A Study on the Customer Response Towards Mobile Banking

CHAPTER 1 INTRODUCTION

Introduction

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

Customer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator within business and is part of a balanced scorecard. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. Organizations need to retain existing customers while targeting noncustomers; Measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace. Customer satisfaction is an abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviours such as return and recommend rate. The level of satisfaction can also vary depending on other factors the customer, such as other products against which the customer can compare the organization's products. The measures of customer satisfaction involve a survey with a set of statements using a scale. The customer is asked to evaluate each statement in terms of their perception and expectation of performance of the service being measured. The tremendous advances in technology and the aggressive infusion of information technology had brought in a paradigm shift in banking operations. Internet banking that has revolutionized the banking industry worldwide has turned out to be the nucleus issue of various studies all over the world. However there has constantly been a significant gap between bankers and customers with regard to mobile banking in India. The purpose of this project is to help fill significant gaps in knowledge about the mobile banking landscape in India. The project presents data, drawn from a survey of opinion of mobile banking users Page 2

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and their satisfaction level. It investigates the extent of usage, the profile of customers and response towards mobile banking using univariate statistical analysis. It was also found that there is significant gap between the perception of the customers and the service providers i.e. the bankers. After Internet Banking, Mobile Banking or M-Banking has become the buzz word in the industry. It’s a fact that Internet Banking has given a boost and has shown a successful way to consider it as a good alternative procedure against physical branch banking. Now where ever you are, you can access your bank account and you can do lot more things like checking your account balance, transfer to some other account, pay your utility bills online and so on, just by comfortably sitting at your home or office. But, the technical disadvantage of Internet Banking is, you have to have internet connectivity and a computer. And here Mobile Banking comes into the picture to address the basic limitation of Internet Banking. If we only consider Asian developing countries, the availability of mobile connectivity is really huge. Where one may not find out a landline telephone or an internet connection, but still in those remote places getting mobile connectivity is not difficult at all with technology advancements. So, Mobile Banking has given the traditional banking a newer look “Anywhere Banking”. Now you don’t need a PC or a laptop with internet connectivity, just you need your cell phone with you. Considering the Asian economy countries like China, India and Korea have seen the mobile boom in last one decade .In Korea, more than 70% of the entire population is carrying mobile. There are over 200 million mobile phone subscribers in India and the number continues to explode. Financial services companies are now working with mobile payment players like mChek to offer innovative mobile phone solutions to urban and rural Indian population.

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Mobile banking has the potential to bring a whole host of people that have no/little access to land lines/internet connections onto the electronic platform – an innovative way to generate financial inclusion. To do so successfully will require customer training, technology stabilization and managing carefully the ‘know your customer’ issues.

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CHAPTER 2 RESEARCH DESIGN

Research Methodology Page 5

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In order to learn, study, assimilate, absorb and then reasonably rationalize only theoretical knowledge is not enough. Analysis from the theory is totally incomplete without a practical angle. Keeping this in mind, the research has been conducted on “Customer Response towards mobile banking”. The area selected is New Bel Road area of Bangalore. The aim was to gain practical knowledge about the consumer behavior. This practical aspect is an invaluable source of knowledge in the study of this important branch that is marketing.

2.1 Background of the study ATM and internet banking have been around in India for a while. While both modes have had some success, penetration and use levels have been moderate. While ATMs offer convenience, they pose a perceived security threat in India given instances of mugging around them. Senior citizens and women appear reluctant to use ATMs if they have a choice to go to a branch and withdraw money in safety. The security situation in India shows little sign of improvement and therefore a large scale proliferation of ATMs will remain a challenge. Internet banking, on the other hand, relies on PC and internet penetration. Estimates suggest that there are approx 40 million internet users which are expected to rise to 100 million soon – despite this growth, penetration and use levels remain low, especially in non-metro areas. Research also suggests that internet banking is picking up amongst the target user group.

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While internet penetration and use in India is relatively low, mobile phone penetration is much higher and growing rapidly. There are over 200 million mobile phone subscribers in India and the number continues to explode. Financial services companies are now working with mobile payment players like mChek to offer innovative mobile phone solutions to urban and rural Indian population. Reserve Bank of India has restrictions on non-bank involvement in money transfer. Therefore, development of mobile financial services applications is being sponsored primarily by banks in India.

2.2 Statement of the problem Though Bangalore has surpassed the silicon valley of USA in software exports and technological innovations, the level of mobile banking users in the city is substantially low. Though the citizens for checking mails, browsing, chatting etc use mobile it is not used for banking transaction on large scale. The study is conducted to analyze the usage of mobile for banking purpose. The study is conducted to highlight the reasons for customer’s preference to mobile banking and measure their satisfaction level the study is titled “A study on customer response towards mobile banking”.

2.3 Need and importance of the study 1. To understand the profile of the customers availing mobile banking facility. 2. To understand the attitude of users towards mobile banking contents.

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2.4 Objectives of the study 1. To know about the level of awareness of mobile banking among the

people who use this service. 2. To know the level of usage of mobile banking. 3.

To analyse the gap between the perceptions of banks offering services and the customers availing the facility.

