IN D E X

Chap 1. 1.1 I n t r o d u c t i o n
1.2 H i s t o r y o f E - B a n k i n g
1.3 O b j e c t i v e s
1.4 R e v i e w o f L i t e r a t u r e

Chap 2. 2.1 Introduction to E-Banking

2.2 Evolution to E-Banking

2.3 Current status of E-Banking in India

2.4 International trends in E-banking

Chap 3. 3.1 Functions of E-Banking

3.2 Features of E-Banking

3.3 Advantages and Disadvantages of E-Banking

Chap 4. 4.1 Types of E-Baking

4.2 Importance of E-Banking in Business

4.3 Types of E-Banking Risk

Chap 5. 5.1 Challenges in E-Banking

5.2 Challenges adoption in E -Banking

5.3 Factors for adoption of E -Banking in India

5.4 Opportunities in E-Banking

Chap 6. 6.1 Case Study

Chap 7. 7.1 Recommendation

7.2 Conclusion
1.1 INTRODUCTION

In recent years the world economy has gone through a new phenomenon which is
considered as one the most important changes since the industrial revolution, i.e. The
birth of “Internet-based Economy”. Considering the benefits of using internet the banks
have started to invest in this newly created market. Banks are playing an important role in
the economic development country. Economic development of a country involves
investment in various sectors of the economy. The bank collects small savings from the
public for investment in various projects. In general banking the banks performs various
agency works for their customers and helps economic development of the country. With
the rapid development of technology, internet plays a significant role in changing the
banking scenario. It provides an online platform for various banking transactions through
which it offers various services like online payment, online fund transfer, online stock
trading and online shopping etc. The use of internet as a delivery channel for banking
services is increasing widely in banking sector. Internet banking facilities enable financial
institution and customers to access their accounts, transactions and getting information on
financial products & services. Now a day’s most of the commercial banks have launched
various services through internet banking including latest service like opening online
saving accounts and demand for these services is increasing rapidly.

1.2 HISTORY OF E-BANKING

Without a sound and effective banking system in India it cannot have a healthy
economy. The banking system of India should not only be hassle free but it
should be able to meet new challenges posed by the technology and other external
and internal factors.

For the past three decades India’s banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no longer
confined to only metropolitans or cosmopolitans in India. In fact, Indian banking
system has reached even to the remote corners of the country. This is one of the
main reasons of India’s growth process.

The government’s regular policy for Indian bank since 1969 has paid rich
dividends with the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for
getting a draft or for withdrawing his own money. Today , he has a choice. Go
ne are days when the most efficient bank transferred money from one branch to
other in two days. Now it is simple as instant messaging or dials a pizza. Money
has become the order of the day
The first bank in India, though conservative, was established in 1786. From 1786
till today, the journey of Indian banking system can be segregated into three
distinct phases.

They are mentioned below:

 Early phase from 1786 to 1969 of Indian banks

 Nationalization of Indian Banks and up to 1991 prior Indian banking sector
Reforms.
 New phase of Indian banking system with the advent of Indian Financial
& Banking sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as phase I, phase II
and phase III.

Phase I

The general Bank of India was set up in the year 1786. Next come bank of
Hindustan and Bengal bank. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) and Bank of Madras
(1843) as independent units and called it presidency Bank. These three banks
were amalgamated in 1920 and Imperial Bank of India was established which
started as private shareholders banks, mostly Europeans shareholders.

In 1809 Allahabad banks was established and first time exclusively by Indians,
Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore.
Between 1906 and 1913, central Bank of India, Bank of Baroda, Canara Bank,
Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in
1935.

During the first phase the growth was very slow and banks also experienced
periodic failures between 1913 and 1948. There were approximately 1100 banks,
mostly small. To streamline the functioning and activities of commercial banks, the
Government of India came up with The Banking Companies Act, 1949 which was
later changed to Banking Regulation Act 1949 as per amending Act of 1965.
Reserve Bank of India was vested with extensive powers for the supervision of
banking in India as the Central Banking Authority.

Phase II

Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalized Imperial Bank of India with extensive
banking facilities on a large scale especially in rural and semi-urban areas. It
formed State Bank of India to act as the principal agent of RBI and to handle
banking transaction of the Union and State Government all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960
on 19th July, 1969, major process of the Prime Minister of nationalization was
carried out. It was the effort of Prime Minister of India, Mrs . Indira Gandhi. 14
major commercial banks in the country were nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in
1980 with seven more banks. This step brought 80% of the banking segment in
India under Government ownership.

The following are the steps taken by the government of India to Regulate
Banking Institutions in the Country :

1945 : Enactment of Banking Regulation Act.

1955 : Nationalization of State Bank of India.

1959 : Nationalization of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalization of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

1980 : Nationalization of seven banks with deposits over 200 cores.

After the nationalization of banks, the branches of the public sector bank India
rose to approximately 800% in deposits and advances took a huge jump by
11,00o%.

Banking in the sunshine of government ownership gave the public implic it faith
and immense confidence about the subtainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking
sector in its reforms measure. In 1991, under the chairmanship of M Narasimham,
a committee was set up by his name which worked for the liberalization of
banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are
being put to give a satisfactory service to customers. Phone banking and net
banking is introduced. The entire system become more convenient and swift. Time
is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered
from any crisis triggered by any external macroeconomics shock as other East
Asian Countries suffered. This is all due to a flexible exchange rate regime, the
foreign reserves are high, the capital account is not yet fully convertible, and
banks and their customers have limited foreign reserves are high, the capital
account is not yet fully convertible, and banks and their customers have limited
foreign exchange exposure.

1.3 OBJECTIVES OF E-BANKING

 To identify various e-banking services /products adopted by Indian banks.

 To study and analyse the progress made by the Indian banking industry in
adoption of technology.
 To study the challenges faced by Indian banks in adoption of technology and
make recommendation to tackle these challenges.
 To study opportunities available in E-Banking.

1.4 REVIEW OF LITERATURE

A.J.Joshua, Moli P Koshy(2011), in this study majority of the respondents have

computer and internet access and they are also mostly proficient in using them. The users
of internet banking, tele banking and mobile banking are in general found to be spending
more hours using computers and internet than non-users of these services. The hours of
computer usage, the frequency of internet usage and hours of internet browsing were
found to be significantly higher among users as compared to non-users of technology
enabled banking self-service. It concludes that banks can target those customers whose
usage of computers, internet and other technology products are relatively on the higher
side.

Trivedi & Patel (2013) analysed the problems faced by customers while using e-
banking facilities in India. It observed that most of the customers know about the e-
banking services offered by their bank. The study found that there is a significant
difference amongst different problems identified while using e-banking services. It also
found that some problems affect more and some problems affect less in use of banking
services. It concluded that all the reasons are not equally responsible for not using e-
banking services.

Haq & Khan (2013) analysed the challenges and opportunities in the Indian Banking
sector. The study showed that only 28 per cent banking clients were using internet
banking after evaluating the population characteristics. It found that there was no
significant relationship in between age and use of cyber banking. It also depicted that
there is no relation in between gender and the adoption of internet banking. It observed
that qualification in terms of education and income of the respondents were playing the
role in the acceptance of online banking. The study suggested that it is the need of time
that financial literacy of the users should be increased through various programs which
should be run by banks to increase the awareness of internet banking.

Vijayakumar Rajarathinam and charndra Kumar Mangalam(2013), has indicate

that users were influenced by factors such as quick direct access, ease of use, anytime
anywhere banking, status symbol, safety and security. The influence of the factors varied
from the type of users. Consumers have different levels of competency in internet
banking usage. The higher the consumers felt about their competency in handling internet
banking, higher was their frequency in usage of internet banking. Moderate and novice of
internet banking users had relatively lesser levels of usage satisfaction.

