Summer Project Report On

TO STUDY CUSTOMER UTILIZATION OF BARODACONNECT & STRATEGIES TO ENHANCE UTILITY VALUE AMONGST THE CUSTOMERS

UNDER THE GUIDANCE OF Mr. R K Sinha DGM, E-Business

Submitted By Bhavik Kothari PGDBM Marketing (Batch 2008-10) N L DALMIA INSTITUTE OF MANAGEMENT STUDIES & RESEARCH

ACKNOWLEDGEMENT This report with regards to BarodaConnect at Bank of Baroda is a result of valuable guidance provided by the Bank and it is due to them that I had an opportunity to get hands-on experience on the working of the Internet Banking module of the Bank. I am very much grateful to Mr. Nandan Shrivastav, General Manager, Retail Banking for providing me this opportunity to get associated with the Retail Banking department of the bank. I am also thankful to Mr. R K Sinha, Deputy General Manager, E-Business and my project guide for his efforts and guidance throughout the project; for providing help and support at every stage of this project. The study is a product of important inputs from a wide section of people. Without their contribution, it was practically impossible to understand and assess the true knowledge of the module. I would like to gratefully acknowledge the contributions of various branches and customers who took great effort to share and demonstrate their views and experiences. The entire BarodaConnect Operations Team (BCOT), especially Mr. Rane, Mr. Kulkarni Mrs. Shivkar and Mrs. Kaur (Tanu mam) at BCC for providing invaluable process knowledge during the entire period of study. Also not to forget the valuable data received from the data centre team which helped in the shaping up of the project. I am also grateful to other Bank of Baroda staff members whose name may not appear on the project for not being directly related to the project but without their cooperation it would have been difficult to accomplish the project. Finally, I am indebted to Prof. Pyare Lal Arya, Director at N L Dalmia Institute of Management Studies and Research for giving an opportunity to get associated with such a marvelous Public Sector Undertaking for the summer internship.

Bhavik Kothari

Executive Summary

The purpose of this research project is to enable an appreciation for the factors contributing to the usage of internet banking system particularly BarodaConnect hich help us understand the utilization value of the system.

The objective of this research project is to study the perceived barriers for low number of users of Bank of Barodas Internet Banking system and various other factors that influence the usage of the system.

The Descriptive and the Exploratory Research Design Method have been used so as to optimize the research objectives and to get the perspective of the target sample population to supplement the research study objectives respectively.

The method of data collection has been through surveys involving questionnaires and interviews for the sample target population. The contact method involves both direct & indirect methods of communication.

This research project will be presented to the organization so as to enable an outlook on the utilization value of their product along with the strategies to enhance the utility value of the same.

TABLE OF CONTENTS Sr. No Topic Acknowledgement Executive Summary Introduction About Bank of Baroda Internet Banking Systems An Overview About Baroda Connect Introduction of project Problem Statement Research Objective Brief outline of report Literature review Internet Banking Industry Indian Banks on the Web Emerging Challenges & Concerns Future of Internet Banking & Trends Research Methodology Research Type Data collection approach Sampling Design Data organization Key findings Overall Demographics Category Analysis Category-wise analysis (Bank of Baroda customer) Category A Category B Category C Category D Non Bank of Baroda Customer analysis Strategies Limitations & Scope of Study Conclusion References Annexure 1 Annexure 2 Annexure 3 Annexure 4 Annexure 5 Page

1 1.1 1.2 1.2.1 1.2.2 1.3 1.4 1.5 1.6 2 2.1 2.2 2.3 2.4 3 3.1 3.2 3.3 3.4 4 4.1 4.2 4.3 4.3.1 4.3.2 4.3.3 4.3.4 4.4 5 6 7

4 5 10 12 18 19 19 20 21 22 28 41 47 50 51 52 53 54 55 56 59 63 63 66 67 70 73 79 104 105

INTRODUCTION

1.1 ABOUT BANK OF BARODA A Saga of Vision & Enterprise It has been a long and eventful journey of almost a century across 25 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai, is a saga of vision, enterprise, financial prudence and corporate governance.

It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital, princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story that needs to be shared with all those millions of people - customers, stakeholders, employees & the public at large - who in ample measure, have contributed to the making of an institution. Mission statement To be a top ranking National Bank of International Standards committed to augmenting stake holders' value through concern, care and competence.

The Heritage Values It all started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. On 20th July 1908, under the Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the legend that has now translated into a strong, trustworthy financial body, THE BANK OF BARODA. It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of helping others grow, and growing itself in turn. The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of this nature will prove a beneficial agency for lending, transmission, and deposit
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of money and will be a powerful factor in the development of art, industries and commerce of the State and adjoining territories." The Ethics Between 1913 and 1917, as many as 87 banks failed in India. Bank of Baroda survived the crisis, mainly due to its honest and prudent leadership. This financial integrity, business prudence, caution and an abiding care and concern for the hard earned savings of hard working people, were to become the central philosophy around which business decisions would be effected. This cardinal philosophy was over the 94 years of its existence, to become its biggest asset. It ensured that the Bank survived the Great War years. It ensured survival during the Great Depression. Even while big names were dragged into the Stock Market scam and the Capital Market scam, the Bank of Baroda continued its triumphant march along the best ethical practices.

Initiatives The mid-eighties marked the beginning of the shift to a buyers` market. The Bank orchestrated its business strategies around the centrality of the customer. It diversified into areas of merchant banking, housing finance, credit cards and mutual funds. A string of segment specific branches entrenched operations in the profitable markets. Overseas operations were revamped and structural changes intensified in the territories to cater to second generation NRIs. Slowly but surely, the move to become a one stop financial supermarket had been set in motion. Service delivery standards were stipulated. Technology was adopted to add punch. Employees across the board were inculcated with the marketing concept. Aggressive marketing became the new business philosophy.

Bank of Baroda has always had an immense faith in the infinite potential of its people. This has been historically demonstrated in its recruitment practices, developmental initiatives, placement processes and promotion policies. Strategic HR interventions like, according cross border and cross cultural work exposure to its managers, hiring diverse functional specialists to support line functionaries and complementing the technical competencies of its people by imparting conceptual, managerial and leadership skills, gave the Bank competitive advantage. The elaborate man management policies also made the Bank a breeding ground for business leaders. The Bank provided around a dozen CEOs to the industry- men who went on to build other great institutions. People initiatives were blended with IR initiatives to create an effectively harmonious workplace, where everyone prospered.

New norms for capital adequacy required new capital management strategies. In 1995 the Bank raised Rs 300 crores through a Bond issue. In 1996 the Bank tapped the capital market with an IPO of Rs 850 crores, Despite adverse market conditions prevailing then, the issue was over subscribed, reflecting the positive public perception of the Bank's fundamental financial strength.

Bank of Baroda pioneered the shift from manual operating systems to a computerized work environment. Starting with ledgers, to ledger posting machines, through ALPMs, the Bank graduated to the use of Unix based systems to Mainframes, to client server based Total Branch Mechanization Systems. Today, the Bank has 1918 computerized branches, covering 70% of its network and 91.64% of its business. Alive to the growing complexities of an intensely competitive marketplace and the mounting expectations of customers fuelled by this competition, the Bank reworked its distribution strategy. It ventured beyond the brick and mortar delivery channel into ATMs and the OmniBOB range of anytime, anywhere electronic channels of PC banking, telephone banking. The

e-banking products used state of the art technologies like digital certificates, smart card authentication and secure networking. The new IT strategy, in the process of implementation will see the deployment of Core Banking Systems, Multi Service Transaction Switch, Payment Gateways - all geared to deliver convenience banking.

In its relentless striving for quality perfection, the Bank secured the ISO 9001:2000 certification for 15 branches. By end of the current financial, the Bank is targeting 54 more branches for this quality certification.

Revolutionary and discontinuous changes in the operating environment are a stark reminder that business success is 'impermanent'. The emergence of IT as a major driver for change, has accentuated the need to initiate a major transformation program. The conversion to an IT savvy, market driven bank will be a prerequisite to survival and growth. A major and strategic step in hi-tech, was the establishment of the Integrated Treasury branch, as a forerunner to full-fledged global treasury operations. Towards creating a future Bank of Baroda, the Bank has adopted a revolutionary new business strategy that will be enabled by a revolutionary new IT strategy. Actioning this strategy will position Bank of Baroda as India's uncontested premier bank. At Bank of Baroda, change is a journey. It has a beginning. There will be no end. It will be a long and difficult march. And the Bank will emerge stronger, more resilient and positioned to become India's first bank of truly global standards. The relocation to the imposing Baroda Corporate Centre, is a true reflection of the Bank's resolve to move ahead of the times. It will not be out of place now, as it stands on the threshold of a digital era, to echo the same sentiments that guided the Bank in its platinum jubilee year - 'a promising future is the sequel to a glorious past'.
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1.2 Internet Banking

1.2.1 An Overview Internet banking refers to the use of the Internet as a remote delivery channel for banking services. Such services include traditional ones, such as opening a deposit account or transferring funds among different accounts, and new banking services, such as electronic bill presentment and payment (allowing customers to receive and pay bills on a banks Web site). Banks offer Internet banking in two main ways. An existing bank with physical offices can establish a Web site and offer Internet banking to its customers as an 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 funds via ATMs or other remote delivery channels owned by other institutions. A growing phenomenon in financial services is the use of the Internet as a channel for financial services. The Internet bank usage might however not be easy for the consumers. Consumers use of Internet banking requires acceptance of the technology, which can be complicated because it involves the changing of behavioral patterns. Technology, on the one hand, can simplify consumers understanding of exchange, but on the other hand, it can make consumers understanding more difficult. Consumers perceive Internet technology as leading to control and chaos, freedom and enslavement, new and outmoded practice, increase and decrease in the feeling of competence, increase and decrease in efficiency, fulfillment and creation of needs, promotion and hindrance of social interaction, and engagement and disengagement. These ambiguities make Internet technology difficult for consumers to understand. To use Internet financial services, consumers not only need to understand the technology, they also

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need to understand financial services. The complex nature of financial services often renders the task of information search easier than information evaluation. Cash management is a key business-oriented service and the Internet would seem to offer significant opportunities for banks to create value by improving the efficiency of cash management systems. Thus, competing in this line of business may be an important determinant of how well small banks compete with larger institutions for business customers.

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1.2.2 About Baroda Connect "Baroda Connect" is an internet banking facility introduced as an alternative delivery channel for rendering effective customer service on 24 X 7 basis. It offers unique customized services to both Retail & Corporate customers. All customers can register under Baroda Connect for View and / or Transaction facility Under VIEW facility customer can View Account summary of all operative, deposit and loan accounts View all multiple Account information online with a single userid Get Account statements

Under Transaction facility customer can (in addition to the above VIEW facilities) Transfer funds immediately or schedule for a future date to self linked and third party Stop Payment of Cheques Pay through Online Tax - Direct and Indirect taxes online such as Excise Duty, Service Tax, Customs Duty, Income Tax etc. Pay through Baroda Easy Pay - utility bills like electricity, mobile etc , Donations, Subscription, Travel plan booking online Book Rail Ticket - IRCTC Additionally a Corporate user can

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Set up multiple workflow of initiators and approvers for transactions and requests

View all trade finance related facilities availed e.g. Export / Import LC, Inland/ Export Bills, Forward Contracts Bank Guarantees, Packing Credit account etc

Use upload facility for single debit-multiple credit, multiple debitmultiple credit and single credit-multiple debit.

Baroda Connect facility is FREE of charge

Baroda Connect is a fully secured 128 bit SSL site duly certified by Verisign

Limit for Fund transfers under Baroda Connect Retail Services Self and Third Party Fund Transfer * Per transaction Daily 25,000 50,000 5,00,000 10,00,000 50000 1,00,000 Self Third Party Corporate

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Weekly Monthly Yearly No. of transaction per day Approvals for Transactions

2,00,000 5,00,000 30,00,000 5 transactions

40,00,000 1,00,00,000 6,00,00,000 No limits

4,00,000 10,00,000 60,00,000

Individual can do

Involvement of multiple users

* For corporate customers there can be different limits for different corporates after approval from the respective Zonal / Regional authority of the Bank

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Application Process

Download appropriate internet banking form from the Home Page - Click the Link under "Download Application Form" to download form for RETAIL Users / CORPORATE Users

Retail.- All Individual account holders should use the RETAIL form Corporate - All non individuals i.e. companies, partnership firms, HUFs, Sole proprietors should use CORPORATE form

The form should be duly filled in, signed by all signatories i.e. all joint account holders in case of a joint account, all partners in case of a partnership firm etc.

