E banking factors of adoption in india 2-3-4

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E banking factors of adoption in india 2-3-4

  1. 1. INTERNATIONAL2,JOURNAL ISSN MANAGEMENT (IJM) International Journal of Management (IJM), OF 0976 – 6502(Print), ISSN 0976 – 6510(Online), Volume 4, Issue March- April (2013)ISSN 0976-6502 (Print)ISSN 0976-6510 (Online)Volume 4, Issue 2, March- April (2013), pp. 01-08 IJM© IAEME: www.iaeme.com/ijm.asp ©IAEMEJournal Impact Factor (2013): 6.9071 (Calculated by GISI)www.jifactor.com E BANKING: FACTORS OF ADOPTION IN INDIA Shilpi Khandelwal Assistant Professor/Research Scholar Singhania University, Pacheri Bari, Jhunjhunu-333515 ABSTRACT The last decade has witnessed a drastic change in the economic and banking environment all over the world. With the economic and financial sector reforms introduced in the country since early 1990s, the operating environment for banks in India has also undergone a rapid change. Increasingly, more and more people are switching to electronic platforms for executing financial transactions. Internet banking has brought about a 360 degree change in the entire banking industry. The wider usage of cell phone and internet certainly seems to be playing a role in blurring physical boundaries, and unlocking a whole new world of opportunities for banks in tapping newer customer segments and in recording greater volume of transactions. For the banks, technology has emerged as a strategic resource for achieving higher efficiency, control of operations, productivity and profitability. For customers, it is the realization of their anywhere, anytime, anyway banking dream. This has prompted the banks to embrace technology to meet the increasing customer expectation and face the tough competition. This research paper is focused on what are the drivers that drive consumers towards adoption of E banking. How consumers have accepted internet banking and how to improve the usage rate were the focus of research area in this study. KEY WORDS: E banking, Technology, Access, Privacy, Service, Satisfaction. INTRODUCTION Service businesses have been experiencing extensive transformations both at macro and micro levels (Sigala & Christou, 2006). Banking industry is no exception feeling the impacts of future trends. The industry has gone through drastic changes in recent decades, mainly due to deregulation, opening up of global and regional markets, development in ICT technology, and, last, but not least, due to consumers adopting the use of digital networks. The expansion of electronic home banking is definitely one of the most influential drivers in the restructuring of banking services. The previous dependence on large networks of branch 1
  2. 2. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 –6510(Online), Volume 4, Issue 2, March- April (2013)offices has been replaced by digital services (Tinnilä, 2011). As consumes are increasinglyusing internet to purchase products and services, they need convenient, safe and familiarpayment and banking services. Due to increase of mobile devices, this trend of digital self-services in banking, irrespective of time and place, can be expected to continue. Competitionand the constant changes in technology and lifestyles have changed the face of banking.Nowadays, banks are seeking alternative ways to provide and differentiate amongst theirvaried services. Customers, both corporate as well as retail, are no longer willing to queue inbanks, or wait on the phone, for the most basic of services. They demand and expect to beable to transact their financial dealings where and when they wish to. Electronic banking isthe wave of the future. It provides enormous benefits to consumers in terms of the ease andcost of transactions. Access is fast, convenient, and available around the clock, whatever thecustomers location plus, banks can provide services more efficiently and at substantiallylower costs. Electronic banking also makes it easier for customers to compare banks servicesand products, can increase competition among banks, and allows banks to penetrate newmarkets and thus expand their geographical reach. Internet revolution is global phenomenonand going by the current growth statistics, India expects a spurt in the Internet penetration incoming years particularly in the electronic commerce. It is an obvious notion that electronic(internet) banking and payments are likely to advance more or less in tandem with e-commerce. Indian banks are realizing the importance of implementing customer relationshipmanagement (CRM) for acquiring and retaining their customers. This clearly indicates theneed for identifying and addressing the major dimensions that plays a crucial role in theeffective implementation of E Banking among customers.LITERATURE REVIEW: The Internet, much like the ATM that came before it, is fundamentally a newdistribution channel through which banks can deliver traditional banking products andservices. Initially, banks promoted their core capabilities, namely, products, channels andadvice, through the Internet. Then, they entered the Internet commerce market asproviders/distributors of their own products and services. An extensive study conducted in2001 by the Consumer Bankers Association indicates that Internet banking usage remainedstagnant from 1996 to 1998, with less than 10% of the market utilizing the service. Thischaracterizes the early adoption phase where the banking industry, in its strikingtransformation, has embarked