A RESEARCH REPORT ON E-BANKING Submitted to:
DECLARATION
From:XYZ
I the undersigned here by declare that project titled as “E-BANKING� submitted by me under the guidance of XYZ is my original work. The findings in this report are based on data collected by myself. While preparing this report I have not copied from any other project report. I declare that any such copying is liable to be punished
XYZ
ACKNOWLEDGEMENT
Heart full thanks to the following people‌. I express my sincere and deep sense of gratitude to my esteemed guide of XYZ for her continued support and supervision. I am highly obliged to her for providing me the opportunity to work under his guidance. It was his scholarly suggestions, immense interest and moral support that helped in competing the work confidently and successfully. I would also place on record my gratitude to all teachers of XYZ College for their constant encouragement. I gratefully thanks to my parents and friends for their support and encouragement which helped me to complete this project. (XYZ)
PREFACE The choice of the present topic of the study was the fulfillment of a much a desire to contribute something to the sphere of research on current topic. A study on “E-BANKING� has been selected. Subject to the limitation of time efforts and resources every possible attempt has been made to study the problem deeply. The whole report divided into eight chapters. First chapter includes introduction of the E-banking which includes evolution & need of E-banking. Chapter second deals with the global development of E-banking. Third chapter includes implication of E-banking on retail banking.. Chapter fourth includes risk management. Chapter 5,6,7,8 includes research methodology, data analysis &interpretation, limitations of study & findings & suggestions respectively.
TABLE OF CONTENTS DECLARATION ACKNOWLEDGEMENT PREFACE
NAME OF TEXT 1. Chapter –1 INTRODUCTION HISTORY OF STANDARD CHARTERED BANK Evolution of electronic Banking Need for E-Banking Changing Paradigms in Banking Electronic Banking Electronic Channels 2. Chapter –II GLOBAL DEVELOPMENT IN E-BANKING
E-Banking Scenario E-Bank Strategy
PAGE NO.
E-banking Key Issues & solutions E-Banking Trends
PAGE NO. 3. Chapter –III RETAIL BANKING – INDIAN SCENRIO Retail Banking in India
Factor Influencing Retail Banking in India Opportunities of Retail Banking 4.
Chapter –IV RISK MANAGEMENT FOR E – BANKING Identification & Analysis of Risk Risk management
5.
Chapter –V RESEARCH METHODOLOGY Statement Of Problem Objective Of Study Source of Data Research Approach Research Instrument Sampling Process
6. Chapter –VI DATA ANALYSIS &INTERPRETATION 7. Chapter –VII LIMITATIONS OF THE STUDY
8. Chapter –VIII FINDINGS & SUGGESTIONS CONCLUSION 9. Chapter –IX ANNEXURES QUEATIONNAIRE BIBLIOGRAPHY
CHAPTER –1
Introduction
HISTORY OF STANDARD CHARTERED BANK
Evolution of electronic Banking
Need for E-Banking
Changing Paradigms in Banking
Electronic Banking
ďƒ˜
Electronic Channels
INTRODUCTION The banking business model globally is undergoing a paradigm shift. As India increasingly integrates with global financial markets, the winds of change are sweeping the Indian banking industry. From an era dominated by mass banking. The thrust now- a -days is on E-Banking i.e. Banking that is technology driven. Rapid computerization awareness of customer needs & competition are galvanizing Indian banks into making banking more convenient each day. In this dynamic and fluid business environment, technology is clearly emerging as the key differentiates and a pre-requisite for survival and success in the e- age. Indian banks are also relapsing that strategic development of IT has to be the cornerstone of the future growth & profitability. As spreads continue to fall and risks continue to rise, competition intensifies and customers become more demanding, various financial products keep converging, & internet and ecommerce bring in entirely new threats and opportunities. Banking is all about information – information on credit risk, liquidity risk, market risk, internet risk, information on how change information any one of them can change bottom line. Banking is all about information – information on credit risk, liquidity risk, market risk, internet risk, information on how change information any one of them can change bottom line. Information leads to better analysis of cost/revenues/profit drivers and equips the banks to respond to market needs. Similarly facts on customers alone banks to take more informed decisions about their strategies and tactics. Information technology besides
ushering information any time, any where. Banking ensures reliability of the customers database and electronic ledgers. IT is also required for banks to know which direction it is going to be correct cource if required and to what hardles are likely to come up information its growth path. The goal of IT strategy is ti provide the technology capability and the flexibility required for acheving the business goals of a bank. Anthony Rohiwink (1991) explains how this form of banking is becoming a competitive advantage. Acc. To him, “technology advances have made home, office and telephone banking more effective and efficient as a means of selling and delivering products, and these channels are gradually gaining more acceptance among customers. At the same time, the rapidly rising costs of operating a physical branch network particularly information terms of staff and premises are making this traditional channel less attractive. Such development are changing the relative competitive advantages if various distribution Channels. They can thus pose a major threat to established competitors with extensive branch networks while creating specific opportunities for new entrants to improve their competitive position with respect to this success factor.�
A BRIEF HISTORY OF STANDARD CHARTERED BANK History The Standard Chartered Group was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa founded in 1863 and the Chartered Bank of India, Australia and China, founded in 1853. Both companies were keen to capitalise on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods from Europe to the East and to Africa. •
The Chartered Bank Founded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853.
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Chartered opened its first branches in Mumbai (Bombay), Calcutta and Shanghai in 1858, followed by Hong Kong and Singapore in 1859.
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Traditional business was in cotton from Mumbai (Bombay), indigo and tea from Calcutta, rice in Burma, sugar from Java, tobacco from Sumatra, hemp in Manila and silk from Yokohama.
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Played a major role in the development of trade with the East which followed the opening of the Suez Canal in 1869 and the extension of the telegraph to China in 1871.
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In 1957 Chartered Bank bought the Eastern Bank together with the Ionian Bank's Cyprus Branches. This established a presence in the Gulf.
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The Standard Bank Founded in the Cape Province of South Africa in 1862 by John Paterson. Commenced business in Port Elizabeth, South Africa, in January 1863.
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Was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885.
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Expanded in Southern, Central and Eastern Africa and by 1953 had 600 offices.
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In 1965, it merged with the Bank of West Africa expanding its operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.
In 1969, the decision was made by Chartered and by Standard to undergo a friendly merger. All was going well until 1986, when a hostile takeover bid was made for the Group by Lloyds Bank of the United Kingdom. When the bid was defeated, Standard Chartered entered a period of change. Provisions had to be made against third world debt exposure and loans to corporations and entrepreneurs who could not meet their commitments. Standard Chartered began a series of divestments notably in the United States and South Africa, and also entered into a number of asset sales. From the early 1990s, Standard Chartered has focused on developing its strong franchises in Asia, the Middle East and Africa using its operations in the United Kingdom and North America to provide customers with a bridge between these markets. Secondly, it would focus on consumer, corporate and institutional banking and on the provision of treasury services areas in which the Group had particular strength and expertise. In the new millennium we acquired Grindlays Bank from the ANZ Group and the Chase Consumer Banking operations in Hong Kong in 2000. Since 2005, we have achieve several milestones with a number of strategic alliances and acquisitions that will extend our customer or geographic reach and broaden our product range
Business & Strategy Our business Listed on both the London Stock Exchange and the Hong Kong Stock Exchange, Standard Chartered PLC is consistently ranked in the top 25 FTSE 100 companies by market capitalisation. By combining our global capabilities with deep local knowledge, we develop innovative products and services to meet the diverse and ever-changing needs of individual, corporate and institutional customers in some of the world's most exciting and dynamic markets. Personal Banking Through our global network of over 1,700 branches and outlets, we offer personal financial solutions to meet the needs of more than 14 million customers across Asia, Africa and the Middle East. SME Banking Our SME Banking division offers a wide range of products and services to help small and medium-sized enterprises manage the demands of a growing business. Wholesale Banking Headquartered in Singapore and London, with on-the-ground expertise that spans our global network, our Wholesale Banking division provides corporate and institutional clients with innovative solutions in trade finance, cash management, securities services, foreign exchange and risk management, capital raising, and corporate finance. Private Banking Our Private Bank advisors and investment specialists provide customised solutions to meet the unique needs and aspirations of high net worth clients.
