Internet Banking Adoption In A Developing Economy: IOCL Employee s Perspective

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1 Internet Banking Adoption In A Developing Economy: IOCL Employee s Perspective ABSTRACT: Bhawna Mishra, Assistant Professor, R.B. Institute of Technology, Agra, UP Sanjay Diwakar, Asst registrar, N.L.University, Lucknow U.P Information technology Services is considered as the key driver for the changes taking place around the world. Internet banking (IB) is the latest and most innovative service and is the new trend among the consumers. The shift from the formal banking to e-banking has been a 'leap' change. This study determines the factors influencing the consumer s adoption of internet banking in India and hence investigates the influence of perceived usefulness, perceived ease of use and perceived risk on use of IB. It is an essential part of a bank s strategy formulation process in an emerging economy like India. Survey based questionnaire design with empirical test was carried out. The results have supported the hypothesis. Keywords: internet banking, perceived usefulness, perceived ease of use, risk, India, emerging economy INTRODUCTION Electronic banking is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick-and-mortar institution. The following terms all refer to one form or another of electronic banking: personal computer (PC) banking, Internet banking, virtual banking, online banking, home banking, remote electronic banking, and phone banking. PC banking and Internet or online banking is the most frequently used designations. It should be noted, however, that the terms used to describe the various types of electronic banking are often used interchangeably. Electronic banking is an activity that is not new to banks or their customers. Bank shaving been providing their services to customers electronically for years through software programs. These software programs allowed the user s personal computer to dial up the bank directly. In the past however, banks have been very reluctant to provide their customers with banking via the Internet due to security concerns. Today, banks seem to be jumping on the bandwagon of Internet banking. Why is there a sudden increase of bank interests in the Internet? The first major reason is because of the improved security and encryption methods developed on the Internet. The second reasons that banks did not want to lose a potential market share to banks that were quick to offer their services on the Internet. Many of the banks like ICICI, HDFC, IndusInd, IDBI, Citibank, Global Trust Bank (GTB), Bank of Punjab and UTI were offering E-banking services. Based on the above statistics and the analysts comments that India had a high growth potential for e-banking the players focused on increasing and improving their E-banking services. As a part of this, the banks began to collaborate with functions online. Why E Banking There a sudden increase of bank interests in the Internet? The first major reason is because of the improved security and encryption methods developed on the Internet. The second reason is that banks did not want to lose a potential market share to banks that were quick to offer their services on the Internet. As discussed by Turner (2001), progress in information technology has slashed the costs of processing information, while the internet has facilitated its transmission, thus facilitating change in the very essence of the banking business. Around the world, electronic banking services, whether delivered > RJCBS: Volume: 01, Number: 11, September-2012 Page 46

2 online or through other mechanisms, have spread quickly in recent years. It must be noted that the impact of e-banking is not limited to industrial and advanced emerging economies. Even in countries with underdeveloped banking systems, E-banking has offered many new business opportunities. E-Banking Is Defined As the automated delivery of new and traditional banking product sand services directly to customers through electronic, interactive communication channels. E-banking includes the systems that enable financial institution customers. Individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network including the Internet, Customers access e-banking services using an intelligent electronic device. The E-banking was firstly introduced in India by the ICICI around There after many other banks like HDFC, IndusInd bank, IDBI, Citibank Trust Banks, UTI, etc. followed the service. As today private and foreign bank had started capturing the market through e-banking hence the competition is heating up and the lack of technology can make a bank loose a customer so now the public banks are breaking the shackles of traditional set-up and gearing up to face the competition posed by the private sector counterparts. Why is there a sudden increase of bank interests in the Internet? The first major reason is because of the improved security and encryption methods developed on the Internet. The second reason is that banks did not want to lose a potential market share to banks that were quick to offer their services on the Internet. Internet Banking In India The financial products and services have become available over the Internet, which has thus become an important distribution channel for a number of banks. Banks boost technology investment spending strongly to address revenue, cost and competitiveness concerns. The purpose of present study is to analyze such effects of IB in India, where no rigorous attempts have been undertaken to understand this aspect of the banking business. A study on the Internet users, conducted by Internet and Mobile Association of India (IAMAI), found that about 23% of the online users prefer IB as the banking channel in India, second to ATM which is preferred by 53%. Out of the 6,365 Internet users sampled, 35% use online banking channels in India. This shows that a significant number of online users do not use IB, and hence there is a need to understand the reasons for not using it. Until the advent of ATMs, people were unaware and/or not directly affected by the technological revolutions happening in the banking sector. ATMs became the major revelation for customers, since it offered the facility to avoid long queues in front of the cashiers in banks. It also provided them the flexibility of withdrawing money anytime, anywhere. In the study by IAMAI, it was found that the people are not doing financial transactions on the banks Internet sites in India because of reasons such as security concerns (43%), preference for face-to-face transactions (39%), lack of knowledge about transferring online (22%), lack of user friendliness (10%), or lack of the facility in the current bank (2%). Consumer Acceptance Of Internet Banking Technological innovations are having significant importance in human general and professional life. This era can safely be attributed as technology revolution. The quick expansion of information technology has imbibed into the lives of millions of people. Rapid technology advancements have introduced major changes in the worldwide economic and business atmosphere. Research on consumer attitude and adoption of IB showed there are several factors predetermining the consumer s attitude towards online banking such as person s demography, motivation and behavior towards different banking technologies and individual acceptance of new technology. It has been found that consumer s attitudes toward online banking are influenced by the prior experience of computer and new technology. The adoption of IB forces consumers to consider concerns about password integrity, privacy, data encryption, hacking, and the protection of personal information. IB requires perhaps the most consumer > RJCBS: Volume: 01, Number: 11, September-2012 Page 47