4. To understand the usage pattern and preference of the customers with regard to frequency, place and banks. 5.

To understand the attitude of the users making banking transactions through the mobile.

2.5 Research Procedure The process of designing a research study involves many inter-related decisions. The most significant decision is the choice of research approach as it determines how the information is obtained. Selecting particular tool for data collection, the research has adopted the Descriptive Research method. This method focus in seeking insights into the general nature of the problem and to focus on the relevant variables that needs Page 8

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to be considered to carry on the research. Through exploratory research the researcher can establish priorities among the research questions for the learning about the practical problems of carrying out the research.

Sampling Technique Sample is the fraction of population. Sampling is a technique or a method of selection of samples. According to the Random Sampling Method it is assumed that entire population is Homogeneous and the samples are selected in such a way that each and every unit of population has equal chance of occurrence or equal probability of occurrence. Sampling Population The population of mobile banking users in areas of New Bel Road is estimated to be 1000. From the above users, 50 respondents were selected based largely on random sampling method.

Instrumentation Technique Primary data generation was necessary to obtain the information pertaining to the research problem in the study. The need for primary data requires that a questionnaire is to be developed. Developing a suitable questionnaire is the most challenging aspect of the research. A questionnaire, which is also familiarly known as “interview schedule” with a format consisting of questions sequentially ordered to obtain the information that are relevant to the objectives of the study. The questions in the questionnaire can be broadly classified into two major categories. A. Open ended questions B. Closed end questions. Page 9

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

Actual collection of Data Collection of original facts by the researcher forms primary data. There are two types of data collection: 1. Primary data, and 2. Secondary data. Primary Data: Information collection specifically for the purpose of investigation, as on one hand is known as primary data or raw data. These are not readily available. This research work mainly depends on questionnaire. With reference to these questionnaires were distributed to the respondents to collect the required data. In case of busy respondents the information was asked orally and filled by the researcher himself. The questionnaires thus collected were administered to the sample and analyzed.

Secondary Data Secondary data are those collected from interviewing party, secondary data includes data for the study and includes appropriate materials from journals, bank websites, text books, and information from internet has also been required wherever necessary. Statistical Techniques adopted Statistical tools like bar chart, pie chart, frequency, percentages, averages and column charts have been used to study.

2.6 Limitations of the study Page 10

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1. The sample size was restricted to hundred customers. 2. Resources like time and cost was a constraint. 3. The study was conducted in Bangalore city. So the findings and conclusion drawn are applicable to Bangalore only. 4. The methods used for analysis and interpretation purpose may have some limitations of their own and some errors can always creep in. 5. The sample size is small; hence the result cannot be generalised.

CHAPTER 3 INDUSTRY PROFILE Page 11

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Industry Profile History of Banking in India Without a sound and effective banking system in India it cannot have a healthy economy. The banking system in India should not only be hassle free but it should be able to meet new challenges posed by the technology and many other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Page 12

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The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: • Early phase from 1786 to 1969 of Indian Banks. • Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms. • New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991. To make this more descriptive, I prefix the scenario as Phase I, Phase II and Phase III.

Phase I The General Bank of India was set up in the year 1786. Bank of Hindustan and Bengal Bank came to India at later stages. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Page 13

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Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those day’s public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.

Phase II Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: • 1949: Enactment of Banking Regulation Act. • 1955: Nationalisation of State Bank of India. • 1959: Nationalisation of SBI subsidiaries. • 1961: Insurance cover extended to deposits. • 1969: Nationalisation of 14 major banks. Page 14

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• 1971: Creation of credit guarantee corporation. • 1975: Creation of regional rural banks. • 1980: Nationalisation of seven banks with deposits over 200 crore. After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%.

Phase III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M. Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure. Nationalization of Banks in India The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. It nationalized 14 banks then. These banks were mostly owned by businessmen and even managed by them. • Central Bank of India.  Bank of Maharashtra.  Dena Bank. Page 15

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 Punjab National Bank.  Syndicate Bank.  Canara Bank.  Indian Bank.  Indian Overseas Bank.  Bank of Baroda.  Union Bank.  Allahabad Bank.  United Bank of India.  UCO Bank.  Bank of India. Before the steps of nationalization of Indian banks, only State Bank of India (SBI) was nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalization of Seven State Banks of India (formed subsidiary) took place on 19th July, 1960. The State Bank of India is India's largest commercial bank and is ranked one of the top five banks worldwide. It serves 90 million customers through a network of 9,000 branches and it offers -- either directly or through subsidiaries -- a wide range of banking services. The second phase of nationalization of Indian banks took place in the year 1980. Seven more banks were nationalized with deposits over 200 crores. Till this year, approximately 80% of the banking segment in India was under Government ownership. Schedule Commercial Banks in India The commercial banking structure in India consists of I. Scheduled commercial banks in India. II. Unscheduled banks in India. Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn Page 16

