DISSERTATION REPORT ON Customers perception towards Internet Banking SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF POST GRADUATE DIPLOMA

IN MANAGEMENT (FINANCE & CONTROL) APPROVED BY AICTE, GOVT OF INDIA (EQUIVALENT TO MBA) ACADEMIC SESSION (2009-2011) Submitted To: Prof. Tushar Ranjan Panigrahi Submitted By: Sudipto Ghosh 09DF059 PGDM (FC)

Institute of Management & Information Science Bhubaneswar Swagat Vihar, Bankuala, Bhubaneswar 751002 Orissa, India
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ACKNOWLEDGEMENT
A Project report is an assessment of ones great skill and aptitude. One needs to devote in immense patience, time and brains for the compilation of one such rewarding outcome of true efforts.

I am indeed thankful to honorable Director Sir (IMIS, Bhubaneswar), Dr. K. C. Padhy who has provided the wonderful opportunity of getting exposed to industrial and business working know-how. This study enabled me to analyze and understand the gaining foothold internet banking system in banking scenario. This opportunity availed has immensely enhanced my own creativity and diversified my thought process by taking a deep insight of various Banks in the Bhubaneswar & Kolkata region and the growing inclination of the Indian customer toward internet banking based on a number of parameters.

I would like to render my sincere heartfelt gratitude to my Project Mentor Prof. Tus har Ranjan Panigrahi for his immense encouragement, guidance and invaluable lecture sessions both before a nd throughout my Dissertation. He has been an inspirational mentor guiding me through every step of my project, thus making the entire Dissertation a complete learning process.

Never the last I would take the opportunity to thank the concerned bank officials for providing me with the necessary and relevant information. A word of thanks to the customers for giving in their invaluable time and being a part of the survey.

SUDIPTO GHOSH

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DECLARATION

This is to certify that Mr. SUDIPTO GHOSH student of PGDM-FC (20092011) I.M.I.S Bhubaneswar has done his dissertation under my guidance and supervision. He has completed the project titled Customers perception towards Internet Banking For the partial fulfillment of PGDM-FC under my supervision. During his project he was found to be very sincere and attentive to small details whatsoever told to him. I wish him luck and success in future.

Under the guidance of: Prof. Tushar Ranjan Panigrahi

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PREFACE
Management education in India gained momentum in the early seventies. In the early stages, faculty, concepts, materials and pedagogy were borrowed from the Western collaborators. The need for market analysis, strategy and decision making and the need for contextual relevance of the application of quantitative techniques to developing countries has been increasingly felt because management principles are not only being applied to business and industry, but also to newer areas like rural development, nonprofit making organizations and non-enterprise management. Banking is a highly information intensive activity that relies heavily on information technology (IT) to acquire, process, and deliver the information to all relevant customers. Banks used the Internet technology as a strategic weapon to revolutionize the way they operate, deliver, and compete against each other. As a result Online Banking was introduced as a channel where bank customers could perform their financial transactions electronically via their banks Web sites. An Online Banking user is expected to perform at least one of the following transactions online: 1. Checking account balance and transaction history 2. Paying bills 3. Transferring funds between accounts 4. Requesting credit card advances 5. Ordering checks 6. Managing investments and stocks trading From a banks perspective, using the Internet is more efficient than using other distribution mediums because banks are looking for an increased customer base. Using multiple distribution channels increases effective market coverage by enabling different products to be targeted at different demographic segments. Also Banks cannot risk loosing customers to competitors within the aggressive competition in the banking industry around the world. Moreover Internet delivery offers customized service to suit the needs and the likes of each user. Mass customization happens effectively through Online Banking. It reduces cost and replaces time spent on routine errands with spending 4 |P age

time on business errands. O nline Banking means less staff members, smaller infrastructure demands, compared with other banking channels. From the customers perspective, Online Banking provides a convenient and effective way to manage finances that is easily accessible 24 hours a day, seven days a week. In addition information is up to date. Nevertheless Online Banking has disadvantages for banks like how to work the technology, set-up cost, legal issues, and lack of personal contact with customers. And for customers there are security and privacy issues.

