Challenges that were grouped based on the types of services offered under E- Banking :

ATM Services :

This is perhaps the most popular E- Banking service used by the people of India. Started in the
mid 90’s India has over one lakh (100000) ATMs today. The Private Banks lead by ICICI bank
took this initiative and have worked hard to popularize it. However ATM services have their own
challenges to contend with.

1. Poor Infrastructure: Lack of proper place, electric connection and satellite (VSAT) /
broadband connectivity has restrained this service from expanding to rural and semi urban
areas in a big way.

2. Security Issues : While urban ATMs are generally located in crowded areas and also it is
easier to get guards it is not so in case of rural areas. Since the machines are loaded with catch
they are easy targets without proper protection. Also the lack of connectivity to the state police
system unlike other nations in the world makes it very difficult.

3. Operating Conditions: India is a multicultural and multi linguistic nation. Our Literacy levels
are not so high. It becomes difficult to have instructions displayed in multiple languages. But the
technology has come out with a solution to this. However technology can not help illiterate
people in this and also ATMs can’t ensure uniform operating levels from all people resulting in
high wear & tear.

Debit/Credit Card Services:

One of the services of Banks which has seen the highest growth in last one and half decades is
that of Credit / Debit cards. While foreign banks like Citibank, Standard Chartered etc were the
first to introduce them (especially Credit cards), it is the new age Indian Private Sector Banks
like ICICI & HDFC among others who capitalized the most with this development. The plastic
money thus made inroads into Indian economy especially luring the young, middle class, literate,
urban crowd. However these are also characterized by certain challenges.

1. PIN Security: It is a major challenge to overcome. All that a card requires to draw money is a
four digit PIN(Personal Identification Number). For an electronic system this simplifies work to a
greater extent. However human mind with it’s limitations especially with creative and illiterate
people alike makes it difficult to remember this number. Also a four digit code with just 10000
permutations is not so tough to crack especially with modern devices. However biometrics has a
solution to this with the use of finger impressions.

2. Swipe/Signature Security : Most of the debit/credit cards are swiped while shopping
indication fund transfer. Even though a slip is generated where a customer needs to sign,
seldom has been a case where the signature is tallied by the Bank while settling claims nor a
shop has been able to tally signatures as most customers don’t sign at the back of their card.
This makes card swiping unpopular with customers and marketers alike especially in small cities.
The disputes are very difficult to settle.

3. Service Charges: One knows that most of the cards in the world are issued either by ‘VISA
or MASTERCard’. They run parallel to banks storing all information about the card holder that is
useful & necessary. However for this service they charge the one who is at the receiving end i.e.
seller. Since the profit margin is a diminishing commodity nowadays, sellers detest this by
discouraging use of card and encouraging sales on cash. But the big two today are willing to
reduce their charges looking at the volumes expected.

Internet Banking

It is perhaps the biggest invention in Banking in the last century. Two of the major contributors
to this remain Automation of Banking and Birth of Internet. While the one ensured conversion of
processes from manual to auto mode, the other ensured it reached everyone concerned with
the activity ; be it the bank, customer or a third party as seller. This revolution however in India
is yet to take place in a big way. While it is a huge cost saving for Banks except initial
investments, the customer remains wary of embracing the same wholeheartedly.

1. The Connectivity: While internet banking remains the fastest and most convenient (even
being operated from home) the nation lacks connectivity on the same. Most of the rural and
some semi urban areas remain unconnected or partially connected. This is an issue beyond the
scope of banks.

2. Bandwidth of Internet Service: Even in the areas where connectivity is adequate,

bandwidth remains a problem. While the Bank branches in this area can afford alternatives such
as satellite connectivity/VSAT, the consumer remains devoid of these facilities at the personal
level. This results in connectivity getting lost and customer losing patience. It also results not
only in more footfalls at branches but contributes to customer dissatisfaction

3. Security: This remains the biggest concern with Internet Banking the world over. In India too
while RBI has issued guidelines in this regard, the issue continues to be of concern to both
Banks & their Customers. While some of the smaller banks in the past have compromised on
this issue, the technological advances in the field have helped the fraudsters to continue to find
ways to evade Bankers & Law makers alike, despite the adherence to rules and regulations by
Banks & Customers.

