Acceptance of E-Banking sector among Service Class: Case Study of Tricity

Dr. Hitesh Kapoor Assistant Professor, Management, UIET, Panjab University, Chandigarh. Email: Hitesh_kapoor78@yahoo.co.in Ms. Aman Dheer Research Scholar Baddi University, H.P Email: aman_0207@yahoo.co.in

ABSTRACT In the recent years there has been explosion of Internet-based electronic banking applications or IT enables Services in banking sector. The emergence of new forms of technology has created highly competitive market conditions for bank providers. However, the changed market conditions demand for banks to better understanding of consumers needs. Internet banking (or E-banking) means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. In internet banking system the bank has a centralized database that is web-enabled. In the recent years there has been explosion of internet based Electronic Banking applications. ITES can be accessed by any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. Electronic banking is changing the banking industry and is having the major effects on banking relationships. The need of this research is to study the awareness and satisfaction level of customers regarding various E-Banking services. Banking business has always been in the forefront of harvesting technology to improve its services and efficiency. Banks have been quick to adopt rapidly evolving electronic and telecommunication technologies to deliver an extensive line of value added products and services to their customers. The need to study E-Banking service arises because preference differs from individual to individual and is unique to each one. INDIAN BANKING INDUSTRY Banking in India has a long and elaborate history of more than 200 years. The beginning of this industry can be traced back to 1786, when the countrys first bank, Bank of Bengal, was established. But the industry changed rapidly and drastically, after the nationalization of banks in 1969. As a result, the public sector banks began experiencing numerous positive changes and enormous growth. Then came the much-talked-about liberalization and economic reforms that allowed banks to explore new business opportunities and not just remain constrained to generating revenues from mere borrowing and lending. This provided the Indian banking scenario a remarkable facelift that only continues to get better with time. The story of technology in banking started with the use of punched card machines like Accounting Machines of 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 tie system and vast improvement in telecommunications during the 1970s and 1980s. 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 door step of the customer. The 1990s saw the birth of the distributed computing technologies and Relational Data Base Management Systems. The banking industry was simply waiting for these technologies. Now with distribution technologies, one could configure dedicated machines called front-end machines for customers service and risk control while communication in the batch mode without hampering the response time on the front-end machine. 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 Electronic 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 customers base will be made up of computer literate customers, the banks must be able to offer these customers products and services allow them to do their banking by electronic means. If they fail to do this they will, simply, not survive. New products and services are emerging that are set to change the way we look at the money and monetary system. CUSTOMER INTERACTION BANKING CHANNELS Main motive and challenge for banks is the way they connect with their customers to provide financial services through various mediums and channels at the right time and in the right way. The HCI related challenges in Internet banking are related to business interaction between the bank and customer. From the banks perspective it is important to give customers freedom to choose the most appropriate channel that best suits their preferences. In addition, the type of business affects customers choice of channel and customers channel preferences vary between countries because of cultural differences, use-habits and legislation.
Branch Office
Call Centers Electronic Payment Channel Internet

Desk Service Post Banking Canopies

Telephone Banking Emails

PC Bank Net Bank Mobile Banking DigiCash

PC Bank Net Bank Mobile Banking DigiCash PayPal

Figure 1 Banking Channels Figure 1 shows the different banking channels presented as a continuum where left side channels are limited by time and place and channels on the right side are freer from these constraints. E BANKING SERVICES MEDIUMS Electronic banking provides a number of services. These includes:1. Automated Teller Machine (ATM) 2. Credit Cards/Debit Cards 3. Smart Cards/ stored value cards 4. Tele-banking or Phone Banking 5. Mobile Banking 6. Internet Banking E BANKING APPLICATIONS 1. Online Trading 2. Bill payment service 3. Electronic Fund transfer

4. Railway pass 5. Investing through Internet banking 6. Phone Recharges 7. E Commerce 8. Mobile Commerce 9. Security Precautions 10. Online Reservations STAGES OF E-BANKING SERVICES Broadly, the levels of banking services offered through INTERNET can be categorized in three types:

Basic Services

Simple Transactional Websites

Internet Banking Services

Figure 2 Stages of E-Banking Services

a. The Basic Services Stage where the banks websites circulates information on different products and services offered to customers and members of public in general. Interaction through customers is done through request and reply ad-hoc queries through e-mail or via telephonic conversations. b. Simple Transactional Websites: these allow customers to submit their instructions, applications for different services, queries on their account balances, etc. there is no transfer of funds in customers accounts. c. Internet banking services: this stage provides customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank and to transact purchase and sale of securities, etc. Most of the banks providing Internet banking products and services offer, to a large extent, an identical and standard package of banking services and transactional capabilities. STRUCTURE OF E-BANKING SERVICES In general, Internet banking products are offered in a two-tiered structure. * A basic tier of Internet banking products includes customer account inquiry, funds transfer and electronic bill payment. * A second or premium tier includes basic services plus one or more additional services such as Brokerage, Cash management, Credit applications, Credit and debit cards, Customer correspondence, DEMAT holdings, Financial advice, Foreign exchange trading, Insurance, Online trading, Opening accounts, Requests and intimations, Tax services, E-shopping, Standing instructions, Investments, Asset management services etc. COMPONENTS OF E-BANKING

E-banking systems rely on a number of common components or processes. The following list includes many of the potential components and processes seen in a typical institution: 1. Customer business relationship management 2. Website design and hosting 3. Firewall configuration and management 4. Intrusion detection system or IDS (network and host-based) 5. Network administration 6. Fund Transfers 7. Security management 8. Internet banking server 9. E-commerce applications (e.g., bill payment, lending, brokerage) 10. Internal network servers 11. Core processing system 12. Programming support 13. Automated decision support systems 14. Server management These components work together to deliver e-banking services. Each component represents a control point to consider. E-BANKING SUPPORT SERVICES In addition to traditional banking products and services, financial institutions can provide a variety of services that have been designed or adapted to support e-commerce. Management should understand these services and the risks they pose to the institution. This section discusses some of the most common support services: 1. Web-linking: Some websites are strictly informational, while others also offer customers the ability to perform financial transactions, such as paying bills or transferring funds between accounts. Virtually every website contains web-links. A web-link is a word, phrase, or image on a webpage that contains coding that will transport the viewer to a different part of the website or a completely different website by just clicking the mouse. 2. Account Aggregation: Account aggregation is a service that gathers information from many websites, presents that information to the customer in a consolidated format, and, in some cases, may allow the customer to initiate activity on the aggregated accounts. Some aggregators use the customer-provided user IDs and passwords to sign in as the customer. Once the customers account is accessed, the aggregator copies the personal account information from the website for representation on the aggregators site (i.e., screen scraping). Generally, direct data feeds are thought to provide greater legal protection to the aggregator than does screen scraping. 3. Electronic Authentication: Verifying the identities of customers and authorizing e-banking activities are integral parts of e-banking financial services. Since traditional paper-based and inperson identity authentication methods reduce the speed and efficiency of electronic transactions, financial institutions have adopted alternative authentication methods, including: a. Passwords and personal identification numbers (PINs), b.Digital certificates using a public key infrastructure (PKI), c. Microchip-based devices such as smart cards or other types of tokens, d.Database comparisons (e.g., fraud-screening applications), e. Biometric identifiers.

4. Website Hosting: Some financial institutions host websites for both themselves as well as for other businesses. Financial institutions that host a business customers website usually store, or arrange for the storage of, the electronic files that make up the website. These files are stored on one or more servers that may be located on the hosting financial institutions premises. Website hosting services require strong skills in networking, security, and programming. The technology and software change rapidly. 5. Electronic Fund Transfers for E-Commerce: Many businesses accept various forms of electronic payments for their products and services. Financial institutions play an important role in electronic payment systems by creating and distributing a variety of electronic payment instruments, accepting a similar variety of instruments, processing those payments, and participating in clearing and settlement systems. However, increasingly, financial institutions are competing with third parties to provide support services for e-commerce payment systems. Among the electronic payments mechanisms that financial institutions provide for e-commerce are automated clearing house (ACH) debits and credits through the Internet, electronic bill payment and presentment, electronic checks, e-mail money, and electronic credit card payments 6. Wireless / Mobile E-banking: Wireless banking is a delivery channel that can extend the reach and enhance the convenience of Internet banking products and services. Wireless banking occurs when customers access a financial institutions network(s) using cellular phones, pagers, and personal digital assistants (or similar devices) through telecommunication companies wireless networks. Wireless banking services in the United States typically supplement a financial institutions e-banking products and services. ISSUES OF E-BANKING 1. Transaction/Operations Issue: these involve risk that arises from frauds, information stealing, HCI related issues, processing errors, system disruptions, or other unanticipated events resulting in the institutions inability to deliver products or services. This risk exists in each product and service offered. The level of transaction risk is affected by the structure of the institutions processing environment, including the types of services offered and the complexity of the processes and supporting technology. The key to controlling transaction risk lies in adapting effective policies, procedures, and controls to meet the new risk exposures introduced by e-banking. Basic internal controls including segregation of duties, dual controls, and reconcilements remain important. Information security controls, in particular, become more significant requiring additional processes, tools, expertise, and testing. 2. Issues relating to Payment receiving in case of Credit cards: Generally, a financial institutions credit risk is not increased by the mere fact that a loan is originated through an ebanking channel. However, management should consider additional precautions when originating and approving loans electronically, including assuring management information systems effectively track the performance of portfolios originated through e-banking channels. If not properly managed, these aspects can significantly increase credit risk. 3. Issues relating to Inflation, Liquidity, Interest rate, Price/Market Risk: Funding and investment-related risks could increase with an institutions e-banking initiatives depending on the volatility and pricing of the acquired deposits. The Internet provides institutions with the ability to market their products and services globally. Internet-based advertising programs can effectively match yield-focused investors with potentially high-yielding deposits. But Internetoriginated deposits have the potential to attract customers who focus exclusively on rates and may provide a funding source with risk characteristics similar to brokered deposits. An