Daniel (1999), in his research paper, described e-banking as the newest delivery
channel offered by the retail banks in many developing countries. The objective of the
study was to analyze the current provision of electronic services of major retail banking
organizations in the UK. The researcher through a questionnaire found that 25% banks in
the UK were those already providing e-banking services, 50% banks were testing or
developing such services while 25% were not providing any e-banking services.
Electronic channels, PC, digital TV and all these provide greater accessibility and
services at lower price. To make services more adaptable, customers should be provided
maximum choice and convenience. Restriction and limitation within organization to
operate the services and its market share or strength were viewed as important to decide
and operate the e-banking services.

Sathye (1999), in his research paper, explored the factors affecting the adoption
of internet banking by Australian customers. The author stated that internet and other
virtual banking had significantly lower the cost structure than traditional delivery
channels. So, the banks should encourage customers to use internet for banking
transactions. The author also emphasized that for adoption of internet banking, it was
necessary that the banks offering this service made the consumers aware about the
availability of such a product and explain how it adds value to the other products. The
analysis of the study showed that security concerns and lack of awareness stand out as
the reasons for non-adoption of internet banking by Australian customers. However,
internet should be considered as a part of overall customers’ service and distribution
strategy. These measures could help in rapid migration of customers to internet banking
resulting in considerable saving of operating costs of banks.
Talwar (1999) examined the IT Revolution in banking sector which had not only
provided improved service to the customer, but also reduced the operational cost. The
author brought out that computerization of banks, introduction of Real Time Gross
Settlement System, setting up of Infinet, Electronic Payment Products(such as Electronic
Clearing Service) had ensured better resource management, systematic efficiency and
substantially reduced inter-branch reconciliation entries. However fear of hacking,
tampering of data, secrecy maintenance were certain issues which pose threats on usage
of electronic banking. The challenges in banking sector were manifold but still the
constitution of National Payment Council by RBI and development of the integrated
payment and settlement system was a step in this direction to remove the obstacles
coming in the way of using electronic banking.

Raghvan (2006) highlighted the transformation in the banking sector due to

effect of information technology, tele-communication and electronic data processing. He
also attempted to visualize the perception of banks in India in the year 2020 taking into
account the impact of internet banking, ATMs, EFT on the performance of banks and
initiative taken in liberalization, privatization and globalization. He also evaluated the
future of online and internet banking. Due to tangible and proven benefits, automation of
manual processes; online and internet banking was slated to increase manifold. Ho also
evaluated that currently an estimated 46 lakh net users were online and this was
estimated to touch 160 lakh by March 2008. Furthermore, he analyzed the projected
indicators of banks in India in 2020 with special emphasis on internet banking, online
banking and electronic banking.

Raja et al. (2008) evaluated the impact of e-payment system on the business
opportunities. They identified that due to the growth of internet users, various electronic
payment mechanisms had been developed to cater the diversity of applicants. The
researchers classified the e-payments into three main groups, namely, cash like systems,
check like systems, and hybrid systems which were further classified into credit cards,
debit cards and electronic cheques. They identified three main issues related to epayment
that were security issues, low interest among businessmen, and heavy reliance
on traditional payment methods. They also analyzed that there were technical and
cultural problems which hinder the path of e-payments. However, to make e-payments
more effective, security threats should be reduced; and people should be realized that
traditional payment methods were more time consuming than electronic payment
methods. They should also be realized that plastic card payments were more convenient,
easier and more secure than cash or cheques.

2.1 INTRODUCTION TO E-BANKING

Virtual Banking /E-Banking / online Banking/ Internet Banking/personal computer

banking /home banking /remote electronic banking/phone banking, these are the
synonyms for the Electronic Banking. Banking consumers today have more options than
ever before: “brick and mortar” institution (has a building and personal service
representatives) “brick and click” institution (physical structure + Internet bank
services) “virtual bank” (no public building – exists only online)

E-banking is defined as the automated delivery of new and traditional banking products
and services directly to customers through electronic, interactive communication
channels. E-banking includes the systems that enable financial institution customers,
individuals or businesses, to access accounts, transact business, or obtain information on
financial products and services through a public or private network, including the
Internet. Customers access e-banking services using an intelligent electronic device, such
as a personal computer (PC), personal digital assistant (PDA), automated teller machine
(ATM), kiosk, or Touch Tone telephone. Hence, it refers to perform the basic banking
transactions by customers round the clock through Electronic media.

Electronic banking in simple terms means, it does not involve any physical
exchange of money, but it’s all done electronically, from one account to another,
using the Internet. Internet banking is just like normal banking, with one big
exception. You don’t have to go to the bank for transactions. Instead, you can
access your account any time and from any time and from any part of the world,
and do so when you have the time, and not when the bank is open. For busy
executives, students, and homemarkers, E-banking is virtual blessing. No more
talking precious time off from work to get a demand draft made or a cheque
book issued.
Banks offer Internet banking in tow main ways. An existing bank with physical
offices can establish a Web site and offer Internet banking to its customers in
addition to its traditional delivery channels.

A second alternative is to establish a “virtual,” “branchless,” or “Internet-only”

bank. The computer server that lies at the heart of a virtual bank may be housed
in an office that serves as the legal address of such a bank, or at some other
location.

Virtual banks may offer their customers the ability to make deposits and
withdraw fund via automated teller machines (ATMs) or other remote delivery
channels owned by other institutions.

Online system allow customers to plug into a host of banking services from a
personal computer by connecting with the bank’s computers over telephone wires
the convenience can be compelling. Not only is travel time reduced, but ATM
machines, telephone banking or banking by mail are often unnecessary. And,
technology continues to make online banking once attempted only by computer
enthusiasts, easier for the average consumer.

Banks use a variety of names for online banking services, such as PC banking,
home banking electronic banking or Internet banking.

Can one imagine life without paper cash? Money has always been part of human
emotions. And although it is difficult to imagine that all those years of savings at
the bank is now just a whole bunch of bits and bytes, it is becoming a reality
and the sooner people adjust to it, the better it is.

2.2 EVOLUTION OF E-BANKING

Opening up of economy in 1991 marked the entry of foreign banks. They brought new
technology with them. Banking products became more and more competitive. There was
need for differentiation of products and services. The ICICI Bank kicked off online
banking in 1996. 1996 to 1998 marked the adoption phase, while usage increased only in
1999, owing to lower Internet Service Provider (ISP) online charges, increased PC
penetration and a tech-friendly atmosphere. To cope with the pressure of growing
competition, Indian commercial banks have adopted several initiatives and e- banking is
one of them. The competition has been especially tough for the public sector banks, as
the newly established private sector and foreign banks are leaders in adoption of e-
banking.

Indian Banks offer to their customers following e- banking products and services:
  Automated Teller Machines (ATMs)
 Internet Banking
 Mobile Banking
 Phone Banking
 Telebanking
 Electronic Clearing Services
 Electronic Clearing Cards
 Smart Cards
 Door Step Banking
 Electronic Fund Transfer
 The three broad facilities that e-banking offers are:
 Convenience- Complete your banking at your convenience in the comfort of your
home.
 No more Qs- There are no queues at an online bank.
 24x7 service- Bank online services is provided 24 hours a day, 7 days a week and
52 weeks a year.

