A Study on Customer Knowledge For Internet Banking

Introduction Internet banking is the term used for new age banking system. Internet banking is also called as online banking and it is an outgrowth of PC banking. Internet banking uses the internet as the delivery channel by which to conduct banking activity, for example, transferring funds, paying bills, viewing checking and savings account balances, paying mortgages and purchasing financial instruments and certificates of deposits. Internet banking is a result of explored possibility to use internet application in one of the various domains of commerce. It is difficult to infer whether the internet tool has been applied for convenience of bankers or for the customers’ convenience. But ultimately it contributes in increasing the efficiency of the banking operation as well providing more convenience to customers. Without even interacting with the bankers, customers transact from one corner of the country to another corner. There are many advantages of online Banking. It is convenient, it isn’t bound by operational timings, there are no geographical barriers and the services can be offered at a minuscule cost. Electronic banking has experienced explosive growth and has transformed traditional practices in banking. Private Banks in India were the first to implement internet banking services in the banking industry. Private Banks, due to late entry into the industry, understood that the establishing network in remote corners of the country is a very difficult task. It was clear to them that the only way to stay connected to the customers at any place and at anytime is through internet applications. They took the internet applications as a weapon ocompetitive advantage to corner the great monoliths likeState Bank of India, Indian Bank etc. Private Banks arepioneer in India to explore the versatility of interneapplications in delivering services to customers. As per prediction the e- banking is leading to a paradigmshift in marketing practices resulting in high performancein the banking industry. Delivery of service in bankingcan be provided efficiently only when the back groundoperations are efficient. An efficient back groundoperation can be conducted only when it is integrated byan electronic system. The components like datahardware, software, network and people are theessential elements of the system. Banking customersget satisfied with the system when it provides themmaximum convenience and comfort while transactingwith the bank. Internet enabled electronic systemfacilitate the operation to fetch these result. An in-depth analysis would help to understand thainternet enabled electronic bank system differentiatesfrom traditional banking operation through faster deliverof information from the customer and service providerAdditionally, it has to be noted that the bankingoperations does not transfer physical currencies insteadit transfer the information about the value for currenciesI-banks enable transfer of information more swiftly online.. In service organizations like banks, informationflows more than physical items. In the commercial worldespecially in most advanced societies today, money israther carried in information storage medium such acheques, credit cards and electronic means that in itspure cash form. E banking has become an importan channel to sell the products and services and is perceived to be necessity in order to stay profitable in successful. The perception is the formed as a result of interpreting the experience. There is a growing interest in understanding the users’ experience; as it is observed as a larger concept than user satisfaction. From this perspective, assessing the user experience is essential for many technology products and services. Customers have started perceiving the services of bank through internet as a prime attractive feature than any other prime product features of the bank. Customers have started evaluating the banks based on the convenience and comforts it provides to them. Bankers have started developing various product features and services using internet applications. Objective The present study aims to explore the major factors responsible for internet banking based on respondents’ perception on various internet applications. Study also tries to examine whether there is any relation with the demographic variable and respondents’ perception about internet banking; and, whether the user and non-user perception differs. Methodology The study employs primary data as well as secondary data. Secondary data was collected from different published sources. Primary data was collected by structured survey. The survey was created online and link sent to the respondents from India using convenience sampling. The respondents, who were approached through email, were 80. Of these, 61 responses were received, giving a response rate of 76.0 percent. In the questionnaire, various internet banking applications were included from previous research. Later, structured questionnaire containing 32 items was developed (18 for general perception and 15 for internet banking features) for the purpose of data collection. All items were measured by responses on a five-point Likert scale in agreement/ relevance with statements, ranging from 1= Strongly Disagree/ Completely Irrelevant to 5= Strongly Agree/ Completely Relevant. The analysis of primary data was carried out using Statistical Package for the Social Sciences (SPSS) 16.0 for windows. Sample Profile From the total respondents’ 64% were males and 36% were females. The chart below depicts the respondents classificationbased on user and non user criteria. Out of totarespondents’ 44 respondents were internet bankingusers’ and 14 were non users. Most of the respondents belongs to the age group of 2430, while 18-23 and 31-39 age group respondents werealmost equal in number. Out of total respondents’ 77% were professional and 18% respondents were