on an era of ‘anytime, anywhere’ banking. Conclusions ofstudy undertaken for European Commission on public perceptions (September, 2003) say thatlack of trust has been frequently cited to be one of the key factors that discourage customersfrom participating in e-commerce, while cultural differences affect the formation of trustApart from trust, there are other variables which influence the usage of Internet banking Theyare intention, beliefs, and subjective norms, trust in the bank, attitude, perceived usefulnessand perceived ease of use (Journal of Services Research, 2007). Demography may also affectthe usage pattern of Internet Banking. It is interpreted that the female respondents are yet toget fully involved in Internet purchase (Journal of Internet Banking and Commerce, 2006).Therefore, enhancing the level of service performance acceptance is the major issue to getcompetitive advantages. Service quality has received much attention because of its obviousrelationship with financial performance, customer satisfaction and retentions (Al-Hawari etal., 2005). Suganthi et al. (2001) conducted the review of Malaysian banking sites andrevealed that all domestic banks were having a web presence. Only 4 of the ten major banks 2
  3. 3. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 –6510(Online), Volume 4, Issue 2, March- April (2013)had transactional sites. The remaining sites were at informational level. There are variouspsychological and behavioral issues such as trust, security of Internet transactions, reluctanceto change and preference for human interface which appear to impede the growth of Internetbanking. Corrocher (2002) investigated the determinants of the Internet technology adoptionfor the provision of banking services in the Italian context and also studied the relationshipbetween the Internet banking and the traditional banking activity, in order to understand ifthese two systems of financial services delivery are perceived as substitutes or complementsby the banks. According to the results of the empirical analysis, banks seem to perceiveInternet banking as a substitute for the existing branching structure, although there is alsosome evidence that banks providing innovative financial services are more inclined to adoptthe innovation than traditional banks. Earlier studies (Barczak et al., 1997; Danniel & Strong,1997; Lia et al., 1999; Polatoglu & Ekin, 2001; Devlin & Yeung, 2003) report factors such asconvenience, flexibility, security concern, complexity, and responsiveness being associatedwith a higher propensity to use internet banking. In the context of the above perspective, thispaper will make an attempt to analyze the evolving sphere of Internet banking and some ofthe factors, which affect persons usage of Internet banking.RESEARCH PROBLEM AND OBJECTIVESThe main questions addressed in the research are:1. Which factors influence the customers propensity to use electronic banking as a primary banking channel. (The most important issue in exploring the first problem is comparing the influence of demographic factors and attitudes towards banking-related issues to the selection of the main banking channel.)2. What are the critical success factors among users of the E banking?3. What are the main characteristics of the non users of electronic banking and what are the main obstacles for adoption of electronic banking.RESEARCH METHODOLOGY Qualitative research method was used in the first phase. Pilot testing with leadingbanking professionals of questionnaire helps to get indepth response of target group. Basedon this we have used exploratory research methodology in the second phase. The working ofthe research was started with the two questionnaires (one for users & the other for non users).In this we have used screening criteria to identify the target group for our research.Questionnaire used seven point scales to measure the opinion of different customers ondifferent parameters.Target population: The first criterion to get the targeted samples was the bank customerswhose bank provides Internet banking services. The sample for conducting the surveycontains customers from Jaipur. The survey also focused on covering all the demographicfactors in the sample itself.Sample size: We have surveyed 242 users of internet banking & 118 non users of internetbanking from different banks and from different locality. From these we got 200 replies fromusers of internet banking & 100 replies from non users of internet banking, which fitted inour criteria of target population. Our analysis is based on these 200 users & 100 non users ofinternet banking. 3
  4. 4. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 –6510(Online), Volume 4, Issue 2, March- April (2013)RESEARCH FINDINGS & DISCUSSION The respondent profile who participated in the study is given in Table I. Table Ipresents the demographic characteristics of the 200 respondents (users). About 67 percent ofthe respondents (users) are males and 33 percent respondents are females. The highestcategory using online banking services are in the age group of 20-30 years. Majority of theusers of e-banking services were graduates (45 percent). Table I also presents thedemographic characteristics of the 100 respondents (non users). About 57 percent of therespondents (non users) are males and 43 percent respondents are females. The highestcategory not using online banking services are in the age group of 40-50 years & above 50years. The striking difference between the users & non users of online banking services isthe age factor. While the younger generation is responding well to technological innovationsthe older generation is finding it hard to rely on new technology. Genders also affecting theadoption of online banking services Females are low on side as compared to males when itcomes to online banking services. Table: I Demographic profile of users & non users Internet Banking Internet banking Users non users N=200 N=100 Undergraduate 47 37 Graduate 90 36 Postgraduate 63 27 Male 134 57 Female 66 43 Income above 2 Lacs/annum 102 54 Income below 2 Lacs/annum 98 46 AGE 16-20 2 3 20-30 78 18 30-40 60 16 40-50 40 39 Above 50 20 24The survey conducted for research among 200 users of E banking addressed six differentissues influencing the adoption of Internet banking. The results are presented in Table II. 4
  5. 5. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 –6510(Online), Volume 4, Issue 2, March- April (2013) Table II: Main factors in adopting E banking (200 respondents’ users of E Banking) Scale ranking from 1 (Not important at all) to 7 (extremely important) No.200 1 2 3 4 5 6 7 Not Extremely important important at all Better Prices 1% 3.5% 8% 10.5% 51% 13.5% 12.5% Recommendations 15% 13.5% 17.5% 14% 22% 12.5% 5.5% Better Service 10% 10.5% 13.5% 11.5% 11.5% 25.5% 17.5% Marketing Efforts 13.5% 17.5% 5.5% 16.5% 26.5% 11.5% 9% Better Access 1% 2% 4.5% 9.5 11.5% 45.5% 26% Higher Privacy 0% 1% 3.5% 15.5% 20% 43.5% 16.5%The most important factors in starting to use Internet banking are first and foremost betteraccess to the services (convenience). This is the single most important benefits that outweighany shortcoming of internet banking. Making transactions and payments right from thecomfort of home or office at the click of a button without even having to step out is a facilitynone would like to forego. Keeping a track of accounts through the internet is much fasterand convenient as compared to going to the bank for the same. Even non transactionalfacilities like ordering cheque books online, updating accounts, enquiring about interest ratesof various financial products etc become much simpler on the internet. Higher Privacy &better service (i.e. preferring self service over office service) are other relevant factors inadopting E banking. Better prices were also of above the average importance. Two factorsthat the respondents moderately consider relevant to their adoption decision were banksmarketing activities and personal recommendations from friends and colleagues. Table III: Main obstacles in adopting E banking (results of a study, 100 respondent’s non users of E Banking) Scale ranking from 1 (unimportant reason) to 7 (important reason) 1 7 No.100 Unimportant 2 3 4 5 6 Important reason reason Computers are difficult 41% 17% 8% 13% 12% 7% 2% No access to internet 0% 3% 5% 15% 21% 35% 21% Internet banking is expensive 8% 5% 19% 17% 11% 25% 15% Low security 7% 12% 8% 14% 21% 22% 18% Have had no chance to try 4% 8% 5% 17% 15% 24% 27% I prefer personal contact 11% 1% 3% 7% 3% 61% 14% 5
  6. 6. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 –6510(Online), Volume 4, Issue 2, March- April (2013)The important factors discouraging the use of Internet banking are lack of Internet access andnot having a chance to try out Internet banking in a safe environment (Table III). The firstproblem would be difficult for a bank alone to solve but banks have already responded bycreating possibilities for Internet bank access in their offices. Those customers who feel thathaving no access is an unimportant reason have listed security concerns and lack of tryingpossibilities as most important. Similar research in other countries has revealed that lack ofpersonal contact might be an obstacle in convincing people to use electronic channels; it isobvious from the respondent data that large majorities of the population want to havepersonal contact. The higher number (75%) of non users opting for personal contact could bedue to better service quality at manual banking.. Personal relationship with the staff at thebanks comes handy when requesting for faster loan approval or a special service which maynot be available to the public. The manager has many discretionary powers such as waivingof penal interest or service fees which were often taken advantage of by better acquaintancewith the staff. Additionally personal contact also meant that the banker would provideessential financial advice and insights which are beneficial to the customer. As found innumerous other studies conducted (Polatoglu & Kin, 2001; Devlin & Young, 2003) ours alsorevealed that security forms a major concern for using Internet banking facility. As high as43% of non-users prefer manual banking due to high level of cyber crimes like phishing,hacking, etc.,. This can be the reason why 17% of users do not prefer Internet banking for allthe transactions. This is the biggest pitfall of the internet banking scheme which needs to beguarded against by the common customer. Non-user friendliness software is another crucialissue which holds people back from using the facility. Fees charged for using Internetbanking facility also make consumers reluctant in exploiting such services. Almost 40% ofconsumers who don’t use Internet banking feel that the charges are not reasonable. In fact26% of users also share the same view. This shows that a little cut in these charges mayinduce them to use this service.CONCLUSION & RECOMMENDATIONS:When investigating