PANCHYAT DEGREE COLLEGE,

BARGARH

Topic:

E-BANKING
Submitted by: Guided By:
Jugesh Dhangadamajhi Prof. Bhanu Prakash Das
Roll no.24S20CO08 HOD of Commerce

1
 A
PROJECT REPORT
ON
“E-BANKING”
SUBMITTED TO THE SMABALPUR
UNIVERSITY IN PARTIAL FULFILLMENT
OF REQUIREMENT OF THE
AWARD OF THE DEGREE OF

MASTER OF
COMMERCE
FINAL YEAR PROJECT 2021
SEMESTER- III

SUBMITTED BY
NAME-JUGESH DHANGADAMAJHI
ROLL NO- 24S20CO08

2
26-01-2022
26-01-2022
 ACKNOWLEDGEMENT

Primarily I would thank GOD for being able to

complete this project with success. Then I would like
to thank my Prof. Bhanu Prakash Das, whose valuable
guidance has been the ones that helped me patch this
project and make it full proof success, his suggestions
and his instructions has served as the major
contributor towards the completion of the project.

Then I would like to thank my parents and friends

who have helped me with their valuable suggestions
and guidance has been helpful in various phases of
the completion of the project.

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 PREFACE
With the rapid globalization of the Indian economy, enterprises are facing with ever
changing competitive environment. Enterprises are adopting strategies aimed at developing
competitive advantage based on enhanced customer value in terms of product
differentiation, quality, speed, service and costs. In the post liberalization era, with the
deregulation of Indian economy, the financial service sector witnessing a complete
metamorphosis and technology is playing a very significant role in this record. Over the
last decade India has been one of the fastest adopters of information technology,
particularly because of its capability to provide software solution to organizations around
the world. This capability has provided a tremendous impetuous to the domestic banking
industry in India to deploy the latest in technology, particularly in the Internet banking and
e-commerce arenas. Banks are growing in size by mergers and acquisitions, which have
been driven by communication and technology. Technology is playing a major role in
increasing the efficiency, courtesy and speed of customer service. It is said to be the age of
E-banking. An Online Banking user is expected to perform at least one of the following
transactions online:
1. Checking account balance and transaction history

2. Paying bills

3. Transferring funds between accounts

4. Requesting credit card advances

5. Ordering checks

6. Managing investments and stocks trading

From a bank’s perspective, using the Internet is more efficient than using other distribution
mediums because banks are looking for an increased customer base. Using multiple
distribution channels increases effective market coverage by enabling different products to
be targeted at different demographic segments. Also Banks cannot risk loosing customers
to competitors within the aggressive competition in the banking industry around the world.
Moreover Internet delivery offers customized service to suit the needs and the likes of each

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user. Mass customization happens effectively through Online Banking. It reduces cost and
replaces time spent on routine errands with spending time on business errands. Online
Banking means less staff members, smaller infrastructure demands, compared with other
banking channels. From the customers’ perspective, Online Banking provides a convenient
and effective way to manage finances that is easily accessible 24 hours a day, seven days a
week. In addition information is up to date. Nevertheless Online Banking has
disadvantages for banks like how to work the technology, set-up cost, legal issues, and lack
of personal contact with customers. And for customers there are security and privacy
issues.

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 INDEX
Chapter Contents Page No.
Introduction to the study
 Introduction
 E-banking and its evolution
 E-banking products
 E-banking services
1. 9-34
 E-banking risk
 Risk management
 E-banking versus traditional banking
 Driving forces
 The Indian scenario
2. Objectives of the study 35
Research Methodology
3.  Research Design 36-37
 Source of Data
5. Data Analysis And Interpretation 38-42
6. Findings 43-44
7. Limitations 45
8. Conclusion 46
9. Suggestions 47-48
10. Bibliography 49

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 INTRODUCTION
A feature of the banking industry across the globe has been that it is increasingly becoming
turbulent and competitive, characterized by an increasing trend towards
internationalization, mergers, takeovers and consolidation of the banking industry.
Moreover a number of non-banking companies are entering the banking industry by
offering financial products and services (e.g., Toyota’s credit card, GM’s auto financing,
etc). This has given a innumerable options to customers in choosing banking services. As a
response and aided by technological developments, banks have attempted to build customer
satisfaction through providing better products and services and at the same time to reduce
operating costs. Thus the banking industry has been constantly innovating and with the
advent of technological developments, particularly in the area of telecommunications and
information technology, one of the latest innovation that took birth, and quite inevitably,
has been the internet
With cyber cafés and kiosks springing up in different cities access to the Net is going to be
easy. Internet banking (also referred as e banking) is the latest in this series of
technological wonders in the recent past involving use of Internet for delivery of banking
products & services. Even the Morgan Stanley Dean Witter Internet research emphasized
that Web is more important for retail financial services than for many other industries.
Internet banking is changing the banking industry and is having the major effects on
banking relationships. Banking is now no longer confined to the branches were one has to
approach the branch in person, to withdraw cash or deposit a cheque or request a statement
of accounts. In true Internet banking, any inquiry or transaction is processed online without
any reference to the branch (anywhere banking) at any time. Providing Internet banking is
increasingly becoming a "need to have" than a "nice to have" service. The net banking,
thus, now is more of a norm rather than an exception in many developed countries due to
the fact that it is the cheapest way of providing banking services.

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WHAT IS E-BANKING?

Electronic banking is one of the truly widespread avatars of E-commerce the world over.
Various authors define E-Banking differently but the most definition depicting the meaning
and features of E-Banking are as follows:
1. Banking is a combination of two, Electronic technology and Banking.
2. Electronic Banking is a process by which a customer performs banking
Transactions electronically without visiting a brick-and-mortar institutions.
3. E-Banking denotes the provision of banking and related service through
Extensive use of information technology without direct recourse to the bank by
the customer.

