SIVA SIVANI INSTITUTE OF MANAGEMENT KOMPALLY, SECUNDERABAD

PROJECT REPORT ON A STUDY ON CONVENIENCE BANKING

REPORT SUBMITTED TO Professor Sri A. Muralidhar Prasad
Finance Department Siva Sivani Institute Of Management

REPORT SUBMITTED BY
Shaiki Agarwal, PGDM, Siva Sivani Institute Of Management

Page 1

TABLE OF CONTENTS

S.NO

PARTICULARS Abstract 1.2 : List of Abbreviation 1.3: Introduction

Page No. 2 3-4 5-6 7 7 7 8 9-11 12-19 20-37 38-46 47-48 52-60 61-63 65 65 66 67-68

Chapter 1 1.1:

1.4: Significance of the study 1.5: Objective of the study 1.6: Scope of the study 1.7: Outline of the study Chapter 2 2.1: An overview of Indian banking Chapter 3 3.1: 3.2: Overview of the project Literature review

Chapter 4 4.1: Theoretical framework Chapter 5 5.1: An overview of latest trend in banking Industry Chapter 6 6.1: Graphs 6.2: 6.3: Data analysis and interpretation Research Findings

6.4: Conclusion 6.5: References Annexure Questionnaire

Page 2

CHAPTER-1

Page 3

1.1 Abstract
Convenience banking is an application of mobile computing and internet based application which provides customers with the support needed to be able to bank anywhere, anytime using a either the mobile handheld device and a mobile service such as text messaging (SMS) or using Internet for Internet banking. Convenience banking removes space and time limitations from banking activities such as checking account balances, or transferring money from one account to another. Because of its gaining importance many studies were initiated on the popularity and awareness of convenience banking. Many of the published studies have focused on Mobile Banking and Internet Banking. In recent research and studies it was found that while mobile banking and more specifically SMS-based mobile banking applications have become popular in some countries and regions, they were still not widely used. This study identifies and investigates the factors which influence customers decision to use a specific form of convenience banking. The results of the data analysis contributes to the body of knowledge in the area by demonstrating that context specific factors such as service quality and service awareness are influencing user perceptions about the usefulness of convenience banking which in turn affect intention to use and adoption. Secondly, the study concludes that the banks should be more aggressive in promoting the EPRODUCTS for their customers (specifically targeting rural customers), Although the study has its limitations, the implications of the results allow providing practical recommendations to the banking industry, and directions for further work.

Page 4

1.2 LiST OF Abbreviation

SET:-------------Social Exchange Theory ECT:------------Expectation-Confirmation Theory TRA:------------Theory of Reasoned Action TPB:-------------Theory of Planned Behavior TAM:------------Technology Acceptance Model ETAM:----------Extension of Technology Acceptance Model DI:---------------Diffusion of Innovation IDT:-------------Innovation Diffusion Theory BI:---------------Behavioral Intention ATB:------------Attitude toward performing the Behavior SN:--------------Subjective Norm AB:-------------Actual behavior PBC:--------------Perceived Behavioral Control PU:---------------Perceived usefulness PEOU:-----------Perceived ease of use EIS:---------------Executive Information System SMS:--------------Short Message services IT:----------------Information Technology

Page 5

ICT:-------------- Information and Communication Technology

ATM:------------Automatic Trailer Machine SPSS:------------Statistical Package for the Social Sciences DFI:---------------Development Financial Institution OIFC:-------------Overseas Indian Facilitation Centre NRIs:-------------Non Resident Indians PIOs:--------------Persons of Indian Origin IPO:---------------Initial Public Offer SMEs:-------------Small Medium Enterprises PC:---------------Personal Banking EFT:---------------Electronic Fund Transfer NIST:--------------National Institute of Standards and Technology MEC:---------------Mobile Electronic Commerce B2B:--------------Business to Business B2C:--------------Business to Customer GSM:-------------Global System for Mobile Communicator ATB:-------------Attitude Toward Performing the Behavior AB:---------------Actual Behavior PBC:---------------Perceived Behavioral Control USE:---------------Usefulness
CRE:--------------- Credibility

Page 6

COM:------------- Compatibility OB:---------------- Observability

1.3 Introduction
Over the last few years Indian banks have spent crores of rupees to provide electronic channel banking. Thay invested heavily in expanding and improving the IT system and, in the process, have come up with a number of new e-banking servies. This wasm mainly to restructure their operation and successfully meet the the ever-changing needs of the customers. From the available host of e-product in the banking industry, it can be said that the innovation has gone to the peak and is reaching the saturation point. Various studies on banks profitability also reported that the Indian banking profitability is mainly from retail banking sector. However, after some years of excitement, it was realized that the banks skyrocketing profit from this area would not be available anymore.E-channel are part of retail banking and, infact, play a major role in reducing the cost of operation in the retail banking segment. This case study explore the usage of various e-channel by the retail users based on the demographic differences and compares the products offered by icici and hdfc banks, being the new generation banks. The objective of the study is to understand the impact of various demographical features on the E-channel usage. From the literature review and preliminary study, it is observed that huge number of products are available in the industry and there is a lot of dublication in the value added services offered through these E-channels. Therefore, the study is more focused on various features of these E-channels, their segmented customers and usage of the services by various customers. For the purpose of common understanding and reporting, generic names are used for the products under the study. In the early 1990s, the government of the then prime minister, PV Narasimha Rao, embarked on a policy of liberalization, permitting the entry of small number of private banks. These were known as new generation tech-savvy banks and included global trust bank (the first of such new generation bank to be set up), which later amalgamated with oriental bank of commerce, Axis bank, YES bank, etc. this move, along with the rapid growth in the economy, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, private banks and foreign banks. The next stage for the Indian banking has been set up with the proposed relaxation in the norms

Page 7

for foreign direct investment, where all foreign investor in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 49% with some restrictions. In the process, retail banking emerged as an important segment, since during same period, several others reforms introduced into the Indian economy and the so-called middile income population emerged as the main segment for availing of utilizers of banking services. Their income levels have gone up and their purchasing power also increased. Added to this, the boom in the services sector and software industry also created a lot liquidity in the in the hands of the individuals and resulted in demand for retail banking. Now, let us try to understand the nature of retail banking. In a recent book, retail banking has been described as hotter than vindaloo . considering the fact that vindaloo, the Indian English innovative curry available in umpteen numbers of restaurant of London, is indeed very and spicy, it seems that retail banking is perceived to be the in-thing in todays world of banking sector can be characterized by the three basic characteristics: Multiple products (deposits credit cards, insurance, investment securities). Multiple channels of distribution (call centers, branches, internet and kiosk), and Multiple customers groups (consumers, small business, corporates).

To talk about retail banking in a broad sense, it largely operates on a one-to-one relationship between the bank and the customer. Todays customer increasingly, is a blend of individual and the community. The community aspect of this is changing the relationship implicitly from one-to-one, to one tomany(bank: community to which the customer belongs). This change affect all aspects of the value sought from financial services across solution, banks need delivery. In essence, banks need to provide fulfillment across individual and community affiliations that have financial and/or access implications.

Page 8

1.4 Significance of the study

The study on Convenience banking is important for two reasons. First, understanding a new information technology and its acceptance can help to reveal the underlying logic of practitioners strategic decisions in information management. Researchers willing to highlight the factors that motivate users ICT adoption while describing how the Hyderabad and Secunderabad culture affects ICT usage will also find this study resourceful. This study also provides information for managers and software vendors seeking to enhance the adoption of communication-oriented forms of ICT and telecommunications.