People Our people, our values
Standard Chartered employs 73,000 people in more than 70 countries and territories worldwide. Our culture is centred on diversity and inclusion - key strengths that fuel our success.
Our board of directors Our leaders reflect the diversity that drives Standard Chartered's success and makes us one of the world's most international banks.
Our global team As we grow and evolve, our commitment remains the same - to get the best out of the broadest spectrum of people, making sure that every individual feels valued for the strengths they bring to Standard Chartered. As a global team, we represent more than 115 nationalities - our 500 most senior employees come from over 61 different countries. Our primary focus is on three strands of diversity - gender, nationality and disability, with a particular emphasis on visual impairment. Overall, our male to female employee ratio is roughly 50:50. 16% of our senior managers are women and our aim is to balance this figure over the next few years.
Principles & Values At Standard Chartered our success is built on teamwork, partnership and the diversity of our people. At the heart of our values lie diversity and inclusion. They are a fundamental part of our culture, and constitute a long-term priority in our aim to become the world's best international bank. Today we employ 73,000 people, representing 115 nationalities, and you'll find 61 nationalities among our 500 most senior leaders. We believe this diversity helps to fuel
creativity and innovation, supporting the development of exciting new products and services for our customers worldwide.
What we stand for Strategic intent • The world's best international bank •
Leading the way in Asia, Africa and the Middle East
Brand promise •
Leading by Example to be The Right Partner
Values •
Responsive
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Trustworthy
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International
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Creative
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Courageous
Approach •
Participation Focusing on attractive, growing markets where we can leverage our relationships and expertise
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Competitive positioning Combining global capability, deep local knowledge and creativity to outperform our competitors
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Management Discipline Continuously improving the way we work, balancing the pursuit of growth with firm control of costs and risks
Commitment to stakeholders • Customers Passionate about our customers' success, delighting them with the quality of our service •
Our People Helping our people to grow, enabling individuals to make a difference and teams to win
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Communities Trusted and caring, dedicated to making a difference
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Investors A distinctive investment delivering outstanding performance and superior returns
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Regulators Exemplary governance and ethics wherever we are
OBJECTIVES Objectives for conducting the research and analysis are listed as under: 1) Compare the services offered by Standard Chartered Bank and the customer’s satisfaction level of the same with that of other Banks in the Private and Government sector, and to access where the Bank has to improve. 2) Study how new distribution channels such as Internet Banking, ATM facility, Phone Banking have changed the face of the Banking industry. 3) Access the Market Potential of Standard Chartered Bank Saving Account 4) Consideration of various promotional and marketing and advertising strategies of Standard Chartered to the satisfaction among its ultimate users and consumers.
EVOLUTION OF ELECTRONIC BANKING Information its evolutionary history, a start had been made information E- banking as early as 1920s but this form of banking did not get a wide spread acceptance till the 1960s. Further it took a long time before this form of banking found popularity with a sizeable group of customers and bankers who are comfortable with technology as a part of their day-to-day lives. Wiech (1993) explains the reasons for this, he says, “in the early days, the effectiveness of electronic banking systems was inhibited by three main factors: Communication technology was in its infancy and inadequate for local or global coverage banks and customers could not communicate internationally within their own organizations or with each other. Most companies and banks had incompatible systems- sometimes even different branches of the same bank had different systems.
Computer manufactures were made to agree on the development of technology standards, which would permit data exchange directly between computer systems.” After 1960s E-Banking and its use recorded a quantum jump. To explains this Kalakota and Whiston (1996) say that, “Recently several innovations helped to simplify consumers payments. These can be broadly classified into:
1. Innovations affecting consumers: Credit and debit cards and automatic teller machine (ATMs) and stored value cards. 2. Innovations enabling Electronic Commerce: digital cash, electronic cheques. Smart cards (also called electronic wallets) and encrypted credit cards and EDI and internal technologies. 3. Innovations affecting companies: such as inter banks transfer through automated clearing houses that allow companies to pay dividends to their shareholders directly or utility companies to debit their customers accounts electronically through standing instructions.
MAJOR BREAK THROUGHS IN E- BANKING 1947- First general- purpose credit card issued information USA. 1950- Dinners club charge card introduced. 1967-First ATM installed information London. 1970- CHIPS provide US dollars fund transfers and transaction settlements on line and information real time. Late 1970s- Home banking started. 1985- Electronic data interchange (EDI) extensively used information bank-to-bank payments systems. 1994- Internet banking
NEED FOR E-BANKING For a long time customers could do their banking only by coming to a bank branch. It took close to half an hour to fill out a demand draft another half an hour to withdraw cash and sometimes. More than twenty days to get an upcountry cheque credited. Moreover, the new private sector banks and the foreign banks are handicapped by the lack of a strong branch network information comparison with private sector banks. Information, the absence of such networks, the market place has been the emergence of a lot of innovation services by these players to increase their market share and reduce their cost of service delivery through direct distribution strategies of “Non Brach Delivery�. Technology is enabling banks to provide the convenience of anytime anywhere banking to increasingly demanding customers. The earlier brick and mortar branch is no longer sufficient. Technology is now taking banks to homes or offices, 24 hours a day, 365 days a year through ATMs, telephones and PCs. Such benefits of the technology provide the compelling reasons why banks should go for Electronic Banking. As the 20th century drew a close, Information Technology become the single most decisive factor, which change the way people interact and carry out their business. With the internet, telecommunication and media convergence, the world is moving to an open market place with a global reach and with E- commerce expected to boom information the next few years,
banks will pay an increasingly important role. Electronic Banking is becoming a strategic necessity for banks. Even as the brick and mortar model collapse, the technology has destroyed the geographical advantages enjoyed by the private sector banks. Information words of R. Ramakrishna, General manager, Bank of India, “they have realized that it is important to empower the customer using information technology. These banks have traditionally provided mass banking and keeping information view are gradually unveiling amenities like ATM, Phone Banking & Intra-city Banking�.
CHANGING PARADIGMS IN BANKING Banking in India has under gone a sea change. From being a mere tool mobilizing saving and providing short term and long term finance. It is now an instrument of socio-economic transformation. Immediately after independence when India embarked upon planned economic development, the country had an inadequately developed financial structure, which was incapable of responding to the needs of a growing and diversifying economy. The branch network was concentrated in cities and towns. Rural areas were 80% of the population resided was barely system was able to neither effectively mobilize savings of the community nor provide credit to the vast majority of population. The govt. initiated a series of measures commencing with in the passage of banking Companies. Act, nationalization of the Imperial Bank of India, social control of Banking and subsequent nationalization of major banks. The concerted efforts to the govt. and the reserve Bank of India bore fruit over the years, during the same period the CRR and the SLR requirements were used as effective instruments of not only monetary policy but also as mechanism for mobilizing cheaper resources for financing the govt. budget deficit. On the other side, the socio economic obligations thrust on the banks coupled with socio- political pressure in credit dispensation affected adversely the profitability of banks and contaminated the assets portfolio of banks and resulted in the accumulation of non performing assets.