Bank

Information
technology

Customer

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 Need for E-Banking
One has to approach the branch in person, to withdraw cash or deposit a cheque or request
a statement of accounts. In true Internet banking, any inquiry or transaction is processed
online without any reference to the branch (anywhere banking) at any time. Providing
Internet banking is increasingly becoming a "need to have" than a "nice to have" service.
The net banking, thus, now is more of a norm rather than an exception in many developed
countries due to the fact that it is the cheapest way of providing banking services.Banks
have traditionally been in the forefront of harnessing technology to improve their products,
services and efficiency. They have, over a long time, been using electronic and
telecommunication networks for delivering a wide range of value added products and
services. The delivery channels include direct dial – up connections, private networks,
public networks etc and the devices include telephone, Personal Computers including the
Automated Teller Machines, etc. With the popularity of PCs, easy access to Internet and
World Wide Web (WWW), Internet is increasingly used by banks as a channel for
receiving instructions and delivering their products and services to their customers. This
form of banking is generally referred to as Internet Banking, although the range of products
and services offered by different banks vary widely both in their content and sophistication.

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 EVOLUTION OF E-BANKING
The story of technology in banking started with the use of punched card machines like
Accounting Machines or Ledger Posting Machines. The use of technology, at that time,
was limited to keeping books of the bank. It further developed with the birth of online real
time system and vast improvement in telecommunications during late 1970’s and 1980’s.it
resulted in a revolution in the field of banking with “convenience banking” as a buzzword.
Through Convenience banking, the bank is carried to the doorstep of the customer.

The 1990’s saw the birth of distributed computing technologies and Relational Data Base
Management System. The banking industry was simply waiting for these technologies.
Now with distribution technologies, one could configure dedicated machines called front-
end machines for customer service and risk control while communication in the batch mode
without hampering the response time on the front-end machine.

Traditional banking Virtual or E-banking

Gunpowder Nuclear charged

Personalized services, time Real time transactions,

consuming, limited access integrated platform, all time
access

Intense competition has forced banks to rethink the way they operated their business. They
had to reinvent and improve their products and services to make them more beneficial and
cost effective. Technology in the form of E-banking has made it possible to find alternate
banking practices at lower costs.
More and more people are using electronic banking products and services because large
section of the banks future customer base will be made up of computer literate customer,
the banks must be able to offer these customer products and services that allow them to do
their banking by electronic means. If they fail to do this will, simply, not survive. New
products and services are emerging that are set to change the way we look at money and the
monetary system.

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13
 E-BANKING PRODUCTS

Automated Teller Machine (ATM)

These are cash dispensing machine, which are frequently seen at banks and other locations
such as shopping centers and building societies. Their main purpose is to allow customer to
draw cash at any time and to provide banking services where it would not have been viable
to open another branch e.g. on university campus.
An automated teller machine or automatic teller machine (ATM) is a computerized
telecommunications device that provides a financial institution's customers a method of
financial\ transactions in a public space without the need for a human clerk or bank teller.
On most modern ATMs, the customer identifies him or herself by inserting a plastic ATM
card with a magnetic stripe or a plastic smartcard with a chip that contains his or her card
number and some security information, such as an expiration date or CVC (CVV). Security
is provided by the customer entering a personal identification number (PIN).
Using an ATM, customers can access their bank accounts in order to make cash
withdrawals (or credit card cash advances) and check their account balances. Many ATMs
also allow people to deposit cash or checks, transfer money between their bank accounts,
pay bills, or purchase goods and services.
ATM in India
The story of the humble cash-dispensing machine started around three decades back. In
India, HSBC set the trend and set up the first ATM machine here in 1987. Since then,
machines worldwide, ATM’s have made hard cash just seconds away all throughout the
day around the globe. For the customers advantage now the banks are looking for fewer
services. Some of the advantages of ATM to customers are:-
 Ability to draw cash after normal banking hours
 Quicker than normal cashier service
 Complete security as only the card holder knows the PIN
 Does not just operate as a medium of obtaining cash.
 Customer can sometimes use the services of other bank ATM’s.

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An ATM is simply a data terminal with two input and four output devices. Like any other
data terminal, the ATM has to connect to, and communicate through, a host processor. The
host processor is analogous to an Internet service provider (ISP) in that it is the gateway
through which all the various ATM networks become available to the card holder (the
person wanting the cash).
Leased-line ATMs are preferred for very high-volume locations because of their thru-put
Capability and dial-up ATM’s are preferred for retail merchant locations where cost is a
greater factor than thru-put. The initial cost for dial-up is less than half that for leased –line
machine. The monthly operating costs for dial-up are only a fraction of the costs for leased-
line.
Tele banking or Phone Banking
Telephone banking is relatively new Electronic Banking Product. However it is fastly
becoming one of the most popular products. Customer can perform a number of
transactions from the convenience of their own home or office; in fact from anywhere they
have access to phone. Customers can do following:-

 Check balances and statement information

 Transfer funds from one account to another
 Pay certain bills
 Order statements or cheque books
 Demand draft request

This facility is available with the help of Voice Response System (VRS). This system
basically, accepts only TONE dialed input. Like the ATM customer has to follow particular
process, initially account number and telephone PIN are fed for the process to start. Also
the VRS system provides the users within additional facilities such as changing existing
password with the new desired, information about new products, current interest rates etc.

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Mobile Banking
Mobile banking comes in as a part of the banks initiative to offer multiple channels banking
providing convenience for its customer. A versatile multifunctional, free service that is
accessible and viewable on the monitor of mobile phone. Mobile phones are playing great
role in Indian banking- both directly and indirectly. They are being used both as banking
and other channels.
Internet Banking
The advent of the Internet and the popularity of personal computers presented both an
opportunity and a challenge for the banking industry. For years, financial institutions have
used powerful computer networks to automate million of daily transactions; today, often
the only paper record is the customer’s receipt at the point of sale. Now that their customers
are connected to the Internet via personal computers, banks envision similar advantages by
adopting those same internal electronic processes to home use.