3 involvement, as it requires the consumer to maintain and regularly interact with additional technology (a computer and an Internet connection). Consumers who use IB use it on an ongoing basis and need to acquire a certain comfort level with the technology to keep using it. In the study by, revealed six composite dimensions of electronic service quality, including the provision of convenient/accurate electronic banking operations; the accessibility and reliability of service provision; good queue management; service personalization; the provision of friendly and responsive customer service; and the provision of targeted customer service. PU, security and privacy are the main perusing factors to accept online banking system. According to study conducted by, PU, PEU, perceived credibility and computer self-efficacy are the factors affecting adoption of IB. TAM provides a conceptual framework for this study. In the technology context of use, the frequency of use and duration of experience with the technology have been found to capture the customer s use of technology. In this study consumer attitude or intention to use is evaluated by PU, PEU, PR and usage pattern by frequency and duration of IB use. Mediums of E-banking Various Products And Services : Electronic banking, also known electronic fund transfer (EFT), uses computer and electronic technology as a substitute for checks and other paper transactions. EFT sare initiated through devices like cards or codes that let you, or those you authorize, access your account. Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) for this purpose. Some use other forms of debit card send personal Identification Numbers (PINs) for this purpose. Some use other forms of debit cards such as those that require, at the most, your signature or a scan. The federal Electronic Fund Transfer Act (EFT Act) covers some electronic consumer transactions. Following are the electronic medium by which services are generally provided by the banks as a part of e-banking services. 1) Internet Banking 2) ATM (Automatic Teller Machine) 3) Phone Banking 4) Mobile Banking 5) Payment Cards (Debits/Credit Card) Types Of Risks Associated With Internet Banking Operational risk: Security risk: System architecture and design.reputational risk Legal risk Money laundering risk Cross border risks Strategic Risk Advantages And Disadvantages Of Internet Banking There are both advantages and disadvantages to Internet banking. Let's look at the advantages first: Advantages of Internet Banking Being able to access your information 24/7 from a computer or laptop is very convenient and that is the main selling point for online banking. Being able to check your balance anytime can be a real life saver in avoiding overdraft charges. Online banking is fast and efficient. You will be able to see transactions immediately and you can access all of your accounts. > RJCBS: Volume: 01, Number: 11, September-2012 Page 48

