You are on page 1of 8

International Journal of Management (IJM), INTERNATIONAL2,JOURNAL ISSN MANAGEMENT (IJM) OF 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue

ue March- April (2013)

ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) Volume 4, Issue 2, March- April (2013), pp. 01-08 IAEME: Journal Impact Factor (2013): 6.9071 (Calculated by GISI)



Shilpi Khandelwal Assistant Professor/Research Scholar Singhania University, Pacheri Bari, Jhunjhunu-333515

ABSTRACT The last decade has witnessed a drastic change in the economic and banking environment all over the world. With the economic and financial sector reforms introduced in the country since early 1990s, the operating environment for banks in India has also undergone a rapid change. Increasingly, more and more people are switching to electronic platforms for executing financial transactions. Internet banking has brought about a 360 degree change in the entire banking industry. The wider usage of cell phone and internet certainly seems to be playing a role in blurring physical boundaries, and unlocking a whole new world of opportunities for banks in tapping newer customer segments and in recording greater volume of transactions. For the banks, technology has emerged as a strategic resource for achieving higher efficiency, control of operations, productivity and profitability. For customers, it is the realization of their anywhere, anytime, anyway banking dream. This has prompted the banks to embrace technology to meet the increasing customer expectation and face the tough competition. This research paper is focused on what are the drivers that drive consumers towards adoption of E banking. How consumers have accepted internet banking and how to improve the usage rate were the focus of research area in this study. KEY WORDS: E banking, Technology, Access, Privacy, Service, Satisfaction. INTRODUCTION Service businesses have been experiencing extensive transformations both at macro and micro levels (Sigala & Christou, 2006). Banking industry is no exception feeling the impacts of future trends. The industry has gone through drastic changes in recent decades, mainly due to deregulation, opening up of global and regional markets, development in ICT technology, and, last, but not least, due to consumers adopting the use of digital networks. The expansion of electronic home banking is definitely one of the most influential drivers in the restructuring of banking services. The previous dependence on large networks of branch

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013)

offices has been replaced by digital services (Tinnil, 2011). As consumes are increasingly using internet to purchase products and services, they need convenient, safe and familiar payment and banking services. Due to increase of mobile devices, this trend of digital selfservices in banking, irrespective of time and place, can be expected to continue. Competition and the constant changes in technology and lifestyles have changed the face of banking. Nowadays, banks are seeking alternative ways to provide and differentiate amongst their varied services. 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. Electronic banking is the wave of the future. It provides enormous benefits to consumers in terms of the ease and cost of transactions. Access is fast, convenient, and available around the clock, whatever the customer's location plus, banks can provide services more efficiently and at substantially lower costs. Electronic banking also makes it easier for customers to compare banks' services and products, can increase competition among banks, and allows banks to penetrate new markets and thus expand their geographical reach. Internet revolution is global phenomenon and going by the current growth statistics, India expects a spurt in the Internet penetration in coming years particularly in the electronic commerce. It is an obvious notion that electronic (internet) banking and payments are likely to advance more or less in tandem with ecommerce. Indian banks are realizing the importance of implementing customer relationship management (CRM) for acquiring and retaining their customers. This clearly indicates the need for identifying and addressing the major dimensions that plays a crucial role in the effective implementation of E Banking among customers. LITERATURE REVIEW: The Internet, much like the ATM that came before it, is fundamentally a new distribution channel through which banks can deliver traditional banking products and services. Initially, banks promoted their core capabilities, namely, products, channels and advice, through the Internet. Then, they entered the Internet commerce market as providers/distributors of their own products and services. An extensive study conducted in 2001 by the Consumer Bankers Association indicates that Internet banking usage remained stagnant from 1996 to 1998, with less than 10% of the market utilizing the service. This characterizes the early adoption phase where the banking industry, in its striking transformation, has embarked on an era of anytime, anywhere banking. Conclusions of study undertaken for European Commission on public perceptions (September, 2003) say that lack of trust has been frequently cited to be one of the key factors that discourage customers from participating in e-commerce, while cultural differences affect the formation of trust Apart from trust, there are other variables which influence the usage of Internet banking They are intention, beliefs, and subjective norms, trust in the bank, attitude, perceived usefulness and perceived ease of use (Journal of Services Research, 2007). Demography may also affect the usage pattern of Internet Banking. It is interpreted that the female respondents are yet to get fully involved in Internet purchase (Journal of Internet Banking and Commerce, 2006). Therefore, enhancing the level of service performance acceptance is the major issue to get competitive advantages. Service quality has received much attention because of its obvious relationship with financial performance, customer satisfaction and retentions (Al-Hawari et al., 2005). Suganthi et al. (2001) conducted the review of Malaysian banking sites and revealed that all domestic banks were having a web presence. Only 4 of the ten major banks