Banks view online banking as a powerful “value added” tool to attract and retain new
customers while helping to eliminate costly paper handling and teller interactions in an
increasingly competitive banking environment. In India first one to move into this area was
ICICI Bank. They started web based banking as early as august 1997.
Types of Internet Banking
Understanding the various types of Internet banking will help examiners assess the risks
involved. Currently, the following three basic kinds of Internet banking are being employed
in the marketplace.
 Informational
 Communicative
 Transactional

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 Growth in Internet Banking

 Competition- studies show that competitive pressure is the chief driving force
behind increasing use of internet banking technology, ranking ahead of cost
reduction and revenue enhancement, in second and third place respectively. Banks
see Internet banking as a way to keep existing customers and attract new ones to the
bank.
 Cost efficiencies- banks can deliver banking services on the Internet at
transaction costs far lower than traditional brick-and-mortar branches. The
actual costs to execute a transaction will vary depending on the delivery channel
used. Rough estimates assumes teller cost Re 1 per transaction, ATM
transaction cost at 45 paisa, phone banking at 35 paisa, debit cards at 20 paisa
and internet banking at 10 paisa per transaction. These costs are expected to
continue to decline.
 Geographical Reach- Internet banking allows expanded customer contact
through increased geographical reach and lower cost delivery channels. In fact
some banks are doing business exclusively via internet-they do not have traditional
banking offices and only reach their customer online. Other financial institutors are
using the Internet as an alternative delivery channel reach existing customer and
attract new customers.
 Branding- Relationship building is a strategic priority for many banks. Internet
banking technology and products can provide a mean for banks to develop and
maintain an ongoing relationship with their customer by offering easy access to
a broad array of products and services. By capitalizing on brand identifications
and by providing a broad array of financial services, banks hope to build
customer loyalty, cross- sell, and enhance repeat business.

 Customer Demographics- Internet banking allows banks to offer a wide array

of option to their banking customers. For many, this is the most comfortable

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 way for them to transact their banking business. Those customers place a
premium on person-to-person contact. Other customers are early dopters of new
technologies that arrive in the market place. These customers were the first to
obtain PCs and the first to employ them in conducting their banking business.
The demographics of banking customer will continue to change. The challenge
to banks is to understand their customer base and find the right mix of delivery
channels to deliver products and services profitably to their various market
segments.

Advantages of Internet Banking

 Convenience
 Ubiquity
 Transaction Speed
 Efficiency
 Effectiveness
Disadvantages of Internet Banking

 Start-up may take time

 Learning curves- Banking sites can be difficult to navigate at first. Plan to invest
some time and\or read the tutorials in order to become comfortable in your virtual
lobby.
 Bank site changes

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INTERNET BANKING SERVICES

1. Bill payment service

Each bank has tie-ups with various utility companies, service providers and insurance
companies, across the country. It facilitates the payment of electricity and telephone bills,
mobile phone, credit card and insurance premium bills.

To pay bills, a simple one-time registration for each biller is to be completed. Standing
instructions can be set, online to pay recurring bills, automatically. One-time standing
instruction will ensure that bill payments do not get delayed due to lack of time. Most
interestingly, the bank does not charge customers for online bill payment.

2. Fund transfer

Any amount can be transferred from one account to another of the same or any another
bank. Customers can send money anywhere in India. Payee’s account number, his bank
and the branch is needed to be mentioned after logging in the account. The transfer will
take place in a day or so, whereas in a traditional method, it takes about three working
days. ICICI Bank says that online bill payment service and fund transfer facility have been
their most popular online services.

3. Credit card customers

Credit card users have a lot in store. With Internet banking, customers can not only pay
their credit card bills online but also get a loan on their cards. Not just this, they can also
apply for an additional card, request a credit line increase and God forbid if you lose your
credit card, you can report lost card online.

4. Railway pass

This is something that would interest all the aam janta. Indian Railways has tied up with
ICICI bank and you can now make your railway pass for local trains online. The pass will

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be delivered to you at your doorstep. But the facility is limited to Mumbai, Thane, Nasik,
Surat and Pune. The bank would just charge Rs 10 + 12.24 percent of service tax.

5. Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. An FD can be opened online
through funds transfer. Online banking can also be a great friend for lazy investors.
Moreover, some banks even give the facility to purchase mutual funds directly from the
online banking system.

So it removes the worry about filling those big forms for mutual funds, they will now be
just a few clicks away. Nowadays, most leading banks offer both online banking and demat
account. However if the customer have there demat account with independent share
brokers, then need to sign a special form, which will link your two accounts.

6. Recharging your prepaid phone

Now there is no need to rush to the vendor to recharge the prepaid phone, every time the
talk time runs out. Just top-up the prepaid mobile cards by logging in to Internet banking.
By just selecting the operator's name, entering the mobile number and the amount for
recharge, the phone is again back in action within few minutes.

7. Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range of all kind of
products, one can shop online and the payment is also made conveniently through the
account. One can also buy railway and air tickets through Internet banking.

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 ELECTRONIC BANKING RISKS

Strategic Risk

On strategic risk E-banking is relatively new and, as a result, there can be a lack of
understanding among senior management about its potential and implications. People with
technological, but not banking, skills can end up driving the initiatives. E-initiatives can
spring up in an incoherent and piecemeal manner in firms. They can be expensive and can
fail to recoup their cost. Furthermore, they are often positioned as loss leaders (to capture
market share), but may not attract the types of customers that banks want or expect and
may have unexpected implications on existing business lines.

Banks should respond to these risks by having a clear strategy driven from the top and
should ensure that this strategy takes account of the effects of e-banking, wherever
relevant. Such a strategy should be clearly disseminated across the business, and supported
by a clear business plan with an effective means of monitoring performance against it.

