Research Outline

On

A Study on Technological Innovations in

Banking with Special Reference to E-Banking
Services in Shivamogga District
Submitted by

Ravi C.S
Lecturer, Department of Commerce and Management,
Sahyadri Arts and Commerce College,
Shivamogga- 577 204
Under The Guidance of

Dr. Kundan Basavaraj

Associate Professor,
Department of Commerce and Management,
Sahyadri Arts and Commerce College,
Shivamogga-577 204
Submitted to Kuvempu University, Jnana Sahyadri, Shankaraghatta-577451 for
registration of Ph.D. Programme in Commerce

May 2012

A Study on Technological Innovations in Banking

with Special Reference to E-Banking Services in
Shivamogga District
1. Introduction
The banking scenario in the country in the post liberalization and deregulated
environment has witnessed sweeping changes. The tremendous advances in
technology and the aggressive infusion of information technology had brought in a
paradigm shift in banking operations. For the banks, technology has emerged as a
strategic resource for achieving higher efficiency, control of operations,
productivity and profitability. For customers, it is the realization of their
Anywhere, Anytime, Anyway banking dream. This has prompted the banks to
embrace technology to meet the increasing customer expectation.
Technology to start with is a business enabler and now has become a business
driver. The banking institutions cannot think of introducing a financial product
without Information technology support is it customer service, transactions,
remittances, audit, marketing, pricing or any other activity in the banks.
Information Technology plays an important role not only to complete the activity
with high efficiency but also has the potential to innovate and meet the future
requirements. Information Technology has therefore introduced new business
paradigms and is increasingly playing a significant role in improving the services
in banking industry.
In the above backdrop it becomes imperative to dwell on the evolution of
Information Technology in banks before embarking on the various aspects of ebanking. Information Technology came into picture as early as in the 1980s in
banking industry through the Rangarajan Committee recommendations and banks
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have given utmost importance to the technology since the last 25 years. The
Reserve Bank of India is constantly pursuing the banks from 1980s to introduce
computerization at branch level and to improve the quality of customer service
through technology.
E-Banking implies performing basic banking transaction by customers round the
clock globally through electronic media. Alternatively electronic banking can be
defined as delivery of banks services to a customer at his office or home by
using electronic technology and this has resulted in conceptualization of
virtual banking. In traditional banking, the customer has to visit the branch of
the bank in person to perform the basic banking operations viz., account enquiry,
fund transfer, cash withdrawal etc. The brick and mortar structure of a bank is
essential to perform the banking functions.
On the other hand, E-Banking enables the customers to perform the basic banking
transactions by sitting at their office or at homes through PC or LAPTOP. The
customers can access the banks website for viewing their account details and
perform the transactions on account as per their requirements. Thus, todays
banking is no longer confined to branches. Customers are being provided with
additional delivery channels which are more convenient and are cost effective to
the banks. This has resulted in shrinking of geographical boundaries, easy reach to
the clientele, reliable and secure services.
This study aims to make a contribution to two primary theoretical areas: the human
electronic banking relationship and interaction, and cognitive and social
psychology. Thus the study is based on literature in two domains:
1. Electronic retail banking
2. Customer behaviour

Studies concerning electronic retail banking in particular have been published in