These negative factors, however, dial not minimizes the credible achievements of the banking systems of over country. Traditionally, the banking has been paper c4ntric. It could be done through either physically or through computerized system. Anyone who wished to deposit or withdraw money or make any other banking transaction had to be personally visit the bank whether it was a individual customer or a corporate customer. A lot of time could be wasted of one had to stand in a long queues waiting for their turn to come. Moreover one could visit the bank after 2 p.m. in public sector banks and 4 p.m. in private banks these banks also closed on holidays as well as on Sunday. The brick and mortar building of the bank branch defined the periphery of service delivery of banking products. Funds could be transferred only by mail transfer by issuing demand drafts that should be physically transported from the place of issuance to its place of payment. Realization of such payments used to take times, often a couple of months. Banks also have to invest a lot in infrastructure, staff etc., speed of service remained slow. Even banks having computerized system involved a lot of time to clear and to some extent common man, traditional banking remained inefficient. The economic scenario has been changing at a rapid pace. Competition both within the banking sector and between banks & non- banks for many areas of business has become more intense. Banks are becoming much more of a multifaceted provider of financial services with increasing tendency to become either financial super- market or niche players. Margins on traditional business have been eaten away and banks have been forced to look to new market and new products to sustain profitability. As the banks are searching for new profits sources, they are becoming more conscious of the need to control risk. The problem therefore, is to disentangle the two from the data provided and determine where legitimate and prudent hedging ends and speculation begins. The key deriving force underlying these developments in the momentum of innovation in a broad range of information proceeding technology including telecommunications and computer technology. The solution to problems of traditional banking business lies in trying to understand such development and its driving force and training and shifting human resources accordingly. There is also a need to recognize business in a way we believe we can
successfully operate and cope with changes. The catchword is reengineering the idea is not just cost cutting and rationalization but creating new interfaces with customers to generate added value. There was a time when man was wanderer or nomad and he used to wanderer from palace to place in search of various necessities of life. But now things have changed completely. With information technology becoming supreme, it has brought every thing right at our doorstep just at all the click of a mouse. Gone are the days when we used to go to the banks standing in long queues depositing or crediting money. Now we can perform every bank transaction in a clam and coordinated way through Electronic Banking. E- banking can be called one in which contact can be made in variety of ways acc. To convenience but maintaining the same interface and assessing the same services. It can take various forms viz, - Internet Banking, phone Banking, Mobile Banking, provision of ATM facilities etc. Today technology has touched almost all aspects of lives. The emergence of E-commerce has revolutionized the way we live; we shop, entertain and interact. Therefore, it should not come as a surprise if it tries to influence the way we save and invest. Morgan Stanley Dean Writer Internet Research emphasized that web is more important for retail financial services than for many other industries. Today when the customer is king and the service providers are rushing to pay obeisance to the king, financial service providers can not be left behind. In this quest to differentiate their services and gain competitive advantages to the customers at the homes. E Banking emerged as a convenient channel for these providers involving use of Internet, Phone or ATMs for delivery of product and services. E- Banking is changing the banking industry and is having the major effect on banking relationships. Banking is now no longer confined to the branches where one has to approach the branch in person to withdraw cash or debit a cheque or request a statement of accounts. In E-banking, any inquiry or transaction is processed online or on phone without any reference to branch (Anywhere Banking) at any time. Providing E-banking services is increasingly becoming a need to have than a nice to have service. It is new 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.
Fundamental shifts are taking place in the banking scene with the dividing lines between banks, non- banking financial institutions, credit card issuers and even software providers getting blurred. M & A among banks largely driven by the market are bringing synergy. But the biggest driving force in banking is going to be the use of Internet and underlying technologies such as EDI, electronic fund transfer, smart cards, interactive multimedia satellite and wireless communication. Internet that is considered to be the most transforming innovation in human history is catching on fast.
ELECTRONIC BANKING: CONCEPTUAL FRAMEWORK In India, the traditional model for growth has been through Branch Banking. Only in the late 80shas there been a start in non-branch banking services. The banking Industry in India is facing unprecedented competition from non-traditional banking institutions, which now offer banking and financial services over the Internet. The deregulations of the banking Industry coupled with of the emergence of new technologies are enabling new competitors to enter the financial service market quickly and efficiently. Indian banking are going for E-Banking in a big way. However, much is still to be achieved. A study conducted by the student of IIML shows following interesting facts: ďƒ˜ Throughout the country E-Banking is in then ascent stage of development (only 50 banks are offering varied kinds of E-Banking services. ďƒ˜ Foreign and Private banks are much advanced in terms of their level of development.
Drivers of Change
Advantages previously held by large financial institutions have shrink considerably. The technology has leveled the plying field and afforded open access to customers in the global market place. E -banking is a cost effective delivery channel for financial institutions. Customers are bracing the many benefits of E-Banking .it access to ones account at any time from any location is convinces unknown a shout time ago. Thus, a Bank online presence transfer from ‘brochure ware’ status to E-banking status once the bank goes through a technology integration effort to enable the customer to access information about his or her specific account relationship. The six primary drivers of E-Banking includes, in order of primary are: Improved Customer accesses. Facilitate the offering of more services. Increase Customer Loyalty. Attract services offered by competitors. Reduced customer attention.
COST ADVANTAGE Branch network once powerful competitive tool for gathering cheap deposit, are becoming costly white elephants. E- Banking costs, in an operational sense are quite lows. In addition, it will allow for reduction in peaking of volumes and thus reduce the need to capitalize for these. But the infrastructure cost of providing such services are quite high. A bank not only has to automate its front-end systems, which the customer interfaces with but also the back end systems so that the bank is able to provide robust functionality. The heavy costs are in the development of the back end systems.
Customer Service
Despite restricting reforms, the standard of customer service in banks has been for below the expectation. Added to this the convenience of driving to the banks, finding a parking slot and spending time in transacting business which technology completely avoids to the customer. Besides, the financial statements can be viewed, printed or download information any format for ease of analysis. Thus, E- Banking as a service delivery channel shifts the control of transaction from the bank to the customer. Customer fined better information through Internet or Phone than from the unwilling less knowledgeable co-operative bank staff.
E-BANKING CHANNELS ATM MOBILE BANKING PHONE BANKING CALL CENTER INTERNET BANKING PC BANKING CREDIT/DEBIT CARD TELE BANKING
NET BANKING: Net Banking means carrying out banking transactions through Internet. Thus the need for a branch is completely eliminated by technology. A customer can view his account details,
transaction history, order drafts, electronically make payments, transfer funds, check his account position and electronically communicate with the bank through the Internet for which he many have wanted to visit the bank branch.
PHONE BANKING: Phone banking means carrying out of banking transaction through the telephone. A customer can call up the banks help line or Phone banking number to conduct transactions like transfer of funds, making payments, checking of account balance and ordering cheques. This also eliminates the customer of the need to visit the banks branch.
MOBILE BANKING: It helps a customer conduct certain transaction through the mobile phone with the help of technologies like WAP and SAP. This helps a bank to combine the Internet and telephone and leverage it to cut costs and at the same time provide its customers the convenience.
PC BANKING: Most of the major banks today provide PC software that when installed on your PC enables you to dial (via a Modem) directly to the banks Private and secure network to access your own bank account details. Most of there applications allow you to process: Single or batched payment instructions Direct Debit instructions International payments Bank transfers as appropriate They also you to download balance and statement information for reconciliation purposes.
INTERNET BANKING:
Internet banking or on-line banking has been very successfully launched by a number of banks and the take up has been very encouraging. this banking service is currently aimed at providing information for personal bank accounts and sole traders or SOHO (small office, home office) business banking web site. Features available normally include: View your bank balance and statement. Make pre- defined bill payments. Initiate bank transfers. Download statement information. The services are secured through user ID and Password and all activity between your Brower and we site encrypted.
TELE- BANKING: Anywhere Banking is the fore under to a host of convenience banking services to come. With Tele- banking and Internet banking customers can access a range of banking services, simply by dialing the telephone of a click of the mouse. ATM (AUTOMATIC TELLER MACHINE): An ATM ((AUTOMATIC TELLER MACHINE) is an electronic device which allows a Banks customers to make cash withdrawals and check their account balance at any time without the need for a human teller. Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts or even buy Postage Stamps.