2.3 CURRENT STATUS OF E-BANKING IN INDIA

Internet Banking has become an integral part of banking system in India. The concept of
e-banking is of fairly recent origin in India. Till the early 90‟s traditional model of
banking i.e. branch based banking was prevalent, but after that non-branch banking
services were started. The credit of launching internet banking in India goes to ICICI
Bank. Citibank and HDFC Bank followed with internet banking services in 1999. The
Government of India enacted the IT Act, 2000 with effect from October 17, 2000 which
provided legal recognition to electronic transactions and other means of electronic
commerce. The Reserve Bank is monitoring and reviewing the legal and other
requirements of e-banking on a continuous basis to ensure that e-banking would develop
on sound lines and e-banking related challenges would not pose a threat to financial
stability. According to report of RBI in jan 2016, there are 196079 ATM and 1337310
point of sale devices in India. To cope with the pressure of growing competition, Indian
commercial banks have adopted several initiatives and e-banking is one of them. The
competition has been especially tough for the public sector banks, as the newly
established private sector and foreign banks are leaders in the adoption of e-banking.
Indian banks offer to their customers following e-banking products and services:

 Automated Teller Machines (ATMs)

 Internet Banking
 Mobile Banking
  Phone Banking
 Tele banking
 Electronic Clearing Services
 Electronic Clearing Cards
 Smart Cards
 Door Step Banking
 Electronic Fund Transfer

To sustain in the growing competition, commercial banks in India have adopted several
initiatives to improve banking services and to gain competitive advantage. The few of the
initiatives taken by Indian banks for internet banking are mentioned below:

 Bank of India recently launched its card-less cash withdrawal service. This
facility helps customers to send money to anyone using Internet banking or by
using ATM, with the help of receiver‟s mobile number.
 The Business Transformation Program is being implemented by the Bank of
Baroda which will provide its customer convenience banking on a 24 X 7 basis in
India and abroad with integrated delivery channels like Internet, Phone, Mobile,
and others.

 A number of Indian banks have implemented Online Tax Accounting System

(OLTAS) for collection of taxes on behalf of Central Board of Direct Taxes,
Government of India.
 ICICI bank launched 24x7 electronic branches, which is a one-stop shop for all
banking transactions. It offers facilities such as cheque deposit machine and an
electronic kiosk through which customers can be accessed internet banking
services. ICICI Bank has also introduced E-Locker for its customers. It is a virtual
locker, which can be accessed through ICICI internet banking which facilitates
customer to store soft copy of their important documents safely such as legal
documents, agreements, policies and various important certificates. ICICI bank is
offering various gifts to customers for start to use internet banking for the first
time.
 The banks are making their presence on social media like Facebook and Twitter
for targeting huge customer base as well as potential customers; there will be
round-the-clock tweets and comments on the bank‟s products and services. After
launching accounts on Facebook and Youtube, SBI took one more step on the
social media by launching a twitter handle.
 Internet Banking has become an integral part of banking system in India. The concept of
e-banking is of fairly recent origin in India. Till the early 90’s traditional model of
banking i.e. branch based banking was prevalent, but after that non-branch banking
services were started. The Indian government enacted the IT Act, 2000, with effect from
the 17th October 2000. To examine different aspects of Internet banking RBI set up a
committee on Internet Banking. The committee had focused on three major areas of
Internet banking, Technology and security issues, legal issues and regulatory and
supervisory issues. RBI had accepted the suggestions and recommendations of the
working committee and accordingly issued guidelines to banks to implement internet
banking in India. The old manual systems which were prevalent in Indian banking for
centuries seem to replaced by modern technologies. Table no 1 exhibit a few facts and
figures related to internet/electronic banking to present its current scenario. It shows
evidence for ATM, POS (Point of sale) and electronic cards (credit and debit cards)
deployed in India as on March, 2016. Table also compared the data of March, 2016 with
March, 2012. It shows growth rate of these banking channels and it seems to be great in
Indian context.

Table 1

TYPES OF NO. OF CHANNELS GROWTH IN %

ELECTRONIC YEAR
CHANNELS MARCH 2012 MARCH 2016
No. of ATMs deployed 95686 199099 108.07
No. of POS deployed 660920 1385668 109.65
No. of CREDIT CARD 17653818 24505219 38.81
issued
No. of DEBIT CARD 278282839 661824092 227.82
issued

From the above table, it is clearly shown that no doubt Indian banks are making sincere
efforts for the adoption of advanced technology and installation of e-delivery channels
but still the concept and scope of E-banking is still evolving. It facilitates an effective
payment and accounting system thereby enhancing the speed of delivery of banking
services considerably. While E-banking has improved efficiency and convenience, it has
also posed several challenges to the regulators and supervisors. Several initiatives taken
by the government of India, as well as the Reserve Bank of India (RBI), have facilitated
the development of E-banking in India. As already discussed, the government of India
enacted the IT Act, 2000, which provides legal recognition to electronic transactions and
other means of electronic commerce. The RBI has been preparing to upgrade itself as a
regulator and supervisor of the technologically dominated financial system. It issued
guidelines on risks and control in computer and telecommunication system to all banks,
advising them to evaluate the risks inherent in the systems and put in place adequate
control mechanisms to address these risks. The existing regulatory framework over banks
has also been extended to E-banking. It covers various issues that fall within the
framework of technology, security standards, and legal and regulatory issues.

2.4 INTERNATIONAL TRENDS IN E-BANKING

There are a number of studies that identify consumer preferences when it

comes to using different delivery channels when interacting with their banks.
According to a 2014 EY Global Consumer Banking Survey, the Internet is the
preferred banking method for 55% of respondents globally for paying bills or making
transfer and for 50% for balance inquiry, while branch banking is favoured for
deposits, advice and sales (see figure 1)

.
Source: EY (2014) Global Consumer Banking Survey
Figure 1. Percentage of channel preference by task
For everyday banking, customers have several alternative channels to choose
from depending on their needs and experience. While on a daily basis they prefer the
internet, mobile and ATMs, for weekly usage customers pick ATM and online
channels far more frequently than any others (see figure 2), but for monthly
usage branch banking is the most common option (EY, 2014)

Source: EY (2014) Global Consumer Banking Survey

Figure 2. Channel used weekly or more often
Although branch and the internet still remain the most important channels, the
growing importance of the mobile channel is undeniable due to the rise of software
solutions that allow users to embrace mobile banking. In most markets, digital
channels were favoured in general for the majority of interactions, and mobile banking
has overtaken online banking in many markets, according to a 2014 Bain & Company
Survey regarding customer loyalty in retail banking (see figure 3).
56 Drigă, I.; Isac, C.
Source: Bain & Company (2014) Customer Loyalty in Retail Banking, Global Edition
Figure 3. Percentage of channel preference in different countries
Obviously, prior to mobile banking online banking had somewhat of an
impact, but worldwide banking customers started to handle more of their banking
interactions via smart phones than through other channels. While it is the newest
channel for banks to reach their customers, mobile banking has evolved and expanded
to an impressive degree during its short life. Mobile banking adoption among
consumers is much faster than the adoption of internet banking as banks have educated
their customers and have invested a great deal in mobile technology and security and
smart phone apps development. In both developed and developing countries, the rapid
take-up of mobile banking is evident (see figure 4).

Source: Bain & Company (2014) Customer Loyalty in Retail Banking, Global Edition
Figure 4. Mobile banking usage worldwide
E-Banking Services - Features, Challenges and Benefits 57
It is obvious that mobile technology is revolutionizing the global banking and
payment industry by offering new opportunities for banks to provide added facilities to
their customers. Although mobile penetration is high in certain countries (such as the
U.S., France, the U.K. or Germany), mobile banking is relatively new in many markets
and its usage is still low in most countries over the world (Gupta, 2013).

