Study on the Impact of Internet and Mobile banking services on increasing customer satisfaction and loyalty for banks

MARKET RESEARCH Study on the Impact of Internet and Mobile banking services on increasing customer satisfaction and loyalty for banks A DISSERTATION REPORT SUBMITTED AS A PART OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION SUBMITTED BY: ANJALI SINGH A10 SHWETA SINGH A66 UMESH CHANDER SHARMA A71 Under the Guidance of Dr. Pravin Kumar SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES SYMBIOSIS INTERNATIONAL UNIVERSITY November 2014

ACKNOWLEDGEMENT We take this opportunity to.express our gratitude to the people who have been instrumental in the.successful completion of this project. We are extremely thankful to our Professor Dr Pravin Kumar, the Guide of this project. He has guided us.on this research and correcting various documents and amending them with attention and care. He has taken the pain to go.through the project and make necessary correction as and when needed at each and every step. We express our special thanks to the Director of Symbiosis Institute of Management Studies, Pune. We would also like to show our greatest appreciation for the support extended to us by the respondents, which was vital for the success of the project. We are also thankful to all the friends and also to the parents for their kind and valuable guidance, whom we consulted for the research work.

DECLARATION BY STUDENT I hereby declare that the project entitled Study of the Impact of Internet and Mobile banking services on increasing customer satisfaction and loyalty for banks, submitted for the MBA Degree is my original work and the project has not formed the basis for the award of any degree, associate ship, fellowship or any other similar titles. Name of the student: Anjali Singh Signature of the Student: Name of the Student: Shweta Singh Signature of the student: Name of the Student: Umesh Chander Sharma Signature of the Student: Place: Pune

SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES CERTIFICATE OF INTERNAL GUIDE TO WHOMSOEVER IT MAY CONCERN This is to certify that Anjali Singh PRN no. 13020441050, Shweta Singh PRN no 13020441160, Umesh Chander Sharma PRN No 13020441189 have completed their dissertation report on Impact of Internet and Mobile banking services on increasing customer satisfaction and loyalty for banks under my guidance. Dr. Pravin Kumar (Project Guide)

TABLE OF CONTENT: SNo Topic Page Number 1. Introduction 1 2. Review of Literature 3 3. Methodology 5 4. Results 6 5. Conclusion 11 6. Bibliography 12 7. Appendix 13

List of Tables SNo Table Heading Page Number 1. Information of the respondents 6 2. Usage of Internet banking services by the respondents 7

List Of Figures: SNo Figure Heading Page Number 1. Frequency of usage of internet banking services 7 2. Prime motives of using e-banking services 8 3. Popular e-banking services 8 4. Mobile banking usage pattern 9 5. Reasons for not using e-banking services 9 6. Government vs Private banks for technologically advanced services 10

Abstract: In order to analyse the impact of internet and mobile banking services on customer satisfaction and loyalty a study was conducted on 100 respondents of different income bands and with age group of 18years and above at various locations. The medium used to get the questionnaire filled ranged from Google doc to personally getting it filled via paper. The focus of the study is to see whether the level of loyalty and satisfaction increases with the delivery of services via e-banking. In addition to the study of the level of loyalty, the study was also conducted to find out the motives behind using and not using e-banking services. Based on these factors a questionnaire was prepared and floated amongst the people and their responses was recorded. In the end of research it was found out that the main motive behind using these services is Convenience of usage and to a great extent the level of satisfaction and loyalty does increase with the delivery of services through e-banking. Keywords: E-banking, loyalty, Satisfaction, Convenience

CHAPTER 1: INTRODUCTION The Indian financial services industry is being reshaped by several forces, chief among them being the customers, competition, technology and distribution. The banking industry is changing rapidly. Volatile cash flows.have prompted customers to seek total solutions at a one-stop-financial services-shop. The convergence.in the banking industry is making it highly competitive. Technological advancements have influenced distribution channels, customer needs and the way in which the industry does business. With the help of electronic channels, traditional banking services are being delivered at a faster pace and with higher efficiency. Distribution has.undergone a significant transformation, resulting in mobile, flexible and remote channels. Economic efficiency is now the only source of value. In the era of 21 st century when every Indian has access to internet or owns a mobile phone, the importance of Brick and mortar stores is decreasing. Different channels of providing services is being expanded. With the presence of Internet channels, the customer finds it more convenient to sit and shop from flipkart or myntra over driving down to the nearest mall. Economic situation of a family is now barely a reason for a customer to not own a mobile phone. Even the poorest of the farmer nowadays has access to at least a cheap Chinese mobile phone. Hence the cost of providing services is being decreased by using alternative channels of providing services. In a service industry with no tangible product, customer satisfaction and loyalty depends upon the quality of service being provided. Now with a channel where no customer human interface is present it becomes very difficult to provide satisfaction as for services like financials, a lot of background knowledge is required on the customer s front. Hence, it becomes very difficult to provide a financial service without a human interface. Features of Financial Market: Financial Market can be defined.as the place where buying and selling of financial instruments take place at low transaction costs. The main aim and objective of the financial markets can be defined as the following: The raising of capital (in the Capital Markets) The transfer of risk (in the Derivatives Markets) The transfer of liquidity (in the Money Markets) International trade (in the Currency Markets) 1

