A Study on Customers Reactions towards Utilization of E-Banking Services INTRODUCTION Lottiya Perumal Ramalingam Associate Professor, Dept. of Commerce & Research Centre Sourashtra College (Autonomous), Madurai 625 004 Tamil Nadu The beginning of the electronic business (e-business) or electronic commerce (e-commerce) age has been shivering the business environment and breaking out innovative and unconventional ways of doing business. One of the latest outcomes of this e-business is internet banking or online banking or electronic banking (i.e. e-banking). The advent of e-business accompanied with technological innovations and globalization is constantly propelling the businesses organization to redefine their business operations in terms of value chain reengineering and restructuring business models. Likely, the financial sector is metamorphosing under the impact of competitive, regulatory and technological forces. The banks have put themselves in the World Wide Web (www) to take advantage of the internet s power and reach, to cope with the accelerating pace of change of business environment. Concept of E-Banking: The concept of e-banking includes all types of banking activities performed through electronic networks. It is the most recent delivery channel of banking services which is used for both businessto-business (B2B) and business-to-customer (B2C) transactions. However, in true sense, e-banking includes activities like payment of bills and invoices, transfer of funds between accounts, applying for a loan, payment of loan installments, sending funds to third parties via emails or internet connections regardless of where the client is located. Importance and Need of the Study: E-banking offers some smart services benefiting both banks and customers. Compared with traditional banking system, it has become imperative to make necessary room for the scheduled banks to flourish e-banking. Among others, attractiveness of e-banking includes: it lowers transaction cost, provides 24- hour services; ensures increased security controls over transactions, reduces fraud risk, performs higher volume of transactions with less time, increases number and volume of value payment through banks, allows remote transactions facilities that replaces physical presence of a customer in a bank branch, and increases transaction speed and accuracy. On the other hand, traditional banking is timeconsuming and more costly and therefore, e-banking replaces traditional banking all over the world. In India, Internet banking both as a medium of delivery of banking services and as a strategic tool for business development, has gained wide acceptance and is fast catching up with more and more banks entering the fray. Initially, some of the banks permit customers to interact with them and transact electronically with them. Such services include request for opening of accounts, requisition for cheque books, stop payment of cheques, viewing and printing statements of accounts, movement of funds between accounts within the same bank, querying on status of requests, instructions for opening of Letters of Credit and Bank Guarantees etc. The ICICI Bank was the pioneer bank to use Internet banking for some of its services, in India. ICICI Bank and a lot of other Indian banks use the Internet banking system to provide online banking solution. Some of the more aggressive players in this area such as ICICI Bank Ltd., HDFC Bank Ltd., Axis Bank Ltd., and Citibank which offer the facility of receipt, review and payment of bills on-line. These banks have tied up with a number of utility companies. In India, the private sector banks like www.theinternationaljournal.org > RJSSM: Volume: 03, Number: 09, January-2014 Page 95
ICICI, HDFC, AXIS, IDBI, etc. are offering electronic banking services to its customers. In terms of usage by customers, HDFC and ICICI Bank have been the forerunners in the country. Compared to HDFC, more number of ICICI Bank branches is operating in Madurai District. Hence, an attempt is made how the customers will react while utilizing the e-banking services of ICICI Bank in Madurai District of Tamil Nadu. REVIEW OF PREVIOUS LITERATURE A review of some of the relevant literature is furnished in this section. Hariharan, S. (2005) in a study pointed out that the internet has changed the relationship between consumers and producers in ways more profound than anyone can imagine. Internet is not just another marketing channel. It is the foundation for a new revolution the information revolution. Today the competition