The form should be submitted through the base branch where the customer is maintaining the account for processing.

Customer will get the User Id by post at the communication address

Passwords should be collected from BOB Branch where the application was submitted against acknowledgement

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First Time Logging Process Open your Internet explorer browser and type www.bankofbaroda.com Click on Net Banking and select Country Select RETAIL USER or CORPORATE USER

Your login page will be opened. Type your User Id (received at your communication address) Password (received through the branch) Click on Go button only once (Please note that the password is case sensitive). The terms and conditions page will be opened. After reading click on Agree button. A screen will be displayed for changing the password. Please change both the sign-on and transaction password in case you have received both. Note that the password must contain a minimum of 8 characters (maximum 16) comprising of an alphabet, a number and a special character. The password should not be the same as the userid.

Additionally, the following functionalities under Baroda Connect are also available Click at Bank's website www.bankofbaroda.com at the appropriate link

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Payment of Indirect Taxes ( Service Tax, Excise duty and Customs duty) Payment of Direct Taxes( Corporation Tax, Income Tax, TDS, Securities tax etc.)

Payment of Utility Bills

Booking of Rail Tickets

The demonstration of the banks system has been attached in the Annexure 5 for references.

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1.3 Introduction of the Project

Internet commerce is a revolution that is driven by the worlds fastest growing sector the Internet. However, like in any emerging technology, there exist barriers to the adoption of Internet banking services.

This study examines the customer utilization of Bank of Barodas Internet banking service BarodaConnect by the account holders of different branches in Greater Mumbai Region. It also further analyzes the various areas of concern which the bank needs to work on so as to enhance the utility value of BarodaConnect.

The study is not only restricted to the bank but a comparative analysis ,of eight premier banks which includes three private sector banks and five public sector banks, is done and their customer responses for internet banking are noted.

The results and the findings are interesting, followed by few strategies in terms of deliverables so as to improve the utilization value of BarodaConnect amongst its customers

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1.4 PROBLEM STATEMENT: Low number of users of Bank of Barodas Internet Banking system Baroda Connect.

1.5 RESEARCH OBJECTIVE: 1. To study the perceived barriers to the usage of Internet Banking system. 2. To study various other factors contributing to the usage of Bank of Barodas Internet Banking system-BarodaConnect

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1.6 Brief Outline of the Report For the purpose of easy understanding and analysis of our report we have divided the report into a number of sections for the convenience of the user. The Initial section of the report consists of background of our subject of concern and deals with the basic fundamental knowledge about the topic and the company for which the research is conducted along with its history, products and services and its Internet Banking system. Also covered in this section is the problem definition and the objective of research. The section thereafter covers the necessary literature to be reviewed so as to obtain an overall view of the project with regards to the previous research conducted and the data readily available for our references. The preceding section discusses on the methodology adopted for the research which includes the data instruments used, the research type and the sampling type alongwith the data organization technique employed. Based on the research methodology adopted the next section covers the most important aspect of the report the Findings from the survey done and an in-depth category-wise analysis with regards to Bank of Baroda as well as Non Bank of Baroda Customers and analyzes their responses. The final section of the report consists of various strategies with their benefits and cost analysis so as to enhance the utility value of the system amongst its customers. The report is finally summarized with its key findings and strategies which need to be further thought about and worked on.

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LITERATURE REVIEW

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2.1 INTERNET BANKING INDUSTRY AN OVERVIEW The Internet banking is changing the banking industry and is having the major effects on banking relationships. Even the Morgan Stanley Dean Witter Internet research emphasized that Web is more important for retail financial services than for many other industries. Internet banking involves use of Internet for delivery of banking products & services. It falls into four main categories, from Level 1 - minimum functionality sites that offer only access to deposit account data - to Level 4 sites - highly sophisticated offerings enabling integrated sales of additional products and access to other financial services- such as investment and insurance. In other words a successful Internet banking solution offers Exceptional rates on Savings, CDs, and IRAs Checking with no monthly fee, free bill payment and rebates on ATM surcharges Credit cards with low rates Easy online applications for all accounts, including personal loans and mortgages 24 hour account access Quality customer service with personal attention DRIVERS OF CHANGE Advantages previously held by large financial institutions have shrunk considerably. The Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. Consumers are embracing the many benefits of Internet banking. Access to one's accounts at anytime and from any location via the World Wide Web is a convenience unknown a short time ago. Thus, a bank's Internet presence transforms
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from 'brouchreware' status to 'Internet 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 Internet banking includes, in order of primacy are: Improve customer access Facilitate the offering of more services Increase customer loyalty Attract new customers Provide services offered by competitors Reduce customer attrition INTERNET BANKING AND THE NEED FOR KNOWLEDGE The financial sector is an example of where the relationship between buyer and seller is complicated because the services are heterogeneous (Eriksson & Mattson, 2002) and contain an extensive level of uncertainty (Eriksson & Sharma, 2003). Financial services, such as funds, placements, accounts, and mortgages, are often perceived as difficult for consumers to understand, thus complicating the consumers decision-making process and attaching a high perceived risk to it (Harrison, 2002). If consumers have extensive knowledge of financial services, they are more likely to use Internet-based financial services than consumers with the same level of knowledge of the technology but with less knowledge of financial services. The knowledge of a service influences the use of a technology; consumers who do not have knowledge of a certain service may be uncomfortable purchasing the service through the Internet. Consumers tend to prefer purchasing standardized products over the Internet, whereas complex services are more often bought in face-to-face interaction (Bobbit & Dabholkar, 2001). Products that

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are more often bought on the Internet, include the following: software, books, and music (Bobbitt & Dabholkar, 2001). These products involve little risk in terms of defects, fragility, style, fabric, and color differences; they are also products that consumers have higher levels of experience purchasing (Bobbitt & Dabholkar, 2001). If consumers lack knowledge about financial services, they may not have the capacity to make favorable decisions based on their presumptions. The lack of financial knowledge may affect an individuals or familys capacity to make a long-term placement, which results in a position that is sensitive to descents in their economy. Research has shown that acquirement of additional information results in improved acting in financial matters (Braunstein & Welch, 2002). According to Mitchel (2002), a lack of financial knowledge may result in two possible scenarios. Individuals who do not understand a product or a service have a tendency to hesitate when they are buying. Consumers who intend to buy despite their lack of knowledge become vulnerable to salespeople who may try to sell them a product or a service that is inappropriate or that they do not need. Neither of these scenarios is good for the supplier of financial services. The first case results in an absent sale, and the second case may result in unsatisfied consumers and increased governance regulation. In the same way that the level of knowledge of financial services may influence the consumers use of financial services, the level of knowledge of technology may influence the consumers use of financial services in a technology-intensive context. If consumers learn about financial services, but not how to purchase them, the level of Internet banking usage will not increase. It is therefore important that consumers learn about financial services as well as Internet banking in order to become a regular Internet banking user (Mittal & Sawhney, 2001).

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Seller support However, even consumers who are knowledgeable about the services and the technology may experience occasions when they cannot overcome obstacles on their own and, therefore, need assistance from someone who is more knowledgeable in that particular problem area. In those cases when consumers need assistance, external sources of information are likely to be important in bridging the gaps in the consumers knowledge. External sources, which provide consumers with information about using the SST, are most often a third party or the seller support. Consumers can transform the information gained from the third party or the seller support into their own personal knowledge. The new knowledge can then serve to bridge the gaps in the consumers knowledge, which will facilitate future usage of the SST. Many firms offering their services through SSTs, provide consumers with assistance around the clock, whereas others provide this support for approximately 14 to 18 hours a day. Service firms refer to this support by different names (e.g., support, customer support, customer centers, customer service), but I have chosen to use the term seller support as a general term to include all of them. Cleveland and Minnucci (2000) define the seller support as a coordinated system of people, processes, technologies and strategies that effectively integrates organizational resources and multiple channels of communication to enable customer interactions that create value for the customer and organization. The seller support enables consumers to access the services they want, when they want, and how they want. Third party influence Several studies have found that individuals prefer to turn to friends and family members for assistance rather than to strangers or formal agencies (Amato, 1990; Burke & Weir, 1975; Croog et al., 1972). The social network which I in this article refer to as third party, consists of individuals who are connected in some form of contact and have some form of social bonds (Axelrod, 1956). The social network often consists of family members, friends, neighbors, and colleagues (Axelrod, 1956; Bell & Boat, 1957), but the
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most frequent social contact is with our families (Axelrod, 1956). A social network is a specific set of linkages among a defined set of persons, with the additional property that the characteristics of these linkages as a whole may be used to interpret the social behavior of the persons involved (Mitchell, 1969). A social network can be developed from entities around which individuals organize their social relationships; for example, it can be developed in a social, psychological, legal, or physical entity around which joint activities are organized (e.g., workplaces, voluntary organizations, hangouts, families, etc.) (Feld, 1981). The social network is sets of interpersonal ties that connect people with various knowledge of the SST to one another through relations of for example family and friendship. Having a tie to someone who is more knowledgeable about SST use yields social capital that people can draw upon to gain more knowledge of SST usage. Ties of for example friendship that is less knowledgeable in matters related to the SST usage provides few advantages for an consumer who needs assistance. Once someone in a persons network becomes more knowledgeable in the area of the problem, than the person self, the ties are transformed into a resource which can increase the own knowledge. Despite the influence the third party has on the consumers behavior, most diffusion research has ignored the effects of social influence (Karahanna et al, 1999). Karahanna et al (1999) identifies two types of social influence: (1) Informational influence, which occurs when individuals accept information as evidence of reality, through either information from someone about their personal experience and evaluation of the innovation or when the individual can observe someone using the innovation, and (2) normative influence, which occurs when individuals conform to the expectations of relevant others. An innovation creates uncertainty (Rogers, 1995) and individuals are in general uncomfortable with uncertainty and therefore tend to increase the interaction with a third party to interpret the innovation (Karahanna et al, 1999). The increased interactions with the third party influence the behavioral decision via informational and
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normative influence (Karahanna et al, 1999). Informational influence occurs when relevant others of the individual inform of their own personal experience and evaluation of the innovation or when the individual can observe the relevant others using the innovation. In addition to informational influence, normative pressure from relevant others to adopt or use the innovation reduces the risk of adoption or use and uncertainty because it provides strong evidence indicating the behavioral decision to adopt or use is a good decision. When the consumer receives assistance from a third party, the service supplier can not influence the consumers behavior, instead an individual in the consumers social network have the power to influence the consumers behavior. The third party uses their own attitudes to influence the consumer, and the consumers behavior therefore may be influenced by the attitudes of the third party, and not by the service supplier. Individuals tend to communicate negative word-of-mouth more frequent than positive word-of-mouth (Lau & Ng, 2001). Therefore, consumers contacting a third party for assistance is expected to use the SST less than individual who do not.

