RIJS Volume 1, Issue 10 (October 2012) ISSN: A Journal of Radix International Educational and. Research Consortium RIJS

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1 A Journal of Radix International Educational and Research Consortium RIJS RADIX INTERNATIONAL JOURNAL OF RESERCH IN SOCIAL SCIENCE AN EMPIRICAL ANALYSIS ON THE CUSTOMERS VIEWS ON INTERNET BANKING SERVICES R.S.Sri Poorani Research Scholar Dr.P.Ambiga Devi Professor of Economics Avinashilingam Institute for Home Science and Higher Education for Women Coimbatore, Tamil Nadu, India Indian banking industry today, is in the midst of an information technology (IT) revolution. The financial reforms that were initiated in the early 90s and the globalization and liberalization measures brought in a completely new operating environment to the banks. Services and products like Anywhere Banking, Tele-Banking, Internet Banking, Web Banking, E-Banking etc. have become the buzzwords of the day and the banks are trying to cope with the competition by offering innovative and attractively packaged technology based services to their customers. Information technology has transformed the functioning of business, the world over. In the Indian context the financial sector, especially the banking sector, has been a major beneficiary from the inroads made by IT. Many new processes, products and services offered by banks and other financial intermediaries are now IT 1 P a g e

2 centered. Effective integration of technology with sound business practices requires business process re-engineering and banks in India need to follow up on the beginnings made in this regard. Virtual or e-bank may save real money. Virtual banks are banks without bricks; from the customer s perspective and they exist entirely on the internet, where they offer pretty much the same range of service. Internet banking (IB) is also known as online banking or net banking. Internet banking can be defined as a facility provided by banking and financial institutions that enables the users to execute bank related transactions through internet. The biggest advantage of internet banking is that people can avail the services sitting at home, to transact business. Due to which, the account holder does not have to personally visit the bank. With the help of internet banking many transactions can be executed by the account holder. When small transactions like balance enquiry, record of recent transaction, etc. are to be processed, the internet banking facility proves to be very handy. The concept of internet banking has thus become a revolution in the field of banking and finance (Rajesh Kumar Srivastava, 2007). Today banking customers are more efficient and technologically sophisticated than ever before. With less and less time available to conduct routine banking business, more and more of them are comfortable with the idea of using internet that includes banking. With adoption of electronic systems and with the connectivity between the customer s computer and the bank computers by means of telecommunication and modems, it has become possible for a customer to interact with the bank round the clock without coming to the bank personally. Banking transactions being information oriented, if a customer provides the necessary information through authenticated media, it is sufficient to carry out the transaction. 2 P a g e

3 Internet banking is changing the banking industry and is having the major effects on banking relationships. Banking is now no longer confined to the branches where one has to approach the person in branch, to withdraw cash or deposit cheque or request a statement of accounts. In true internet banking, any enquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. Providing internet banking is increasingly becoming a need to have than a nice to have service. The net banking thus, now is more of a norm rather than an exception in many developed countries due to the fact that it is the cheapest way of providing banking service. Banks view internet banking as a powerful value added tool to retain and attract new customers and to eliminate costly paper handling in an increasingly competitive banking environment. There has been a paradigm shift in global banking after electronic banking became the mode of delivery of traditional as well as new innovative products to customers. Online banking through traditional banks enable customers to perform all routine transactions, such as account transfers, balance enquiries, bill payments, and stop payment requests and some even offer online loan and credit card application. In India banks have tried to introduce internet based e-banking systems to improve their operations and to reduce costs. Despite all their efforts aimed at developing better and easier internet banking systems, these systems remain largely unnoticed by the customers, and certainly underused in spite of their availability. 3 P a g e

