e Banking Services

An Analytical Study on E- Banking Services Bank

The Janatha Co-operative

CHAPTER- 1 INTRODUCTION

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INTRODUCTION INTRODUCTION TO FINANCIAL SERVICES Since 1990’s, there has been an upsurge in the financial services provided by various banks and financial institutions. Efficiency of emerging financial system largely depends upon the quality and variety of financial services provided by financial intermediaries. Financial services are in fact, an important component of the financial system. An orderly functioning of the financial system depends to a great deal on the range of financial services being provided. Financial services have today taken the shape of an industry. In fact, one of the world’s largest industries today is the financial services industry. The term financial services can be defined as “activities, benefits and satisfaction, connected with the sale of money that offers to users and consumers, financial related value”. Financial service organizations render services to industrial enterprises and to ultimate consumer markets.

PLAYERS IN FINANCIAL SERVICE SECTOR The various players that provide financial services to industrial enterprises and ultimate consumer markets are explained below:

I. Banking Institutions Indian banking industry is subject to the control of the central bank (i.e. Reserve Bank of India). The RBI as the apex institution organizes runs, supervises, regulates and develops the monetary system and the financial system of the country. The main legislation governing commercial banks in India is the Banking Regulation Act, 1949. The Indian banking institutions can be broadly classified into two categories: 1) Organized sector 2) Unorganized sector

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Financial Institutions

Banking Financial Institutions

Organized

Commercial Banks, Cooperative Banks, Regional Rural Banks, Foreign Banks.

Non-Banking Financial Institutions

Unorganized

Indigenous Banks, Money Lenders etc.

Organized

Development Banks

IFCI, ICICI, IDBI, SFC’s, SIDC’s, SIDBI’s, IIBI.

Fig: Types of Financial Institutions

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Unorganized

Non-Banking Financial Companies

Investment Companies, HirePurchase Companies, Merchant Banks.

An Analytical Study on E- Banking Services Bank

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1) Organized Sector The organized banking sector consists of commercial banks, cooperative banks and the regional rural banks.

(a) Commercial banks The commercial banks may be scheduled banks or non-scheduled banks. At present only one bank is a non-scheduled bank. All other banks are scheduled banks. The commercial bank consists of 27 public sector banks, private sector banks, and foreign banks. Traditionally, commercial banks accepted deposits and met the short term and medium term funding needs of the industry. But now, since 1990’s banks are also funding the long term needs of the industry particularly the infrastructure sector.

(b)Co-operative banks An important segment of the organized sector of Indian banking is the cooperative banking. Different types of co-operative credit societies are operating the Indian economy. These institutions can be classified into two broad categories: (a) Rural credit societies which are primarily agricultural; (b) Urban credit societies which are primarily non-agricultural. For the purpose of agricultural credit there are different cooperative credit institutions to meet different kinds of needs. For example, short and medium term credit is provided through three tier federal structure: (c) Regional Rural Banks (RRBs). Regional Rural Banks were set by the state government and the sponsoring commercial banks with the objective of developing the rural economy. Regional Rural Banks provide banking services and credit to small farmers, small entrepreneurs in the rural areas. (d) Foreign Banks. Foreign Banks have been in India from British days. ANZ Grind lays Bank has its presence in number of places with 56 branches. The Standard and Chartered bank has 24 branches and Hong Kong Bank 21. All other foreign banks have branches less than 10. Obviously, these banks have concentrated on corporate clients and have been specializing in areas relating to international banking.

History of Co-operative Bank

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The Co-operative Credit System was introduced in India in 1904, when the Cooperative Credit Society Act was passed. The societies formed under the Act were intended to be small and simple credit societies for simple folks requiring small accounts only. The other idea was also that of educating the farmers and others as to the use of credits and of inculcating in them the habit of thrift and self-help. The Co-operative is an important constituent of the Indian Financial System, judging by the role assigned to Co-operative, the expectations the co-operative is supposed to fulfill, their number and the movement originated in the west, but the importance of such banks have assumed in India is rarely parallel anywhere else in the impedance of such banks have operative banks in India play an important role even today in rural financing. The business of Co-operative bank in the urban areas also has increased phenomenally in recent years due to the sharp increase in the number of Primary Co-operative banks. Co-operative banks in India are registered under the Co-operative Societies Act. The Co-operative bank is also regulated by the RBI. They are governed by the Regulation Act 1949 and Banking Laws (Co-operative) Act 1965.

Meaning and definition of Co-operative Bank Co-operative banks are a part of the vast and powerful super structure of Cooperative Institutions which are engaged in the tasks of production, marketing and distribution, servicing and banking in India. Co-operative banks are the banks which are registered under The Karnataka Co-operative Societies Act, 1959. In the words of Henry Warf “Co-operative banking is an agency which is in a position to deal with the small man on his own terms accepting the security he has, without drawing on the protecting of the rich”. Devine defines a “Co-operative bank is a mutual society formed, composed and governed by the working proper themselves for enrage regular saving and granting small loans on easy terms of interest and easy payments”.

TYPES OF CO-OPERATIVE BANK:

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RBI

NABARD

UCB’S

SCB’S

SLDB’S

DCCB’S

CLDB’S

PAC’S

PLDB’S

BRANCHES OF SLDB’S

Fig: Types of Co-operative Banks.

NABARD: National Bank for Agricultural and Rural Development. SCB’S

: State Co-operative Banks.

DCCB’S : District Central Co-operative Banks. PAC’S

: Primary Agricultural Credit Societies.

CLDB’S : Central Land Development Banks. PLDB’S

: Primary Land Development Banks.

UCB’S

: Urban Co-operative Banks.

SLDB’S

: State Land Development Banks.

RBI

: Reserve Bank of India.

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Co-operative banks in India, finance urban areas under the following:      

Industries. Small scale Industries. Home Finance. Consumer Finance. Personal Finance. Self-employment.

Co-operative banks in India, finance rural areas under the following:    

Farming. Cattle. Milk. Pottery.

FEATURES:  They are organized and managed on the principles of Co-operative self-help and mutual help.  They function with the rule “one member one vote”.  Co-operative banks perform all the main banking functions of deposit, mobilization, supply of credit and provision of remittance facilities.

2) Unorganized Sector In the unorganized banking sector there are the indigenous bankers, money lenders, seths, sahukars carrying out the function of banking.

i.

Indigenous Bankers Indigenous bankers are the forefathers of modern commercial banks. These are the individuals or partnership firms performing the banking functions. They also act as financial intermediaries. As the term indigenous indicates, they are the local bankers.

ii.

Money Lenders Money lenders depend entirely on their own funds for the working capital. Money lenders may be rural or urban, professional or non-professional.

II.

Non-Banking Institutions

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The non-banking institutions may be categorized broadly into two groups a) Organized Financial Institutions b) Unorganized Financial Institutions

A. Organized Financial Institutions a) All India development Financial Institutions. b) The State Level Development Financial Institutions. These specialized financial institutions are also Development Banks because they provide not only finances but also help in promotion of new enterprises.

 Industrial Finance Corporation of India (IFCI) The industrial finance corporation of India was established in 1948 under the IFCI 1948. The main objective of the corporation has been to provide medium and long-term credit to industrial concerns in India. The objectives of the corporation as laid down in the preamble of IFC Act, 1948, are “making medium and long-term credits more readily available to industrial concerns in India, particularly in circumstances where normal banking accommodation is inappropriate or recourse to capital issue methods is impracticable”. The financial assistance of the corporation is available to limited companies or co-operative societies registered in India and engaged or proposing to engage in (a) manufacture, preservations or processing of goods (b) the mining industry; (c) the shipping business; (d) the hotel industry; and (e) the generation or distribution of electricity or any other form of power.

 Industrial Credit and Investment Corporation of India (ICICI) The industrial credit and investment corporation of India (ICICI) was established in 1995 as a public limited company under the Indian Companies Act for developing medium and small industries of private sector. Initially its equity capital was owned by companies, institutions and individuals but at present its equity is owned by public sector institutions like banks, LIC and GIC etc. It provides term loans in Indian and foreign currencies, underwrites issues of shares and debentures, makes direct subscription to these issues and guarantees payment of credit made by others.

 Industrial Development Bank of India (IDBI) The Industrial Development Bank of India was established under the Industrial Development Bank of India Act, 1964 as a wholly owned subsidiary of the Reserve Bank of India. The ownership of IDBI has since been transferred to Central

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Government from February 16, 1976. The main object of establishing IDBI was set up an apex institution to co-ordinate the activities of other financial and to act as a reservoir on which the other financial institutions can draw. IDBI provides direct financial assistance to industrial units also to bridge the gap between supply and demand of medium and long term finance.