OBJECTIVES: 1. To determine the motives of a customer to pursue internet/mobile banking services. 2. To determine if improving the quality of e-banking services impacts brand loyalty towards a bank. SCOPE/LIMITATION OF THE STUDY: The study is biased as most of the respondents are youth from the age band of 18-25years and has also is geographically biased towards Pune city. 2

CHAPTER 2: REVIEW OF LITERATURE Parasuraman et al. (1985) identified ten determinants of service process quality that were further distilled them into five dimensions: tangibles, reliability, responsiveness, assurance, and empathy, and as a result SERVQUAL. model came into being (Parasuraman et al., 1988). Parasuraman et al. (1988; 1991) defined service quality as the difference between customer expectations of service to be received and perceptions of the service actually received. KUMBHAR Vijay (2011) in the study titled FACTORS AFFECTING THE CUSTOMER SATISFACTION. IN E-BANKING: SOME EVIDENCES FORM INDIAN BANKS found that Perceived Value, Brand Perception, Cost Effectiveness, Easy to Use, Convenience, Problem. Handling, Security/Assurance and Responsiveness are important factors in customers satisfaction in e-banking. Contact Facilities, System Availability, Fulfillment, Efficiency and Compensation. are comparatively less important. Responsiveness, Easy to Use, Cost Effectiveness and Compensation are predictors of brand perception in e- banking and Fulfillment, Efficiency, Security/Assurance, Responsiveness, Convenience, Cost Effectiveness, Problem Handling and. Compensation are predictors of perceived value in e- banking. More recently, Jani, Sashikant (2012) found that most of the customers.prefer e-channel with time and cost utility. They are not fully aware about the Operational plan of e-channels. After realizing the potential of e-banking, banks will have to change in order to grab the opportunity and to face the challenges posed by technology. Though the number of customers using technology may not be large. It is just a manner of time and efforts inculcated by banks to make e-technology popular among customers. Other customers will also want to adopt technology in banking transactions over a period of time as personal contact program. Advertisement, and demo at the counter is provided by banks. It makes the use of technology popular, easier and cheaper. From the study it can be inferred that there is a positive perception on the use of technology by both 3

Levesque and McDougall (1996) in "Determinants of customer satisfaction in retail banking", comprehensively analysed.the effects of service quality, service features and customer complaint handling on customer satisfaction in the Canadian retail banking sector. Their findings suggest that satisfaction.determinants in retail banking are driven by a number of factors including service quality dimensions. 4

CHAPTER 3: METHODOLOGY 1. Selection of Topic The topic for research was selected in order to perform a detailed analysis on the impact of internet and mobile banking services on customer satisfaction and loyalty. The selection of topic was done by keeping in mind the various factors which affect the loyalty of a customer towards a bank and whether technologically advanced services is one of those factors. 2. Size of Sample Strategic random sampling.was the methodology chosen to conduct the research. A sample size of 100 was selected for this research. 3. Pilot Study To test the feasibility of the.tool of data collection a pilot study was conducted on 20 respondents. A questionnaire of 10 questions was made and administered. Based on the results, certain modifications were made and final questionnaire was prepared. 4. Hypothesis Based on the results of the pilot study the following hypotheses were formulated: H1: There is a significant difference in consumer perception regarding technology in public and private sector banks. H2: Consumers are more loyal towards banks which provide online banking services. 5. Data Collection A Primary research, involved a questionnaire consisting of 20 questions that try to bring out relevant data to meet the objectives of the research, was developed and used for the survey. The response of the respondents was taken by floating a Google document or through one on one interaction. 6. Analysis of Data The data collected was tabulated and presented in the form of tables and graphs in Chapter 4. 5

