A study on Adoption of Internet Banking by Tricity Customers

A Marketing Research Proposal

SUBMITTED BY GEET SAHNI MBA (IB) SECOND SEMESTER

SUBMITTED TO DR. TEJINDER PAL SINGH

Introduction Over the few decades, Information technology has affected the banking industry highly and has provided a way for the banks to differentiate their products and services. Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society. Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific. 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 other words it is said that it is updated 'on-line, real time'. The system is updated immediately after every transaction automatically. Internet banking is a system of banking that enables customers to perform various financial transactions on a secure website via the Internet. There are many banks and credit union that operate websites for internet banking. Internet Banking is basically conducted via a personal computer connected to Internet. Apart from it, people can also do financial transactions using Internet banking on their cellular phones or personal digital assistants. All one need is a computer, PDA or cell phone with active internet connection to get going with net banking. Before using net banking, one needs to activate net banking facility with his/her bank. Bank provides a unique user ID and password for its customers to login into the bank website for conducting financial transactions using net banking. For any transaction, one should have an active bank account, appropriate bank balance for transactions, bank account number, customers user ID, debit/credit card number,and Internet banking PIN number along with access to the internet.

Why Internet Banking ? Differentiation of products from the others A combination of regulatory and competitive reasons Stress on branchless banking. Increasing volumes of banking transactions Providing customers with cost effective services

The common features of Internet banking fall broadly into several categories: Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer, apply for a loan, new account, etc.) Payments to third parties, including bill payments and telegraphic/wire transfers Funds transfers between a customer's own transactional account and savings accounts Investment purchase or sale Loan applications and transactions, such as repayments of enrollments Non-transactional (e.g., online statements, cheque links, cobrowsing, chat) Viewing recent transactions Downloading bank statements, for example in PDF format Viewing images of paid cheques Transaction approval process Features commonly unique to Internet banking include personal financial management support, such as importing data into personal accounting software.

History of Internet Banking: Banking in India Started in the year 1786 with The General Bank of India being the first. Reserve Bank of India came in 1935. Became the central banking authority in 1965. Banking Companies Act passed in 1949. Formation of State Bank of India in 1955. Nationalization of 14 major banks in 1969. Seven more in 1980. Opening up of economy, implementations of recommendations of the Narsimham committee. Adoption of Internet Banking: According to Doyle (1998) customers are invariably the best source of ideas. Innovations have commercial value only if they meet the needs of customers better than the current products. Innovative customers those individuals who are at the forefront in buying new products or applying new ideas are the most valuable sources. This learning is called the Adoption Process and consists of Five stages as follows: Awareness: First, the Individual is exposed to the innovation but lacks complete information about it Interest: Next, the individual becomes interested in the new idea and seeks additional information about it.

Evaluation: Individual mentally applies the innovation to his present and anticipated future situation, and then decides whether to try it. Trial: The individual makes full use of the innovation Adoption: The individual decides to continue the full use of the Innovation Types of Internet Banking Understanding the various types of Internet banking products will help examiners assess the risks involved. Currently, the following three basic kinds of Internet banking are being employed in the marketplace: Informational This is the basic level of Internet banking. Typically, the bank has marketing information about the banks products and services on a stand-alone server. The risk is relatively low, as informational systems typically have no path between the server and the banks internal network. This level of Internet banking can be provided by the bank or outsourced. While the risk to a bank is relatively low, the server or Web site may be vulnerable to alteration. Appropriate controls therefore must be in place to prevent unauthorized alterations to the banks server or Web site. Communicative This type of Internet banking system allows some interaction between the banks systems and the customer. The interaction may be limited to electronic mail, account inquiry, loan applications, or static file updates (name and address changes). Because these servers may have a path to the banks internal networks, the risk is higher with this configuration than with informational systems. Appropriate controls need to be in place to prevent, monitor, and alert management of any unauthorized attempt to access the banks internal networks and computer systems. Virus controls also become much more critical in this environment. Transactional This level of Internet banking allows customers to execute transactions. Since a path typically exists between the server and the banks or outsourcers internal network, this is the highest risk architecture and must have the strongest controls. Customer transactions can include accessing accounts, paying bills, transferring funds, etc. Internet Banking Risks Internet banking creates new risk control challenges for national banks. From a supervisory perspective, risk is the potential that events, expected or unexpected, may have an adverse impact on the banks earnings or capital. The OCC has defined nine categories of risk for bank supervision purposes. The risks are credit, interest rate, liquidity, price, foreign exchange, transaction, compliance, strategic, and reputation. These categories are not mutually exclusive and all of these risks are associated with Internet banking.

