SYNOPSIS

For Ph.D. in Management

DEVI AHILYA VISHWAVIDHYALAYA, INDORE (MP)

Topic:

“Impact of Technological Changes on Customer

Experience in Banking Sector-
A Study of select Banks in Madhya Pradesh ”

Research Scholar Supervised by:

_________________ _________________
Siddharth S Jain Dr. Vivek Sharma
Assistant Professor, IMS

_____________________
Research Centre
Institute of Management Studies
 Technological Changes & Banker Customer Relationship-
A Study of select Banks in Madhya Pradesh

Introduction:
The advent of technology has played a key role in modernization of the industries over
time. It has been witnessed that this modernization has led to a major paradigm shift in the
human interaction part of these industries.
Banking industry in India is a substantial part of the economy, especially, the service
sector. India has seen many phases of development in banking system; Indigenous-banking
system was being carried out by sahukars, chettis, mahajans etc. They placed funds to the
disposal of king at wars and also lent money to traders and craftsmen. The origin of modern
banking in undivided India can be traced back to The General Bank of India & Bank of
Hindustan in 1786‡; In 1906, the Swadeshi Movement inspired local businessmen and political
figures to create banks of & for the Indian community.
This need-based evolution of the Indian banking system has come a long way since its
initiation. Since the post independence era, the Indian Banking System has been in a repair
mode. The economy needed a revival to bridge the gap between rich and poor and feed the
fund-needy with formal credit, which was done in 2 phases of nationalization (1969 & 1980). In
1969, 14 banks were nationalised and in 1980, 6 more banks were nationalised.
The Indian economy is looking forward to a major transformation, with several policy
initiatives at arm’s length. The encouraging business sentiments, spending on robust
infrastructure, controlled inflation in the economy and improved consumer confidence are
factors, which predict the country’s promising economic growth. All these factors suggest that
India’s banking sector is also headed onto the growth trajectory, as the rapidly growing business
and earning/spending individuals would have to resort to commercial banks for their credit
needs.
As per the RBI, India’s banking sector is sufficiently capitalised and well-regulated. The
financial and economic conditions in the country are far superior to any other country in the
world. Credit, market and liquidity risk studies suggest that Indian banks are generally robust
and have endured the global recession well.

‡ BANKING LAW AND PRACTICE MODULE OF ICSI- CS PROFESSIONAL PROGRAM- P.24

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 Figure depicting evolution of Indian Banking industry from 1921 till date.

Indian banking industry has recently witnessed the roll out of innovative banking models
like payments and small finance banks. RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.
The digital payments system in India has evolved the most among 25 countries with
India’s Immediate Payment Service (IMPS) being the only system at level 5 in the Faster
Payments Innovation Index (FPII).§
In August 2017, Global rating agency Moody's announced that its outlook for the Indian
banking system was stable. In November 2017, Global rating agency Moody's upgraded four
Indian banks from “Baa3” to “Baa2”.

§ - according to an FIS report, https://www.ibef.org/industry/banking-india.aspx

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Market Size:
The Indian banking system consists of
 27 Public Sector Banks,
 26 Private Sector Banks,
 46 Foreign Banks,
 56 Regional Rural Banks,
 1,574 Urban Cooperative Banks and
 93,913 Rural Cooperative Banks, in addition to cooperative credit institutions.
Public-sector banks control more than 70 per cent of the banking system assets, thereby
leaving a comparatively smaller share for its private peers. Banks are also encouraging their
customers to manage their finances using mobile phones.
As the Reserve Bank of India (RBI) allows more features such as unlimited fund
transfers between wallets and bank accounts, mobile wallets are expected to become strong
players in the financial ecosystem.
The unorganised retail sector in India has huge untapped potential for adopting digital
mode of payments, as 63 per cent of the retailers are interested in using digital payments like
mobile and card payments, as per a report by Centre for Digital Financial Inclusion (CDFI).

ICRA estimates that credit growth in India’s banking sector would be at 7-8 per cent in FY
2017-18.
The advancements in technology have brought the mobile and Internet banking services
in picture. Almost every banking company is laying emphasis on providing services to their
clients via Internet and now largely through smartphones (via Mobile Apps), in order to enhance
the overall banking experience as well as give them a competitive edge.
IBEF Banking report of April 2018 (https://www.ibef.org/download/Banking-Report-
April-2018.pdf) drills down into various research and gives the following observations:
1. Value of Public Sector Banks assets increased to US$1.52 Trillion in FY17 from
US$1.34 Billion.
2. RBI has allowed, regional rural banks with net worth of at least US$15.28 million to
launch Internet banking facilities.
3. As of February 2017, Airtel Payments Bank opens over 1 lac accounts in UP of which
60% have been opened in rural areas.
4. Indian demography has several advantages forming a strategic edge for banking
industry, such as robust demad due to increasein working population, technology