CHAPTER 4: RESULTS Table 1: Information of the respondents SNo Demographic Percentage 1. Gender Male 68 Female 32 2. Age Group 18-25years 46 26-35years 28 36-50years 18 51 & above years 8 3. Educational Qualifications Higher Secondary 5 Graduate 36 Post graduate 59 others 0 DISCUSSIONS: Gender: It is evident from the above table that 68% of the respondents are male and 32% of the respondents are female. Traditionally it has been observed that males are more involved in the banking affairs of the house than a female, hence the gender bias. Age Group: AGE-It was seen that maximum number of respondents (46%) lie in the age group of 18-25 years and whereas 28%, 18% and 8% fall in the bracket of 26-35, 36-50 and above 50 years respectively. Education: Majority of the respondents have Post Graduate degrees (59%), whereas graduate and higher secondary make up the remaining 36% and 5% of the respondents respectively. 6

TABLE 2: Usage of Internet banking services by the respondents SNo Usage of internet banking services Percentage Yes 78 No 22 Figure 1: Frequency of usage of internet banking services 13 5 Everyday Once a month 22 Once a week Others 60 DISCUSSIONS: From table 2, we can see that 78% of the respondents use internet banking services, while remaining 22% do not use it. Figure 1, shows the frequency of usage. Maximum respondents (60%) use internet banking services once a week. From cross examination we ve observed that the out of the respondents who use internet banking services, maximum respondents are post graduates & their frequency of usage is also more than the respondents with other educational qualification. 7

Figure 2: Prime motives of using e-banking services WHAT ARE THE PRIME MOTIVES OF USING E- BANKING SERVICES? Eco-friendly 12 Feature Mobility Services Better Rates 12 54 62 Convenience 78 0 10 20 30 40 50 60 70 80 90 Cumulative Score DISCUSSION: From figure 2, we can conclude that the convenience is the highest ranked motive for customer to engage in the e-banking. Closely following it is plethora of services offered by banks. Most of the commonly used facilities can be accessed securely through e- banking. Another factor is anywhere-anytime aspect of internet or mobile banking. They offer availing of banking services on-the-go and hence save time. Figure 3: Popular e-banking services 8

DISCUSSION: From figure 4 we can see that, majority of the transaction through internet banking are for online shopping, e-ticketing, bill payments and recharges. Other banking services like bank statements, fund transfers and account inquiries etc. follows it. Figure 4: Mobile banking usage pattern Mobile Banking Usage Pattern Other Do not use mobile banking Fixed deposit interest rates enquiry Foreign currency exchange rates enquiry Recharge of mobile phones/dth Stop payment instruction on a cheque Electronic bill payments Inter account fund transfer Mini Statement request Balance enquiry 0% 0% 0% 7% 13% 33% 33% 40% 47% 47% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% DISCUSSIONS: From figure 4 we can see that, majority of the respondents seemed more confident with e-banking than mobile banking. The inclination in mobile banking is towards recharges. Figure 5: Reasons for not using e-banking services REASONS OF NOT USING INTERNET AND MOBILE BANKING SERVICES Other Banking servers may perform payments incorrectly Service may be bad due to low speed Feel unsafe to provide sensitive information over internet Takes a long time to understand internet banking services Frauds and hacking of accounts Not receiving compensation in case of errors Fear of losing money 5% 7% 7% 34% 32% 54% 68% 80% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 9

DISCUSSIONS: From figure 5 we can see that amongst the people who do not use e- banking services, the primary constraint that is perceived is difficulty in learning the usage. Though modern user-interface has simplified a lot, respondents with lower literacy rates and in the higher age bracket have relatively refrained from e-banking. Figure 6: Government vs Private banks for technologically advanced services 30 Government Private 70 DISCUSSION: From figure 6, we can see that for technologically advanced services like e-banking people trust private banks more than government. This could be because of the size of funding and efficiency that private banks show in delivery of their services. Definitely the private bank employees are able to provide higher level of customer satisfaction than government. This could also be one of the factors that imparts customer loyalty in a customer. 10

CHAPTER 5: CONCLUSION The first objective of the study was to find out the motives behind pursuing e-banking services. From the research we found that the driving motive for use of technology driven e- banking services is convenience of usage. Internet banking and mobile services make transactions and payments very convenient right from the comfort of home/office at the click of button. Also, keeping and maintaining a record of accounts through e-banking/m-banking is much faster too as compared to traditional methods of visiting the physical banks. Not only that, non-transactional facilities like ordering cheque books, updating accounts, enquiring interest rates of various financial instruments has become simplified because of that. The second objective of the study was to find out if improving the-banking service quality increases the brand loyalty towards a particular bank. From the research we can say that say that a person tends to be more brand loyal if the banking affairs can be done online. If the banking services are not available online then it becomes very tedious a job to first understand the services and then avail to them. The bank is offering all the services to the customer via a faster channel. Hence the customer doesn t need to look elsewhere. Hence it can be safely said that by making the process of availing the services an easy job, customer satisfaction and brand loyalty can be increased. 11