Credit Risk Credit risk is the risk to earnings or capital arising from an obligors failure to meet the terms of any contract with the bank or otherwise to perform as agreed. Credit risk is found in all activities where success depends on counterparty, issuer, or borrower performance. It arises any time bank funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether on or off the banks balance sheet. Internet banking provides the opportunity for banks to expand their geographic range. Customers can reach a given institution from literally anywhere in the world. In dealing with customers over the Internet, absent any personal contact, it is challenging for institutions to verify the bonafides of their customers, which is an important element in making sound credit decisions. Verifying collateral and perfecting security agreements also can be challenging with out-of-area borrowers. Unless properly managed, Internet banking could lead to a concentration in out-of-area credits or credits within a single industry. Moreover, the question of which states or countrys laws control an Internet relationship is still developing. Effective management of a portfolio of loans obtained through the Internet requires that the board and management understand and control the banks lending risk profile and credit culture. They must assure that effective policies, processes, and practices are in place to control the risk associated with such loans. See the Loan Portfolio Management, booklet of the Comptrollers Handbook for a more complete discussion of credit risk. Interest Rate Risk Interest rate risk is the risk to earnings or capital arising from movements in interest rates. From an economic perspective, a bank focuses on the sensitivity of the value of its assets, liabilities and revenues to changes in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows (repricing risk); from changing rate relationships among different yield curves affecting bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options embedded in bank products (options risk). Evaluation of interest rate risk must consider the impact of complex, illiquid hedging strategies or products, and also the potential impact that changes in interest rates will have on fee income. In those situations where trading is separately managed, this refers to structural positions and not trading portfolios. Internet banking can attract deposits, loans, and other relationships from a larger pool of possible customers than other forms of marketing. Greater access to customers who primarily seek the best rate or term reinforces the need for managers to maintain appropriate asset/liability management systems, including the ability to react quickly to changing market conditions.

Liquidity Risk Liquidity risk is the risk to earnings or capital arising from a banks inability to meet its obligations when they come due, without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned changes in funding sources. Liquidity risk also arises from the failure to recognize or address changes in market conditions affecting the ability of the bank to liquidate assets quickly and with minimal loss in value. Internet banking can increase deposit volatility from customers who maintain accounts solely on the basis of rate or terms. Asset/liability and loan portfolio management systems should be appropriate for products offered through Internet banking. Increased monitoring of liquidity and changes in deposits and loans may be warranted depending on the volume and nature of Internet account activities. Price Risk Price risk is the risk to earnings or capital arising from changes in the value of traded portfolios of financial instruments. This risk arises from market making, dealing, and position taking in interest rate, foreign exchange, equity, and commodities markets. Banks may be exposed to price risk if they create or expand deposit brokering, loan sales, or securitization programs as a result of Internet banking activities. Appropriate management systems should be maintained to monitor, measure, and manage price risk if assets are actively traded. Foreign Exchange Risk Foreign exchange risk is present when a loan or portfolio of loans is denominated in a foreign currency or is funded by borrowings in another currency. In some cases, banks will enter into multi-currency credit commitments that permit borrowers to select the currency they prefer to use in each rollover period. Foreign exchange risk can be intensified by political, social, or economic developments. The consequences can be unfavorable if one of the currencies involved becomes subject to stringent exchange controls or is subject to wide exchange-rate fluctuations. Foreign exchange risk is discussed in more detail in the Foreign Exchange, booklet of the Comptrollers Handbook. Banks may be exposed to foreign exchange risk if they accept deposits from non-U.S. residents or create accounts denominated in currencies other than U.S. dollars. Appropriate systems should be developed if banks engage in these activities. Transaction Risk Transaction risk is the current and prospective risk to earnings and capital arising from fraud, error, and the inability to deliver products or services, maintain a competitive position, and

