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CHAPTER - I

INTRODUCTION
Online banking is an electronic payment system that enables customers of a financial
institution to conduct financial transactions on a website operated by the institution, such
as a retail bank, virtual bank, credit union or building society. Online banking is also
referred as Internet banking, e-banking, virtual banking and by other terms. To access a
financial institution's online banking facility, a customer with Internet access would need
to register with the institution for the service, and set up some password (under various
names) for customer verification. The password for online banking is normally not the
same as for telephone banking. Financial institutions now routinely allocate customers
numbers whether or not customers have indicated an intention to access their online
banking facility. Customers' numbers are normally not the same as account numbers,
because a number of customer accounts can be linked to the one customer number. The
customer can link to the customer number any account which the customer controls,
which may be cheque, savings, loan, credit card and other accounts. Customer numbers
will also not be the same as any debit or credit card issued by the financial institution to
the customer.

To access online banking, a customer would go to the financial


institution's secured website, and enter the online banking facility using the customer
number and password previously setup. Some financial institutions have set up additional
security steps for access to online banking, but there is no consistency to the approach
adopted. The market for mobile phones and the use of internet through mobile phones is
rapidly increasing. It has multiplied to 2.5 times in last 5 years. The growth can be seen
as in 2005, approximately 2 billion mobile phone users to approximately 5.3 billion users
by 2010 (ITU, 2010). Also the internet users through mobile handsets is approximately
940 million by 2010 and is expected to continuously rise in the forth coming years (ITU,
2010). The number of applications and services available on the mobile handsets has
created a different section for people using mobile banking. It has brought about a
revolution in the way the people perceive banking. Mobile handsets are used for
numerous purposes when it comes to banking. The services offered by the banks to
transfer the money, to check the balance, to request a cheque book and so on has made
mobile banking a very useful and time saving commodity. Many different services can be
availed through mobile banking. The services which revolve around the standard bank
account which includes daily transactions, requests for particular services and alerts fall
under the term "Mobile Accounting". Now a day the transactions relating to shares,
stocks and bonds can also be accessed through mobile banking which fall under the
category of "Mobile Brokerage". The third category, "Mobile Finance" revolves around
the non-transactional activities like inquiry for the balance in an account, ordering a mini
statement, etc (Georgi & Pinkl, 2005 cited in Tiwari & Buse, 2007).
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According to Tiwari and Buse (2007), the mobile phones are used to offer the services of
banking and finance in mobile banking. There are many means to provide e-banking and
mobile banking is one of them (Laukkanen, 2007). The usage of information technology
in providing the services through mobile is the most modern method of banking
A sound and effective banking system is the backbone of an economy. The economy of a
country can function smoothly and without many hassles if the banking system backing it
is not only flexible but also capable of meeting the new challenges posed by the
technology and other external as well as internal factors. The importance and role of
information technology for achieving this benign objective cannot be undermined. There
is an urgent need for not only technology up gradation but also its integration with the
general way of functioning of banks to give them an edge in respect of services provided
to the customers, better housekeeping, optimizing the use of funds and building up of
management information system for decision making. The technology has the potential to
change methods of marketing, advertising, designing, pricing and distributing financial
products and services and cost savings in the form of an electronic, self-service productdelivery channel. The technology holds the key to the future success of Indian Banks.
Thus, Electronic Banking is the need of the hour, which cannot be lost sight of except
at the cost of elimination from the competition. The existence of Electronic banking also
becomes inevitable due to the standards required to be matched at the international level.
Thus, the domestic as well as the international standards mandates the adoption of
Electronic banking at the earliest possible moment.
In India, from the early I990's, electronic banking is gaining in popularity as an important
distribution channel to provide banking services. This direction is being taken by the
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batiks to differentiate their services to the consumers to gain their loyalty. The strategies
adopted by the Indian banks to survive the increased competition are the focus of this
study.

Technology is enabling banks to provide the convenience of anytime-anywhere-banking.


Banks are now reengineering the way in which their services can be reached to their
customers by bringing in flexibility in their "distribution channels". The earlier brick-andmonar branch is no longer sufficient; technology is now taking banks to the homes or
offices, 24 hours a day, 365 days a year through ATMs, phone banking and PC banking.
The financial supply chain is undergoing a fundamental strategic change.

What is Non-Branch-Banking?
Traditionally, consumers could do their banking only by coming to the bank branch. The
brick-and-mortar building of the bank branch defined the periphery of service delivery of
banking products. The trend of Non-Branch-Service Delivery in banking started with the
growing popularity of electronic payment services. It started with Electronic Funds
Transfers (EFT). Then credit cards came. ATMs and smart cards were next in the
evolutionary history. Gradually, with the advance of computing technology, telephone
banking and Computer Telephony Integration (CTI) became a powerful medium of
delivering banking services. The latest product is Electronic banking, where the
technology and other issues are still under evolution. These new technologies have
broken the paradigm of branch banking. Customers, whether individual consumers or
business corporate, are no longer required to go to the bank to do their business. It can be

done from home, using the PC or the telephone, or at the shopping markets, using plastic
money. Some banks have now also started door to door delivery of services. As a result, it
is now possible to order cash or demand drafts to be delivered at home. Consumers
wishing to open accounts with banks or to apply for durable loans can call up Direct
Sales Associates (DSAs) of banks and their representatives will complete the necessary
documentation at the customer's convenience, at his desired place und time. These are the
elements of the new flexible financial supply chain.