4 DIFFUSION OF INTERNET BANKING IN INDIA Like most of other activities in banking, the Reserve Bank of India set up two Committees in quick succession to accelerate the pace of automation of operations in the banking sector. In the early 80 s, a high level Committee was formed under the Chairmanship of Dr. C. Rangarajan, then Governor of the Reserve Bank of India, to draw up a phased plan for computerization and mechanization in the banking industry over a five year time frame of The focus by this time was on customer service and two models of branch automation were developed and implemented. Having gained experience in the earlier mode of computerization, the second Rangarajan Committee constituted in 1988 drew up a detailed perspective plan for computerization of banks and for extension of automation to other areas like funds transfer, , BANKNET, SWIFT, ATMs, Internet banking etc. The Government of India enacted the Information Technology Act, 2000, generally known as IT Act, 2000, with effect from the 17 th October 2000 to provide legal recognition to electronic transactions and other means of Electronic Commerce. Reserve bank of India had set up a Working Group on Internet Banking to examine different aspects of internet banking (I-banking). The Group had focused on three major areas of I-banking - (i) technology and security issues, (ii) legal issues and (iii) regulatory and supervisory issues. The RBI had accepted the Recommendations of the Working Group and accordingly issued guidelines on internet banking in India for implementation by banks. The Working Group has also issued a Report on Internet Banking covering different aspects of I- banking. Considerable progress has been made in consolidating the existing payment systems and in upgrading technology with a view to establishing an efficient, integrated and secure system functioning in a real-time environment. Major projects under 4 P a g e

5 implementation are electronic clearing, centralized funds management, structured financial messaging solutions and the Indian Financial Network (INFINET). Facilities under Electronic Funds Transfer (EFT) have been upgraded and their spatial reach expanded with multiple settlements in a day. Foreign exchange clearing has been initiated through the Clearing Corporation of India Limited (CCIL). Adequate security features are being incorporated into the EFT. As per the Reserve Bank of India statement (2011) Preparatory work for the Real Time Gross Settlement (RTGS) was complete. As per an internet survey conducted by NASSCOM the Indian internet market grew steadily in terms of subscribers. There is a growth of 30% in March 2002 compared to the 1.1 million active subscriber bases in March The survey also forecasted that the number of internet subscribers in the year was likely to reach 7.7 million, with the user base to grow over 50 million. India's internet user base is growing at a rapid pace. India's internet population grew to 29 million by March 2003 from 10.7 million in Banking and finance market has got the largest share i.e. 21 percent among the other sectors of economy in using information technology. Thus there is a lot of scope for banking institutions to expand their internet banking services to have a more sophisticated customer base. As many as 7% of account holders in the country are using the internet for banking transactions, while branch banking has fallen by a full 15 percentage points, according to a report by global management consultancy McKinsey & Company. "Use of the Internet for banking has seen a massive rise in the survey, taking the overall number of bank consumers who use the Net to close 7% of the total bank account holders - - a seven-fold jump since even as for the first time in the past 13 years, branch banking has come down by a full 15 percentage points during the same period," McKinsey & Company India partner and head of its retail banking services Renny Thomas said (Business Standard, 2012). He further stated that the percentage of online users of banking 5 P a g e

6 transactions was just about 1% in the agency's 2007 survey, Thomas added. In 2007, the number of times Indian respondents visited bank branch for doing transactions was 0.58 while the same in 2011 was 0.49, showing a fall of 15 percentage points. Branch usage has dropped by 27 percentage on an average across Asia between 2007 and 2011, while usage of the Internet and mobile banking have increased by 28 percentage and 83 percentage, respectively, says the survey, which was also conducted across the Asia-Pacific region. When it comes to digital banking, the survey said, "India leads growth in Asia in mobile and internet usage for banking. While there was a 15 percent decline in branch usage here, the growth in usage of the internet and mobile banking has almost tripled." Private and foreign banks have been the early adopters of e-banking while the public sector banks are also beginning to hold on to the competition. ICICI bank and HDFC bank have taken a lead in introducing e-banking in India. ICICI bank is the first one to have introduced internet banking for a limited range of services such as access to account information; correspondence for the first time in 1996 followed by, funds transfer between its branches (Rajneesh and Padmanabhan, 2002). ICICI is also getting into e trading, thus offering a broader range of integrated services to the customer. Other banks also followed the suit. However, was the period of internet banking adoption and the internet banking usage gained importance in After ICICI, Citibank, Indus Ind bank and HDFC bank were the early ones to adopt the technology from With this background, an attempt was made in this study to make An Empirical Analysis on the Customers Views on Coimbatore city. Internet Banking Services among selected respondents in 6 P a g e