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2.2 INDIAN BANKS ON WEB The banking industry in India is facing unprecedented competition from nontraditional banking institutions, which now offer banking and financial services over the Internet. The deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market quickly and efficiently. Indian banks are going for the retail banking in a big way. However, much is still to be achieved. This study which was conducted by students of IIML shows some interesting facts: Throughout the country, the Internet Banking is in the nascent stage of development (only 50 banks are offering varied kind of Internet banking services). In general, these Internet sites offer only the most basic services. 55% are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions & cash management services. Foreign & Private banks are much advanced in terms of the number of sites & their level of development. It's the new generation of banking in India. Most private and MNC banks have already setup an elaborate Internet banking infrastructure. And this exercise has provided them numerous benefits like: Greater reach to customers Quicker time to market Ability to introduce new products and services quickly and successfully Ability to understand its customers needs

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Customers are given access to information easily across any location Greater customer loyalty Multi-national and private sector banks in India have been very successful in setting up Internet banking services. This is mainly because these banks already had a robust automated banking environment on which they could build the Internet banking infrastructure. Most multi-national banks already have efficient Internet banking infrastructures running in other countries which could be emulated in India. And the private banks, which are relatively young, did not have to carry the burden of legacy systems. They merely invested in best-of-breed Internet banking solutions from the start. In a fix

Unfortunately nationalized banks have been unable to evolve as fast as most private sector and MNC banks. As a result, in many organizations there may be a mix of automated systems and manual systems, with both systems running parallel, and using half-baked applications created by smaller vendors which run in certain departments. This creates a chaotic scenario. Network management is a nightmare, the legacy systems may buckle any moment, new users and locations keep coming up, and there are also issues of security and consolidation. This is a typical situation at a usual nationalized bank: A very large network of branches nationwide growing fast Lack of connectivity in remote locations A very large base of customers increasing fast 75-80 percent automation in main branches with less automation in remote cities and smaller branches

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Large amount of legacy equipment which doesn't integrate well with other systems Inefficient and outdated applications in some departments which are not flexible and don't integrate well with other applications Slow-to-change mentality of an Indian customer who is used to dealing with a human teller Web-enabling banks with such infrastructure and number of branches nationwide at one go is a near-impossible task. However each of the challenges can be overcome with good planning, phased implementation, and lots of grit on the part of the CIOs. The RBI steps in The Reserve Bank of India (RBI) has created a comprehensive document which lays down number of security-related guidelines and strategies for banks to follow in order to offer Internet banking. The guidelines broadly talk about the types of risks associated with Internet banking, the technology and security standards, legal issues involved, and regulatory and supervisory concerns. Any bank that wants to offer Internet banking must follow these guidelines and adhere to them as a legal necessity. Vaidyanathan Iyer, National Manager, eSecurity Business, Computer Associates provides solutions to banks which can help them go online. He says, "the guidelines have been created with a lot of thought regarding the banking scenario in India. It is at par with international banking standards and is very comprehensive." Background The document broadly categorizes levels of Internet banking services into three types: The basic level service in which the banks' websites disseminate information on different products and services to customers. It may receive and reply to customers' queries through e-mail.

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Simple transactional websites which allow customers to submit their instructions, applications for different services, and queries on their account balances. They do not permit any fund-based transactions on their accounts. The third level of Internet banking services offered by fully-transactional websites which allow customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank, and to transact purchase and sale of securities. Internet banking The document lays down some of the distinctive features of Internet banking. They are: It removes the traditional geographical barriers as it could reach out to customers of different countries/legal jurisdiction. This has raised the question of jurisdiction of law/supervisory system to which such transactions should be subjected. It has added a new dimension to different kinds of risks traditionally associated with banking, heightening some of them and throwing new risk control challenges. Security of banking transactions, validity of electronic contract, customers' privacy, etc., which have all along been concerns of both bankers and supervisors have assumed different dimensions given that Internet is a public domain, not subject to control by any single authority or group of users. It poses a strategic risk of loss of business to those banks who do not respond in time to this new technology, being the efficient and cost effective delivery. Securitythe key concern It's evident from the document and from a general study of the business case of Internet banking, that security is perhaps the biggest concern. Connectivity issues to remote locations is also very important, but the need to be secure is far more pressing.

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The document says that security issues include questions of adopting internationally accepted state-of-the-art minimum technology standards for access control,

encryption/decryption (minimum key length), firewalls, verification of digital signature, and Public Key Infrastructure (PKI). Concerns in Chapter 5 and 6 The concerns and guidelines about security are discussed in detail in Chapter 5 and Chapter 6 of the report. The key components of security concerns are Authentication: The assurance of identity of the person in a deal Authorization: A party doing a transaction is authorized to do so Privacy: The confidentiality of data and information relating to any deal Data integrity: Assurance that the data has not been altered Non-repudiation: A party to the deal cannot deny that it originated the communication or data If these areas are not addressed, the bank may suffer operational risk, reputational risk, legal risk, money laundering risk, and strategic risk. Chapter 6 of the report talks about technology and security standards for Internet banking. It talks about TCP/IP, the OSI Layers, and application architectures. There are guidelines for backup and recovery, list of the different types of attacks and the ways in which they can compromise a system, like sniffer attacks, DoS, and e-mail bombs. Authentication techniques like tokens, biometrics, and smart cards are described. The concepts of firewalls, proxy servers, cryptography, digital signatures, certification, SSL, and PKI are explained in detail. Security tools like scanners, sniffers, and IDSs are also described. Physical security is talked about and followed by guidelines of a security policy and a number of recommendations. The recommendations talk about access control, isolation of application servers, security logs (audit trails), penetration testing, backup and recovery practices, monitoring against threats, and education.
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Comprehensiveness and Indian banks The RBI guidelines are very exhaustive and extremely comprehensive. But are Indian banks following the guidelines accordingly? Experts at Global E-Secure Limited, a security solutions company say that none of the Indian banks which offer Internet banking facilities have an IT security policy as stipulated by the RBI. While banks have been asked to file monthly reports to show compliance to the guidelines, most of them have sought time to satisfy the security policy criterion. The RBI is insisting on a written document, signed by the Board of Directors to make the banks aware that IT security is not just an IT concern, but something that could affect overall business as well. The company also says that while these banks do have security measures, there is no clear-cut program which incorporates all the aspects of a comprehensive security policy. Also, some banks do not have straight-through processing. There is manual intervention, which poses a great security risk for the customer. In order to fill such gaps, the security policy guidelines clearly lay out the areas which should be looked into. To provide a further check, the RBI is also empowered to audit the compliance to the policy. Rajeev Wadhwa, COO, Global E-Secure Limited says, "Following the release of its guideline, the RBI will also come out with a policy on similar lines. Hence, it's imperative that banks immediately act upon the same. The RBI has asked I-banking and e-trading banks to perform ethical hacking of their servers and submit their reports. Since there is no proper ethical hacking policy and methodology published in the IT-Act nor by the RBI, these banking organizations have to depend on only security specialists who have the Service Level Agreement (SLA) and a procedure in place."

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Indian Banks-The New Web Hub Indian banks have a chequered history. The British legacy left behind a host of large and small privately-held banks. The late 60s saw the 34opularize343434on of banks, leading to the emergence of the public sector banks. The 90s saw the banking industry embracing technology in a massive way, led in particular by the new private banks and MNC banks. Among these series of technology innovations, Internet banking for the retail segment is a recent phenomenon that has generated a lot of interest in the Indian banking industry. Private and foreign banks have been the early adopters while the PSU banks are also beginning to latch on to the bandwagon. As per IDC estimates, the total number of registered users for Internet banking in India is over two million. But this figure needs to be adjusted for dormant users and multiple accounts (a user having accounts with more than one bank). India has a little less than a million active Internet banking users. And though this is just 0.096 percent of the total population, it represents 15 percent of the Indias Internet user population. Thus indicating that the concept of Internet banking is surely catching on. Impressive as these figures might be, the truth is that India lags behind other countries in Internet banking. In the US, the number of commercial banks with transactional websites is 1,275 or 12 percent of the total number of banks. Of these, seven could be called virtual banks. Ten traditional banks have established Internet branches or divisions that operate under a unique brand name. At present, in the US approximately 78 percent of all commercial banks with assets more than $5 billion, 43 percent of banks with $500 million to $5 billion in assets, and 10 percent of banks under $500 million in assets have transactional websites. From the Asian market experience, it is clear that Internet banking is here to stay and will be a major channel to acquire and service customers. Markets like Korea and Singapore have nearly 10 percent of their population banking over the Internet.
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Though, these markets are way ahead of India both in terms of Internet penetration and online banking penetration, India is a big potential market and is fast catching up with its Asian counterparts. The Indian saga In contrast, Indian banks have an insignificant Internet banking record. ICICI Bank kicked off online banking way back in 1996 and a host of other banks soon followed suit. But even for the Internet as a whole, 1996 to 1998 marked the adoption phase, while usage increased only in 1999due to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere. Reveals Anup Bagchi, head, Internet Banking, ICICI Bank, We had launched the Internet banking service even before the RBI had formulated its guidelines. Fortunately, as it was a comparatively new concept, the regulating authorities were extremely co-operative with us. After ICICI, Citibank, IndusInd Bank and HDFC Bank and Timesbank (now part of HDFC Bank), were the early ones to bite the technology bullet in 1999. Says C N Ram, head, information technology, HDFC Bank, Our vision was very clear, we were not enamoured by the concept of Internet banking but looked at it more as an add-on service which our customers should gradually adopt. In line with this strategy, initially the Net banking facility was provided in order to meet the information requirements of the customers and gradually it ventured into fund transfers and third party transfers. Though adoption of Internet banking by Indian banks and their customers would not set the Arabian Sea on fire, no one can deny the obvious benefits that this service offers. Costs of banking service through the Internet amount to a fraction of the costs through conventional methods. Industry estimates assume teller cost at Re 1 per transaction, ATM transaction costs at Re 0.45, phone banking at Re 0.35, debit cards at Re 0.20 and Internet banking at Re 0.10 per transaction. Says V K Ramani, president, information technology, UTI Bank, another of the early adopters, No wonder, the cost-conscious
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banks in the country are now actively considering using the Internet as a channel for providing services. People were popularize about even ATM at the beginning, but look how it has picked up today. However, he warns that banks cannot expect instant returns, unless the Internet population itself does not reach a critical mass. Besides, he also feels that fully popularized banks, with better management of their customer base are in a stronger position to cross-sell their products through this channel. Nitin Chopra, head, consumer banking, ABN-AMRO Bank, feels that the prohibitive costs of real estate would always make Internet banking a much more viable option in the long run than physical banks. In todays environment besides their physical branches, banks need to grow non-branch delivery networks as a part of their growth strategy. ATMs are currently the hot favourite for most banks, but Internet banking definitely has the potential to leave the rest behind. Therefore, on the whole, Internet banking increases operational efficiencies and reduces costs, besides giving a platform for offering value added services to the customer, thereby fulfilling all the essential prerequisites for a flourishing banking industry. The PSU lethargy

As in all forms of technology innovations, PSU banks have remained laggards in the race for adopting Internet banking practices. There are very few popularized banks like State Bank of India, Bank of Baroda, Allahabad Bank, Syndicate Bank and Bank of India, that offer Internet banking services. Some others like Union Bank of India, Canara Bank and Punjab National Bank are on the verge of doing so. SBIs Internet banking initiative, launched in July 2001, is in fact doing quite well and has over 18,000 registered customers across 150 branches. The enthusiastic response has encouraged the SBI management to extend the service to an additional 500 branches. But despite positive news like this, PSU banks still have a lot of catching up to do on the Internet banking services front.
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DD Krishnamoorthy, deputy general manager, information technology, Bank of India says that the primary reason preventing PSU banks from introducing online banking services, has been the absence of a legal framework to back up, and regulate Internet banking operations in the country. Though the Information Technology Act 2000 attempted to address a number of e-commerce regulatory issues, he feels that there still are several grey areas which have neither been spelt out properly, nor have the courts suggested workable modes of implementation. Though Internet banking is only an extension of traditional banking services, there are several instances which contradict the legal framework for this banking in India provided by a set of enactments like the Banking Regulations Act, 1949, the Reserve Bank of India Act, 1934 and the Foreign Exchange Management Act, 1999. However, not many are willing to buy the argument that its the lack of regulations that is preventing the PSU banks from taking the Internet plunge. Says an industry analyst, More than a lack of regulatory framework, it is lack of zeal and a mindset attuned towards resisting any new technology that is holding back the popularized banks. On top of this, the highly popularize unions are also an impediment as they feel that Internet banking would expose the low productive levels of the workforce. The average customer profile of PSU banks is also comfortable with the traditional banking system and is not too keen on adopting an online model. Typically, most PSU banks have the majority of their customer base in the smaller cities or towns and even in remote villages. Even in bigger cities, a large proportion of their customers are either senior citizens or at least 50+ who have a natural aversion towards adopting new technology. This not the case with private or MNC banks, where the clientele is mostly urban-based falling in the 20-40 age group and who have a higher exposure to technology. Even the IDC survey seems to confirm this premise. Among the elite Internet banking users, that is, those customers who belong to Socio-Economic Class A1 (SEC A1) in the
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top five cities, it has been found that people access their account through the Internet once every week. Similarly users visit their ATM centre on an average of two times per week. The workplace happens to be the most favoured place to access Internet for banking purposes. The home comes a close second while 38opularize take the third place. ATM in the close vicinity to the office is the most preferred place among users for banking. The users (24 percent) who access the ATM near their office mostly go during the first half of the day, between 9 AM to 12 PM, but most preferred time by all users (41 percent) is between 6-9 PM. Bouquet strategy