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TABLE OF CONTENT

PREFACE ..4 CHAPTER 1: EXECUTIVE SUMMARY..7 1.1 INTRODUCTION ......8 1.2 OBJECTIVE OF THE STUDY.10 1.3 LITERATURE SURVEY..10 1.4 RESEARCH METHODOLOGY...12

CHPATER 2: DATA ANALYSIS AND INTERPRETATION 2.1 ANALYSIS....14 CHAPTER 3: CONCLUSION AND RECOMMENDATION...21 CHAPTER4: LIMITATION....22 CHAPTER5: BIBLOGRAPHY.......22 CHAPTER5: ANNEXURE..24

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EXECUTIVE SUMMARY
An analysis of the differences in risk perceptions between bank customers using Internet Banking and those not using Internet Banking was done and it showed that risk perceptions in terms of financial, psychological and safety risks among customer not using the internet was more meaningful than those using internet banking. Customers not preferring to use internet banking thought that they would be swindled when using this service, and therefore, are particularly careful about high risk expectation during money transfers from and between accounts. Only 37% of Indian Internet users come from Top 10 cities i.e. Mumbai, Bangalore, Delhi, Kolkata, Chennai, Pune, Hyderabad, Ahmedabad, Surat and Nagpur. Another day and another number. As per IAMAI and Icube, the number of active Internet user (i.e. ones who logon to Internet atleast once a month) is now 32 million and numbers who have used Internet atleast once stands at 46 million. Maximum of the person who are going on for internet banking lies in the age bracket of 26-35 but the rise in the age the level of users become low. Approximately 17% of female use internet banking. This is a matter of concern for the banks to understand what are the causes why this is happening. Although many major banks have started offering i-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 i-banking. But then too there is a fear in mind of customer using internet as a medium for the banking transaction.

Private and foreign banks are trying to turn more and more customer towards the usage of internet for the banking transaction. This study is basically to k now the relation of various independent variables on the customer usage of internet for banking.

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INTRODUCTION
What is a bank? A banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money. It is an institution for receiving, keeping, and lending money.

What is online banking? Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union.

Need for internet banking? One has to approach the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true Internet banking, any inquiry 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 services

Banks have traditionally been in the forefront of harnessing technology to improve their products, services and efficiency. They have, over a long time, been using electronic and telecommunication networks for delivering a wide range of value added products and services. The delivery channels include direct dial up connections, private networks, public networks etc and the devices include telephone, Personal Computers including the Automated Teller Machines, etc. With the popularity of PCs, easy access to Internet and World Wide Web (WWW), Internet is increasingly used by banks as a channel for receiving instructions and delivering their products and services to their customers. This form of banking is generally referred to as Internet Banking, although the range of products and services offered by different banks vary widely both in their content and sophistication.

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Indias banking sector is growing at a fast pace. India has become one of the most preferred banking destinations in the world. The reasons are numerous: the economy is growing at a rate of 8%, Bank credit is growing at 30% per annum and there is an everexpanding middle class of between 250 and 300 million people (larger than the population of the US) in need of financial services. All this enables double-digit returns on most asset classes which is not so in a majority of other countries. Foreign banks in India achieving a return on assets (ROA) of 3%, their keen interest in expanding their businesses is understandable even more so when compared with the mearly 1% average ROA for the Top 1000 banks in the world.

From the perspective of banking products and services being offered through Internet, Internet banking is nothing more than traditional banking services delivered through an electronic communication backbone, viz. Internet, but in the process it has thrown open issues which have ramifications beyond what a new delivery channel would normally envisage and, hence, has compelled regulators world over to take note of this emerging channel. Some of the distinctive features of i-banking are: 1. It removes the traditional geographical barriers as it could reach out to customers of different countries / legal jurisdiction. This has raised the question of jurisdiction of law / supervisory system, to which such transactions should be subjected. 2. It has added a new dimension to different kinds of risks traditionally associated with banking, heightening some of them and throwing new risk control challenges. 3. Security of banking transactions, validity of electronic contract, customers privacy, etc., which have all along been concerns of both bankers and supervisors have assumed different dimensions given that Internet is a public domain, not subject to control by any single authority or group of users, 4. It poses a strategic risk of loss of business to those banks, who do not respond in time, to this new technology, being the efficient and cost effective delivery mechanism of banking services. 5. A new form of competition has emerged both from the existing players and new players of the market who are not strictly banks.

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OBJECTIVE OF THE STUDY

Perceptual mapping of internet banking users. To know the cause why customers are not using internet banking To know which age group of customers is using different e-banking facilities. To study the internet banking facilities offered by the banks to its customers To study as to how much internet banking has penetrated in the minds of the customers To gain insights about functioning of internet banking.