 State Financial Corporations (SFCs) The State Financial Corporation Act was passed by the Government of India in 1951 with a view to provide financial assistance to small and medium scale industries which were beyond the scope of IFCI. According to this Act, a State Government is empowered to establish a financial corporation to operate within the state. At present there are 18 such corporations functioning in the country. These corporations are expected to be complementary to the Industrial Finance Corporation of India. While IFCI provides assistance only to large industrial concerns owned by public limited companies, partnership firms or sole-trading concerns.

 State Industrial Development Corporations (SIDCs) In order to accelerate industrial development various states have set up Industrial Development Corporations. Andhra Pradesh and Bihar were the first states to set up such corporations in 1960. Most of the states have set up such institutions at present. At present there are 28 such SIDCs working in the country. Many of these corporations are registered under Companies Act and two have been set up under the statutes of legislative bodies. These corporations are wholly owned by state governments.

 Industrial Investment Bank of India Ltd. (IIBIL) IRBI was established on March 20, 1985 under Indian Industrial Reconstruction Bank Act, 1984 as a result of reconstituting Indian Industrial Reconstruction Corporation. The basic aim of establishing IRBI was to revive sick and closed industrial units and to act as prime loan and reconstruction agency. IRBI has been rechristened as Industrial Investment Bank of India Ltd. (IIBIL) with effect from March 27, 1997.

 Small Industries Development Bank of India (SIDBI)

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The Small Industries Bank of India was set up in 1990 under the SIDBI Act, 1990. The main objective of SIDBI has been to work as a principal financial institution for the promotion, financing and development of industries in the small-scale sector.

B. Unorganized Financial Institutions The unorganized non-banking financial institutions include number of nonbanking financial companies (NBFCs) providing whole range of financial services. These include hire-purchase and consumer finance companies, leasing companies, housing finance companies, factoring companies, credit rating agencies, merchant banking companies etc. NBFCs mobilize public funds and provide loanable funds. There has been remarkable increase in the number of such companies since 1990’s. NBFC’s intermediate between the savers and investors. These companies are also known as ‘Finance Companies’, ‘Loan Companies’, ‘Finance Corporations’ etc. They advance loans to wholesale and retail traders, small scale industries and selfemployed persons. The finance companies give loans which are generally unsecured and the rate of interest charged is much higher than the banking companies. Besides giving advances, the finance companies run chit funds, purchase and discount hundies, and have also taken up merchant banking, mutual funds, hire-purchase, leasing etc.

BANKING INNOVATIONS Banking plays a vital role in the economic growth of a country. The banking scenario has changed drastically. The changes which have taken place in the last five years are more than the changes that took place in last fifty years because of the institutionalization, liberalization, globalization and automation in the banking industry. The main invention that is being brought in use is the computer. Today the entire world is moving hand in hand and banks and computers are two wheels of the same chariot. Today the computer is being extensively used in almost all bank branches in our country. Services to the customers have substantially improved due to easy, fast and accurate use of computers. Banks provide wide range of banking services to the needs of different classes and sectors of society.

VIRTUAL BANKING

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Virtual banking refers to any banking service delivered to the customer by means of a computer controlled system without involving the usual bank’s branch. In other words, in a virtual bank, customer’s integration with the bank is replaced by an electronic machine which is new and innovative. Virtual banking has been the result of customer demand, commercial motivation and technology developments over the years, use of virtual banking has increased due to the following factors: 

The introduction of automated teller machine (ATM) imparted flexibility to



bank customers and gave further momentum to virtual banking. The introduction of debit and credit cards helped both the consumers and



retailers to be free from cash handling. The use of computer by banks for accounting and as a tool to expand and



improve customer service. The routine banking transaction was becoming both costly and time consuming. Virtual banking is being used to cut cost and time overheads in handling routine transactions.

E-BANKING E-Banking is the banking of the new era. Making banking products and services available to wholesale and retail customers, through an electronic distribution channel is called e-banking. E-banking is the outcome of technological innovations and competition. In fact, banks have been using electronic and telecommunication networks for delivering a wide range of value added products and services. The devices have been telephone, personal computers including Automated Teller Machines (ATM). The delivery channels have been direct dial up connections, private and public networks. To this newer edition of e-banking are being added e.g. internet banking and mobile banking. The growing popularity of personal computers, easy access to internet and World Wide Web (WWW), has increased the use of internet by banks as a channel for receiving instructions and also delivering their products and services to the customers. This is generally referred to as ‘Internet banking’ or ‘I-banking’ or ‘Net banking’. This is one of the newer form e-banking which is gaining popularity and its other popular name is ‘On-line banking’.

EVOLUTION OF E-BANKING

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The story of technology in banking started with the use of punched card machines like Accounting Machines or Ledger Posting Machines. The use of technology, at that time, was limited to keeping books of the bank. It further developed with the birth of online real time system and vast improvement in telecommunications during late1970’s and 1980’s.it resulted in a revolution in the field of banking with “convenience banking” as a buzzword. Through Convenience banking, the bank is carried to the doorstep of the customer. The 1990’s saw the birth of distributed computing technologies and Relational Data Base Management System. The banking industry was simply waiting for these technologies. Now with distribution technologies, one could configure dedicated machines called front-end machines for customer service and risk control while communication in the batch mode without hampering the response time on the front-end machine. Intense competition has forced banks to rethink the way they operated their business. They had to reinvent and improve their products and services to make them more beneficial and cost effective. Technology in the form of E-banking has made it possible to find alternate banking practices at lower costs. More and more people are using electronic banking products and services because large section of the banks future customer base will be made up of computer literate customer, the banks must be able to offer these customer products and services that allow them to do their banking by electronic means. If they fail to do this will, simply, not survive. New products and services are emerging that are set to change the way we look at money and the monetary system.

REQUIREMENTS FOR MAKING ONLINE BANKING SUCCESSFUL     

Higher rate on deposits. 24 hours access. Free bill payments and rebates on ATM surcharges. Credit card with low interest rates. Innovative products and high quality of services.

THE BASSLE COMMITTEE’S ELECTRONIC BANKING GROUP

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The Bassle Committee on banking supervision has taken note of these issues. In 1999, it constituted Electronic Banking Group (EBG) a group having representation of 17 central banks. The task for the group has been to develop risk management guidance for internet banking. It has identified fourteen Risk Management Principles for sound risk management in E-banking: 1) Effective management oversight of e-banking activities. 2) Establishment of a comprehensive security control process. 3) Comprehensive due diligence and management oversight process for 4) 5) 6) 7)

outsourcing relationships and other third-party dependencies. Authentication of e-banking customers. Non repudiation and accountability for e-banking transactions. Appropriate measures to ensure segregation of duties. Proper authorization controls within e-banking systems, database and

applications. 8) Data integrity of e-banking transactions, records and information. 9) Establishment of clear audit trails for e-banking transactions. 10) Confidentiality of key bank information. 11) Appropriate disclosures for e-banking services. 12) Privacy of customer’s information. 13) Capacity, business continuity and contingency planning to ensure availability of e-banking systems and services. 14) Incident response planning.

PRE E-BANKING SCENARIO IN INDIA Traditional Banking Traditionally the relationship between the bank and its customers has been on a one-to-one level via the branch network. This was put into operation with clearing and decision-making responsibilities concentrated at the individual bank level. The head office has responsibility for the overall clearing network, the size of the branch network and the training of staff in the branch network. The bank monitored the organization’s performance and set the decision-making parameters, but the information available to both branch staff and their customers was limited to one geographical location. The Indian banks lag far behind the International banks in providing on-line banking. In fact, this is not possible without creating sufficient infrastructure or presence of sufficient number of users. Some of the reasons and problems being faced are as follows:

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

Although security options in e-banking are available, there is no certification of



the appropriate certification authority. The available communication bandwidth available is not enough to meet



requirement. Most of the banks lack uninterrupted power supply, which is essential for such



services. The interact details for such services are one-sided, with banks enjoying supremacy. This does not give confidence to the customers (ATM and telebanking get preference). However, despite these hindrances, it is becoming popular and certain steps are

being undertaken to promote E-banking:  Department of tele-communication is making additional bandwidth available.  Steps have been initiated to appoint Certification authority.  As Chief Vigilance Commissioner is insisting on more computerization, and credit Information Bureau is proposed to be set-up, this will help E-banking.  The RBI has put the real-time funds transfer through the Real Time Gross settlement (RTGS) system in place. The access will be through only one specified gateway. This will ensure rigorous access control.  Various levels of security are being ensured by RBI.  Dematerialization of share has made significant process; this will help Ebanking.  The RBI has set-up the group to examine various issues regarding I-banking and technology. This will help in creating the right kind of infrastructure. In fact certain things have already been initiated.