1.5 Objectives of the study

To identify popular E-banking channels, study their utility and make suggestions for improving

the acceptability of such channels.

To study and understand the features of various comparable E-banking channels offered by

banks in India. To study and understand the impact of various demographic features on the usage of E-banking

channels. 1.6 Scope of the study This study will endeavor to determine those factors that influence the formation of attitude towards convenience banking and their relation to the use of internet banking, mobile banking, phone banking, SMS banking and ATMs services. While this research focuses on attitude development in particular, it also investigates individual differences in demographics and perceptions. Hence, the users of public and private banks are the respondents in this study. Their perception about each of the

Page 9

variables of the technology accepted model shall be examined using the exiting model. The main limitation of the study is that it relies heavily on primary data.

1.7 Outline of the study This research report will consist of six chapters. The first chapter has given a detail account of the Abstract, list of Abbreviation, introduction, significane of the study, objective of the study, scope of the study, and Limitation of the study. The second chapter presents Company profile, third chapter consists overview of the project and Literature review,fourth chapter consists Theoretical framework, fifth chapter consists an overview of latest trend in banking.

Page 10

CHAPTER-2

Page 11

2.1 An overview of Indian Banking

A Bank is an institution whose debt (bank deposit) is widely accepted in settlement of other peoples debt to each other. Bank is a business organization, which accepts accepts money in the form of deposits for the purpose of lending and investment. Bank repays it on demand or otherwise withdrawal by cheques, etc. bank deals with money i.e. lending and borrowing of money. Through above process bank generates profit. Bank advances money to individual as may be required and to which individuals entrust money when not required by them for use Commercial Banking A commercial bank is a type of financial intermediary and a type of bank. It raises funds by collecting deposits from businesses and consumers via checkable deposits, savings, deposits, and time deposits. It makes loans to businesses and consumers. It also buys corporate bonds and government bonds. Its primary liabilities are deposits and primary assets are loans and bonds. It is a business organization, which deals in money, i.e., borrowing and lending of money. In this borrowing, and lending of money it makes profit. The lending rate of interest is higher than it pays to its depositors; it is because of this difference in lending and borrowing rates of interest that it is able to make profits. Functions of Commercial Banks: Acceptance of deposits Advising of Loans Investment of Funds Purchase and Sale of Foreign Exchange Creation of Credit Fulfillment of Socioeconomic Objective

Banking Reforms In 1991, the Indian economy went through a process of economic liberalization, which was followed up by the initiation of fundamental reforms in the banking sector in 1992. The banking reform package was based on the recommendations proposed by the Narsimhan Committee Report (1991) that advocated a move to a more market oriented banking system, which would operate in an environment of prudential regulation and transparent accounting. One of the primary motives behind

Page 12

this drive was to introduce an element of market discipline into the regulatory process that would reinforce the supervisory effort of the Reserve Bank of India (RBI). Market discipline, especially in the financial liberalization phase, reinforces regulatory and supervisory efforts and provides a strong incentive to banks to conduct their business in a prudent and efficient manner and to maintain adequate capital as a cushion against risk exposures. Recognizing that the success of economic reforms was contingent on the success of financial sector reform as well, the government initiated a fundamental banking sector reform package in 1992. Banking sector, the world over, is known for the adoption of multidimensional strategies from time to time with varying degrees of success. Banks are very important for the smooth functioning of financial markets as they serve as repositories of vital financial information. From a central banks perspective, such high-quality disclosures help the early detection of problems faced by banks in the market and reduce the severity of market disruptions. Consequently, the RBI as part and parcel of the financial sector deregulation, attempted to enhance the transparency of the annual reports of Indian banks by, among other things, introducing stricter income recognition and asset classification rules, enhancing the capital adequacy norms, and by requiring a number of additional disclosures sought by investors to make better cash flow and risk assessments. During the pre economic reforms period, commercial banks & development financial institutions were functioning distinctly, the former specializing in short & medium term financing, while the latter on long term lending & project financing. Commercial banks were accessing short term low cost funds through savings investments like current accounts, savings bank accounts & short duration fixed deposits, besides collection float. Development Financial Institutions (DFIs) on the other hand, were essentially depending on budget allocations for long term lending at a concessionary rate of interest. The scenario has changed radically during the post reforms period, with the resolve of the government not to fund the DFIs through budget allocations. DFIs like IDBI, IFCI & ICICI had posted dismal financial results. In fact, their very viability has become a question mark. Now they have taken the route of reverse merger with IDBI bank & ICICI bank thus converting them into the universal banking system.

Page 13

CHAPTER-3

3.1 Overview of the project

Convenience banking
Convenience Banking
Page 14

(AAAs of Banking)

Convenience Banking is a term often used by Banks to indicate Anytime, Anywhere and Anyhow banking. In the real sense, this amounts to every retain banker being provided round the clock access to the services of the bank. However, in the context of India, when you surpass & go beyond the 25% urban population, the biggest hurdle would be the awareness and usability. This difference is also evident in the rural sector. Convenience banking should also take into consideration the urban-rural awareness mismatch when the services hit the road. Language is the biggest hurdle that one would face in the realm of India.
Page 15

In the online banking scenario, we are still challenged in not gaining unified access to all the accounts/investments that a retail banker makes with a bank (Savings, Credit Card, Investments etc.). When a customer builds a relationship with a financial institution, the expectation is to sustain or safe guard the relationship for as long as the person is alive. A lot goes into ensuring this and with the applicability of technology to cater to the masses; there is a serious divide among the masses in terms of usage. This is simply due to lack of connection that they build with a specific channel (as there is no human interface). Customer demands on the expected services are increasing on a day to day basis and their desire to have a mechanism or a platform to take tactical financial decisions are surmounting. While online banking is a convenience factor, financial institutions need to realize that the real convenience is experienced with unified access. If masses need to embrace channels other than Branch Banking and ATM, the other transacting medium need to provide compelling experience wherein the end users feel served. The transacting medium should make the consumer self-sustainable by providing optimum information on demand and relevant tools to take tactical decisions on the finances. The biggest gap that we see today is the lack of exposure provided to the consumers. Yes! Financial institutions need to provide exposure to the end customers in helping them take timely decisions. It does not make sense to call up customer service or visit a branch all the time. Imagine the vast majority wanting to visit a branch. The economics of scale breaks here. On the contrary, none of the banks in Indian or foreign banks provide a Next Generation experience on their services, be it online or onsite. There has been increased awareness & realized need in having a bank account. At least in Urban India, gone are those days, where people used to queue up to collect their salaries in their offices/factories. For the sake of convenience, every individual has been given an ATM card for them to walk across to an ATM and withdraw cash at their convenience. Reality hits the road, when the vast majority becomes the consumers of the services offered by the financial institutions. There has been regular instances of an ATM machine breakdown during the first day of a month (rural areas of an Urban city), wherein the vast majority would become consumers of the ATM service. Imagine the masses in India & having banking accounts, become consumers of one specific service. This would be the breaking point, as today with the limited consumer base itself, we witness outages, breakdowns, crashes and malfunctions. It is the war of market share and is time for financial institutions to innovate and bring in sophistication in terms of the customer touch points and the services.

Page 16

The most important of all is the Convergence of multiple form factors, which is a definite comforting factor and addresses ease of use across the board. Have we ever thought of providing an ATM like accessibility (& look and feel) in terms of navigation to an internet banking user. Why cant we break the monotony in terms of the way banking experience is perceived online? Would that not be intuitive for first time users to find their way into self-service mode? The second aspect that decides the success of the online mode is of self-sustainability. We often look out to understand certain investments with a bank and are left with lots of questions. Enough tools should be made available for online users to take tactical & timely decisions. Seven types of services under convenience banking:

Internet banking Mobile banking SMS banking Phone banking ATM services Payment gateway Alerts

Internet banking

Page 17

It gives you instant access to your Banking Accounts, Demat Accounts, Investment Accounts, netc@rd and Insurance Accounts. In addition you can transfer money, pay your bills, pay for your online shopping, make subscription payments and more. And all this comes to you on a robust and secure technology platform.

