Role of Digitalization in

Banking sector and its Keywords: less-cash society, Online Banking,

effects on customers Digitalization, Technology, TAM

Author 1- Dr. C Sumangala

HOD, Dept.of Introduction
Management,
Yuvaraja’s college, Mysore Today’s world has advanced far beyond the
imagination. Every sector have made up to new
Author 2- Shama E Milton
innovations and findings. In the present scenario
Research Scholar, post demonetization, the need for high
performance banking sector is mandatory. The
University of Mysore
aim of the present government to become a less-
In the present scenario, government has made
cash society has brought in changes in the
its first move towards less-cash society by
banking operations. RBI has recently brought to
demonetization which has envisaged changes in
light “Payments and Settlement Systems in
the economy, life of people in the country and
India: Vision 2018” –strategies for enduring
has also brought out the relevance of banking
results to enable cashless society in India by
operation amongst the mass. The mix of cash
promoting and encouraging electronic
and cashless transactions happening across the
transactions. The blend of cash and cashless
country has a major challenge for the banks as
transactions occurring across the country has a
they have to facilitate the prevalence of
major challenge for the banks as they have to
technology-based self service applications like
facilitate the prevalence of technology-based self
Online banking, mobile banking, NEFT, RTGS
service applications like Online banking, mobile
etc among all its customers. Government and the
banking, NEFT, RTGS etc along with integrated
Banking sector have to take initiative in helping
processes like bill payment etc among all its
the public understand and learn the importance
customers. Every individual in the country is
of digital banking. The use of Technology
aware of primary banking operations like having
Acceptance Model (TAM) is of relevance in
an account of their own but the need of the hour
analyzing the scenario. This paper focuses on the
is to provide optimum level of customer
measures taken by the banks to identify the
satisfaction in using the technology based
requirements of the customers and to have a
banking system. Banks must realize the positive
smooth digital banking operation.
impact of long-term value of building customer
loyalty which can be achieved by maintaining
the existing customer base and also to attract the
prospective customers. Banks are exploring
innovative ways to make banking experience of
customers more convenient, valuable
proficient. Banking sector is using latest tools
and methods to cater the needs of the customer
and is also offering customized products and
services to counterpart their needs.
implementing Customer relationship
management (CRM) solutions, banks
significantly improve the level of customer
satisfaction. For providing better transaction
experiences of different transaction channels
banks can assist customers through Data
warehousing. Data mining technique can be
implied by the banks to analyze and measure
Customer transaction patterns and behavior.
Recent studies clearly state that social
influences significantly impact the attitude
towards adoption of e-banking which in turn
influences intention to adopt. The major factors
influencing the inhibition of usage of e-banking
are facility of internet, cost of internet,
complexity, compatibility, awareness
interest. Lack of knowledge and technological
skills and socio-culture are also hurdle in
development path of e -banking. Financial cost,
usefulness, self-efficacy, credibility, Experience,
Social influence and Perceived usefulness are
the factors which significantly influence
consumer behavior intention in adopting e-
banking.
According to a report by the Boston
Consulting Group in collaboration with FICCI
and the Indian Banks’ Association (IBA), India
and has around 470 million banking customers.
Among this demographic, 60 million of them,
amounting to 13% of the total users, use online
banking. And within this category, 10% prefer
By the hybrid model of regular online and online
banking. About 1% of users primarily prefer the
can online channels for all their banking needs.
In the competitive scenario of the
banking sector, every bank has to focus on
distinct factors like changing consumer needs
driven by online commerce, branch optimization
of networks in order to reduce costs and
Changing demographic trends and potential new
consumer markets. In the last few years the
private sector banks have come a long way with
their IT enabled services which has pressurized
Indian Public Sector Banks to follow them by
going in for the latest technologies so as to meet
the threat of competition and retain their
customer base.
and
India is on the verge of a digital
revolution with 462 million internet users in
2016. According to Mckinsey report, 2016 the
annual economic impact of such applications
could be $550 billion to $1 trillion a year in
2025. That represents 20 to 30 percent of India’s
incremental economic growth from 2012 to 2025
and up to six times the current revenue of the IT
services sector.
 amount of deposits that flowed into banks
between April and October 2016.