in business is not between products, it is between business models. He also compared the e-business with e-commerce and explained the advent of e-commerce. Hanna-Maija Vainio (2006) made a research to identify the factors that influence corporate customers adoption of Internet banking services in Denmark, Finland, Norway and Sweden. Infogile Technologies (2007) in their case study paper describes the basic concepts, services offered, market survey and technology which enables mobile banking. Md. Abdul Hannan Mia, Mohammad Anisur Rahman and Md. Main Uddin (2007) in their paper attempt to assess the evolution, status and prospects of E-banking. This paper concludes that the E-Banking sector is highly prohibitive for the new entrants although the inception cost is lower with high growth rate. Kamakodi, N. and Basheer Ahmed Khan (2008) evaluated the e-banking channel acceptance by Indian customers. A survey result was obtained from 292 respondents about their views on electronic banking channels. The results indicate that the majority of the customers are very comfortable and willing to use e-banking channels. Salim Al-Hajri and Arthur Tatnall (2008) conducted a study on the adoption of internet banking in Oman. In their study they explained that Omani banks continue to conduct most of their banking transactions using traditional methods. Dalia El- Kasheir, Ahmed S. Ashour, and Omneya M. Yacout (2009) made a research which aims to understand and explain customers continued intention to use internet banking in Egypt. By using a sample of users of internet banking services, perceived ease-of-use was found to be the strongest predictor of intentions to continued usage of internet banking services. Rahmath Safeena, Hema Date and Abdullah Kammani (2011) carried out a study on internet banking adoption in an emerging economy. They highlighted that information technology service is considered as the key drive for the changes taking place around the world. OBJECTIVES OF THE STUDY The main objective of the study is to identify the factors which influenced the customers to react towards the utilization of e-banking services of ICICI Bank. SAMPLING METHODOLOGY The study is based on both secondary and primary data. Secondary data have been gathered through books, journals, reports and web sites. Primary data have been collected through a structured interview schedule by adopting random sampling method. Samples of 280 customers were chosen for primary data collection. ANALYSIS AND INTERPRETATION For assessing the reactions of customers, an attempt has been made to identify the factors which are useful for utilization of e-banking service. For this, 25 statements has been given and the sample respondents are asked to mention their reactions by marking their responses in strongly agree, agree, neither agree or disagree, disagree and strongly disagree columns and the scores of 5, 4, 3, 2 and 1 respectively has been awarded for analysis purpose. www.theinternationaljournal.org > RJSSM: Volume: 03, Number: 09, January-2014 Page 96
The technique adopted to identify and analyze the factors for the reactions of customers on usefulness of e-banking service is factor analysis. There are several methods available for factor analysis. But the Principal Factor Method with Kaizer Normalization rotation is mostly used and widely acceptable method in factor analysis by majority of researchers. Further, the columns of the loading matrix which define factors have had several high and low values while the rows of the loading matrix which define variables vis-a-vis factors have had only one high value. One of the final outcomes of a factor analysis is called rotated factor matrix (also termed as rotated component matrix), a table of co-efficient that expresses the ratios between the variable and the factors that have been prepared. The sum of squares of the factor loadings of variable is called communalities (h 2 ). The communality (h 2 ) of a factor is its common factor variance. The factors with factor loadings of 0.5 or greater are considered as significant factors. This limit is chosen because it had been judged that factors with less than 50 per cent common variation with the rotated factor pattern are too weak to report. Hence, in the present study, the principal factor analysis method is adopted and Varimax with Kaiser Normalization rotation is used to identify the factors which reacts the customers to use the e-banking services. Testing for Sampling Adequacy: Before extracting the factors, to test the appropriateness