CREDIT CARD:
Very time you use a Credit Card. But we are actually borrowing money that is made available to you by a bank or other financial institution. The institution pays the debt to the vender and in turn you pay back the money that you borrowed in addition to any interest drawn on the amount you borrowed.
CHAPTER-II GLOBAL DEVELOPMENT IN E-BANKING E-BANKING GLOBAL PRESPECTIVE E-BANKING SCENARIO
E-BANK
STRATEGY
E-BANKING
KEY
ISSUES
AND
SOLUTIONS E-BANKING TRENDS
E-BANKING GLOBAL PRESPECTIVE Overview The advent of Internet has initiated an electronic revolution in the global banking sector. The dynamic and flexible nature of this communication channels as well as its ubiquitous reach, has helped in leveraging a variety of banking activities. New banking intermediaries offering entirely new type of banking services have emerged as a result of innovative E- business
models. The Internet has emerged as one of the major distribution channels of banking products and services, for the bank in US and the European countries. Initially, banks promoted their core abilities i.e. products, services and the advice through the Internet. Then, the entered the E-Commerce markets as provides/distributors of their own products and services. More recently, due to advances in Internet securities and the advent of the relevant protocols, banks have discovered that they can play their primary roles as financial intermediaries and facilitators of complete commercial transactions via electronic network especially Internet. Some banks have chosen a route of establishing a direct web presence while others have adopted for either being an owner of financial services centric electronic marketplace or being participants of a non- financial services centric electronic marketplace. The trends towards electronic delivery of banking products and services is occurring partly as a result of consumer demand and partly because of the increasing competitive environment in the global banking industry. The Internet has changed the customer’s behavior that is demanding more customized products/services at a lower price. However, very few banks have been successful in developing effective strategies for fully exploiting the opportunities offered by the Internet. For traditional banks to define what niche markets to serve and decide what products/services to offer, there is a need for a clear and concise Internet commerce strategy. Banking transaction had all ready started taking place through the Internet way back in1995. The Internet promised an ideal platform for commercial exchange, helping banks to achieve new level of efficiency in financial transaction by strengthening customer relationship, promoting price discovery and spend aggregation and increasing the reach. Electronic finance offered considerable opportunities for banks to expand client base and rationalize their business while the customers received value in the form of savings in time and money.
This book presents a comprehensive view of the global E-Banking industry covered in four sections. The first section “E-Banking Scenario” discusses the actual stage, prospects, and issues related to E-Banking in Asia with a focus on India, US and Europe. It is also deals with the impact of E-Banking industry structure. The second section “E-Banking strategies” reveal key strategies that banks must implement to derive maximum value through the on line channel. It also brings guidance for those banks, which are planning to build online businesses. The third section “E-banking Transactions” discusses how the Internet has radically transformed banking transactions. This section focuses on cross border transaction, B2B transactions, and electronic bill payment and presentment and mobile payments. In the spite of all the hype, E-Banking has been a non-starter in several countries. The fourth section E-Banking: Key Issues and Solutions, identifies various issues why E-Banking is not gaining high acceptance among customers and the risks involved in it. This section highlights the negative side of the story and offers valuable advice to the banks to mitigate those risks.
E-Banking Scenario The banking industry is expected to be a leading player in E-Business while the banks in developed countries are working primarily via Internet as non- branch banks, Banks in developing countries use the Internet as an Information delivery tool to improve relationships with customers. In early 2001,app. 60% of E-business in UK was concentrated in the financial services sector, and with the expected 10- fold increase o0f the British E- business market by 2005,
the share of the financial services will further increase. Around one fifth of finish and Swedish bank customers are banking on line, while in US, acc. To UNCTAD online banking is growing at an annual rate of 60% and the number of online accounts is expected to reach 30 million by 2007. Banks have established an Internet presence with various objectives. Most of them are using the Internet as a new distribution channel. Financial services, with the use of Internet, may be offered in an equivalent quality with lower costs to the more potential customers. There may be contacts from each corner of the world at any time of day or night. This means that banks may enlarge their market without opening new branches. The banks in US are using the web to reach opportunities in three different categories: to market information, to deliver banking products and services and to improve customer relationship. In Asia, the major factor restricting growth of E- banking is security, in spite of several countries being well connected via Internet. Access to high quality E-banking products is an issue as well. Majority of banks in Asia are just offering basic services compared with those of developed countries. Still, E-banking seems to have a future in Asia. Acc. To McKinsey survey, E- banking will succeed if the basic features, especially Bill Payment, are handled well. Bill Payment was the most popular feature, cited by 40 % of respondents of the survey. However, providing this service would be difficult for banks in Asia because it requires a high level of security and involves arranging transactions with a variety of players. In India, app. four % of high and middle –income group banking customers conducted banking on the Internet in 2006 compared to 7 to 8 % in Singapore and South Korea. In 2006, a Reserve Bank of India survey revealed that all of the major banks were either offering E- banking services at various levels or planned to do so in the near future. Some of the Private Banks included ICICI Bank, HDFC Bank, IndusInd Bank, IDBI Bank, Citibank, Global Trust Bank, Bank of Punjab and UTI Bank. In the same year, out of an estaminate 0.9 million Internet user base, app. 70% were reported to be banking on the Internet. The above statistics reveal
that India does have a high growth potential for e- banking. The banks have already started focusing on increasing and improving their E- banking services. As a part of this, the banks have begun to collaborate with various utility companies to enable the customers to perform various functions online. In 2006, over 70 % of the banks in US were offering E-banking services. However, large banks appeared to have a clear advantage over small banks in the range of services they offered. Some banks in US were targeting their Internet strategies towards business customers. Apart from affecting the way customers received banking services, E- Banking was expected to influence the banking industry structure. The economies of E-banking were expected to favour large banks because of economies of scale and scope and the ability to advertise heavily. Moreover, E-banking offered entry and expansion opportunities that small banks traditionally lacked.
E-BANKING STRATEGIES Though E-banking offers vast opportunities, yet even les than one in three banks have an Ebanking strategy in place. Acc. to a study, less than 15% of banks with transactional websites will realize profits directly attributable to those sites. Hence, banks must recognize the seriousness of the leverage the opportunities presented by the Internet.
No single E-banking strategy is right for every banking company. But whether they adopted an offensive or a defensive posture, they must constantly re- evolution their strategy. In the fast paced e-economy, banks have to keep up with the constantly evolving business models and technology innovations of the Internet space. Early E-business adopter like Wells Fargo not only entered the E-banking Industry first also showed flexibility to change as the market development. Not many banks have been as a E- business Savvy. But the pressure is now building for all banks to develop sound E-business strategies that will attract and retain increasingly discriminating customers. Customers have some rational reasons for staying offline. Some of these reasons include usability features of the site, concerns about security and frequent complaints that signing up is complicated and time – consuming. Banks can solve these problems by refocusing investment on improving the sites basic functionally and user- friendliness, and avoiding advanced features that most customers neither develop a variety of partnerships. They have to put their time and efforts to identify the best opportunities. In the case of traditional banks, if they are too aggressive in using price incentives for customers to bank online, their efforts to build a sound E- Banking business may not fructify. Banks have to be creative in rethinking organizational structures and management processes. Traditional banks that are conservative in nature may find it difficult to attract and retain online talent. Moreover, getting people in the traditional business to help build an Eenterprise would not be an easy task. To make all this happen, requires a major revision of incentives systems, planning and budgeting processes and management roles. Banks can exploit the opportunities provided by the Internet if they demonstrate courage, use their imagination and take decisive action. E Banking gives banks the opportunities to significantly expand their customer relationships provided they position themselves effectively. To leverage these opportunities they must form structured alliances with service affiliates, and acquire competitive advantage in collecting processing and developing customer information.