manage information. Transaction risk is evident in each product and service offered and encompasses product computing systems, complexity of products and services, and the internal control environment. A high level of transaction risk may exist with Internet banking products, particularly if those lines of business are not adequately planned, implemented, and monitored. Banks that offer financial products and services through the Internet must be able to meet their customers expectations. Banks must also ensure they have the right product mix and capacity to deliver accurate, timely, and reliable services to develop a high level of confidence in their brand name. Customers who do business over the Internet are likely to have little tolerance for errors or omissions from financial institutions that do not have sophisticated internal controls to manage their Internet banking business. Likewise, customers will expect continuous availability of the product and Web pages that are easy to navigate. Software to support various Internet banking functions is provided to the customer from a variety of sources. Banks may support customers using customer-acquired or bank-supplied browsers or personal financial manager (PFM) software. Good communications between banks and their customers will help manage expectations on the compatibility of various PFM software products. Attacks or intrusion attempts on banks computer and network systems are a major concern. Studies show that systems are more vulnerable to internal attacks than external, because internal system users have knowledge of the system and access. Banks should have sound preventive and detective controls to protect their Internet banking systems from exploitation both internally and externally. See OCC Bulletin 99-9, Infrastructure Threats from Cyber- Terrorists for additional information. Contingency and business resumption planning is necessary for banks to be sure that they can deliver products and services in the event of adverse circumstances. Internet banking products connected to a robust network may actually make this easier because back up capabilities can be spread over a wide geographic area. For example, if the main server is inoperable, the network could automatically reroute traffic to a back up server in a different geographical location. Security issues should be considered when the institution develops its contingency and business resumption plans. In such situations, security and internal controls at the back-up location should be as sophisticated as those at the primary processing site. High levels of system availability will be a key expectation of customers and will likely differentiate success levels among financial institutions on the Internet. National banks that offer bill presentment and payment will need a process to settle transactions between the bank, its customers, and external parties. In addition to transaction risk, settlement failures could adversely affect reputation, liquidity, and credit risk.

Compliance Risk Compliance risk is the risk to earnings or capital arising from violations of, or nonconformance with, laws, rules, regulations, prescribed practices, or ethical standards. Compliance risk also arises in situations where the laws or rules governing certain bank products or activities of the banks clients may be ambiguous or untested. Compliance risk exposes the institution to fines, civil money penalties, payment of damages, and the voiding of contracts. Compliance risk can lead to a diminished reputation, reduced franchise value, limited business opportunities, reduced expansion potential, and lack of contract enforceability. Most Internet banking customers will continue to use other bank delivery channels. Accordingly, national banks will need to make certain that their disclosures on Internet banking channels, including Web sites, remain synchronized with other delivery channels to ensure the delivery of a consistent and accurate message to customers. Federal consumer protection laws and regulations, including CRA and Fair Lending, are applicable to electronic financial services operations including Internet banking. Moreover, it is important for national banks to be familiar with the regulations that permit electronic delivery of disclosures/notices versus those that require traditional hard copy notification. National banks should carefully review and monitor all requirements applicable to electronic products and services and ensure they comply with evolving statutory and regulatory requirements. Advertising and record-keeping requirements also apply to banks Web sites and to the products and services offered. Advertisements should clearly and conspicuously display the FDIC insurance notice, where applicable, so customers can readily determine whether a product or service is insured. Application of Bank Secrecy Act (BSA) requirements to cyber banking products and services is critical. The anonymity of banking over the Internet poses a challenge in adhering to BSA standards. Banks planning to allow the establishment of new accounts over the Internet should have rigorous account opening standards. Also, the bank should set up a control system to identify unusual or suspicious activities and, when appropriate, file suspicious activity reports (SARs). The BSA funds transfer rules also apply to funds transfers or transmittals performed over the Internet when transactions exceed $3,000 and do not meet one of the exceptions. The rules require banks to ensure that customers provide all the required information before accepting transfer instructions. The record keeping requirements imposed by the rules allow banks to retain written or electronic records of the information.

