A study on customers’ perception on adoption of

digital banking in Indian Banking Sector

Dr. Rajsee Joshi, Ritika Goel, Shraddha Garg
Faculty of Management, GLS University

Abstract
Digital banking plays a vital role in today’s world where people are looking beyond the
traditional way of going to the bank for doing their bank transactions. Internet banking has
transformed the traditional way of banking and has brought new dimensionsto the banking
sector. This research describes the current state of digital banking and discusses customers’
perception on adoption of digital banking in Indian context. Digital banking has enabled the
banks to enhance its operation and effective cost cutting, however looking at the global
context, it still has a long way to go. This paper presents a detailed study of customers’
perception and their adaptability to these revolutionary changes in banking. A primary survey
was conducted using a structured questionnaire on the customers’ level of satisfaction and
their expectations regarding various digital banking services. The study establishes the fact
that customers are in the process of getting acclimatised with the notion of digital banking
and that despite all the challenges, their perception towards digitalizationis fast changing.
Keywords: Customers’ perception, Digital banking, Adaptability of Indian banks

Introduction
Digitalization is the use of digital technologies to change a business model and provide new
revenue and value-producing opportunities; it is the process of moving to a digital business.
(Zhou, 2016). According to (Shukla, 2014) “Digital” is the new buzz word in the banking
sector, with banks all around the globe shifting towards digitalization. Banks of all sizes and
across all regions are making huge investments in digital initiatives in order to maintain a
competitive edge and deliver the maximum to its customers. Additionally, digitalization leads
to robust data analytics and intelligence, which helps banks get closer to customers and close
in on competition. Basically digitalization is a combination of two worlds: a new customer
experience on the outside and an efficient, effective operating model on the inside—both
enabled by digitalization and the underlying technologies, processes, and structures.
(Weschool, 2017) mention that digitalization impacts everything, and this impact is
transformative. Digitalization is about taking full control of your customer experience and
managing all the needs, existing and new, for your customers and developing a business
model accordingly.

However, there are some challenges which banks face due to digitalization, namely, security
risks, financial illiteracy, lack of customer awareness, fear factor, lack of training, etc. One of
the greatest concerns of digital banks in 2019 is to remove the friction from customer

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journey. Banks are struggling and competing against the increasing onslaught of FinTech
companies and start-ups that specialize in resolving some common banking issues and
simplifying the customer journey with mobility and context. Forward-thinking banks have
responded to these market disruptions by expanding their in-house capabilities. Others have
partnered with Fintechs’ to develop new digital offerings. And some have simply been
acquired by their competitors. Customers want a seamless and simple transactional journey
enabled by technology and various digital channels. Digital innovations in banking sector,
emerging financial models, delivery systems and customer expectations are driving banks to
re-evaluate how they deliver value to their digital customers.

Hence, with the ever increasing need of technology adoption, the question arises of where do
Indian banks stand in terms of technology adaptability and do they match the needs of their
customers?

Literature Review

(Golani, 2017) says that the banking and financial services sector in India has undergone
through disruptive changes in the last decade as far as adoption of technology is concerned.
With the government providing incentives for digitalization of the economy, it is definitely
the success mantra for the banks. As the market is exposed to disruptive digital services, it is
now putting its hands on changing client preference from traditional banking to its
digitalization. People have actively started using technology to do banking transactions and
avail other services because they want more convenience at the cost of paying additional
price.

(Rathee, 2017) says that revolutionary technological transformation that includes the features
like anytime anywhere banking, ultra-fast response time, the usage of digital channels by
avoiding or bringing down the paper-based transactions has changed the face of Indian banks.

(Yadav, 2017) highlights that digitalization is enhancing customer experience and making it
easy for the customer to do business with the Bank and vice-versa, by effective use of
technology.