LITERATURE REVIEW

In India still there is lack of users for internet as a medium for banking purpose, but the banking system are upgrading and bringing many electronic banking medium for customers so that banking can be made more convenient.

[1] Joseph et al. (1999) investigated the influence of internet on the delivery of banking services. They found six underlying dimensions of e-banking service quality such as convenience and accuracy, feedback and complaint management, efficiency, queue management, accessibility and customization. Jun and Cai (2001) identified 17 service quality dimensions of i-banking service quality. These are reliability, responsiveness, competence, courtesy, credibility, access, communication, understanding the customer, collaboration, continuous improvement, content, accuracy, ease of use, timeliness, aesthetics, security and divers features. They also suggested that some dimensions such as responsiveness, reliability and access are critical for both traditional and internet banks. Jayawardhena (2004) transforms the original SERVQUAL scale 10 | P a g e

to the internet context and develops a battery of 21 items to assess service quality in ebanking. By means of an Exploratory Factor Analysis (EFA) and a Confirmatory Factor Analysis (CFA), these 21 items are condensed to five quality dimensions: access, website interface, trust, attention and credibility.

From the provider perspective, there are target quality and delivered quality. The focus of process- or supply- led quality definition is rather internal than external, and it is defined as conformance to requirements. It lays emphasis on the importance of the management and the supply-side quality, and there is an important role of the process in determining the quality of outcome (Ghobadian, 1994) . Achieving the quality of conformance between the planned (target) quality level and the real quality delivered to customers depends on the service quality management system in an organization.

[2] IAMAI report on online banking 2006. 43% of online banking users havent started online financial transaction because of security reasons, 39% havent started because they prefer face to face, 22% havent started because they dont know how to use, for 10% sites are not user friendly and for 2% banks are not providing the facility of internet banking. According to research 68% of the customers can not say that when they will be starting the financial transactions through internet. Maximum numbers of online banking users are male and maximum of them are in age the group of 25-35. Numbers of female users are very less i.e. 17% only. More than 60% of the people who are having account with have accounts in 3-4 banks. Only 37% of Indian Internet users come from Top 10 cities i.e. Mumbai, Bangalore, Delhi, Calcutta, Chennai, Pune, Hyderabad, Ahmedabad, Surat and Nagpur. Another day and another number. As per IAMAI and I-cube, the number of active Internet user (i.e. ones who logon to Internet at least once a month) is now 32 million and numbers who have used Internet at least once stands at 46 million.

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RESEARCH METHODOLOGY

RESEARCH TYPE: I have used descriptive research in my studies. Descriptive research is also called Statistical Research. The main goal of this type of research is to describe the data and characteristics about what is being studied. Although this research is highly accurate, it does not gather the causes behind a situation. Descriptive research is used to obtain information concerning the current status of the phenomena to describe "what exists" with respect to variables or conditions in a situation. Here I have also tried to find out the main cause why there is perceptual blocking of the Indian customers towards internet banking. The methods involved range from the survey which describes the status quo, to developmental studies which seek to determine changes over time.

Statement of the problem Identification of information needed to solve the problem Selection or development of instruments for gathering the information Identification of target population and determination of samp ling procedure Design of procedure for information collection Collection of information Analysis of information Generalizations and predictions

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DATA COLLECTION:

Primary Data: Structured Questionnaire Secondary Data: Online Database, Journals, Surveys

SAMPLING:

I have used convenience sampling technique. It is also called haphazard or accidental sampling. I have gathered the information by conducting a survey where I visited various Private & Foreign Bank branches within Bhubaneswar, Kolkata & Siliguri by interacting with their customers with the help of my questionnaire. I also interacted with the employees of the Banks I visited to identify the reason behind the acceptance or in acceptance of Internet banking.

Sample Unit: Internet Users (for banks) Sample Technique: Convenient sampling Sample Area: Bhubaneswar, Siliguri & Kolkata Sample Size: 120

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DATA ANALYSIS AND INTERPRETATION

Q1. Own a internet connection
27 51 20 8 1 Dont have an internet connection 3 1 2 4 3

Age 18-25 26-35 36-45 46-60 61-+

Table 1

Figure1

From the above chart we can say that age group between 18-25 own an internet connection of 27% while who dont own an internet is 3%, similarly people between 26-35 own an internet connection of 51% while 1 % dont own an internet, 36-45 own an internet of 20% while 2% dont own, 46-60 own 8% internet connection while 4% dont own, 61and above own 1 % internet connection, 3% dont own. Finally we can see that age group 26-35 own maximum % of internet connection.