BIBLIOGRAPHY 1. Kumbhar Vijay (2011). Sources of customer satisfaction with internet banking: A comparative study of different customer segments. The International Review of Consumer Research 2. Jha, S and Singh, B. (2013, April). Impact of e-banking services on the level customer loyalty. Indian Journal of Marketing. 3. Patney, M. (2010). Retrieved, from http://www.iimb.ernet.in/publications/review/march2008/customer-satisfaction 4. Pughazhendi, A and Ravindran, D. (2011, October). E-banking Functionality and Outcomes of Customer Satisfaction: An Empirical Investigation. International journal of research in commerce and management 5. Wirtz, J., Mattila, A.S. and Tan, R.L.P. (2007). Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2354281 12

APPENDIX 1 Impact of Internet and mobile banking services quality on customer satisfaction and loyalty Dear Respondent, We are MBA students at Symbiosis Institute of Management Studies, Pune. We are conducting a survey on the impact of Internet and mobile banking services quality on customer satisfaction and loyalty. We seek your cooperation in answering the questionnaire given below. We assure you that the information you provide will be kept strictly confidential, it will be used only for academic purposes. Please tick ( ) the appropriate option. * Required 1. 1. Name * 2. 2. Gender * Mark only one oval. Male Female 3. 3. Age Group * Mark only one oval. 18-25 26-35 36-50 51 and above 4. 4. Please Specify you educational qualifications: * Mark only one oval. Higher secondary Graduate Post graduate Other: 5. 5. Which Bank's services do you use? * 6. 6. Do you use online/mobile banking services? * Mark only one oval. Yes No https://docs.google.com/a/sims.edu/forms/d/1-zc2k47umbjisco3poprnggyqarrhgjcbs623pcwkc8/edit 1/4

11/10/2014 The impact of Internet and mobile banking services quality on customer satisfaction and loyalty - Google Forms 7. 7. If yes, please specify the frequency of usage Mark only one oval. Everyday Once every week Once in a month 8. 8. What are the prime motives of using E-banking services? * (1 Lowest-5 highest) Mark only one oval per row. 1 2 3 4 5 Convenience Better Rates Services Mobility Eco-friendly 9. 9. If No, please state the reasons of not using internet and mobile banking services. Check all that apply. Fear of losing money Not receiving compensation in case of errors Frauds and hacking of accounts Takes a long time to understand internet banking services Feel unsafe to provide sensitive information over internet banking Service may be bad due to low speed Banking servers may perform payments incorrectly Other: 10. 10. Which of the following internet banking services do you use? * Check all that apply. Balance enquiry Fund transfers Information of banking service Cheque book orders Payment of bills Rrecharge of mobile phones/dth e-ticketing Interim bank statements Apply for loans Online Shopping Do not use internet banking Other: https://docs.google.com/a/sims.edu/forms/d/1-zc2k47umbjisco3poprnggyqarrhgjcbs623pcwkc8/edit 2/4

11/10/2014 The impact of Internet and mobile banking services quality on customer satisfaction and loyalty - Google Forms 11. 11. Which of the following mobile banking services do you use? * Check all that apply. Balance enquiry Mini Statement request Inter account fund transfer Electronic bill payments Stop payment instruction on a cheque Recharge of mobile phones/dth Foreign currency exchange rates enquiry Fixed deposit interest rates enquiry Do not use mobile banking Other: 12. 12. Does your bank provide all the services which are available offline through internet and mobile banking? * Mark only one oval. Yes No 13. 13. Are all your banking affairs managed by a single bank or you use different bank for different services? * Mark only one oval. Same Different 14. 14. If your bank is not providing all the services online and still you are using the same bank for all the banking affairs, please specify the reason why you are using the same bank. 15. 15. Do Govt. sector banks and private Banks instill the same level of confidence while using E-banking? * Mark only one oval. Govt. banks are more secure Private banks are more secure No Difference Powered by https://docs.google.com/a/sims.edu/forms/d/1-zc2k47umbjisco3poprnggyqarrhgjcbs623pcwkc8/edit 3/4

APPENDIX 2