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 oriented innovations in the industry such as ATMs, Mobile Apps, UPI etc., strong
fundamentals due to rising fee income levels, high net interest margins imroving the
revenue mix, Policy support in terms of private sector participation, healthy regulatory
oversight and credible monetory policy by RBI.
What next?
Enhanced spending on infrastructure, speedy implementation of projects and
continuation of reforms are expected to provide further impetus to growth. All these factors
suggest that India’s banking sector is also set for robust growth as the rapidly growing
businesses would turn to banks for their respective credit needs.
Also, the advancements in technology have brought the mobile and internet banking
services to the forefront. The banking sector lays prominence on providing improved services to
their clients and also upgrading their technology infrastructure, in order to enhance the
customer’s overall experience as well as give banks a competitive edge.
Many banks, including HDFC, ICICI and AXIS are exploring the option to launch
contact-less credit and debit cards in the market shortly. The cards, which use near field
communication (NFC) mechanism, will allow customers to transact without having to insert or
swipe.
Mr Bill Gates, Co-founder of Microsoft Corp, has stated that India will move quite
rapidly to a digital payments economy in as little as seven years, based on the introduction of
digital payment banks combined with other things like direct benefit transfers, universal
payments interface and Aadhaar.

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 Review Of Related Literatute

Do better customers utilise electronic distribuiton channels: A study of PC Baking- Lorin

M. Hitt & Frances X. Frei

Many service firms are pursuing electronic distribution strategies to augment existing physical
infrastructure for product and service delivery. But little systematic study has been made for
whether and how characteristics or behaviors might differ between customers who use
electronic delivery systems and those who use traditional channels. Authors have explored these
differences by comparing customers who utilize personal-computer-based home banking (PC
banking) to other bank customers. Authors have concluded through case studies and detailed
customer data from four institutions that PC banking customers are apparently more profitable,
principally due to unobservable characteristics existing before the adoption of PC banking.

Demographic characteristics and changes in customer behavior following adoption of PC

banking account for only a small fraction of overall differences. It also appears that retention is
marginally higher for customers of the online channel.

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The Business of Banking: Looking to the Future—Part II- Julie L. Williams and James
F.E. Gillespie, Jr. (The Business Lawyer- Vol. 52, No. 4 (August 1997), pp. 1279-1331)

The above article analyzes the nature of national bank’s "incidental powers." A review of the
case law addressing national banks' incidental powers discloses several distinct forms of the
concept:

1) activities that facilitate operating a bank as a business enterprise,

2) activities functionally adjacent to the business of banking that enhance the quality and
efficiency of its content and delivery, and
3) activities that optimize the use and value of a bank's facilities and competencies, or
enable the bank to avoid economic waste in its banking franchise.

Further, a review of OCC decisions regarding the role of technology in the banking business
indicates that these component facets of national banks' incidental powers are adaptable and
applicable to the modern banking environment.

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Market Concentration and the Diffusion of New Technology in the Banking Industry:
Timothy H. Hannan and John M. McDowell- (The Review of Economics and Statistics- Vol.
66, No. 4 (Nov., 1984), pp. 686-691)

This study examined the relationship between market concentration and diffusion of ATMs in
the banking industry. The data allows us to test the role of market concentration in the diffusion
process in a way which avoids the problem of inter industry differences and few degrees of
freedom faced in previous studies. The impact of market concentration on the timing of first
market introduction is also examined. Market concentration is found to have a positive effect on

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both the factors, namely; rate of diffusion of this new technology and the proportion of firms
having innovation at the end of study period.

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Indian Banking Industry: Challenges And Opportunities: Krishn A Joshi, Vijay Goyal-
International Journal of Business Research and Management, Volume (3) : Issue (1) : 2012

The banking industry in India has a huge canvas of history and has also achieved new vistas
with the advent of time. The use of technology has brought a revolution in the working style of
the banks. Nevertheless, the fundamental aspects of banking i.e. trust and the confidence of the
people on the institution remain the same. In the recent times when this paper was written, the
authors observed that the banking business has undergone a major shift bringing new risk
exposure.

The article attempts to identify general sentiments, challenges and opportunities. Divided into
three parts,

 The article, in its first part includes the introduction and general scenario of Indian
banking industry.
 The second part discusses the various challenges and opportunities faced by Indian
banking industry.
 Third part concludes that urgent emphasis is required on the Indian banking product and
marketing strategies in order to get sustainable competitive edge over the intense
competition from national and global banks.

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Determinants of customer satisfaction in retail banking: Levesque and McDougall (1996)-

International Journal of Bank Marketing, Vol. 14 Issue: 7, pp.12-20

Authors, in this Article have investigated the major determinants of customer satisfaction and
future intentions in the retail bank sector. They identified the determinants which include

 service quality dimensions (e.g. getting it right the first time),

 service features (e.g. competitive interest rates),
 service problems,
 service recovery and
 products used.

It was found, in particular, that service problems and the bank’s service recovery ability have a
major impact on customer satisfaction and intentions to switch between banks.

----

Modelling the impact of customer‐ employee relationships on customer retention rates in a

major UK retail bank: M. Clark: Management Decision, Vol. 35 Issue: 4, pp.293-301.