E- BANKING: KEY ISSUES AND SOLUTIONS IN SPITE OF SEVERAL BENEFITS OF THE Internet in the banking industry, it may prove to be a double edged sword. For instance, banks may gain revenue advantage on the retail side by charging for services such as EBPP and may improve cross selling of products. But on the other hand, the effect of the Internet on the commercial side of the bank is negative. Cash managers are worried about potential revenues decreases as the processing of paper bills declines and third parties attract customers to competing services. There are fears that the Internet is the first step on a download spiral in commercial banking that begins with losses in cash management and lockbox services and ends with banks being excluded from the payment loop. As EBPP become more popular, checks and check processing fees, a major source of bank revenues will decline. Banks will be left to handle settlements, which have low margins and will be less equipped to offer newer and potentially more profitable services. Security that may arise due to the unauthorized access to a banks key information like accounting system, risk management system and portfolio management system a breach of security could result in direct financial loss to the bank. In addition to external attacks, Banks are exposed to security risk from internal sources e.g. employee fraud. Employees can acquires the authentication data in order to access the customer accounts causing losses to the bank. Operational risks that may arise due to inaccurate processing of transactions, nonenforceability of contracts, comprises in data integrity, data privacy and confidentiality, unauthorized access/intrusion to banks systems and transactions, etc. these risks may arise due to weakness in design, implementation and monitoring of banks information system, inadequate technology, negligence by customers and employees, fraudulent activity by employees and hackers.
Banks face the risk of wrong choice of technology, improper system design and inadequate control processes. Technology, which is outdated, not scalable or not proven, any lead to loss of banks investment and risk its business. Many banks rely on outside service providers to implement, operate and maintain they’re E- banking system since they do not have the requisite expertise. However, it adds to the operational risk. Legal risk arises when violation of laws, rules and regulations or prescribed particles takes place or when the legal rights and obligations of parties to a transaction are not well established. These risks may also arise due to the uncertainty about the validity of some agreements formed via electronic media and law, regarding customer disclosures and privacy protection. E-banking extents the geographic reach of banks and customers beyond national borders, which may lead to cross border risks. This risk involves legal and regulatory risks, as there may be uncertainty about legal requirements in some countries and jurisdiction ambiguities with respect to the responsibilities of different national authorities. The risk of unauthorized data alteration is real in an E- banking environment both when data is being transmitted or stored. Proper access control and technological tools to ensure data integrity is of almost importance to banks. Banks system must be technologically equipped to handle these risks. Reputation risk is the risk of getting significant negative public opinion, which may result in loss of funding or customers. The main reasons for this risk may be system or product not working to the expectations of the customers, system deficiencies, security branch, inadequate information to customers, about product use and problem resolution procedures, problems with communication networks that impair customers access to their funds or account information. This may cause the customer todiscontiue the use of product/service.
As E-banking transactions are conducted remotely, banks may find it difficult to apply traditional method for detecting and preventing undesirable criminal activities, which may lead to money laundering risk. Application of money laundering rules may also be inappropriate for some forms of electronic payments. This may result in legal problems for non-complying to “knowing your customer� laws. Banks, International organizations, govts. And financial institutions have to work together to manage all the risks mentioned above. It is critical that partnerships must continue to enhance consumer trust towards E- banking. Banks conducting business online have to consider security and reliability as their first business priority for customer retention.
E-BANKING TRENDS Convergence is one of the clear visible trends in the banking industry. Here, convergence does not mean offering banking, broking and insurance services under one corporate name through the Internet. It covers different dimensions, including channel delivery, sales culture, back office processes and the knowledge management infrastructure all being integrated via Internet. Few banks take these different dimensions into consideration; instead, they view convergence purely as a product – centric development that will enable them to cross-sell products. A strategy that does not go beyond product convergence is bound to have some limitations. Effective knowledge management is the key issues to the E- business success of converged banking institutions. However, this requires high level of cross- organizational co-operation and information sharing. An effective knowledge management system will vastly improve the institutions ability to know its customers. Robust customer information management systems at the front- end, coupled with efficient fulfillment processes, can enable banks to
shorten the delivery time of their products and services. Successful convergence will help them in the development of a seamless supply chain that will be transparent to the customers Another trend in e banking is a shift of focus of banks from being product- centric to customer- centric. Access to the Internet has put wealth management decisions and demandside technology in customer’s hands and they can dictate the types of products and services they require. While the Internet has enabled banks to deliver desired products/services more quickly and inexpensively, the challenges for them is to enhance customer touch using Echannels, which is very important for client retention. To succeed on the Internet, banks must continually differentiate from their competitors, broaden their market and provide value through their products and services. E.G. Wells Fargo had shifted 1.4 million of its traditional banking customers online within five years of the development of its transactional website. However, the company had maintained its Internet strategy as a complement to existing channels and had found that its E-banking customers were more than 50% less likely to leave the bank than non-internet customers. The bank continued to enter new alliances and expanded its web offerings to maintain its dominant position. Finally, developing just a me –too website would not work for banks. Several banks are creating electronic financial communities in which customers assemble it present and pay bills while satisfying other financial and informational needs. By bringing consumers and vendors together at one site, financial institutions can leverage the trust, clients have in them and act as the intermediary to ensure billers get paid and consumers get satisfactory services. Last but not the least, banks may conduct periodical surveys and take customer views on the simplicity and ease of operation of their web sites and other e- Banking initiatives.
CHAPTER-III ďƒ˜ IMPLICATIONS OF E-BANKING IN RETAIL BANKING
RETAIL BANKING –INDIAN SCENARIO Retail Banking is, however board in Nature- it refers to the dealing commercial banks with individual customers, both on liabilities and assets sides of the balance sheet. Fixed, current /savings accounts on the liabilities side; and mortgages, loans(e.g., personal ,housing, auto and educational) on the assets side, are the more important of the products offered by banks. Related ancillary services. Today’s retail banking is characterized by three basic characteristics: Multiple products (deposits, credit cards, insurance, investments and securities); Multiple channels of distribution (call centre, branch, internet and kiosk);and Multiple customer group (consumer, small business, and corporate).
What is the nature of retail banking? In a recent book ,retail banking has been described as “hotter than vindaloo” 1. Considering the fact that vindaloo, the Indian English innovative curry available in it seems that retail banking is perceived to be the in thing in today’s world of banking.
RETAIL BANKING IN INDIA Retail banking in India is not a new phenomenon. It has always been prevalent in India in various forms. For the last few years it has become synonymous with mainstream banking for many banks. The typical offered in the Indian retail banking segment are housing loans , consumption loans for the purchase of durables, auto loans, credit cards and educational loans . the are marketed under attractive brands names to differentiate the products offered by different banks. As the report on trend and Progress of India, 2003-04 has shown that loan values of these retail landing typically range between Rs. 20,000to Rs. 100 lakh. The loans for generally for duration of five to seven years with housing loans granted for a longer duration of 15 years. Credit card is another rapidly growing sub segment of this products group. In recent past retail lending has turned out to be key profit driver for banks with retail portfolio constituting 21.5 per cent of total outstanding advances as on March 2004. The overall impairment of the retail loans portfolio worked out much less then the Gross NPA ratio for the entire loans portfolio.
FACTORS INFLUENCING INDIA I.
RETAIL
BANKING
IN
Economic prosperity: After1992, India’s economy grew at an average rate of 6.8 and continues to grow and as far as the present growth rate is concerned, it is near 7.5 percent. This economic prosperity has led to a consequent increase in purchasing power and has given stimulus to a consumer boom.
II. Consumer demographics: The changing consumer demographic indicates great potential for growth in consumption, both qualitatively and quantitatively. The factors for changing consumer demographics are:
Increasing affluent with bulging middle class. The youngest people in the world. Increasing literacy level. Urbanization is a continuing trend. Increasing consumption mind set in India
India has the highest proportion of young. (70% of the population is below 35 years of age, which better opportunities.