Key Features

Bank 24X7 - anywhere, anytime View details across Accounts, Term Deposits and DEMAT Accounts Invest/Redeem in Mutual Funds online Stringent security offers complete peace of mind

Net Banking Features - What can you do online? Net Banking gives you a host of services, giving you complete control of your accounts:

View account balance, account activity, place standing instructions and CHEQUE status Open a Term Deposit Transfer funds online between your/third party accounts with Bank account supported by RBI Place request for a CHEQUE BOOK, debit card PIN or payment gateway registration View securities available for DEMAT View current Mutual Fund holdings, Buy and redeem Mutual Funds online Shop online at over 3000 websites, make utility bill payments across more than 60 companies

NEFT system

and 42 cities.

Page 18

Mobile banking
Key Features

Anytime, Anywhere Banking Experience online banking - without a PC or internet connection View details across Accounts, Term Deposits and Investments Pay utility bills Invest/Redeem in Mutual Funds - anytime, anywhere Secured platform - encrypted communication Menu driven service - no need to remember complex codes Security through 256 bit encryption. Check your account balances for Current, Savings & Term Deposit accounts View your account activity Transfer funds between your accounts or other accounts in Bank Purchase & redeem Mutual Fund units Report loss/theft of Debit Card and request for replacement Check status of your Cheque instruments Request issue of new Cheque book Pay Utility Bills to over 140 service providers Make VISA credit card payment Transfer funds to VISA debit cards

What you need to access this service

A Bank accounts A Java-enabled handset

Page 19

An active GPRS connection (Advanced GPRS recommended) from your service provider Registration for Net Banking and a Net banking password

SMS banking
It enables you to access your bank account, investment account and demat account on your Mobile Phone. Now get latest update on your account balance, salary credits, large debits, large credits, holding value and much more, on your mobile anytime. Key Features

Access your bank account on your Mobile Phone Get latest update on your account balance, salary credits, and more

Phone banking
Key Features

Quick and easy access from anywhere PIN based security Customer Care Officers available 24 x 7*

ATM network
The state of the art touch screen Banks ATMs are part of the Visa/Plus and Cashnet ATM network. That means you can withdraw cash from ATM Network with any International and Domestic Visa/Visa Electron/Plus Credit Cards/Debit Cards.

Key Features

Access your account anytime anywhere State of the art Touch Screen ATMs

Page 20

Affiliated to the VISA network Access any ATM in the country absolutely free. 24-hour access to cash Transfer funds between accounts View Account Balances and Mini Statement

Payment gateway
Payment Gateway enables you to shop online at over 3000 websites, make utility bill payments across more than 60 companies and 42 cities, pay insurance premium, pay for magazine subscriptions, make donations to charitable and religious institutions, transfer money to Securities for margin money, settlement transfer or IPO funding and use Visa Money Transfer facility to pay your credit card bills or transfer money to any VISA debit card across the country. Payment Gateway is an Internet based facility using which you can pay online merchants by debiting your selected Bank account. Key Features

Online shopping Pay for Utility bills Make donations Transfer money for online trading Transfer money to any VISA credit/debit card in India

Alerts
You can subscribe for automatic updates for your account either on your mobile phone or email address. These alerts are sent on occurrence of a particular transaction. For example, if the balance in your account falls below the required Average Quarterly Balance, or if there is a credit of high value in your account. Key Features

Get automatic updates for your account on either your mobile or email

Page 21

Get immediate update on a large debit or large credit in to your account

3.2 Literature review

INTERNET BANKING The objective of study were framed after undertaking the Library Study approach. During the library study various reference book were identified and articles from the referred journals were reviewed. The gist of the library study is given below : Hanna-Maija Vainio (2006) has observed that Perceived Ease of Use and Bank Support were

significantly influencing the use of Trade Finance Internet Services. However, it is much unexpected that the rest of the hypotheses were rejected. Pikkarainen, Pikkarainen, Karjaluoto, and Pahnila, (2004) defines internet banking as an internet portal, through which customers can use different kinds of banking services ranging from bill payment to making investments. With the exception of cash withdrawals, internet banking gives customers access to almost any type of banking transaction at the click of a mouse (De Young, 2001) Indeed the use of the internet as a new alternative channel for the distribution of financial services has become a competitive necessity instead of just a way to achieve competitive advantage with the advent of globalization and fiercer competition. All banks using the internet as an additional channel or a bank using only the internet as delivery channel are now on equal footing to offer their banking services on the internet and to compete for customers around the world. Karjaluoto, Mattila, and Pento (2002) put it this could be the reason why the internet is widely seen as the most important delivery channel in the era Robinson, (2000) Sathye, (1999) Internet Banking is beneficial for both the provider and the customer. The rationales of banks usage of the internet banking technology from the banks perspective are mainly related to cost savings . Jayawardhena & Foley, (2000) Such service also saves the time and money of the bank with an added benefit of minimizing the likelihood of committing errors by bank tellers. Internet banking offer services regardless of geography and time and banks thus provide its services to the customers for them to use at their convenience. Karjaluoto et al. (2002) argued banking is no longer bound to time and geography. Customers over

Page 22

the world have relatively easy access to their accounts, 24 hours per day, and seven days a week. The author further argued that, with internet banking services, the customers who felt that branch banking took too much time and effort are now able to make transactions at the click of their fingers. Competition is yet another important rationale as with increasing competitive pressures from existing firms and new entrants in the market, internet banking strategy has been an interesting way to retain existing customers and attract new ones. The use of internet banking as an alternative channel has also been allowing banks to target different demographic segments more effectively. Robinson (2000) believes that the supply of internet banking services enables banks to establish and extend their relationship with the customers. There are other numerous advantages to banks offered by online banking such as mass customization to suit the likes of each user, innovation of new products and services, more effective marketing and communication at lower costs, development of non-core products such as insurance and stock brokerage as an expansion strategy, improved market image and better and quicker response to market evolution. (Jayawardhena & Foley, 2000) Benefits for the end users are numerous as well and includes convenience of the service (time saved and globally accessible service), lower cost of transaction and more frequent monitoring of accounts among others. The benefits of internet banking are known and unanimous, though there are some reserves mainly in terms of security of the system. However, this study is not aimed at analysing the rationales or benefits of internet banking but, as spelled out previously, rather to investigate the possible factors that determine the adoption of internet banking for the case of Mauritius. Waite and Harrison(2002) Online banking acceptance has gained special attention in academic studies during the past five years as, for instance, banking journals have devoted special issues on the topic. We can find two fundamental reasons underlying online banking development and diffusion. First, banks get notable cost savings by offering online banking services. It has been proved that online banking channel is the cheapest delivery channel for banking products once established. Second, banks have reduced their branch networks and downsized the number of service staff, which have paved the way to self-service channels as quite many customers felt that branch banking took too much time and effort Therefore, time and cost savings and freedom from place have been found the main reasons underlying online banking acceptance. Purcell and Toland (2003) Using E-banking, SMEs can apply online for lines of credit, credit cards, loans and mortgages, hence, less visit is required to banks for doing banking transactions. Through Internet, SMEs can do research on banking products, interest rates, terms, and then choose lenders that best fulfil their expectations and needs. Customers prefers E-banking for conveniences,