SERVICES OF E-BANKS Internet banks offer a variety of features and perks, rushing to lure online customers. E-banking attracts customers with ‘convenience’. The three broad facilities that E-banking offers are:

a) Convenience Complete your banking at your convenience, in the comfort of your home or at any place you can access the Net.

b) No more Qs There are no queues at an online bank.

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c) 24/7 services Bank online 24 hours a day, 7 days a week and 52 weeks a year.

d) Online applications Customers can begin their banking relationship with an online application. No need to waste time driving to a local branch to begin a banking relationship. Customers can fill out and submit electronically all necessary information needed to open a checking, savings account or even a fixed deposit. When the application is submitted, the bank will mail you a signature card for its records and request you to mail or wire your initial funds.

e) Account Access Internet banking customers now have the ability to view their accounts online, including checking, savings, loans and credit cards. No need to wait for your monthly statements or wait in queue for the next available customer service representative. Account access enables customers to view most recent activity on accounts, including cleared checks, deposits, ATM transactions and balances as of previous days activities. Customers no longer have to hold on to the cleared checks, since their bank will store for them online.

f) Account transfers Internet banking customers have the ability to transfer funds to and from their accounts online. With a simple online form, customers can move money from a checking account to a savings account and vice-versa within the safety and convenience of their home, without having to visit the ATM. Funds transferred online are updated in less than three hours. In addition, customers can set-up recurring transfers to accounts. A recurring transfer will take place on the customer specified date, with a specified amount.

g) Bill Payment Online bill payment enables customers to pay anyone, friends or family, as well as pay their bills electronically. As an add on feature to Internet banking, bill payment enables customers to spend paper checks to anyone or an electronic check to any institution that accepts electronic bill payments. To use bill payment, customers are

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required to set up their payees online. Customers then have the ability to set up recurring, automatic payments to a specific biller on a specified day or just a one-time payment. Arrange payments three to five days, before the due date, to ensure timely delivery. It is important to note that not all banks provide bill payment as a free feature.

BENEFITS OF PARTICIPATING ONLINE MERCHANTS Following are some of the benefits of participating online merchants:

(a) 24/7 customer service Although it is easy to yield to the temptation of allowing the Internet to replace expensive branch personnel and overhead, many banks have found that a customer service staff ready at any hour is well worth the expensive. This can be especially true as customers’ transition to online banking and need help learning the features. Offering telephone and e-mail contacts are a basic level of service. Offering live chat assistance is the exceptional level.

(b) Access to old transactions Choices made in designing the Internet interface may include how much history will be available online. Some banks have chosen to show only 30-45 days, while others offer a history of six months or a year.

(c) Categorize transactions and produce reports Functionality is a king as online banking customers using these features enjoy a Web interface that delivers the utility of a money management software application.

(d) Export your banking data Most banks offering the management interface also allow easy downloading of financial information into files that can be imported into Microsoft Money and Intuit’s Quicken.

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(e) Interactive guides and tools to help selection of proper product Although online, interactive guides through a bank’s products, adds complexity to the programming it also serves the bank by assisting potential customers in choosing new products or services. Interactive Tools to design a savings plan, choose a mortgage, obtain online insurance quotes all tied to applications. These tools help remove some of the mystery involved in so many account options and costs.

(f) Loan status and credit card account information Bank customers are familiar with reviewing their checking account information, but many banks are adding the ability to look at one’s loan status and credit card information as well. Access to as many accounts held at the bank seems to be the goal.

(g) View digital copies of checks This again, is removing a down side to online banking. It makes images of checks available as replacement for sending out cancelled checks or sheets of printed check images.

(h) Online forms for ordering checks, stop payments, etc Convenience is popular and if a customer visits his or her online account frequently it only makes sense to allow the ability to reorder checks or perform certain commands through the same interface. These features and many others help customers save time, simplify their lives and provide greater value than conventional banking.

E-BANKING PRODUCTS 1. AUTOMATED TELLER MACHINE (ATM): These are cash dispensing machine, which are frequently seen at banks and other locations such as shopping centers and building societies. Their main purpose is to allow customer to draw cash at any time and to provide banking services where it would not have been viable to open another branch e.g. on university campus. An automated teller machine or automatic teller machine (ATM) is a computerized telecommunications device that provides a financial institution's customers a method of financial\ transactions in a public space without the need for a human clerk or bank

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teller. On most modern ATMs, the customer identifies him or herself by inserting a plastic ATM card with a magnetic stripe or a plastic smartcard with a chip that contains his or her card number and some security information, such as an expiration date or CVC (CVV). Security is provided by the customer entering a personal identification number (PIN).Using an ATM, customers can access their bank accounts in order to make cash withdrawals (or credit card cash advances) and check their account balances. Many ATMs also allow people to deposit cash or checks, transfer money between their bank accounts, pay bills, or purchase goods and services. Some of the advantages of ATM to customers are:• Ability to draw cash after normal banking hours • Quicker than normal cashier service • Complete security as only the card holder knows the PIN • Does not just operate as a medium of obtaining cash. • Customer can sometimes use the services of other bank ATM’s.

2. TELE BANKING OR PHONE BANKING: Telephone banking is relatively new Electronic Banking Product. However it is fastly becoming one of the most popular products. Customer can perform a number of transactions from the convenience of their own home or office; in fact from anywhere they have access to phone. Customers can do following:i. Check balances and statement information. ii. Transfer funds from one account to another. iii. Pay certain bills. iv. Order statements or cheque books. v. Demand draft request.

3. MOBILE BANKING: Mobile banking comes in as a part of the banks initiative to offer multiple channels banking providing convenience for its customer. A versatile multifunctional, free service that is accessible and viewable on the monitor of mobile phone. Mobile phones are playing great role in Indian banking- both directly and indirectly. They are being used both as banking and other channels.

4. INTERNET BANKING: The advent of the Internet and the popularity of personal computers presented both an opportunity and a challenge for the banking industry. For years, financial

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institutions have used powerful computer networks to automate millions of daily transactions; today, often the only paper record is the customer’s receipt at the point of sale. Now that their customers are connected to the Internet via personal computers, banks envision similar advantages by adopting those same internal electronic processes to home use. Banks view online banking as a powerful “value added” tool to attract and retain new customers while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment. In India first one to move into this area was ICICI Bank. They started web based banking as early as august 1997.

TYPES OF INTERNET BANKING OR E-BANKING i.

INFORMATIONAL This is the basic level of Internet banking. Typically, the bank has marketing

information about the bank’s products and services on a stand-alone server. The risk is relatively low, as informational systems typically have no path between the server and the bank’s internal network.

ii.

COMMUNICATIVE This type of Internet banking systems and the customer. The interaction

between the bank’s system and the customer. The interaction maybe limited to electronic mail, account enquiry, loan applications, or static file updates (name and address change). Because these servers may have a path to the bank’s internal networks, the risk is higher with this configuration than with informational systems.

iii.

TRANSACTIONAL This level of Internet banking allows customers to execute transactions. Since a

path typically exists between the server and the bank or outsourcer’s internal network, this is the highest risk architecture and must have the strongest controls. Customer transactions can include accessing accounts, paying bills, transferring funds etc.

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ADVANTAGES OF E-BANKING  Convenience Unlike your corner bank, online banking sites never close; they’re available 24 hours a day, seven days a week, and they’re only a mouse click away. With pressures on time and longer travelling periods, more and more people find it tiresome waiting in queues.

 Ubiquity If you’re out of state or even out of the country when a money problem arises, you can log on instantly to your online bank and take care of business, 24\7.

 Transaction speed Online bank sites generally execute and confirm transactions at or quicker than ATM processing speeds.

 Efficiency You can access and manage all of your bank accounts, including IRA’s, CDs, even securities, from one secure site.

 Effectiveness Many online banking sites now offer sophisticated tools, including account aggregation, stock quotes, rate alert and portfolio managing program to help you manage all of your assets more effectively. Most are also compatible with money managing programs such as quicken and Microsoft money.

 Cheaper alternative

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With increasing competition, it seems to be the cost factor that is driving banks to offer the facility. The Internet is still a very cheap alternative to opening a physical branch, and most of the push seems to be coming from the supply side. The costs of a banking service through the Internet form a fraction of costs through conventional methods.

DISADVANTAGES OF E-BANKING  Start-up may take time In order to register for your bank’s online program, you will probably have to provide ID and sign a form at a bank branch. If you and your spouse wish to view and manage their assets together online, one of you may have to sign a durable power of attorney before the bank will display all of your holdings together.

 Learning curves Banking sites can be difficult to navigate at first. Plan to invest some time and\or read the tutorials in order to become comfortable in your virtual lobby.

 Bank site changes Even the largest banks periodically upgrade their online programs, adding new features in unfamiliar places. In some cases, you may have to re-enter account information.