studying. Framework of the factors As mentioned that survey focuses on the finding the customers’ perception on various internet application related with internet banking. Various factors which contribute to the customers’ perception such as convenience, flexible virtual banking system, reliability, time factor, real time access to information, saving transaction cost, on-line bill payments, digital signature for security, faster transfer, easy to use, user friendlylow transaction fees, any time and anywhere bankingfacility, access to current and historical transaction datafacility of fund transfer to third party are taken for thisstudy. These factors came from different studies. The Framework of the factors which are taken to assessthe perception is as follows: 1. Convenience way of operating bankingtransactions: Online banking is a highly profitablechannel for financial institutions. It provides customersconvenience and flexibility and can be provided at alower cost than traditional branch banking. Theconvenience of online banking is helping people gaingreater control of their finances and contributing tochanging patterns in cash withdrawal and day to daymoney management. 2. Flexible virtual banking system: Financiainstitutions have spent a great deal of time and moneydeveloping online banking functionality to allowcustomers an easy and convenient way to manage theimoney. A customer can check balance by logging intobanks website through a user name and password. Inthis way he can enquire balance, status of chequesperform funds transfers, order drafts, request issue ocheque books etc. 3. Reliability: identified one of the very importanservice quality dimensions of i-banking service quality isreliability. The online banking environment has growntremendously over the past several years and wicontinue to grow as financial institutions continue tostrive to allow customers to complete money transferspay bills, and access critical information online. Duringthis same time, online banking has been plagued byInternet criminals and fraudsters attempting to steacustomer information. Phishing, pharming, and othetypes of attacks have become well known and are widelyused as a means for fraudsters to obtain informationfrom customers and access online banking accounts. Aa result, authenticating customers logging onto theionline banking service has become a crucial concern ofinancial institutions. 4. Time factor: Liu and Arnett in their studyidentified time factor as one of the prime factor that inInternet banking service quality feature for thecustomers. Saving time is an importance factor whichinfluences the customers prefers to use i-banking.Banks can make the information of products andservices available on their site, which is, anadvantageous proposition. Prospective customer cangather all the information from the website and thus if hecomes to the branch with queries it will be very specificand will take less time of employee. 5. Real time access to information: The banks started i-banking initially with simple functions such as real time access to information about interest rates, checking account balances and computing loan eligibility. Then, the services are extended to online bill payment, transfer of funds between accounts and cash management services for corporate.. 6. Saving transaction cost: Improving customer service, increasing market reach and reducing costs are now basic expectations of Internet banking services. If consumers are to use new technologies, the technologies must be reasonably priced relative to alternatives. Otherwise, the acceptance of the new technology may not be viable from the standpoint of the consumer. Internet banking model offers advantages for both banks and customers. The Internet provides the banks with the ability to deliver products and services to customers at a cost that is lower than any existing mode of delivery. 7. On-line bill payments: The most popular online transaction through internet banking is funds transfer/bill payment. Of the twenty-two million users in US, twenty percent or 4.6 million people regularly used online bill payment services offered by the top ten financial institutions. This report also highlighted that the usage of online bill payment services increased by thirty-seven percent at the end of the first quarter 2004. 8. Digital signature for security: 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. Digital signature is a precautionary measure to prevent malpractices and tampering the information. It is a form of enhanced authentication. Nearly one in 5 customers were victims of identity theft and fraud. 9. Faster transfer: Another important factor that contributes the framework of the perception is the faster transfer of fund. The fundamental advantage of the internet banking is the transfer of the information about the money’s worth to any place at any time with a mouse click’s distance. 10. Easy to use and user friendliness: Ease of use is another important determinant for the customer preferring the internet banking. In a study reported that ease of use of innovative product or service as one of the three important characteristics for adoption from the customer’s perspective. The user friendliness of domain names as well as the navigation tools available in the web-sites is an important determinant for ease of use. The design of the web-sites with appropriate use of graphical user interface is also considered as animportant determinant. It is also worth noting that propenavigation attributes and search facility will also certainlybe helpful to consumers when they surf the Internet. Inaddition, the level of interactivity of the site will certainlyhave an effect on the consumers’ perception of the usefriendliness of the Internet. 11. Low transaction fees: Another factor that wouldstand in the way of consumer adoption of Internebanking is the cost factor. In Internet banking, two typesof costs are involved. First, the normal costs associatedwith Internet access fees and connection charges andsecondly the bank fees and charges. These two types ocosts shape the perception of the customers. 