Business risks

Business risks are also significant. Given the newness of e-banking, nobody knows much
about whether e-banking customers will have different characteristics from the traditional
banking customers. They may well have different characteristics – e.g. I want it all and I
want it now. This could render existing score card models inappropriate, thus resulting in
either higher rejection rates or inappropriate pricing to cover the risk. Banks may not be
able to assess credit quality at a distance as effectively as they do in face to face
circumstances. It could be more difficult to assess the nature and quality of collateral
offered at a distance, especially if it is located in an area the bank is unfamiliar with
(particularly if this is overseas). Furthermore as it is difficult to predict customer volumes
and the stickiness of e-deposits (things which could lead either to rapid flows in or out of
the bank) it could be very difficult to manage liquidity.

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Of course, these are old risks with which banks and supervisors have considerable
experience but they need to be watchful of old risks in new guises. In particular risk models
and even processes designed for traditional banking may not be appropriate.

Operations risk

Banks face three main types of operations risk:

 Volume forecasts
 Management information systems and
 Out sourcing.

Accurate volume forecasts have proved difficult - One of the key challenges encountered
by banks in the Internet environment is how to predict and manage the volume of
customers that they will obtain. Many banks going on-line have significantly misjudged
volumes. When a bank has inadequate systems to cope with demand it may suffer
reputation and financial damage, and even compromises in security if extra systems that are
inadequately configured or tested are brought on-line to deal with the capacity problems.

As a way of addressing this risk, banks should:

 Undertake market research,

 Adopt systems with adequate capacity and scalability,
 Undertake proportionate advertising campaigns, and
 Ensure that they have adequate staff coverage and develop a suitable business
continuity plan.

In brief, this is a new area, nobody knows all the answers, and banks need to exercise
particular caution.

The second type of operations risk concerns management information systems. Again this
is not unique to E-banking. Many banks venture into new areas without having addressed
management information issues. Banks may have difficulties in obtaining adequate

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management information to monitor their e-service, as it can be difficult to
establish/configure new systems to ensure that sufficient, meaningful and clear information
is generated. Such information is particularly important in a new field like e-banking.
Banks are being encouraged by the FSA to ensure that management have all the
information that they require in a format that they understand and that does not cloud the
key information with superfluous details.

Finally, a significant number of banks offering e-banking services outsource related

business functions, e.g. security, either for reasons of cost reduction or, as are often the
case in this field, because they do not have the relevant expertise in-house. Outsourcing a
significant function can create material risks by potentially reducing a bank’s control over
that function. Outsourcing is of course neither new nor unmanageable but banks should be
mindful of the FSA’s guidance on outsourcing, which addresses these risks.

Security

Security issues are a major source of concern for everyone both inside and outside the
banking industry. E-banking increases security risks, potentially exposing hitherto isolated
systems to open and risky environments. Both the FSA and banks need to be proactive in
monitoring and managing the security threat.

Security breaches essentially fall into three categories; breaches with serious criminal intent
(e.g. fraud, theft of commercially sensitive or financial information), breaches by ‘casual
hackers’ (e.g. defacement of web sites or ‘denial of service’ - causing web sites to crash),
and flaws in systems design and/or set up leading to security breaches (e.g. genuine users
seeing / being able to transact on other users’ accounts). All of these threats have
potentially serious financial, legal and reputation implications.

Many banks are finding that their systems are being probed for weaknesses hundreds of
times a day but damage/losses arising from security breaches have so far tended to be
minor. However some banks could develop more sensitive "burglar alarms", so that they

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are better aware of the nature and frequency of unsuccessful attempts to break into their
system.

It is easy to overemphasize the security risks in e-banking. It must be remembered that the
Internet could remove some errors introduced by manual processing (by increasing the
degree of straight through processing from the customer through banks’ systems). This
reduces risks to the integrity of transaction data (although the risk of customers’ incorrectly
inputting data remains). As e-banking advances, focusing general attention on security
risks, there could be large security gains.

So what should banks be doing? Our view is that to deal with these emerging threats
effectively, financial institutions need as a minimum to have:

 A strategic approach to information security, building best practice security controls

into systems and networks as they are developed
 A proactive approach to information security, involving active testing of system
security controls (e.g. penetration testing), rapid response to new threats and
vulnerabilities and regular review of market place developments
 Sufficient staff with information security expertise
 Active use of system based security management and monitoring tools
 Strong business information security controls

These are the issues line supervisors will be raising with their banks as part of their on-
going supervision; or, for new applicants, will need to be given adequate assurances about.

Reputation risks

Finally, with regard to risks, reputation risk is also there. This is considerably heightened
for banks using the Internet. For example the Internet allows for the rapid dissemination of
information which means that any incident, either good or bad, is common knowledge
within a short space of time. Internet rumors can easily become self-fulfilling prophecies.
The speed of the Internet considerably cuts the optimal response times for both banks and

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regulators to any incident. Banks must ensure their crisis management, particularly PR,
processes are able to cope with Internet related incidents (whether they be real or hoaxes).
Any problems encountered by one firm in this new environment may affect the business of
another, as it may affect confidence in the Internet as a whole. There is therefore a risk that
one rogue e-bank could cause significant problems for all banks providing services via the
Internet. This is a new type of systemic risk and is causing concern to e-banking providers.
Overall, the Internet puts an emphasis on reputation risks. Never before has the bank’s shop
window (i.e. its site) been so important.

One last reputation risk will be familiar to all. That is whether the products being sold over
the net are being marketed in such a way that the bank will be protected against future
charges of mis-selling. As in the physical, so in the virtual world. Banks need to be sure
that customer’ rights and information needs are adequately safeguarded and provided for.

