobtaining internal or third-party audit reports. Examiners should refer to the IS Handbook for acomplete discussion of outsourcing issues. Whatever the source of Internet banking technology,

products, and services, it is important for the national bank to have personnel with an appropriatelevel of specialized expertise, consistent with risk, to monitor and manage the business.

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 andelectronic data interchange. The banking industry also recognizes that the Internet must be secureto 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 tomaintaining 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.



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Literature Review

The concept of electronic banking has been defined in many ways 1(Daniel, 1999; Karjaluoto,1999) namely as the delivery of banks' information and services to customers via differentdelivery platforms that can be used with different terminal devices such as a personal computer

and a mobile phone with browser or desktop software, telephone or digital television.

Electronic banking is a larger concept than banking via the internet 7(Karjaluoto, 2002) and theinternet is a main delivery channel for electronic banking and its value to customers and banks iscontinuously increasing 7 (Karjaluoto, 2002; Mattila,2001).

It is important to identify factors that cause people to accept new technologies and informationsystems and use them. Several theories are offered in this respect, such as Theory of ReasonedAction 6(Fishbein and Ajzen, 1975), Technology Adoption Model 5(Davis, 1989), Theory of Innovation Diffusion (Rogers, 1983), and Theory of Planned Behavior 1(Ajzen, 1991), and

Decomposed Theory of Planned Behavior 12

(Taylor and Todd, 1995). Behavioral intention to use technology is explained by people's attitudes toward the behavior andsubjective norms. If the behavior is voluntarily controlled by the individual, it can accuratelyexplain the factors influencing technology adoption 8(Laukkanen and Cruz, 2009).

The theory of planned behavior 1(Ajzen, 1991) extends on the former by adding perceived behavioral control into the model as a determinant of behavioral intention and behavior. Thistheory also predicts involuntary behaviors. It determines the impacts of three factors namelyattitude, subjective norms and perceived behavior control on how individual’s tend to behave13(Tuchila, R. (2000 ).

Attitude is the general feeling of people about the desirability or undesirability of a particular issue or behavior. Subjective norm refers to individual's perception related to opinions of societyabout doing or not doing the behavior 12(Taylor and Todd, 1995).

The Theory of Reasoned Action is one of the most important theories that are used to explainhuman behavior’s 19(Pedersen, 2005). Behavioral intention to use technology is explained by

people's attitudes toward that behavior and subjective norms. If the individual voluntarilycontrols the behavior, it can accurately explain the factors influencing technology adoption20

(Laukkanen and Cruz, 2009). The theory of planned behavior 21

(Ajzen, 1991) extends onthe former by adding perceived behavioral control into the model as a determinant of behavioralintention and behavior.

This theory also predicts involuntary behaviors. It determines the impacts of three factorsnamely attitude, subjective norms and perceived behavior control on how individual’s tend to

behave 22 (Rao and Troshani, 2007). Attitude is the general feeling of people about the



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desirability or undesirability of a particular issue or behaviour. Subjective norm refers toindividual's perception related to opinions of society about doing or not doing the behaviour 23(Taylor and Todd, 1995). The construct perceived control of behavior is the individual's

perception about ease or difficulty of doing behaviour and indicates the individual's perceptionsabout required skills, resources, and opportunities in doing the behaviour. From the technologyacceptance model 24(Davis, 1989), behavioural intention is in turn, explained by the attitudetowards the use of the system, which is described as the perceived usefulness and its perceivedease of use.

Perceived ease of use refers to the degree to which a person believes that using a particular system would be free of effort, while perceived usefulness refers to the degree to which a person

believes that using a particular technology will enhance his performance. Subjective nom and perceived behavioural control 25(Luarn and Lin, 2005). This resulted in increased power toexplain behavioural intentions and accurate understanding of behavioural events 26(Pedersen,

2005).

According to their decomposed theory of planned behaviour, the behaviour to use a new servicefor instance is determined by the intention to use and perceived behavioural control. Intention touse, in turn, is determined by the attitude toward behaviour, subjective norm and perceived

behavioral control. Attitude comprises of perceived ease of use, perceived usefulness andcompatibility. Compatibility refers to the degree to which an innovation is perceived as beingconsistent with existing values, past experiences, and needs of potential adopters 27(Moor andBenbasat, 1991) .