III. Technological Factor: Convenience banking in the form of debit cards, internet and phone banking anywhere at anytime has attracted many new customers in the banking field. The increase in use of credit/debit cards, ATMs, direct Debits and phone banking is due to the technological innovation which ha. “Brought growth in retail banking in India.
IV. Treasury income has been on the decline during the last Two years. In such a scenario, retail businesses provide a good vehicle for profit maximization.
V. Decline in interest rates have also contributed to the growth of retail credit by generating demand,” for such credit.
OPPORTUNITY FOR RETAIL BANKING: Young population is 70%. 130 mn+ people get added to the working population.
CHAPTER- IV RISK MANAGEMENT FOR E-BANKING IDENTIFICATION & ANALYSIS OF RISK RISK MANAGEMENT
RISK MANGEMENT FOR E- BANKING Banks are locked in a love hate relation electronic channels. On the one hand is offers a potentially attractive way to serve customers without the heavy cost associated with the traditional bricks and mortar business model. On the other hand, the E- banking is open and insecure . it is very antithesis to what bank are used to deposit the diehotomy, the IT continues to gain importance in the commercial world. In most cases, the incentives are either need to meet. The competitive and customer demand or the need the cut costs. As per international report internet banking, a banking transaction at a brick and mortar cost around $1.07..$0.27 via an ATM and just one percent on the internet. The decision to use the net is rarely a technical one. In looking at electronic bill presentment and payment (EBPP) considerable cost saving can occur. EBPP cost just about a 6th of that of a cheque. Technology brings advantages of quite a different character from those based on legacy systems, traditional clearing and settlement Infrastructure and heavily regulated manual processes. As a results new players are better positions to reap the benefits of the technology than encumbents. Electronic banking and electronic money activities carry risks for banking organizations , and these risks must be balanced against the benefits.
Identification and Analysis of risks: Because of the rapid changes in information and technology, no list of risks can be exhaustive. While the basic type of risk generated by electronic banking and electronic money are not new . The specific ways in which some the risk arises , as well as magnitude of their impact on banks may be new banks and supervisors. Operational risks, reputation risks and legal risks may be the most important risks categories for the most electronic banking and electronic money activities.
1. Operational risks
Operational risks arises the potential for the loss due to the significant deficiencies in the systems reliability. It includes: i. Security risks:Operational risks arises with respect to the controls over access to a banks critical accounting and risk management system. With electronic money, a breach of security could results in fraudulently created liabilities of the bank. ii. System design, implementation and maintenance: A bank faces the risk that the system it chooses are not well designed or implemented. Many banks are likely to relay on outside services providers and external experts to implement, operate and support portions of their electronic money and electronic banking activities. Services expected by the banks or may fail to update their technology in the timely manner. A service provider operations could be interrupted due to the system breakdowns or financial difficulties, jeopardizing a banks ability to deliver products& services. The rapid pace of change that characterizes information .technology presents banks with the risk of systems obsolescence. iii. Customer misuse of product and services : Customer using personal information (e.g. authentication, credit nos. or bank account numbers) in a non secure electronic transmission could allow criminals to gain access to customers accounts. Subsequently, the bank may incur financial losses because of transactions customers did not authorize.
2. Reputational Risks: Reputational risk is the risk of significant negative public opinion that results in the critical loss of funding all customers. Reputational risk may involve actions that create a lasting nagetive public image of overall bank operations, such that the banks ability to establish and maintain customer relationship is significantly impaired.
3. Legal Risk:
Legal risk arises from violations or non conformance with, laws, rules, regulations or prescribed practices or when the legal rights and obligation of parties to a transactions are in some cases uncertain. Banks engaging in electronic banking and electronic money activities can face legal risks with respect to the customer disclosures and privacy protection. Customers who have not adequately informed about their rights and obligation may bring suit against a bank. Failure to provide adequate privacy protection may, also subject a bank to regulatory sanctions some countries.
4. Other Risks: Traditional banking risks such as credit risks , liquidity risks ,interest rate risks and market risks also arises from the electronic banking and electronic money activities . Though their practical consequences may of a different magnitudes for banks and supervisors.
5. Cross Border Issues: Electronic banking and electronic money activities are based on technology that by its very nature is designed to extend the geographic reach of banks and customers . Such market expansion can extend beyond national borders, highlighting certain risks. Although banks currently face similar types of risks in international banking , it is important to note that these risks are also relevant to the cross border conduct of electronic banking and electronic money. Banks may face different legal and regulatory requirements when they deal with customers across national borders.
RISK MANAGEMENT The rapid pace of the technological innovation is likely to, change the nature and scope of the risks banks face in electronic banking and electronic money. Supervisor expect banks to have processes that anable bank management to respond to current risks, and to adjust to new risk, controlling risk exposure, and monitoring risk will help banks and supervisor to attain these goals. Bank, may employ such a process when committing to new electronic banking and electronic money activities as they evaluate existing commitments to these activities.
I. Assessing Risks: Assessing risks is an ongoing process. It typically involves three steps. First a bank may engage in a rigorous analytic process to identify risks and where possible to quantify that. A second step in assessing risks is for the board of directors or senior management to determine bank’s risk tolerance, based on an assessment of the losses bank can afford to sustain in the event a given problem materializes. Finally management can compare its risk tolerance with its assessment of a risk to ascertain if the risk exposure fits within the tolerance limits.
II. Managing & Controlling Risk: This phase of risks management process includes activities such as implementing security policies and measures, coordinating internal, communications, evaluating and upgrading products and services implementing measures to ensure that out sourcing risks are controlled and managed, providing disclosures and customer education and developing contingency plans. (a)
Security policies and Measures : -
Security is the combination of the systems, applications and internal controls used to safeguard the integrating, authenticity and confidently of data operating process. Proper security realize on the development and implementation of adequate security policies and security measures for processes within the bank and for communications between and external parties. A security policy states management’s intentions to support information security and provides the explanation of the banks security organization. It also establishes guidelines that define bank’s security organization. It also establishes guidelines that banks security risk tolerance. The policy may define responsibilities for designing, implementing and enforcing information security measures and it may establish procedures to evaluate policy compliance, enforce disciplinary measures and report security violations. Security measures are combinations of software and hardware tools, and personnel management that contribute to building secure system operations. Senior management should regard security as a comprehensive process i.e. only as strong as the weakest link in the process. Banks can choose from a variety of security measure to prevent or mitigate externals and internal attacks and misuse of electronic banking and electronic money. Such measures includes e.g encryption, passwords, fire balls, virus controls and employee screening. (b)
Internal Communications Aspects of operational, reputational, legal and others risk can be managed and
controlled if the senior management communicates to key staff how the provision of electronic banking and electronic money is intended to support the overall goals of the bank. At the same time technical staff should clearly communicates to senior management how systems are designed to work as well as strengths and weaknesses of systems.
(c) Evaluating and upgrading :
Evaluating products and services before they introduced on a wide spread basis can also help limit operational and reputational risks. Testing validates that equipment and systems functions properly and produce the desired results. Pilot programmes or prototypes can be helpful in the developing new applications. The risk of system slow down or disruption can be also reduced by polices to review the, capabilities of existing hardware and software regularly. (d) Outsourcers: A growing trend in the industry if for banks to focus statistically on core competencies and relay on external parties specializing in activities outside the banks expertise. While these
arrangement may offered benefits such as cost reduction and
economics of scale, outsourcing does not relive the bank of the ultimate responsibilities for controlling risks that effects its operations. Consequently banks should adopt polices to limit risks arising from reliance on outside service providers. (e) Disclosures and Customer Education : Disclosures and customers education may help a bank limit legal and reputaional risk. Disclosures and programmes to educate customers that address how to use new products and service, fees charges for services and products and problem and error resolution procedures can help bank comply with customer protection and privacy laws and regulations. (f) Contingency Planning: A bank can limit the risk of distruptions in internal processes or in service or product delivery by developing contingency plans that establishes its course of action in the event of a distruption in its provision of electronic banking electronic money services. The plan may address data recovery, alternative data processing, capabilities, emergency staffing and customer service support, back up systems should be tested periodically to ensure their continuing effectiveness. Banks should ensure that their contingency operations are as secure as their normal productions operations.