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013)

had transactional sites. The remaining sites were at informational level. There are various psychological and behavioral issues such as trust, security of Internet transactions, reluctance to change and preference for human interface which appear to impede the growth of Internet banking. Corrocher (2002) investigated the determinants of the Internet technology adoption for the provision of banking services in the Italian context and also studied the relationship between the Internet banking and the traditional banking activity, in order to understand if these two systems of financial services delivery are perceived as substitutes or complements by the banks. According to the results of the empirical analysis, banks seem to perceive Internet banking as a substitute for the existing branching structure, although there is also some evidence that banks providing innovative financial services are more inclined to adopt the innovation than traditional banks. Earlier studies (Barczak et al., 1997; Danniel & Strong, 1997; Lia et al., 1999; Polatoglu & Ekin, 2001; Devlin & Yeung, 2003) report factors such as convenience, flexibility, security concern, complexity, and responsiveness being associated with a higher propensity to use internet banking. In the context of the above perspective, this paper will make an attempt to analyze the evolving sphere of Internet banking and some of the factors, which affect person's usage of Internet banking. RESEARCH PROBLEM AND OBJECTIVES The main questions addressed in the research are: 1. Which factors influence the customers' propensity to use electronic banking as a primary banking channel. (The most important issue in exploring the first problem is comparing the influence of demographic factors and attitudes towards banking-related issues to the selection of the main banking channel.) 2. What are the critical success factors among users of the E banking? 3. What are the main characteristics of the non users of electronic banking and what are the main obstacles for adoption of electronic banking. RESEARCH METHODOLOGY Qualitative research method was used in the first phase. Pilot testing with leading banking professionals of questionnaire helps to get indepth response of target group. Based on this we have used exploratory research methodology in the second phase. The working of the research was started with the two questionnaires (one for users & the other for non users). In this we have used screening criteria to identify the target group for our research. Questionnaire used seven point scales to measure the opinion of different customers on different parameters. Target population: The first criterion to get the targeted samples was the bank customers whose bank provides Internet banking services. The sample for conducting the survey contains customers from Jaipur. The survey also focused on covering all the demographic factors in the sample itself. Sample size: We have surveyed 242 users of internet banking & 118 non users of internet banking from different banks and from different locality. From these we got 200 replies from users of internet banking & 100 replies from non users of internet banking, which fitted in our criteria of target population. Our analysis is based on these 200 users & 100 non users of internet banking.

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013)

RESEARCH FINDINGS & DISCUSSION The respondent profile who participated in the study is given in Table I. Table I presents the demographic characteristics of the 200 respondents (users). About 67 percent of the respondents (users) are males and 33 percent respondents are females. The highest category using online banking services are in the age group of 20-30 years. Majority of the users of e-banking services were graduates (45 percent). Table I also presents the demographic characteristics of the 100 respondents (non users). About 57 percent of the respondents (non users) are males and 43 percent respondents are females. The highest category not using online banking services are in the age group of 40-50 years & above 50 years. The striking difference between the users & non users of online banking services is the age factor. While the younger generation is responding well to technological innovations the older generation is finding it hard to rely on new technology. Genders also affecting the adoption of online banking services Females are low on side as compared to males when it comes to online banking services. Table: I Demographic profile of users & non users Internet Banking Users N=200 47 90 63 134 66 102 98 2 78 60 40 20 Internet banking non users N=100 37 36 27 57 43 54 46 3 18 16 39 24

Undergraduate Graduate Postgraduate Male Female Income above 2 Lacs/annum Income below 2 Lacs/annum AGE 16-20 20-30 30-40 40-50 Above 50

The survey conducted for research among 200 users of E banking addressed six different issues influencing the adoption of Internet banking. The results are presented in Table II.