various academic journals. The most important of these are the international
Journal of bank marketing, the journal of financial services marketing, the journal
of Indian banks association and the journal of internet banking and commerce. The
customer behaviour literature is, a huge area comprising many different research
orientations. The fundamental reason for studying customer attitudes in the present
study originates on the one hand out of the lack of attitude research in electronic
banking and on the other hand out of the authors interest in understanding
customers needs and desires. Thus, this study aims to inquire into the psychology
of the customer behaviour.
Traditional Banking Vs E-Banking
In traditional banking, the customer has to visit the branch of the bank in person to
perform the basic banking operations, viz., account enquiry, funds transfer, cash
withdrawals etc. The brick and mortar structure of a bank is essential for the
performance of banking functions. On the other hand, E-banking enables the
customers to perform the basic banking transactions by sitting at their office or at
homes through viewing their Account details and perform the transactions by
sitting at their office or at homes through PC or LAPTOP.
The customers can access the banks website for viewing their Account details and
perform the transactions on account as per their requirements. With E-banking, the
brick and mortar structure thereby giving a concept of virtual banking, the brick
and mortar structure of the traditional banking gets converted into a click and
portal model, thereby giving a concept of virtual banking a real shape. Thus,
today's banking is no longer confined to branches. Customers are being provided
with additional delivery channels which are more convenient to customers and are
cost effective to the banks. These delivery channels include ATM, Tele Banking,
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Internet Banking, Mobile Banking, Home Banking etc. Thus, E-banking facilitates
banking transactions by customers round the clock globally.
2. Review of Related Literature
Daniel (1999) defines electronic banking as the delivery of banks' information and
services by banks to customers via different delivery platforms that can be used
with different terminal devices such as a personal computer and a mobile phone
with browser or desktop software, telephone or digital television. Electronic
banking also commonly known as internet banking or e-banking, Internet Banking,
defined as the delivery of banking services through the open-access computer
network (the internet) directly to customers home or private address.
Margaret et al, (2000) in their study on Factors Influencing the Adoption of
Internet Banking revealed that attitudinal and perceived behavioral control
factors, rather than social influence, play a significant role in influencing the
intention to adopt Internet banking. In particular, perceptions of relative advantage,
compatibility, trial ability, and risk toward using the Internet were found to
influence intentions to adopt Internet banking services.
Sabbagh-AL Imtiyaz and Molla Alemayehu (2003) in their study main aim of
this paper is to explore the drivers and inhibitors of customers Internet
banking adoption in the Sultanate of Oman. Data from 225 respondents were
used to address the aim. The findings indicate that, in Oman, only two banks offer
Internet banking services to customers. The main drivers of adoption appear to be
compatibility, usefulness and ease of use. The extent of use is affected by lack of
government support, poor quality of connection and page loading speed. Trust and
face-to face personal banking preference have been found as major inhibitors of IB
adoption.
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Madhu (2003) in his article stated that The New World of Banking a Paradigm
Shift, reported that banks invested more in technology and increased focus was
on internet bank, Automated Teller Machine (ATM), mobile banking, tele-banking
and anywhere banking. Technology also helped banks to improve their product
delivery and profitability. It increased customer service and reduced transaction
costs. This had helped banks to lower charges to its customers.
Hill (2004) in this he has conducted a study concerned with Identifying the
Characteristics of Online Banking Users. She mentioned that it is commonly
assumed that demographics do influence the acceptance of electronic self-service
tools, such as online banking. The results of the study were that people who use
such services are young, trendy and high earning. They actively seek out online
banking tools, and they want to conduct all transactions through the same channel.
Fitzergerald (2004) in his research articles on An Investigation into Peoples
Perceptions of Online Banking, choose to analyze four different research papers
to identify current and potential customers perceptions on online banking. He
concluded that there are common perceptions regarding online banking with
disregard to demographic, geographic or psychographic characteristics. He argued
that security concerns and lack of awareness of online banking are among the
major non adoption areas.
Sohail and Shanmugham (2004) in their research article titled E-banking and
Customers preferences in Malaysia: an empirical investigation, their results
were based on a survey of 300 respondents. Their conclusion indicates that age and
educational qualifications of electronic and conventional banking have no
significant impact on E-banking adoption. Instead, they argued that accessibility to