4 Disadvantages of Internet Banking It is, however, also important to consider the negatives too when looking at the advantages and disadvantages of Internet banking: A lot of people are uneasy banking online because they are not sure that the process is secure. Banks do have protections in place, but it is always possible that there is a chance (however slim) that something will go wrong. her stumbling block for some people is the work involved to set up an online account. This will take some time as will learning how to use the bank s website. There are usually several options for learning how to use the site - there is a number to call or address or a tutorial for help when setting up your online account or the site. If your Internet connection is not working or of the bank s server is down, you won t be able to access your information or make transactions. Usually, however, these interruptions are usually short-lived and are not a major concern. About IOCL In order to ensure greater efficiency and smoother working in the petroleum sector,government of India decided to merge the refineneries and the distribution activities.the Indian Refineries and Indian Oil Company were combined to form the giant Indian Oil Corporation (IOCL) on 1stSeptember 1964, with its registered office at Bombay. In 1967, the pipeline division of the corporation was merged with the refineries division. Research &Development of Indian Oil Came into Existence in In October 1981 Assam Oil Company was nationalized and has been amalgamated with IOCL as Assam Oil Division(AOD) OBJECTIVE OF STUDY Analysis the efficiency of e-banking at IOCL. To know about RTGS/ NEFT guidelines. To know about bank reconciliation. For finding security level of E-Banking To know about provided services by banks in e banking at IOCL To check familiarity of e banking at IOCL Elements to be tested Satisfaction Of Customers With E Banking Performed Activities On E Banking System Visit To A Bank Branch E Banking Is Easy To Use Familiarity Of Users With E Banking Security In E Banking RTGS/NEFT Guidelines Ability To Check Voucher In Sap SMS Service Efficiency Responsiveness Problem Handling Convenience Perceived Value Cost Effectiveness RESEARCH METHODOLOGY The key intention of this paper is to evaluate those factors that manipulate the nature of customers towards online banking and their growing tendency towards the online financial institutions. A survey > RJCBS: Volume: 01, Number: 11, September-2012 Page 49

5 instrument in the form of questionnaire was developed through data collected from previous studies on acceptance of IB. Sample Size of the sample 120 Sample Area IOCL, Mathura Collection of data Data was collected through personal experience of employee, were collected through a questionnaire. which was primary data. Beside for explanation several issues, articles, internet data and books etc were consulted. Which was secondary data? Few data were collected from the SAP module in IOCL. Data analysis & Interpretation of data Data analysis Some statistical tools like Mean, S.D, C.V, has been calculated to compare the various results and to get the desired results. Analysis After the completion of entire analysis interpretation were made on the basis of bar graph,figure pie chart. Finding DATA ANALYSIS AND INTERPRETATION How long have you been using e banking in IOCL 1 Year = 24= 20 % Less than 5 year = 64 = % More than 5 year = 32 = % 1 year less than 5 year more than 5 year 5year PERFORMED ACTIVITIES ON E BANKING SYSTEM Have you performed any of the following activity on e banking system? 1=Payment transfer to same group of account = 32 % 2=Payment transfer to other group of bank = 28 % 3=Direct e-remittance from your account for bill payments = 40 % > RJCBS: Volume: 01, Number: 11, September-2012 Page 50

6 1 2 3 VISIT TO A BANK BRANCH How frequently do you visit your bank branch in a month? 1=Once in a month = 40 = % 2=Twice in a month =32 = =None = 48= 40 % In this question our aim was to know about customers that means how frequently do they visit their bank branch in a month and finally we found - 1. Some user visits their bank branch once in a month. 2. Some users visit their bank branch twice or more than twice in a month. 3. Many of the users were present in IOCL, they don t visit their bank branch in a month. So before starting a survey, we focused that some of the no. of peoples will be present they don t visit their bank branch at any time in a month. > RJCBS: Volume: 01, Number: 11, September-2012 Page 51

7 SATISFACTION EASYNESS 100 SECURITY ABILITY TO CHECK VOUCHER IN SAP 80 SMS SERVICE RTGS/NEFT GUIDELINES EFFICIENCY 60 RESPONSIVENESS PROBLEM HANDLING 40 CONVENIENCE PERCEIVED VALUE 20 COST EFFECTIVENESS 0 YES NO CONFUSED FINDINGS A research survey was very successful in IOCL on the topic of Internet Banking Adoption in a Developing Economy: IOCL Employee s Perspective And in this result we found out some important points and these points are as follow E banking is very fast service in current scenario It is secure to use Employees are satisfied with E-Banking, those have knowledge of computer and Internet. Process of bank reconciliation Satisfaction in costumer of e-banking because of its provided services. E Banking increases efficiency of service and responsiveness toward customer, and problem handling is becoming easier. Perceived value is increasing as services are doing better and people are believing it to be a cost effective way > RJCBS: Volume: 01, Number: 11, September-2012 Page 52