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Author studied the impact of customer-employee relationships on customer retention rates in a
major UK retail bank. His study reveals that employee and customer perceptions of service
quality are related to customer retention rates and that employee and customer perceptions of
service quality (customer perceptions) are related to each other.

----

Digital banking, customer experience and bank financial performance: UK customers’

perceptions: https://goo.gl/YCnuEc - C. Mbama & Patrik O. Ezepue.

This study examines customers’ perceptions of digital banking, customer experience,

satisfaction, loyalty, and financial performance in UK banks.

The research consists of a survey of UK bank customers’ perceptions of the above premises; use
of banks’ financial reports to obtain financial performance ratios; Multivariate Factor Analysis,
Structural Equation Modelling, and ANOVA tests to explore research hypotheses on the
relationships among the study factors.

The main factors which determine customer experience in digital banking are service quality,
functional quality, perceived value, employee-customer engagement, perceived usability and
perceived risk. There is a significant relationship among customer experience, satisfaction and
loyalty, which is related to financial performance.

This study concentrates on UK bank customers which limits its generalisability to other banks
globally. Some significant effects of customer characteristics on the study factors were
observed, which have useful implications for digital banking, bank marketing services, and bank
financial performance.

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Objectives Of The Proposed Research:

1. To study technological changes in Banking in last 10 years.

2. To study the effect of technological changes on Banker Service Delivery.

3. To study the impact of technological changes on customer experience in Banking Industry.

4. To suggsest measures for better usage of technological advancements.

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Proposed Methodology Of The Research Work:

The Research Type will be:

1. Exploratory; since the topic is relatively new therefore study will be conducted through
secondary research i.e. review of available literature, informal qualitative approaches
such as discussions with customers etc.
2. Causal; since the proposed research aims to study the impact of technological changes in
banking industry on customer experience.

The Data for the research will be primary as well as secondary. Primary data will be collected
through self structured questionnaires and secondary data will be collected through industry
reports, bulletins issued by regulatory bodies and newspaper articles and news.

Primary Data will be collected through questionnaires which will be circulated using Google
forms and also personal interaction with target sample.

The population considered in the research is banking customers of Madhya Pradesh.

The sample size out of the population will be 1000 customers, ranging from the age of 18 to 30
years of age. The sample is taken so in order to keep the study specific. The details of the
sample are as follows:

Target Districts are the ones with top population density, i.e. Indore, Bhopal, Ratlam, Jabalpur.

Target Banks with 200 to 250 Customers each:

1. State Bank of India-
2. ICICI Bank
3. HDFC Bank Limited
4. HDFC Limited
5. Any other bank on basis of data collection.

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Expected Outcome Of The Proposed Work:

The study aims to derive a correlation between TECHNOLOGICAL CHANGES (specific

parameters like turnaround time, transaction time, waiting time, money transfer settlement
duration, customer retention, extent of extended relationship after primary enrolment with a
bank etc.) and CUSTOMER EXPERIENCE.

The findings of this study will primarily be helpful to suggest bankers on how they can further
improvise customer experience and as a result of the same, how can they increase their revenues
by penetrating into the existing customer base, market development and product development.

Also, this study will open further scope of research on the topic with new variables as the
technological changes are continuously happening in the banking industry as well as customer
experience can never be defined by limited number of variables.

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Webliography:

S.no URL/Filename
1 https://www.ibef.org/industry/banking-india.aspx
2 https://www.ibef.org/download/Banking-Report-April-2018.pdf
3 Do better customers utilise electronic distribuiton channels: A study of PC Baking-
Lorin M. Hitt & Frances X. Frei
4 The Business of Banking: Looking to the Future—Part II- Julie L. Williams and
James F.E. Gillespie, Jr. (The Business Lawyer- Vol. 52, No. 4 (August 1997), pp.
1279-1331)
5 Market Concentration and the Diffusion of New Technology in the Banking
Industry: Timothy H. Hannan and John M. McDowell- (The Review of Economics
and Statistics- Vol. 66, No. 4 (Nov., 1984), pp. 686-691)
6 Indian Banking Industry: Challenges And Opportunities: Krishn A Joshi, Vijay
Goyal- International Journal of Business Research and Management, Volume (3) :
Issue (1) : 2012
7 Determinants of customer satisfaction in retail banking: Levesque and McDougall
(1996)- International Journal of Bank Marketing, Vol. 14 Issue: 7, pp.12-20
8 Modelling the impact of customer‐ employee relationships on customer retention
rates in a major UK retail bank: M. Clark: Management Decision, Vol. 35 Issue: 4,
pp.293-301.
9 Digital banking, customer experience and bank financial performance: UK
customers’ perceptions: https://goo.gl/YCnuEc - C. Mbama & Patrik O. Ezepue.
10 http://www.iibf.org.in/documents/reseach-report/Report-26.pdf
A study of customer service quality of banks in India- Dr. Manasa
Nagabhushanam, Banglore
11 Rating criteria for banks and financial institutions- Report by CRISIL

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