Page 23

speed, round the clock services and access to the account from any parts of the world E-banking offers benefits to banks as well. Banks can benefit from lower transaction costs as E-banking requires less paper work, less staffs and physical branches E-banking leads higher level of customers satisfaction and retention . E-banking reduces loan processing time as borrowers loan application can be viewed by loan processing and loan approval authority simultaneously Typically, loan applications received at branch level and send to documents from branch to head office consume much time and delay loan sanction period. Electronic Cash and Internet Gaming (2003), has defined electronic banking as an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick and mortar institution. The following terms all refer to one form or another of electronic banking: personal banking, (pc) virtual banking, on line banking, home Banking, remote electronic banking, and phone banking are the most frequently used designations, on line electronic banking system give every body the opportunity for easy access to their banking activities. Earring Wood and Story (1996) With the extensive technology innovation and telecommunication, we have seen new financial distribution channels increasing rapidly both in the numbers and form, from ATMs, telephone banking, PC banking to internet banking. Kimball and Gregor (1995) Developing alternative distribution channels is not only important in terms of reducing costs and improving competitiveness, but also in terms of financial institutions ability to retain the existing customer case as well as to attract new customers. Ehou and Chou (2000) identified five basic services associated with online banking: view account balances, and transaction histories, paying bills, transferring funds between accounts, requesting credit card advance, and ordering checks. Wan, Luk and Chow (2005) The most commonly factors are ease of use, transaction security, convenience and speediness . Joris, Claessens, and Valentine Dem (2001) Organization theorists and practioners have defined e-banking in various ways. A Survey of Electronic Banking has defined electronic banking as an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick and mortar institution. The following terms all refer to one form or another of electronic banking: personal banking, (pc) virtual banking, on line banking, home Banking, remote electronic banking, and phone banking are the most frequently used designations, on line electronic banking system give every body the opportunity for easy access to their banking activities. Greenland, Woodruff, Thornton and White (2000) The trend within the banking industry is to replace human tellers with self-service distribution channels. the strength of customer intentions for usage of human tellers within the next two years support the concept that the branch will still play an instrumental rate

Page 24

in the delivery of services to customers in the future. Sathye (1999) proposed a model for Internet Banking Adoption, which argued that the Intention of Internet Banking in Australia is significantly influenced by variables of system insecurity, case of use awareness of service and its benefits, reasonable price, availability of infrastructure and resistance to charge. The Willis Report (1997) Stated that the technology must be reasonably priced relative to alternatives for customers to adopt. Otherwise the acceptance of the new technology may not be viable from customers stand point. Customers today are more conscious of expenses associated with the banking as they are generally better informed abo alternative option. The total costs incurred in using Internet Banking must be minimal or competitive. Howard and Moore (1982) reported that consumers must be aware of the new brand before adoption. Therefore it is important factor that the boxes have to create awareness on internet banking to the consumers. Adoption means acceptance and continued use of a product, service and idea. Customers go through a process of knowledge, persuasion, decision and confirmation before they adopt the product or services. Offer the internet banking; the greater the awareness level among customers and therefore the higher will be internet banking adoption. Besides awareness, the service provided by the banks should be perceived to be innovative with high quality and user friendliness to meet an individuals expectation. Cooper (1997) reported that case of use of innovation product or service as one of the three important characteristics for adoption from the customers perspective. This is related to user friendliness and ease of navigation as well as simple institutions to use the service. Nsouli and Schaechter (2002) E-banking is the waves of the future. It provides enormous benefits to consumers in terms of case and cost of transactions, either through internet, telephone or other electronic delivery channels. Power (2000) The transformation from traditional brick-and-mortar banking to E-banking has been automatic teller machine (ATM) has the retail banking industry witnessed such significant and extensive change. Formally, E-banking comprises varies formats or technologies, including telephone (both landline and cell phone banking, direct bill payment (EFT), and PC or internet banking Ehou and Chou (2000) identified five basic services associated with online banking: view account balances, and transaction histories; paying bills, transferring funds between accounts; requesting credit card advanced; and ordering checks. Raihan (2001) Majority of banks is planning to introduce ICT for integration of banking service and new finance service, which will play a vital role in bragging efficiency in the financial sector. Wan, Luk and Chow (2005) The most commonly factors are ease of use, transaction security, convenience and speediness. ICT networking has offered a wide range of delivering channels in retail banking Banking institutions need to exploit

Page 25

opportunities that arise from these development and changes to remain competitive. The successful financial institutions in the future will be those that are able to leverage most from the information and communication technology revolution. Increasingly consumers are also demanding more efficient banking services are becoming more discrediting of the power that the technology brings. The winners will be those financial institutions that are able to harness on the Capability of ICT in making strategies decisions in terms of inability leader alignment of business, enhancing organizational capacity and capability, risk management and building better customer relationships CC the rapid pace of advancement.

Online Banking Trends

Security stays of major importance to online consumers. This is under standable 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. Customer retention becomes ever more important. Research shows that the more services of his or her bank the customer uses, the higher 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. 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. Some players will take a second stab at mobile banking. Increasingly faster transmission via GPRS or

Page 26

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. 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 shown here refers to US customers, we observe a similar trend in Europe: Researching via the internet is gaining importance in online banking. MOBILE BANKING Schofield & Kubin 2002 The telecommunications industry worldwide has scrambled to bring what is available to networked computers to mobile devices Presently, the use of electronic banking is considerably high and as more and more users sign up for electronic-banking, the maturity as regards remote banking ( i.e. banking outside the banking hall) is on the increase. With electronic banking, users can now conveniently carry out banking transactions, but this convenience cannot be achieved if the user does not have access to the internet, hence, in other words, the user cannot carry out a banking transaction while waiting for a bus, or perhaps while having lunch in a restaurant. With m-banking, convenience can be achieved 24hrs a day. This is because a user has access to his mobile phone all day, at all times. So, to effectively achieve a truly convenient banking mode, a truly mobile mode of banking has to be explored, hence the need for M-banking. Strader and Shaw (1997) Electronic commerce (ecommerce) is a modern enterprise strategy aiming to satisfy organization, product, service, client demands, improve product or service quality and improve delivery speed at lowered costs. Kalakota and Whinston (1997) claimed that e-commerce is a Modern Businessmen Theology used to meet organization and customer demands, improve product or service quality and delivery speed. Furthermore, National Institute of Standards and Technology (NIST) in America defined e-commerce as any activities related to commodity or service through electronic communication of commercial transactions such as inventory, dealing, advertising, approach and payment etc. conveyed through digital data. This digital data is e-commerce transactional services including text, voice, and virtual