of the factor model, Bartlett s test of Sphericity is used to test the null hypothesis that the variables are inter-correlated in population. The test statistics of Sphericity is based on a chi-square transformation of the determinant of the correlation matrix. Another useful statistics is the Kaiser-Meyer-Olkin (KMO) test of sampling adequacy which was suggested by Marjoric A. Pett (2003). Small value of the KMO statistic indicates that the correlation between parts of variable cannot be explained by other variables and that factor analysis may not be appropriate. Generally, a value greater than 0.5, is desirable. The correlation matrix was examined carefully and the two tests namely Bartlett s test of Sphericity and Kaiser-Meyer Olkin test were undertaken to test if it was judicious to proceed with factor analysis in the present study. The computed results are presented in Table 1. TABLE 1 KMO and Bartlett s Test Measure Estimated Value Kaiser-Meyer Olkin (KMO) Measure of Sampling Adequacy 0.825 Bartlett s Test of Sphericity (Approx. Chi-square) 5792.553 Degree of Freedom 300 Significance 0.000 From Table 1, it could be inferred that the Bartlett s test was significant with P = 0.000, being less than 0.05. Sampling adequacy measured using the Kaiser-Mayer Olkin (KMO) of 0.825 was taken as acceptable. Thus the factor analysis may be considered an appropriate technique for analyzing the data. Factor analysis was done with 25 variables (statements) by Varimax with Kaiser Normalization rotation for receiving the reactions of customers towards the usefulness of e-banking services of ICICI Bank. The rotated factor matrix for the variables relating to the overall reactions of customers towards utilization of e-banking services is shown in Table 2. TABLE 2 Rotated Factor Matrix for Reactions of Customers Sl. Rotated Factor Loadings (h 2 ) Statements / Variables No. F-1 F-2 F-3 F-4 F-5 1 Convenient way to manage finances.849 -.027.188.090.149 0.787 2 More user-friendly than branch counter.764.049.159.324.127 0.733 3 Banking can be made conveniently.760 -.145 -.097.304.004 0.700 4 Allows to manage finances more efficiently.757 -.034.240.169.029 0.661 www.theinternationaljournal.org > RJSSM: Volume: 03, Number: 09, January-2014 Page 97
5 Gives greater control.731 -.155.363 -.042.142 0.713 6 Others will know about my transactions.726.003.211.163.213 0.643 7 Lack of personal relations exist.671.086 -.156.244.289 0.625 8 Easy to remember how to perform tasks.011.924.218 -.069.151 0.929 9 Easy to conduct all banking transactions -.005.919.196 -.061.117 0.901 10 Learning to operate would be very easy -.003.895.132 -.086.173 0.855 11 Does not require a lot of mental effort -.260.873.019 -.145 -.088 0.858 12 Utilization gives higher status in society.136.135.837 -.107.212 0.793 13 Trendy among my peers.097.116.770.154.198 0.679 14 More prestigious.338.148.723.190.068 0.699 15 Easy misappropriation of funds.097.284.575.134.211 0.483 16 Can be utilized at any time.012 -.190 -.042.823.113 0.728 17 Increases flexible in mobility.456.005.108.812.059 0.883 18 Eliminates demographic limitation.443 -.035.122.799.060 0.854 19 Easy to use.386 -.120.191.758.081 0.780 20 Confident over the security aspects.270 -.190.112.072.712 0.634 21 Safer transactions due to advanced technology.073.400.220 -.089.710 0.725 22 E-banking results are apparent.070.051.113.114.700 0.523 23 Confident in utilization of services.148.255.536 -.099.572 0.711 24 Possibility for tampering transactions.240.173.177.228.564 0.488 25 Eliminates time constraint.049.449.253.074.500 0.510 F1=Factor 1; F-2=Factor 2; F-3=Factor 3; F-4=Factor 4; F-5=Factor 5 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 8 iterations. It is understood from Table 2 that all the 25 statements have been extracted into five factors. These factors are the results from balancing and summation of many specific likes and dislikes of customers of ICICI Bank experienced over a period of time through gaining more and more information about e- banking services. The first factor is identified as Convenient on the basis of loaded variables. It has explained with the following seven variables viz. (i) convenient way to manage finances (ii) more user-friendly than branch counter (iii) banking can be made conveniently (iv) allows to manage finances more efficiently (v) gives greater control (vi) others will know about my transactions and (vii) lack of personal relations exist. Among these variables, the first five variables are related to convenience in nature, it has been