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Developments in Digital Banking Services: An Indian Perspective

Ms. Ritu Bajaj(Assistant Professor) School of Business Administration

Bhagwan Parshuram Institute of Technology Phn. No. 9810113796

Ms. Aarti Haswani (Assistant Professor) School of Business Administration

Bhagwan Parshuram Institute of Technology Phn. No. 9953441876


Today, Banking is thought of as a process instead of just a physical setting where monetary
transactions took place. It is now open 24*7 and for the whole year. The main reason behind this is
the evolution and developments in Digital Banking Services. It is only due to the increase in the
number of users of digital banking services that we experience convenience in doing banking
transactions within our home or office premises. The present paper is an attempt to understand the
evolution and developments in Digital Banking services and tries to highlight the important factors
that prevents banking customers from using digital banking services. Despite the fact that there has
been increase in the number of banking customers, still there are customers who prefer to visit the
physical branches personally and avail banking services. A descriptive study has been done to
analyze the developments in digital banking services.

Key Words: Digital banking, Cyber security, Online Banking, Internet Banking

1. Introduction

Banking has always been an inherent part of our lives. Withdrawing/Transferring money, updating the
passbook or checking bank balance, all required a visit to the bank and is a time consuming task due to
long queues and waiting time which leads to frustration. However, in today’s era consumer banking has
transformed a lot with remarkable improvements due to the introduction of digital banking services. In
present banking scenario, a lot of initiatives have been taken by Government to provide convenience, ease
of use, better customer services and facilities with the help of information technology.

Digital banking services are banking services that are offered to a customer on their internet-enabled
computer, smart phone, or tablet. This form of consumer banking is far better than actually visiting a
bank. Banks have been using digital technologies to help transform various areas of their business.

Digital banking can be defined as extending the transactional facility to customers by banks through
various secured digital channels by taking care of data security, related risk mitigation and regulatory
aspects by banks themselves. This is achieved by integrating online (internet) and mobile banking
services by adoption of latest digital technologies like analytics, social media, innovative payment
solutions and mobile technology with the aim of exceeding customer expectation, convenience and

Today we find ourselves in a digital wonderland, where the milk/vegetable provider accepts wallet
payment without a fuss, a father buys a book costing about hundred rupees for his daughter using a debit

As part of its drive for digital transformation, Government of India is also taking steps and making people
understand the need and importance of adopting the new and upgraded technologies. Various projects are
being undertaken under Digital India initiative with an objective to have a bright and sustainable growth
of our nation. Some of the recent service offerings in the area of Digitalization of Banking Services are
Unified Payments Interface (UPI), BHIM (Bharat Interface for Money), E- wallets such as Paytm,
Mobikwik and free Charge.

With the increase in use of digital banking enabled applications, certain issues like data integrity,
authentication and trust have been raised and are gaining importance. These issues need to be taken care
of by digital banking service providers to provide a better customer experience.

Digital Banking include not only internet banking. Its scope extends to all such banking activities which
are done without visiting the physical branch of the bank. Say, making online payments, buying tickets
via wallet money, phone banking , banking via UPI etc.

1.1 Evolution of Digital Banking:

Digital Banking is not a new concept. Efforts have been taken from time to time by Banking Industry to
provide efficient and effective services to its customers. The process of digital banking could be well
explained in four phases:
1. Mechanisation (Since 1980): The main focus in this phase was the transition from manual process to
automated process with the help of computer technology.

2. Automation (Since 1990): With the opening up of the economy in 1991-92, the process of
computerization gained pace. This gave an opportunity to banks to provide the convenience of
“Anywhere and Anytime Banking” to its customers by adopting the Core Banking Platform.

3. Internet (Since 2000): The major developments done in this phase included online banking,
telebanking, RTGS, NEFT and so on.

4. Mobile (Since 2010): Smart phone technology gave a push to the use of digital banking services to a
great extent. Major developments in this phase included Check Truncation System, Biometrics, Prepaid
cards, Mobile Banking.

These are all remarkable landmarks in the digital revolution in the banking sector. Digital banking has
changed the face of banking and brought about a noteworthy transformation in the banking operations.

Fig No. 1: Technology Developments in Indian Banking


1.3 Advantages and Disadvantages of Digital Banking:

Technological advancements in banking sector have done tremendous progress in the number of
customers using banking services. There is a large increase in the number of customers applying for new
banking accounts. Development in digital banking services is one of the main reason for this increase in
number of banking customers.

Despite this fact, there are large numbers of customers who still prefer to visit physical branch personally
rather than using digital banking services. Following are some of the major advantages and disadvantages
of using digital banking services:


 Digital banking is quick and convenient approach of doing banking transaction.

 It reduces dependence on banking staff and provide an option to control account.

 Digital banking provides us 24*7 access for doing banking transactions.

 Digital banking is paperless and there is no need to file so many forms, letters and statements and
to store them for future reference.

 Through smart phone applications of banks, Banking accounts can be managed easily and

 Digital banking is very useful for making regular bill payments of utility services, rent etc.

 Digital banking provides us the flexibility of operating our bank account from any part of the
country without any additional charge.

 Digital banking is economical. Some offers and deals are also only available online.


 It is difficult to do digital banking without having basic knowledge of using internet and

 Security is the biggest concern of people due to which they hesitate to use digital banking

 It is difficult to track automated bill payments as sometimes more money is debited from our
 Digital banking is completely impersonal and therefore it is difficult to convey crucial
information regarding complex transactions at the other end.

 Digital banking services depends on a reliable and working computer, speed of internet
connection. Otherwise it is difficult to use these services effectively.