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013)

Table II: Main factors in adopting E banking (200 respondents users of E Banking) Scale ranking from 1 (Not important at all) to 7 (extremely important) No.200 1 Not important at all 1% 2 3 4 5 6 7 Extremely important 12.5% 5.5% 17.5% 9% 26% 16.5%

Better Prices

3.5% 13.5% 10.5% 17.5% 2% 1%

8% 17.5% 13.5% 5.5% 4.5% 3.5%

10.5% 14% 11.5% 16.5% 9.5 15.5%

51% 22% 11.5% 26.5% 11.5% 20%

13.5% 12.5% 25.5% 11.5% 45.5% 43.5%

Recommendations 15% Better Service Marketing Efforts Better Access Higher Privacy 10% 13.5% 1% 0%

The most important factors in starting to use Internet banking are first and foremost better access to the services (convenience). This is the single most important benefits that outweigh any shortcoming of internet banking. Making transactions and payments right from the comfort of home or office at the click of a button without even having to step out is a facility none would like to forego. Keeping a track of accounts through the internet is much faster and convenient as compared to going to the bank for the same. Even non transactional facilities like ordering cheque books online, updating accounts, enquiring about interest rates of various financial products etc become much simpler on the internet. Higher Privacy & better service (i.e. preferring self service over office service) are other relevant factors in adopting E banking. Better prices were also of above the average importance. Two factors that the respondents moderately consider relevant to their adoption decision were banks' marketing activities and personal recommendations from friends and colleagues. Table III: Main obstacles in adopting E banking (results of a study, 100 respondents non users of E Banking) Scale ranking from 1 (unimportant reason) to 7 (important reason)
No.100 Computers are difficult No access to internet Internet banking is expensive Low security Have had no chance to try I prefer personal contact 1 Unimportant reason 41% 0% 8% 7% 4% 11% 2 17% 3% 5% 12% 8% 1% 3 8% 5% 19% 8% 5% 3% 4 13% 15% 17% 14% 17% 7% 5 12% 21% 11% 21% 15% 3% 6 7% 35% 25% 22% 24% 61% 7 Important reason 2% 21% 15% 18% 27% 14%

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013)

The important factors discouraging the use of Internet banking are lack of Internet access and not having a chance to try out Internet banking in a safe environment (Table III). The first problem would be difficult for a bank alone to solve but banks have already responded by creating possibilities for Internet bank access in their offices. Those customers who feel that having no access is an unimportant reason have listed security concerns and lack of trying possibilities as most important. Similar research in other countries has revealed that lack of personal contact might be an obstacle in convincing people to use electronic channels; it is obvious from the respondent data that large majorities of the population want to have personal contact. The higher number (75%) of non users opting for personal contact could be due to better service quality at manual banking.. Personal relationship with the staff at the banks comes handy when requesting for faster loan approval or a special service which may not be available to the public. The manager has many discretionary powers such as waiving of penal interest or service fees which were often taken advantage of by better acquaintance with the staff. Additionally personal contact also meant that the banker would provide essential financial advice and insights which are beneficial to the customer. As found in numerous other studies conducted (Polatoglu & Kin, 2001; Devlin & Young, 2003) ours also revealed that security forms a major concern for using Internet banking facility. As high as 43% of non-users prefer manual banking due to high level of cyber crimes like phishing, hacking, etc.,. This can be the reason why 17% of users do not prefer Internet banking for all the transactions. This is the biggest pitfall of the internet banking scheme which needs to be guarded against by the common customer. Non-user friendliness software is another crucial issue which holds people back from using the facility. Fees charged for using Internet banking facility also make consumers reluctant in exploiting such services. Almost 40% of consumers who dont use Internet banking feel that the charges are not reasonable. In fact 26% of users also share the same view. This shows that a little cut in these charges may induce them to use this service. CONCLUSION & RECOMMENDATIONS: When investigating all the variables and the response by consumers, this study reveals that the perception of the consumers can be changed by awareness program, friendly usage, less charge, proper security, and the best response to the services offered. Demographics play an important role in the adoption of E banking facilities as we have seen that age & gender factor considerably affects the adoption. Also better access i.e convenience plays pivotal role in enhancing the use of e banking facilities among users. The study also provides the kind of correlation between different factors. In case of the consumers who dont use Internet banking services, having all facilities at their disposal, technology was not the biggest issue. Some recommendations for the Banks on the basis of this research are: Banks should ensure that online banking is safe and secure for financial transaction like traditional banking. Banks should organize seminar and conference to educate the customer regarding uses of online banking as well as security and privacy of their accounts. Some customers are hindered by lack of access to online banking. They should be provided online banking facilities in the banks.