Chong, et al. (2010) empirically examines the factors that affect the adoption decision of
online banking in Vietnam. Perceived usefulness, perceived ease of use, trust and government
support was examined to determine if these factors are affecting online banking adoption.
The results showed that perceived usefulness, trust and government support all positively
associated with the intention to use online banking in Vietnam. Contrary to the technology
acceptance model, perceived ease of use was found to be not significant in this study. The
impact of online banking intensity on the financial performance of community banks were
examined by Acharya and Lingam (2008). Study results indicate that the increasing use of
internet as an additional channel of marketing banking services has significantly improved
the financial performance of community banks.

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Malhotra and Singh (2010) conducted an exploratory study and make effort to present the
current status of Internet banking in India and the extent of Internet banking services offered
by Internet banks. In addition, it seeks to examine the factors affecting the extent of Internet
banking services. The results reveal that the private and foreign banks have performed well in
offering a wider range and more advanced services of Internet banking in comparison with
public sector banks. He also highlighted the determinants affecting the extent of Internet
banking services, size of the bank, experience of the bank in offering Internet banking,
financing pattern and ownership of the bank are found to be significant.

Research Gap
Literature review suggests that there has been research addressing the importance of
technology adoption and factors affecting the adaption of technology in Indian context.
However there seems to be a research gap with respect to what do the customers feel about
the level of technology adoption and what are their expectations from Indian banks. This
research paper aims to fulfil this research gap.

Research Objectives

 To know customers’ perception about the level of adaptability of digital banking

 To identify the factors that affect customers’ adoption of digitalization in banking sector.
 To know the customer satisfaction level of service qualities offered digitally in banks
Research Methodology
The research adopts descriptive research design. In total 150 customers from 4 private and 4
public sector banks were surveyed adopting a structured questionnaire. Stratified sampling
was used to select the samples, where the population was divided into two strata namely,
public banks and private banks.

Data Analysis
1. Which category of banks do you consider as most technologically advanced?

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It was observed from the survey that 65% of the respondents perceive Private sector banks as
more technologically advanced whereas 35% of the respondents are in favour of Public sector
banks.

2. Rate the adaption of technology by your bank on a scale of 1 to 5 as compared to

global standards of technology adoption. (1 being least adaptive to 5 being highly
adaptive)

13% 10%

Least adaptive
16% Somewhat adaptive
Neutral
Adaptive
41%
Highly adaptive
20%

Large percentage of respondents perceives their banks to be somewhat adaptive to

technology. Only 13% of the respondents believe their banks to be highly adaptive of
technology. This shows that Indian banking sector has a long path ahead when it comes to
adaption of technology as compared to the global standards.

3. What factors prompt you to adapt to new technology in banking?

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 100
90
80
70
60
50 Reduced transaction time
40
30 Cost of effectiveness
20 Ease of use
10
Security
0

It was observed that customers consider security to be the most important factor followed by
cost effectiveness for adapting technology in banking.

4. Rate your satisfaction level on a scale of 1 to 5 for the following services:

A. ATM Services
120
100
80 Promptness of Card
60 Delivery

40 Conveniently located

20
Transaction Processing
0 Time
No. of services offered

It is observed that with respect to ATM services that customers are overall satisfied with the
promptness of card delivery, location and transaction processing time. However they seem to
be dissatisfied with the array of services offered to them via ATM.

B. Telephone Banking Services

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 120
100
80
60 Reasonable no. of voice
40 prompts

20 Clear instructions
0
Additional options

It was observed that overall customers are satisfied with the phone banking services offered
by the banks with respect to no. of voice prompts, clear instructions and additional options.
Also users of phone banking are decreasing in no. hence a large majority was neutral with
their satisfaction level.

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 C. Mobile Banking

100
90
80
70
60
50
40 Reward point status
30 Prepaid mobile recharge
20
10 SMS alerts
0 Transaction status

It was observed that overall the customers seemed satisfied with mobile banking services
however around 30% of them were dissatisfied with the overall services of mobile banking

D. Internet Banking

80
70 Relaibility in terms of not
60 freezing often
50
Info provided on website
40
30
20 Updation of content
10
0
Process of transaction

Range of
products/services
provided

It was observed that the customers are satisfied towards information provided on the website
and the range of products and services offered. However there is dissatisfaction amongst
customers with respect to website freezing.