3.1 FUNCTIONS OF E-BANKING

The personal e-bank system provides the following services:

 Inquire about information of account: The client inquires about the details of his
own account information such as the card’s / account’s balance and the detailed
historical records of the account and downloads the report list.
 Card accounts transfer: The client can achieve the fund to another person’s Credit
Card in the same city.
 Bank-securities account transfer: The client can achieve the fund transfer between
his own bank savings accounts of his own Credit Card account and his own
capital account in the securities company. Moreover, the client can inquire about
the present balance at real time.
 Foreign exchange transaction: The client can do the real- time transfer and get
the feedback information about payment from our bank when the client does
shopping in the appointed web-site.
 Client Service: The client can modify the login password, information of the
Credit Card and the client information in e-bank on net.
 Account Management: The client can modify his own limits of right and state of
the registered account in the personal e-bank, such as modifying his own login
password, freezing or deleting some cards and so on. Reporting the loss if any:
The client can report the loss in the local area (not nationwide) when the client’s
Credit Card or passbook is missing or stolen.

3.2 FEATURES OF E-BANKING

 Easy Electronic Fund transfer facility.

 Better efficiency in Customer relationship management.
 Making the Payments of bills like electricity, telephone bills, and mobile
recharge.
 It introduces virgin & innovative banking products & services.
 It can view of balance of accounts and statements
 E-banking can bring doorstep services.
 Balance and transaction history search.
  Transaction history export.
 Order mini statements.
 Mobile banking.
 Pay anyone payments Multi Payments.
 SMS banking services.

3.3 ADVANTAGES AND DISADVANTAGES OF E-BANKING

ADVANTAGES:

 Very low setup cost.

 Capability to cater to a very large customer base.
 Saves a lot of operational costs.
 Banks can offer a lot of personalized services to their customers.
 Reduction of burden on branch banking.
 Ensures round the clock banking transactions to customers
 Banks are able to provide efficient, economic and quality service to customers.
 Assists in increasing the speed of response to customers requirements
 It offers convenience to customers as they are not required to go to the banks’s
premises.
 There is very low incidence of errors.
 The customers can obtain funds at any time from ATM machines.
 The credit cards and debit cards enables the customers to obtain discounts from
retail outlets.
 The customer can easily transfer the funds from one place to another place
electronically.

DISADVANTAGES :

 Investment of time upfront can be formidable. The data entry is

necessary before the numbers can be massaged and money managed
successfully. Online bill payment is an example of an effort that
requires setting up which leads to ultimate convenience.
 Switching software or bank re-entry of data, although internet based
system are less impacts by this. But competition seems t be
minimizing this problem. The personal finance management software
Microsoft money enables users of competing software to import data
easily.
 Like anything that deals with the transfer of large amount of money,
security is a major factor of online banking. It is taken very serious
during online banking procedures.
  With a system as complex as Online Banking, some errors are
inevitable. i.e. : An interrupted online session; late arrival of payments
etc. a mistake made by either the user or the banks in question, can
affect both, causing problems. For example: An ‘Infinity’ (ICICI’s
Online Banking Brand name) customer from Bangalore (who did not
want to be named) paid his cell phone bill thought the bank, only to
receive another bill the following month, with late fees. The amount
had been debited from his account but not passed on to cellular
operator.
 When dealing with computers, there is always concern of the system
crashing, viruses entering the system or power cut. There are large
problems and are not easily solved. In all this case, many people
would be affected, information may be lost and a back –up plan would
have to be initiated.

4.1 TYPES OF E-BANKING

E-BANKING IS DIVIDED IN FOLLOWING TYPES:

 ATM (Automatic teller machine)

 Tele banking/Phone banking.

 Mobile banking.

 PC banking.

 Internet banking.

 Wireless/ PDA banking.

AUTOMATED TELLER MACHINE (ATM)

Automated teller machine is seen everywhere. These machines brought innovation

in the banking sector all over the world. The advent of the ATM has made the
concept of the clock banking a reality. The ATM has been helpful to both the
bankers and customers. The load crowd of customers in the banking hall of a
branch waiting for their turn to collect cash is dippearing.

The ATM is the device use by the bank customers to process account transaction.
This system is known as “anytime money” because with services the person
having the ATM card can withdraw cash any time he want. Since the ATM
machine can be build anywhere like near markets and railway stations etc, so one
can easily with draw money from it.

Advantages of ATM:

To banks

 Less space required

 Capital expenditure is lower as compare to branch
 Bank’s staff gets more time to do marketing
 Lower transaction cost
 One more means for advertising bank’s products

To customer

 Convenience of shopping no need to carry cash

 No need to visit bank for transaction
 Banking anytime, anywhere, anyhow
 Fast and efficient service
 Good currency notes

Disadvantages of ATM:

 Flexible to efficiency’s expense, at present, for any one application it is

usually possible to find a more optimized technology.
 Cost, although it will decrease with time.
 New customer premises hardware and software are required competition
from other technologies - 100 Mbps Ethernet and fast Ethernet.
 Presently the application that can benefit from ATM such as multimedia
are rare.

The wait, with all the promise of ATM’s capabilities many details are still in the
standards process.
Tele banking or Phone banking:

The customer interacts with the bank for various services over phone. There will
no charge for dialing to the toll free number provided by banks Tele-banking,
also know as “voice over phone” is consider under anywhere banking. The
customer indentifies himself to the system by entering his pin number and is
guided by a voice response for each banking services namely:

 Balance in the account

 Transaction status, e.g. whether cheque deposited is cleared or not
 Request for issue of cheque book is registered
 Request for issue of bank statement is registered

In normal course all above activities would have involved customer visit to a
branch and this Tele-banking has improved banking services and enabled remote
banking.

Advantages of Tele-banking:

1. You may not have time to visit your bank every week and if our business
is located out of town, getting to a branch can be time consuming and
expensive. With telephone banking, your bank is on the other end of the
line whenever you need it.
2. You can manage your business account at any time, which is idial if you
are busy during the day with running your business.
3. As well as the basics of running your business account – paying a bill,
transferring money, setting up a direct debit and so on – you may also be
able to appointment with your bank manager.
4. Making payment by phone can simplify your banking – you don’t need to
confirm the payments in writing, and you can check all your transactions
against your statement when it arrives.

The disadvantages of Tele-banking:

The most common one would have to be the fact that not all banks and building
societies offer 24 hour telephone banking. They may if is simply a case of
checking your balance or recent transaction but for anything more involved in that
it can cause a problem. Also telephone banking is not active usually over bank
holidays such as Christmas day or New year day.
Mobile banking

Mobile banking comes in as a part of the bank initiative to offer multiple

channels banking providing convenience for its customer. A versatile multi
functional, free service that is accessible and viewable an the monitor of mobile
phone. Mobile phones are playing great role in banking and other channels.

Mobile banking can be divided into two broad categories of facilities:

 Alert facility:

Mobile banking alert facility keeps you informed about the significant transaction
in your account. It keeps you update where ever u go.

 Request facility:

Mobile banking request facility enables you to enables you to query for your
account balance.