the Internet, awareness of E-banking and customers resistance to change are the
main factors influencing the adoption.
Rai (2005) in his articles on titled Strategic Marketing for Indian Public
Sector Banks in Globalized Economy concluded that the liberalization policy
paved way for the growth of private and foreign banks. These banks not only
offered very good service right from 24 hour banking to sophisticated customer
relationship practices, but also a variety of new and other related banking
instruments like mobile banking, internet banking, core banking, e-mail banking.
These instruments helped them in attracting new customers.
Mohanty (2005) in his research article on Core Banking Solution for Banks The Indian Experience, in E-banking in India stated that through core banking
solution (CBS) banks provided all services like ATM, debit cards, tele-banking,
internet banking, etc., through a single channel. CBS helped to connect all
branches and offices to the central host. Management of enormous data, and
supervision became easier. Despite the huge benefits, some banks failed to
implement CBS due to the fear of complexities in operations and massive costs
involved.
Sharman (2006) through his finding suggest that convenience is the main
motivator for consumers to bank on the internet, while there is a range of other
influential factors that may be modulated by banks. The findings also highlight
increasing risk acceptance by consumers in regard to internet based services and
the growing importance of offering deep levels of consumer support for such
services.
Ravi .V (2006) in his research articles stated that Profiling of Internet Banking
Users in India using Intelligent Techniques, with the advent of innovative
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technology, banks were able to provide customized products and services like
internet banking, mobile banking, ATMs etc., to their customers. Latest technology
helped the banks to reduce their transaction cost. But certain risks associated with
innovative technology and technology related frauds were found to increase. In
order to provide smooth and safe banking to their customers, banks must enhance
the technology related security.
Kesseven et al. (2007) in their research article titled Analyzing the Factors that
Influence the Adoption of Internet Banking in Mauritius was found that the
most significant factor for the adoption of internet banking is ease of use and that
other important elements featured reluctance to change, trust and relationship in
banker, cost of computers, internet accessibility, convenience of use, and security
concerns.
Divya Singhal and V. Padhmanabhan (2008) examined the major factors
responsible for internet banking based on customer perception on various internet
applications. The Study also tries to examine whether there is any relation with the
demographic variable (e.g. gender) and respondents perception about internet
banking; and, whether the user and nonuser perception differs. The study employs
both primary data as well as secondary data. Secondary data was collected from
different published sources. Primary data was collected by structured survey. The
analysis done by using factor analysis indicate that utility request, security,
utility transaction, ticket booking and fund transfer are major factors. Out of
total respondents more than 50 % agreed that internet banking was convenient and
flexible ways of banking and it also have various transaction related benefits.
Wise and Ali (2009) argued that many banks want to invest in ATMs to reduce
branch cost since customers prefer to use them instead of a branch to transact
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business. The financial impact of ATMs is a marginal increase in fee income