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includes only those banks in this schedule which satisfy the criteria laid down under section 42 (6) (a) of the Act. As on 30th June, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches. The scheduled commercial banks in India comprise of State bank of India and its associates (nationalized banks (19), foreign banks (45), private sector banks (32), co-operative banks and regional rural banks. "Scheduled banks in India" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank". "Non-scheduled bank in India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank". Overview of the Banking Structure in India The structure of the banking system in India consists of two parts 1. Unorganised Sector, and 2. Organised Sector. The organized sector comprises of money lenders and indigenous bankers. The organized sector consists, of commercial banks, cooperative banks and regional rural banks. Beside these institutions which provide short-term credit to business, there are number of specialized terms lending institutions which provide long term requirements of industry agriculture and foreign trade. The Page 17

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Reserve Bank of India, the central bank of the country is at apex of the banking structure in India. Cooperative Banks The cooperative banks and societies have been playing very useful role in meeting the requirements of people in the rural areas. The cooperative banks, originated with the enactment of the cooperative credit societies Act of 1904. The Act provided for the establishment of credit societies Act, 1912 provided for the establishment of co-operative central banks by a union of primary credit societies. The Maclagan committee appointed in 1914 recommended the establishment of a state cooperative Apex bank. Following this, central cooperative banks were established in many provinces. But the cooperative movement to cater to the needs of agriculturists received momentum only during the post-independence period. The co-operative Banking Structure in India is a pyramid type of a 3 Tire structure comprising 1. Primary agricultural cooperative credit societies, at the village level. 2. District central cooperative banks at the district level. 3. The state cooperative bank at the state level. Primary co-operative credit societies The primary co-operative credit societies function at the base of the cooperative credit system. There are primary credits co-operative societies, service co-operative societies, marketing society’s etc. They are specialized institutions discharging specific functions. These societies raise funds by way of share capital, deposits from member’s non-members and loans from district central cooperative banks. Primary agricultural credit cooperatives provide short-term loans, medium term loans to farmers to buy seeds, fertilizers, implements etc. Page 18

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The agriculture marketing societies help farmers in securing good prices for the products produced by them, by means of marketing. The land mortgage (now called land developed banks) banks provide long term loans to farmers to buy capital equipment and make permanent improvements on the land. Most of the cooperative credit banks, apex banks, commercial banks or regional rural banks. The primary agricultural credit societies which occupy a predominant position in the cooperative structure are socio-economic organizations established for betterment of the members in particular and the local people in general. Central Cooperative Banks A central cooperative bank is a federation of primary credit societies in a specified area. They are established in each district to serve as a refinancing agency to the primary credit societies. The primary societies are the members of these banks. Since the membership is open only to co-operative societies, the central cooperative banks are called “pure central banks”. The central cooperative banks obtain funds from the state cooperative apex bank. They also borrow from commercial banks and NABARD. They carry on commercial banking activities in the concerned districts like accepting deposits from the societies and the public, advancing loans (short and medium) to primary cooperative societies on the security of first class gilt-edged securities. They also discount cheques and hundies of cooperative organizations. They also act as “balancing centres” making available temporary excess funds of one primary cooperative society to another which is need of them. State Co-operative Banks The state co-operative banks operating at the top of cooperative credit structure are a federation of central cooperative banks. They are also known as “APEX Basks”. They act as watch dog of the co-operative banking structure in the state. They receive deposits from the public and local boards, municipalities Page 19

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etc., Further, they receive loans at call and short notice from the commercial banks and the Reserve Bank of India. The state governments contribute a certain portions of their working capital. They lend money to central cooperative banks which in turn lend it to primary societies. They act as inter mediatory between the state co-operative bank and primary credit societies. Urban co-operative Banks Urban co-operative banks are similar to commercial banks in their operation. Normally, person living in certain urban areas. Classes like traders, merchants, professionals and salaried classes are members of urban co-operative banks. In some banks, there is a provision for admitting only individuals as members. They are lending and borrowing institutions like commercial banks. These banks generally accept current, savings and fixed deposits. They provide loans only to their members. All major cities in India are having a good number of co-operative banks. Land Development Banks Besides short term and medium term loans, agriculturists also require long term loans for effecting permanent improvement in land, for purchase of pump sets, tractors, digging up of wells etc. To cater to the long term needs of agriculturists, land development banks have been meet the long term credit requirements of the agriculturists. It is a two tier structure with central land development banks at the state level and primary land development banks at the taluk or district level. The banks of Tamilnadu, Bombay, Andhra Pradesh and Karnataka are of this type. In states like Gujarat, Uttar Pradesh, and Jammu and Kashmir, there is a unitary structure, i.e.; the Apex land development banks operate directly through their own branches at the district or taluk level. Today all states are having land development banks. The land development banks obtain funds mainly by the issue of long term debentures. The debentures are Page 20

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guaranteed by the state government and are subscribed by the life insurance corporation banks and state bank of India. They specialize in granting loans against agricultural land. They lend money at low rates of interest. Now days the land development banks are giving long term loans to land owners to buy agricultural machinery and equipments, digging of wells, installation of pump sets etc. They give loans only for productive purposes.