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 RISK MANAGEMENT

Financial institutions should have a technology risk management process to enable them to
identify measure, monitor and control their technology risk exposure. Risk management of
new technologies has three essential elements:

 The planning process for the use of technology

 Implementation of technology
 The means to measure and monitor risk.

In a survey conducted by the Online Banking Association, member institutions rated

security as the most important issue of online banking. There is a dual requirement to
protect customers' privacy and protect against fraud. Banking Securely: Online Banking via
the World Wide Web provides an overview of Internet commerce and how one company
handles secure banking for its financial institution clients and their customers. Some basic
information on the transmission of confidential data is presented in Security and
Encryption on the Web. PC Magazine Online also offers a primer: How Encryption Works.
A multi-layered security architecture comprising firewalls, filtering routers, encryption and
digital certification ensures that your account information is protected from unauthorized
access:

 Firewalls and filtering routers ensure that only the legitimate Internet users are
allowed to access the system.
 Encryption techniques used by the bank (including the sophisticated public key
encryption) would ensure that privacy of data flowing between the browser and the
Infinity system is protected.Digital certification procedures provide the assurance
that the data you receive is from the Infinity system.

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 List of some banks operating E-Banking in India

Bank Name Technology Vendor Service offering

ABN AMRO Bank Infosys (Bank Away) Net Banking

Abu Dhabi Commercial Bank Infosys (Bank Away) ADCB Net Link

Bank of India I-flex BOIon line

Citibank Orbitech (now Polaris) Citibank Online

Corporation Bank I-flex CorpNet

Deutsche Bank Db direct

Federal Bank Sanchez Fed Net

Global Trust Bank Infosys (BankAway) ibank@gtb

HDFC Bak i-flex/ Satyam Net Banking

HSBC Online@hsbc

ICICI Bank Infosys, ICICI Infotech Infinity

IDBI Bank Infosys (Bank Away) i-net banking

IndusInd Bank CR2 Indus Net

Punjab National Bank Infosys (Bank Away) Internet Banking

Standard Chartered Bank In-House Me Standard Chartered Online

State Bank of India Satyam/Broadvision Online sbi .com

UTI Bank Infosys (Bank Away) Iconnect

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 INTERNET BANKING VERSUS TRADITIONAL BANKING

In spite of so many facilities that Internet banking offers us, we still seem to trust our
traditional method of banking and is reluctant to use online banking. But here are few cases
where Internet banking will turn out to be a better option in terms of saving your money.

'Stop payment' done through Internet banking will not cost any extra fees but when done
through the branch, the bank may charge you Rs 50 per cheque plus the service tax.

Through Internet banking, you can check your transactions at any time of the day, and as
many times as you want to.

On the other hand, in a traditional method, you get quarterly statements from the bank and
if you request for a statement at your required time, it may turn out to be an expensive
affair. The branch may charge you Rs 25 per page, which includes only 30 transactions.
Moreover, the bank branch would take eight days to deliver it at your doorstep.

If the fund transfer has to be made outstation, where the bank does not have a branch, the
bank would demand outstation charges. Whereas with the help of online banking, it will be
absolutely free for you.

As per the Internet and Mobile Association of India's report on online banking 2006,
"There are many advantages of online banking. It is convenient, it isn't bound by
operational timings, there are no geographical barriers and the services can be offered at a
miniscule cost."

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 Impact of E-Banking on traditional services

One of the issues currently being addressed is the impact of e-banking on traditional
banking players. After all, if there are risks inherent in going into e-banking there are other
risks in not doing so. It is too early to have a firm view on this yet. Even to practitioners the
future of e-banking and its implications are unclear. It might be convenient nevertheless to
outline briefly two views that are prevalent in the market.The view that the Internet is a
revolution that will sweep away the old order holds much sway. Arguments in favor are as
follows:

E-banking transactions are much cheaper than branch or even phone transactions. This
could turn yesterday’s competitive advantage - a large branch network - into a comparative
disadvantage, allowing e-banks to undercut bricks-and-mortar banks. This is commonly
known as the "beached dinosaur" theory.

E-banks are easy to set up so lots of new entrants will arrive. ‘Old-world’ systems, cultures
and structures will not encumber these new entrants. Instead, they will be adaptable and
responsive. E-banking gives consumers much more choice. Consumers will be less inclined
to remain loyal.

E-banking will lead to an erosion of the ‘endowment effect’ currently enjoyed by the major
UK banks. Deposits will go elsewhere with the consequence that these banks will have to
fight to regain and retain their customer base. This will increase their cost of funds,
possibly making their business less viable. Lost revenue may even result in these banks
taking more risks to breach the gap.

Portal providers are likely to attract the most significant share of banking profits. Indeed
banks could become glorified marriage brokers. They would simply bring two parties
together – eg buyer and seller, payer and payee.

The products will be provided by monolines, experts in their field. Traditional banks may
simply be left with payment and settlement business – even this could be cast into doubt.

29
Traditional banks will find it difficult to evolve. Not only will they be unable to make
acquisitions for cash as opposed to being able to offer shares, they will be unable to obtain
additional capital from the stock market. This is in contrast to the situation for Internet
firms for whom it seems relatively easy to attract investment.
There is of course another view which sees e-banking more as an evolution than a
revolution.
E-banking is just banking offered via a new delivery channel. It simply gives consumers
another service (just as ATMs did).
Like ATMs, e-banking will impact on the nature of branches but will not remove their
value.
Experience in Scandinavia (arguably the most advanced e-banking area in the world)
appears to confirm that the future is ‘clicks and mortar’ banking. Customers want full
service banking via a number of delivery channels. The future is therefore ‘Martini
Banking’ (any time, any place, anywhere, anyhow).
Traditional banks are starting to fight back. The start-up costs of an e-bank are high.
Establishing a trusted brand is very costly as it requires significant advertising expenditure
in addition to the purchase of expensive technology (as security and privacy are key to
gaining customer approval).
E-banks have already found that retail banking only becomes profitable once a large critical
mass is achieved. Consequently many e-banks are limiting themselves to providing a
tailored service to the better off.
Nobody really knows which of these versions will triumph. This is something that the
market will determine. However, supervisors will need to pay close attention to the impact
of e-banks on the traditional banks, for example by surveillance of:
 Strategy
 Customer levels
 earnings and costs
 advertising spending
 margins
 funding costs
 Merger opportunities and threats, both in the UK and abroad.