Page 27

images. However, due to the rapid change of information technology, people are no longer satisfied with e-commerce. After e-commerce, mobile commerce (m-commerce) has become the next wave of technology-driven commerce. E-commerce has extended its arena into M-commerce in recent years. Kalakota and Robinson (2001) mentioned that M-commerce refers to business transactions conducted while on the move. Nagi and Gunasekaran (2007) M-commerce refers to the conduct of commerce via wireless devices. Tsalgatidou and Pitoura, (2001) M-commerce which is also called mobile electronic commerce (MEC) or mobile E-business refers to E-commerce (E-business) activities relying solely or partially on mobile E-commerce transactions. Kalakota and Robinson (2001) The growth of m-commerce is due to users seeking to conduct business, communicate and share information while away from their desktop computers. Tsalgatidou and Pitoura (2001) In contrast to e-commerce, Mcommerce not only extends the benefits of the Web, but also allows unique services and additional benefit. Joanne (2001) Whereas E-commerce bridges distance and enables companies to display and sell wares cheaply to consumers and other businesses round the world, one of the selling points of mcommerce will be proximity. Risto Perttunen, head of McKinseys global wireless group in Helsinki claimed that M-commerce will be the second biggest industry behind healthcare by the end of 2010. Joanne (2001) Therefore, the growth of M-commerce is considered positive. The future of m commerce is not only bright but also huge. According to Varshney and Vetter (2002) mobile commerce could be divided into ten categories including mobile financial applications, mobile advertising, mobile inventory management/ product locating and shopping, proactive service management, wireless re-engineering, mobile auction or reverse auction, mobile entertainment services and games, mobile distance education, mobile office and wireless data center. Table has summarized these ten applications. Therefore, this study focuses on mobile banking which belongs to mobile financial applications. Applications and networking requirements of M-commerce applications

Page 28

Class of applications

Applications Applications where mobile device

Examples Banking, brokerage, and payments for mobile users. User specific and location sensitive advertisements

Mobile financial applications (B2C, B2B)

becomes a powerful financial medium Applications turning the wireless

Mobile advertising (B2C) Mobile inventory management (B2C, B2B)/Product locating and shopping (B2C, B2B)

infrastructure and devices into a powerful marketing medium.

Applications attempting to reduce the Location tracking of goods, amount of inventory needed by managing boxes, troops, and people. in-house and inventory-on-move. ______________________________ _____________________ Applications helping to find the location of product and services that are needed Finding the location of a new/used car of certain model, color and features.

Proactive service management (B2C, B2B)

Applications attempting to provide users information on services they will need in very-near-future

Transmission of information related to aging (automobile) components to vendors

Wireless re-engineering (B2C, B2B)

Applications that focus on

Instant claim-payments by

improving the quality of business services insurance companies using mobile devices and wireless infrastructure. ________________________ Applications allowing users to buy ______________________ Airlines competing to buy

________________________

Mobile auction or reverse auction (B2C, B2B)

a or sell certain items using multicast landing time slot during support of wireless runway congestion (a proposed solution to infrastructure air-traffic congestion problem).

Mobile entertainment services and games (B2C Mobile office (B2C

Applications providing the entertainment services to users on per event or subscription basis Applications providing the
Page complete office environment to 29

Video-on-demand, audio-on-demand, and interactive games Working from traffic jams, airport, and conferences

mobile users any where any time

Trends in Mobile Banking

The advent of the Internet has revolutionized the way the financial services industry conducts business, empowering organizations with new business models and new ways to offer 24 hour accessibility to their customers. The ability to offer financial transactions online has also created new players in the financial services industry, such as online banks, online brokers and wealth managers who offer personalized services, although such players still account for a tiny percentage of the industry. Over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world and it is still growing at a rapid pace. According to the GSM Association and Ovum, the number of mobile subscribers exceeded 2 billion in September 2005, and now exceeds 2.5 billion (of which more than 2 billion are GSM). According to a study by financial consultancy Celent, 35% of online banking households will be using mobile banking by 2010, upfrom less than 1% today. Upwards of 70% of bank center call volume is projected to come from mobile phones. Mobile banking will eventually allow users to make payments at the physical point of sale. "Mobile contact less payments will make up 10% of the contact less market by 2010. Many believe that mobile users have just started to fully utilize the data capabilities in their mobile phones. In Asian countries like India, China, Bangladesh, Indonesia and Philippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure, and in European countries, where mobile phone penetration is very high (at least 80% of consumers use a mobile phone), mobile banking is likely to appeal even more. This opens up huge markets for financial institutions interested in offering value added services. With mobile technology, banks can offer a wide range of services to their customers such as doing funds transfer while traveling, receiving online updates of stock price or even performing stock trading while being stuck in traffic. According to

Page 30

the German mobile operator Mobilcom, mobile banking will be the "killer application" for the next generation of mobile technology. Mobile devices, especially smart phones, are the most promising way to reach the masses and to create stickiness among current customers, due to their ability to provide services anytime, anywhere, high rate of penetration and potential to grow. According to Gartner, shipment of smart phones is growing fast, and should top 20 million units (of over 800 million sold) in 2006 alone. In the last 4 years, banks across the globe have invested billions of dollars to build sophisticated internet banking capabilities. As the trend is shifting to mobile banking, there is a challenge for CIOs and CTOs of these banks to decide on how to leverage their investment in internet banking and offer mobile banking, in the shortest possible time. The proliferation of the 3G (third generation of wireless) and widespread implementation expected for 20072011 will generate the development of more sophisticated services such as multimedia and links to m-commerce services.

Mobile Banking Business Models

A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what business model, if mobile banking is being used to attract low-income populations in often rural locations, the business model will depend on banking agents, i.e. retail or postal outlets that process financial transactions on behalf telecoms or banks. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. Many telecoms will work through their local airtime resellers. However, banks in Colombia, Brazil, Peru, and other markets use pharmacies, bakeries, etc. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank/Telecommunication Company (Telco). Another difference lies in the nature of agency agreement between bank and the Non-Bank. Models of branchless banking can be classified into three broad categories - Bank Focused, Bank-Led and Nonbank-Led. Bank-focused Model The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking.

Page 31

Bank-led Model The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade partner (telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a JV between Bank and Telco/non-bank. In this model customer account relationship rests with the bank Non-bank-led Model The non-bank-led model is where a bank does not come into the picture (except possibly as a safekeeper of surplus funds) and the non-bank (e.g. telco) performs all the functions.

SMS BANKING Baron, Patterson and Harris ( 2006) Text messaging was first developed in 1991 for GSM digital mobile phones, almost by accident SMS was the triumph of the consumer - every generation needs a technology that it can adopt as its own to communicate with - and the text generation took up SMS. The fact that the entry barriers to learning the service were so high were an advantage because it meant that parents and teachers and other adult authority figures were unlikely, unable and unwilling to use the service. SMS is one of the few services in consumer history that has grown very fast without corresponding decreases in pricing. Trappey III & Woodside (2005) Although SMS suffers a limitation from the 160 character text-only format, innovations such as the ability to send barcodes improve opportunities for coupons, point-of-sale redemption, and ticket purchases opportunities for marketing via mobile phone. have opened

Page 32

Page 33

Chapter-4

4.1 Theoretical framework

In deriving a framework for this study four existing research frameworks were considered:

Social Exchange Theory (SET)

Social exchange explains social change and stability as a process of negotiated exchanges between parties. Social exchange theory (SET) posits that all human relationships are formed by the use of a subjective cost-benefit analysis and the comparison of alternatives. According to the SET, customers perceive higher risks compared to conventional shopping environment on the Internet as a result of long distances, virtual identities, or lack of regulations. Relevant to SET, Lou concludes that characteristic-based trust, processbased trust and institutional-based trust are antecedents of general trust online, and that building customers trust, a core component of SET and relationship marketing, can be one of these solutions. Trust becomes more critical than ever in the new era of Internet and web media. Kim et al. utilized two important factors related to SET are time discrepancy and satisfaction to

Page 34

contrast consumer trust and purchase behavior between pre-purchase and post-purchase stage. Zhang and Zhang adopt SET in their proceeding paper to prove trust is significant in the initial stage of transaction on Internet.