Miscellaneous Functional Societies In recent years, co-operative societies have been set up to serve a number of useful purposes. Housing co-operatives have been organized on federal structure. At the state level, there are central co-operative societies and at the local level there are primary house building co-operative societies the central co-operative housing corporation obtains funds through the issue of debentures guaranteed by the state government. All the primary housing societies are the members of the central housing corporation. There are consumer co-operative societies which are employees of a particular organization and consumers in a locality from either a credit or noncredit society. Non-credit societies are formed with a view to sell consumer products at reasonable prices.

Regional Rural Banks (RRBs) The limited role played by commercial banks in providing rural credit and the weakness and deficiencies of co-operative banks in providing credit to small and marginal farmers, rural artisans and the weaker sections of the society, led to the appointment of a working group. In July, 1975, the government of India appointed a working group under chairmanship of Sri M. Narasimhan to review the position of rural lending to targeted groups. The Page 21

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working group identified various weaknesses of the commercial banks and cooperative credit agencies and felt that these institutions would not be able to fill the regional and functional gaps in the rural credit system and therefore, recommended a new type of institution. Accepting the recommendations the government promulgated it the regional rural banks act, 1976. The object of setting up the regional rural banks was to develop the rural economy by providing for the development of agriculture, trade, commerce, industry and other productive activities in rural areas, credit and other facilities, particularly to small and marginal farmers, agriculture labourers artisans and small entrepreneurs.

The regional rural banks are generally sponsored by major commercial banks with the participation of state and central governments. To start with, 5 regional rural banks were set up on 2nd October 1975. The share capital of the regional rural banks is provided by the central government up to 50 percent, state governments, up to 15 percent, and the balance is subscribed by the Page 22

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sponsored commercial bank. The management of the regional rural bank is vested in 9 member board of directories headed by a chairman appointed by the government of India. The central government and the sponsoring bank nominate 3 members each to the board, and the state government nominates 2 members. The sponsor bank, besides subscribing to the capital, provides assistance to it in several ways, such as, financial accommodation, deputation of managerial and other staff and arranging the recruitment of staff and their training. They are required to provide credit adequately to the development of agriculture, to small and marginal farmers, agricultural labourers, and meet the credit needs of rural poor who are taking up self-employment activities.

Mobile Banking

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Mobile banking (also known as M-Banking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device. The advent of the Internet has revolutionized the way the financial services industry conducts business, empowering organizations with new business models and new ways to offer 24x7 accessibility to their customers. The ability to offer financial transactions online has also created new players in the financial services industry, such as online banks, online brokers and wealth managers who offer personalized services, although such players still account for a tiny percentage of the industry. Over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world and it is still growing at a rapid pace. According to a study by financial consultancy Celent, 35% of online banking households will be using mobile banking by 2011, up from less than 20% today. Upwards of 70% of bank center call volume is projected to come from mobile phones. Mobile banking will eventually allow users to make payments at the physical point of sale. "Mobile contactless payments” will make up 10% of the contactless market by 2011. Many believe that mobile users have just started to fully utilize the data capabilities in their mobile phones. In Asian countries like India, China, Bangladesh, Indonesia and Philippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure, and in European countries, where mobile phone penetration is very high (at least 80% of consumers use a mobile phone), mobile banking is likely to appeal even more. This opens up huge markets for financial institutions interested in offering value added services. With mobile technology, banks can offer a wide range of services to their customers such as doing funds transfer while travelling, Page 24

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receiving online updates of stock price or even performing stock trading while being stuck in traffic. According to the German mobile operator Mobilcom, mobile banking will be the "killer application" for the next generation of mobile technology. Mobile devices, especially smart phones, are the most promising way to reach the masses and to create “stickiness” among current customers, due to their ability to provide services anytime, anywhere, high rate of penetration and potential to grow. According to Gartner, shipment of smartphones is growing fast, and should top 20 million units (of over 800 million sold) in 2009 alone. In the last 4 years, banks across the globe have invested billions of dollars to build sophisticated internet banking capabilities. As the trend is shifting to mobile banking, there is a challenge for CIOs and CTOs of these banks to decide on how to leverage their investment in internet banking and offer mobile banking, in the shortest possible time. The proliferation of the 3G (third generation of wireless) and widespread implementation expected for 2005–2010 will generate the development of more sophisticated services such as multimedia and links to m-commerce services.

Mobile banking business models A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what business model, if mobile banking is being used to attract lowincome populations in often rural locations, the business model will depend on banking agents, i.e., retail or postal outlets that process financial transactions on behalf telecom companies or banks. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Many telecom companies will work

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through their local airtime resellers. However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank/Telecommunication Company (Telco). Another difference lies in the nature of agency agreement between bank and the NonBank. Models of branchless banking can be classified into three broad categories - Bank Focused, Bank-Led and Nonbank-Led. Bank-focused model The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks’ customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking.