Mobile/ TeleBanking
The result of boon in telecom sector in the form of mobile telephony in India during first decade
of this century has seen an explosion in the number of telecom subscribers which stands today
at 875 million +. This fact has encourage the bankers to offer more and more services on
telephone rather than in Branch banking. These include services like cheque book request,
password reset, DD request etc. However this type of banking has some peculiar problems.

1. Illiteracy : Unlike in the use of mobile phones banking requires an awareness about
processes, rules and regulations. However most of the mobile users in the lower class do not
understand them and find them difficult to operate

2. Technology : This can be a severe constraint when it comes to use of mobile instruments.
Since most of the people buy instruments within their budgets, there is a severe constraint on
the part of service providers in terms of features being offered in these handsets

3. Penetration : Unlike Mobile Telephony Banking has not been able to make inroads into the
rural heartland of India. The fact that 83% of Indian population still doesn’t have a bank account
proves this. Hence the problem needs to be addressed at the Bank Level

4. Security : This again is a major concern because of two factors a. Lack of availability of a
Reliable Network by the Mobile service provider in the Area b. Information leak due to easy
accessibility of a mobile handset. Apart from these there is always a danger of Apps on a
smartphone, which regularly access information stored in the mobile, stealing some important
data

Electronic fund Transfer

One of the most useful applications of E-Banking, this feature has immensely helped the
Businesses. In the beginning only intra bank transfers were real time. But however after RBI
took an initiative to connect all the scheduled banks in India, Intra bank transfer in real time
(RTGS) has become reality. However this technology still needs a lot of improvement because
of the following challenges.

1. Limit on Fund Transfers : Even though RBI has limited the fund transfer on Internet
Banking due to security reasons, walking into a branch every time a bigger fund transfer needs
to be done is cumbersome and time consuming. A way needs to be arrived at ensuring the
same happens from an office computer and not from a Bank branch

2. ECS Cancellation : ECS has transformed businesses of many service providers like
telephones, electricity, water supply boards, bank loan repayments etc. However there is a
problem in cancellation of the same. The service provider needs to approve it even if customer
of the bank wants to do the same. Given the fact that most of the service providers in electricity
& water supply are owned by the government, one can imagine the difficulties involved. It is this
fact that has made ECS unattractive among the customers.
Other Challenges

While the above ones are the challenges faced by various services being offered under the
EBanking, there are couple of others which are common to any given bank.

1. Investment in Infrastructure : Computerisation of a Bank attracts huge costs. Apart from

hardware and software purchase one has to invest in Networking and conversion of large data.
While it may not bother the established large banks much, it is definitely taxing on the smaller
especially private & co-operative sector banks.

2. Training the Employees : While the new age private sector banks have found it much
easier to do especially with recruitment of young computer literate employees, the larger public
sector banks lagged hugely behind in this. However they have been able to do reasonably well
after working on it for over a decade now.

3. Human Resource Management : While the banks on one hand tried to train the existing
employees on these new skill sets they also realized the obsolescence of a huge work force
once the computerization happens. Thus most of the public sector banks came out with
Voluntary Retirement Schemes(VRS) to heave off the future burden on their exchequer.
However they had to do away with lot of their reserves for this, resulting in the fall of profitability.

4. Customer Education : New age private banks started offering E-banking services from day
one to their customers. However the old public sector banks found it very difficult to convince
their customers on the benefits of this initiative. While educating customers formally was a
formidable option banks resorted to incentives like a free debit cum atm card, Free Net Banking,
Monthly Statement of accounts on EMail, No charges on ECS etc to divert customers to these
alternate channels of banking.