This probably explains why more and more banks are looking at Internet banking as another attractive addition to their bouquet of delivery channels. At least in urban areas, ATMs are already fast becoming the most popular mode of banking, while phone banking and mobile banking are also on the upswing as the user base grows. Internet banking now seems to be the perfect model to complement the whole system. Says Ram, In fact, currently telephone banking is much more popular than Internet banking. But we at HDFC Bank are working on a strategy to integrate various channels like the telephone, ATM, Internet, mobile, branches, etc. Customers have real-time access in all wherein any action in any of the above mentioned channels would be immediately reflected in the account of the account holder. All these initiatives taken by banks are part of their channel diversification strategy, where they intend to put the strategy matrix in place. This will be done through sprucing up the channel strategy in depth and width in which width would mean the various varieties of channel and depth would mean the value added services in each channel. Adds Ramani, We can divide the user group into 50 percent that would not prefer transacting through the Internet, 25 percent that are open to the idea, and the

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other 25 percent that are the ones who can be given credit to 39opularize the use of Internet for transaction purposes. What is ultimately emerging is that though there is certainly a high level of importance attached to Internet banking, it is at present not necessarily a priority for all banks. As far as banks are concerned, migrating customers to any self-directed channel is the main goal. However, the future of banking will be one in which customers can address most of their needs through self-directed means and the key differentiator will be how effective a bank is in getting its customers online and deriving measurable value from this presence. One can sum up the whole Internet banking scenario with the adage, For while winners may not see massive gains, the losers will fade from view as their ability to compete is eroded with every mouse click. Indias Net banking almanac Bank Name ABN AMRO Bank Abu Bank Bank of India Centurion Bank Citibank Corporation Bank Deutsche Bank Federal Bank Global Trust Bank Sanchez Infosys (BankAway) Dhabi Commercial Infosys (BankAway) I-flex Logica Orbitech (now Polaris) I-flex ADCB NetLink BOIonline MyCBOL Citibank Online CorpNet db direct FedNet ibank@gtb Technology Vendor Infosys (BankAway) Service offering NetBanking

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HDFC Bank HSBC ICICI Bank IDBI Bank IndusInd Bank Punjab National Bank Saraswat Bank Standard Chartered Bank State Bank of India UTI Bank Bank of Baroda

i-flex/ Satyam

NetBanking Online@hsbc

Infosys, ICICI Infotech Infosys (BankAway) CR2 Infosys (BankAway)

Infinity i-net banking IndusNet

In-House Satyam/Broadvision Infosys (BankAway) Infosys(BankAway

Me Standard Chartered Online onlinesbi.com iConnect BarodaConnect

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2.3 EMERGING CHALLENGES & CONCERNS IN INTERNET BANKING Information technology analyst firm, the Meta Group, recently reported that "financial institutions who don't offer home banking by the year 2000 will become marginalized." By the year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop which will be driven by Demand side pressure due to increasing access to low cost electronic services. Emergence of open standards for banking functionality. Growing customer awareness and need of transparency.Global players in the fray Close integration of bank services with web based E-commerce or even disintermediation of services through direct electronic payments (E- Cash). More convenient international transactions due to the fact that the Internet along with general deregulation trends, eliminate geographic boundaries. Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases. Certainly some existing brick and mortar banks will go out of business. But that's because they fail to respond to the challenge of the Internet. The Internet and it's underlying technologies will change and transform not just banking, but all aspects of finance and commerce. It represents much more than a new distribution opportunity. It will enable nimble players to leverage their brick and mortar presence to improve customer satisfaction and gain share. It will force lethargic players who are struck with legacy cost basis, out of business-since they are unable to bring to play in the new context. Relationship building is a strategic priority for many banks. Internet Banking technology and products can provide a means for banks to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services, through which banks build customer loyalty, cross sell, and
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enhance repeat business. As the demographics of banking customers continue to change, the challenge to banks is to understand their customer base and find the right mix of delivery channels to make available products and services profitably to their various market segments. When the public uses the internet to move or hold their money, they expect messages to arrive at their destination without error or interception; they expect the system to be safe from fraudulent or unauthorised access; and they expect to enjoy the same degree of customer confidentiality as with conventional banking arrangements. They want to be assured not only that the execution process is reliable and secure, but also that there are adequate controls on read only access facilities.

In a survey conducted by the Online Banking Association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers' privacy and protect against fraud. Banking Securely: Online Banking via the World Wide Web provides an overview of Internet commerce and how one company handles secure banking for its financial institution clients and their customers. Some basic information on the transmission of confidential data is presented in Security and Encryption on the Web. PC Magazine Online also offers a primer: How Encryption Works. A multi-layered security architecture comprising firewalls, filtering routers, encryption and digital certification ensures that your account information is protected from unauthorised access: Firewalls and filtering routers ensure that only the legitimate Internet users are allowed to access the system. Encryption techniques used by the bank (including the sophisticated public key encryption) would ensure that privacy of data flowing between the browser and the Infinity system is protected. Digital certification procedures provide the assurance that the data you receive is from the Infinity system.
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One of the main challenges therefore facing Internet banking is that of security of data and confidentiality, both for the user and the bank. By virtue of the nature of banking, absolute confidence in the privacy and security of data is a fundamental requirement and needs to be demonstrated not only to the banks own clients and internal auditors, but also to external auditors and regulators. How can we as bank supervisors obtain these assurances? Inevitably we will have to depend to a large extent on the experts who have and continue to devise sophisticated methods. The key components of these methods, which will help maintain a high level of public confidence in an open network environment, include:

_ Security _ Authentication _ Certification _ Non-repudiation _ Privacy Security Although the publicly accessible Internet is generally less secure than the direct dial-in access system, both types of connections are vulnerable to interception and alteration. For example, software sniffers can obtain passwords, account numbers, credit card numbers, etc. without regards to the means of access. Firewalls are frequently used on Internet banking systems as a security measure to protect internal systems and should be considered for any system connected to an outside network. They provide the gateway to guard against unauthorised individuals gaining access to the banks network. The mere presence of a firewall does not ensure security, as firewalls are not impenetrable. There are instances where the existing privacy protection regime afforded Internet banking customers have proven
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inadequate. Take for example Eggs (the on-line bank run by Prudential (UK)) account holders who found that the log-out function malfunctioned, enabling other people to browse their account and even transfer funds. Authentication Authentication is a process that provides confidence to the message receiver on the identity of the sender and the integrity of the message itself. In a digital environment, authentication is achieved through the use of a digital signature, which is analogous to a handwritten signature. This piece of data asserts that a named person wrote or otherwise agreed to the document to which the signature is attached. Authentication is usually implemented through the use of Encryption technology. Encryption is the transformation of data into an unreadable form. The purpose of encryption is to provide secrecy by keeping the information hidden. Information can be encrypted through use of an encryption key and decrypted for viewing via a decryption key. Public key cryptography and secret key cryptography are currently the two leading cryptosystems. For secret key cryptography, only the sender and the receiver know the common encryption and decryption key. The main concern here is to getting the sender and receiver to agree upon a secret key without anyone else finding out. In a multi-user environment, secure key distribution becomes even more difficult, and to overcome this problem the public key cryptography was developed. The public key system requires that each person involved in a transaction possesses a key pair, of which one key is made publicly available, and the other is private; nobody else besides the person to whom it is assigned ever needs to know it. A message encrypted with a persons public key cannot be decrypted with that public key; the formula used to encrypt the message is a one-way function and cannot be reversed. So only the person who has a private key corresponding to that public key can decrypt and read the message. For example, as Joe sends an order to Company A, the pieces of information that are confidential are encrypted using Company As public key. Company A uses its private

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key to decrypt, and this message can only be decrypted with that key; thus the customer knows that only Company A received the message. Certification A trusted third party is a necessary part of the Internet banking process. A certificate authority is a trusted third party that verifies identities in cyberspace. Certificates issued by certifying authorities are issued to deter and detect an entity from impersonating another using a fake key. Some people think of the certificate authority functioning like an online notary. The basic concept is that a bank, or other third party, uses its good name to validate parties in transactions. This is similar to the historic role banks played with letters of credit, where neither the buyer nor seller knew each other but the bank knew both parties. Thus the bank used its good name to facilitate the transaction, for a fee. Non-repudiation Non-repudiation is the undeniable proof of participation by both the sender and receiver in a transaction. It is one of the reasons public key encryption was developed, i.e., to authenticate electronic messages and prevent denial or repudiation by the sender or receiver. There are two sides to non-repudiation: one side is relevant to the sender, known as non-repudiation of origin, and to assure that the sender cannot deny having sent the message. The other side is at the receivers side, known as non-repudiation of receipt, to assure the receiver cannot deny the receipt of the message. Both of these are extremely important to the banking community. Privacy Privacy is a consumer issue of increasing importance. Banks that recognize and respond to privacy issues in a proactive way make this a positive attribute for the bank and a benefit for its customers. Public concerns over the proper versus improper accumulation and use of personal information are likely to increase with the continued growth of electronic commerce and the Internet.

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2.4 FUTURE OF INTERNET BANKING It is an old clich to say that "time equals money," but like virtually all cliches, there is a significant grain of truth to the statement. To define the concept of time equaling money a step further, one could point to the reality that opportunity costs play a significant factor in the generation of prosperity and money. From a definition that can be learned in any Economics 101 course, opportunity costs (on a very baseline level) refer to the fact that if a person does something specific, the time and money invested in such an activity result in the minimizing of the ability to do something else with the same time and money. In other words, no one can commit resources to two courses of action simultaneously without expanding the source (money) required to maintain a simultaneous venture. This is why it is important to drastically reduce unproductive downtime from a person's life and use the recaptured time for pursuits that will be productive. This is why internet banking is such an important concept. While we would all love to live in a world where banking and the time required to make a banking transaction are greatly limited, we will never achieve such a goal unless we leave the confines of traditional banking and veer towards internet banking instead. When it comes to time costs, traveling to the bank, waiting in traffic, waiting in line, dealing with poor or limited customer service all add minutes to the time wasted in one's day. This is to say nothing of the hassles involved with having to conduct all business within the framework of the hours of operation that the bank is open. Internet banking eliminates virtually all of these needless hassles. With the convenience of internet banking, one can conduct most simple banking processes like withdrawals, transfers, checking one's balances, pay a loan or even make
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monetary deposits 24 hrs a day, 7 days a week, 365 days a year. Literally, internet banking is a world without limits! Well, of course, it does have certain limits as oftentimes a human element will be required under certain customer service conditions. But for many basic banking issues, internet banking will serve the banking public well. Unfortunately, there will be those who have certain reservations against using internet banking services. The main reason for such reservations is an unnecessary desire to avoid dealing with something that is considered "new." While it is understandable that people will have reservations against taking the great leap into trying something new, it also must be understood that very little worth anything comes without taking a great step forward. So, do not continue to do things the hard way. Embrace the ease of internet banking today. FIVE KEY TRENDS IN INTERNET BANKING 1. Security stays of major importance to online consumers. This is understandable but also a very general insight. Firms with online activities will therefore have to deal with the matter in a more differentiated way. Those who are concerned about security have identified as the most dangerous threats, first, the lack of staff awareness and, second, viruses, Trojan horses, and worms. This holds for all sectors. The financial industry, however, is particularly sensitive to the topic. The fear of a lack of security is a higher hurdle to those internet users who do not use online banking than missing monetary incentives or insufficient comfort or functionality.

2. Customer retention becomes ever more important. Research shows that the more services of his or her bank the customer uses, the higher
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the real and psychological switching costs will be. Also: the more services the customer uses, the greater are the banks expected profits. Customer loyalty, therefore, gains importance over customer

acquisition, and the value of customer relationship management becomes apparent.

3. Technological progress will give a boost to existing online banking services and devices. Their quality will improve. Ever faster and more powerful chips and the widespread use of broadband internet access make online banking more comfortable for more and more people without necessarily triggering the emergence of completely new devices and inventions.

4. Some players will take a second stab at mobile banking. Increasingly faster transmission via GPRS or UMTS feed the vision that mobile banking merits another attempt in spite of the GSM failure. Indeed, many advantages can be thought of. SMS alerts can disburden more expensive channels (e.g. contact centres). Also, useful information can be transmitted to the client, and increase customer loyalty at low cost. Still, a comprehensive business case in transaction banking and brokerage with cost covering revenues is currently not in sight.