28Al-Majali and Nik Mat (2010) decomposed the subjective norms further into two normative beliefs namely family influences and mass media influences. Family influences emphasize onthe relationship between the people under the family control where from parents, a personacquires an orientation toward religion, politics and economics, and a sense of personal ambition,self worth, and love. Mass media influences are non-personal communication channels such as

print media, broadcast media, and network media 29 (Kotler, 2006) .

Perceived behaviour control is composed of three control beliefs: self-efficacy, governmentsupport and technology support. Self- efficacy refers to individual’s self -confidence in his or her ability to perform a behaviour 30(Compeau and Higgins, 1995). Government support can playan intervention and leadership role in the diffusion of innovation 31(Tan and Teo, 2000). Finally, technology support becomes easily and readily available as e-commerce applicationssuch as internet banking services become more feasible 32(Shih and Fang, 2004).

Internet banking brings a number of benefits for both the provider and the customer. From the bank’s perspective these are mainly related to cost savings 33(Sathye 1999; Robinson, 2000) and



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internet banking remains one of the cheapest and more efficient delivery channels34(Pikkarainen et al., 2004). Other rationales for the adoption of such services are related tocompetition as it helps to retain existing customers and attract new ones 35(Robinson, 2000). Further, mass customization, more effective marketing and communication at lower costs areamong the benefits of internet banking services 36(Tuchila, 2000). Benefits for the end users arenumerous and include mainly convenience of the service (time saved and globally accessibleservice), lower cost of transaction and more frequent monitoring of accounts among others(Pikkarainen et al., 2004).

For businesses and enterprises, in particular, internet banking is seen as a means to better administer funds 37(Tuchila. 2000) as well as there is quick and continuous access to informationwhich helps in reducing costs. However, in many cases, customers are still reluctant to use of internet banking, as they are concerned with security aspects of the system. Further, internet

banking requires access to a computer and access to the internet which is an additional cost to the

client.Moreover, customers may not be IT conversant to use internet banking. Behavioural intentionhas a positive influence on internet banking services adoption in Singapore and Thailandrespectively.

12Taylor and Todd (1995) extend the theory of planned behavior by breaking down the structureof attitude, subjective norm and perceived behavioral control 14(Luarn and Lin, 2005). Thisresulted in increased power to explain behavioral intentions and accurate understanding of

behavioral events (Pedersen, 2005). According to their decomposed theory of planned behavior,the behavior to use a new service for instance is determined by the intention to use and perceived

behavioral control. Intention to use, in turn, is determined by the attitude toward behavior,subjective norm and perceived behavioral control. Attitude comprises of perceived ease of use,

perceived usefulness and compatibility.

Compatibility refers to the degree to which an innovation is perceived as being consistent withexisting values, past experiences, and needs of potential adopters 9(Moor and Benbasat, 1991). Perceived behavior control is composed of three control beliefs: self-efficacy, governmentsupport and technology support. Self- efficacy refers to individual’s self -confidence in his or her ability to perform a behavior 2(Compeau and Higgins, 1995) .

Government support can play an intervention and leadership role in the diffusion of innovation11(Tan and Teo, 2000) . Internet banking brings a number of benefits for both the provider andthe customer. From the bank’s perspective these are mainly related t o cost savings 10(Sathye1999; Robinson, 2000 ) and internet banking remains one of the cheapest and more efficientdelivery channels (Pikkarainen et al., 2004).



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Research Problem

Which factors influence the customers' propensity to use electronic banking as a primary banking channel. The most important issue in exploring the first problem iscomparing the influence of demographic factors and attitudes towards banking-related

issues to the selection of the main banking channel. What are the main characteristics of the heavy users of electronic banking and what

are the main obstacles for further adoption of electronic banking. Why somecustomers find the new channels unacceptable and which obstacles should be eliminatedin order to convince the customers about the advantages of using Internet banking.