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E-Commerce Conducting Business through electronic networks

E-Finance

E-Money

Providing financial services through electronic channels

Stored value or prepaid payment mechanism

E-Banking

Other financial services and products

Providing banking products and services through electronic delivery channel

Insurance, online brokering etc.

Internet banking

Telephone banking

Other electronic delivery channels Fig: Diagram of E-Banking System

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The Janatha Co-operative

RESEARCH DESIGN

RESEARCH DESIGN Research design is a formal plan of action for a research project. Research design help researchers to layout their research questions, methodologies, implementation, procedures and data collection and analysis for the conduct of a research project. Generally there are three types of research design quantitative design, qualitative design and mixed methods design. Research design is a decision making process. During the decision making process, the researcher should choose from many design alternatives and consider over the trade-offs of each approach and decide the best possible solution. Generally speaking, the research design decisions are influenced by the questions the investigator is trying to answer, by the resource such time, trained personnel and money that the researcher have at hand, by the characteristics of the research sites, and also by the researcher’s personal preferences. A research is a logical and a systematic plan prepared for directing a research study. It specifies the objectives of the study, methodology and technique to be adopted for achieving the objective. It constraints the blue print for the collection, measurement and analysis of the data.

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An Analytical Study on E- Banking Services Bank

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A research design is the arrangement of condition for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure.

TITLE OF THE STUDY The study is titled as “An Analytical study on E-banking Services at The Janatha Co-operative Bank Limited.”

STATEMENT OF THE PROBLEM Though Bangalore has surpassed the silicon valley of USA in Software Exports and technological innovations, the level of Internet users in the city is substantially low. There seems to be a digital divide between the computer literates and the others. Though the citizens for checking mail, browsing, chatting etc. use Internet it is not used for banking transactions large scale. The study is conducted to analyze the usage of Internet for banking purpose. The study is conducted to highlight the reasons for customer’s preference to Internet banking and measure their satisfaction level.

NEED AND SIGNIFICANCE OF THE STUDY  To understand the profile of the customers availing Internet banking facility.  To understand the attitude of the users making banking transactions through the net.  To understand the Internet usage pattern and preferences of the customers with regard to frequency, place and banks.  To understand the attitude of the users towards Internet banking contents.  To analyze the gap between the perceptions of banks offering Internet services and the customers availing the facility.

OBJECTIVES OF THE STUDY  To know about the awareness of E-banking among the banking customers.

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 To know the problems faced by the customers while doing their transactions through E-banking.

 To analyze the reasons for non- usage.  To give a few suggestions to the bank about their E-banking promotional activities.  To fill in the gaps, which exist between the services expected by the customers and the services offered by the bank.

REVIEW OF LITERATURE Purpose The review of literature is done to find out the previous literatures and write ups done on E-banking. The review was made to find out the advantages and disadvantages of E-banking. The customer base, technological adaptability etc. the past literatures and articles have benefited the researcher in having a bird’s eye view of the subject.

Methodology The past researchers and writers have used the Internet as their prime tool for collecting the information about the Internet banking usages. While conducting the research structured questionnaire method was used. The prime reason for this is that a very few reliable literatures are available on this particular concept. Some of the banking journals carry regular articles on online banking, which is based on a customer survey. The previous studies conducted were conducted in one particular city with a sample size of 100. The researcher also adopts the same methodology. Abstract In India few studies have been conducted on the current status of Internet banking. Thus only few literatures are available on this subject in India. Therefore this report reflects the current status of Internet banking by Indian private, public and foreign banks operating in India. For instance, Unnithan (2001) studied the drivers for change in the evolution of the banking sector, and the move towards electronic banking by focusing on two economies: Australia and India. The paper found that Australia is a country with

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An Analytical Study on E- Banking Services Bank

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Internet ready infrastructure as far as telecommunication, secure protocols, PC penetration and consumer’s literacy is concerned. India by comparison, is overwhelmed by weak infrastructure, low penetration, developing security protocols and consumer reluctance in rural sector. Although many major banks have started offering Internet banking services, the slow pace will continue until the critical mass is achieved for PC, Internet connections and telephones. However, the upsurge of IT professionals with growing demands is pressuring the government and bureaucracy in the country to support and develop new initiatives for a faster spread of Internet banking. Gupta (2002) found that Internet banking is fast becoming popular in India. However, it is still in its evolutionary stage. By the year 2005, a large sophisticated and highly competitive Internet banking market will develop. Almost all the banks operating in India are having their websites but only a few banks provide transactional Internet banking. Rao (2003) provided a theoretical analysis of Internet banking in India and found that as compared to banks abroad, Indian banks offering online services still have a long way to go. For online banking to reach a critical mass, there has to be sufficient number of users and the sufficient infrastructure in place. Agarwal (2003) explored the role of e-banking in e-democracy. With the development of synchronous technologies and secured electronic transaction technologies, more banks and departments were using Internet for transactional and information medium. Dayananda (2007) studied the customer preference towards Internet banking and found that Internet banking perceived as a luxurious way of banking used primarily by the high income group. The Income level and occupation were the key parameters for deciding the usage level of Internet banking. He also found that, there is a significant difference between the satisfaction level of the customers and the type of the bank they transact with.

SCOPE OF THE STUDY The study aims to identify the customer preference towards E-banking services provided by “The Janatha Co-operative Bank”. The study is done based on the survey

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method where a set of questionnaire is prepared about the particular topic and that is given to the respondent who are using E-banking services of their respective banks. It is the survey method which is conducted to know the problems regarding E-banking services from the respondents.

RESEARCH METHODOLOGY A research methodology is a way to systematically solve research problem. Descriptive method of research was carried out to conduct this project. Descriptive research includes surveys and facts. Finding solution to the problem and its main objective of the study is to find out what, who, when and how the topic is covered. The study may be simple or complex. It may be done in many ways. The simplest descriptive study concerns a unvaried question and hypothesis in which we ask about size, form, distribution or existence of variable.

SAMPLE DESIGN It is a definite plan for obtaining sample from a given population. It refers to the technique or the procedure. The researcher would adopt in selecting items for the sample. Sample design may be as well as lay down the number of items to be included in the sample i.e. the size of sample. The sample design is determined before the data are collected.

SAMPLE TECHNIQUE Sample is the fraction of the population. Sampling is a technique or a method of selection of samples. The technique in carrying out this research is Simple Random Sampling technique. Random sampling is a good technique where there are comprehensive lists available in the target population. Random sampling method refers to the technique in which each and every individual from huge population is taken into consideration and is given an equal chance of being included in the sample method.

SAMPLE SIZE It refers to the number of elements to be included in the study. An important decision that has to be taken while adopting sampling techniques is sample method. In this study the size of respondents was decided to be 50.

SOURCES OF DATA  

The data is gathered from two sources. They are: Primary data. Secondary data.

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1) Primary data Information collected specifically for the purpose of the investigation, as on one hand is known as primary data or raw data. These are not readily available. The primary data is collected through questionnaires, surveys, interviews by the respondents. This research work mainly depends on questionnaire.

2) Secondary data Secondary data refers to the data which have already been collected and analyzed by someone else. Secondary data includes data for the study and includes appropriate materials from newspapers, magazines, journals, bank websites, text books, phonic conversations with respondents and information from the internet has also been acquired wherever necessary.

TOOLS/TECHNIQUES OF DATA COLLECTION Primary data: It is collected through questionnaires and through surveys and personal interviews. Secondary data: It is collected through internet and some information in text books, magazines etc.

PLAN OF ANALYSIS AND INTERPRETATION The data collected was edited (only minor errors were called for in removing some conflicts in answers as well as correcting spelling mistakes of websites). Each response was numbered. The data was coded. The data thus code was entered in the MS-Excel package. Most of the analysis of data was done using MS-Excel package. The analysis included bar chart and pie chart. It is done to understand the format and to analyze in an easy way.

OPERATIONAL DEFINITION OF THE CONCEPTS Automated teller machines

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These are computer-controlled terminals located in premises of the bank or elsewhere, through which customers can make deposits, withdrawals or other transactions as they would through a bank teller.

E-mail Messages, usually text, sent from one person to another via computer. E-mail can also be sent automatically to a large number of addresses.

Internet The vast collection of inter-connected networks that are connected using the TCP/IP protocols that are evolved from ARPANET of the late 60’s and early 70’s. The Internet connects tens of thousands of independent networks into the vast global Internet and is probably the largest wide area network in the world.

Network Any time two or more computers are connected together so that they can share resources, this constitutes a network. Connecting two or more networks together constitutes Internet.

Search Engine A web based system used for searching the information available on the web. Some search engines work by automatically searching the contents of the other systems and creating a data base of the results. Other search engines contain only material manually approved for inclusion in the database, and some combine the two approaches.