5. Online research grows. An increasing number of visitors of bank websites do considerable research before making financial decisions. They shop around for financial products, and make their own investment decisions in part without consultants. Though the chart
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shown here refers to US customers, we observe a similar trend in Europe: Researching via the internet is gaining importance in online banking

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RESEARCH METHODOLOGY

50

3.1 Research Type:

The research design is descriptive and exploratory. The research was conducted using a purely quantitative method. It employed a survey method surveying the account holders in banks offering Internet banking services in the Mumbai region, India. The Mumbai Region for the purpose of this study comprises of :

a. Mumbai South which includes suburbs like Colaba, Cuffe Parade, Nariman Point and the Girgaon cluster.

b. Mumbai North which includes western suburbs and business centers like Vile parle, Santacruz, Andheri, Goregaon, Malad, Kandivali , Borivali

c. Mumbai Metro East which covers the Central Suburbs like Chembur, Ghatkopar , Mulund, Thane (Urban & Rural) and New Bombay(Navi Mumbai).

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3.2 Data Collection Approach

There are a wide variety of methods that can be used. These as combinations. The primary classification is: Primary data Secondary data Primary data: The data is collected especially to address a specific research objective. Method of Data Collection Contact Method Direct & Indirect(which includes Mail, Telephonic Conversation, Fascimile,Intercepts,Direct Meet) Instrument of Data Collection Interviews , Questionnaire Surveys methods can be used singly or

Secondary data: The data is collected for some other purpose, not addressing the specific research objective. Referred journals Websites Magazines.

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The study included eight major banks operating in India of which three were from the Private sector namely HDFC , ICICI , Axis Bank whereas five from the Public Sector namely Union bank of India, Bank of India, Punjab National Bank, Canara Bank and State Bank of India. A comparative study of Bank of Baroda (thereafter referred as the Bank) vis--vis these banks were done of various factors and the results were tabulated considering various Internet Banking aspects.

3.3 Sampling Design

The sampling method employed was a Cluster/Area Sampling Method. The questionnaires were distributed in two formats that were in soft and hard copy formats. Soft copy format of the questionnaire was sent out through electronic mail via the Internet, whilst the hard copies were distributed personally and some responses were even obtained via the telephonic conversations. Sampling Size Estimation With a Z value (Confidence Interval) of 95% and Standard Deviation (s) (With Mixture of Heterogeneity & Homogeneity) of 35% and Error rate (e) of 2% We find the Sample size using n= which comes to n = 250 and with 5% extra including the contingency for the total inputs we estimate the sample size to be 263. Of the various branches of the Bank spread across the Mumbai region twenty one (21) branches were visited and with a sample size of 15 from each branch 315 questionnaires were distributed. The reason for the sample selected being the average number of users at every branch being around 200 250 of which the active users were very low so a sample size of around 5 to 8% of the total user base was selected an appropriate sample. Finally only 267 of the respondents actively responded, yielding a response rate of

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84.75%.The 267 valid respondents were adequate for the study to infer valid conclusions. Along with the survey send to these branch clients, more 400 responses of customers other than the mentioned above were obtained from various other areas to get an idea of the responses and services of other Banks Customers.

3.4 Data Organization

Out of the 267 Bank customers it was found that 141 customers used the Internet Banking whereas the remaining 126 customers did not utilize the Internet Banking facility by the Bank. Both the cluster results obtained were adequate for the study to infer valid conclusions However of the 400 Non Bank of Baroda Customers, 304 customers used Internet Banking of various banks whereas the remaining 96 customers were still hesitant to use the Internet Banking due to various reasons as given in the findings. The data collected were tabulated and analyzed using a statistical software package known as Statistical Package for Social Sciences. The different types of analysis used in this research were: 1) Descriptive statistical analysis The findings are presented in the following pages.

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KEY FINDINGS

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4.1 Overall Demographic Information of the Respondents (Bank of Baroda Customers)

The data of the respondents demographics is presented below. It can be observed that majority (80%) of the respondents are male and the remaining 20% were females.

Gender Distribution
20%

Male 80% Female

Considering the age wise distribution of the respondents the major focus was on the age group between 21-40 years because it is this age group which is technology savvy and is comfortable in using the technology compared to the other age groups

Age Group Distibution

90 80 70 60 50 40 30 20 10 0 Users

Users

<= 20 7

21-30 78

31-40 84

41-50 51

>50 47

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With regards to the educational background of the respondents it was found that a majority (95%) of the respondents were either Graduate / Post Graduate and only a small chunk of the lot was in the studying phase. A sample size with this background would be more responsive to understanding the new features of the Internet Banking compared to the uneducated class.

Education
5%

Grad. & PG Studying 95%

The occupation wise distribution of the respondents is quite a mix of self employed /Business and Salaried individuals. A heterogeneous mix helps us in analyzing the individuals as well as corporate behavior while deciding the selection of services.

Occupation
Salaried Self Employed/Business Retired

3%

46% 51%

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Also considered is the banks association with the respondents where it helps in tapping the untapped but potential and loyal customer base. It was found the majority of the respondents of the survey were associated with the Bank for more than five years followed by one to three years.

Association

< One Yr 9% One-Three Years 19%

> Five Yrs 57%

Three-Five Years 15%

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4.2 Category analysis

Considering the data available from the survey with respondents , we categorized the complete data into four broad categories as shown below

BoB\Non BoB Users Non Users

Users Category A Category C

Non Users Category B Category D

Category A: Includes users which use Bank of Baroda as well as other Banks Services Category B: Includes users which use Bank of Baroda services but not other Banks Services Category C: Includes users which do not use Bank of Baroda Services but use other Banks Services. This includes the 304 respondents which were other banks customers and have been using their services. Category D: Includes users which neither use Bank of Barodas services nor any other banks services. The purpose of categorizing the users is to tap the complete customer base and to map on their responses with regards to their feedback and inputs .The demographics of the different categories consolidated are as given below. The Gender wise distribution shows that majority of respondents are males in all the categories and a minor section of females. This indicates the amount of female respondents customers that can be targeted to increase the female customer base using Internet Banking services. Also an indirect influence can be made in proper channeling and influencing the services through the female/ working women channel.

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Gender Distribution
80 70 60 50 40 30 20 10 0 Male Female

Axis Title

Category A 45 15

Category B 66 15

Category C 34 6

Category D 68 18

Considering the age wise distribution of the category

Agewise Distribution
35 30 25 Users 20 15 10 5 0 Category A Category B Category C Category D <= 20 2 0 3 2 21-30 19 27 3 29 31-40 22 28 16 18 41-50 10 12 8 21 >50 7 14 10 16

It can be seen that majority of the users are in the age group 21-40 years. These are the respondents who mainly form the working / salaried or self employed class of individuals and hence can contribute towards technology banking. However a huge
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number of respondents in this age group (21-40 years) in the C & D category indicate the shift of this group either to other banks or branch banking. Thus special strategies must be implemented to attract and convert them into potential users which shall be discussed further in the strategies section. As far as the education background of the respondents goes it can be seen that majority of them are either graduates / post graduates or still studying.

Education
90 80 70 60 Users 50 40 30 20 10 0 Grad. & PG Studying Category A 58 2 Category B 79 2 Category C 38 2 Category D 79 7

The sample of this demographic can be used to infer that majority of the respondents are knowledgeable enough to understand the usage of the Internet and its facilities. However a huge amount of respondents in the category D in this group is a bit mind boggling which could be due to various reasons which shall be discussed further in category wise analysis . As far as the employment background of the respondents goes,

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Employment Distribution
60 50 40

Users

30 20 10 0 Salaried Self Employed/Business

Category A 22 38 0

Category B 43 38 0

Category C 23 17 0

Category D 48 30 8

Retired

It can be seen that there are almost similar number of salaried and self employed respondents. But concerning category in this case is the category D with maximum number of Salaried / Self Employed / Retired users who do not use any Internet Banking system as such. Thus this category and the employment distribution needs to be further analyzed to get to the crux of the issue.

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4.3.CATEGORY-WISE ANALYSIS 4.3.1 Category A Analysis Category A users consists of users who have been using BarodaConnect as well as other banks internet banking system What needs to be analyzed in this cluster of users is a. which other banks services do they utilize b. primary driving reasons for their services c. impact of the latest advertisement campaign A. Other Banks services they Utilize
Canara Bank 0% BoI UBoI 4% 0% PNB 0% SBI 9% Axis bank 12%

Other Banks
Others 16%
HDFC 24%

ICICI 35%

Majority of the Banks users have been using other Private sector banks services which includes ICICI Bank followed by HDFC Bank and lastly by Axis Bank. It is seen that there are very few Banks customers who have been using other public sector banks services(mainly SBI). Thus the major competitor for the bank seems to be private sector banks who have been acquiring majority of the Internet banking users.

B. Primary driving reasons for their services The various reasons for using other banks services vis--vis the banks services are given below:
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Driving Reasons
45 40 35 30 25 20 15 10 5 0 Axis Bank Citibank HDFC ICICI SBI IDBI Others Good features Incentive to use Easiness to use Response Time Service Quality

It can be seen that ICICI Banks users have variety of reasons for using the services and thus many of them even feel ICICI bank offers complete Internet Banking solutions with top class service quality, good features, response time to their queries and many others. Even though the number of users using SBI have been less but the amount of satisfaction noticed in terms of their driving reasons has been substantial. Also HDFC Bank users have been satisfied with the Banks service quality and easiness to use. Thus we need to devise proper strategies to improve on each of these fronts which shall be discussed in detail later.

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C. Impact of the latest advertisement campaign Since majority of these users have been using other banks services due to variety of driving reasons, it is very important to judge the impact of our latest advertisement on them.

Advertisement Impact
No Impact Heard of Good Impact

15%

22% 63%

Around 63% of the users are not aware of the new ad campaign and hence they need to be targeted for the latest technology savvy products which are at par with other banks. Also word of mouth publicity needs to be emphasized on, so that customers who have good reviews about the banks new advertisements and services do spread it among their groups and clusters.

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4.3.2 Category B Analysis Category B users consists of users who have been using the Internet Banking system of Bank of Baroda only. This category of users shows the loyalty towards the bank and its services. What needs to be analyzed in case of such users is the impact of advertisement and level of awareness they get through the banks campaign so as to retain the customer base

Ads Impact
No Impact Heard of Good Impact

28%

11%

61%

As it can be seen from the doughnut chart around 61% of the customers are unaware about the new advertisement campaign which shows that the message for technology banking and features isnt reaching the mass as far as Bank of Baroda customers are concerned, whereas of the rest 39% around one third have heard of and the remaining who have heard have a good impact. Various strategies need to be applied so as to reach to these cluster of customers , retain them and let them know about the various new products about how bank is progressing.

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4.3.3 Category C Analysis Category C users include those who have not been using Bank of Barodas IB system but use other Banks IB system. The analysis of these respondents was done on various aspects which include a. their association with the bank b. Awareness about the system & services c. Comparative analysis with other banks driving features A. Association with the Bank:

Association
20 18 16 14 12 10 8 6 4 2 0 < One Yr Users 3

Users

One-Three Years
11

Three-Five Years
8

> Five Yrs 18

It can be clearly seen that majority of the respondents have been associated with the bank for more than five years and hence fall into the loyal category of customers. However their association with bank is more of branch association and is loyal towards the branch and not towards the technology banking. Also it can be seen that the respondents who have been associated with bank for just one to three years fall into the still-skeptic-about-the bank category and need to be entrusted about their capital and security to overcome their cognitive dissonance.

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B. Awareness of the system On enquiring about the awareness of the IB system 68% of them were aware but chose to use other banks systems due to a variety of driving reasons.

Awareness
Aware Not Aware

32%

68%

Thus indicative from this is to convert the aware customers into real users. C. Comparative analysis with other banks driving features A comparative analysis helped us in knowing the preferred choice of respondents for internet banking

User Pattern BoB Customers

HDFC Bank 15% Others 25% Canara Bank 4% ICICI 29%

UBoI 6%

BoI 15%

SBI 6%

PNB 0%

Axis 0%

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Majority of them preferred ICICI Bank followed by a group of other banks and then by HDFC Bank and Bank of India. The various reasons for the same are shown as below and can be analyzed further.