The Office of Foreign Asset Control (OFAC) administers laws that impose economic sanctions against foreign nations and individuals. This includes blocking accounts and other assets and prohibiting financial transactions. Internet banking businesses must comply with OFAC requirements. A bank needs to collect enough information to identify customers and determine whether a particular transaction is prohibited under OFAC rules. See the FFIEC Information Systems Examination Handbook (IS Handbook) for a discussion of OFAC. Strategic Risk Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes. This risk is a function of the compatibility of an organizations strategic goals, the business strategies developed to achieve those goals, the resources deployed against these goals, and the quality of implementation. The resources needed to carry out business strategies are both tangible and intangible. They include communication channels, operating systems, delivery networks, and managerial capacities and capabilities. The organizations internal characteristics must be evaluated against the impact of economic, technological, competitive, regulatory, and other environmental changes. Management must understand the risks associated with Internet banking before they make a decision to develop a particular class of business. In some cases, banks may offer new products and services via the Internet. It is important that management understand the risks and ramifications of these decisions. Sufficient levels of technology and MIS are necessary to support such a business venture. Because many banks will compete with financial institutions beyond their existing trade area, those engaging in Internet banking must have a strong link between the technology employed and the banks strategic planning process. Before introducing a Internet banking product, management should consider whether the product and technology are consistent with tangible business objectives in the banks strategic plan. The bank also should consider whether adequate expertise and resources are available to identify, monitor, and control risk in the Internet banking business. The planning and decision making process should focus on how a specific business need is met by the Internet banking product, rather than focusing on the product as an independent objective. The banks technology experts, along with its marketing and operational executives, should contribute to the decision making and planning process. They should ensure that the plan is consistent with the overall business objectives of the bank and is within the banks risk tolerance. New technologies, especially the Internet, could bring about rapid changes in competitive forces. Accordingly, the strategic vision should determine the way the Internet banking product line is designed, implemented, and monitored.

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Reputation Risk Reputation risk is the current and prospective impact on earnings and capital arising from negative public opinion. This affects the institutions ability to establish new relationships or services or continue servicing existing relationships. This risk may expose the institution to litigation, financial loss, or a decline in its customer base. Reputation risk exposure is present throughout the organization and includes the responsibility to exercise an abundance of caution in dealing with customers and the community. A banks reputation can suffer if it fails to deliver on marketing claims or to provide accurate, timely services. This can include failing to adequately meet customer credit needs, providing unreliable or inefficient delivery systems, untimely responses to customer inquiries, or violations of customer privacy expectations. Internet banking services that are poorly executed or otherwise alienate customers and the public can damage a banks reputation. Well-designed marketing, including disclosures, is one way to educate potential customers and help limit reputation risk. Customers must understand what they can reasonably expect from a product or service and what special risks and benefits they incur when using the system. As such, marketing concepts need to be coordinated closely with adequate disclosure statements. A national bank should not market the banks Internet banking system based on features or attributes the system does not have. The marketing program must present the product fairly and accurately. National banks should carefully consider how connections to third parties are presented on their Web sites. Hypertext links are often used to enable a customer to link to a third party. Such links may reflect an endorsement of the third partys products or services in the eyes of the customer. It should be clear to the customer when they have left the bank s Web site so that there is no confusion about the provider of the specific products and services offered or the security and privacy standards that apply. Similarly, adequate disclosures must be made so that customers can distinguish between insured and noninsured products. National banks need to be sure that their business continuity plans include the Internet banking business. Regular testing of the business continuity plan, including communications strategies with the press and public, will help the bank ensure it can respond effectively and promptly to any adverse customer or media reactions. Risk Management Financial institutions should have a technology risk management process to enable them to identify, measure, monitor, and control their technology risk exposure. Examiners should refer to OCC Bulletin 98-3, Technology Risk Management for additional guidance on this topic. The risk planning process is the responsibility of the board and senior management. They need to possess the knowledge and skills to manage the banks use of Internet banking technology and technology-related risks. The board should review, approve, and monitor Internet banking