III. MONITORING RISKS: On going monitoring is an important aspect of any risk management process. For electronic banking and electronic money activities, monitoring its particularly important because the nature of activities are likely to change rapidly as innovations occurs and because of their reliance of some products on the use of open networks such as the internet. Two important elements of monitoring are systems testing and auditing. (a) System testing and surveillance lines: Testing of system’s operation can help detect unusual activity patterns and avert major system problems, disruptions and attacks. (b) Auditing: Auditing (External & Internal) Provides an important independent control mechanism for detecting deficiencies or minimizing risks in the provision of electronic banking and electronic money service. The role of an auditor is an to ensures that appropriate standards, policies and procedures and developed and the bank consistently adheres to them. IV Management of Cross Border Risks: Cross border risks may be more complex than risk bank face, with in their home country. Hence banks and supervisors may need to devote added attention to assessing, controlling and monitoring operational, reputational, legal and the risks arising from cross border electronic money activities.
CHAPTER- V RESEARCH METHODOLOGY STATEMENT OF PROBLEM OBEJECTIVE OF THE STUDY SOURCE OF DATA RESEARCH APPROACH RESEARCH INSTRUMENT SAMPLING PROCESS
RESEARCH METHODOLOGY Statement of Problem: All the private banks in the city are providing different e-banking services and acceptance to their current account holders. They have different e-banking services charges and different types of accounts to cater to the needs of their customers. The reasons for selecting this topic is to compare all the different e-banking services provided by different banks to give the suggestions to improve the products in order to make competitive and customer friendly. This helps the bank to make changes in their products in order to compete even with nationalized and co-operative banks.
Objective of the Study: The subject matter or the scope of the study is to confined the comparison of the e-banking services provided by the private sector banks in the Panipat city. Earlier studies on e-banking were completely technical oriented but on the other hand my study is customer oriented. The study also attempts to know the customers awareness about the services provided how often they utilize those services. An attempt is made to know the satisfaction level of the customers and customer awareness.
Sources of Data: The study is based on primary and secondary data. Primary data has been collected from persons having their current account in different banks (including private &nationalized banks in Panipat city) by filling up well-structured questionnaire and through personal meeting with customers. Secondary data was collected from different brochures of different banks, websites of banks, magazines and journals.
Research Approach: To collect the primary data, “Survey Research Approach” was adopted for the project .
Research Instrument: For the collection of primary data, properly structured Questionnaire was used. The questionnaire comprises of both Close Ended and Open- Ended Questions. In case of Close ended questions, Checklist, Likert scales have been included.
Sampling process: It is not feasible to go for a population surveys due to the numerous consumers and their scattered location. Hence, marketers go for intelligent sampling. As per Banking regulations Act the bank customer account holder’s details are not been provided. In this research, researcher surveyed 200 respondents who were having their current account with private bank nationalized & co-operative banks in the city. In this research Convenience Sampling Method have been used for sampling procedure.
CHAPTER-VI DATA ANALYSIS & INTERPRETATION
ANALYSIS & INTERPRETATION OF DATA Table. 1: Age of customer in years Particulars Below 25
No. of Respondent 60
% 30
25-35
92
46
35-50
38
19
Above 50
10
5
200
100
Total 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
46%
30% 19%
5% BELOW 25
25-35
35-50
ABOVE 50
The table depicts that 92(46%) of the respondents are in the age group of mid age and 30% of below 25 years of age frequently use e banking services. It is followed by 19% in age group of 35 – 50 years. Only 5% of adults use these services.
Table. 2: Annual family income of customer in Rupees Particulars Below 50000
No. of Respondent 6
% 3
50000-100000
12
6
100000-200000
38
19
200000-300000
64
32
Above Rs. 300000
80
40
Total
200
100
40%
40% 35%
32%
30% 25% 19%
20% 15% 10% 5% 0%
3% BELOW 50000
6% 50000100000
100000200000
200000300000
ABOVE 300000
The table depicts that 80 (40%) of the respondent are in the income level of above Rs. 3 Lacs. It is followed by 32% in Rs. 2 to3 lacs % 19% of the respondent belong to net annual income of Rs. 1 to 2 lacs and 9% belong to above Rs.50,000
Table. 3: Occupation of customers Particulars
No. of Respondent
%
Self employed
60
30
salaried
120
60
agricultural
20
10
Total
200
100
60%
60% 50% 40% 30%
30%
20% 10%
10% 0%
SELF EMPLOYED
SALARIED AGRICULTURAL
The table depicts that 60 (30%) of the respondent are self employed. It is followed by 60% of salaried people which in maximum percentage use e banking services, with minimum of 10% of people engaged in agricultural occupation.
Table. 4 : Account holders in different Banks Particulars
No. of respondents
%
Nationalised Banks
80
40
Private Banks
70
35
Cooperative Banks
50
25
Total
200
100
40%
40% 35%
35% 30%
25%
25% 20% 15% 10% 5% 0%
Nationalised Banks
private banks
co-operative banks
From the above table it is inferred that out of 200 respondents 80 (40%) having an account with nationalized banks, 70 (35%) have an account with private sector banks and 50 (25%) have an account with co-operative banks. Analysis shows that respondents have accounts with more than one bank
Table – 5 : Services offered by the banks and used by customers Services
Yes
No. of
No
%
Respondents
No. of
%
Respondents
Net Banking
150
75
50
25
Phone Banking
120
60
80
40
150
75
50
25
76
38
124
62
ATM Mobile Banking
Inter branch/ intercity Bill pay At Par Payable
134
67
16
33
29
14
171
86
98
49
102
51
100% 25%
80%
40%
25%
33%
51%
62% 60%
86%
40%
75%
60%
75%
20% 0%
no yes
67% 49%
38% 14% net banking
phone banking
atm
mobile banking
intercity
bill pay
at par payable
It is clear from the above table that the major banks provide facility of Net Banking, Phone Banking, ATM, Inter branch service and at par payable facility to the customers. Out of these 43%, 35% and 29% respondents are using the facility of Inter Branch/ Intercity, ATM and Net Banking services.
Table – 6 : Facility offered through ATM Facility
Yes No. of Respondents Cash withdrawal 123 Account balance 132
% 66 66
enquiry Request for
132
66
cheque Book Transfer of
85
funds Bill Payment
0
No No. of Respondents 68 68
Total Respondent % 34 34
200 200
68
34
200
42
115
58
200
0
200
100
200
Deposit cash or
132
66
68
34
200
Cheque 100% 80%
34%
34%
34%
34% 58%
60% 40% 20% 0%
100% 66%
66%
66%
66% 42%
0% cash acc. request for transfer of bill withdrawl Balance cheque funds payment enquiry book
cheque
\From the above table it can be observed that 66% of the respondent said that though the ATM bank provides the facility of cash withdrawal, Account balance enquiry, Request for cheque Book, Deposit cash or Cheque it dose
Table – 7 : Use of Credit Card by Customer
no yes
100% 80% 60%
69%
60%
no
40%
yes
20% 0%
40%
31%
internal credit card debit card
Table – 8 : Reason for the use of credit card
Card
Yes
RANKS
No
1
2
No. of Convenience Status Safety
%
Respondents No. of 80 40 respondents 88 44 32 16
Internal debit
Total Respondent
No. of Respondents % 54 70 76
3 % No. of 27 respondents 35 38
No. of
%
Total
Respondents % 64 44 92
32 22 32
Respondents 200 200 200
62
31
138
69
200
40
40
120
60
200
card Credit card
Table 7&8 shows that 31% & 40% respondents have an international debit & credit card. 40% & 44% respondents give the first rank to credit cards for Convenience and Status respectively. The data shows that 16% respondents feel that the card is safe.