named as convenient factor. It has high factor loadings of 0.849 and low factor loadings of 0.671. In the factor all the variables have been positively loaded and the reactions of customers towards the utilization of e-banking services of ICICI Bank have a high positive correlation. It implies that all the variables in the factor have positive influence on the utilization of e-banking services of ICICI Bank. The Eigen value and the percentage of variance explained is 7.907 and 31.627 respectively. Thus, the convenient factor is identified as one of the important factors in the usefulness of e-banking services. The second factor has been identified as Easy Operational. This factor includes variables like easy to remember how to perform tasks, easy to conduct all banking transactions, learning to operate would be very easy and does not require a lot of mental effort have been accounted for 0.924, 0.919, 0.895 and 0.873 with factor loading. The four variables loaded in this factor are operational activity. Hence, this factor has been narrated as easy operational. The communality values for these variables are 0.929, 0.901, 0.855 and 0.858 respectively. It indicates that higher amount of variance is explained by the extracted factors. The total variance explained is given in the form of Eigen value. It is 5.232 for the second factor. It accounted for 20.926 percentage of variance. It is concluded that the variables www.theinternationaljournal.org > RJSSM: Volume: 03, Number: 09, January-2014 Page 98
loaded in this factor have highly reacted the customers of ICICI Bank towards the utilization of e- banking services. The third factor has been narrated as Prestige. This factor includes variables like utilization gives higher status in society, trendy among my peers, more prestigious and easy misappropriation of funds. In this factor, the first three variables are directly related to prestigious of respondents. So, this factor has been named as prestige. The variables included in this factor have been accounted for 0.837, 0.770, 0.723 and 0.575 with factor loading. All the variables have positively loaded and the first three variables are with high loadings. The communality values for these variables are 0.793, 0.679, 0.699 and 0.483 respectively. It indicates that higher amount of variance is explained by the extracted factors. The total variance explained is given in the form of Eigen value. It is 1.855 for the third factor and the percentage of variance is 7.420. The fourth factor has been represented by the variables namely, (i) can be utilized at any time (ii) increases flexible in mobility (iii) eliminates demographic limitation and (iv) easy to use. This factor is explained with 6.111 per cent of the total variations. The extracted Eigen value is 1.528. All the variables in this factor have been positively loaded. It means that this factor has a positive influence on customers reaction on usefulness of e-banking services of ICICI Bank. It also shows that the customers have been mainly reacting because of can be utilized at any time, increases flexible in mobility and eliminates demographic limitation variables in this factor. And all the variables have high communality indicating that the variables within Factor 4 have very high association. All the variables except the last one i.e. easy to use are flexible in nature; and thus the factor has been named as Flexible Factor'. The fifth factor is narrated as Confidence on the basis of loaded variables. The higher factor loading on its variables helps in identifying variables associated with Factor 5. It indicates that among the various performance scales, confident over the security aspects, safer transactions due to advanced technology, e-banking results are apparent and confident in utilization of services are important variables in this category. The high communality value of the variables also indicates that the variables within Factor 5 have very closely associated. The extracted Eigen value is 1.376 and the percentage of variance explained in this factor is 5.502. The confidence of customers in dealing with e-banking services is considered as an important factor for their favourable reaction towards ICICI Bank e- services. Further, the total variance explained by the factor analysis for each factor by way of extracted sums of squared loadings is shown in Table 3. TABLE 3 Total Variance Explained Extraction Sums of Squared Loadings Sl. No. Factors Eigen Values Percentage of Variance Cumulative Percentage of Variance 1 Convenient Factor 