Excellence in e-banking services A study of Indian Customers

Authors: Dr. Dhiraj Sharma Asst. Professor SMS PUP Simerpreet Kaur Asst Professor &HOD MGT PIMT MGG

The twenty-first century is characterised by the use of information and communication technology which has revolutionised our working and living patterns. A new era of banking, termed e-banking or Internet banking has emerged, where customers can perform their financial transactions electronically over the internet through their personal computer or laptop at a time convenient to them, without having to be restricted to regular branch operating hours.

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This era can safely be attributed as technology revolution. The quick expansion of information technology has imbibed into the lives of millions of people. Rapid technology advancements have introduced major changes in the worldwide economic and business atmosphere. Information technology developments in the banking sector have sped up communication and transactions for clients . E-banking is also one of the technologies which are fastest growing banking practices nowadays. It is vital to extend this new banking feature to clients for maximizing the advantages for both clients and service providers.

E banking means any user with a personal computer and a browser can get connected to his banks website to perform any type of the virtual banking functions. The term "electronic banking" or e-banking covers both computer and telephone banking. Actually it is the updated 'on-line, real time' system. The system is updated immediately after every transaction automatically. Internet banking, electronic fund transfer, online ticket booking, electronic cheques, electronic clearing settlement system and many more e- services etc have now become the lifeblood of banking industry. The ICICI Bank is the first bank which started online banking in 1996. Currently 78% of its customer base is registered for online banking.

E Banking products and services are offered in a two tier structure A basic tier of Internet banking products includes customer account inquiry, funds transfer and electronic bill payment. A second or premium tier includes basic services plus one or more additional services like brokerage, cash management, credit applications, credit and debit cards, customer correspondence, demat holdings, financial advice, foreign exchange trading, insurance, online trading, opening accounts, requests and intimations, tax services, e-shopping, standing instructions, investments, asset management services etc.

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Various tools of Electronic Banking are: Automated Teller Machine Credit Cards/Debit Cards Mobile /telebanking Internet banking Services include Transactions Answering routine queries, Bill payment service, Electronic Fund transfer (EFT), Electronic Clearing System (ECS) customers Railway Pass, Investing through internet banking, Recharging prepaid phone etc.

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The online channel of Indias second-largest private sector bank, HDFC, is the countrys most popular banking website, as measured by the average number of daily visitors. HDFC attracts an average of 417,360 online visitors per day. Private sector rival ICICI come a close second, with just over 400,000 visitors per day. Axis (159,000) come third while the countrys largest lender, State Bank of India only ranked fourth with just over 132,000. Kotak Mahindra (5th with 44,000 visitors) and Union Bank of India (6th with almost 30,000) performed strongly. The top 10 are rounded off by IDBI Bank, UCO Bank, Bank of India and Corporation Bank. Citigroup, Standard Chartered and HSBC were the top three ranked international bank websites

To study recent developments in e-banking at national and international level. To identify the relationship between demographic variables of the customer with his perception towards e banking services followed by banks

Many researchers at national and international level have worked on ebanking services. Some of the studies are described here. Amongst International studies Egland (1998) studied the estimation of the number of U.S. banks offering Internet banking and analyzed the structure and performance characteristics of these banks Furst et.al. (2000) presented data on the number of national banks in U.S. offering Internet banking and the products and services being offered.He found that only 20 percent of national banks offered Internet banking in the third quarter of 1999. Guru et.al. (2000) examined the various electronic channels utilized by the local Malaysian banks and also accessed the consumers reactions to these delivery channels. It was found that Internet banking was nearly absent in Malaysian banks due to lack of adequate legal framework and security concerns. Jasimuddin (2001) found that within one year of the introduction of Internet service in Saudi Arabia, Saudi banks had shown their Internet presence. 73% of the Saudi banks possessed their own web sites and 25% of the web sites were offering full services over Internet.