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Q2. How much time do you spend on internet? A) Everyday B) 1 to 6 days in a month C) 6 to 12 days in a month D) Once in a month
Age 18-25 26-35 36-45 46-60 61-+

A) Everyday
6 9 6 2 1

B) 1 to 6 days in a month
9 13 7 2 3

C) 6 to 12 days in a month
15 30 9 8 0

Table 2

Figure2

From the above data & chart we can say that the younger generation have been using internet on a regular basis but the age group between 36-45, 4660 and 61 and above have started using internet in recent . Finally we can say that the age group between 26-35 are the maximum users of the internet .

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Q3. What is the frequency of visiting your bank branch per month? a) Less than 1 b) 1 to 3 times c) 3 to 8 times d) 8 to 12 times e) over 12 times
age 18-25 26-35 36-45 46-60 61-+ <1 11 4 3 2 3 1 to 3 10 5 5 3 0 3to8 5 7 2 4 0 8to12 3 10 4 2 0 12+ 1 26 8 1 1

Table3

Figure3

From the above data & chart we can say that in comparison to all the above age groups maximum no. of time that a customer is visiting to the bank comprises of age group between 26-35 thats around 12 times in a month .

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Q4. What is the main reason of visiting your bank branch? (Please choose the single most important reason) To make a deposit To get advice for investment options To inquire about a balance To withdraw cash Other
age 18-25 26-35 36-45 46-60 61-+ Deposit 10 13 5 4 1 Advice 4 8 2 2 0 Balance 10 10 4 2 0 Withdrawal 4 17 7 4 3 Others 2 4 4 0 0

Table 4

Figure4

From the above data & chart we can say that the reason for visiting the bank maximum no. of time is basically for the cash withdrawl that to is done by the age group between 26-35 which is 17 times. It is also seen that the first priority to visit the banks is different for every age group, it varies.

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Q5. What are the e-banking facilities provided by your bank? ATM Online banking Telephone banking Mobile banking SMS banking

Age 18-25 26-35 36-45 46-60 61-+

ATM 20 10 2 14 5

Online 21 29 16 25 2

Telephone 12 14 2 2 2

Mobile 15 18 15 2 2

SMS 25 30 12 14 5

Table 5

Figure5

From the above chart we can say that all the above age gropus says that almost all the facilites are provided by their banks whether it be an atm, online, telephone, mobile or sms, expcept to the person who belong to the age group of 61 and above . This shows that the Banks generally dont or are reluctant to target the senior citizens.

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Q6. What are the banking services you use which your Internet bank offers? (Please check all you are currently using) Seeking product and rate information Calculate loan payment information Download loan applications Download personal bank transaction activity. Check balances on- line Apply for consumer loans or credit cards online Inter-account transfers On-line bill payments Others

Figure6

From the above diagram we can that the perosn uses internet banking basically for seeking product and rate information and secondly for checking balance and then they use it to download loan information and lastly to download personal bank transaction activities .

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Q7. What is the single most important reason that you chose this particular bank as your Internet bank? (Please choose one) I have a traditional bank account with the same bank The brand name of the bank The excellent service offered by this bank Others

Figure7

From the above chart we can say that the reason for choosing particular bank for internet bank account is beacause of the excellent services offered by the bank and second most improtant reason is that of brand name of the bank . Therefore it can be interpreted that customers are more fond of services rather than brand or traditionality.

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CONCLUSION AND RECOMMENDATIONS

There is still a lot needed for the banking system to make reforms and train there customers for using internet for there banking account. Going through the survey the main problem that lies is, still customers have a fear of hacking of accounts and thus do not go on for internet banking. Banks are trying there level best by providing the best security options to the customers but then too there is lot of factors which betrays a customer from opening an internet bank account.

Banks are providing free internet banking services also so that the customers can be attracted. By asking the bank employs I came to know that maximum numbers of internet bank account holders are youth, business man and HNIs.

If proper training should be given to custo mer by the bank employs to open an account will be beneficial secondly, the website should be made friendlier from where the first time customers can directly make and access there accounts.