WWW (World Wide Web) World Wide Web (or simply the web for short) is a term frequently used (incorrectly) when referring to “the internet”. WWW has two meanings Firstly, loosely used whole constellation of resources that can be accessed using the Gopher, FTP, HTTP, TELNET, USENET, WAIS and some other tools. Second, the universe of hypertext servers (HTTP) servers, more commonly called “web servers”, which are the servers that serve web pages to web browsers.

Virus A chunk of computer programming code that makes copies of itself without any conscious human intentions. Some viruses do more than simply replicate

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themselves, they might display messages, install other software or files, delete software or files, etc. A virus requires the presence of some other program to replicate itself. Typically, viruses spread by attaching themselves to programs and in some cases files.

Server A computer or software package, that provides a specific kind of service to client software running on other computers. The term can refer to a particular piece of software, such as a www server, or the machine on which the software is running.

LIMITATIONS OF THE STUDY 1. The study is confined to only one company. 2. Due to the limited time in-depth study could not be made. 3. Some of the respondents were not willing to give all information regarding their internet banking practice. 4. The sample size is small; hence the result cannot be generalized.

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CHAPTER SCHEME The entire study is presented in the form of a project under the following chapter scheme. A brief description of these chapters has been given below.

1. INTRODUCTION This chapter includes the theoretical background or conceptual frame work of financial institutions. It also includes the meaning, importance and other relevant aspects of E-banking.

2. RESEARCH DESIGN This chapter includes the title of the study, statement of the problem, objective of the study, scope of the study, review of literature, research methodology, data collection method, sample design, sample technique, sample size, tools and techniques of data analysis, operational definition of the concepts of E-banking and limitations of the study.

3. BANK PROFILE This chapter gives the complete information about “The Janatha Co-operative Bank”. Its origin, vision and mission statement, management and services offered by the bank.

4. DATA ANALYSIS AND INTERPRETATION In this chapter an attempt has been made to analyze and interpret the data collected through a survey conducted using a pre-tested questionnaire. Statistical tools such as averages, percentages, charts, diagrams, tables are used to analyze and present the data in a more meaningful and effective manner.

5. SUMMARY OF FINDINGS, CONCLUSIONS AND SUGGESTIONS In this chapter the major findings of the study are summarized, conclusions are drawn on various issues considered on this study and important suggestions for the effective utilization of Internet banking services.

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CHAPTER- 3 BANK PROFILE

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BANK PROFILE HISTORY The Janatha Co-operative Bank was started in 1964 with few members, with 4 branches in the state serving depositors and account holders. Bank also started with 2 more branches under expansion scheme. Banking sector is under tremendous pressure to perform well due to immense competition from various domestic and foreign banks. Profitability is one of the means by which performance is measured. It also showcases bank’s strengths and weakness. Mr. Nanjappa Reddy and other 9 promoters are the founders of the bank. The objectives of the founders were to promote banking habit, entrepreneurs among all sections and class of people. Over the years, the bank has grown from strength to strength and successfully withstood the challenges of economic depression and other stiff circumstances of the country. The bank has 4 branches in Bangalore (with 2 more starting this financial year). The bank is formed on co-operative principles, where in they are service oriented than the profits. The bank is providing loans at low interest rates and easy EMI’s to economically weaker sections like sole proprietors, small firms, shop keepers etc.

MANAGEMENT Today the bank is leaving up to its founder’s reputation as the service oriented bank. The management includes dedicated professionals who bring in considerable amount of experience in banking industry. Currently bank has 13 BOD (Board of Directors) and 3 Nominal Directors.

VISION The main vision of the bank is to improve the social status of poor people and to serve the weaker sections of the society.

MISSION

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1. 2. 3.

The missions of the bank are: Expansion of geographical area of operation. Increase number of branches and start branches in rural areas. Serving weaker sections and poor people by providing different easy scheme of

4.

loans with easy EMI’s. Adoption and installation of modern techniques like computerization and

5. 6.

ATM’s etc. Introduction of mobile banking. Innovation schemes of investments to increase public deposits.

SERVICES When the bank commenced operations in 1964, service was primarily focused on growth and development of the urban sector. Today, a variety of specialized banking services are offered through various branches.

DOMESTIC OFFERINGS Janatha co-operative bank offers an array of customer’s friendly deposit and credit schemes. This scheme has been decided after careful understanding of the customer requirements.

LIST OF BOARD OF DIRECTORS (BODs) 1) Mr. K. Puttaswamy (President). 2) Mr. M.S. Vijay Sarathi. 3) Mr. C.L. Marigowda. 4) Mr. Rudhregowda. 5) Mr. Jayarame Gowda. 6) Mr. L. Gangadhar. 7) Mr. C. G. Vijay Kumar. 8) Mr. Aravind. 9) Mr. B.H. Narasimaiah. 10) Mr. L. Govind. 11) Mr. P.S. Ramesh. 12) Dr. A. Kallappa. 13) Smt. S.V. Vijaylakshmi. 14) Mr. D. Chikkanna Gowda.

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15) Mr. Seetharamu. 16) Mr. G. Nagaraju.

CHAPTER- 4

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DATA ANALYSIS AND INTERPRETATION

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DATA ANALYSIS AND INTERPRETATION Table 4.1: GENDER WISE CLASSIFICATIONS OF RESPONDENTS

GENDER

NUMBER OF

PERCENTAGE

RESPONDENTS MALE

30

60%

FEMALE

20

40%

TOTAL

50

100%

ANALYSIS The female users represent 20% of the sample size while 30% of the users are men.

Fig: GENDER WISE CLASSIFICATION OF RESPONDENTS

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40% 60%

MALE FEMALE

INTERPRETATION Majority of the internet banking customers are men and a majority of women are yet to adapt this technology.

Table 4.2: AGE WISE CLASSIFICATION OF RESPONDENTS

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An Analytical Study on E- Banking Services Bank

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AGE OF THE

NUMBER OF

PERCENTAGE

RESPONDENTS

RESPONDENTS

20 - 30

28

56%

30 - 40

12

24%

40 - 50

06

12%

50 AND ABOVE

04

8%

TOTAL

50

100%

ANALYSIS The survey shows that the maximum users of internet banking fall between the age group of 20-30 with 56%, followed by the 30-40 age group constituting of 24% of the sample size, 40-50 age groups with 12% and the least users are the respondents who have crossed the age of 50 with only 8% using it.

Fig: AGE WISE CLASSIFICATION OF RESPONDENTS

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8% 12% 56%

24%

20-30 30-40 40-50 50 & above

INTERPRETATION The innovation does not seem to be popular among the above-50 age group i.e. only 8% representing the sample size.

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An Analytical Study on E- Banking Services Bank

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Table 4.3: EDUCATION WISE CLASSIFICATION EDUCATIONAL

NUMBER OF

QUALIFICATION

RESPONDENTS

PERCENTAGE

POST-GRADUATES

20

40%

GRADUATES

15

30%

DIPLOMA HOLDERS

10

20%

OTHERS

5

10%

TOTAL

50

100%

ANALYSIS The survey indicates that the majority of the Internet banking users i.e. 70% is post graduates and graduates. Graduates form 30% of the sample size and post graduates form 40%.

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An Analytical Study on E- Banking Services Bank

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Fig: EDUCATION WISE CLASSIFICATION

45% 40% 35% 30% 25% 20%

40%

15%

30%

10%

20%

5%

10%

0% POST GRADUATES

GRADUATES

DIPLOMA HOLDERS

OTHERS

INTERPRETATION This indicates that the Internet banking is still a facility, which is used only by the educated cadre of the society and is yet to reach the less-educated section.

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Table 4.4: OCCUPATION WISE CLASSIFICATION OCCUPATION

NUMBER OF

PERCENTAGE

RESPONDENTS SELF-EMPLOYED

06

12%

SALARIED

36

72%

HOUSE WIFE

04

8%

STUDENT

03

6%

OTHERS

01

2%

TOTAL

50

100%

ANALYSIS The largest category of the users is the salaried class who form a substantial part of the sample size i.e. 72%, the next category is the self-employed i.e. 12% and the least being are the housewives, students and others.

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Fig: OCCUPATION WISE CLASSIFICATION 80% 72% 70% 60% 50% 40% 30% 20% 12%

8%

10%

6%

2%

0% SELF EMPLOYED

SALARIED

HOUSE WIFE

STUDENT

OTHERS

INTERPRETATION From the above figure we can observe that majority of the users of internet banking are the salaried class and the least being the housewives, students and others.

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Table 4.5: SECTOR WISE CLASSIFICATION OF SALARIED RESPONDENTS NUMBER OF SECTOR

RESPONDENTS

PERCENTAGE

PUBLIC SECTOR

8

22%

PRIVATE SECTOR

28

78%

TOTAL

36

100%

ANALYSIS The graph is a glaring indicator of the usage pattern. Out of the 36 salaried employees, 28 of them are private sector employees, while the public sector employees constituted only 8.