7.907 31.627 31.627 2 Easy Operational Factor 5.232 20.926 52.553 3 Prestige Factor 1.855 7.420 59.973 4 Flexible Factor 1.528 6.111 66.084 5 Confidence Factor 1.376 5.502 71.586 Table 3 exhibits the factors for reactions on usefulness of e-banking services of ICICI Bank. It gives details like Eigen values, percentage of variance, and cumulative percentage of variance for the five factors extracted by Principal Component Method of Factor Analysis. All the factors account for about 71.586 per cent of the variance in the data. The first factor namely convenient had a variance of 31.627 per cent with an Eigen value 7.907. The second factor called easy operational accounted www.theinternationaljournal.org > RJSSM: Volume: 03, Number: 09, January-2014 Page 99
for variance of 20.926 per cent and Eigen value loaded with 5.232. These two factors have more percentage of variance when compared to other three factors. FACTOR-WISE LEVEL OF REACTIONS OF CUSTOMERS An attempt is also made to measure the level of reactions of customers towards e-banking services of ICICI Bank Limited. The level of reactions of customers has been measured with the mean score of the factors extracted. The computed mean along with the standard deviation for the various factors are presented in Table 4. TABLE 4 Level of Reactions towards E-Banking Services Sl. No. Factors Mean Score Standard Deviation 1. Convenient 4.05 0.37 2. Easy Operational 3.29 0.76 3. Prestige 3.96 0.54 4. Flexible 4.11 0.37 5. Confidence 3.88 0.65 Overall 3.88 0.52 It is observed from Table 4 that the factor flexible is the most important factor which influenced the reactions of customers on the utilization of e-banking services. It scored a high mean value of 4.11 and low standard deviation of 0.37. The customers also perceive that they are influenced with convenient factor. The mean score for this factor is 4.05. These two factors indicate a higher level of influence on customers towards utilization of e-banking services. The other factors score in a range not very far from the neutral point on the scale of strongly agree to strongly disagree. The customers are moderately influenced with factors like prestige (3.96), confidence (3.88) and easy operational (3.29). The overall reactions of customers of ICICI Bank towards utilization of e-banking services are found to be moderate by scoring a mean value of 3.88. CONCLUSION It is concluded from the study that five factors, viz. convenient, easy operational, prestige, flexible and confidence, were extracted from 25 given statements. Of these five factors, the factor flexible has a high mean value of 4.11 and low standard deviation of 0.37. Hence this factor is treated as the most important factor for customers reactions towards utilization of e-banking services. REFERENCES 1. Dalia El- Kasheir, Ahmed S. Ashour, and Omneya M. Yacout (2009). Factors Affecting Continued Usage of Internet Banking Among Egyptian Customers. International Business Information Management Association (IBIMA), Vol.9, pp.252-263. 2. Hanna-Maija Vainio (2006). Factors Influencing Corporate Customers Acceptance of Internet Banking: Case of Scandinavian Trade Finance Customers. M.Sc. Thesis in Accounting submitted to The Swedish School of Economics and Business Administration, February. 3. Hariharan, S. (2005). E-Commerce A Prelude. Kisan World, Vol.32, No.2, February, p.64. 4. Kamakodi, N. and Basheer Ahmed Khan (2008). Looking Beyond Technology: A Study of E-Banking Channel Acceptance by Indian Customers. International Journal of Electronic Banking, Vol.1, No.1, pp.73-94. 5. Marjoric A. Pett. Nancy R. Lackey and John J. Sullivan (2003). Marketing Sense of Factor Analysis. Sage Publications, New Delhi, pp.73-78. www.theinternationaljournal.org > RJSSM: Volume: 03, Number: 09, January-2014 Page 100
6. Md. Abdul Hannan Mia, Mohammad Anisur Rahman and Md. Main Uddin (2007). E- Banking: Evolution, Status and Prospects. The Cost and Management, Vol. 35, No.1, January-February, pp.36-48. 7. Mobile Banking The Future (2007). White Paper Overview by Infogile Technologies Pvt. Ltd., August. 8. Emerging Economy: Indian Consumer s Perspective (2011). International Arab Journal of e- Technology, Vol.2, No.1, January, pp.56-64. 9. Salim Al-Hajri and Arthur Tatnall (2008). Technological Innovation and the Adoption of Internet Banking in Oman. The Electronic Journal for Virtual Organizations and Networks, Vol. 10, Special Issue on Living Labs, August, pp.59-83. www.theinternationaljournal.org > RJSSM: Volume: 03, Number: 09, January-2014 Page 101