30
 Security Precautions

Customers should never share personal information like PIN numbers, passwords etc with
anyone, including employees of the bank. It is important that documents that contain
confidential information are safeguarded. PIN or password mailers should not be stored,
the PIN and/or passwords should be changed immediately and memorized before
destroying the mailers.

Customers are advised not to provide sensitive account-related information over unsecured
e-mails or over the phone. Take simple precautions like changing the ATM PIN and online
login and transaction passwords on a regular basis. Also ensure that the logged in session is
properly signed out.

31
 DRIVING FORCES IN E-BANKING

The business strategists MICHEAL PORTER identified five competitive forces which tend
to drive down the profitability of any industry as comprising: barriers to entry, many small
suppliers, many small buyers, few substitutes and few competitors.

Potential entrants

Industry
Competitors

Suppliers Buyers

Rivalry among
Competitors

Substitutes

FIGURE: An application of PORTER’s five forces model to the banking industry

Threat of new entrants- HIGH

Industry competitors- LOW
Bargaining power of buyers- HIGH
Bargaining power of suppliers-LOW
Threat of substitutes- LOW
Applying this version of Porter’s five forces Model to the banking industry, he observed
that one of the critical factors – barriers to entry – no longer exists

32
 THE INDIAN SCENARIO

Drivers of change

Advantages previously held by large financial institutions have shrunk considerably. The
Internet has leveled the playing field and afforded open access to customers in the global
marketplace. Internet banking is a cost-effective delivery channel for financial institutions.
Consumers are embracing the many benefits of Internet banking. Access to one's accounts
at anytime and from any location via the World Wide Web is a convenience unknown a
short time ago. Thus, a bank's Internet presence transforms from 'brouchreware' status to
'Internet banking' status once the bank goes through a technology integration effort to
enable the customer to access information about his or her specific account relationship.
The six primary drivers of Internet banking includes, in order of primacy are:

 Improve customer access

 Facilitate the offering of more services
 Increase customer loyalty
 Attract new customers
 Provide services offered by competitors
 Reduce customer attrition.

Indian banks on web

The banking industry in India is facing unprecedented competition from non-traditional

banking institutions, which now offer banking and financial services over the Internet. The
deregulation of the banking industry coupled with the emergence of new technologies, are
enabling new competitors to enter the financial services market quickly and efficiently.

Indian banks are going for the retail banking in a big way. However, much is still to be
achieved. This study that was conducted by students of IIML shows some interesting facts:

33
  Throughout the country, the Internet Banking is in the nascent stage of development
(more than 50 banks are offering varied kind of Internet banking services).
 In general, these Internet sites offer only the most basic services. 55% are so called
'entry level' sites, offering little more than company information and basic
marketing materials. Only 8% offer 'advanced transactions' such as online funds
transfer, transactions & cash management services.
 Foreign & Private banks are much advanced in terms of the number of sites & their
level of development.

Emerging challenges

Information technology analyst firm, the Meta Group, recently reported "financial
institutions who don't offer home banking by the year 2000 will become marginalized." By
the year of 2002, a large sophisticated and highly competitive Internet Banking Market will
develop which will be driven by

 Demand side pressure due to increasing access to low cost electronic services.
 Emergence of open standards for banking functionality.
 Growing customer awareness and need of transparency.
 Global players in the fray
 Close integration of bank services with web based E-commerce or even
disintermediation of services through direct electronic payments (E- Cash).
 More convenient international transactions due to the fact that the Internet along
with general deregulation trends eliminates geographic boundaries.
 Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product
purchases.
 Certainly some existing brick and mortar banks will go out of business. But that's
because they fail to respond to the challenge of the Internet. The Internet and its
underlying technologies will change and transform not just banking, but also all
aspects of finance and commerce.

34
 OBJECTIVES OF THE STUDY:-

The main objectives of the study are:

 To study the awareness level and reaction of customers toward E-Banking channels
provided by Bank.

 To find out the frequency and the factors that influences the adoption of E-Banking
services.

 To measure the satisfaction level of people.

 To understand the problems encountered in by service class people while using E-

Banking services (ATM, Phone banking, etc)

 To find out main cause of dissatisfaction if any about E-Banking channels.

 To know which is the most popular service provided on Internet by Bank.

35
 RESEARCH METHODOLOGY
The term research is also used to describe an entire collection of information about a
particular subject.

Methodology is the method followed while conducting the study on a particular project.
Through this methodology a systematic study is conducted on the basis of which the basis
of a report is produced.
It is a written game plan for conducting Research. Research methodology has many
dimensions. It includes not only the research methods but also considers the logic behind
the methods used in the context of the study and explains why only a particular method or
technique has been used. It also helps to understand the assumptions underlying various
techniques and by which they can decide that certain techniques will be applicable to
certain problems and other will not. Therefore in order to solve a research problem, it is
necessary to design a research methodology for the problem as the some may differ from
problem to problem.

Nature
The methodology adopted to achieve the project objective involved descriptive research
method. The information required for fulfilling the objective of study was collected from
various secondary sources.

Type of research

36
This study is DESCRIPTIVE in nature. It helps in breaking vague problem into smaller
and precise problem and emphasizes on discovering of new ideas and insights.