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013)

Banks must emphasize the convenience that online banking can provide to people, such as avoiding long queue, in order to motivate them to use it by spreading awareness about benefits of online banking. Banks must emphasize the cost saving that online can provide to the people, such as reduce transaction cost by use of online banking.

REFERENCES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Barczak G.E, Scholder P. & Piling B.K.T. (1997), Developing typologies of consumer motivation for use of technologically based banking services, Journal of Business Research 38 (2), 131-40. Black N.J. Lockett A., Ennew C. & Winklhofer H. (2001), Adoption of Internet banking, a qualitative study, International Journal of Retail & Distribution Management 29 (8), 390-8. Innovative Marketing, Volume 3, Issue 4, 2007 Corrocher, N. (2002), Does Internet banking substitute traditional banking? Empirical evidence from Italy,Working Paper, CESPRI, No. 134, November. Dabholkar P. & Bagozzi R. (2002), An attitudinal model of Technology based self service: Moderating effect of consumer traits & situational factors, Journal of Academy of Marketing Science 30 (3), 184-201. Danniel E. & Storey C. (1997), Online banking Strategies & Management Challenges, Long Range Planning 30(6), 890-8. Devlin J. F. & Young Matthew (2003), Insight in to customer motivation for switching to Internet Banking, Int. Rev. of Retail, Distribution & Consumer Research, 13-4, Oct, 375-392. European commission (2003), Report on Public perception on Bank September Global Information Technology Report 2001-2002: Readiness for the Networked World. The World Economic Forum and the Center for International Development (CID) at Harvard University Journal of Internet Banking and Commerce (2006), Impact of demographics on the consumption of different service online in India, vol. 11, No. 3, 353-355. Journal of Service Research (2007), Profiling of internet banking users in India, vol. 6, No. 2, March, 77-125. Kautz, K, Larsen, E. . (2000) 'Diffusion theory and practice. Disseminating quality management and software process improvement innovations'. Information Technology & People, Vol. 13, No. 1, pp 11-26 Mohammed Al-Hawari, Nicole Harley and Tony Ward (2005), Measuring banks automated Service Quality, a confirmatory factor analysis approach, Marketing Bulletin, 16, 1-19. Parasuraman A., Zeithami V. & Malhotra A. (2005), A multiple Item Scale for assessing Electronic Service quality, Journal of Service Research 7 (3), 213-234. Polatoglu, V. N. & Ekin S. (2001), An Imperial investigation of Turkish consumer acceptance of internet banking service, International Journal of Bank Marketing 19 (4), 156-65. Rao, G. R. and Prathima, K. (2003), Internet Banking in India, Mondaq Business Briefing, April 11. Rogers, E. M. (1995) Diffusion of Innovations. 4th Ed. The Free Press, 518 p

International Journal of Management (IJM), ISSN 0976 6502(Print), ISSN 0976 6510(Online), Volume 4, Issue 2, March- April (2013)

17. 18. 19. 20. 21. 22. 23.

Sigala, M. & Christou, E. (2006). Global trends and challenges in services. Managing Service Quality, 16(4), 345-348 Suganthi, Balachander and Balachandran (2001), Internet Banking Patronage: An Empirical Investigation of Malaysia, Journal of Internet Banking and Commerce, Vol. 6, No. 1, May. Tinnil, M. (2011). A Review of service frameworks analyzing strategic repositioning: the case of bank services. International Journal of Information Systems in the Service Sector 3(1), 21-38. Tinnil, M. (2012). A Classification of Service Facilities, Servicescapes and Service Factories, International Journal of Services and Operations Management (IJSOM), 11(3), 267-291. eithml V. (2002), Service excellence in electronic channels, Managing Service Quality 12 (3), 135-138. Shilpi Khandelwal, E Banking Innovations: Trends in India International Journal of Management (IJM), Volume 3, Issue 3, 2012, pp. 200-215, Published by IAEME Dr. Harsh Dev, Suman Kumar Mishra, Ajay Pratap, Uml Modeling For Online Banking System Using Object Oriented Databases International journal of Computer Engineering & Technology (IJCET) Volume 3, Issue 2 , 2012, pp. 630-639, Published by IAEME