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technology-related projects that may have a significant impact on the banks risk profile. They should determine whether the technology and products are in line with the banks strategic goals and meet a need in their market. Senior management should have the skills to evaluate the technology employed and risks assumed. Periodic independent evaluations of the Internet banking technology and products by auditors or consultants can help the board and senior management fulfill their responsibilities. Implementing the technology is the responsibility of management. Management should have the skills to effectively evaluate Internet banking technologies and products, select the right mix for the bank, and see that they are installed appropriately. If the bank does not have the expertise to fulfill this responsibility internally, it should consider contracting with a vendor who specializes in this type of business or engaging in an alliance with another provider with complementary technologies or expertise.

Measuring and monitoring risk is the responsibility of management. Management should have the skills to effectively identify, measure, monitor, and control risks associated with Internet banking. The board should receive regular reports on the technologies employed, the risks assumed, and how those risks are managed. Monitoring system performance is a key success factor. As part of the design process, a national bank should include effective quality assurance and audit processes in its Internet banking system. The bank the performance standards. Internal Controls Internal controls over Internet banking systems should be commensurate with an institutions level of risk. As in any other banking area, management has the ultimate responsibility for developing and implementing a sound system of internal controls over the banks Internet banking technology and products. Regular audits of the control systems will help ensure that the controls are appropriate and functioning properly. Technology: In-House or Outsourced? The different levels of complexity associated with certain areas involving security, operations, planning, and monitoring have caused many national banks to outsource all or parts of their Internet banking operations. Banks should periodically reassess their sources of technology support to determine whether a given solution continues to fit their business plan and is flexible enough to meet anticipated future needs. Regardless of whether technology services are provided in-house or through a third-party servicer, national banks need to have a strong link between their technology provider and their strategic planning process. This will enable the bank to link new products and services with the existing technology and product mix.

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There are pros and cons to offering technology-based products and services in house versus contracting with a vendor. Larger national banks with substantial resources may choose to purchase computer hardware and operating systems and/or develop the necessary application software in-house. This option may provide the greatest flexibility to customize product offerings. Other banks may choose to purchase a turnkey system from a vendor. In this arrangement the vendor typically provides the hardware, operating systems, and applications software necessary to enable the bank to offer the particular product or service to its customers. The vendor will typically provide the service and maintenance for the turnkey system. A variation is to outsource the service. Using this option, national banks contract with a vendor to operate their Internet banking Web sites at the vendors location. This option may be especially well suited for banks that do not have the technical expertise to develop this service in-house. However, such banks need to place additional emphasis on their due diligence to ensure that security is not compromised. Several companies are responding to the developing markets for Web pages, Internet banking applications, and bill presentment and payment services. some are start-up companies with unproven products, services, or track records. National banks need to perform due diligence before selecting a vendor to provide Internet banking services. They should have a formal service agreement with the vendor that clearly addresses the duties and responsibilities of the parties involved. National banks need to monitor their vendors operational performance, financial condition, and capability to stay current with evolving technologies. National banks typically fulfill their responsibility to assure their vendors have sound internal controls by obtaining internal or third-party audit reports. Examiners should refer to the IS Handbook for a complete discussion of outsourcing issues. Whatever the source of Internet banking technology, products, and services, it is important for the national bank to have personnel with an appropriate level of specialized expertise, consistent with risk, to monitor and manage the business.

Issues in Internet Banking Financial institutions, their card associations, and vendors are working to develop an Internet payment infrastructure to help make electronic commerce secure. Many in the banking industry expect significant growth in the use of the Internet for the purchase of goods and services and electronic data interchange. The banking industry also recognizes that the Internet must be secure to achieve a high level of confidence with both consumers and businesses. Sound management of banking products and services, especially those provided over the Internet, is fundamental to maintaining a high level of public confidence not only in the individual bank and its brand name but also in the banking system as a whole.