12. Any time and anywhere banking facility: Onlinebanking users say that convenience is the mosimportant factor, online banking lets them access theiaccounts from anywhere and at any time. 13. Access to current and historical transaction dataAccording to IAMAI report’s – online banking ‘2006’customers prefer to view account balances, transactionhistory and updates get e-statements, credit card anddebit card transaction history and updates, checking thestatus of their credit card accounts, viewing informationregarding their demat account, information on their fixeddeposits. 14. Facility of fund transfer to third party: Accordingto IAMAI report’s – online banking 2006, majority of thecustomers prefer on-line banking channels to transfefunds to third party. 15. Queue management: One among the importandimensions of e-banking service quality is queuemanagement. Data Analysis and Results Factor Analysis was performed with 15 statementsrelated with internet banking features. The KaiserMeyar-Olkin(KMO) for was .658 and significant Barlett’sTest of Sphericity supported the use of factor analysis inorder to extract independent variables associated withthe internet baking. The degree of common varianceamong the fifteen variables is “mediocre” which reflectsif a factor analysis is conducted, the factors extractedwill account for fare amount of variance but not asubstantial amount. An exploratory principal component factor analysis wasdone using SPSS 16.0. Varimax rotation was used toidentify the underlying factors for internet bankingfeatures. Items with eigen values greater than one wereextracted and all factor loading greater than 0.5 were retained. Fifteen items yielded 5 factors explaining 74.10 percent of variance as shown in table 1. The major five independent set of factors associated with the internet banking features are extracted from the factor analysis and explained in brief: Utility Request: Three out of four items loadings on this factor relate to ‘utility request’ dimension of internet banking. The respondents felt that these requests through online banking are important ones. Security: security as the most important issue of online banking. The items loadings on this factor relate to security aspect. Utility Transaction: Past researches indicates that online bill payment service is very important feature of online banking and people are effectively using this service. Researches also indicate that users for bill payments are increasing. People are also making online deposits andaccount opening through this. Ticket Booking: Ticket booking is another importanfeature of internet banking. Now, people need not visibooking reservation centers any more, they can buy aiand train tickets online using Internet Banking Facility. Fund Transfer: Fund transfer and account statement isclubbed together as one factor and they are explaining15.85 percent of variance. General perception about internet banking was gaugedby 18 items. Out of which seven items were related withconvenience and flexibility and 8 items were related withtransaction related benefits. All items were measured ona scale of 1to 5. From the questionnaire convenienceand flexibility related items clubbed together andaverage score taken to gauge the respondentsperception about convenience factor. Out of totarespondents 81 % respondents felt that internet bankingis very convenient and flexible banking. And samepercentage i.e. 81% from total users agrees or stronglyagrees that internet banking is convenient. They felt thait gives benefits like no queuing in bank and one can doanytime and anywhere banking. Approx 69 percent ototal respondent agreed that internet banking hastransaction related benefits. These benefits includeefficient and speedy transfer of funds with lowetransaction cost. And, with internet banking one cancheck transaction details regularly without any hassle. When asked ‘Digital signature is best way to have security’, 36% of total respondents agrees while only 22% strongly agrees with this. However, 63% of internet banking users either agrees or strongly agrees that digital signature is best way to have security. Out of total Male respondents 64% while 50% of total female respondents either agrees or strongly agrees that digital security is best way to have security and When asked that internet banking is most reliable only 9 % users strongly agrees with this and 26% users agrees with the statement. Out of total respondents only 11 % strongly agrees about the reliability of internet banking. ANOVA results for assessing perception about internet banking with age and gender showed no difference. Limitations and Future Research Although this research is primarily based on the primary data from the users and non users of Internet banking, the findings cannot be generalized, as the research is based on non probability sampling. This study has successfully examined the major factors responsible for internet banking based on respondents’ perception on various internet applications; future research may include examining the factors importance. Future research may also consider the impact of other demographic variable like education. - Conclusions - Thus, the analysis done with the help of statistical toolsclearly indicate the factors responsible for internebanking. Factor analysis results indicate that ‘utilityrequest’, ‘security’, ‘utility transaction’, ‘ticket bookingand ‘fund transfer’ are major factors. Out of totarespondents’ more than 50 % agreed that internebanking is convenient and flexible ways of banking and ialso have various transaction related benefits. ThusProviding Internet banking is increasingly becoming a“need to have” than a “nice to have” service. - References -

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