substantially offset by the cost of significant increases in the number of customer
transactions. The value proposition however, is a significant increase in the
intangible item "customer satisfaction". The increase translates into improved
customer loyalty that in result in higher customer retention and growing
organization value. Internet banking is a lower-cost delivery channel and a way to
increase sales. Internet banking services has become one of the most important
factors in the business economy today.
KR. Kamath (2010) Banks may more towards universal banking driven by the
forces of deregulation, liberalizations, and technological advancement. The
pressures would emanate from super markets, utility service providers etc.,
Technology has played and is playing a critical and arguably the most important
role in redefining the financial business. Banks are responding by offering
alternative delivery channels like ATMs, Tele banking, internet banking, mobile
banking etc., Most of the banks have already implemented core banking solution
(CBS) across all offices to provide anytime anywhere banking in true sense.
Vijay M. Kumbhar (2011) showed that, demographic characteristics, internet
access, awareness, customer education, cost effectiveness and service quality were
the most important factors in the adoption of internet banking. Therefore banks
need to develop their internet banking services. According to the demographic
characteristic to the needs of the possible customers as well as the existing
customers in order retain them and encourage use more internet banking services.
From the above review of few important works; it is observed that a number of
researchers have worked in the past on e-banking services; internet banking,
technological innovations in banking etc. however, stated earlier, these studies
concentrated only on technological innovations and e-banking services in banks.
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But there are very few studies conducted on e-banking services. Hence there is a
need for a comprehensive study on e-banking services in Shivamogga district with
a special emphasis on some selected banks.
3. Statement of the Problems
Though the facility of e-banking is getting popular and spreading very fast, most of
the people do not know about it and many people may not use it due to the
misconception of money transfer, hacking privacy, security etc. this study is an
effort to investigate the level of awareness and perception among the customers
using e-banking services in Shivamogga district. This research investigates the
factors which influences the usage of e-banking services. It also tells the frequency
of availing the e-banking services by the customers. This research is an effort to
study the technological innovations in banking on quality services delivery of the
bank customers and also tries to find out the technical, administrative and
procedural problems faced by the customers using e-banking facility. This research
tries to find that it is the technology that has really helped service provider like
banks to provide quality service in less time.
4. Objectives of the Study
The primary objective of the study is to know the e-banking services in
Shivamogga district to find out the sustainability and growth of the banking sector.
Based on the primary objectives, the following key objectives are:
1) To know technological innovations in electronic banking in Shivamogga
district
2) To review and gain guidance from the previous studies and literature
3) To describe the e-banking and its delivery channels as an overview
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4) To examine the profile of the selected banks and the area of study
5) To measure the customers perception about e-banking in Shivamogga
district
6) To enlist the findings of the study and offer appropriate suggestions for an
effective governance of the e-banking
5. Scope of the Study
A number of surveys are conducted in the metro cities of India like Bangalore,
Chennai and Delhi but the customers of the metro cities differ with the customers
of non metro cities in attitude, usage, pattern and recall etc., Therefore the present
research work has been undertaken in the Shivamogga district between the urban,
and rural area as the most people are being in use of e-banking activities. This
study is mainly confined to the e-banking customers only, who have been using the
electronic delivery channels, particularly ATM, Internet Banking; Net Banking,
Mobile Banking and Tele-banking in Shivamogga district of Karnataka state.
6. Hypotheses
The theoretical framework is developed from the literature review. The dependent
variable is consumer perception on the E-banking security. There are four
independent variables such as trust on secure E-transaction, improved technology
and sufficient mechanism for E-Banking transaction, high quality service finally,
awareness and knowledge about regulatory framework of E-banking. These
independent variables are positively related to the dependent variable.
Hypotheses: From the discussion of the theoretical framework, four hypotheses are
formulated to test the relationship between each of the four independent variables
and dependent variable. The four hypotheses guiding this study are as follows:
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H1: The expansion E-banking transaction further, secure transactions with the
trust of the customer are necessary
H2: The increase of use of E-banking system depends on improved technology
and sufficient mechanisms of control
H3: The survival in a highly competitive E-banking industry, depends on high
quality service to customers
H4: The level of awareness about regulatory framework of E-banking represents
a significant factor affecting the use of E-banking
7. Methodology
Research Methodology is the way of systematically solving the research problem.
It is a science of studying how research is conducted. The research methodology
enlightens the methods to be followed in research activities starting from
investigation to presentation. It includes the research design, the locale of research,
the sampling framework, the sources of data, the collection of data, the framework
of analysis and limitations.
Locale of research is studying the services in banking industry, it is imperative to
select the bank branches and customers in banks. Hence, it is decided to include
the banks in the seven taluk of Shivamogga district. The appropriate sampling
technique is used to select the customers of the banks as the samples. Research
design is a framework or blue print for conducting the research projects. It deals
with the procedures necessary for obtaining the information needed to structure
and to solve research problems.
The present study is descriptive and diagnostic in nature since the study describes
the characteristics of e-banking service in banking sector. It is also marked by the
prior formulation of specific hypothesis. It will be preplanned and structured
design. The tool to be used to collect the data is pre-structured interview schedule.
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Since, the study is based on pre-planned objectives and methodology to fulfill the
objectives, it is descriptive in nature. Since the study has made an attempt to
analyze the impact of on the service of commercial banks, customer satisfaction
and customer loyalty; and the impact of satisfaction on service of commercial
banks on customer loyalty, it is diagnostic in nature. Hence, the applied research
design of the study is descriptive and diagnostic research design.
7.1. Sample Selection
For the purpose of the study, totally six leading commercial banks are selected
three public sector banks and three private sector banks, They dominate the market
in the category of e-banking in Shivamogga district. The selected banks are ICICI
bank, HDFC bank and AXIS bank from the private sector and the state bank of
India, corporation bank and Canara bank from the public sector. These six banks
constituted 75% of the total market share in providing services through e-banking.
Moreover, the names of these banks were placed in the BEST BANK 2006 award
panelists, conducted by business India Magazine (December 17, 2006). So, it is
perceived that an analysis of the primary data collected through the survey
conducted among the customers of these banks would help to understand the
perception about e-banking.
7.2. Sampling Methods
The personal judgment method will be employed for the selection of banks, where
six banks will be chosen for the study. By using simple random method 100
costumers will be selected from each bank. This sample pack of 600 customers,
will be duly calculate on the base of sampling proportion.

