INTRODUCTION

ABSTRACT
Technological developments have been growing at an alarming speed in the
international arena. Internet is proudly one of the best in those. So, the
banking sector is also making the best utilization of it. In this study based on
E-BANKING, it has been observed that the development of E-banking has
increased by leaps and bounds during the past few years. Concentrating on
the Indian economy, the use of E-bankingis still in the developing stage.
Today in India the scope of E-banking is growing by a good decent rise in its
usage. The rise in the usage of the Internet is the main criteria for
development of E-banking.
This project helps us to understand that how the E-banking came into
existence and its need in the modern world. It shows us the insights of the Ebankingin India. It helps us to understand the opportunities and the challenges
associated with the E- banking in India.

BACKGROUND: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
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
doorstep of the customer.
The 1990s 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 frontend machine.
Traditional banking

Virtual or E-banking

Gunpowder

Nuclear charged

Personalized services, time

consuming, limited access

Real time transactions,

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.

NEED OF THE STUDY: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.

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.

LITERATURE REVIEW:-

Nitsure, R.R. (2003) this article indicates the E-banking Challenges and opportunities
lies in the banking industry. E-banking has the potential to transform the banking
business as it significantly lowers transaction and delivery costs. This paper discusses
some of the problems developing countries, which have a low penetration of
information and telecommunication technology, face in realizing the advantages of Ebanking initiatives. Major concerns such as the 'digital divide' between the rich and
poor, the different operational environments for public and private sector banks,
problems of security and authentication, management and regulation, and inadequate
financing of small and medium scale enterprises (SMEs) are highlighted.
Picado, Gonzalez & Eckelman (2004) this study investigated the customer
satisfaction using QFD and a research on service quality and customer satisfaction has
become significant in the service industries. This study develops a case study that
considers both external and internal service management issues and subsequent
service innovations based on the framework of quality function deployment (QFD).
Application of the customer window quadrant (CWQ) and the action plan matrix in
the analysis of customer and service elements constitute a different approach for QFD.
Some benefits and disadvantages of the QFD process are discussed as compared to
extant service quality and customer paradigms. Finally, suggestions and directions are
offered for future applications, with particular interest in the online bank service
management issues.
Asghar (2004) the study depicts that E-banking and the web channel are here to stay.
Financial services rely on multiple distribution channels and E-banking represents the
channel of the future. Success stories around E-banking have taken shape through a
mix of innovation and experience. The financial services sector needs to apply both
these factors to their advantage to produce the desired results. Win-win
implementation of E-banking not only requires high online penetration rates and
stable infrastructures, but more importantly, for companies to realize the powerful
revenue opportunity of this business arm vis--vis the traditional brick and mortar
system of operation. Therefore, it is imperative that all E-banking implementations are
seamlessly integrated with the core 'traditional' services thereby making the online
experience truly holistic for the customer.
Kamiya (2006) this article shows that Indian banks are trying to make your life
easier. Not just bill payment, you can make investments, shop or buy tickets and plan
a holiday at your fingertips. In fact, sources tell us, "Our E-banking base has been
growing at an exponential pace over the last few years. Currently around 78 per cent
of the bank's customer base is registered for online banking." To get started, all you
need is a computer with a modem or other dial-up device, a checking account with a
bank that offers online service and the patience to complete about a one-page
application--which can usually be done online. You can avail the following services:
Bill payment Services, Fund Transfer, Credit Card, Online shopping, and Investment
though Online etc. Due to the E-banking the life of an individual becomes easy and
raises the standard of life of the humans.
Hsun, K.S. (2008) this study considers the coherence of the financial service sector
and adopts different observational variables to identify innovation capital (training
and R&D density) and process capital (IT system sufficiency). The results show that

human capital has a direct impact on both innovation capital and process capital,
which in turn affect customer capital; while finally, customer capital affects business
performance. In addition, there is a negative relationship between process capital and
customer capital in the financial service sector. It suggests that in the financial service
sector, customer satisfaction relies on a sufficient degree of training and R&D density.
Intemperate investment on the support of E-banking operation systems may not be a
good answer.
Reeti, Sanjay, and Malhotra, A. (2009) Stated about the Customers perspectives
regarding E-banking in an emerging economy. So that, the author determining various
factors affecting customer perception and attitude towards and satisfaction with Ebanking is an essential part of a bank's strategy formulation process in an emerging
economy like India. To gain this understanding in respect of Indian customers, the
study was conducted on respondents taken from the northern part of India. The major
findings depict that customers are influenced in their usage of E-banking services by
the kind of account they hold, their age and profession, attach highest degree of
usefulness to balance enquiry service among E-banking services, consider security &
trust most important in affecting their satisfaction level and find slow transaction
speed the most frequently faced problem while using online banking.

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.
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.
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.

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. Lack of primary data.
3. 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.
4. Due to continuous change in environment, what is relevant today may be
irrelevant tomorrow.

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

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, ATMs 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 ATMs.

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 thruput Capability and dial-up ATMs 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.

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 customers 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

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 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

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.

Payees 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 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.

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. Einitiatives 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 edeposits (things which could lead either to rapid flows in or out of the bank) it could
be very difficult to manage liquidity.

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 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
banks control over that function. Outsourcing is of course neither new nor
unmanageable but banks should be mindful of the FSAs 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 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.

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.

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

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."

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 yesterdays 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.

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.

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.

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 PORTERs 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 Porters five forces Model to the banking industry, he
observed that one of the critical factors barriers to entry no longer exists

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 nontraditional 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:

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.

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
Fully aware
Had an idea
No idea
Total

Percentage
37%
46%
17%
100%

Figure1.

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.

Table 2.
Awareness of E-Banking services

Percentage

ATM
Debit Card
Credit Card
Phone Banking
Mobile Banking
Internet Banking
Total

26.03%
17.75%
14.79%
11.83%
14.79%
14.79%
100%

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%.

Table 3.

Factors influencing the level of usage

More than
All time availability
Ease of use
Nearness

average
8
22
18

Average
11
7
14

Less than

Not

average
1
2
5

at all
3
1
0

Total
79
64
58

Security
Direct access
Friends/ Relatives
Status symbol

10
12
8
11

13
7
14
14

4
2
7
7

1
0
8
10

40
53
40
49

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.
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

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.

Table 5

Problems identified by the users of E-Banking service

a
b
c
d
e
f
g
h

Factors
Time consuming
Insecurity
ATM out of order
Amount debited
but not withdrawn
Problem of change
in mobile number
Password forgotten
Card misplaced
Card misuse

Percentage
14.82%
11.31%
15.58%
9.80%
10.555
14.57%
12.56%
11.81%

Figure 5

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

FINDINGS OF THE STUDY

The overall percentage of servicemen having complete knowledge about ebanking 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 ebanking 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 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 ebanking 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 demotivating 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.

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. EBanking 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.

SUGGESTIONS
Internet banking would drive us into an age of creative destruction due to nonphysical 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.

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 its
the normal tendency of a human not to have changes work on the old track, thats
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.

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 Martnez, Profiling the Adoption of Online Banking

Services

in

the

European

Union.

Retrieved

www.csu.edu.au/faculty/commerce/ jib/issues/issue02/iss02_egea.pdf

www.banknetindia.com

www.bharatbook.com

from