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Literature Review The concept of electronic banking has been defined in many ways 1(Daniel, 1999; Karjaluoto, 1999) namely as the delivery of banks' information and services to customers via different delivery platforms that can be used with different terminal devices such as a personal computer and a mobile phone with browser or desktop software, telephone or digital television. Electronic banking is a larger concept than banking via the internet 7(Karjaluoto, 2002) and the internet is a main delivery channel for electronic banking and its value to customers and banks is continuously increasing7 (Karjaluoto, 2002; Mattila,2001). It is important to identify factors that cause people to accept new technologies and information systems and use them. Several theories are offered in this respect, such as Theory of Reasoned Action 6(Fishbein and Ajzen, 1975), Technology Adoption Model 5(Davis, 1989), Theory of Innovation Diffusion (Rogers, 1983), and Theory of Planned Behavior 1(Ajzen, 1991), and Decomposed Theory of Planned Behavior 12(Taylor and Todd, 1995). Behavioral intention to use technology is explained by people's attitudes toward the behavior and subjective norms. If the behavior is voluntarily controlled by the individual, it can accurately explain the factors influencing technology adoption 8(Laukkanen and Cruz, 2009). The theory of planned behavior 1(Ajzen, 1991) extends on the former by adding perceived behavioral control into the model as a determinant of behavioral intention and behavior. This theory also predicts involuntary behaviors. It determines the impacts of three factors namely attitude, subjective norms and perceived behavior control on how individuals tend to behave 13 (Tuchila, R. (2000). Attitude is the general feeling of people about the desirability or undesirability of a particular issue or behavior. Subjective norm refers to individual's perception related to opinions of society about doing or not doing the behavior 12(Taylor and Todd, 1995). The Theory of Reasoned Action is one of the most important theories that are used to explain human behaviors 19(Pedersen, 2005). Behavioral intention to use technology is explained by people's attitudes toward that behavior and subjective norms. If the individual voluntarily controls the behavior, it can accurately explain the factors influencing technology adoption 20 (Laukkanen and Cruz, 2009). The theory of planned behavior 21(Ajzen, 1991) extends on the former by adding perceived behavioral control into the model as a determinant of behavioral intention and behavior. This theory also predicts involuntary behaviors. It determines the impacts of three factors namely attitude, subjective norms and perceived behavior control on how individuals tend to behave22 (Rao and Troshani, 2007). Attitude is the general feeling of people about the

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desirability or undesirability of a particular issue or behaviour. Subjective norm refers to individual's perception related to opinions of society about doing or not doing the behaviour 23 (Taylor and Todd, 1995). The construct perceived control of behavior is the individual's perception about ease or difficulty of doing behaviour and indicates the individual's perceptions about required skills, resources, and opportunities in doing the behaviour. From the technology acceptance model 24(Davis, 1989), behavioural intention is in turn, explained by the attitude towards the use of the system, which is described as the perceived usefulness and its perceived ease of use. Perceived ease of use refers to the degree to which a person believes that using a particular system would be free of effort, while perceived usefulness refers to the degree to which a person believes that using a particular technology will enhance his performance. Subjective nom and perceived behavioural control 25(Luarn and Lin, 2005). This resulted in increased power to explain behavioural intentions and accurate understanding of behavioural events 26(Pedersen, 2005). According to their decomposed theory of planned behaviour, the behaviour to use a new service for instance is determined by the intention to use and perceived behavioural control. Intention to use, in turn, is determined by the attitude toward behaviour, subjective norm and perceived behavioral control. Attitude comprises of perceived ease of use, perceived usefulness and compatibility. Compatibility refers to the degree to which an innovation is perceived as being consistent with existing values, past experiences, and needs of potential adopters 27(Moor and Benbasat, 1991).
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Al-Majali and Nik Mat (2010) decomposed the subjective norms further into two normative beliefs namely family influences and mass media influences. Family influences emphasize on the relationship between the people under the family control where from parents, a person acquires an orientation toward religion, politics and economics, and a sense of personal ambition, self worth, and love. Mass media influences are non-personal communication channels such as print media, broadcast media, and network media29 (Kotler, 2006). Perceived behaviour control is composed of three control beliefs: self-efficacy, government support and technology support. Self-efficacy refers to individuals self-confidence in his or her ability to perform a behaviour 30(Compeau and Higgins, 1995). Government support can play an intervention and leadership role in the diffusion of innovation 31(Tan and Teo, 2000). Finally, technology support becomes easily and readily available as e-commerce applications such as internet banking services become more feasible 32(Shih and Fang, 2004). Internet banking brings a number of benefits for both the provider and the customer. From the banks perspective these are mainly related to cost savings 33(Sathye 1999; Robinson, 2000) and