institution can control this potential volatility and expanded geographic reach through its deposit contract and account opening practices, which might involve face-to-face meetings or the exchange of paper correspondence. 4. Legal Issues: Compliance and legal issues arise out of the rapid growth in usage of ebanking and the differences between electronic and paper-based processes. E-banking is a new delivery channel where the laws and rules governing the electronic delivery of certain financial institution products or services may be ambiguous or still evolving. Specific regulatory and legal challenges include: a. Uncertainty over legal jurisdictions and which states or countrys laws govern a specific ebanking transaction b.Delivery of credit and deposit-related disclosures/notices as required by law or regulation c. Retention of required compliance documentation for on-line advertising, applications, statements, disclosures and notices d.Establishment of legally binding electronic agreements. e. Digital signatures issuance f. Security password recovery issue 5. Strategic Issues: A financial institutions board and management should understand the risks associated with E-banking services and evaluate the resulting risk management costs against the potential return on investment prior to offering e-banking services. Poor e-banking planning and investment decisions can increase a financial institutions strategic risk. Early adopters of new e-banking services can establish themselves as innovators who anticipate the needs of their customers, but may do so by incurring higher costs and increased complexity in their operations. Conversely, late adopters may be able to avoid the higher expense and added complexity, but do so at the risk of not meeting customer demand for additional products and services. In managing the strategic risk associated with e-banking services, financial institutions should develop clearly defined e-banking objectives by which the institution can evaluate the success of its e-banking strategy. 6. Reputation Risk: An institutions decision to offer e-banking services, especially the more complex transactional services, significantly increases its level of reputation risk. Some of the ways in which E-banking can influence an institutions reputation include: a. Loss of trust due to unauthorized activity on customer accounts b. Disclosure or theft of confidential customer information to unauthorized parties (e.g., hackers) c. Failure to deliver on marketing claims d. Failure to provide reliable service due to the frequency or duration of service disruptions e. Customer complaints about the difficulty in using e-banking services and the inability of the institutions help desk to resolve problems f. Confusion between services provided by the financial institution and services provided by other businesses linked from the website. Advantages of Electronic Banking BENEFITS TO THE CUSTOMERS: With the advent of E-Banking customers has gained following benefits:1. 24 X 7 Services: Banking provides 24 hrs., 365 days a year service to the customers of bank i.e. anytime banking

2. Anywhere Banking: Customer can withdraw cash, deposit cash, check account balances and can do transactions from his office or from his house or while traveling via mobile telephone i.e. Anywhere Banking. 3. Automatic Record keeping: It includes a sense of financial discipline by recording each and every transaction 4. Greater customer Satisfaction by offering;a. Unlimited access to bank, not limited by walls of the branch b. Less Risk. And greater security to the customer as they can avoid traveling with cash. c. Ease is payment of utility Bills, payment of dividends & interest etc. d. On line purchase of goods or services including on line payment for the same e. E-Banking brings down the cost of banking to customer over a period of time. f. Customer service is more prompt and efficient. g. Customer support BENEFITS OF THE BANKS According to N.S. BISHT Information not money is taking a prominent place in banking today. Computers have revolutionized the way banking is done. Benefits of generating revenue, declaring cost, increasing productivity and attracting new customers, competitive advantages are providing by E-Banking. E-Banking has assisted the banks in reducing costs in many areas, especially those associated with providing services to customers. The cost of providing routine transactions in a traditional environment is fear greater than providing the same by electronic means. The following are the benefits to banks: 1. Increased customer base 2. More investors 3. Increase revenue: Banks have the ability to increase revenue by generating user transaction fee for the use of a bill payment product and have the option of charging on account access for the use of on-line system. 4. Reduction of load on central DB: Load on branches has been reduced considerably by establishing central data base 5. Increased Productivity: The use of Electronic technology increases the productivity of the bank. 6. Quick Access: Bank representatives are able to process data more quickly and efficiently, track account activity with automatic reports. As noted by Martin Barley an economists at Brookings Institute and Robert J-Gorden an economist as north western university, the per cheque processing cost from electronic fund transfer is a fraction of conventional cheque processing system. 7. Reduced risk of overdraw: By connecting ATMs & POS terminals on- line, risk of over drawl can be eliminated in case of ATM, Credit and Debit cards. 8. Marketing of Banks Services: On line Banking-an effective medium of promotion of various schemes of the Bank a marketing tool indeed. 9. Better Customer Relationships: Helps in establishing better customer relationship and retaining and attracting customers. BENEFITS TO BUSINESS.