7 OBJECTIVES 1. To analyse the socio economic and demographic features of the respondents on internet banking usage. 2. To find out the banking habits of the respondents and 3. To elicit the views of the respondents on internet banking services. In the course of the study, the following hypotheses are tested. The usage of internet banking depends on socio economic and demographic characteristics of the respondents. SELECTION OF THE SAMPLE UNITS The study aims to explore the customer s adoption on internet banking services. For this purpose the respondents are selected through convenience sampling method, a non probability sampling technique. The investigator initially approached one public sector bank and one private sector bank for collecting data, after obtaining official permission from the staff. Further data were collected using convenience sampling technique from the respondents who were willing to provide the required data. All the respondents of the current study are located in Peelamedu, Singanallur and Vadavalli areas of Coimbatore city. The data for this study is collected from a sample of 100 respondents, in which 50 respondents are users of internet banking and another 50 respondents are non users of internet banking. A detailed questionnaire which covers the general profile of the respondents, the information on the bank details and the views of the respondents on the characteristics of internet banking was administrated to the respondents. The data for the study are collected from the respondents in the months of May and June P a g e

8 MAJOR FINDINGS It can be seen from the collected data that 56 percent of the participants are males and the remaining females. The findings are in consonance with the findings of Melek Acar Boyacioglu et al., (2010). Among the internet bank users, 62 percent are males and among the non users 46 percent are males. The survey results further show that more than 85 percent of the respondents among both the users and nonusers of internet bank are Hindus. Caste wise analysis shows that backward community (56 percent) dominates in the usage of the internet banking. While 78 percent of the internet banking users is unmarried, in the case of non users 60 percent are married. Norazah Mohd Suki (2010). The findings confirm the results of It is observed that among the users of internet bank, 40 percentages are in the age group of 20 to 30 years. In the case of non users in this age group, the percentage is 78. The findings are similar to the findings of Melek Acar Boyacioglu et al (2010). When taken the users and non users together, it is found that 59 percentages of the respondents are in the age group of years, 21 percentages in the age group of years and the remaining above 40 years of age. It is revealed that both the users and nonusers of internet bank of the current study have completed at least school level education. Majority of the respondents are graduates. In the case of users of internet bank, this percentage is 92 and for the non users of internet banking, it is 90. Among the users of internet bank 20 percent are post graduates, 16 percent have done BE/MBBS/CA and 8 percent are diploma holders. Among the non users a majority of 36 percent have completed professional education. 8 P a g e

9 In terms of occupation among the users of internet bank majority are bankers (28 percent) and technicians (28 percent), followed by professionals with 18 percent and business with 14 percnt. School teachers are 4 percent and non workers are 8 percent. Among the non users majority are technicians (26 percent) along with business men (26 percent) and students (26 percent). Among the users of internet banking it is seen that 50 percent of the respondents earn more than Rs 20,000 per month. Twenty eight percent earn less than Rs 10,000 and 20 percent in the range of Rs 20,001-30,000. Among the non users of internet bank, a discernible feature is that, 70 percent have their monthly income being less than Rs 10,000, 20 percent in the range of Rs 10,001-20,000 and 10 percent in the range of Rs 20,001-60,000. The data reveals that among the users of internet banking, 20 percent have their monthly family income being less than Rs 20,000; majority of 52 percent in the range of Rs 20,001-40,000 and 28 percent have their income between Rs 41,000-60,000. In the case of non users, 46 percent have their income being less than Rs 20,000, 44 percent in the range between Rs 20,001-40,000 and the remaining 10 percent in the income range of Rs 40,001-60,000. BANK DETAILS A majority of 58 percent of the users of internet bank have their accounts in public sector banks and the remaining in private sector banks. In this, Oriental bank of Commerce stands first with 24 percent of the respondents, followed by the State bank of India with 20 9 P a g e