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internet banking remains one of the cheapest and more efficient delivery channels 34 (Pikkarainen et al., 2004). Other rationales for the adoption of such services are related to competition as it helps to retain existing customers and attract new ones 35(Robinson, 2000). Further, mass customization, more effective marketing and communication at lower costs are among the benefits of internet banking services 36(Tuchila, 2000). Benefits for the end users are numerous and include mainly convenience of the service (time saved and globally accessible service), lower cost of transaction and more frequent monitoring of accounts among others (Pikkarainen et al., 2004). For businesses and enterprises, in particular, internet banking is seen as a means to better administer funds 37(Tuchila. 2000) as well as there is quick and continuous access to information which helps in reducing costs. However, in many cases, customers are still reluctant to use of internet banking, as they are concerned with security aspects of the system. Further, internet banking requires access to a computer and access to the internet which is an additional cost to the client. Moreover, customers may not be IT conversant to use internet banking. Behavioural intention has a positive influence on internet banking services adoption in Singapore and Thailand respectively.
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Taylor and Todd (1995) extend the theory of planned behavior by breaking down the structure of attitude, subjective norm and perceived behavioral control 14(Luarn and Lin, 2005). This resulted in increased power to explain behavioral intentions and accurate understanding of behavioral events (Pedersen, 2005). According to their decomposed theory of planned behavior, the behavior to use a new service for instance is determined by the intention to use and perceived behavioral control. Intention to use, in turn, is determined by the attitude toward behavior, subjective norm and perceived behavioral control. Attitude comprises of perceived ease of use, perceived usefulness and compatibility.

Compatibility refers to the degree to which an innovation is perceived as being consistent with existing values, past experiences, and needs of potential adopters 9(Moor and Benbasat, 1991). Perceived behavior control is composed of three control beliefs: self-efficacy, government support and technology support. Self-efficacy refers to individuals self-confidence in his or her ability to perform a behavior 2(Compeau and Higgins, 1995). Government support can play an intervention and leadership role in the diffusion of innovation 11 (Tan and Teo, 2000). Internet banking brings a number of benefits for both the provider and the customer. From the banks perspective these are mainly related to cost savings 10(Sathye 1999; Robinson, 2000) and internet banking remains one of the cheapest and more efficient delivery channels (Pikkarainen et al., 2004).

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Research Problem Which factors influence the customers' propensity to use electronic banking as a primary banking channel. The most important issue in exploring the first problem is comparing the influence of demographic factors and attitudes towards banking-related issues to the selection of the main banking channel. What are the main characteristics of the heavy users of electronic banking and what are the main obstacles for further adoption of electronic banking. Why some customers find the new channels unacceptable and which obstacles should be eliminated in order to convince the customers about the advantages of using Internet banking.

Research Objectives 1. To identify the benefits of Internet banking for customers 2. To identify the factors those influence the customers for using mobile as an Internet banking tool. 3. To identify the factors why people do not adopt Internet banking services

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Hypothesis
1. H1: Perceived usefulness has a positive effect on use of Internet Banking. 2. H2: Perceived ease of use has a positive effect onuse of Internet Banking. 3. H3: Perceived risks have a negative impact on use of Internet Banking.