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7.3. Statistical Tools

The collected data will be analyzed by statistical tools such as chi square test,
Factor analysis, Correlation, Regression and ANOVA. The computer software
SPSS 17 package will be used to work out the statistics.
8. Limitations of the Study
Complaints and various problems expressed by the e-banking customers have to be
generalized as they are not confined to any particular area. The study has focused
on the perception of the customers regarding e-banking services of the banks. The
survey and analysis of the data have to be limited and related to e-banking services
only.
9. Chapter Scheme
The report of the proposed study will be presented in the following chapter scheme
Chapter No.
I
II
III
IV
V
VII

Title of the Chapter

Introduction
Research Design
Profile of the banks
E-Banking and its delivery channels
Measuring Customers Perception

about

Empirical Evidence from Shivamogga District

Summary of Major Findings and Suggestions

Reference
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the

e-banking:

1. Margaret Tan and Thompson S. H. Teo, (2000), Factors Influencing the Adoption of
Internet Banking Journal of the Association for Information Systems, 1(5).
2. Madhu Vij, (2003) The New World of Banking a Paradigm Shift, Journal of
Management Research, 3(3), p.139.
3. Sohail, M, and Shanmugham, B. (2004), E-banking and Customers preferences in
Malaysia: an empirical investigation, Information sciences, Informatics and Computer
Science: An International journal, 150 (3-4), 207-217.
4. Rai, A.K. (2005) Strategic Marketing for Indian Public Sector Banks in Globalized
Economy, the ICFAI Journal of Service Marketing, 3(1), p.24.
5. Dharmendra Singh and Garima Kohli (2006) Evaluation of Private Sector Banks in India:
A SWOT Analysis, Journal of Management Research, 6(2), p.92.
6. Ravi, V, Mahilcarr and Sagar N.V, (2006) Profiling of Internet Banking Users in India
using Intelligent Techniques, Journal of Services Research, 6(2), p.61.
7. Sharman, (2006), Understanding consumer adoption of internet banking: An interpretive
study in the Australian banking context, Journal of Electronic Commerce Research, 7(2).
8. Kesseven et al. (2007), Analyzing the Factors that Influence the Adoption of Internet
Banking in Mauritius Proceedings of the 2007 Computer Science and IT Education
Conference.
9. Ravi, V, Mahilcarr and Sagar N.V, (2006) Profiling of Internet Banking Users in India
using Intelligent Techniques, Journal of Services Research, 6(2), p.61.
10. Dharmendra Singh and Garima Kohli (2006) Evaluation of Private Sector Banks in
India: A SWOT Analysis, Journal of Management Research, 6(2), p.92.

(Dr.Kundan Basavaraj)

(Ravi.c.s)

Research Guide

Research Scholar

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