5 Security Risk: The problem related to the security has become one of the major concerns for
banks. A large group of customers refuses to opt for e-banking facilities due to uncertainty and
security concerns. According to the IAMAI Report (2006), 43% of internet users are not using
internet banking in India because of security concerns. So it's a big challenge for marketers and
makes consumers satisfied regarding their security concerns, which may further increase the
online banking use.

6 The Trust Factor: Trust is the biggest hurdle to online banking for most of the customers.
Conventional banking is preferred by the customers because of lack of trust on the online
security. They have a perception that online transaction is risky due to which frauds can take
place. While using e-banking facilities lot of questions arises in the mind of customers such as:
Did transaction go through? Did I push the transfer button once or twice? Trust is among the
significant factors which influence the customers‟ willingness to engage in a transaction with
web merchants.
7 Customer Awareness: Awareness among consumers about the e-banking facilities and
procedures is still at lower side in Indian scenario. Banks are not able to disseminate proper
information about the use, benefits and facility of internet banking. Less awareness of new
technologies and their benefits is among one of the most ranked barrier in the development of
e-banking.

8 Privacy risk: The risk of disclosing private information & fear of identity theft is one of the
major factors that inhibit the consumers while opting for internet banking services. Most of the
consumers believe that using online banking services make them vulnerable to identity theft.
According to the study consumers‟ worry about their privacy and feel that bank may invade their
privacy by utilizing their information for marketing and other secondary purposes without
consent of consumers.

9 Strengthening the public support: In developing countries, in the past, most e-finance
initiatives have been the result of joint efforts between the private and public sectors. If the
public sector does not have the necessary resources to implement the projects it is important
that joint efforts between public and private sectors along with the multilateral agencies like the
World Bank, be developed to enable public support for e-finance related initiatives.

10 Availability of Personnel services: In present times, banks are to provide several services
like social banking with financial possibilities, selective up gradation, computerization and
innovative mechanization, better customer services, effective managerial culture, internal
supervision and control, adequate profitability, strong organization culture etc. Therefore, banks
must be able to provide complete personnel service to the customers who come with
expectations.

11 Implementation of global technology: There is a need to have an adequate level of

infrastructure and human capacity building before the developing countries can adopt global
technology for their local requirements. In developing countries, many consumers either do not
trust or do not access to the necessary infrastructure to be able to process e-payments.

12 Non- Performing Assets (NPA): Nonperforming assets are another challenge to the
banking sector. Vehicle loans and unsecured loans increases N.P.A. which terms 50% of banks
retail portfolio was also hit due to upward movement in interest rates, restrictions on collection
practices and soaring real estate prices. So that every bank have to take care about regular
repayment of loans.

13 Competition: The nationalized banks and commercial banks have the competition from
foreign and new private sector banks. Competition in banking sector brings various challenges
before the banks such as product positioning, innovative ideas and channels, new market
trends, cross selling ad at managerial and organizational part this system needs to be manage,
assets and contain risk. Banks are restricting their administrative folio by converting manpower
into machine power i.e. banks are decreasing manual powers and getting maximum work done
through machine power. Skilled and specialized man power is to be utilized and result oriented
targeted staff will be appointed.

14 Handling Technology: Developing or acquiring the right technology, deploying it optimally

and then leveraging it to the maximum extent is essential to achieve and maintain high service
and efficiency standards while remaining cost effective and delivering sustainable return to
shareholders. Early adopters of technology acquire significant competitive advances Managing
technology is therefore, a key challenge for the Indian banking sector.

OPPORTUNITIES IN E-BANKING-

Untapped Rural Markets: Contributing to 70% of the total population in India is a largely
untapped market for banking sector. In all urban areas banking services entered but only few
big villages have the banks entered. So that the banks must reach in remaining all villages
because majority of Indian still living in rural areas.