Bank-led model The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade partner (telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a JV

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between Bank and Telco/non-bank. In this model customer account relationship rests with the bank Non-bank-led model The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank (e.g telco) performs all the functions. Mobile Banking Services Mobile banking can offer services such as the following: Account Information 1. Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements 7. Insurance policy management 8. Pension plan management 9. Status on cheque, stop payment on cheque 10. Ordering check books 11. Balance checking in the account 12. Recent transactions 13. Due date of payment (functionality for stop, change and deleting of

payments) 14. PIN provision, Change of PIN and reminder over the Internet 15. Blocking of (lost, stolen) cards Page 27

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Payments, Deposits, Withdrawals, and Transfers 1. Domestic and international fund transfers 2. Micro-payment handling 3. Mobile recharging 4. Commercial payment processing 5. Bill payment processing 6. Peer to Peer payments 7. Withdrawal at banking agent 8. Deposit at banking agent Especially for clients in remote locations, it will be important to help them deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa. The feasibility of such banking agents depends on local regulation which enables retail outlets to take deposits or not. A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the client's account. Investments 1. Portfolio management services 2. Real-time stock quotes 3. Personalized alerts and notifications on security prices Support Page 28

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1. Status of requests for credit, including mortgage approval, and insurance coverage 2. Check (cheque) book and card requests 3. Exchange of data messages and email, including complaint submission and tracking 4. ATM Location Content Services 1. General information such as weather updates, news 2. Loyalty-related offers 3. Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.

Challenges for a Mobile Banking Solution Key challenges in developing a sophisticated mobile banking application are: Interoperability There is a lack of common technology standards for mobile banking. Many protocols are being used for mobile banking – HTML, WAP, SOAP, XML to name a few. It would be a wise idea for the vendor to develop a mobile banking application that can connect multiple banks. It would require either the application to support multiple protocols or use of a common and widely acceptable set of protocols for data exchange. There are a large number of different mobile phone devices and it is a big challenge for banks to offer mobile banking solution on any type of device. Page 29

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Some of these devices support J2ME and others support WAP browser or only SMS. Overcoming interoperability issues however have been localized, with countries like India using portals like R-World to enable the limitations of low end java based phones, while focus on areas such as South Africa have defaulted to the USSD as a basis of communication achievable with any phone. The desire for interoperability is largely dependent on the banks themselves, where installed applications (Java based or native) provide better security, are easier to use and allow development of more complex capabilities similar to those of internet banking while SMS can provide the basics but becomes difficult to operate with more complex transactions. Security Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT departments. The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network: 1. Physical part of the hand-held device. If the bank is offering smart-card based security, the physical security of the device is more important. 2. Security of any thick-client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application. 3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions. 4. User ID / Password authentication of bank’s customer. 5. Encryption of the data being transmitted over the air. Page 30

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

6. Encryption of the data that will be stored in device for later / off-line analysis by the customer. Scalability & Reliability Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile banking infrastructure to handle exponential growth of the customer base. With mobile banking, the customer may be sitting in any part of the world (true anytime, anywhere banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7 fashion. As customers will find mobile banking more and more useful, their expectations from the solution will increase. Banks unable to meet the performance and reliability expectations may lose customer confidence. There are systems such as Mobile Transaction Platform which allow quick and secure mobile enabling of various banking services. Recently in India there has been a phenomenal growth in the use of Mobile Banking applications, with leading banks adopting Mobile Transaction Platform and the Central Bank publishing guidelines for mobile banking operations. Application distribution Due to the nature of the connectivity between bank and its customers, it would be impractical to expect customers to regularly visit banks or connect to a web site for regular upgrade of their mobile banking application. It will be expected that the mobile application itself check the upgrades and updates and download necessary patches (so called "Over The Air" updates). However, there could be many issues to implement this approach such as upgrade / synchronization of other dependent components.

Personalization It would be expected from the mobile application to support personalization such as: 1. Preferred Language Page 31

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2. Date / Time format 3. Amount format 4. Default transactions 5. Standard Beneficiary list 6. Alerts

Mobile Banking in the world This part of the mobile commerce is very popular in countries where most of their population is unbanked. Countries like Sudan, Ghana and South Africa received this new commerce very well. In Latin America countries like Uruguay, Paraguay, Argentina, Brazil, Venezuela, Colombia, Guatemala and recently in Iran banks like Persian, Tejarat, Mellat, Saderat, Sepah, Edbi and Bankmelli offer this service. Guatemala has the support of Banco industrial. Mexico released the mobile commerce with Omnilife, Bancomer and a private company (MPower Ventures). Kenya's Safaricom (Part of the Vodafone Group) has had the very popular MPESA Service - mainly used to transfer limited amounts of money, but has been increasingly used to pay utility bills. Zain in 2009 launched their own mobile money transfer business known as ZAP in Kenya and other African countries.

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STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

CHAPTER 4 ANALYSIS & INTERPRETATION OF DATA

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Analysis and Interpretation The findings are summarized in the following section:

Table no.1 Showing gender wise classifications of Respondents Sl. No 1 2

Gender Male Female Total

No. Of Respondents

Percentage

35 15

70 30

50

100

Analysis: The female user’s represents 30 percent of the sample size while 70 percent of the users are male. .