all the variables and the response by consumers, this study reveals thatthe perception of the consumers can be changed by awareness program, friendly usage, lesscharge, proper security, and the best response to the services offered. Demographics play animportant role in the adoption of E banking facilities as we have seen that age & genderfactor considerably affects the adoption. Also better access i.e convenience plays pivotal rolein enhancing the use of e banking facilities among users.The study also provides the kind of correlation between different factors. In case of theconsumers who don’t use Internet banking services, having all facilities at their disposal,technology was not the biggest issue. Some recommendations for the Banks on the basis ofthis research are: • Banks should ensure that online banking is safe and secure for financial transaction like traditional banking. • Banks should organize seminar and conference to educate the customer regarding uses of online banking as well as security and privacy of their accounts. • Some customers are hindered by lack of access to online banking. They should be provided online banking facilities in the banks. 6
  7. 7. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 –6510(Online), Volume 4, Issue 2, March- April (2013) • Banks must emphasize the convenience that online banking can provide to people, such as avoiding long queue, in order to motivate them to use it by spreading awareness about benefits of online banking. • Banks must emphasize the cost saving that online can provide to the people, such as reduce transaction cost by use of online banking.REFERENCES1. Barczak G.E, Scholder P. & Piling B.K.T. (1997), Developing typologies of consumer motivation for use of technologically based banking services, Journal of Business Research 38 (2), 131-40.2. Black N.J. Lockett A., Ennew C. & Winklhofer H. (2001), Adoption of Internet banking, a qualitative study, International Journal of Retail & Distribution Management 29 (8), 390-8. Innovative Marketing, Volume 3, Issue 4, 20073. Corrocher, N. (2002), Does Internet banking substitute traditional banking? Empirical evidence from Italy,Working Paper, CESPRI, No. 134, November.4. Dabholkar P. & Bagozzi R. (2002), An attitudinal model of Technology based self service: Moderating effect of consumer traits & situational factors, Journal of Academy of Marketing Science 30 (3), 184-201.5. Danniel E. & Storey C. (1997), Online banking Strategies & Management Challenges, Long Range Planning 30(6), 890-8.6. Devlin J. F. & Young Matthew (2003), Insight in to customer motivation for switching to Internet Banking, Int. Rev. of Retail, Distribution & Consumer Research, 13-4, Oct, 375-392.7. European commission (2003), Report on Public perception on Bank September8. Global Information Technology Report 2001-2002: Readiness for the Networked World. The World Economic Forum and the Center for International Development (CID) at Harvard University9. Journal of Internet Banking and Commerce (2006), Impact of demographics on the consumption of different service online in India, vol. 11, No. 3, 353-355.10. Journal of Service Research (2007), Profiling of internet banking users in India, vol. 6, No. 2, March, 77-125.11. Kautz, K, Larsen, E. Å. (2000) Diffusion theory and practice. Disseminating quality management and software process improvement innovations. Information Technology & People, Vol. 13, No. 1, pp 11-2612. Mohammed Al-Hawari, Nicole Harley and Tony Ward (2005), Measuring banks’ automated Service Quality, a confirmatory factor analysis approach, Marketing Bulletin, 16, 1-19.13. Parasuraman A., Zeithami V. & Malhotra A. (2005), A multiple Item Scale for assessing Electronic Service quality, Journal of Service Research 7 (3), 213-234.14. Polatoglu, V. N. & Ekin S. (2001), An Imperial investigation of Turkish consumer acceptance of internet banking service, International Journal of Bank Marketing 19 (4), 156-65.15. Rao, G. R. and Prathima, K. (2003), Internet Banking in India, Mondaq Business Briefing, April 11.16. Rogers, E. M. (1995) Diffusion of Innovations. 4th Ed. The Free Press, 518 p 7
  8. 8. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 –6510(Online), Volume 4, Issue 2, March- April (2013)17. Sigala, M. & Christou, E. (2006). Global trends and challenges in services. Managing Service Quality, 16(4), 345-34818. Suganthi, Balachander and Balachandran (2001), Internet Banking Patronage: An Empirical Investigation of Malaysia, Journal of Internet Banking and Commerce, Vol. 6, No. 1, May.19. Tinnilä, M. (2011). A Review of service frameworks analyzing strategic repositioning: the case of bank services. International Journal of Information Systems in the Service Sector 3(1), 21-38.20. Tinnilä, M. (2012). A Classification of Service Facilities, Servicescapes and Service Factories, “International Journal of Services and Operations Management” (IJSOM), 11(3), 267-291.21. eithml V. (2002), Service excellence in electronic channels, Managing Service Quality 12 (3), 135-138.22. Shilpi Khandelwal, “E Banking Innovations: Trends in India” International Journal of Management (IJM), Volume 3, Issue 3, 2012, pp. 200-215, Published by IAEME23. Dr. Harsh Dev, Suman Kumar Mishra, Ajay Pratap, “Uml Modeling For Online Banking System Using Object Oriented Databases” International journal of Computer Engineering & Technology (IJCET) Volume 3, Issue 2 , 2012, pp. 630-639, Published by IAEME 8

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