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Fig:

SECTOR

WISE

The Janatha Co-operative

CLASSIFICATION

OF

SALARIED

RESPONDENTS

78% PRIVATE SECTOR

22% PUBLIC SECTOR

0%

10%

20%

30%

40%

50%

60%

70%

80%

INTERPRETATION This proves that the private sector employees have a upper hand in responding to this radical change and 8 of employees representing the sample size is significant and negligible.

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Table 4.6: INCOME WISE CLASSIFICATION OF RESPONDENTS INCOME

NUMBER OF

PERCENTAGE

RESPONDENTS 5000 & 10000 & 15000 & 20000

20

40%

TOTAL

50

100%

ANALYSIS People who have a monthly income of more than 20,000 still dominate in the usage level of the internet banking, the above forming 20% of the sample size. They are followed by the next income level i.e. 15000-20000 per month (12%). The usage level in the next series are as follows: 10000-15000 (10%), 5000-10000 (8%) and below 5000 cadre who do not represent the sample size.

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Fig: INCOME WISE CLASSIFICATION OF RESPONDENTS 100% 90% 80% 70% 60%

8%

50%

10%

12%

20%

40% 30% 20% 10% 0%

0%

INTERPRETATION The internet seems to be popular among the cream of the society i.e. people with a monthly income of 20000 and above. The middle class customer still prefers the traditional banking method. It would not be out of place to mention this analogy in this context. “Higher the income more is the usage of internet banking and vice-versa”.

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Table 4.7: RESPONDENTS AWARENESS TOWARDS E-BANKING SERVICES

PROVIDED

BY

THEIR

BANKING

INSTITUTIONS

AWARENESS

NUMBER OF

PERCENTAGE

RESPONDENTS YES

40

80%

NO

10

20%

TOTAL

50

100%

ANALYSIS From the above figure it is analyzed that out of 50 respondents, 80% respondents are aware of E-Banking services provided by their Banking Institutions and 20% respondents are not aware of E-Banking services provided by their Banking Institutions.

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An Analytical Study on E- Banking Services Bank

Fig:

The Janatha Co-operative

RESPONDENTS AWARENESS TOWARDS SERVICES

PROVIDED

BY

THEIR

E-BANKING BANKING

INSTITUTIONS

80% 80% 70% 60% 50% 40%

20%

30% 20% 10% 0% YES

NO

INTERPRETATION From the above figure it is interpreted that majority of the respondents are aware of E-Banking services and only 20% of the respondents are not aware of EBanking services provided by their banking institutions.

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An Analytical Study on E- Banking Services Bank

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Table 4.8: FREQUENCY OF USAGE OF INTERNET BANKING FREQUENCY OF

NUMBER OF

USAGE

RESPONDENTS

PERCENTAGE

DAILY

04

8%

WEEKLY

14

28%

MONTHLY

10

20%

AS & WHEN REQUIRED

22

44%

TOTAL

50

100%

ANALYSIS The customers who use internet banking on a regular basis are very few i.e. hardly 8%. But the weekly and monthly users form a significant part of the group by having a share of 28% and 20% respectively. But the remaining respondents use the net only when the need arises.

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An Analytical Study on E- Banking Services Bank

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Fig: FREQUENCY OF USAGE OF INTERNET BANKING 44% 45% 40% 35%

28%

30% 20%

25% 20% 15%

8%

10% 5% 0% DAILY

WEEKLY

MONTHLY AS & WHEN REQUIRED

INTERPRETATION The analysis very clearly indicates that still a substantial percentage (44%) of customers who have internet banking use it only when required. They need to be brought into the main stream by their respective bankers.

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Table 4.9: PURPOSE OF USING INTERNET BANKING NUMBER OF PURPOSE OF USAGE

RESPONDENTS

PERCENTAGE

10

20%

ACCOUNTS

17

34%

TICKET BOOKING

15

30%

OTHERS

08

16%

TOTAL

50

100%

CHECKING THE BANK BALANCE OPERATE BETWEEN

ANALYSIS 34% of the respondents use internet banking to operate between accounts, 30% of the users’ book tickets online, 20% of them use for checking the bank balance and 16% use it for other purposes.

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Fig: PURPOSE OF USING INTERNET BANKING

16% 30%

20%

CHECKING THE BANK BALANCE OPERATE BETWEEN ACCOUNTS

34%

TICKET BOOKING OTHERS

INTERPRETATION Majority of the customers (34%) use internet banking to operate between the accounts. This is a positive sign for the banker because he can increase the customer data base by promoting their online and also through positive word-of-mouth.

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Table 4.10: RESPONDENTS PREFERENCES TOWARDS EBANKING

OR

TRADITIONAL

BANKING

PRACTICE NUMBER OF PREFERENCE

RESPONDENTS

PERCENTAGE

E-BANKING SERVICES

46

92%

TRADITIONAL

04

8%

50

100%

BANKING PRACTICE TOTAL

ANALYSIS From the above figure we can observe that out of 50 respondents, 92% of respondents are using E-banking services and 8% of respondents are using Traditional banking practices.

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Fig: RESPONDENTS PREFERENCES TOWARDS E-BANKING OR TRADITIONAL BANKING PRACTICE

100% 90% 92% 80% 70% 60% 50% 40% 30% 20% 10% 0% E-BANKING SERVICES

8% TRADITIONAL BANKING PRACTICE

INTERPRETATION From the above survey it is interpreted that majority of the respondents are using E-banking services and only 8% of the respondents are under the practice of traditional banking.

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Table 4.11: RESPONDENTS REASONS FOR THE USAGE OF EBANKING SERVICES NUMBER OF REASONS FOR USAGE

RESPONDENTS

PERCENTAGE

CONVENIENT

42

84%

SAFETY

06

12%

LESS EXPENSIVE

02

4%

TOTAL

50

100%

ANALYSIS From the above table we can observe that out of 50 respondents, 42 respondents use E-banking services for convenient purpose, 6 respondents use Ebanking services for safety purpose and 2 respondents use E-banking services for less expensive.

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Fig: RESPONDENTS REASONS FOR THE USAGE OF EBANKING SERVICES

LESS EXPENSIVE 4%

SAFETY

12%

CONVENIENT

0%

84%

10%

20%

30%

40%

50%

60%

70%

80%

90%

INTERPRETATION Majority of the respondents i.e. 82% of the sample size are convenient of the usage of E-banking services. While 12% of them feel that it is safe to use E-banking

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services and 4% of the respondents feel that the usage of E-banking services is less expensive.

Table

4.12:

RESPONDENTS

PREFERENCE

TOWARDS

AUTHENTICATION (VERIFICATION) AUTHENTICATION

NUMBER OF

(VERIFICATION)

RESPONDENTS

PERCENTAGE

SECURITY DEVICE

26

52%

SMS TEXT PASSWORD

18

36%

E-CERTIFICATE

06

12%

TOTAL

50

100%

ANALYSIS From the above figure we can observe that out of 50 respondents, 52% respondents prefer security device for using E-banking services, 36% respondents prefer SMS Text Password for using E-banking services, and 12% respondents prefer E-certificate for using E-banking services.

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An Analytical Study on E- Banking Services Bank

Fig:

RESPONDENTS

The Janatha Co-operative

PREFERENCES

TOWARDS

AUTHENTICATION (VERIFICATION)

12%

SECURITY DEVICE 52% 36%

INTERPRETATION

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An Analytical Study on E- Banking Services Bank

The Janatha Co-operative

Out of 50 respondents, 26 respondents prefer security device for using Ebanking services, 18 of them prefer SMS Text Password and 6 respondents prefer Ecertificate for using E-banking services.

Table 4.13: USE OF INTERNET BANKING WHILE ON TOUR INTERNET BANKING

NUMBER OF

WHILE ON TOUR

RESPONDENTS

PERCENTAGE

MOST OF THE TIMES

20

40%

QUITE OFTEN

14

28%

RARELY

10

20%

NEVER

6

12%

TOTAL

50

100%

ANALYSIS

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An Analytical Study on E- Banking Services Bank

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It is evident from the table that 20 out of 50 respondents use net banking most of the times while on tour. That forms about 40% of the frequently touring customers. 14 of the respondents availed net facility quite often. The people who rarely used net banking while on tour were 10 out of 50. 6 of the respondents never used net banking outside their hometowns.

Fig: USE OF INTERNET BANKING WHILE ON TOUR

40% 35% 30% 25% 40% 20% 28%

15%

20% 10%

12%

5% 0% MOST OF THE TIMES QUITE OFTEN

RARELY

INTERPRETATION

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NEVER

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A majority of the customer’s use net banking while on tour because they feel that it is convenient to access it from anywhere, anytime and any amount. The banker need not have a physical branch in many places, as the banking requirements of the customers, who visit the place, would be met through the Internet.