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Chart no.1 Graph showing gender wise classification of respondents

Interpretation: Majority of the mobile banking customers are men and a majority of women are yet to adopt this technology

Table no.2 Age wise classification of respondents Sl. No 1 2 3 4 5

Age (in Years) 20 – 25 26 – 30 31 – 35 36 – 40 Above 41 Total

No. Of Respondents 10 23 8 5 4 50

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Percentage 20 46 16 10 8 100

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

Analysis: From the above table it is clear that the respondents were chosen from all the age groups. There were 21% respondents from the age group ranging between 20-25 years; 46% of the respondents between 26-30 years; 19% of the respondents between 31-40 years; 4% of the respondents falling above the age group of 41 years. It is significant that the number of respondents in the age group of 26-30 years is optimum.

Chart no.2 Showing the age wise classification of the respondents

Interpretation: From the above chart it is clear that age group ranging between 20 years to 40 years and above, the respondents is not divided equally. There was least number of people in the category of above 41 which they may be thinking that mobile banking is not so secure. While majority of respondents belong to the age group 26-30.

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Table no.3 Education wise classifications of the respondents Sl. No 1 2 3 4

Education Post Graduates Graduates Diploma Holders Others Total

No. Of Respondents 25 16 5 04 50

Percentage 50 32 10 08 100

Analysis: From the table, it is very much clear that most of the respondents were post graduates; they constituted 50% of the total number of respondents. Out of total respondents 32% were graduates; 10% were diploma holders; 08% of the respondents were have completed their basic education.

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Chart 3 Sowing education wise classifications of the respondents

Interpretation: From the above data, we can interpret that majority of respondents were postgraduates, who have knowledge about mobile banking and ready to transact their bank accounts by using mobile. After the post graduates the graduates and diploma holders were the respondents who are interacting.

Table no.4 Showing details of occupation of the respondents Sl. No 1 2

Occupation Self – Employed Salaried

No. of Respondents 05 33 Page 38

Percentage 10 66

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

Students Housewives Total

3 4

08 04 50

16 08 100

Analysis: From the table, it can be said that salaried respondents 66% occupy the major portion of the total. And next are the students who are 16% occupy the second position and self – employed, housewife’s and professional people are in next positions respectively.

Chart no.4 Graph showing the occupation of the respondents

Interpretation: From the above data, we can interpret that the business community and housewives is yet to avail this facility. The reasons could be attributed to difficulty in maintaining accounts as very less transactions are involved. Page 39

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Table no.5 Table showing details of income of the respondents Sl. No 1 2 3 4

Income Group < 10,000 10,001 – 20,000 20,001 – 30,000 >30,001 Total

No. Of Respondents 7 13 8 22 50

Percentage 14 26 16 44 100

Analysis: From the above table it is clear that 14% of the respondents lied in the income group of less than Rs.10,000; 26% respondents were in the income group of Rs.10,001 to 20,000; 16% of the respondents were from income group of Rs.20,001 to 30,000; and the rest 44% of the respondents were from income group of Rs.30,001 and above.

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Chart no.5 Showing the income earned monthly by the respondents

Interpretation: Major number of respondents was in the income group of above Rs. 30,001. These were the respondents from salaried who had good knowledge of the mobile banking. There were good number of respondents from the income group of Rs.10,001 – 20,000 but these people transact because of the maintenance charges by the banks.

Table no.6 Table showing awareness of mobile banking Page 41

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Sl. No 1 2

Gender Yes No Total

No. Of Respondents

Percentage

38 12

76 24

50

100

Analysis: It is well clear from the chart that majority of people 76% o people who use mobile banking are well aware of it .

Chart no.6 Showing awareness of mobile banking

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Interpretation: We can easily interpret from the chart that most of the respondents who are using mobile banking are well aware of it and rest 24% are not because of the reason that they recently started using the service and are new to it.

Table no.7 Table showing frequency of mobile banking usage Sl. No 1 2 3 4

Frequency Daily Weekly Monthly As and when needed Total

No. Of Respondents 07 15 22 06 50

Percentage 14 30 44 12 100

Analysis: From the above table it is clear that significant number of customers uses mobile banking monthly and corresponds to 44% of the total. Weekly customers occupy 30% of the total respondents. But the remaining use net only when the need arises.

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Chart 7 Graph showing frequency of usage

Interpretation: The analysis very clearly indicates that still a substantial percentage (12%) of customers who have mobile banking use it only when required. They need to be brought into the mainstream by their respective banks. So that the banks can see that transaction rate increases. Most of the students and housewife’s have a low frequency of transactions because of their income level.

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Table no.8 Banks you use as your Mobile Banking service providers. Sl. No 1 2 3 4

Banks SBI ICICI HDFC Others Total

No. Of Respondents 23 15 13 9 50

Percentage 46 30 26 18 100

Analysis: From the above table we can easily analyze that maximum number of respondents 23 used mobile banking service by SBI after that 15 and13 respondents used ICICI and HDFC respectively, while 9 respondents used other banks as their service provider.

Chart no.8 Banks you use as your Mobile Banking service providers. Page 45

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

Interpretation: Here through this chart it can interpreted that people usually prefer public bank like SBI over ICICI and HDFC for mobile banking .A majority of respondents 46% use SBI as their mobile banking service provider followed by ICICI and HDFC.