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5. Select the bank in which you have your account (Select any one which is primary
bank for your transactions)

IDBI
Bank HDFC Bank
PNB 9% 14%
11% Kotak
Mahindra Bank
10%
Bank of Baroda
15% ICICI Bank
12%

SBI Axis Bank

15% 14%

Out of 150 respondents, 50% belonged to the Private sector banks, whereas 50% belonged to
the Public sector banks.
Hypothesis Analysis
To test the variability of technology adoption and customer satisfaction between public and s
Hypothesis Significant value Decision
Ho: There is no variability in adaption of
technology between Public and Private The significant value is less
sector bank than 0.05, indicating that
H1: There is variability in adaption of 0.000 the null hypothesis is
technology between Public and Private rejected and alternate
sector bank hypothesis is accepted.
Ho: There is no variability in factors that
prompt adaption of technology between
public and private sector banks The significant value is
H1: There is variability in factors that 0.150 greater than 0.05, indicating
prompt adaption of technology between that the null hypothesis is
public and private sector banks accepted.
Ho: There is no variability in satisfaction
level for ATM services between Public The significant value is less
and Private sector banks than 0.05, indicating that
H1: There is variability in satisfaction 0.003 the null hypothesis is
level for ATM services between Public rejected and alternate
and Private sector banks hypothesis is accepted.
Ho: There is no in satisfaction level for
Phone banking services between Public The significant value is
and Private sector banks greater than 0.05, indicating
H1: There is variability in satisfaction 0.869 that the null hypothesis is
level for Phone banking services between accepted.
Public and Private sector banks

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Ho: There is no in satisfaction level for The significant value is less
Mobile banking services between Public than 0.05, indicating that
and Private sector banks the null hypothesis is
H1: There is variability in satisfaction 0.000 rejected and alternate
level for Mobile banking services between hypothesis is accepted.
Public and Private sector banks
Ho: There is no in satisfaction level for
Internet banking services between Public The significant value is less
and Private sector banks than 0.05, indicating that
H1: There is variability in satisfaction 0.000 the null hypothesis is
level for Internet banking services rejected and alternate
between Public and Private sector banks hypothesis is accepted.

Findings
Results suggest that there is variability in the adoption of technology between private and
public banks. Private sector banks seem to have adopted technology better than the Public
sector banks. Overall customers’ perception also suggests that there are somewhat satisfied
with the technological adoption of their banks in comparison with global standards.
With respect to factors that prompt customers to adapt new technology, they do not vary
amongst private sector banks and public sector banks. Customers in general consider security
as the primary reason for technology adaption.
As far as customer satisfaction is concerned with respect to technology adaption there is
variability in satisfaction of customers with ATM services. Overall results suggest that
customers are dissatisfied with the no. of services offered through ATM by public sector
banks.
For phone banking there seems to be no variability in the satisfaction level of private and
public sector banks. Results suggest that majority of the customers are neutral with respect to
this service provided.
For mobile banking and internet banking services there seems to be variability in the
satisfaction level of private sector and public sector banks. Results suggest that private sector
banks seems to offer better mobile banking and internet banking services as compared to
public sector banks. Specifically, customers had issues with the website freezing while
transacting with public sector banks.
Recommendation and Conclusion
It can be concluded that banks in India still have a long way to go to match global standards
in terms of technological adoption. Specifically, public sector banks need to improve their
technological adoption to create better customer satisfaction. Security is the primary factor
considered important by the customers to adapt technology, so that needs to be improved by
the banks. Public sector banks also need to add on more no. of services they offer through
ATM kiosks as well as improve their mobile banking and internet banking services.

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