Driving Reasons
6% 4% 10% 4% 32% Service Quality Response Time Easiness to Use Incentive to Use Good Features 25% 19% Everything's good Nothing Special

It can be clearly seen that around 32% of our customers rank them better in terms of service quality which includes the way in which they offer their services, their way of responding to them , helping them and serving them with regards to their required inputs; whereas 25% of our customers like the way other banks have put up their website and the Internet banking system which includes their website dynamics, ease of navigation, navigation flow, features availability, online support and tracking facility and 19% of the respondents like them on their response time i.e. the way they respond to their queries and the time within which they solve their queries and offer them pin point solutions. Remaining responses give a mixed review of other driving features like their features which we can relate to their proper presentation and navigation flow. Also something to be noticed is the incentive to use which includes various promotions, campaigns and motivating factors to use their systems. Thus in order to capture this segment of users one needs to work on all the above mentioned issues. The working on these points shall be discussed in the strategy planning stage. Also to be noted is there are certain number of respondents who have been using the system due to their employers association and thus their association with the banks
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4.3.4 Category D Analysis Category D includes users who are Bank of Baroda customers but do not use any banks Internet banking system. The analysis for the same is done below and is based mainly on the reasons a. Their association with the bank. b. Awareness about the system & services. c. Reasons for not using the Internet banking system. A. Association with the bank
60 50 40 30 20 10 0 < One Yr One-Three Years Three-Five Years > Five Yrs 14 12 4 56

Users

It can be clearly seen from the graph above that majority of this segment users are associated with the bank for more than five years followed by those with association of less than a year. This can be inferred to be a indicator that we have a huge database of users who have been associated with the bank for long time and have trust in the banking facilities and can be switched onto from traditional banking to technology banking. Also we have users who are new to the bank and we can create a good technology impact and can be switched to the Internet Banking system. Further analysis for the same can be done based on their awareness level and their reasons for clinging onto traditional banking.

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B. Awareness Level It can be noticed that majority of the customers are aware about the system and the remaining unaware are the ones who do not know about the system and its features and hence do not use the system. The reasons for not using the system even though being aware about the system shall be explored .

Awareness
Aware Not Aware

19%

81%

C. Reasons for not using the system The reasons for not using the system are as shown

Internet Connectivity 8% Security Concerns 4%

Nothing Special JLT 12%

Category D
Not Aware 15% Not User Friendly 0%

Registation Process Hitch 19%

Branch Banking Convenient 42%

A major proportion of the customers have the notion that branch banking is rather convenient which needs to be changed and more emphasis needs to be done on
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showcasing the positives and efficiency of the technology banking. Another point noticed was the hitch in the registration process which needs to be tackled; considering the current registration process many improvements need to be made at the operations end, all of which shall be discussed in the strategies section. Also another astonishing fact obtained that many just had a mental block of not using the system and hence did not use the system, whereas many didnt use it because of security concerns and the remaining didnt use it because they werent aware about the system. Positives noticed for further analysis was the age group wise analysis as shown.

Age Distribution BBC

>50 41-50 31-40 21-30 <20 0 <20 Users 2 5 21-30 12 31-40 9 10 41-50 6 15 >50 14

It is seen that a major proportion users who feel that branch banking is convenient who are above fifty years who have a mental block regarding the usage which need sto be cleared with various campaigns promotions and the like whereas the next higher proportion is between 21 30 who can be easily attracted for the features of the internet banking system.

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4.4 Non Bank of Baroda users

As per the survey done we mainly had two classifications namely Bank of Baroda customers and non Bank of Baroda customers. The in depth analysis category wise is done as above, whereas of the non banks customers shall be covered in this section We surveyed 400 customers, of which 76% were users while remaining were non users, Of which around 60% of the users were male and the remaining 16% females; forming a similar pattern as in the bank (BoB) users; lesser female users, a unexplored potential yet to be targeted.

Users
Non Users Male Female

Male 60% Non Users 24% Users 76% Female 16%

Considering the age wise distribution we had majority of them in the range of 21-30 years.

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Agewise distribution
Users >50 41-50 31-40 21-30 <20 0 9 13 81 201

Around 201 users customers were of the age group 21-30 and using the Internet banking system whereas compared to similar percentage of BoB users their usage pattern was different. Thus we need to focus on various reasons which bolster the usage of these non BoB users to use the system and the banks they prefer.

Banks Preferred A prominent trend in these users have been found for using services of private sector banks which are mainly due to the various reasons listed. However one point noticed is the spread of these banks in the corporate house, which Bank of Baroda lacks to certain extent. Thus focus on big corporate houses is one key target area. The banks they prefer includes HDFC bank (41%) followed by ICICI bank (35%) and others. One key thing noticed here is the infiltration of SBI with 9% which is slowly but progressively gulping into the private banks pie.

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Banking Customers
HDFC ICICI Axis 6% 13% SBI PNB BoI 0% 41% UBoI Canara Bank Others 1% 4% 1%1%

33%

The various reasons for the preference are as mentioned below which includes variety of them. Reasons for using their services

Driving Reasons
250 200 Users 150 100 50 0 Service Quality 161 Response Time 39 Good Features 21

Easiness 195

Incentive 27

Others 23

Series1

It is seen that majority of the customers have been using the system because of two main reasons a. Service Quality b. Easiness to use This indicates and gives a clear review of what the customers want in their Internet banking system other than sufficient features.
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Service quality includes the way their system services their needs , suffices their demands with optimum number of services , features and their website features along with the pre registration, post activation features and their support. Easiness to use also includes to certain extent the pre registration and post activation procedures. But as far as the reviews of people are concerned in this regards it is mainly the website navigation, availability of their required features, low website bounce rates, customer friendly tabs and menus . And going back to the responses from our category A users who have been using other banks services it is the same conclusion which can be derived Thus we need to work on each of these issues separately to offer the same branch banking service quality to our internet banking customers too. Also as far as frequency of usage goes it is seen that majority of the users use the system either once a day/week or more than once which indicates more number of transactions happening through the internet banking facility and hence lesser manpower cost to the bank, which is not that frequent in case of our banking customers due to variety of reasons as discussed above. The results are as shown below

Frequency
once in a day Very Often Once in a week Once in a fortnight 3% 16% 8% 34% More than once

39%

Also other prominent findings include the transactions which they mainly use
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Other Online 2% Shopping Loan 13% Calculator 0% Online Taxes

Usage
Balance Check 31%

Payment 0%
Funds Transfer 23%

Bill Payments 31%

It can be seen that two main transactions used are balance check as well as bill payments followed by funds transfer and online shopping, which shows that these customers do not use the system merely for viewing but for real transacting too which is not the case with our customers and needs to be focused. Advertisement Impact It is very important for us to analyze the impact of latest advertisement campaign on non bank customers because this would form our new target audience and also help us in getting inputs for enhancing the utility value. The results are as follows

Ads Impact
No Impact Somewhat Good Impact negative impact

10% 11%

6%

73%

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It is clearly evident that around 73% of the non BoB customers are no way influenced by the latest advertising campaign , whereas only 10 % of them have a good impact. Thus our focus should be in setting ads which influence the heart as well as the mind share of the customers and thus influence their decision making with regards to internet banking services.

Thus it is this findings from other banks customers which would helps us decide our strategies for improving our services , acquiring new customers whereas switching branch banking customers to internet banking and helping them to transact using the best alternate delivery channel of Internet Banking.

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STRATEGIES

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Strategies for Enhancing the Utility value Zone Gujarat UP Greater Mumbai Reg. 31.03.08 34247 11847 22766 Reg. 31.03.09 58776 19529 43368 12634 24031 30301 5506 18989 3397 5432 221963 Target F.Y 2009-10 86000 28700 63500 18500 35200 44400 8000 27800 5000 7900 325000

Maharashtra & Goa 5110 North South Eastern Rajasthan Bihar, Orissa Jharkhand MP & Chattisgarh TOTAL 2416 112119 10336 12990 1936 9232 & 1239

Considering our focus only on Greater Mumbai Zone we find that the present Internet banking customer base is 43368 and the target for next year is 63500 which means an increase of around 47% at almost half the rate as previous year.

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Customer Target
90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2008 Users 22766 2009 43368 2010 (Bank Target) 63500 2010 (Strategised) 87000

Thus we need to devise strategies not only to increase our customer base as targeted but also to encourage the usage of the same. In the following sections to come we shall devise strategies to achieve almost double than this year figures (87000+). Thus we now shall cover strategies for the same on mainly three basic approaches A. Level of Awareness B. User Friendliness C. Better Utility Features Each of them shall be covered on Internal as well as External fronts. For the clarity of definition internal front covers all those practices which should be followed within the bank by the Bank employees which includes manpower planning , training programs, incentive planning and better functional understanding; whereas External covers attempts that should be done externally so as to influence the customers and include advertisements, promotions, donations , charity, public relations and the like.

Users

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A. Level of Awareness
Internal Practices & Initiatives One of the very important aspects for a product / service to work efficiently is the level of awareness of people associated with the service; the same holds true for Internet banking system Baroda Connect. While surveying the customers around forty to fifty bank employees were also surveyed as customers in the form of mystery shopping to judge on their level of awareness and affinity to use the system and to our astonishment only 10 12 employees were found to be using the system and fully aware about the features and utility of BarodaConnect. Thus in order to reach out to the masses for presenting our service it is initially very important for our employees to be fully aware about the system in terms of the facilities , utilities and functionalities available . Also they must be fully updated on latest technological developments going in the bank so that even they can assist the customer with regards to the services requested and our latest technological banking used. Quoting example of the latest advertisement campaign with the slogan: State of the art. Straight from the heart. It was found that majority of the banks employees were themselves not aware about what the slogan meant and what area did it focus and on asking their reviews about what comes to their mind on hearing this they gave absurd rather vague answers which were no way related to banks campaign. Thus this implies the impact of the latest advertisements on the bank employees was almost nil. Also while surveying the employees on the latest campaign BarodaNext it was found that majority of the employees were still not in a position to explain what the initiative was, that could be due to variety of reasons like 1. Either they were not involved in the upbringing of the idea and thus no support / interest from their side. OR 2. They are too loaded with their duties that they do not have time to know about other ongoing activities of the bank. OR

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3. They are merely interested in doing their daily monotonous activities and not updating themselves about any new developments in the bank. OR 4. They are not trained and updated frequently about the latest products / services of the bank. The response obtained could be due to one or more than one of the above reasons. The reasons could be further analyzed to know the employees attitude towards new products/services and the training / developments they wish to participate in; the same can be mapped on to analyzing the employee activeness for Internet Banking system- Baroda Connect. Another insight obtained was the level of awareness in the BarodaConnect Operations Team (BCOT) which mainly looks after the operations of the system. It was found that of 20 - 22 operations team members none of them have received an official training program and have been a part of the team and working on the operations front by their own skill set and self gained knowledge about the working and features of the system. Thus as an first initiative a full fledged training needs to be given to the BCOT members on various fronts which includes Functional Working , Technological Background of the Website , Various Features and difficulties faced , security concerns and the like. Also not only initial training would work but fixed interval regular periodical training needs to be done so as to update about the latest developments happening in the bank with regards to developments in the internet banking arena. Further these people would train other employees on various necessary issues of concern so as to assist the customer with regards to their queries. What needs to be developed is a help desk centre wherein a log of all the queries addressed would be maintained along with a faster online help assistance in terms of helpline software a similar developed by one of our BCOT Team member so that in case of similar queries in the near future easy solutions can be offered within small duration of time.

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Also some amount of responsibility should be covered and distributed to the branch employees too. Further analyzing on this school of thought we need to design incentive based schemes for branch employees wherein a small target of just attracting/ channelizing four customers per employee per month should be given to each employee of the branch .In this way if we work out we find that with an average employee strength of 18 employees / branch it works out to be 72 customers per branch per month. Working: Greater Mumbai Zone Number of branches: Eighty Five (85) Avg. Number of Employees / Branch: 16 20 (18) Customers to be attracted: Four per employee per month (One per employee per week) Total No. of Customers gained per month per branch: 18*4 = 72 Total Number of branch customers: 72*85 = 6120 Total Customers switched in a year: 6120*12 = 73440 Result: Much higher than our projected total.