Table no.9 Satisfaction from service provided by banks

Sl. No 1 2

Gender Yes No Total

No. Of Respondents 28

Percentage

22

56 44

50

100

Analysis: From table we get mixed reaction about the satisfaction from the mobile banking service 56% of respondents said they are satisfied and 44% were not satisfied.

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Chart no.9 Satisfaction from service provided by banks

Interpretation: From the above chart it can be interpreted that an ample amount of people 44% were not satisfied by the services provided by their mobile banking service provider which shows a need of creating a system for capturing responses from unsatisfied customers and resolving their issues.

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Table no.10 Showing purpose of usage Sl. No 1 2 3 4 5 6 7 8

Purpose A/c checking Recent Transaction Instruction to bankers Operate between A/c Ticket booking Payment of bills Online stock trading Others Total

No. Of respondents 10 06 07 10 02 06 07 02 50

Percentage 20 12 14 20 4 12 14 4 100

Analysis: From the table it is clear that there is no significant majority. 20% of the respondents use mobile banking for A/c balance checking and operating between A/c such as money transfer. 14% of the respondent’s use mobile banking service to give instructions for bankers and to trade online. And very few people use mobile banking for ticket booking (4%) and 12% of them use to check recent transactions.

Chart no.10 Page 48

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Showing purpose of using the mobile banking

Interpretation: Majority of the customers (20%) use the mobile banking to check their account status as it might be a free service provided by the banker unlike operating between two accounts for money transfer. This is a positive sign for banker because he can increase the customer database by promoting their mobile banking and also through positive word-of-mouth.

Table no.11 Showing the facilities provided by the banks

Sl. No

Facilities

No. Of respondents

Percentage

1

Free bill payment

14

28

2

Password reset

25

50

3

Security enhancement

11

22

10

20

50

100

4

International fund transfer Total

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Analysis: From the analysis it is clear that many of the banks provide online password reset. Major number of customer 50% voted that their banker provide the password reset to easily remember their passwords. 28% of the banks provide free bill payment. And 22% of the banks provide security enhancement which is more important than others.

Chart no.11 Showing facilities provided by the banks

Interpretation: From the analysis it is clear that most of the banks provide online password reset to change the passwords of customers. Which help the customer to change their account password from time to time to keep the account secure, so that the account security details cannot be guessed. And banks also provide free bill payment to encourage usage of internet banking and to earn goodwill for the bank.

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Table no. 12 Awareness about the services offered by service providers Sl. No 1 2

Gender Yes No Total

No. Of Respondents 19 31 50

Percentage 38 62

100

Analysis: From the above table it is clear that a majority of respondents 62% are not aware of the services offered by their mobile banking service providers.

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Chart no. 12 Awareness about the services offered by service providers

Interpretation: From the above chart we can interpret that though mobile banking is a new technology and it has a large scope in terms of usage a majority of respondents are not aware of all the services they are offered .Only 38% people know about all the services offered.

Table no.13 Table showing the ranking of factors considered for mobile banking

Sl. No

Factors

1 2

Rankings 3 4

1

2

Response time Security

17 22

07 08

11 07

10 10

05 03

3

Complaint resolution

12

13

09

06

10

4

Informative

10

13

12

05

10

5

Easy accessibility

15

10

10

09

06

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STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

6

Service charges

07

18

14

10

01

Analysis: During the survey, respondents were asked to rank the different factors that can have influence on mobile banking such as response time, security, complaint resolution, informative, easy accessibility, service charges. Out of 50 respondents, 22 of them had given the first rank to the factor ‘security’, 17 of them responded for ‘response time’ is more important factor, 15 of them provided that their bank has ‘easy accessibility’. ‘Informative’ and ‘service charges’ occupy the later last place in the mind of the respondents.

Chart no.13 Showing the ranking of factors considered for mobile banking

Interpretation: It is evident that ‘security’ was the major factor that was considered by the respondents as an important one which an account should have. ‘Response time’ was the second important factor and ‘easy accessibility’ as third important factor.

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Ranking

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

CHAPTER 5 SUMMARY OF FINDINGS RECOMMENDATION & CONCLUSION

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Summary of Findings 1.

The survey shows that a majority of users were between the age group of 26 – 30. The internet banking does not seem popular among the above 41 age group with only 8% representing the sample size.

2.

Among the mobile banking users a significant percentage i.e. 82% of the sample are post graduates and graduates and negligent percentage are diploma holders and others.

3. Majority of the users are the salaried class who form 66% of the sample size. The students are the next frequent user while self employed and professional formed the next category. 4. The top layer of the society i.e. people drawing a salary of more than Rs. 30,001 every month are the maximum users of mobile banking, the next being the 10,001 to 20,000 group. The mobile banking and the income level seem to be directly proportional. 5.

There are respondents who use mobile banking monthly (44%), weekly basis (30%), daily basis (14%), and as and when required (12%). A substantial number of respondents still use it only when required and the banker have to attract such customers towards frequent usage

6. .A note worthy section of the customers use mobile banking to operate between accounts and to check their account balance (20%) while the others used it for giving instructions to bankers and online trading (14%), payment of bills (12%), account statement generation (12%). 7.