1.4 Challenges of Digitalization

Despite the various advantages of digital banking services, there are many important concerns which
poses challenges for digitalization of banking services. Some of the main challenges are highlighted

 The dark face of being digital i.e. cyber security risks which is very important to be taken care
off. And risk mitigation actions need to be strengthened by the banks by exploring and
implementing the ways through additional security could be provided and will reduce the
potential for device and account level fraud.
 Adoption of technology and convincing the customers to use digital modes of banking is the
biggest challenge in a country like India where consumers want relevant products/solutions,
reduced costs and increased efficiency.
 Skill development of workforce and investments into training and manpower development is the
need of the hour.Segmentation of customer is another facet which will not only facilitate ease of
interaction, targeted product placement, thus increasing the probability of further acceptance of
digital baking services.
 Taking digital banking to the unbanked is another challenging task and social responsibility.

2. Literature review

With the gradual advancement of technology and availability of network services at affordable cost,
traditional banking is being replaced by digital banking. Customers are inclined towards convenience
banking given the fact that they believe that online banking will save time. A lot of literature is available
on digital banking and its evolution.

The major factors that influenced the acceptance of digital banking services are perceived usefulness and
information on online banking on the website. (TeroPikkarainen, Kari Pikkarainen, Heikki
Karjaluoto, SeppoPahnila, 2004 ).
Though there has been a tremendous growth in the number of customers using digital banking services,
there has been a number of reasons accounted for usability of branch banking. Some of the reasons are
perception of risk, computer and technological skills and traditional cash-carry banking culture. Lack of
awareness is also one of the major reasons for not using digital banking services.
Sylvie Laforet, Xiaoyan Li, (2005)

A number of studies have been done on listing the factors that affect attitude formation towards online
banking and their relation to the use of online banking services. These studies tried to link the consumer
behavior theory with the usability of digital banking services.

Aladwani (2001) conducted a study to identify primary motivators of online banking. The results
indicated that the views of top management in the smallest and biggest banks toward online banking
drivers differ notably especially when it comes to rating the importance of the technology for bank’s
image, for bank’s competitive position, for reducing administrative costs, and for reducing operational

Mathew Joseph, Cindy Mcclure & Beatriz Joseph (1999) investigated the influence of technology, such as
the ATM, telephone, and Internet, on the delivery of banking service in Australian banking sector. The
study identified six dimensions of electronic banking service quality such as Convenience/Accuracy,
Feedback/Complaint Management, Efficiency, Queue Management, Accessibility and Customization. It
was found that consumers have perceptual problems with some aspects of electronic banking. The best
aspect of Electronic Banking is convenience and no waiting time whereas security was found to be a
major concern in the improvement of electronic banking services.

Trust is found to be one of the crucial issue for customer retention in terms of Digital Banking services. A
study by (Flaviánet al., 2006) showed that initial trust is a significant factor because it has important
effects on purchase intention in online shopping. Trust is an assessment made by the online consumer in
regard to the trustworthiness of the electronic vendor. (Alsajjan and Dennis, 2010). According to
(Alsajjan and Dennis, 2010), trust can play an important role in boosting the level of adoption ofInternet
banking among online customers. Various factors have been identified that impact trust with respect to
internet banking. Some of these factors concluded are third-party seals, risk, reliability and availability,
privacy, user’s knowledge, security, quality, reputation, brand name and usability.

3. Research Methodology:
The present study is purely descriptive and is based on the secondary data only which is collected through
online magazines, journals, published reports and newspaper.

Objectives of the study:

 To describe the evolution and developments in digital banking services.

 To understand the factors affecting the usability of digital banking services.

4. Factors affecting usability of digital banking services

 Convenience: It is one of the important factors which affect the people’s intention to use digital
banking services. These services should be easy to use and provide flexibility to the customers.

 Information on online banking: The use of digital banking services is fairly a new practice too
many people, low awareness of internet banking is a major factor in causing people not to adopt
digital banking which should be considered.
 Perceived risk: The term risk has been defined in terms of uncertainty and consequences
associated with consumer’s actions. Perceived risk increases the resistance and ultimately reduces
the intention to use digital banking services.
 Prior internet knowledge:This factor affects the intention of the people to use digital banking
services as people who doesn’t know anything about working of internet are unable to use those
 Security perception: Security is one of the very important factors which works like a hurdle in
adoption process of digital banking services so should be taken care off.
 Time Factor: One of the most important factors in customer banking quality of service features
of the time element. Savings are important factors that affect the customer preferring I-banking.
Banks may be useful for information about the products and services offered on their site.
Potential customers can collect all the information on the website is in the office with a very
specific question and reduces the time those employees.
 Perceived usefulness:People uses digital banking only when they find that option useful to them.
That is why this factor is very important determinant of people’s intention to use these services.
 Behavioral intentions:
 Computer self efficacy:
 Image:
 Perceived behavioral control:
 Perceived credibility

5. Conclusion

To sum up, there is no denying the fact that there are large numbers of banking customers who are
motivated and willing to use digital banking services. But still there is a large number of customers who
find using digital banking services as a difficult and risky task. There are various reasons cited for this
reluctance such as cyber security, lack of awareness of online banking services. Banking sector must now
focus on efforts to make banking customers more aware of digital banking services. They must organize
camps regularly to educate customers about the benefits of using digital banking services and how to
safely perform the banking transactions in digital mode.


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2. Sylvie Laforet, Xiaoyan Li, (2005) "Consumers’ attitudes towards online and mobile banking in
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3. Heikki Karjaluoto, Minna Mattila, Tapio Pento, (2002) "Factors underlying attitude formation
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