Table 4.14: DIFFICULTIES ENCOUNTERED WHILE USING INTERNET BANKING NUMBER OF PROBLEMS

RESPONDENTS

PERCENTAGE

HOST NOT WORKING

10

20%

SLOW ACCESSIBILITY

5

10%

TIME CONSUMING

15

30%

NONE

20

40%

TOTAL

50

100%

ANALYSIS

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A majority of the customers had no complaints about the internet facilities of the corresponding banks (40%). But a few of the customers complained about the nonworking of the host (20%), slow accessibility during peak hours (10%) and time consuming (30%).

Fig: DIFFICULTIES ENCOUNTERED WHILE USING INTERNET BANKING

20%

40%

HOST NOT WORKING 10%

SLOW ACCESSIBILITY TIME CONSUMING NONE

30%

INTERPRETATION

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Customers using the Internet banking had no problem with the technical services. But a segment of the customers have encountered minor problems while using the same.

Table 4.15: SAFETY OF INTERNET BANKING SAFETY OF

NUMBER OF

INTERNET BANKING

RESPONDENTS

PERCENTAGE

12

24%

EXTENT

25

50%

MODERATELY SAFE

10

20%

NOT AT ALL SAFE

3

6%

50

100%

ABSOLUTELY SAFE AND SECURE SAFE TO A LARGE

TOTAL

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ANALYSIS During the survey, the respondents were asked to state their viewpoint about the safety of the Internet banking. 50% of them stated it was safe to a large extent, 24% stated it was absolutely safe and secure, customers who said it was moderately safe and not at all safe formed 20% and 6% of the sample size.

Fig: SAFETY OF INTERNET BANKING

NOT AT ALL SAFE

6%

MODERATELY SAFE

20%

50%

SAFE TO A LARGE EXTENT

ABSOLUTELY SAFE AND SECURE

24%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

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An Analytical Study on E- Banking Services Bank

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INTERPRETATION This is a clear indication that a majority of customers do not have any fear attributed to the technical feasibility and safety concerns of Internet banking. Though cases of hacking have been reported it is always few and far between. The customers still trust the banker’s technology of E-banking.

Table 4.16: CHARGES MADE BY THE BANKS FOR E-BANKING SERVICES NUMBER OF BANK CHARGES

RESPONDENTS

PERCENTAGE

YES

8

16%

NO

42

84%

TOTAL

50

100%

ANALYSIS From the above table we can observe that out of 50 respondents, 8 respondents say that, the bank charge for E-banking services and 42 respondents say that, the bank do not charge for E-banking services.

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Fig: CHARGES MADE BY THE BANKS FOR E-BANKING SERVICES

90% 80% 70% 60% 84%

50% 40% 30% 20%

16%

10% 0% YES

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NO

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INTERPRETATION From the above figure it is interpreted that majority of the banks do not charge for E-banking services.

Table 4.17: TRY TO GET THE DETAILS OF OTHER PRODUCTS AND SERVICES OFFERED BY THE BANK WHILE USING THE INTERNET FACILITY TRY TO GET DETAILS OF

NUMBER OF

OTHER PRODUCTS AND

RESPONDENTS

PERCENTAGE

YES

35

70%

NO

15

30%

TOTAL

50

100%

SERVICES

ANALYSIS

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70% of the respondents covered in the survey try to get the details of other products and services of the bank while using Internet facility. 30% of them are not eager to look at the Spam mails or other homepages of the bank.

Fig: TRY TO GET THE DETAILS OF OTHER PRODUCTS AND SERVICES OFFERED BY THE BANK WHILE USING INTERNET FACILITY

70% 70% 60% 50% 40% 30%

30% 20% 10% 0% YES NO

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INTERPRETATION A majority of the customers are eager to learn about the new products and services offered by the bank. The fact remains that the customer could be looking out for an investment option in the same bank.

Table 4.18: REASONS FOR NON-EXTENSIVE USAGE REASONS FOR NON-

NUMBER OF

EXTENSIVE USAGE

RESPONDENTS

PERCENTAGE

10

20%

20

40%

14

28%

E-BANKING

6

12%

TOTAL

50

100%

NON-ACCESS TO INTERNET SECURITY CONCERNS

PREFER TRADITIONAL BANKING/ ATM NOT FULLY AWARE OF

ANALYSIS

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The 50 respondents who mentioned that they used Internet banking only when required were asked an additional query as to state the reasons for this. The highest number of respondents (20) was worried about the security. 14 of the respondents preferred traditional banking or ATM, 10 of them said the internet was not frequently accessible to them either in home or in the office and 6 of them said they were not fully aware of the concepts of E-banking.

Fig: REASONS FOR NON-EXTENSIVE USAGE 40% 35% 30% 25% 20% 20% 15% 10% 5% 0%

40% 28%

12%

INTERPRETATION The biggest concern for the users seems to be security. The users fear that in case they operate via Internet banking frequently and transacts large amount of money

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through the net could be hacked by another person. The next reason for non-extensive usage was that people still liked to frequent the bank or move to their nearest ATM counters. The bank’s ATM in a way acts as a complement to Internet banking.

Table 4.19: PROBLEM SOLVING IN CASE OF TECHNICAL PROBLEM NUMBER OF OPTIONS

RESPONDENTS

PERCENTAGE

35

70%

OF PERSONAL TALK

15

30%

TOTAL

50

100%

TALK PERSONALLY TO THE BANKER SEND MAIL INSTEAD

ANALYSIS 70% of the users would like to talk personally to the banker in case they encountered any technical problem.

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30% of the users would like to send a mail and do not want to visit the bank personally.

Fig: PROBLEM SOLVING IN CASE OF TECHNICAL PROBLEM

30% TALK PERSONALLY TO THE BANKER SEND MAIL INSTEAD OF PERSONAL TALK 70%

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INTERPRETATION The survey shows clearly that majority of the customers do not want to try out any self-helping mechanism as far as their banking transactions are concerned. 30% of the customers are confident of solving the problem themselves or wish to use any impersonal method to solve the same.

Table 4.20: RESPONDENTS OPINION TOWARDS E-BANKING SERVICES PROVIDED BY THEIR BANKING INSTITUTIONS NUMBER OF RATINGS

RESPONDENTS

PERCENTAGE

EXCELLENT

1

2%

GOOD

36

72%

SATISFACTORY

12

24%

POOR

1

2%

TOTAL

50

100%

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ANALYSIS From the above table we can observe that out of 50 respondents, 1 respondent opinion is excellent towards the E-banking services provided by their banking institutions, 36 respondents opinion is good, 12 respondents opinion is satisfactory and 1 respondent opinion is poor towards E-banking services provided by their banking institutions.

Fig:

RESPONDENTS

OPINION

TOWARDS

E-BANKING

SERVICES PROVIDED BY THEIR BANKING INSTITUTIONS

80% 70%

72%

60% 50% 40% 30% 20% 24%

10% 0% 2% EXCELLENT GOOD

SATISFACTORY

2% POOR

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INTERPRETATION From the above figure it clearly states that majority of the respondents i.e. 72% of the sample size opinion is good towards E-banking services provided by their banking institutions. 2% of the respondents opinion is excellent towards E-banking services provided by their banking institutions and 24% of the respondents opinion towards E-banking services is satisfactory and 2% of the sample size opinion is poor towards the E-banking services provided by their banking institutions.

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CHAPTER- 5 SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

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SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION SUMMARY OF FINDINGS 1. The female users represent 40% of the sample size whereas male users represent 60% of the sample size. 2. The survey shows that majority of the users were between the age group of 20-30. The Internet banking does not seem popular among the above 50 group with only 8% representing the sample size. 3. The post graduates and graduates form about 70% of the Internet banking users. The diploma holders and others formed an insignificant and negligent part of the users segment. 4. Majority of the users are the salaried class who form about 72% of the sample size. The self-employed are the next frequent users while housewives and students formed the next category. 5. Among the salaried class, it is the private sector employees who dominate in the usage level representing 78% of the salaried class. The Internet seems to be a faraway technology to the public sector employees. 6. The top layer of the society i.e. people drawing a salary of more than 20,000 every month were the maximum users of Internet banking, the next being the 15,000 to 20,000 group. The Internet banking and income level seemed to be directly proportional.

7. The survey shows that 80% of the respondents are aware towards the E-banking services provided by their banking institutions whereas 20% of the respondents are not aware towards the E-banking services provided by their banking institutions.