Advantages of Mobile banking

Mobile banking through cell phone offers many advantages for customers as well
as banks. Some of them are as follows:-

1) Mobile banking has an edge over internet banking. In case of online banking
you must have an internet connection and computer. This is a problem in
developing countries. However, with mobile banking, connectivity is not a
problem. You can find connectivity in the remotest of places also where
having an internet connection is a problem.
2) You can make transaction or pay bills anytime. It saves a lot of time. Mobile
banking thorough cell phone is user friendly. The interface is also very simple.
You just need to follows the instructions to make the transaction. It also
saves the record of any transaction made.
3) Cell phone banking is cost effective. Various banks provide the facility at
a lower cost as compared to banking by self.
4) Banking through mobile reduces the risk of fraud. You will get an SMS
whenever there is an activity in your account. This includes deposits, cash
withdrawals, funds transfer etc. You will get a notice as soon as any amount
is deducted or deposited in your account.
5) Banking thought cell phone benefits the banks too. It cuts down an the
cost of Tele-banking and is more economical.
6) Mobile banking through cell phone is very advantageous to the banks as it
severs as guide in order to help the banks improve their customer care
service.
7) Banks can be in tough with their clients with mobile banking.
8) Banks can also promote and sell their products and services like Credit
cards , loans etc to a specific group of customers.
9) Various banking services like Account Balance Enquiry, Credit/Debit Alerts,
Bill payment Alerts, Transaction History, Fund Transfer Facilities, and
Minimum Balance Alerts etc can be accessed from your mobile.
10) You can transfer money instantly to another account in the same bank
using mobile banking.

PC banking:

PC banking allows the customer to access the information regarding to their

bank accounts through a dial up connection. They can also download the
information and process it in their own manners. It is different from the
internet banking in the sense that internet banking is done over a highly
accessible public networks, where as PC banking is accessible just to bank’s
customers.

 PC banking makes things easier

You can access your account just from your home PC, 24 hours per day, 7
days per week. All you need is a computer with an internet connection, and a
card reader, which can be obtained at your four Fortis Bank. The card reader
gives you unique codes based on your bank card and pin number, so your
account stays safe.

 PC banking goes faster

Because you don’t need to go all the way to your local bank office, you save
a lot of time that you don’t want to be wasting in traffic. A lot of
information and reports can be obtained with a few clicks, and transactions
can be done without signing papers. Most of your time will be spend on time
going to the website and logging in, so it is advisable to do all you’re
banking at a certain time. For example, Every Monday you log in and do
your transaction and administration. Now you just log in once and process all
transfers and reports at once.
 Advantages of PC banking:

 PC Banking enables you round-the-clock access.

 You usually do not think to stand an queue as a way to perform important
banking transaction. The PC banking enables you to do just that suitable
from the ultimate comfort and privacy of your homes.
 In comparison towards the Online banking program, the PC banking
provide you increased security.
 Since the level of security is very much greater in PC banking, you
can access very much more services that what you by way of online
banking.
 What’s more, even the speed of the banking transaction is very much
faster that online banking.
 In case you are using individual economic management computer
software and want the inputs from your checking, savings and cash
marketplace accounts, PC banking makes it probable for you to
download the related information suitable into the computer software
program.

You could also check your balances and love the conversation and power of
electronic fund transfer.

Disadvantages:

 There is no personal interaction between yourself and the bank

(employee/advisor).
 You can access your account from the PC that you originally installed
the software.
 You cannot deposit physical cash using internet banking i.e. cheques,
cash in hand. This would require a personal visit to the bank.

Internet banking:

Internet banking let you handle many baking transaction via your personal
computer. For instance, you may use your computer to view your account
balance, request between accounts, and pay bills electronically. Internet banking
system and method in which a personal computer is connected by a network
service provider directly to a host computer system of a bank such that customer
service requests can be processed automatically.

The advent of the Internet and the popularity of personal computer presented both
an opportunity and a challenge for the banking industry. For years, financial
institutions have used powerful computer network to automate million of daily
transaction ; today, often the only paper record is the customer’s receipt at the
point of sale. Now that their customers are connected to the internet via personal
computers are connected to the Internet via personal computers, banks envision
similar advantages by adopting those same same internet electronic processes to
home use. Bank view online banking as a powerful “vale added” tool to attract
and retain new customers while helping to competitive banking environment.

It generally implies a service that allows customers to use some form of computer
to access account-specific information and possibly conduct transaction from a
remote location - such as at home or the workplace. The obvious advantage to
the consumer is convince—one bank recently used the advertising motto “bank
naked’ to emphasize the customer’s freedom to conduct routine banking
transaction from the comfort and security of his/her home 24X7.

Type of Internet Banking:

There are three basic type of internet banking that is being employed in the
market place:

 INFORMATION.

 COMMUNICATION.

 TRANSACTION.

 Information:

This is most basic level of internet banking. The bank has marketing information
about its product and services on a stand-alone server. This level of internet
banking services can be provided by the bank it self or by sourcing it out.
Since the server and website may be vulnerable to alteration, control must
therefore be in place to prevent unauthorized alterations to data the server or
web site.

 Communication:
 This type of internet banking allows the interaction between the bank’s system
and customer. It may be limited to electronic mail, account inquiry, loan
application, or static file update. This risk is higher with this configuration that
with the earlier system and therefore appropriate control need to be in place to
prevent, monitor, and alert management of any unauthorized attempt to access
bank’s internal network and computer system. Under this system the client makes
a request to which the bank subsequent responds.

 Transaction:

Under this system of internet banking customers are allowed to execute

transaction. Relative the information and communication type of internet banking,
this system processes the highest level of risk architecture and must have the
strongest control. Customer transaction can include accessing accounts, paying bills,
transferring funds, etc. this possibilities demand very stringent security.

4.2 IMPORTANCE OF E-BANKING IN BUSINESS

Businesses rely on efficient and rapid access to banking information for cash flow
reviews, auditing and daily financial transaction processing. E-banking offers ease of
access, secure transactions and 24-hour banking options. From small start-up companies
to more established entities, small businesses rely on e-banking to eliminate runs to the
bank and to make financial decisions with updated information. The importance of E-
Banking are as follows:

 Activity Review Business owners, accounting staff and other approved

employees can access routine banking activity such as deposits, cleared checks
and wired funds quickly through an online banking interface. This ease of review
helps ensure the smooth processing of all banking transactions on a daily basis,
rather than waiting for monthly statements. Errors or delays can be noted and
resolved quicker, potentially before any business impact is felt.

 Productivity E-banking leads to productivity gains. Automating routine bill

payments, minimizing the need to physically visit the bank and the ability to work
as needed rather than on banking hours may decrease the time involved in
performing routine banking activities. Additionally, online search tools, banking
actions and other programs can allow staff members to research transactions and
resolve banking problems on their own, without interacting with bank employees.
In some cases, month-end reconciliations for credit card transactions and bank
accounts can be automated by using e-banking files.

 Lower Banking Costs Banking relationships and costs are often based on
resource requirements. Businesses that place more demands on banking
employees and need more physical assistance with wire transfers, deposits,
 research requests and other banking activities often incur higher banking fees.
Opting for e-banking minimizes business overhead and banking expenses.

 Reduced Errors Utilizing e-banking reduces banking errors. Automation of

payments, wires or other consistent financial activities ensures payments are made
on time and may prevent errors caused by keyboard slips or user error.
Additionally, opting for electronic banking eliminates errors due to poor
handwriting or mistaken information. In many cases, electronic files and daily
reviews of banking data can be used to double or triple check vital accounting
data, which increases the accuracy of financial statements.

 Reduced Fraud Increased scrutiny of corporate finances through audits and anti-
fraud measures requires a high level of visibility for all financial transactions.
Relying on e-banking provides an electronic footprint for all accounting
personnel, managers and business owners who modify banking activities. E-
banking offers visibility into banking activities, which makes it harder for under-
the-table or fraudulent activities to occur.