10 percent and ICICI with 14 percent. Among the non users of internet banking also, public sector banks have a majority of 68 percent of the respondents followed by private sector banks with 32 percent. The statistics reveals that among the users of internet bank 72 percent maintain a minimum balance amount of less than Rs 5,000 and it is 92 percent in the case of non users of internet bank. In the case of users of internet bank, 34 percent have account for a period of 1-5 years, another 34 percent for 6-10 years, and the remaining 32 percent having accounts for more than 10 years. In the case of non users of internet bank 84 percent have accounts for a period of 1-5 years. The respondents are asked to state whether they are credit card holders. Among the users only 48 percent use credit cards and the remaining 52 percent do not possess credit cards. In the case of non users while 28 percent are credit card holders, 72 percent do not possess credit card. Among the users of the internet bank a majority of 30 percent rarely visit the bank, 28 percent daily, 22 percent at least once in a week, 16 percent once in 15 days and the remaining 4 percent once in a month. In the case of non users of internet bank, these percentages are 44, 10, 24, 10 and 12 respectively. Among the 50 users of internet bank 56 percent access internet bank in their work place, 34 percent in their houses and the reaming 10 percent from the browsing centers. While 86 percent use internet bank at least once in a week; 2 percent each use it either once in 15 days or a month and 10 percent use internet bank rarely. Further, 48 percent of the users 10 P a g e

11 stated that they use internet bank for simple transactional services 32 percent for fully transactional service and 20 percent only for information services. VIEWS ON INTERNET BANKING SERVICES An attempt is made in this section to find out the views on internet banking services from both the users and non users of internet bank. It has been found out that among the respondents who have internet connection 34 percent do not use internet banking services and among the respondents who do not have internet connection 21 percent use internet banking services. This is shown in the following table 1. Table-1 Ib Use And Having Internet Connection Internet connection User Internet Banking Non User Total Yes Number % No Number % Total Number Source: Field survey, P a g e

12 Among the users of internet bank, 86 percent are familiar with online technology. Though 14 percent are not familiar with online technology they still use internet banking service. Another point to be noted here is that among the respondents who are familiar with online technology, 46 percent still does not use internet banking service. In the sample 82 percent of the users of internet banking have personal computer with internet facility and this percentage was 46 percent among the non users of internet banking. It has been found out that among the respondents who have internet connection 34 percent do not use internet banking services and among the respondents who do not have internet connection 21 percent use internet banking services. This is shown in the following Table 2. Table-2 Ib Use And Having Internet Connection Internet connection Internet Banking Total User Non User Yes Number % No Number % Total Number P a g e

13 Among the respondents who are satisfied with internet banking services percent are users and percent are non users. Similarly percent of the respondents who are not satisfied with internet banking service are non users of internet banking. This is shown in Table 3 TABLE-3 RELATIONSHIP BETWEEN IB USE AND THE LEVEL OF SATISFACTION Internet Banking Services Internet Banking User Non user Total Satisfied Number % Not Satisfied Number % Total Number SSource:Source :Field survey, Further from the data given in the above table among the users of internet banking, 96 percent are satisfied with internet banking services and among the non users the percentage was P a g e

14 It is observed that among the respondents who felt that the legislation on internet banking services is good, 57 percent are from the users of internet banking services and among those who said that it is poor, 66 percent are from non users of internet banking. Among the users of internet banking 78 percent felt that the legislation is good and among the non users of internet banking and also majority of 58 percent have expressed the same view. It is seen from the data that 69 percent of the respondents who finds the use of internet banking as difficult and 41 percent of the respondents who do not find the use of internet banking as difficult are non users of internet banking. Among the users of internet banking, 80 percent find the method to use internet banking services as easy and among the non users this percentage is 56. From the data it is observed that 51 percent of the respondents who prefer face to face banking and 45 percent who do not prefer face to face banking are from the non users of internet banking. Among the users of internet banking services 55 percent do not prefer face to face banking and among the non users this percentage is 45. The following Table 4 gives the views of the sample group on whether the price of internet banking is reasonable or not reasonable. 14 P a g e