Perceived Perceived risk PR ease of use PEU Perceived

usefulnes
PU

Internet Banking IB

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Research Methodology The research problem of this project indicates that this study is mainly descriptive, aiming to find out and describe the effective factors, which influence the adoption of Internet banking services by customers. It also provides a basic understanding of the effective factors in adoption of a new technology, by stating the existing theories related to this subject. Since conclusions are presented in order to explain the effective factors, which have been described, it begins to explain the phenomena so the study becomes somehow explanatory. Data Collection: Empirical data for the study is to be collected with the help of questionnaires. The questionnaire of Lockett & littlers study (1997) can be replicated with some minor changes Some interviews with banking professionals and academicians will also be used in the study Sampling Technique: The sample for this study is the students from an University Business School, Panjab University, Chandigarh. Convenience sampling method was used. The reasons of using this sampling type are twofold. First, it offers an easy way to obtain the raw data for the further analysis. Second, it saves times and costs since the respondents can be randomly selected. Although there are limitations of using students as subjects, they are appropriate in this study for several reasons. First they are good surrogate for banking customers, they are current bank customers have experience with traditional banking services and are most likely familiar with the IB. Second, student sample reflects current and future banking customers. Internet users are generally low with majority of them between 20- 30 ages. Sample Size: 100 Data Analysis: Now the data that is to be collected through the survey is presented and analyzed statistically using the independent samples t- test. This test compares the means for two groups of cases, and is used to test whether the difference in means of one variable in two groups of respondents is significantly different from zero. Here using independent samples t-test, the means of personal characteristics and internet banking characteristics in two groups of users and non users.

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Analysis Analysis Statistical Package for Social Sciences (SPSS) version 16 was used as the analysis tool. The demographic profile of the respondents is shown in table 1. Reliability is determined by Cronbachs coefficient alpha (), a popular method for measuring reliability suggests that for any research at its early stage, a reliability score or alpha that is 0.60 or above is sufficient. As shown in Table 2, the reliability scores of all the constructs were found to exceed the given constraint.

Table 2: Reliability Determinants PU PEU PR No. of items 6 8 3 Reliebility 0.942 0.897 0.978

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Results This study examines the influence of H1, H2 and H3 of IB. As expected, the results have supported the hypothesis that PU and PEU have positive effect on the use of IB and PR have negative effect on the use of IB. The results of the regression analysis conducted on the factors indicate that PR, PU and PEU on online banking were found to be the most influential factors explaining the use of online banking services. The result shows that PR is negatively related to the adoption of IB use which supports the hypothesis and is in line with the previous studies. Also it shows that PU and PEU has positive relation with IB use supporting the hypotheses. This finding refers to the fact that consumers use online banking for the benefits and also due to its easiness in use which provides in comparison to other banking delivery channels. This finding is in line with other studies. When online banking is perceived as useful, customers intention to adopt it would be greater. Likewise bank customers are likely to adopt IB when it is easy to use. This shows that bank customers anchor their online banking adoption intention to the beneficial outcomes and ease of use process of the system. Although IB provides flexibility in performing financial transaction, fast and easy, however individuals are still reluctant to adopt the system because of the risk associated with it. Security and privacy are two elements in the PR. Customers are not ready to take any risk on using the new system. Practical implication of these results is that banks need to highlight the benefits of IB, make IB easy to use, and enhance IB security to improve consumers trust. They also need to make the consumers aware about the system by providing them about the details of the benefits associated with it and also ensuring security of the system. Banks can highlight benefits such as IB conveniences in their promotional and advertising activities. 9. Conclusion The result of this study shows that PU, PEU and PR are the important determinants of online banking adoption. This study meets the desired objective; but it suffers from one setback. The relatively small size of the sample limits generalization of the outcome of the study.This study was conducted to explore the factors influencing intentions to adopt IB services. As such, there is still room for further investigation into the adoption of IB services. The replication of this study on a wider scale with more IB customers and with different national cultures is essential for the further generalization of the findings. By using a longitudinal study in the future, we could investigate our research model in different time periods and make comparisons, thus providing more insight into the phenomenon of online banking adoption.

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