1. Increase in business because of increased purchasing power of the Credit Card holders and ease with which purchasing can be done. 2. Less need for merchant / traders to provide Credit facility to their customers. 3. Making e-commerce a reality and globalizing the trade. 4. Development of global and loyal clientele base. 5. Assured immediate settlement / payment. 6. Avoid all the cost and risk problems involved in handling cash. 7. Providing services of International standard at low transaction cost. BENEFITS TO GOVT. & TRADERS 1. Globalization of Trade through Electronic payments & clearing systems. Assist in providing Global market to the National Products & Services. 2. National Products & services. 3. Promotion of E-Banking in India will promote exports and increase in flow of foreign Exchange. 4. Promotion of E-Banking in will eliminate the risk of carrying heavy cash. 5. E-Banking will improve transparency in transactions. HURDLES IN IMPLEMENTATION Although there are obvious benefits in Internet Banking, there are some hurdles in the smooth implementation of Internet-banking. a. PC user base in India is extremely low compared to global standards. b. The Internet user base is limited. c. Lack of infrastructure to advanced technology based banking services. d. The absence of a regulatory framework for Internet banking transactions in India. e. The mindset of the Indian consumer, who prefers personal interactions and is not very comfortable, doing transactions through the Internet. f. Limited awareness about the potential of Internet banking on the part of banks. g. Security: In paperless banking transactions, many problems of security are involved. A security threat is defined as a circumstansive decision or event with potential to cause economic hardship to data or network resources in the form of destruction, disclosure, modification of data, denial of services, fraud, waste and abuse RESEARCH DESIGN A research design is the framework or blue print for conducting marketing research. It details the necessary procedures for obtaining the required information. The research design used by me was exploratory in nature. Sampling Plan: Sampling can be defined as the section of some part of an aggregate or totality on the basis of which judgment or an inference about aggregate or totality is made. The sampling plan helps in decision making in the following areas: Universe: The universe of the study was the residents of Tricity (Chandigarh, Panchkula and Mohali). Sampling units: The sampling unit of my study is the Respondents (servicemen, etc.) Sample size: Keeping in mind all the constraints 500 respondents was selected on random basis. Sampling technique: Individuals were selected on the basis of convenient sampling technique.

Data Collection 1. Primary data: It is obtained from respondents with the help of widely used and well known method of survey, through a fully structured questionnaire. 2. Secondary data: Secondary data was collected from govt. publications, journals, magazines, internet bank annexure, brochures.

Data analysis techniques

To analyze the data obtained with the help of questionnaire, following tools were used. 1. Likert scale: These consist of a number of statements which express either a favorable or unfavorable attitude towards the given object to which the respondents is asked to react. The respondent responds to in terms of several degrees of satisfaction or dissatisfaction. 2. Percentage, Bar Graphs and Pie Charts: These tools are used for analysis of data. DATA ANALYSIS 1) To know the usage level of respondents regarding various IT Enabled services OPTIONS RESPONSE ATM 100 Debit cards 92 Credit cards 84 Phone banking 27 Mobile banking 35 Internet banking 50
120 100 80 60 40 20 0

INTERPRETATION It can be analyzed from above that maximum number of respondents are use ATM, Debit cards and Credit cards. Out of 500, 35% are use of mobile banking and 50% respondents are using of internet banking and least number of respondents use phone banking. 2) To know the usage of internet banking payment mechanisms.