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Under national studies Agarwal et.al. (2003) explored the role of e-banking in e-democracy.B Balwinder Singh & Pooja Malhotra (2004) in their study explored the factors affecting a banks decision to adopt internet banking in india. Srivatsa et. al (2007) in their study emphasized that Retail banking has undergone rapid changes with the introduction of new technology based channels and people have adapted to different ways of deriving their banking needs. Dinesh Gupta et. al.(2008) in their study explained the importance of mother tongue in enhancing technology savvy banking services in rural areas. Divya Singhal and V. Padhmanabhan (2008) explore the major factors responsible for internet Mohammed Sadique Khan et.al.(2009), in their study examined the service quality of internet banking (i-banking) services in India from customers perspective. Ahmed Audu Maiyaki. (2010) studied relationships between the effects of electronic banking facilities, customers employment sector and customers agegroup on their choice of banks.

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Typeof study Data Source Sampling Technique Sample size Area Time Period Analysis

:Descriptive . :Primary and Secondary :Convenience :120 :Patiala city and Ludhiana city :December 2010 April 2011 :Simple Percentage and Chi square Test

Visa Europe has launched a new card with a one-time code solution. Four banks including MBNA, a Bank of America company in the UK, Cornr Bank in Switzerland, Cal in Israel and IW Bank in Italy are a party to that. The Visa card with one-time code offers banks an innovative solution to authenticate consumers through an alpha-numeric display and a 12-button keypad built into a conventional credit, debit or prepaid card. It is a neat solution for consumers to use and also contains a battery designed to last three years. The product has been developed in conjunction with EMUE technologies.

New mobile banking technology is providing financial services to Kenyan farmers living in extreme poverty. Nuru International's savings-led Community Economic Development Program integrates Mifos and M-Pesa to disburse micro credit loans as one of many different poverty solutions as a way to end poverty. ATM gold machine in US florida launched on 18/12/2010.The machine has been designed for shopping small gold gifts.The machine can hold up to $150,000 in gold and automatically adjusts its pricing every 10 minutes to reflect the going rate. In Dubai abu dhabi has the similar gold vending Atm machines

India is not at all very behind from this trendy machines. Recently on 22 Oct 2011 Gitanjali has launched its own Diamond and gold ATM machine. It offers nearly 40 products ranging from 10g gold coins embossed with the image of Laxmi, the Hindu goddess of wealth, to diamond-studded pendants with religious motifs priced from US$20 ($25) to US$610. Payments for all purchases are via credit and debit cards and the manufacturers claim that these esoteric ATMs will be especially expedient for last-minute gifts. ATM milk machine in Pune

The total turnover of various payment and settlement systems in India grew by 16% in value terms in 200910. The annual turnover in payment systems has been increasing as a ratio of GDP, consistent with the financial deepening of the economy. In 2010, Indias electronic payments were US$17 trillion (INR786trillion). In 2009, McKinsey estimated Indias payments industry revenues at US$14 billion. Payment flows (both electronic and paper) are 7.8 times the GDP, comparable to many Western countries and emerging economies such as Brazil (7.3), Italy (7.2) and the US. (7.0).

To enable the finalization of a framework for the delivery of basic financial services using mobile phones, the Cabinet Secretariat constituted an inter-ministerial group (IMG) in 2009. The framework envisages the creation of mobile-linked no frills accounts, enabling a basic set of transactions via a mobile PIN-based system. The government plans the implementation of a UID (unique identifier), a 12-digit number for every citizen of India, to enable a national identifier for all citizens. .

MasterCard is developing a payment solution for Aadhar (UID), which should pave the road ahead for integrated electronic payments. The payment system in India has gone through significant transition over the past decadeThe RTGS system has been in operation in India since March
2004 and has been exhibiting rapid growth, not only in terms of volume and value of transactions, but also in the coverage of branches. During the year 200910, a total of 11,172 bank branches were added in the RTGS system, increasing the number of RTGS-enabled bank branches to 66,178. The efficiency of the RTGS system can be judged from the peak volume of RTGS transactions, which reached 248 thousand transactions on 30 March 2010, as compared to the last years peak level of 128 thousand transactions on 29 March 2009.