Table –9 : Trust Towards Private Sector Banks Table 9 provides the details of trust towards Private sector Bank. 50% respondents have faith in the services offered by Private sector Banks. 55% respondents have no faith in the services offered by Private sector Banks. The interest rates offered for F.D. by private sector banks do not match expectations of the customers.
RANKS 1 No. of
2 %
Respondents
No. of
3 %
Respondents
No. of
%
Respondent
Total Respondents
Convenience
40
20
100
55
50
25
200
Services
100
50
50
25
50
25
200
Safety
20
10
70
35
110
55
200
Interest rates
40
20
40
20
120
60
200
Table-10 : Choice of Customer for Operating Account
Banks HDFC ICICI UTI Centurion Nationalized Co-operatives Total
40%
No. of Respondents 80 68 10 16 10 16 200
% 40 34 05 08 05 08 100
40% 34%
35% 30% 25% 20% 15% 10%
5%
5% 0%
HDFC
ICICI
UTI
8%
8%
5%
CENTURION NATIONALISED
COOPERATIVES
It is clear from the data that the choice of opening account 40% & 34% respondents gives preference to HDFC & ICICI Bank. 8% respondents prefer Centurion and Co-operative Banks while only 5% respondents prefer UTI & Nationalized Banks.
Table 11 : Selection Criteria for Opening Account with bank Criteria Brand Image Services AQB Amount Charges Location Total
No, of Respondents 20 110 45 20 5 200
60%
% 10 55 23 10 2 100
55%
50% 40% 30%
23%
20% 10% 0%
10%
10% 2%
BRAND IMAGE SERVICES
AQB ACCOUNT
CHARGES
LOCATION
Table 11 shows that while opening the Account 55% respondents prefer the services offered by the Banks, while 23% respondents see the AQB amount. It is also clear that customer do not give much more importance to brand image and charges of Banks. There is no influence of location of bank over customer while opening account with Banks.
CHAPTER-VII
LIMITATIONS OF THE STUDY
LIMITATIONS OF THE STUDY The study is limited to one city only. There may be lack of accuracy. All the information furnished by the respondents was treated as correct. The size of sample was small so therefore generalization is being done.
CHAPTER-VIII FINDINGS & SUGGESTIONS
FINDINGS & SUGGESTIONS
One of the most important reason for which people are opting for Private banks is due to the e-banking services and inter connectivity between the branches.
The people having high income are more concerned for the e-banking services as compared to average and low income group. Still many people prefer co-operatives as their first choice due to the facility of same day clearing due to e-banking revolutions. Moreover, co-operatives work more on relations rather than rules, which is more preferable to many customers. Business houses that have their business spread over different places prefer to have their account in private banks because of the e-banking services provided by the Private Banks. Customers having a plus account in the HDFC bank can get their Demand drafts made free of charge, irrespective of the location. Moreover, the facility of fund transfer due to net banking also reduces their collection charges to a large extent and thus they can make smart use of their money. The use of E- Banking services is still not up to the mark as expected by the banks. This requires awareness among the customers about benefits of these services. The customers should be educated about the benefit of these services. This would help the Bank in a long run.
The machine, which was earlier used as a tool for adding customer service, is now considered as a revenue earner. The maximum use of ATM is usually done only for the purpose of cash withdrawal and balance inquiry. But in Panipat is just a mini bank where one
can access most of its functions due to net banking, which would help the Bank to reduce its burden at the branches. Moreover, there is an need to increase the number of ATMs.
The debit card is used only as a substitute for ATM. The customers do not faith in this facility. This required awareness among the customers so that they can make efficient use of the card and the facility. This in turn will increase the flow of funds in the bank.
Due to cost effective advantage e-banking is benefiting the bank customers.
E-banking services are more popular among young generation, which constitutes 70% of Indian population, as compared to older generations.
If classified on the basis of occupation, salaried people are more availing the ebanking services as compared to the business class.
Only from security point of view ,e-banking is still not considered to be much safe.
CONCLUSION The reveals that there is vast opportunity as well as challenges for E- Banking in India. It has been found that due to technological innovations and significant change in demographic profile of customers, there is huge market potential lying ahead. As there is increasingly challenging business environment, E-Banking in India requires competitive tools, Products development and differentiation, business process reengineering, micro planning, market prudent pricing, customization, technology up gradation, home/electronic mobile Banking, cost reduction and cross-selling. In future, Banks need to equip themselves with internal capabilities and build efficient and viable business models to create advantage of new opportunities available into a long- term sustainable competitive advantage.
CHAPTER- IX ANNEXURES
QUESTIONNAIRE Dear Sir/Mam, I, Swati bansal, student of MBA (IV), vaish college of engineering, Rohtak as a part of the academic course I am conducting a study on “Role of E- Banking in Indian Banks.” I need your most esteemed opinion in the respect to complete the study. I shall feel highly obliged if some time is spared by u to provide the relevant information. The opinion given by you will be kept confidential and will be used only for academic purpose. Q1.
Age group of Customer in years a)
Below 25 years
b)
25-35 years
c)
35-50 years
d)
Above 50 years
Q2.
Annual Family Income of Customer in Rupees a) b)
Below 50000 50000-100000
c) 100000-200000 d) 200000-300000 e) Above Rs. 300000 Q3.
Occupation of Customer a)
self employed
b)
Salaried
c) Agricultural occupation
Q4
Q5.
Q6.
Account Holders in Different Banks a)
Nationalized Banks
b)
Private Banks
c)
Co-operative Banks
Service offered by the Banks & used by customers a)
Net Banking
b)
Phone Banking
c)
ATM
d)
Mobile Banking
e)
Inter branch / Intercity
f)
Bill pay
g)
At Par Payable
Facility offered through ATM a) Cash Withdrawal b) Account Balance Enquiry c) Request For cheque Book d) Transfer of Funds
e) Bill Payment f) Deposit Cash or Cheque Q7.
Q8.
Q9.
Q10.
Q11.
Customer Satisfaction of Different Services a)
Customer Support
b)
Mobile Banking
c)
Phone Banking
d)
Net Banking
e)
Fund Transfer
f)
Location
g)
Clearing Facility
How many customers using Credit Card/Debit Card ? a)
International Debit Card
b)
Credit Card
What factor Pull customers to use Credit Card/ Debit Card ? a)
Convenience
b)
Status
c)
Safety
Why Customers trust Private Sector Banks ? a)
Convenience
b)
Safety
c)
Services
d)
Interest Rates
Choices of Customer for Opening Account. a)
HDFC
b)
ICICI
c)
UTI
d)
Centurion
e)
Nationalized
f) ďƒ˜ Q12.
Co-operatives
What is the customers selection criteria for Opening an Account with Banks? a)
Brand Image
b)
Services
c)
Charges
d)
Location
Thanks for your co-operation
BIBLIOGRAPHY Books I. Bhalla,V. K., Market and Services. S. Chand & Company II.
Macchi Raju. H. R. : Merchant Banking
III.
The future of Retail Banking. ACI worldwide (2004).
IV. Gopinath Shyamala : Retail Banking opportunities and challenges (2005). V. Kamesan Vepa : Retail Banking challenges ahead in distribution channels in urban/rural (2003) Websites http://www.ficci.com http://www.rctailtech.com http://www.scholar.goggle.com http://www.icicibank.com
India