Banking sector frauds are resolved through the

implementation of a web based database which
is operational form January 21, 2016, by Central
Fraud Registry (CFR). This tool will help in
appropriate detection and mitigation of frauds
which in turn facilitates banks to take conversant
business decisions.

On August 25, 2016; the Unified Payments

Interface (UPI) was launched to give a boost to
SOURCE: McKinsey Global Institute mobile banking. This is predicted to transform
analysis retail payments with high degree of penetration
of mobile phones in the country.
Government’s role
The Reserve Bank has set up an inter-regulatory
Role of government in the implementation of
working group to examine various aspects
modern banking practices is phenomenal.
related to Fin Tech innovations and the related
Introduction of Pradhan mantri yojana by the
risks and opportunities as these alternative
Government to ensure that every household has
institutions is expected to advance competition
at least one universal bank account has changed
in the financial sector which may cause threat
the lives of many people of the country. To
and challenge resulting in long-term systemic
reinforce protection for bank customers, RBI has
concerns.
brought in common risk-based know-your-
customer (KYC) norms. The strategy to adopt
The State Bank of India gained a global image
less cash economy through demonetization has
with the merger; SBI is now catapulted among
had a great impact in the banking practices
the top ranking 50 banks in the world in terms of
which has broadened the scope and scale for
assets w. e. f.1st April,2017.
digital banking. Between October 28, 2016 and
December 23 2016, banks’ deposits have Customer services
increased from around Rs 107 lakh crore to
112.6 lakh crore. This is almost double the During 2015-16, 95,377 complaints were
received against SCBs by 15 regional offices of
the Banking Ombudsman as against 85,131
during the previous year. PSBs witnessed a
marginal decline in the share of complaints
received at Banking Ombudsman Offices to 68.2
per cent from 70.5 per cent in the previous year.
Population group-wise, urban and metropolitan
centers received a majority of the complaints (73
per cent of the total complaints in 2015-16)
under the Banking Ombudsman scheme
remained the most popular mode followed by
mobile-wallets. During 2015-16, the value of
transactions through PPI cards and mobile-
wallets increased significantly to `254 billion
and `206 billion respectively, against `105
billion and `82 billion respectively in the
previous year which shows the onset of e-
banking.

Population group-wise distribution of

complaints received

Progress of prepaid instruments

(value)