NEFT (national electronic funds transfer) has been doing extremely well and the product is growing from strength to strength in terms of acceptability, reach and volumes handled. As at end-February 2011, around 75,000 branches of the 100 banks participated in the NEFT system and the volume of transactions processed increased to 13.5 million in February 2011.

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Future Trends Changing customer preferences, mobile and internet penetration, rising cards, growth in disposable income and spend, as well as new technology initiatives have bolstered the payments landscape in India. It is evident that electronic payments will become increasingly popular as a delivery mechanism. However, there will always be customer segments, which will prefer to transact through a cheque or go to a branch to withdraw money. As such, banks will need to decide on the product strategy and create a mapping of their payment portfolio with their customer segments. Banks will need to increase their efforts in migrating customers from paper-based payments to electronic payments if they want to reap their benefits of cost advantages. However, this will require a fundamental change in consumer behavior, which can happen only if the banks and the regulator offer a secure, robust and efficient network, in addition to incentives in terms of convenience and benefits to customers.

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Business leaders of tomorrow would need to build on technologies foundations to deliver electronic payment systems. A robust architectural framework should be built by all banks to enable flexibility in gaining market share and increasing profitability from a more demanding customer base.

Further, the technology framework needs to be developed, ensuring security to protect the reputation and support effective risk management.

To achieve this, the increased acceptance of electronic payments by consumers across India is important

There is no significant relationship between demographic variables of the respondents and their perception on e banking services followed by banks.

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The variables are: Computer knowledge Age Occupation Income Period of relationship with the bank Gender

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Hypothesis1: H0: There is no relationship between computer knowledge and respondents perception on e banking services

H1: There is a relationship between computer knowledge and respondents perception on e banking services

Computer knowledge/s core

Low

Medium

High

Total

ZERO Knowledge

12(10)

7(5.8)

5(4.1)

24

BASIC Knowledge

5(4.1)

12(10)

8(6.6)

25

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DIPLOMA DEGREE POST GRADUAT E

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5(4.1) 5(4.1) 5(4.1)

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5(4.1) 5(4.1) 5(4.1)

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10(8.3) 15(12.5) 16(13.3)

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20 25 26

Knowledege level/Score
`

Low

Middium

High

Total

ZERO Knowledge
`

6.41

6.80

10.80

24

BASIC Knowledge
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6.66 5.33 6.66

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7.08 5.66 7.08

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11.25 9.00 11.25

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25 20 25

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DIPLOMA DEGREE POST GRADUAT E

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6.93 32

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7.36 34

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11.70 54

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26 120

Total

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CALCULATED VALUE =17.39 TABULATED VALUE @ 5%significance level with 8 Df=15.51

Further by applying the chi square test it is clear that calculated value is significantly higher than the tabulated value. So we will reject the hypothesis and conclude that there is a significant relationship between computer knowledge and respondents perception on e banking services.

Hypothesis 2: H0: There is no relationship between Age and respondents perception on e banking services. ` H1: There is a relationship between Age and respondents perception on e banking services.
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Age/score 20-30 30-40 40-50 50-60 60 n above Total

Low 5(4.1) 5(4.1) 5(4.1) 5(4.1) 5(4.1) 25

Medium 5(4.1) 5(4.1) 5(4.1) 5(4.1) 5(4.1) 25

High 22(18.3) 33(27.5) 5(4.1) 5(4.1) 5(4.1) 70

Total 32 43 15 15 15 120

Age(yrs)/score 20-30 30-40 40-50 50-60 60 n above

Low 6.66 8.95 3.12 3.12 3.12

Medium 6.66 8.95 3.12 3.12 3.12 25

High 18.66 25.08 8.75 8.75 8.75 70

Total 32 43 15 15 15 120

Total

25

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Calculated value =17.87 Tabulated value @8Df=15.51 Calculated value > tabulated value

Interpretation of facts: From the chi square test it has been found that the calculated value is higher than the tabulated value. So we reject the hypothesis and conclude that there is a significant relationship between age and respondents perception on e banking services

Hypothesis 3:
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H0: There is no relationship between respondents occupation and their perception

on ebanking
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H1: There is a relationship between respondents occupation and their perception on

e banking
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Chi square :Tabulated value-15.51 Calculated value@ 8Df-18.06

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Calculated value >tabulated value From the chi square test it has been found that the calculated value is higher than

the tabulated value. So we reject the hypothesis and conclude that there is a significant relationship between Occupation and respondents perception on e banking services. As businessmen are using e banking services to a larger extent as compared to service class (both government and private) and students so accordingly the satisfaction level is also high in case of businessmen.