What we need to design is the incentive scheme which can either be monetary or cumulative to highest customers that a branch can acquire. The branch availing the maximum number of customers shall be awarded in terms of some holiday package / one day trip to a particular nearby place. Also the same incentive based plan used for Regional E channel managers can be put to implementation at the branch level. For the ease of employees who are still unaware about the Internet banking modules and the facilities offered through the bank we need to arrange various training programs for them to have technology savvy employees.

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Internet banking officers: A strategized and effective concept Also while considering the future developments for achieving our targets what we can design is a team of Internet banking officers at every branch who can assist the branch employees as well as the customers. For the testing purpose we can try to appoint a few of employees from the e-marketing department who are well acquainted with the system in Mumbai branches and observe the response of the employees as well as the customers. The responsibilities of the Internet Banking officers would be: 1. To make the new and existing customers aware about the Internet Banking features and facilities 2. To attract and raise an intention to shift to internet banking system of the bank. 3. To actually complete the registration process and then activate to use the system 4. To eliminate cognitive dissonance, if any, of the customers with regards to any features like security, services and the like. This strategy can be applied in cases wherein the branch employees have the potential to convert the branch customers to internet banking customers but are too loaded with their own set of responsibilities and hence cannot devote time for the purpose. Thus what they need to do is to just direct the potential customers to the Internet Banking officers and then he shall complete the remaining process to convert them into internet banking customers.

BENEFITS OF THE STRATEGY The benefits of the strategy include monetary as well as better utilization benefits. Using this strategy not only can the bank save on huge amount of software resources but various other like paper, computer , printer and most importantly human resources which can be better utilized for other purposes like financial advisory , customer relationship management, financial planning and other banking products. As far as benefits to the customer are considered there are lot of time savings which he can gain on. There would be lesser queues at the branch for pass book entries, fund
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transfers and the same can be done online with better utilization of their time for other priority tasks. The intention of the internet banking is to minimize the usage of the branch and offer at-your-fingertips-banking. The use of Internet banking officers at a few branches for trial purposes can be initiated and tested so as to judge upon the success of the strategy.

COST The cost includes 1. Cost of the few selected employees which includes Salaries etc 2. Training costs of the employees

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External Initiatives Considering the nave stage of internet banking system in our bank the first thing we need to work on is Awareness. Our media planning in terms of Advertisements , Banners and hoardings should intend on the vast arena of internet based system ,facilities, features, benefits to the customer and the like. For example an advertisement with a man discussing the benefits of internet banking to customers standing in queue for passbook entry or fund transfer would have a good impact on them to shift from branch banking to internet banking. Similarly a hoarding / banner with message of Why do you need to visit the branch every now and then when you can get everything at the click of your mouse with bottom line as Get yourself registered and be a active user in flat four days would definitely create a good impact about the facilities and services of the bank with regards to internet banking. Also what matters today to many customers is that they need some incentive to use; with this context in mind we can use SMS as an important medium to reach out to the masses. We can provide some vouchers or Bank of Baroda goody bags to the users. This would not only attract more users but also whenever the customers use our goody bags it would focus on our customer loyalty and spread the word quickly. Also while searching for Internet Banking on Google; one key finding obtained was about SBI. It was the first site to flash on the search engine thus directing maximum users. We need to try to obtain a similar search response for our website too. We also can use the viral marketing techniques along with paid ads on various online shopping / travel planning websites like makemytrip.com / yatra.com / irctc.co.in so that we get focus / attention online while one transacts for a particular service. The other incentive based strategy we can apply is to tie up with various utility services payees to offer some discount / cash back on using the bank of baroda internet banking system for paying their utility bills either via BarodaConnect or by using their BarodaConnect for ECS facility.
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Also what one can do to spread awareness among the customers is while the customers are busy standing in queue for a particular transaction / services one of our internet officers can target him to explain about the benefits of using the system and thus switch him from branch to internet. Also one thing noticed yet unnoticed is the availability of Relationship mangers with regards to Internet banking about which the customers are unaware; which needs to be taken care of. As far as new customers are concerned we can make them aware about the system as our initiative and not on their request. This would lead to initial registration benefit thus saving on our future initiatives. Thus in the external planning stage we work on four stages of reaching to the masses

BENEFITS OF THE STRATEGY The benefits other than discussed in the internal incentive section include a. Reaching to the masses b. Creating awareness amongst the customers about the internet banking c. Creating an interest and intention to use the banks services and actually transacting through the system.

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d. Indirectly acquiring banks customers currently using other banks services for transacting through BarodaConnect.

COST The costs that would be incurred in this initiative/ strategy would be comparatively high, but considering the huge customer base it would reach; the cost would be much lower and cheaper. The various costs would include 1. Media Planning / Advertisements 2. Paid Advertisements 3. Corporate Tie-ups 4. Promotion budget for bill payments cash back

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B. User Friendliness
The next important aspect to be considered once awareness is done is to provide a very user friendly approach to the customer registering for the internet banking system. The user friendliness needs to be checked on various fronts like 1. Pre-Registration Stage 2. Registration Process Stage 3. Activation Process Stage 4. Usage/Transaction Stage In order to improve and efficate the process we need to first understand the banks ongoing registration to activation cycle which shall be explained below. It is then that we work on individual fronts and section as mentioned above so as to improve the utility value in terms of user friendliness

Customer approaches Bank for system access

Time spent : Variable, depends on customer

Bank sends Filled up Form to BCOT

Generation of ITRACK No. & sending takes around 3 days

BCOT Receives the duly filled form

NO ITRACK Entry Manual Keying of entry

YES A

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3 Days for process

Inward Entry Stage Either direct or manual key in

2 Days for process

Dispatch Password to branch / user id to Customer

Unknown Time Span

Enabling the user id by activation process

Thus the total time for the customer application receipt to password dispatch takes around 7 to 15 days which has not been my personal experience (Mystery Shopping) Being on a conservative side and assuming that it would take 15 days, its too long considering the speed offered by other banks. Thus we need to split or subdivide the processes into sub-processes and work on each of them to increase the speed and efficiency of the system. 1. Pre Registration Stage: This stage includes the application / internet banking system application assistance stage wherein a customer needs to fill in the application form and thereon the process is carried forward. We can enhance the efficiency of the process by offering the internet banking system as a compulsory option to all the new customers so that we can save on the reinitiating process of conversion to internet banking. This can be done by giving within the form instructions for Internet banking system registration.

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2. Registration Stage: This is the immediate stage succeeding the pre-registration stage wherein within the bank activities take place. This phase takes around 5 to 7 working days depending upon the various intermediate necessary steps. We can improve on the efficiency of this process by reducing the time span to just few hours by use of OCR forms the character recognition forms wherein one doesnt need to manually key in the forms but just scan them and thus save lot of time in the process WORKING: Considering the manual key in we find that only 150 forms can be keyed in by a person in practical working day of eight hours and the number of forms we receive each day is around 500 in number. Thus it takes processing time of three days for a particular received entry; with the probability that it will be in the same received five hundred forms. However using the OCR machine for feeding the data we can complete the same in hours. Thus, saving huge amount of time and resources by using the OCR system we can offer better efficiency in the process.

3. Activation Stage: This is the stage wherein once the within the bank activities are duly completed, the customer receives the user id and the password needs to be collected from the branch. (Note: Visit to the branch makes it again dependent on branch banking) And also once this process is done, the hitch comes when the customer has to activate his account, which is not necessary and absolutely redundant mainly because it is the same customer who has validated and requested for the access of the system. We can reduce the time span in this process by delivering the user id and the password at the door steps of the customer with a validating signature and address/ identity proof of the customer. For security purpose of the customer the first login should be

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based on certain unique questions and combinations known to the customer and thus can avoid fraudulent logins and accesses. Thus, we can reduce the enabling time, the present duration for which is not known.

4. Usage / Transaction Stage: Once the above mentioned stages are covered, the most important stage is the Usage or transaction stage wherein post the formal activities the actual transaction needs to be done. This stage is a very important stage as even though there are many users who register for the service but hardly few who actually use the system. Thus the conversion rate from the registration to usage is very low. This can be proved from the data availed from the data centre which shows that of the total registered user base of around 221963 users the analytics data is particularly poor. The total number of clicks and transactions as per data availed shows that there are only 3021 corporate and around 925 clicks on a daily basis which is hardly 1.77% usage and thus we have this amount of users using the system actually as compared to the registration. Thus there could be various reasons which need to be analyzed in depth to get to the Crux of the issue and explore the unexplored potential of the remaining 98.23% users and convert them into potential users. The primary reasons stated by category users for the same are as below: 1. There are lots of problems while actually logging in the system related to the transacting section, activation and password feeding error. 2. Also many a times even though they have recently received the password it does not get activated easily and thus they need to track the problem with the operations team. 3. Also considering the response time for solving their queries, many users quit their intention to use the system. 4. Also some pre-conceived notions about their past experiences stop them from reusing the system.
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Thus in order to improve upon the actual usage we need to devise a usage / transaction stage team which would look after all or mainly most of the above mentioned queries and help the customer to use the system. Also as suggested above direct delivery of the password and user id with the activation based on certain combination of questions on first login can help solve majority of the activation and transaction issues, Thus what we can design is a full fledged team of around five members who would be replacing the current help desk staff of only 2 members.

The functionality and responsibility of the team members would be 1. To log in every call they take with their respective queries and develop a call log with their solutions offered so that a similar instance in the future can be addressed much faster 2. In case if the issue is a longer and time consuming then to assure the user about responding them by a call back. 3. To assist the user with a onscreen help with a online help functionality so that the user can clarify his query while on the screen using his system. 4. To reassure the customers every time they use the system about the security concerns with regards to safe transactions, security measures used and the like so that they feel safe about their transactions

One major issue discussed with the users is the unavailability of the toll free numbers. This is mainly because of the resources (currently two- one for branch assistance and one for customer) dedicated for the cause which is hardly a number that should be dedicated for the development and assistance. The same can be solved using this team of five members who can help in addressing the issues of the customers.

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Manpower Planning One important aspect in this stage as well as to have user friendliness is the manpower planning stage. In this stage we divide our manpower and assign them specific functionalities to efficate the process. The same shall be discussed as below We design a team of 12 members working in the BCOT Team who shall be working in the designed pattern as shown:

PreRegistraton Stage

Forms Distribution (Branch Correspondence) Forms Completion Activities Number of members dedicated: Three (One for the first function and two for branch assistance)

Registration Stage

Use of OMR forms for faster entry Registration a compulsory option rather than on request Number of members dedicated: Two for faster OMR entries and similar tasks

Activation Stage

Combined with the registration stage Based on some fixed combination based login Number of members dedicated: Two to look after the immdeiate activation and the above mentioned activities

Usage/Transaction Stage

Helpdesk Setup / System Call Log System Number of members dedicated:Five which acts as our customer relationship cell at helpdesk

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Thus it is using all the above mentioned strategy stages and the manpower planning as described above which can be implemented to improve on the user friendliness front. Also at the usage stage we need to further refine our website to match the requirements of the users and help them get what they need from the system. This section of website requirements shall be covered in the utility features planning stage. BENEFITS OF THE STRATEGY Considering the current scenario no proper channelizing of responsibility distribution can be seen, the adverse effects of which are borne by the customer. The above mentioned strategy would be beneficial to the bank and the customer in terms of 1. Fixed and dedicated resources with their set of responsibilities. 2. Availability of the required customer assistance from the banks helpdesk 3. Faster & Hassle free registration procedure to encourage the registration 4. Lower dependence on the branches (only in terms of forms retrieval) 5. Use of fixed combination security measures to ensure security and confidentiality of the customer access. 6. Setup of Helpdesk which would further facilitate the process in terms of the response time, easiness in the registration friendliness and usage.

COST The total cost incurred for implementing the strategy would be mainly on two fronts a. Technology Implementation b. Training to match the technology

a. Technology Implementation This front covers usage of OMR/OCR Optical Character Recognition machines for form entry and scanning so as to reduce the time in the registration process. Also some software needs to be developed to feed in from the OCR to the system. This further needs to be discussed with the software vendor for the actual costs that would incur.
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Also we need to develop a helpdesk system which would perform the tasks as discussed above with regards to the call log and customer assistance.

b. Training to match the technology Training forms a important component of the development as implementation of a particular module would work efficiently only when the resources are trained to perform efficiently. Thus technology training in terms of better utilization of the technology should be the next prime are of cost in this strategy.