Multiple Channels: Banks can offer so many channels to access their banking and other
services such as ATM, Local branches, Telephone/mobile banking, video banking etc. to
increase the banking business.

Competitive Advantage: The benefit of adopting e-banking provides a competitive advantage

to the banks over other players. The implementation of e-banking is beneficial for bank in many
ways as it reduces cost to banks, improves customer relation , increases the geographical reach
of the bank , etc. The benefits of e banking have become opportunities for the banks to manage
their banking business in a better way.

Increasing Internet Users & Computer Literacy: To use internet banking it is very important
or initial requirement that people should have knowledge about internet technology so that they
can easily adopt the internet banking services. The fast increasing internet users in India can be
a very big opportunity and banking industry should encash this opportunity to attract more
internet users to adopt internet banking services. Table shows evidence of increasing number of
internet users in India.

Worthy Customer Service: Worthy customer services are the best brand ambassador for any
bank for growing its business. Every engagement with customer is an opportunity to develop a
customer faith in the bank. While increasing competition customer services has become the
backbone for judging the performance of banks.

Internet Banking: It is clear that online finance will pickup and there will be increasing
convergence in terms of product offerings banking services, share trading, insurance, loans,
based on the data warehousing and data mining technologies. Anytime anywhere banking will
become common and will have to upscale, such up scaling could include banks launching
separate internet banking services apart from traditional banking services.
 Retail Lending: Recently banks have adopted customer segmentation which has helped in
customizing their product folios well. Thus retail lending has become a focus area particularly in
respect of financing of consumer durables, housing, automobiles etc., Retail lending has also
helped in risks dispersal and in enhancing the earnings of banks with better recovery rates

Increasing Internet Users & Computer Literacy: To use internet banking it is very important
or initial requirement that people should have knowledge about internet technology so that they
can easily adopt the internet banking services. The fast increasing internet users in India can be
a very big opportunity and banking industry should en-cash this opportunity to attract more
internet users to adopt internet banking services.

Initiatives Taken By Government Agencies For Financial Literacy Financial literacy and
education play a crucial role in financial inclusion, and inclusive growth. A study reported that
there is significant impact of financial literacy on use of internet banking, If customers are not
financially educated they will simply avoid using new online services and not change their
traditional way of banking, thus banks will not be able to convert users into their new online
banking strategies. Various government institutions like RBI, SEBI, IRDA and various other
market players have taken a number of initiatives on financial education. They have prepared a
school curriculum along with various topics including internet banking, banking product and
services, net banking to educate the school students, college students, working executives,
middle income group, home makers, retired personnel, self-help groups etc.

Competitive Advantage The benefit of adopting e-banking provides a competitive advantage

to the banks over other players. The Implementation of e-banking is beneficial for bank in many
ways as it reduces cost to banks, improves customer relation increases the geographical reach
of the bank, etc. The benefits of e-banking have become opportunities for the banks to manage
their banking business in a better way.

Suggestions :

The following suggestions are recommended for enhancing e-banking / internet banking
services of banks to the customers

1) Banks should take necessary steps to create awareness among rural people about the
advantages of e-banking / internet banking services available in the banks.

2) The e-banking / internet banking system should be enhanced to make the online enquiry and
online payment much more easier to the customers.
3) Public sector banks should improve their e-banking / internet banking services to compete
with their private sector counterparts.

4) Most of the customers have not availed of the e-banking / internet banking services because
they do not trust the internet channel presuming it as complicated. So banks may set up a team
of personnel to train the customers to get acquainted with internet channel.
5) The bank customers have perceived the risk of getting wrong information from e-banking /
internet banking services. These illusions should be removed from the minds of the customers
by bank people as these factors are the barriers for most of the customers for not adopting
these services.

6) Though e-banking / internet banking is convenient and easy to use, customers are afraid of
adopting these services because they think that using these “services are difficult and
complicated”. So, on-site training can be provided to the bank customers who intend to use e-
banking / internet banking services.