15 TABLE-4 IB USE AND THE PRICE OF IB SERVICE Price Internet Bank Total User Non User Reasonable Number % Not Number Reasonable % Total Number Source: Field survey, It is understood from the table that among the respondents who felt that the price of internet banking services is reasonable, 56 percent are users of internet banking and among those who stated that the price is not reasonable 81 percent are non users of internet banking. From the data it is observed that 51 percent of the respondents who prefer face to face banking and 45 percent who do not prefer face to face banking are from the non users of internet banking. Among the users of internet banking services 55 percent do not prefer face to face banking and among the non users this percentage is P a g e

16 INTERDEPENDENCE BETWEEN USAGE OF INTERNET BANKING AND SOCIO ECONOMIC FACTORS To find out whether the usage of internet banking depends on selected socio economic and demographic factors of the respondents X 2 test was applied. The socio economic and democratic factors chosen for the study are gender, religion, caste, age, marital status, occupation and income. The null hypothesis tested is H 0 : The usage of internet banking is independent of gender/religion/caste/age/education/ marital status/occupation and income of the respondents. H a : The usage of internet banking depends on socio, economic and demographic factors. To have cell frequencies, in constructing contingency table, at least equal to 5, the following classifications were used. For the age of the respondents, the classification was given in table 5. TABLE-5 CODE FOR AGE OF THE RESPONDENTS Age (in years) Code P a g e

17 For the occupation of the respondents, the classification is given in table 6. TABLE-6 CODE FOR OCCUPATION OF THE RESPONDENTS Occupation Business School Teacher Student/ House wife Bankers/ Professionals Technicians Code The respondents are coded based on their monthly income as given in table 7. TABLE-7 CODE FOR MONTHLY INCOME OF THE RESPONDENTS MONTHLY INCOME(Rs) < above CODE P a g e

18 The calculated x 2 values are shown in the following table 8. TABLE-8 X 2 TEST: INTERNET BANKING USAGE AND SELECTED CHARACTERISTICS OF THE RESPONDENTS. Characteristic Calculated d.f Theoretical X 2 Significanc s X 2 Value Value at 5% Level e Level Gender Religion Caste Age Education Marital status Occupation Monthly income Source: calculations based on field survey, The table shows that calculated x 2 values for all the chosen variables are significant at 5 percent level, excepting for religion. Hence it could be concluded that the usage of internet banking depends on gender, caste, age, education, marital status, occupation and income of the respondents. 18 P a g e

19 CONCLUSION From the study, it is inferred that, young, unmarried graduates use internet banking services in a greater proportion. Public sector banks promote internet banking along with traditional banking system significantly. But a point to be noted is that the banks-both public and private sectors have to go a long way in attracting customers to follow internet banking system. The study further reveals that the banks have to adopt suitable strategies for the customers to be satisfied with internet banking services provided by them. REFERENCES Business Standard (2012), Friday, September 21, Melek Acar Boyacioglu, Tevfik Hadi Hotamis and Huseyin Cetin (2010), An Evaluation of Internet Banking in Turkey, Journal of Internet Banking and Commerce, Vol. 15, No.2 Norazah Mohd Suki, (2010), An Empirical Study of Factors Affecting the Internet Banking Adoption among Malaysian Consumers, Journal of Internet Banking and Commerce, Vol. 15, No.2 Rajesh Kumar Srivastava (2007), Customer s perception on usage of internet banking, Innovative Marketing, Volume 3, Issue 4. pp Rajneesh and Padmanabhan (2002), Internet opens new vistas for Indian Banks, Express Computers,Retrived on 27 th April 2007 from /indtrend1.shtml 19 P a g e