Expectation-Confirmation Theory (ECT)

Expectation-confirmation theory (ECT) is proposed by Oliver to widely study consumer satisfaction, repurchase intention and behavior. The underlying logic of the ECT framework is: consumers firstly form an initial expectation prior to purchase, and then engender perceptions about its performance after a period of initial consumption. Thus, they may decide the satisfaction level based on the extent to which their expectation is confirmed through assessing the perceived performance by their original expectation. Finally, the satisfied consumers form repurchasing intentions. Trust is the expectation that other individuals or companies with whom one interacts will not take over advantage of a dependence upon them. Since trust involves in expecting of transaction, it must relate to ECT for deciding which store is trustworthy. Kim et al. accept the trust satisfaction relationship is developed through repeated interactions, and it is expected that trust is related to the level of satisfaction. Furthermore, a consumers trust positively affects a consumers expectation with an e-retailers product or service in the research model. Zhang and Zhang have also conducted the ECT in their proceeding paper for develop a model which could explain the repurchase intention as well we long term trust formation. Koppius et al. integrated ECT with the TAM model, since in both models Perceived Usefulness plays a central role and thus provides a natural connection point even though trust and perceived risk played no significant role at this research.

Theory of Reasoned Action (TRA)

The Theory of Reasoned Action is a widely studied model from social psychology, which is concerned with the determinants of consciously intended behaviors (Ajzen and Fishbein, 1980; Fishbein and Ajzen, 1975). It is composed of attitudinal, social influence, and intention variables to predict behavior. Figure 2-2 is a schematic representation of the relationships among constructs in TRA. It is hypothesized by TRA that the individual's behavioral Intention (BI) to perform a behavior is jointly determined by the individual's Attitude toward performing the Behavior (ATB) and Subjective Norm (SN), which is the overall perception of what relevant others think the individual should or should not do. The importance of ATB and SN to predict BI will vary by behavioral domain. For

Page 35

behaviors in which attitudinal or personal-based influence stronger (e.g., purchasing something for personal consumption only), ATB will be the dominant predictor of BI, and SN will be of little or no predictive efficacy. While for behaviors in which normative implications are strong (e.g., purchasing something that others will use), SN should be the dominant predictor of BI, and ATB will be of lesser importance (Ajzen and Fishbein, 1980). The Theory of Reasoned Action also hypothesizes that BI is the only direct antecedent of actual behavior (AB). BI is expected to predict AB accurately if the three boundary conditions specified by Fishbein and Ajzen (1975) can be hold: (a) the degree to which the measure of intention and the behavioral criterion correspond with respect to their levels of specificity of action, target, context, and time frame; (b) the stability of ] intentions between time of measurement and performance of the behavior; and (c) the degree to which carrying out the intention is under the volitional control of the individual (i.e., the individual can decide at will to perform or not to perform the behavior). Moreover, TRA is a general model that does not specify the beliefs that are operative for a particular behavior. Researchers using TRA must first identify the beliefs that are salient for subjects regarding the behavior under investigation. Fishbein and Ajzen (1975) and Ajzen and Fishbein (1980), suggest eliciting five to nine salient beliefs using free response interviews with representative members of the subject population. They recommend using modal salient beliefs for the population, obtained by taking the beliefs most frequently elicited from a representative sample of the population. The TRA has been successfully applied to a large number of situations to predict the performance of behavior and intentions. For example, TRA predicted turnover (Prestholdt et al., 1987); education (Fredricks and Dossett, 1983); and breast cancer examination (Timko, 1987). In a meta-analysis of research on the Theory of Reasoned Action, Sheppard et al. (1988) concluded that the predictive utility of the TRA was strong across conditions.

Page 36

Figure 1.0 ( Theory of Reasoned Action

Theory of Planned Behavior (TPB)

Despite the predictability of the TRA is strong across studies, it becomes problematic if the behavior under study is not under full volitional control. Sheppard et al. (1988) pointed out two problems of the theory. First, one must differentiate the difference between behaviors from intention. This could be problematic because a variety of factors in addition to ones intentions determine how the behavior is performed. Second, there is no provision in the model for considering whether the probability of failing to perform is due to ones behavior or due to ones intentions. To deal with these problems, Ajzen (1985) extended the Theory of Reasoned Action by including another construct called perceived behavioral control, which predicts behavioral intentions and behavior. The extended model is called the Theory of Planned Behavior (TPB). As Figure 2-3 shows, TRA and TPB have many similarities. In both models, BI is a key factor in the prediction of actual behavior. Both theories assume that human beings are basically rational and make systematic use of information available to them when making decisions. By considering controlrelated factors, TRA assumes that the behavior being studied is under total volitional control of the performer (Madden et al., 1992). However, TPB expands the boundary conditions of TRA to more goal-directed actions. Attitude toward Behavior (ATB) is defined as a persons general feeling of favorableness or unfavorableness for that behavior (Ajzen and Fishbein, 1980). Subjective Norm (SN) is defined as a persons perception that most people who are important to him/her think he/she should or should not perform the behavior in question (Ajzen and Fishbein,
Page 37

1980). Attitude toward behavior is a function of the product of ones salient beliefs that performing the behavior will lead to certain outcomes, and an evaluation of the outcomes, i.e., rating of the desirability of the outcome. The main difference between these two theories is that the TPB has added Perceived Behavioral Control (PBC) as the determinant of Behavioral Intention, as well as control beliefs that affect the perceived behavioral control. Though it may be difficult to assess actual control before behavior, TPB asserts that it is possible to measure PBC - peoples perception of the ease or difficulty in performing the behavior of interest (Ajzen, 1991). PBC is a function of control beliefs and perceived facilitation. Control belief is the perception of the presence or absence of requisite resources and opportunities needed to carry out the behavior. Perceived facilitation is ones assessment of the importance of those resources to the achievement of the outcomes (Ajzen and Madden, 1986). PBC is included as an exogenous variable that has both a direct effect on actual behavior and an indirect effect on actual behavior through intentions. The indirect effect is based on the assumption that PBC has motivational implications for behavioral intentions. When people believe that they have little control over performing the behavior because of a lack of requisite resources and opportunities, then their intentions to perform the behavior may be low even if they have favorable attitudes and/or subjective norms concerning performance of the behavior. Bandura (1977) has provided empirical evidence that people's behavior is strongly influenced by the confidence they have in their ability to perform the behavior. The structural link from PBC to BI reflects the motivational influence of control on actual behavior through intentions. The direct path from PBC to AB is assumed to reflect the actual control an individual has over performing the behavior. Ajzen (1985) offers the following rationale for this direct path. First, if intention is held constant, the effort needed to perform the behavior is likely to increase with PBC. For example, if two people have equally strong intentions to learn to ride a bike, and if both try to do so, the person who is confident that he or she can master this activity is more likely to ride the bike than a person who doubts his or her ability. Second, PBC often serves as a substitute for actual control, and insofar as perceived control is a realistic estimate of actual control, PBC should help to predict AB. As with TRA, the relative importance of BI predictors varies with the behavioral domain. In some applications, it may be found that only ATB has a significant impact on BI; in others, ATB and

Page 38

PBC will be significant; in still others, ATB, SN, and PBC will contribute to the prediction of BI (Ajzen, 1985). Similarly, the ability of PBC and BI to predict AB also will vary across behaviors and situations. Both BI and PBC can make significant contributions to the prediction of goal-directed actions. In any given application, however, one predictor may be more important than the other, and only one of the two may be significant. The Theory of Planned Behavior has been successfully applied to various situations in predicting the performance of behavior and intentions, such as predicting user intentions to use a new software (Mathieson, 1991), to perform breast self- examination (Young et al., 1991), to avoid caffeine (Madden et al., 1992), to perform unethical behavior (Man, 1998), and to understand wastepaper recycling (Cheung et al., 1999). Madden et al. (1992), Man (1998), and Cheung et al. (1999) all found that TPB has a better predictive power of behavior than TRA.