4.3 TYPES OF E-BANKING RISK

E-BANKING RISK:-

 Strategic Risk

 Operational Risk:
 Technology infrastructure
 Security
 Data integrity
 System availability
 Internal control

 Reputational Risk

 Legal Risk

 Other traditional banking Risk

 Credit Risk
 Liquidity Risk
 Market Risk
 Foreign Risk
E-banking using internet as an added delivery channel may shift bank risk profiles
to some degree and create new risk control challenges for banks. Accordingly,
supervisors need to consider the implication of a bank’s use of e-banking delivery
channels on its strategic risk, operational risk, reputational risk, legal risk, market
risk, and foreign exchange risk.

 Strategic risk and business risk:

Strategic risk is one of the most significant risk that e-banking activity presents
for banking organization. Strategic risk differs for other risk categories in that it
is more general and board in nature. Strategic decision to be given by bank’s
board of directors and executive management will have implicative for all other
risk categories.

Some of the strategic risk involve with e-banking are directly linked with timing
issues. There can be significant strategic risk associated with management decision
to be a technology pioneer, particularly if the institution becomes burdened with
system made redundant by rapid technological charges.

 Operational risk:

Because of reliance of the technology for all facets of banking operational risk is
one of the most significant risks. To limit operational risk, banking organization
may want to consider implementing an integrated enterprise-wide architecture and
technology infrastructure that can facilitate interoperability, ensure the security,
integrity and availability of data and support the management of relationship with
third party services provider.

 Technological infrastructure:

E-banking has brought the issue of technological system and application integrated
to the forefront. Many large banks now faced with the task of integrating system
for e-banking activities with their existing legacy system and with system of
multiple service providers and partners.

These banks are exposed to significant operational risk from errors in transaction
processing if the systems for e-banking are not properly integrated.

 Security:

The majority of the bankers surveyed by EBS (electronic banking group)

members indentified security risk as a primary concern relating to E-banking
external threats such as “hacking”, “sniffing”, “and denial of services” attacks
expose banks to new security risk. Open electronic delivery channels cerate
new security issues for banks with respect to confidentiality and integrity of
information, non repudiation of transaction, authentication of users and access
control.

 Data integrity:

Data integrity is an important component of system security. Banking

organization must improve interoperability with in and across enterprise to
effectively manage relationship with customer, other banks and external
services provider.

 System availability:

In additional to ensuring secure internal networks for their e-banking activities,

effectively capacity planning is critical to ensuring the ongoing availability of
e-banking product and services. Competitive pressures and increased reliance
on having services available 24 hours a day and 7 days a week (24*7) have
raised customer expectation considerably and in torn reduce the tolerance for
tolerance for error. To complete effectively and avoid potentially significant
reputation risk that could arise from system outage, banks offering e-banking
services may sliver the right mix of product and services securely , accurately
and consistently. Moreover trends in outsourcing make it necessary for bankers
to ensure that similar plans are in place at their external services providers
and are periodically tested for effectiveness.

 Internal control/audit:

The ability to correct and detect errors is critical internal control component of
any banking operation. Much of efficiency and reduction in e-banking services
stem from banks ability to implement “straight-through processing”. While the
benefit of straight-through processing are many, the reality is that e-banking
modifies how internal controls, proper segregation of duties and clear audit
trails are applied over broad access channels.

 Reputational risk:

The banks reputation can be impacted by any adverse development that

precludes the availability of their e-banking delivery channels. Bank has long
based their business on a reputation of trust. The ability to provide a trusted
network to support e-banking if critical, and bank’s reputation can be damage
by internet banking services that are properly executed or otherwise alienate
 customer and the public. Banks reputation can suffer if it fails to deliver
secure, accurate and timely e-banking services on a consistent basis. A bank’s
reputation can also be adversely impacted if it fails to respond to inquiries
posted via email, does not provide proper disclosure, or violates customer
privacy.

 Legal risk:

Legal risk arising from e-banking activates represents another ares of increased
concern. Currently supervision in every jurisdiction and examining how existing
legal and regulatory frameworks originally design to address issues affecting
the “physical” world of banking interact with the developing e-banking
delivery channels as well as examining potential ambiguities.

A bank that develop relationships via the internet with customer in other
jurisdictions may be unfamiliar with the banking and customer protection laws
and regulation specific to those countries and may consequently incur
heightened legal risk.

 Other traditional banking risk:

The e-banking delivery channels also has implication for other traditional
banking risks such as credit risk., Liquidity risk, interest rate risk and market
risk.

 Credit risk:

The credit risk of banking institution can be affected by e banking activities in a

number of ways. The use of internal delivery channel may allow banks,
especially small institution, to expand very rappidly, which could lead to
heightened asset quality and internal control risks. The use of the internal also
allows bank to expand their geographical reach out of their traditional area, which
increase the challenge of understanding local market dynamics and risks, verifying
collateral and perfecting security lions with out-of-area borrowers. In addition, the
internal also makes it more difficult to authenticate the identity and
creditworthiness of potential customers, which are essential element to sound credit
decision.

 b) Liquidity risk:

The speed with which the information and mis informatin moves over the internet
can have implication for liquidity risk profile of banks. Adverse information about
a bank, whether it is true or not, can be easily disseminated over the internal
through bulletin boards and news groups. This couuld cause depositors to
withdraw their funds in mass at any time of the day, any day of the week.
Accordingy, increased monitoring of liquidity and changes in deposits and loan
may be warranted depending on the volume of activity created through e
banking.

 Market risk:

The impact of recent growth in securities issuance and tradind over the internet
on banks market risk is complex. From a market standpoint, the increase volume
of securities, which are traded over the internet volatility, but on the other hand,
it can lead to increased liquidity. From an individual bank's standpoint, banks may
be exposed to increase market risk if they create or expand deposits brokering,
loan sales, or securitization programmer as a result of internet banking activities.
As with liquidity risk, the effect the increased E banking activities on market
volatility need to be monitered by banks and supervisors.

 Foreign exchange risk:

A bank may be exposed risk if it is accepts deposits from foreign customers or

create accounts denominated in currencies other than their local currency. Since the
internet allow banks the opportunity to expand their geographic range, even
internationally, some bank may take a greater foreign exchange risk through e
banking activities then the have through their traditional delivery channels.
Supervision should ensure that a bank initiating cross-border e banking activities
through the internet has the appropriate risk management systems and expertise to
manage these risks properly.