Hypothesis 4:
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H0: There is no relationship between respondents income and their perception on e

banking
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H1: There is a relationship between respondents income and their perception on e

banking
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Chi Square: Tabulated value =15.51 Calculated value @8 Df=16.67

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Calculated value >Tabulated Value From the chi square test it has been found that the calculated value is higher than

the tabulated value. So we reject the hypothesis and conclude that there is a significant relationship between income and respondents perception on e banking services.The respondents with average income of 20000-30000 per month are having highest level of satisfaction

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Hypothesis 5: H0: There is no relationship between respondents Period of relationship with bank

and their perception on e banking

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H1: There is a relationship between respondents Period of relationship with bank

and their perception on e banking

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Chi Square:Tabulated value= 15.51 Calculated value@8Df =3.85

From the chi square test it has been found that the calculated value is lesser than the

tabulated value.
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So we accept the hypothesis and conclude that there is a no relationship between

respondents affiliation with bank and respondents perception on e banking services

Hypothesis 6:
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H0: There is no relationship between gender and respondents perception on e

banking services
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H1: There is a relationship between gender and respondents perception on e banking

services
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Chi square:Tabulated value= 5.99 Calculated value@8Df=3.01

From the chi square test it has been found that the calculated value is lesser than the tabulated value. So we accept the hypothesis and conclude that there is a no relationship between gender and respondents perception on e banking services

Variable Computer knowledge

Chi square result Calculated value =17.39 Tabulated value @8Df=15.51 CV>TV Calculated value =17.87 Tabulated value @8Df=15.51 CV>TV Tabulated value=15.51 Calculated value@ 8Df=18.06 CV>TV Tabulated value =15.51 Calculated value @8 Df=16.67 CV>TV

Hypothesis Reject

Age

Reject

Occupation

Reject

Income

Reject

Period of relationship with Tabulated value= 15.51 the bank Calculated value@8Df =3.85 CV<TV Gender Tabulated value= 5.99 Calculated value@8Df=3.01 CV<TV

Accept

Accept

The study revealed that the demographic variables like age, education, computer knowledge, occupation, income are having strong relationship with customer perception on e banking services, whereas period of affiliation with the bank and gender are not having any relationship with the perception of customer. Further the test results imply that people of less and lower middle age group have given highest score, so banks have to decide on strategies which will attract even the high middle aged and old aged people.

Since computer knowledge plays important role in customer perception on e banking practices, banks can give proper training to customers in usage of e banking services. Banks have to educate their employees to give proper training to the customers to use the facilities provided through e banking for better usage even for the old aged customers. Banks can provide best user interface which is very friendly and easy to use, in order to attract more customers. Many companies like Diebold etc. have started offering ATMs with user friendly features like biometrics, and user screen in local language. Since businessmen have got good perception on e banking services, banks have to adopt right strategies to attract even people of other categories like government employees, students, private employees etc.

The study also revealed that period of relationship with the bank is not having relationship with customer perception. This means that even people who are maintaining accounts in a bank for a longer period may also be unsatisfied but they will continue with the bank because of their thinking as people feel that they will have to go under complicated procedures of opening up a new account or they resist shifting .

Banks have to look into this category of people and they should educate and offer the best services to them to attract them. Finally, to compete more efficiently and effectively in the marketplace, the banks should provide proper training to the employees and through them to the customers. The banks are investing heavily on Information technology but unless banks arrange demonstration programs/Refresher courses for the employees ,neither they can deliver best knowledge to customers and nor they can train them properly