With respect to facilities provided by the banks online password reset with 50% stood first in the minds of customers. Free bill payments 28% and security enhancement 22% comes next.

8.

The survey shows that 34% of the users feel response time is the most important factor. Page 55

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9.

There was a highly positive response of 44% in the category of security.

Suggestions and Recommendations 1. The users among the female segment are quite low as compared to their male counterparts. The banks need to educate housewives and working ladies in order increase their customer base and to encourage the female segment to use this facility. 2. The mobile banking is popular among the youth. If trend continues then the banks would be catering only to the niche market, so efforts must be made to bring in the age group of 40 and above. 3. Only the elegant and educated classes of the country like the graduated and post-graduates do the mobile banking. The banks should also target the non-graduates and business men. 4. The salaried part forms a majority of the population. The usage level among the students, professionals and self-employed need to be increased to a larger extent. 5. The survey shows that a majority of the users from the top layer of the economic society i.e. people with an annual income of more than 30,001. As the income decreases the mobile banking habits seemed to be unpopular. Though mobile banking is catering to the needs of the higher income group it is time that this facility flowed on to the lower group income group also. 6. Above 40% of the users use mobile banking monthly. 15% of them use it for daily this frequency of usage need to be increased through internet advertising, promotional schemes, and promotional offers, value added services etc... 7. The silver lining is that 50% of the customers receive information on various promotions schemes. The bankers can here by send mails and individual letters to the mobile banking users as well as the customers to inform and educate the customer about the other facilities available.

5.3 Conclusion Page 56

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Banks can have a tie-up with other banks so that the customers can transact between accounts of various types of banks. Banks have to eliminate the fear of security from the customers mind, make it more user friendly. They also need to make ways for retrieving the passwords in case the customer has forgotten. Banks need to promote this facility at par with other products and services. The package needs to be updated quite frequently. Till date only a few banks have adopted mobile banking into its threshold, more banks should come up with such facilities. If more and more banks adopt this technology then they could achieve twin objectives: ♦ Reduce the excess work force, and ♦ Reduce the number of branches. Mobile banking in India is set to explode; approximately 43 million urban Indians used their mobile phones to access banking services during quarter ending August, 2009, a reach of 15% among urban Indian mobile phone user. Today, it is a known fact that a mobile phone is not just a communication tool but a multitasking device that throws ample opportunities for businesses. The mobile banking concept addresses the limitation of Internet banking. Still the users face many problems right from the telecom operator to banks, the handset to software application support for using services. Above that still there's lack of trust while using mobiles for banking, so awareness needs to be created at large.

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CHAPTER 6 BIBLIOGRAPHY

Bibliography

Marketing Management

Philip Kotler Page 58

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

Business Research Methods

Donald. R. Cooper

Websites

www.google.co.in www.wikipedia.com www.hdfcbank.com www.statebankofindia.com

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ANNEXURE

QUESTIONNAIRE Title: A Study on the customer response towards Mobile Banking. I am Anurag Asthana pursuing MBA from M.S Ramaiah College of Arts, Science & Commerce. Please go through the following questionnaire and identify the appropriate responses for each of them. There is no such thing as a correct answer, therefore please feel free to respond. Page 60

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

Disclaimer: Your response via this questionnaire will be used strictly for academic purposes. There will not be any commercial solicitation or usage of the response in any kind / form whatsoever. Name: 1. Sex: 2. Age Group a. 20 -25 e. Above 41.

b. 26 – 30

c. 31 – 35

3. Educational qualification a. Post Graduate c. Graduate

d. 36 – 40

b. Diploma Holder d. Others Please Specify

1. Occupation a. Self Employed c. Student e. Professional

b. Salaried d. House Wife

1. Monthly income a. Less than 10,000 c. 20,001 – 30,000

b. 10,001 – 20,000 d. Above 30,001

1. Are you well aware of mobile banking? a. Yes b. No

2. How frequently do you use mobile banking? a. Daily b. Weekly c. Monthly d. As and when needed 8. Which of the following banks do you use as your Mobile Banking service providers? Page 61

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a. b. c. d.

SBI ICICI HDFC Others

8. Are you satisfied with the services and facilities offered by your service provider? a. Yes b. No 9.

What is your purpose of using Mobile banking? a. Account balance check b. Recent Transaction c. Giving instructions to bankers d. Operate between accounts e. Ticket booking f. Payment of bills g. Stock trading h. Others specify _________

8.

Does your mobile banking service provide the following features? a. Free bill payment b. Password reset c. Security enhancement d. International Fund Transfers

8. Are you aware of all the services offered by your Mobile Banking service providers? a. Yes b. No 8.

Please give your response on the following attributes with respect to 5 scale rating. Very good

Good

Response Time Security Complaint Resolution

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Neutral

Poor

Very Poor

STUDY OF CONSUMER BEHAVIOUR ON MOBILE BANKING

Informative Easy Accessibility Services Charges

9. Any other Suggestions ----------------------------------------------------------------------------------------------------------------------------------------------------------------.

Thank You

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