Research Objectives

1. To identify the benefits of Internet banking for customers

2. To identify the factors those influence the customers for using mobile as an Internet banking tool.

3. To identify the factors why people do not adopt Internet banking services



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Hypothesis

1. H1: Perceived usefulness has a positive effect on use of Internet Banking.

2. H2: Perceived ease of use has a positive effect onuse of Internet Banking.

3. H3: Perceived risks have a negative impact on use of Internet Banking.

InternetBanking

IB

Perceived

risk

PR

Perceived

ease of use

PEUPerceived

usefulnes

PU



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Research Methodology

The research problem of this project indicates that this study is mainly descriptive , aiming tofind out and describe the effective factors, which influence the adoption of Internet bankingservices by customers. It also provides a basic understanding of the effective factors in adoption

of a new technology, by stating the existing theories related to this subject. Since conclusions are presented in order to explain the effective factors, which have been described, it begins toexplain the phenomena so the study becomes somehow explanatory.

Data Collection:

Empirical data for the study is to be collected with the help of questionnaires. Thequestionnaire of Lockett & littlers study (1997) can be replicated with some minorchanges

Some interviews with banking professionals and academicians will also be used in thestudy

Sampling Technique: The sample for this study is the students from an University BusinessSchool, Panjab University, Chandigarh. Convenience sampling method was used. The reasons of using this sampling type are twofold. First, it offers an easy way to obtain the raw data for thefurther analysis. Second, it saves times and costs since the respondents can be randomly selected.Although there are limitations of using students as subjects, they are appropriate in this study for several reasons. First they are good surrogate for banking customers, they are current bank customers have experience with traditional banking services and are most likely familiar with theIB. Second, student sample reflects current and future banking customers. Internet users aregenerally low with majority of them between 20- 30 ages.

Sample Size: 100

Data Analysis: Now the data that is to be collected through the survey is presented and analyzedstatistically using the independent samples t- test . This test compares the means for two groupsof cases, and is used to test whether the difference in means of one variable in two groups of respondents is significantly different from zero . Here using independent samples t-test, themeans of personal characteristics and internet banking characteristics in two groups of usersand non users.



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Analysis

Analysis

Statistical Package for Social Sciences (SPSS) version 16 was used as the analysis tool. The

demographic profile of the respondents is shown in table 1. Reliability is determined byCronbach’s coefficient alpha (α), a popular method for measuring reliability suggests that for any research at its early stage, a reliability score or alpha that is 0.60 or above is sufficient. Asshown in Table 2, the reliability scores of all the constructs were found to exceed the givenconstraint.

Table 2: Reliability

Determinants No. of items Reliebility

PU 6 0.942

PEU 8 0.897

PR 3 0.978



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Results

This study examines the influence of H1, H2 and H3 of IB. As expected, the results havesupported the hypothesis that PU and PEU have positive effect on the use of IB and PR havenegative effect on the use of IB. The results of the regression analysis conducted on the factors

indicate that PR, PU and PEU on online banking were found to be the most influential factorsexplaining the use of online banking services. The result shows that PR is negatively related tothe adoption of IB use which supports the hypothesis and is in line with the previous studies.Also it shows that PU and PEU has positive relation with IB use supporting the hypotheses. Thisfinding refers to the fact that consumers use online banking for the benefits and also due to itseasiness in use which provides in comparison to other banking delivery channels. This finding isin line with other studies.

When online banking is perceived as useful, customer’s intention to adopt it would be greater. Likewise bank customers are likely to adopt IB when it is easy to use. This shows that bank

customers anchor their online banking adoption intention to the beneficial outcomes and ease of use process of the system. Although IB provides flexibility in performing financial transaction,fast and easy, however individuals are still reluctant to adopt the system because of the risk associated with it. Security and privacy are two elements in the PR. Customers are not ready totake any risk on using the new system. Practical implication of these results is that banks need tohighlight the benefits of IB, make IB easy to use, and enhance IB security to improve consumers’ trust. They also need to make the consumers aware about the system by providing them about thedetails of the benefits associated with it and also ensuring security of the system. Banks canhighlight benefits such as IB conveniences in their promotional and advertising activities.

9. Conclusion

The result of this study shows that PU, PEU and PR are the important determinants of online banking adoption. This study meets the desired objective; but it suffers from one setback. Therelatively small size of the sample limits generalization of the outcome of the study.This studywas conducted to explore the factors influencing intentions to adopt IB services. As such, there isstill room for further investigation into the adoption of IB services. The replication of this studyon a wider scale with more IB customers and with different national cultures is essential for thefurther generalization of the findings. By using a longitudinal study in the future, we couldinvestigate our research model in different time periods and make comparisons, thus providing

more insight into the phenomenon of online banking adoption.



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