5.1 CHALLENGES IN E-BANKING

 Security Risk: The problem related to the security has become one of the major
concerns for banks. A large group of customers refuses to opt for e-banking
facilities due to uncertainty and security concerns. According to the IAMAI
Report (2006), 43% of internet users are not using internet banking in India
because of security concerns. So it‟s a big challenge for marketers and makes
consumers satisfied regarding their security concerns, which may further increase
the online banking use.
 The Trust Factor: Trust is the biggest hurdle to online banking for most of the
customers. Conventional banking is preferred by the customers because of lack of
trust on the online security. They have a perception that online transaction is risky
due to which frauds can take place. While using e-banking facilities lot of
questions arises in the mind of customers such as: Did transaction go through?
 Did I push the transfer button once or twice? Trust is among the significant
factors which influence the customers‟ willingness to engage in a transaction with
web merchants.
 Customer Awareness: Awareness among consumers about the e-banking
facilities and procedures is still at lower side in Indian scenario. Banks are not
able to disseminate proper information about the use, benefits and facility of
internet banking. Less awareness of new technologies and their benefits is among
one of the most ranked barrier in the development of e-banking.
 Privacy risk: The risk of disclosing private information & fear of identity theft is
one of the major factors that inhibit the consumers while opting for internet
banking services. Most of the consumers believe that using online banking
services make them vulnerable to identity theft. According to the study
consumers‟ worry about their privacy and feel that bank may invade their privacy
by utilizing their information for marketing and other secondary purposes without
consent of consumers.
 Strengthening the public support: In developing countries, in the past, most e-
finance initiatives have been the result of joint efforts between the private and
public sectors. If the public sector does not have the necessary resources to
implement the projects it is important that joint efforts between public and private
 sectors along with the multilateral agencies like the World Bank, be developed to
enable public support for e-finance related initiatives.
 Availability of Personnel services: In present times, banks are to provide several
services like social banking with financial possibilities, selective up gradation,
computerization and innovative mechanization, better customer services, effective
managerial culture, internal supervision and control, adequate profitability, strong
organization culture etc. Therefore, banks must be able to provide complete
personnel service to the customers who come with expectations.
 Implementation of global technology: There is a need to have an adequate level
of infrastructure and human capacity building before the developing countries can
adopt global technology for their local requirements. In developing countries,
many consumers either do not trust or do not access to the necessary
infrastructure to be able to process e-payments.
 Non- Performing Assets (NPA): Nonperforming assets are another challenge to
the banking sector. Vehicle loans and unsecured loans increases N.P.A. which
terms 50% of banks retail portfolio was also hit due to upward movement in
interest rates, restrictions on collection practices and soaring real estate prices. So
that every bank have to take care about regular repayment of loans.
 Competition: The nationalized banks and commercial banks have the
competition from foreign and new private sector banks. Competition in banking
sector brings various challenges before the banks such as product positioning,
innovative ideas and channels, new market trends, cross selling ad at managerial
and organizational part this system needs to be manage, assets and contain risk.
Banks are restricting their administrative folio by converting manpower into
 machine power i.e. banks are decreasing manual powers and getting maximum
work done through machine power. Skilled and specialized man power is to be
utilized and result oriented targeted staff will be appointed.
 Handling Technology: Developing or acquiring the right technology, deploying
it optimally and then leveraging it to the maximum extent is essential to achieve
and maintain high service and efficiency standards while remaining cost effective
and delivering sustainable return to shareholders. Early adopters of technology
acquire significant competitive advances Managing technology is therefore, a key
challenge for the Indian banking sector.

Challenges and indicators of e-Banking in India are as follows:

1. Infrastructural Barriers
2. Knowledge Barriers
3. Legal And Security Issues
4. Economic Factors
5. Social And Cultural Barriers
6. Management And Banking Issues
CHALLENGES INDICATOR

Infrastructural Weak Telecommunication(fiber optic, satellite networks, and

communication bandwidth)

Software available in country is not suitable

Hardware available is not sufficient in the country (PC, ATM,

POS, etc.)

Flaws in design, implementation and monitoring of Bank’s

system
Knowledge Limited trained Human Resources

Improper use of Technology

Lack of Technological knowledge

Flaws in design, implementation and monitoring of Bank’s

information system

Legal and Security Lack and limitation of regulation and law

Increased potential of fraud

Denial of e-documents in courts

Lacking or weak security measures

Lack of strong trust environment

Economic Need for heavy investment regarding new infrastructures

Low level Of Internet penetration due to high costs

Low level of average income per person and therefore, low

ability to achieve communication equipment in India

Outsourcing

Socio-cultural Negative perception of e-banking services

Less awareness and familiarity regarding new technologies and

their benefits

Illiteracy

Charging fees is a reason for the loss of customers

Worry and perception of e-banking as a threat to the bank’s

 employees

Some clients tend to a bank in order to communicate with

bank’s clerk

People want to have a bank receipt

Tendency of people to hold cash component in India

English Language Barrier

Management and Banking E-banking poses a number of managerial risks for Bank
management

Resistance of employees and managers regarding new

technologies

Lack of adequate coordination, interaction and cooperation

between banks and other decision making centers

Lack of long term strategic management

Change and shift of managers and decision makers is an

important obstacle

5.2 CHALLENGES ADOPTION IN E-BANKING IN INDIA

E-banking is facing following challenges in Indian banking industry:

 Not safe and secure: The most serious threat faced by e- banking is that it is not
safe and secures all the time. There may be loss of data due to technical defaults.
 High start up cost: E-banking requires high initial start up cost. It includes
internet installation cost, cost of advanced hardware, software, modem,
computers, cost of maintenance of all computer equipments, and cost of
reorganizational structure.
 Lack of Professional: There is shortage of web developers’ content providers
and knowledgeable professionals to perform banking activities through internet.
 Restricted Business: All banking transactions cannot be performed
electronically. Many banking activities require personal visit of customers.
 Improper infrastructure: There is lack of proper infrastructure for the
installation of e-delivery channels.
  Not techno savvy: A majority of customers are not computer savvy.
 Unavailability of internet services: availability of internet band width and
connectivity is not uniform.
 Competition: The nationalized banks and commercial banks have the
competition from foreign and new private sector banks. Competition in banking
sector brings various challenges before the banks such as product positioning,
innovative ideas and channels, new market trends, cross selling ad at managerial
and organizational part this system needs to be manage, assets and contain risk.
Banks are restricting their administrative folio by converting manpower into
machine power i.e. banks are decreasing manual powers and getting maximum
work done through machine power. Skilled and specialized man power is to be
utilized and result oriented targeted staff will be appointed.

5.3 FACTORS FOR ADOPTION OF E-BANKING IN INDIA

Factors which led the India to adopt the E-banking according to their priorities are as
follows:
 Better access to services
 Better Services
 Higher Privacy
 Better Prices
 Bank’s Marketing Activities
 Personal Recommendations from friends and colleagues

5.4 OPPORTUNITIES IN E-BANKING

 Untapped Rural Markets: Contributing to 70% of the total population in India is

a largely untapped market for banking sector. In all urban areas banking services
entered but only few big villages have the banks entered. So that the banks must
reach in remaining all villages because majority of Indian still living in rural
areas.

 Multiple Channels: Banks can offer so many channels to access their banking
and other services such as ATM, Local branches, Telephone/mobile banking,
video banking etc. to increase the banking business.

 Competitive Advantage: The benefit of adopting e-banking provides a

competitive advantage to the banks over other players. The implementation of e-
banking is beneficial for bank in many ways as it reduces cost
 to banks, improves customer relation , increases the geographical reach of the
bank , etc. The benefits of e- banking have become opportunities for the banks to
manage their banking business in a better way.

 Increasing Internet Users & Computer Literacy: To use internet banking it is

very important or initial requirement that people should have knowledge about
internet technology so that they can easily adopt the internet banking services.
The fast increasing internet users in India can be a very big opportunity and
banking industry should encash this opportunity to attract more internet users to
adopt internet banking services. Table shows evidence of increasing number of
internet users in India.

 Worthy Customer Service: Worthy customer services are the best brand
ambassador for any bank for growing its business. Every engagement with
customer is an opportunity to develop a customer faith in the bank. While
increasing competition customer services has become the backbone for judging
the performance of banks.
 Internet Banking: It is clear that online finance will pickup and there will be
increasing convergence in terms of product offerings banking services, share
trading, insurance, loans, based on the data warehousing and data mining
technologies. Anytime anywhere banking will become common and will have to
upscale, such up scaling could include banks launching separate internet banking
services apart from traditional banking services.
 Retail Lending: Recently banks have adopted customer segmentation which has
helped in customizing their product folios well. Thus retail lending has become a
focus area particularly in respect of financing of consumer durables, housing,
 automobiles etc., Retail lending has also helped in risks dispersal and in
enhancing the earnings of banks with better recovery rates

6.1 CASE STUDY

How Kotak Mahindra is changing the conventional banking through #hashtags.