We can see the time is changing and that people are accepting technology but there is still a lot of perceptual blocking which hampers the growth, its the normal tendency of a human not to have changes in work on the old track, thats also one of the reasons for the slow acceptance of internet banking accounts.

Recommendations:
Give proper training to customers for using i-banking Create a trust in mind of customers towards security of there accounts Provide a platform from where the customers can access different accounts at single time without extra charge. The Banks should make their sites more users friendly.

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Customers should be motivated by the employees of the Banks to use ibanking facilities more.

LIMITATIONS
1. Time Constraints. 2. Budgetary Constraints. 3. Lack of Awareness. 4. In acceptance of internet by customers.

BIBLOGRAPHY

SITES (http://www.icmrindia.org/free%20resources/casestudies/banking1.htm#b1 www.hdfcbank.com/ www.hsbc.co.in/ www.icicibank.com/ www.yesbank.in/ www.db.com en.wikipedia.org/wiki/Perceptual_mapping www.rocw.raifoundation.org/fashion/BAfashion-mktg/brandpositioning/lecturenotes/lecture-04.pd en.wikipedia.org/wiki/Multidimensional_scaling

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REFRENCES

1. IAMAI report on online banking 2006 2. The Indian Internet Banking Journal - Nachiket Mor, Head of ICICI's Treasury, in March 2000. 3. The Impact of Internet Banking Service Quality On Business Customer Commitment.

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Annexure
This survey is designed to understand bank account holders perspectives on Inte rnet banking, their experience with Internet banking, and their expectations on Inte rnet banking services

QUESTIONNAIRE
Name .. Age 18-25__ , 26-35__, 36-45__, 46-60__, 60 +____ Gender MALE FEMALE Occupation . 2) Do you own an internet Connection? a) Yes 3) How much time do you spend on internet? A) Everyday B) 1 to 6 days in a month C) 6 to 12 days in a month D) Once in a month 3) What is the frequency of visiting your bank branch per month? a) Less than 1 b) 1 to 3 times c) 3 to 8 times d) 8 to 12 times e) over 12 times b) No

4) What is the main reason of visit in your bank branch? (Please choose the single most
important reason) To make a deposit To get advice for investment options To inquire about a balance To withdraw cash Other 5) What are the e-banking facilities provided by your bank? ATM Online banking Telephone banking Mobile banking 24 | P a g e

SMS banking

6) What are the e-banking services you use provided by the bank? ATM Online banking Telephone banking Mobile banking SMS banking

~~~For those who uses internet banking service~~~

What is the name of the bank you have an Internet bank account with? ________ What are the most important reasons for which you have opened an Internet bank account? (Please prioritize the following list in the order of importance ) (1: the most important, 6: the least important) Convenience (24 hours service, anywhere connectivity) ______________ Curiosity______________ Better rates______________ Safe and secure______________ Low service charge______________ Easy to maintain my banking transaction activity______________ Online shopping ___________________

What are the banking services you use which your Internet bank offers? (Please check all you are currently using) Seeking product and rate information 25 | P a g e

Calculate loan payment information Download loan applications Download personal bank transaction activity. Check balances on- line Apply for consumer loans or credit cards online Inter-account transfers On-line bill payments Others

What is the single most important reason that you chose this particular bank as your Internet bank? (Please choose one) I have a traditional bank account with the same bank The brand name of the bank The excellent service offered by this bank Others In addition to your Internet bank account, do you also have a traditional bank account? Yes No

For those who didnt use internet banking

The main reasons that you have not opened an Internet bank account yet? (Check all that apply)

Never heard of Internet banking Concerned about security Haven't taken time to open an account Don't see any real value in having this type of account Too new. I would like to see how it works, then I may open an account Not available through my bank others

For your choice of an Internet bank, please indicate how much each of the following factors is important to you: Better rate and lower service charge______________ Bank familiarity______________ Bank location (geographic) ______________ 26 | P a g e

The size of bank (in terms of asset) ______________ Security of Transaction______________ Convenience (24 hours service from anywhere) ______________ Quick service (transaction completed in seconds instead of minutes) ______________ Variety of features and services that are offered(for example; bill payment, account reconciliation, electronic bill payment) ______________ Integrated value-added services using other on- line services and resources (for example; other brokerage account summary) ______________

Thank You

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