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8. There are respondents who use Internet on a daily basis (8%), weekly basis (18%), monthly basis (20%) and as and when required (44%). A substantial number of respondents still use it only when required and the banker have to attract such customers towards frequent usage. 9. A note-worthy section of the customers use Internet banking to operate between the accounts (34%) while others used it for ticket booking (30%), checking the bank balance (20%), and others (16%). 10. It is said that most of the respondents prefer to use E-banking services rather than Traditional banking practices for various transactions. 11. From the study it is also found that most of the respondents use E-banking services provided by their banking institutions for convenient purpose when compared to safety and less expensive. 12. We can come to know that 52% of the respondents prefer to use Security device for

authentication (verification), 36% prefer SMS text password and 12%

respondents prefer E-Certificate for authentication (verification). 13. Majority of the respondents i.e. 40% of them use Internet banking most of the times while on tour. 28% of them use quite often, 20% use rarely while on tour and 12% of the respondents say that they never use Internet banking while on tour. 14. From the above survey it states that majority of the respondents i.e. 40% feel that there are no difficulties encountered while using Internet banking. 20% of them face difficulties like host not working, 10% slow accessibility and 30% time consuming, and these are the major difficulties encountered by 60% of the sample size.

15. The survey shows that 50% of the users feel Internet banking is safe to a large extent, 24% felt it was absolutely safe and secure, 20% felt it was moderately safe and 6% felt it was not at all safe. 16. It is found that most of the respondent banks do not charge for E-banking services provided by their banking institutions.

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17. It was found that during the survey 70% of the respondents look out for other products from the bank while using Internet facility. 18. With regard to non-extensive usage, security concern was the biggest bottleneck. Some customers perceived that a brilliant hacker could access their e-accounts by using their user name and password. On the other hand a segment of customers still opted for traditional banking/ ATM, the age group being above 50. 19. 70% of the customers required the banker’s assistance when encountered by a problem on Internet. But 30% had no problem with their impersonal assistance as long as the problem was solved quickly. 20. From the study it is found that 72% of the respondent’s banks provide Good Ebanking services, around 24% of the respondent’s banks are providing satisfactory level of E-banking services and 2% of the respondent’s banks are providing Excellent and Poor level of E-banking services respectively.

SUGGESTIONS Based on the findings there are a few suggestions that can be made here. These are 1) The users among the female segment are quite low as compared to their male counterparts. The banks need to target the housewives and the office goers in order

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to increase their customer base and to encourage the female segment to use this facility. 2) The Internet banking is popular among the youth. If the trend continues then the banks would be catering only to a niche market, so efforts must be made to bring in the 50 plus age group into the main stream. 3) Only the elegant and educated classes of the country like the graduates and postgraduates form the Internet banking population. The banks could target the nongraduates who have a huge asset base to avail the facility. 4) The salaried class forms a majority of the population. The usage level among the housewives, students and self-employed need to be increased to a large extent. 5) When the salaried classes are sub-divided into private and public sector employees, the survey shows that it is private sector employees who form the customer data base. The banks need to target the employees of the public sector units and encourage them to be a part of the “net banking family”. 6) The survey shows that a majority of the users form the top layer of the economic society i.e. people with an annual income of more than 20,000. As the income decreases the Internet banking habits seemed to be unpopular. Though Internet banking is catering to the needs of the higher income group it is time that this facility flowed on to the lower income groups also. 7) The survey shows that majority of the respondents are aware towards E-banking services provided by their banking institutions but still the banks should make efforts to create awareness about E-banking services provided by their institutions. 8) About 44% of the users use Internet banking as and when required. Their frequency of usage needs to be increased through Internet advertising, promotional schemes, promotional offers, value added services etc. 9) Only about 34% of the customers use the net to operate between accounts the trend has to show a positive trend and it is possible by offering more reliable and qualitative services by the bankers through transactional Internet banking. 10) Majority of the respondents i.e. 92% of them prefer E-banking services provided by their banking institutions but only 2% of the respondents prefer traditional

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banking practice. Therefore the banks should attract these respondents towards the usage of E-banking services. 11)

84% of the respondents use E-banking services for convenient purpose, 12% respondents use E-banking services for safety purpose and 4% of the respondents use E-banking services for less expensive. Therefore the banks should attract those customers who use E-banking services for safety purpose.

12) Verification for accessing E-banking services should be made mandatory for all customers. 13) Majority of the respondents i.e. 40% of sample size use internet banking most of the times while on tour. But the banks should attract those customers who use Internet banking quite often, rarely and never by providing them the required Ebanking services while on tour. 14) 70% of the customers look out for other products and services of the corresponding banks while using the Internet banking. The banker can thereby send SPAM mails and individual letters to the Internet users as well as the other customers to inform and educate the customers about the other facilities available. In short Internet banking can act as a supplement in promoting the banks loans, advances etc. 15) Security concern is the biggest bottleneck to Internet banking. Most of the fear related to security is superficial and created through negative word of mouth. The banks need to make a special segment in their brochures to gain the confidence of the public. The firewalls used for the system should be highlighted and the public should be given a strong feeling that the net banking is a “fool-proof system”. 16) Though security concerns proved to be a hurdle the good news is that 94% of the respondents agree that Internet banking is safe and secure till date. This would make the banker’s job easier while promoting this product. 17) There is a need for the banker to go personally to the customer’s doorstep whenever the customers encounter a technical problem. A majority of the customers prefer a banker’s personal assistance. The bank can enhance the Customer Relationship Management through a frequent and timely visit to the customer.

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18) More financial services should be inculcated in E-banking rather than just viewing service and also updated and relevant information should be added on to site. 19) The fund transfer services formalities and procedures should be eased. 20) The transactions through E-banking should be supported with mobile banking services by instant alerts. 21) The E-banking should also include other services like mutual fund, Demat account etc.

CONCLUSION From the study it is concluded that E-banking service is the next big thing in the banking sector. We see a tremendous increase in the usage level of E-banking. Ebanking is the banking of new era. Making banking products and services available to wholesale and retail customers, through an electronic distribution channel is called Ebanking. E-banking is the outcome of technological innovations and competition. In fact, banks have been using electronic and telecommunication networks for delivering a wide range of value added products and services in the coming years no bank will survive without the service of E-banking. The growing popularity of personal computers, easy access to internet has increased the use of internet by banks as a channel for receiving instructions and also delivering their products and services to the customers. The security and reliability plays a vital role for the development of E-

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banking services. Banks have to eliminate the fear of security from the customers mind, make it user friendly. They also need to make ways for retrieving the pass word 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. If the banking institution works on the above suggestions it will reduce the operating and maintenance cost at the bank locations.

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ANNEXURE

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QUESTIONNAIRE Name: E-mail address: 1. Gender ( ) Male

( ) Female

2. Age ( ) 20-30

( ) 30-40

( ) 40-50

( ) 50 and above

3. Education ( ) Post graduation

( ) Graduation

( ) Diploma holders

( ) Others

4. Occupation ( ) Self Employed

( ) Salaried

( ) Student

( ) Others

5. Employed in ( ) Public sector

( ) Private sector

6. Monthly Income

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( ) House wife

An Analytical Study on E- Banking Services Bank

( ) 15000 and 5000 and 10000 and 20000

7. Are you aware towards E-banking services provided by your Banking Institution? ( ) Yes

( ) No

8. How often do you use E-banking services? ( ) Daily

( ) Weekly

( ) Monthly

( ) As and when required

9. For what purpose do you use Internet banking? ( ) Checking the bank balance

( ) Operate between accounts

( ) Ticket Booking

( ) Others

10. Which do you prefer? ( ) E-banking Service

( ) Traditional Banking Practice

11. Why do you use the above services? ( ) Convenient

( ) Safety

( ) Less Expensive

12. Which of the following do you prefer most to use for authentication (verification)? ( ) Security Device

( ) SMS Text Password

13. How often do you use Internet Banking while on tour? ( ) Most of the times

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( ) Quite often

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( ) E-Certificate

An Analytical Study on E- Banking Services Bank

( ) Rarely

The Janatha Co-operative

( ) Never

14. What are the difficulties encountered while using Internet banking? ( ) Host not working

( ) Slow accessibility

( ) Time consuming

( ) None

15. How secure is your E-banking services provided by your banking Institutions? ( ) Absolutely safe and secure

( ) Safe to a large extent

( ) Moderately safe

( ) Not at all safe

16. Does your bank charge for E-banking services? ( ) Yes

( ) No

17. Do you try to get the details of other Products and services offered by the bank while using Internet banking? ( ) Yes

( ) No

18. What are the reasons for non-extensive usage? ( ) Non-access to Internet

( ) Security concern

( ) Prefer Traditional Banking

( ) Not fully aware of E-banking

19. Which do you prefer in case of solving the Technical problem? ( ) Talk personally to the Banker

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( ) Send mail instead of personal talk

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20. How do you rate the E-banking services provided by your banking Institutions? ( ) Excellent

( ) Good

( ) Satisfactory

( ) Poor

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