Figure 1.1 Theory of Planned Behavior

Decomposed of Theory of Planned Behavior

Taylor and Todd (1995) indicated that a better understanding of the relationships between the belief structures and antecedents of intention requires the decomposition of attitudinal beliefs. Shimp and Kavas (1984) argued that the cognitive components of belief could not be organized into a single

Page 39

conceptual or cognitive unit. Taylor and Todd (1995) also specified that, based on the diffusion of innovation theory, the attitudinal belief has three salient characteristics of an innovation that influence adoption, are relative advantage, complexity and compatibility (Rogers, 1983). Taylor and Todd (1995) showed that the decomposed model of the TPB has better explanatory power than the pure TPB and TRA models. So, the argument of our empirical study is that Internet banking is a technological innovation and thus the decomposed TPB model gives a more satisfactory explanation of adoption intention. Related advantage refers to the degree to which an innovation provides benefits which supersede those of its precursor and may incorporate factors such as economic benefits, image, enhancement, convenience and satisfaction (Rogers, 1983). Relative advantages should be positively related to an innovations rate of adoption (Rogers, 1983; Tan and Teo, 2000). Complexity represents the degree to which an innovation is perceived to be difficult to understand, learn or operate (Rogers, 1983). It is also defined as the degree to which an innovation is perceived as relatively difficult to understand and use. Innovative technologies that are perceived to be easier to use and less complex have a higher possibility of acceptance and use by potential users. Thus, complexity would be expected to have negative relationship to attitude. Complexity (and its corollary, ease of use) has been found to be an important factor in the technology adoption decision (Davis et al., 1989). Compatibility is the degree to which the innovation fits with the potential adopters existing values, previous experience and current needs (Rogers, 1983). Tornatzkey and Klein (1982) find that an innovation is more likely to be adopted when it is compatible with the job responsibilities and value system of the individual. Therefore, it may be expected that compatibility relates positively to adoption. As for the structure of normative belief, while some studies have found support for the decomposition of normative belief structures (e.g. Burnkrant and Page, 1988), studies such as those by Shimp and Kavas (1984) and Oliver and Bearden (1985) have failed to identify a multidimensional structure for nbjmcj. Therefore, as Taylor and Todd (1995), we also should not provide additional insight into the decomposition of the subjective norm.

Page 40

In addition, according to Ajzen (1985, 1991), PBC reflects belief regarding access to the resources and opportunities needed to effect a behavior. PBC appears to encompass two components. The first is facilitating conditions (Triandis, 1979), which reflect the availability of resources needed to perform a particular behavior. This might include access to the time, money and other specialized resources. In fact, as supporting technological infrastructures become easily and readily available, Internet commerce applications such as banking services will also become more feasible. Accordingly, the government can play an intervention and leadership role in the diffusion of innovation. The second component is self-efficacy (Ajzen, 1991), that is, being confident of the ability to behave successfully in the situation (Bandura, 1977, 1982). An individual with the self-assured skill to use a computer and the Internet is more inclined to adopt Internet banking. This component then refers to comfort with using the innovation.

Figure 1.2 Decomposed model of theory of planned behavior

Technology Acceptance Model (TAM)

Technology Acceptance Model (TAM), introduced by Davis (1989), is an adaptation of the Theory of Reasoned Action (TRA) specifically tailored for modeling user acceptance of information systems. The goal of TAM is to provide an explanation of the determinants of computer acceptance that is general, capable of explaining user behavior across a broad range of end-user computing technologies and user populations, while at the same time being both parsimonious and theoretically justified. Ideally one would like a model that is helpful not only for prediction but also for explanation, so that researchers

Page 41

and practitioners can identify why a particular system may be unacceptable, and pursue appropriate corrective steps. A key purpose of TAM, therefore, is to provide a basis for tracing the impact of external factors on internal beliefs, attitudes, and intentions. TAM was formulated in an attempt to achieve these goals by identifying a small number of fundamental variables suggested by previous research dealing with the cognitive and affective determinants of computer acceptance, and using TRA as a theoretical backdrop for modeling the theoretical relationships among these variables. As Figure 2-5 shows, TAM posits that two particular beliefs, perceived usefulness (PU) and perceived ease of use (PEOU), are the primary relevance for computer acceptance behavior. PU is defined as the degree to which a prospective user believes that using a particular system would enhance his or her job performance. This follows from the definition of the word useful: capable of being used advantageously. Within an organizational context, people are generally reinforced for good performance by raises, promotions, bonuses, and other rewards (Pfeffer, 1982; Vroom, 1964). A system high in perceived usefulness, in turn, is one for which a user believes in the existence of a positive useperformance relationship. PEOU refers to the degree to which a prospective user believes that using a particular system would be free of effort. This follows from the definition of ease: freedom from difficulty or great effort. Effort is a finite resource that a person may allocate to the various activities for which he or she is responsible. All else being equal, an application perceived to be easier to use than another is more likely to be accepted by users. In January 2000, the Institute for Scientific Informations Social Science Citation Index listed 424 journal citations of the two journal articles that introduced TAM (i.e., Davis 1989, Davis et al. 1989). In the past decade, TAM has become well established as a robust, powerful, and parsimonious model for predicting user acceptance.

Page 42

Figure 1.3 Technology Acceptance Model. Source

Extension of Technology Acceptance Model (ETAM)

A study of the adoption of telemedicine technology by physician using TAM has found relatively low explanation power of TAM of attitude and intention (Hu et al., 1999). The researchers suggested that integration of TAM with other IT acceptance models or incorporating additional factors could help to improve the specificity and explanatory utility in a specific area. IS researchers have begun to use TAM to examine the possible antecedents of Perceived Usefulness and Perceived Ease of Use toward microcomputer usage (Igbaria, Guimaraes, and Davis, 1995; Igbaria, Iivari, and Maragahh, 1995). However, one criticism of the current TAM studies is that there are very few investigations target at the study of the factors (i.e., the external variables) that affect the PU and PEOU (Gefen and Keil, 1998). In order to address this issue, Venkatesh and Davis (1996) used three experiments to investigate the determinants of Perceived Ease of Use. The results showed that general Computer Self-Efficacy significantly affects Perceived Ease of Use at all time, while Objective Usability of the system affects users' perception after they have direct experience with the system. Furthermore, Venkatesh and Davis (2000) developed and tested a TAM2 model by including a number of determinants to Perceived Usefulness into the new model (see Figure 2-6 .It is a theoretical extension of the Technology Acceptance Model that explains Perceived Usefulness and Usage Intentions in terms of social influence processes (Subjective Norm, Voluntariness, and Image) and cognitive instrumental processes (Job Relevance, Output Quality, Result Demonstrability and Perceived Ease of Use). Longitudinal data were collected from four different organizations that spanned a range of industries, organizational contexts, functional areas (ranging from small accounting service firm, medium-sized manufacturing firm, to the personal financial services department of a large financial services firm), and types of system being introduced. The results showed that all the above-mentioned social influences and cognitive instrumental processes have significantly influenced user acceptance of the systems.