Utility Features

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In order to understand the utility features of BarodaConnect we need to perform a comparative analysis of the banks services vis--vis other premier banks services The same shall be analyzed with the help of the table below Services\Banks HDFC ICICI Axis Account Information Balance Summary Account details, activity Download activity Transfers & Payment Funds Transfer within India Funds Transfer outside India Bill Payments Payee List Direct payments w/o reg.(Gateways) Standing Instructions Demand / Draft SBI PNB BoI UBoI Canara BoB

Managers

Cheque

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Investment services Mutual Account Share Trading Demat Account Fund

Customer Service

A/c Servicing Rate Information Apply now

Value Added Services

Train Bookings

Online Payments

Tax

Loan Modeling Online Shopping Mobile Recharge Contact Centre Send Messages Read Messages

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Read Messages

Saved

Information Closing Link to Centre Security Concerns 128bit Security Secure Code the Portal

From the above chart it can be seen that our Bank is almost at par with all the other premier banks in terms of utility services except at a few places with regards to internet security which is currently taken care of by the bank. However what lacks the most is the orientation of the website, the response speed, the bounce rate, the transaction time and the like. One important thing noticed on the websites of private premier banks was the ease of navigation, easy availability of the functions and quick transactions capability which were missing on the public sector websites except for SBI. Thus we need to develop a faster response system which is very light on usage and takes much less time to load while transacting. Also security concerns need to be taken care of which includes awareness of phishing attacks, security secure codes- two token security measures. Thus in order to improve on various utility features, we need to work on orientation of the various modules and features and their appearance. This would not only provide convenience to the customers but also ease the queries to the helpdesk as major problems the customers face include those wherein they are unable to locate a particular service they are looking for especially in the bill payments section just to mention a few.

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As another initiative we can try to have corporate accounts and then their salaried accounts transferred to our bank on various quality features which are at par with other banks. This would help us gain huge corporate as well as salaried accounts and thus better number of active internet banking users who would actually be using the system for various transaction purposes. Analyzing from the current data availed from the data centre team we find that even though the number of registered corporate users is almost half that of retail users but the usage pattern is completely reverse. We have majority clicks from the corporate users with major transactions happening for the bill payments which include tax payments, railways booking and premium payments. Thus the most used transactions include Self/Third Party Transfers and Bill Payments which are covered as above. The tabulated result is as follows: Services Self\Third party Transfers Bill Payments Tax payments Users Retail Corporate Both Both Day 1 153 41 700 Unavailable Day 2 435 251 2262 1283 Day 3 412 254 1182 225

This is merely a slice of the actual pie on what we need to work on and thus this data is barely sufficient to take improvisation steps and even the customer base actually using the system is particularly low. In order to improvise on what best our bank can provide, we need to implement a web analytics system which would help us improve on daily basis to monitor the flaws of our system and the areas of concern where we need to work on.

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About Web Analytics System Web analytics is the measurement, collection, analysis and reporting of internet data for purposes of understanding and optimizing web usage. There are two categories of web analytics; off-site and on-site web analytics. Off-site web analytics refers to web measurement and analysis irrespective of whether you own or maintain a website. It includes the measurement of a website's potential audience (opportunity), share of voice (visibility), and buzz (comments) that is happening on the Internet as a whole. On-site web analytics measure a visitor's journey once on our website. This includes its drivers and conversions; for example, which landing pages encourage people to make a purchase. On-site web analytics measures the performance of your website in a commercial context. This data is typically compared against key performance indicators for performance, and used to improve a web site or marketing campaign's audience response BENEFITS OF THE STRATEGY Thus implementation of this system helps us analyze on various fronts which include a. Ease of Navigation b. Optimum Usage of Web Features c. Navigation Flow d. Better & Optimum Transaction Time e. Easy availability of required features

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COST For initial observation purposes we can implement free web analytics from Google or Yahoo. However with the advance of our response and successful results we can then purchase a paid system with better functionalities and thereafter further improve our web features.

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6. Limitations of the study

However, this study has limitations. The study conducted was in the region of Greater Mumbai Zone; the behavioral pattern for the entire Indian Customer base would be proximate to the selected population. The factors, which were developed in this study, are mostly based on exploratory studies. Moreover, it is almost first of its kind in this part of the country; it may be difficult to generalize. Many behavioral implications have been considered in depth; however it is practically impossible to map on the complete human behavior due to varying behavior patterns of the human mind. It is through this research study an attempt is made to gain an insight into consumer behavior with regards to adaptation of technological products in the country. Scope of study This study can be used as a base for future research and further implementation of strategies suggested with regards to analyzing the finer components related to enhancing the utility value of the banks internet banking system- BarodaConnect. This study also suggests some simple, easy to use and implement strategies which can be implemented and monitored on a frequent basis so as to improvise on the banks product and enhance the functionality with the customers Also with regards to this study we can try to analyze the pricing index for the bank as done in the reference world retail banking report.

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7. Conclusions
The most important aspect of the study is what we can conclude from the findings and how we can actually work on the improvements. A key finding in a research on Customer Utilization of BarodaConnect was that Internet banking is critical for customer retention in the banking industry. Therefore, the adoption of Internet banking services by the account holders is crucial to the banking industry. The findings of this study are also indicating that there is a need for developing a cost effective, technically supportive and security based Internet banking adoption model by the bank. Considering the sum of money invested into Internet banking systems, it is essential to ensure that the people will actually use them. In order to achieve this goal, attention must be given to issues, which were discussed in previous sections. Further, the findings also indicate that the bankers take efforts in diffusing the Internet banking technology by developing the faith in usefulness, ease of use, credibility, reliability, access, and fastness among the customers. Also the bank needs to work on various fronts which include 1. Level of Awareness with regards to Internal and External fronts which includes various in-house awareness drives, incentive based planning and external media sources like advertisements, incentive to use, promotions and cash back offers. 2. User Friendliness in terms of speeding up the Registration process by proper manpower planning and efficient utilization of resources and deployment of modern technological support and training. 3. Proper display and appearance of utility features with the guidance of Web Analytics System, various corporate tie-ups and the like.

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References
1. www.bankofbaroda.com 2. www.bobibanking.com 3. www.networkmagazineindia.com 4. www.expresscomputeronline.com 5. www.aba.com 6. www.banknetindia.com 7. www.irdbt.com 8. www.iba.org.in 9. www.cimoney.com 10. www.arraydev.com/commerce/jibc 11. The Internet Business Review-Issue 1 October 20041 12. Reserve Bank of India Report on Internet Banking Systems 13. World Banking Report 2009 by Capgemini 14. Internet Banking: Developments & Prospects - Karen Furst, William W. Lang, and Daniel E. Nolle 15. Journal of Internet Banking and Commerce 16. E-Marketing by Judy Strauss, Adel El-Ansary and Raymond Frost 17. Internet Banking Multi Dimensional Perspectives by Krishna Kishore Puranam and Ravi Kumar Jain B

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ANNEXURE

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Annexure 1 : MODUS OPERANDI FOR PROJECT

Understand BarodaConnect's operations Study & Analyze BarodaConnect's Features (Retail & Corporate) Internal Study Study & Analyze the Web Analytics for our System

Study Other Private Banks' Internet Banking System(Retail & Corporate) Study Other Public Banks' Internet Banking System (Retail & Corporate) External Study Try to map on their Web Analytics for a particular period ( Subject to Availability)

Field Study

Visit Bank of Baroda Branches to get the comfort level regarding I.B. system & their offerings Visit Other Premier banks' & try to map them on as per BoB's mapping

Surveys

To conduct surveys through various instruments like Questionnaires,Interviews,Branch Intercepts and the like Requires prior designing of target sample and sample designing.

Data Consolidation

To consolidate the data availed from all the sources (Internal & External)

To perform the comparison in terms of various parameters (Influential / Behavioral / Costing / Features /Services /Level of Differentiation / Utililization Value / Benefits -customers & bank) Data Analysis

Findings

To pen down the findings in terms of the improvements deliverables that can be done.

Measures / Strategies

To devise steps / strategies to improvise the utility value to customer

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Annexure 2: Bank of Baroda Customers Questionnaire Name______________________________ Age________________________________ Profession__________________________

o You have been our privileged customer for a. Less than a year b. 1-3 years c. 3-5 years d. Greater than five years

o Are you aware about Bank of Barodas Internet Banking System & its wide variety of features? a. Yes b. No

o Do you use the system? a. Yes b. No

o If yes, you are a. Retail User b. Corporate User c. Both

o How frequently do you use the System?\ a. Once in a Day b. Once in a week c. More than once in a day / week e.Once in a fortnight

d. Very often (several times in a day)

o What transactions do you mainly use the Internet Banking Services for (Please rank acc. To the usage) a.Balance Check Taxes Payment
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b. Bill payments

c. Funds Transfer

d.Online

e. Online Shopping (Ticket Booking..etc)

f. Loan Calculator

g. Other

o In case if you do not use it, that is mainly because a. I am not aware about the system and facilities b. Its not that user friendly c. I feel Branch Banking is rather convenient d. There are lots of complications in the registration process e. Internet Banking is not that secure

o Do you use any other banks net banking services? a. Yes b. No

o If yes, please select which of them? a. HDFC Bank e. Punjab National Bank h.Canara Bank i.If others b. ICICI Bankc. Axis Bank f. Bank of India d. SBI

g. Union Bank of India

o What leads you to driving towards their services? a. Service quality d. Good Features b. Response time e. Others c. Easiness to use d. Incentive to use

o What would you like Bank of Baroda to improve on with regards to Internet Banking ? a. Level of Awareness Features b. User-friendliness c.More Utility

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o Whats the first thing that comes to your mind when you see Baroda Next? a.

o What is the first thing that comes to your mind when you hear State of the Art. Straight from the Heart? a. ..

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Annexure 3 Non Bank of Baroda Customers Questionnaire Name______________________________ Age________________________________ Profession__________________________ o You have been a Banking customer for a. Less than a year b. 1-3 years c. 3-5 years d. Greater than five years

o Are you aware about Internet Banking System & its wide variety of features? b. Yes b. No

o Do you use the system? b. Yes b. No

o If yes, you are b. Retail User b. Corporate User c. Both

o How frequently do you use the System? b. Once in a Day d. b. Once in a week c. More than once in a day / week e.Once in a fortnight

Very often (several times in a day)

o What transactions do you mainly use the Internet Banking Services for (Please rank acc. To the usage) Balance Check Payment Online Shopping (Ticket Booking..etc) Loan Calculator Other
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Bill payments

Funds Transfer

Online Taxes

o In case if you do not use it, that is mainly because a. I am not aware about the system and facilities b. Its not that user friendly c. I feel Branch Banking is rather convenient d. There are lots of complications in the registration process e. Internet Banking is not that secure

o Which all Banks Internet Banking Services do you use? a. HDFC Bank e. Punjab National Bank h.Canara Bank i. Bank of Baroda b. ICICI Bankc. Axis Bank f. Bank of India d. SBI

g. Union Bank of India

o What leads you to driving towards their services? a. Service quality d. Good Features b. Response time e. Others c. Easiness to use d. Incentive to use

o What would you like to improve on with regards to Internet Banking ? a. Level of Awareness Features b. User-friendliness c. More Utility

o Whats the first thing that comes to your mind when you see Baroda Next? a.

o What is the first thing that comes to your mind when you hear State of the Art. Straight from the Heart? a. ..
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Annexure 4 Website Analytics Requirements

Weekly No. of Visits Pageviews Repeated Visits New Visits(Unique Views) Average Time Spend(00:00:00) Traffic Sources Overview Direct Traffic Reffering Sites Search Engines Total Clicks

Monthly Quarterly Yearly

Through Adwords Keywords Campaigns Ad Versions Pop Ups Bounce Rates(%) Navigation Analysis Navigation Paths(ease of navigation) Entrance paths(navi-flow) Landing Page Optimization Entrance Sources Entrance Keywords

Chart Analysis

Related to Entry Through Related to Keywords Based Search

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Engines Click Patterns Most Clicked Transactions/Menu Least Clicked Transactions/Menu Avg. Time Spend on each Menu Avg. Time Spend on Sub Menu

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Annexure 5 BarodaConnect Demo(Retail) Front page

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Login Page

Post login Features Screen

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Bills

Transfers

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Requests

Mail System Online

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Alert System

Personal Profile Change

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Activity / Transaction Based History

Financial Modeling

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