Prepaid payment instruments

Due to greater use of prepaid payment

instruments (PPIs) for purchase of goods and
services and for fund transfers, the value of
transactions by these instruments has increased Current trends
considerably in recent years. Among the prepaid
Indian banks in the digital era are leading the
instruments, PPI cards (which include mobile
pack when it comes to transforming from digital
prepaid instruments, gift cards, social benefit
to truly digital. The Indian banking sector’s
cards, foreign travel cards and corporate cards)
growth is fueled by innovative initiative and
technology enabled trends that will gain
momentum in the coming days are as follows:
Open banking
Open banking is a reliable, personalized
financial advising system, precisely customized
to the needs of the customer to the given
circumstance to be delivered securely and
confidentially. Open banking uses ‘APIs’ to
share information securely, without you having
to reveal your password. This is the same
technology that guides an Ola/ Uber driver who
and where you are or which lets you sign in to
other online accounts using Google account.
Hence this system is tailored for better customer
experiences.
Cloud Banking
Progressive banks are already making straddles
in cloud adoption which transforms its business
to operating model. In 2017, you could expect
Siri to help you move funds and open a new
fixed deposit account with your bank.
Demonetisation is pushing India towards a
cashless society, and as banks prepare to deal
with the increased influx of electronic
transactions, cloud will provide banks with the
required elasticity to meet these demands.
Artificial Intelligence
Artificial intelligence (AI) has the potential to
transform both front office and back office
operations with its self-improving programs—at
ICICI Bank, for example, software robots have
been deployed in over 200 business process
functions, reducing the response time to
customers by up to 60%. AI has already proven
itself in providing seamless differentiated
customer experience on digital channels, and
security measures with its integration within the
banking infrastructure.
Mobile banking
Indian banks leveraged the increasing
adoption of mobile to provide customized
offerings on their apps. However, digital
technologies are evolving at an
unprecedented rate, and so is customer
adoption. To keep pace, banks would be
required to provide services on a gamut of
connected devices and wearables. Apps,
while still widely used, are not the only
channel for customer interaction. Today we
have smart virtual personal assistants on
mobile phones that can engage with
customers in a more interactive manner.
Customers in banking
Customers are the pillars in the banking sector.
Customer satisfaction should be the ultimate
criteria as it a measure of how products and
services offered by the banks meet or surpass
customer expectation. Liao and Cheung (2002)
stated that willingness to use Internet banking
depends on the expectations of accuracy,  The absence of a regulatory framework
security, network speed, user-friendliness, user for Internet banking transactions in
involvement, and convenience. India.
 The mindset of the Indian consumer,
Rahamath et.al. (2014) have carried out a study
who prefers personal interactions and is
titled “Customer perspectives on E-business
not very comfortable, doing transactions
value: Case study on internet banking” states
through the Internet.
that e-baking is useful, easy to use and its
awareness among customers is positive whereas
adopting the technology by customers is Steps to implement e-banking
dismissive due to risk i.e. security and privacy,
 Awareness is the keystone to adopt
associated to it
the new technology hence it has to

Adoption of e-banking by customers is a major be created among customers and

concern. Mattila found that internet facility, merchants

complexity, compatibility, awareness and  Public awareness campaign in large-

interest play crucial role in m-banking scale has to be orbited through
adaptation. Lack of knowledge and media just like the Pulse Polio
technological skills and culture are also hurdle in campaign by enrolling mass
development path of electronic m-banking. celebrities.
Financial cost, usefulness, self-efficacy and  Educational hoardings to be
credibility are the factors which influence installed at block offices, post
consumer behavior regarding m-banking offices, hospitals, bank branches and
adaptation. main markets in each block/gram
panchayat/village.
Challenges  Education can emphasize on
importance and benefits of various
Apart from the security issues, there are a host of
modes of digital payments etc and
other problems like:
its usage to farmers, small
 PC user base in India is exceptionally entrepreneurs, self-help groups
low compared to global standards. (SHGs), school students and senior
 Lack of infrastructure to advanced citizens.
technology based banking services.  A help number has to be facilitated
to provide 24 x 7 service with
capacity to support high traffic
 volumes and indigenous capabilities
to guide customers on various e-
banking transactions.
 Schemes has to be brought in like
cash back on digital spends;
including cash backs on small
spends through sovereign e-wallet,
discounts on government payments
via digital means, cash backs on
UPI/ USSD/ AEPS payments etc.
 Consider Tax refund for consumers
on spends through digital means up
to a certain proportion of annual
income.
 Government should come out with
an insurance scheme to cover losses
incurred in digital transactions on
account of fraud, etc. in order to
address the apprehension of general
public in adopting digital payments.
The scheme should target low ticket
transactions to cover the vulnerable
sections like small merchants,
farmers etc.
Conclusion
Internet and technology has revolutionized the
Banking process but customers are still finding it
difficult to adopt to the technology enabled
services due to various factors mainly being the
perceived risk, accessibility, lack of trust and
transparency (hidden charges) and lack of
unwillingness to commit time and adopt to a
new tool. In India, consumer acceptance to e-
banking has not penetrated to the larger masses
hence steps have to be derived by the Banks and
the Government for greater customer orientation
and service. The problems faced by the
consumers due to technology enabled banking
have to be transformed from awareness to usage.
Organizations that invest time, energy, and
resources required to achieve excellence in
customer service will be the ones that will thrive
and grow in the competitive scenario.
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