Research design
Research design constitutes the blue print for the collection, measurement and analysis of
data. The statistical data is obtained from the website. The present study seeks to identify
the extent of preferences of E-Banking over traditional banking among the people.
Sources of data:
Following are the methods of sources of data:
Secondary data:
 Articles on E-Banking taken from journals, magazines published from time to time.
 Through internet.

37
 DATA ANALYSIS AND INTERPRETATION
(As per the statistical records from website, in accordance market research done by them regarding E-banking services)

Table1.
Awareness of people regarding e-banking service provided by the bank while opening
an account

Percentage
Fully aware 37%
Had an idea 46%
No idea 17%
Total 100%

Figure1.

Awareness about e-banking services

37%

Fully aware
Had an idea
100%
No idea
46% Total

17%

Interepretation
As seen from Table 1, overall percentage of service class people having complete
knowledge about e-banking services provided by the bank while opening an account in it is
37%, those having some idea about it is 46% and the percentage of people having no
awareness of e-banking services provided by the bank is 17%. It can reasonably, be
concluded that nearly 85% of the population is having awareness about e-banking services.

38
Table 2.

Awareness of E-Banking services

Percentage
ATM 26.03%
Debit Card 17.75%
Credit Card 14.79%
Phone Banking 11.83%
Mobile Banking 14.79%
Internet Banking 14.79%
Total 100%

Relative awareness about different e-

banking services

30.00%
20.00%
Series1
10.00%
0.00%
Banking

Banking
Internet
Debit

Credit
Card

Banking
Card

Mobile
ATM

Phone

Interpretation
E banking constitutes services provided in terms of ATMs, Debit Card, Credit Card, Phone
Banking, Mobile Banking, Internet Banking etc, of which the first six have been covered.
Amongst these ATM scores the largest used service status (26.03%) as indicated by table 2
figures. Close on the heels is Debit card (17.75%), Credit card (14.79%), while phone
banking lags behind by scoring the least ie.,11.83%.

39
Table 3.

Factors influencing the level of usage

More than Less than Not
Average Total
average average at all
All time availability 8 11 1 3 79
Ease of use 22 7 2 1 64
Nearness 18 14 5 0 58
Security 10 13 4 1 40
Direct access 12 7 2 0 53
Friends/ Relatives 8 14 7 8 40
Status symbol 11 14 7 10 49

Factors influencing level of

usage

90
80
70
60 Not at all
50
40 Less than
30 average
Average
20
10 More than
0 average
Strongly
e ity

l
sy s
N use

ie t a ity
s

R ss

bo
tu tive
es
as il

Fr rec ur

s/ ce

m
E l ab

rn

ec
of

S ela
c
ea
ai

s
av

ta
e

i
nd
im

D
t
ll
A

Figure3
Interpretation
A study of the factors, table 6, influencing the usage was made by listing out various
factors such as all time availability, ease of use, nearness etc., and from which it came to
fore that amongst the various factors all time availability is ranked as the major motivating
factor, followed by ease of use, direct access, nearness, security in decreasing order of
importance. Quite interestingly friends and relatives, status symbol scored the least
motivating factors.

40
Table 4

Various benefits accruing from E-Banking services to its users

Percentage
Time Saving 42.42%
Inexpensive 12.72%
Easy Processing 24.24%
Easy Fund Transfer 15.75%
Others 4.85%

Figure 2

Benefits of e-banking

TIME SAVING

INEXPENSIVE

EASY PROCESSING

EASY FUND
TRANSFER
EMERGENCY SKIN
SAVING
OTHERS

Interpretation
When asked to list various benefits accruing from the usage of e-banking, time saving
received highest percentage score at 42.42% among different benefits such as time saving
(42.42%), inexpensive (12.72%), easy processing (24.24%), easy fund transfer(15.75%).
Quite interestingly, easy processing feature scored more than the inexpensiveness of the e-
banking services. The other benefits accruing to the people include ready availability of
funds, removal of middlemen and no rude customer relation executives.

41
Table 5

Problems identified by the users of E-Banking service

Factors Percentage
a Time consuming 14.82%
b Insecurity 11.31%
c ATM out of order 15.58%
Amount debited
d 9.80%
but not withdrawn
Problem of change
e 10.555
in mobile number
f Password forgotten 14.57%
g Card misplaced 12.56%
h Card misuse 11.81%

Figure 5

Problems identified by the users of E-Banking services

70
60
50
40
30
20
10
0
Time Insecurity ATM out of Amount Problem of Password Card Card
consuming order debited but change in forgotten misplaced misuse
not mobile
withdrawn number

No. of Respondents

Interpretation Most of the users face the problem of ATM out of order (15.58%),
followed by time consuming (14.82%), password forgotten (14.57%) and then other
problems as card misplaced, card misuse, insecurity, etc

42
 FINDINGS OF THE STUDY

 The overall percentage of servicemen having complete knowledge about e-banking

services provided by the bank while opening an account in it is 37%, those having
some idea about it is 46% and the percentage of people have no awareness of e-
banking services provided by the bank is 17%. It can reasonably, be concluded that
nearly 85% of the population is having awareness about e-banking services.
 The percentage distribution of awareness avenues, the major skewness is in favour
of advertisements, which score 34% among different avenues such as personal visit,
executives of the banks, advertisements and friend/relatives. While the least score is
for personal visit.
 Among those aware (which account for 83 in number) about 74 persons use e-
banking services, which is 74% of total population studied.
 E banking constitutes services provided in terms of ATMs, Debit Card, Credit Card,
Phone Banking, Mobile Banking, Internet Banking etc, of which the first six have
been covered. Amongst these ATM scores the largest used service status (26.03%)
Close on the heels is Debit card (17.75%), Credit card (14.79%), while phone
banking lags behind by scoring the least ie.,11.83 .
 To find out the level of usage amongst the service class, percentage has been
calculated from the total completely filled in questionnaires and the incomplete
questionnaires were discarded. The frequency of usage of ATM is highest followed
by debit card..
 A study of the factors, influencing the usage was made by listing out various factors
such as all time availability, ease of use, nearness etc., and amongst the various
factors all time availability is ranked as the major motivating factor, followed by
ease of use, direct access, nearness in decreasing order of importance. Quite
interestingly friends and relatives, status symbol scored the least motivating factors.
 When asked to list various benefits accruing from the usage of e-banking, time
saving received highest percentage score at 42.42% among different benefits such
as time saving (42.42%), inexpensive (12.72%), easy processing (24.24%), easy