About the Company:

Kotak Mahindra Bank is a private sector bank in India. It offers a wide range of banking
and financial services for retail as well as corporate customers through a variety of
channels. It was established in the year 1985 as Kotak Mahindra Finance Ltd. (KMFL)
was primarily into bill discounting business. In 2003, KMFL got the banking licence
from Reserve Bank of India (RBI) which made KMFL to become the first non-banking
finance company in India to be converted into a bank.

Business Objectives:

Kotak Mahindra Bank had the following objectives to achieve through digital
marketing:

 They wanted to cater to the current young and dynamic generation of India.
 They did not wanted people to specially log on to their bank website or
application for day to day banking services.
 They wanted to give an easy solution to its customers for banking which will also
help them in saving time and cost through digitized channel.
 They wanted to be innovative and give a more convenient banking option to its
customers.
 Though the above-pointed objectives are somewhat interlinked the ultimate
objective was to make highest use of the digital media platform and integrate its
banking services in order to achieve more customer base and to save costs.

Strategy adopted by Kotak Mahindra:

Kotak Mahindra realized the value of going digital in the banking sector and they started
working on re-defining the conventional banking rules and took help of the existing
capabilities of digital marketing platform, the technology which is available, the customer
insights that they had and the regulatory and the risk framework which needs to be
followed. They married all these together and came up with a lot of innovative solutions
for which they have won so many innovation awards and have also been recognized at
the global level.

There are a lot of new initiatives taken by Kotak Mahindra Bank in order to achieve its
objectives. Its’ Executive Vice President & Head – Digital Initiatives, Mr. Deepak
Sharma, explains in an interview with ETCIO.com that how digital world has really
transformed the conventional banking in today’s world.

They have started with Jifi and Jifi saver which is a new age digital account that offers
anytime access and on-the-go transactions using #hashtags. They have a pre -defined list
of hashtags which can be used to manage some of the banking services like recharging
pre-paid mobile or DTH services, to know the account balance, last 3 transactions, access
statement, cheque status enquiry, to locate nearest ATM/Branch, PIN regeneration, credit
card information etc. There are altogether 21 different services which are being offered
by Kotak Mahindra through #hashtag banking.

The only difference between the Jifi and Jifi saver is that Jifi is more of a non interest
paying current account which does not require to maintain any balance and Jifi saver is a
savings account which offers a 6% or 4% interest p.a. with a minimum balance
requirement of INR 1,00,000 and INR 10,000 respectively.

Results achieved by Kotak Mahindra:

They have been able to cater to an emerging segment of customers who wants to do
everything digitally. They have also realized that this emerging segment of customers are
unconcerned with the location of the branch or ATM, and they know now that a large
part of their banking can be done online through digital media platform.

Their #hashtag banking has proved that banking can be fun and they have also won
accolades from various global agencies. There are 65,611 people already connected to Jifi
and in another interview with Lighthouseinsights, Mr. Deepak Sharma claimed that
“About 25 percent of our customers are using Twitter to bank with us, while about 50-60
percent bank using Facebook”.

They have also saved on a lot of infrastructure cost and manpower cost by reaching out to
so many customers digitally. Though digital platform does require some investment but
the overall investment is really less than the otherwise cost of managing the infrastructure
and manpower for the bank. Kotak has relatively smaller network of branches and
ATM’s and through Digital Platform they have somehow compensated that through the
digital media platform. They have also saved a lot of cost as there are certain transactions
which earlier used to happen through call centres, ATM’s or Branches are being migrated
to digital platforms.

Mr. Deepak Sharma also adds in his interview to Lighthouseinsights, that about 10
percent of Kotak’s accounts are now opened online which increased from 6-7 percent
from last year. This is a clear indication that people are more comfortable in doing online
banking using this digital platform of theirs.

Learning:

Kotak Mahindra has been really innovating in changing the rules of the conventional
banking. People in the past used to think that banking services are a pain and to get
anything done one has to actually make the effort to go to a branch and do the formalities.
With the help of digital media platform Kotak is making Banking fun for its customers by
offering various banking or financial services through social media platforms like Twitter
and Facebook where all the majority of the action is taking place.

This also ensures that they get a direct feedback from their customers from the social
media platform which is also the biggest digital word of mouth platform and hence if
everything is done in a correct manner they get a real-time appreciation of their services.
This also helps them in constantly innovating their product to meet the requirements of
their customers.

There is a long way to go for digital platform, with constant evolution of more and more
functionalities the banking sector will also introduce more and more services which can
be catered through these platforms.

7.1 RECOMMENDATION:
The following are certain recommendations to popularise e- banking services/ products:

 Create awareness about e-banking: Banks should create awareness among

people about e-banking products and services. Customers should be made literate
about the use of e-banking products and services.

 Special arrangements by banks: Special arrangements should be made by banks

to ensure full security of customer funds. Technical defaults should be avoided by
employing well trained and expert technicians in field of computers, so that loss
of data can be avoided. Banks should use latest technologies with timely updates
to secure customers valuable money from the hands of hackers.

 Specialised training: Employees of banks should be given special technical

training for the use of e-banking, so that they can further encourage customers to
use the same.
  Organising seminars and workshops: Seminars and workshops should be
organised on the healthy usage of e- banking especially for those who are ATM or
computer illiterate.
 Cater to need of customers: E-banking services should be customised on basis
of age, gender, occupation etc so that needs and requirements of people are met
accordingly.

 Proper infrastructure: Government should make huge investments for building

the infrastructure.

 Security arrangements by customers: Customers should never share personal

information like PIN numbers, passwords etc with anyone, including employees
of the bank. Documents that contain confidential information should be
safeguarded. PIN or password mailers should not be stored, the PIN and/or
passwords should be changed immediately and memorised before destroying the
mail. Take simple precautions like changing the ATM PIN and online login and
transaction passwords on a regular basis. Ensure that the logged in session is
properly signed out.

7.2 CONCLUSION

With the time, the concept of internet banking has got attention in the Indian context.
Most of the banks have already implemented the e-banking facilities, as these facilities
are beneficial to both i.e. banks as well as .consumers. The banks are facing many
challenges and many opportunities are available with the banks. Many financial
innovations like ATMs, credit cards, RTGS, debit cards, mobile banking etc. have
completely changed the face of Indian banking. Thus, there is a paradigm shift from the
seller's market to buyer's market in the industry and finally it affected at the bankers level
to change their approach from "conventional banking to convenience banking" and "mass
banking to class banking". The shift has also increased the degree of accessibility of a
common man to bank for his variety of needs and requirements. In years to come, e-
banking will not only be acceptable mode of banking but will be preferred mode of
banking.

Finally, the study concludes that E-banking is need of the hour. Though there are lots of
hurdles in the way of smooth implementation of E-banking in India but at the same time
E-banking has bright future in India. It is golden path for banking sector in India to
maximize its profits and also the customer base. That’s why E-banking can never be
neglected. Moreover the recommendations provided in this research are useful for the
banks and also for the customers for better service and satisfaction respectively. Thus
only those banks will survive in the future which will manage the changes as per
technological developments and customer requirements because future of the banks
ultimately stays in the hands of customers. They should be satisfied at any cost. Banks
are making sincere efforts to popularise the e-banking services and products. Younger
generation is beginning to see the convenience and benefits of ebanking. In years to
come, e-banking will not only be acceptable mode of banking but will be preferred mode
of banking

In India, E-banking is in a nascent stage. No doubt Indian banks are making sincere
efforts for the adoption of advanced technology and installation of e-delivery channels
but still masses are wary of the concept. E-banks should create awareness among people
about E-banking products and services. Customers should be made literate about the use
of e-banking products and services. Indicators of the challenges of E-banking should be
taken into account to reap the maximum benefits of E-banking in India.