OPTIONS Credit Card Debit Card Electronic Transfer Electronic Cash

RESPONSE 60 10 26 4

Direct Access Accuracy of information Easy Return Policy Time Saving

INTERPRETATION 60% of respondents use credit cards while 10% use debit cards, 26% use EFT and 10% of respondents use electronic cash for making payments online. 3) To know the factors which influence most to use E-Banking / ITES services?
60 50 40 30 20 10 0

OPTIONS RESPONSE All time availability 51 Direct Access 20 Accuracy of information 11 Easy Return Policy 08 Time Saving 10

INTERPRETATION Maximum no. of respondents i.e. 71% use E-Banking / ITES because of its all time available and 28% use it because of direct and only 18% use it for getting accurate information. 4) To know whether respondents find ITES services financially secure or not.

OPTIONS Yes No Cant say

RESPONSE 64 10 36

Yes

No

Cant say

INTERPRETATION 64% of respondents feel that ITES Services are financially secure while 36% of respondents cant say anything about the financial security.

5) To know whether the banks provide customer support for any problems faced by the respondents
70 60 50 40 30 20 10 0 Always Mostly Never Sometimes

OPTIONS Always Mostly Never Sometimes

RESPONSE 26 51 18 3

INTERPRETATION Most of the respondents that are 52% feel that mostly these banks try to solve their problems while 28% said that always these banks solve their problems and no respondents said that these banks never try to solve their problems. 6) To know preference of IT Enabled Services over traditional banking services by respondents. Banking Services Cant say OPTIONS ITES Traditional RESPONSE 54 10 36

ITES

Traditional Banking Services Cant say

INTERPRETATION 54% respondents said yes that E-Banking services better over traditional banking services while only 10% said no and 36% said that they cant say. FINDINGS OF THE STUDY 1. Most of the respondents use e-banking payment methods. 2. E-Banking services provided by a banks plays an important role in selection of a bank. 3. Most of the respondents feel that they are mostly informed by their banks about any kind of information related to E-Banking services. 4. Amongst the various factors influencing the usage, all time availability is ranked as major motivating factor followed by direct access and getting accurate information. 5. Banks are ready to solve any kind of problems faced by their customers related to Banking. 6. Respondents feel that it saves a lot of time by using E-Banking and it also results in inexpensiveness and easy processing. 7. E-Banking services are regarded as financially secure but even then 36% finds it insecure as the major problem in the usage of E-Banking which arises from the misuse and misplacement of card. 8. Service class people are quite satisfied with the E-Banking services banks are providing. 9. E-Banking services are used over traditional banking services as it is all time available which saves time. RECOMMENDATIONS 1. Banks should try to provide timely information to its customers regarding new innovations in E-Banking services. 2. E-Banking should be made more secure by giving information to the customers regarding safety measures to be taken while using E-Banking services. 3. Customers should be informed about all kind of fees which is to be paid. There should not be any kind of hidden charges. 4. Periodic feedback should be taken to know suggestions for improvement. 5. New innovations should be made to make E-Banking more attractive. Conclusion The service class people are quite satisfied with E-Banking services banks are providing but they feel that banks should be more active in providing timely information to them about

various new addition in these services which can which can make its use even more easier. And they also want that E-Banking services should be free of cost. Sometimes there are some hidden costs which the customers come to know only at the time of availing these services. So banks should come forward to make these improvements for their customers. Further, with increasing consumer demands banks have to constantly think of innovative customized services to remain competitive. E-Banking is innovative tool that is fast becoming a necessity. It is a successful strategic weapon for banks to remain profitable in a volatile and competitive market place of today. REFERENCES Books 1.Malhotra T.D., Electronic Banking and Information Technology in Banks (Sultan Chand & Sons, 2004) 2.Gupta, Vivek., E-Banking : Global Perspectives (ICFAI Publications, 6/2002) 3.S.B. Verma, S.K.Gupta, M.K.Sharma., E-banking and Development of Banks(Deep & Deep Publications Pvt. Ltd, 2007) Articles 4.Chandana R, Unnithan, Paula, 2005, E-Banking Adaptation and Dot.Com Viability: A Comparison of Australian and Indian Experiences in the Banking sector 5. M.C., Swatman, 2006, a comparative study of Australian and Indian experiences in ebusiness 6.Kannabiran G. and Narayan P.C, 2006, experiences of a private sector bank in a deploying Internet banking and e-commerce in India. 7.Guerrero Mario Martinez, 2007, Profiling the Adoption of Online Banking Services in the European Union Web sites 8. http://www.worldjute.com/ebank.html 9. http://www.nasscom.in/upload/48505/eBanking.pdf 10. http://www.centurionbop.co.in/personalbank/internetbank.html 11. http://web-banking.org/accounts/introduction.html