43
 fund transfer (15.75%). Quite interestingly, easy processing feature scored more
than the inexpensiveness of the e-banking services. The other benefits accruing to
the people include ready availability of funds, removal of middlemen and no rude
customer relation executives.
 Among the users, various problems that are encountered while using e-banking
services. Card misuse and its misplace are major reasons that create hurdles in its
usage, while time consumption, accounting mistakes such as amount debited but not
withdrawn and change of mobile number seem to be the least bothering problems.
 From the non users, an attempt was made to elicit the reasons for its non usage..
Satisfaction with traditional banking was considered as prime de-motivating factor,
followed closely by the fear of insecurity, then ‘hidden cost’ factor, which
suggested their resistance to change, which to some extent can be countered by
aggressive advertisement and utilizing other modes of awareness dissemination as
well.

44
 LIMITATIONS OF THE STUDY
Every research is conducted under some constraints and this research is not an exception.
Limitations of this study are as follows:-

1. There were several time constraints.

2. The basic figures as per by the source i.e. statistical records states that analysis
obtained through various statistical tools is based on examining, service class
people only.
3. Due to continuous change in environment, what is relevant today may be irrelevant
tomorrow.

45
 CONCLUSION
The usage of E-banking is all set to increase among the service class. The service class at
the moment is not using the services thoroughly due to various hurdling factors like
insecurity and fear of hidden costs etc. So banks should come forward with measures to
reduce the apprehensions of their customers through awareness campaigns and more
meaningful advertisements to make E-banking popular among all the age and income
groups. Further, with increasing consumer demands, banks have to constantly think of
innovative customized services to remain competitive. E-Banking is an innovative tool that
is fast becoming a necessity. It is a successful strategic weapon for banks to remain
profitable in a volatile and competitive marketplace of today.
In future, the availability of technology to ensure safety and privacy of e-transactions and
the RBI guidelines on various aspects of internet banking will definitely help in rapid
growth of internet banking in India.

46
 SUGGESTIONS

Internet banking would drive us into an age of creative destruction due to non-physical
exchange, complete transparency giving rise to perfectly electronic market place and
customer supremacy. The question to be asked right now is "What the Indian Banks should
do" Whatever is the strategy chosen and options adopted, certain key parameters would
determine the bank's success on web:

For long-term success, a bank may follow:

 Adopting a webs mindset

 Catching on the first mover's advantage
 Recognizing the core competencies
 Ability to deal multiplicity with simplicity
 Senior Management initiative to transform the organization from inward to
outward looking
 Aligning roles and value propositions with the customer segments
 Redesigning optimal channel portfolio
 Acquiring new capabilities through strategic alliances.

The above can be implemented in four steps:

 Familiarizing the customer to new environment by demo version of software on

bank's web site. This should contain tour through the features which are to be
included. It will enable users to give suggestions for improvements, which can be
incorporated in later versions wherever feasible.
 Second phase provides services such as account information and balances,
statement of account, transaction tracking, mailbox, check book issue, stop
payment, financial and customized information.
 The third phase may include additional services such as fund transfers, DD issue,
standing instructions, opening fixed deposits, intimation of loss of ATM cards.

47
 The last step should include advanced corporate banking services like third party
payments, utility bill payments, establishment of L/Cs, Cash Management Services
etc. Enhanced plan for the customers in future can include requests for demand
drafts and pay orders and many more to bring in the ultimate in banking
convenience.

Also if proper training should be given to customer by the bank employs to open an
account will be beneficial secondly the website should be made friendlier from where
the first time customers can directly make and access there accounts.

We can see the time is changing and we he passage of time people are accepting
technology there is still a lot of perceptual blocking which hampers the growth it’s the
normal tendency of a human not to have changes work on the old track, that’s also one
of the reason for the slow acceptance of internet banking accounts.
 Give proper training to customers for using i-banking
 Create a trust in mind of customers towards security of there accounts
 Provide a platform from where the customers can access different accounts at
single time without extra charge.
 Make there sites more users friendly.
 Customers should be motivated to use I banking facilities more.

48
 BIBLIOGRAPHY

MAGAZINE
 “From Physical to Virtual Banking”, Indian Management, September 2003

JOURNALS
 Economic and Political Weekly
Dec 27, 2003 issue (E-Banking Challenges and Opportunities)
 The Cost and Management, January-February, 2007

BOOKS
 Malhotra, T. D., “Electronic Banking and Information Technology in Banks” Sultan
Chand and Sons, New Delhi, 2002.
 S.S Kaptan & N.S. Choubey. “Indian Banking in Electronic Era”
 Dr Mishra A.K., “Internet Banking in India”

WEBSITES
 Unnithan, Chandana R, Swatman, Paula M.C. “E-Banking Adaptation and Dot.Com
Viability: A Comparison of Australian and Indian Experiences in the Banking
Sector”. Retrieved from
http://www.deakin.edu.au/buslaw/infosys/docs/workingpapers/archive/
 Guerrero, Mario Martínez, “Profiling the Adoption of Online Banking Services in
the European Union”. Retrieved from www.csu.edu.au/faculty/commerce/
jib/issues/issue02/iss02_egea.pdf

 www.banknetindia.com
 www.bharatbook.com

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