8 This finding refers to the fact that consumers use online banking for the benefits and also due to its easiness in use which provides in comparison to other banking delivery channels. When online banking is perceived as useful, customer s intention to adopt it would be greater. Likewise bank customers are likely to adopt IB when it is easy to use. This shows that bank customers anchor their online banking adoption intention to the beneficial outcomes and ease of use process of the system. Although IB provides flexibility in performing financial transaction, fast and easy, however individuals are still reluctant to adopt the system because of the risk associated with it. It was very important point to know that there is a large decreasement in visiting time at bank branch. This study suggests that they should consider focusing on the prevention of intrusion, fraud and identity theft. In addition, this study suggests that online banking companies could develop trust-building mechanisms to attract customers, such as statements of guarantee, increased familiarity through advertising, and long-term customer service. The proposed model makes an important contribution to the emerging literature on ecommerce, especially with regard to online banking. CONCLUSION The result of the study shows that E-Banking is very good service if bank provide a guarantee of security and privacy.it is easy to use in compare of traditional bank and is basically used in IOCL for payment and some part of collection. It is very faster and cheaper and E-Banking also save time, cost and reduces human involvement as a mediator from the survey it is clear that more no. of peoples have already reduced their bank branch visited time in month as E banking is providing some other services such as sms on each and every transaction. This study meets the desired objective; but it suffers from one setback. The relatively small size of the sample limits generalization of the outcome of the study.this study was conducted to explore the factors influencing intentions to adopt IB services. As such, there is still room for further investigation into the adoption of IB services. The replication of this study on a wider scale with more IB customers and with different national cultures is essential for the further generalization of the findings. By using a longitudinal study in the future, we could investigate our research model in different time periods and make comparisons, thus providing more insight into the phenomenon of online banking adoption. Responsiveness, Easy to Use, Cost Effectiveness and Efficiency are predictors of customer satisfaction in e-banking and Fulfillment, Efficiency, Security/Assurance, Responsiveness, Convenience, Cost Effectiveness, Problem Handling are appetizer of perceived value in e-banking. Therefore, banker and e-banking service designers should think over these dimensions and make possible changes in the e-banking services according to the customers expectations and need of the time. It will be helps to enhance service quality of e-banking and increase the level of customers satisfaction in EBanking. References 1. Agarwal, R, Rastogi, S & Mehrotra, A., Customers perspectives regarding e-banking in an emerging economy, Journal of Retailing and Consumer Services, vol. 16, pp , Aladwani, A., Online Banking: A Field Study of Drivers, Development Challenges, and Expectations, International Journal of Information Management, vol. 21, pp , Aldas-Manzano, J, Lassala-Navarre, C, Ruiz- Mafe, C & Sanz-Blas, S., The role of consumer innovativeness and perceived risk in online banking usage, International Journal of Bank Marketing, vol. 27, no. 1, pp , Al-Hajri, S & Tatnall, A., Technological Innovation and the Adoption of Internet Banking in Oman, The Electronic Journal for Virtual Organizations and Networks, vol. 10, pp , Al-maghrabi, T & Dennis, C., Driving online shopping: Spending and behavioral differences among women in Saudi Arabia, International Journal of Business Science and Applied Management, vol. 5, no. 1, pp , > RJCBS: Volume: 01, Number: 11, September-2012 Page 53

9 6. Alsajjan, B & Dennis, C., Internet Banking Acceptance Model: Cross-Market Examination, Journal of Business Research Al-Somali, S, Gholami, R & Clegg, B., An Investigation into the Acceptance of Online Banking in Saudi Arabia, Technovation, vol. 29, pp , Amin, H., An Analysis of Online Banking Usage Intentions: An Extension of the Technology Acceptance Model, International Journal of Business and Society, vol. 10, no. 1, pp , Amin, H., Internet Banking Adoption among Young Intellectuals, Journal of Internet Banking and Commerce, vol. 12, no Gerrard, P., Cunningham, J.B. and Devlin, J.F. (2006). Why consumers are not using internet banking: a qualitative study. Journal of Services Marketing, 20 (3), pp > RJCBS: Volume: 01, Number: 11, September-2012 Page 54