Page 43

Figure 1.4 TAM2

Triandis Model
Similar to TRA, TPB and TAM, Triandis model assumes an attitude-intention- behavior relationship. Triandis model, however, include a number of relevant variables. The model, as presented in Figure 2-7, takes into account the important constructs such as habit, social factors and facilitating conditions. It postulates that the probability of performing an act is a function of (a) habits; (b) intention to perform the act; and (c) facilitating conditions. The intention of performing a particular behavior is a function of the (a) perceived consequences; (b) social factors (including norms, roles and the selfconcept); (c) Affect (Chang and Cheung, 2001). Facilitating conditions refer to the necessary resources and supports to perform a behavior, for example, time, money, expertise, hardware, software, network connection, etc. The inclusion of this construct has made up the deficiency of TAM, which assumes that usage is volitional and that no barriers would prevent an individual from using an IS (Mathieson et al., 2001). Triandis model has been widely adopted in the studies of social and health behavior, and consumer behavior. In recent studies, the Triandis model has been applied to technology adoption researches including the adoption of personal computer, internet/WWW and Executive Information System (EIS) (Chang and Cheung, 2001; Cheng et al., 2002; Cheung et al., 2000). For example, Triandis model and its extensions were used to understand the determinants of users intention for using the internet/WWW in working environments and for shopping (Chang and Cheung, 2001; Cheung et
Page 44

al., 2000). The findings in Chang and Cheungs study (2001) show that theoretical constructs in the Triandis model are useful in explaining the intention to use the Internet Whereas, the modified model, which includes the constructs of perceived complexity, near-term and long-term consequences, provides a better fit. The new model shows that affect, social factors, facilitating conditions, and perceived near-term consequences all have positive impacts on the intention to use the Intention/WWW. Firstly, the modified model assumes that perceived complexity (in contrast to perceived ease of use in TAM) is a persons perception, which is an internal factor, and should therefore be put under the construct of perceived consequences. Secondly, while the Triandis model posits that facilitating conditions only affect the actual behavior, the modified model postulates that facilitating conditions can have significant impacts on intention. It is similar to TPB that perceived behavioral control affects both the behavioral intention and actual usage. Thirdly, on the basis of the past studies on TAM, the modified model postulates that perceived complexity has positive impact on affect. That is, the users will feel happier if they perceive the computer technology is easy to use. Fourthly, consistent with the TRA that intention is a function of the subjective norm, the modified model assumes that social factors (including social norms and perceptions of the significant others) have positive impact on affect (Chang and Cheung, 2001).

Figure1.5 Schematic of the Triandis Model

Page 45

Diffusion of Innovation Innovation Diffusion Theory (IDT) is a model that explains the process by which innovations in technology are adopted by users. Rogers defines an innovation as an idea, practice, or object that is perceived as new by an individual or other unit of adoption (Rogers, 1995). Diffusion is defined as the process by which an innovation is communicated through certain channels over time among the members of a social system. So, it follows that Innovation Diffusion theory focuses on explaining how new ideas and concepts gain widespread adoption. Innovation Diffusion Theory considers a set of attributes associated with technological innovations that affect their rate of widespread adoption. Rogers defines these attributes as: Relative advantage The degree to which an innovation is perceived to be better than the idea it supersedes. Compatibility The degree to which an innovation is perceived as consistent with the existing values, past experiences, and needs of potential adopters. Complexity The degree to which an innovation is perceived as relatively difficult to understand and use Trialability The degree to which an innovation may be experimented with on a limited basis. Observability The degree to which the results of an innovation are visible to others. Among these attributes, only relative advantage, compatibility and complexity are consistently related to innovation adoption. ` Rogers reviewed nearly 1500 studies where variants of IDT are used to investigate the

adoption of technological innovations in an array of settings including agriculture, healthcare, city planning, and economic development. A smaller set of studies focus on, how these attributes influence

Page 46

behavioral intention and use. Rogers developed his IDT constructs by identifying the product attributes that most greatly influenced adoption.

Comparison of Theories Although the TAM, TRA, TPB, Triandis and IDT focus on different determinants to explain the consumer behavior in technology adoption, these theories share some similarities. Firstly, TRA, TPB, TAM and Triandis model assume an attitude- intention-behavior relationship, that is, cognitive and normative or affective beliefs form attitude, which, in turn, has influence on behavioral intention and actual usage of behavior. Secondly, the perceived usefulness (PU) in TAM is similar to relative advantage in IDT and, to a certain extent, the perceived consequences in Triandis model. These constructs are cognitive component of individuals attitude. The constructs of PU, relative advantage and perceived consequences in various models further justify the rationale in TRA that the beliefs about the consequences of the behavior are keys to the formulation of attitude towards the behavior. Thirdly, the construct of perceived ease of use (PEOU) in TAM is obviously close to the complexity construct in IDT. Fourthly, perceived behavioral control in TPB refers to ones perception of whether a behavior is under his control and whether he has access to resources and opportunities required to facilitate a behavior (Ajzen, 1991). In this connection, facilitating conditions in Triandis model is related to the perceived behavioral controls in TPB. However, Triandis model posits that facilitating conditions only affect the actual behavior while the perceived behavioral controls in TPB affect both the behavioral intention and actual usage.

Page 47

Chapter-5

Page 48

5.1 A Overview of the Latest Trend in Banking Industry

At the beginning of the 21st century, the biggest banks in the industrial world have become complex financial organizations that offer a wide variety of services to international markets and control billions of dollars in cash and assets. Supported by the latest technology, banks are working to identify new business niches, to develop customized services, to implement innovative strategies and to capture new market opportunities. With further globalization, consolidation, deregulation and diversification of the financial industry, the banking sector will become even more complex. Although, the banking industry does not operate in the same manner all over the world, most bankers think about corporate clients in terms of the following:

Commercial banking - banking that covers services such as cash management (money

transfers, payroll services, bank reconcilement), credit services (asset-based financing, lines of credits, commercial loans or commercial real estate loans), deposit services (checking or savings account services) and foreign exchange;

Investment banking - banking that covers an array of services from asset securitization,

coverage of mergers, acquisitions and corporate restructuring to securities underwriting, equity private placements and placements of debt securities with institutional investors. Over the past decade there has been an increasing convergence between the activities of investment and commercial banks, because of the deregulation of the financial sector. Today, some investment and commercial banking institutions compete directly in money market operations, private placements, project finance, bonds underwriting and financial advisory work. Furthermore, the modern banking industry has brought greater business diversification. Some banks in the industrialized world are entering into investments, underwriting of securities, portfolio management and the insurance businesses. Taken together, these changes have made banks an even more important entity in the global business community.
Page 49

Chapter-6

Page 50

6.1 Graphs
Percentage frequencies

OCCUPATION Valid Frequency STUDENT EMPLOYEE BUSINESSMAN Total 21 68 13 102 Percent 20.6 66.7 12.7 100.0 Percent 20.6 66.7 12.7 100.0 Cumulative Percent 20.6 87.3 100.0

Page 51

GENDER Valid Frequency MALE FEMALE Total 79 23 102 Percent 77.5 22.5 100.0 Percent 77.5 22.5 100.0 Cumulative Percent 77.5 100.0

Page 52

AGE Valid Frequency 18-30 30-50 Total 92 10 102 Percent 90.2 9.8 100.0 Percent 90.2 9.8 100.0 Cumulative Percent 90.2 100.0

Page 53

ANNUAL INCOME Valid Frequency BELOW 2 LACS 2-4 LACS 4-6 LACS ABOVE 6 LACS Total 33 28 31 10 102 Percent 32.4 27.5 30.4 9.8 100.0 Percent 32.4 27.5 30.4 9.8 100.0 Cumulative Percent 32.4 59.8 90.2 100.0

Page 54

HOW FREQUENTLY DO YOU VISIT YOUR BANK BRANCH EVERY MONTH Valid Frequency 1-3 TIMES 3-8 TIMES 8-12 TIMES MORE THAN 12 TIMES Total 50 40 7 5 102 Percent 49.0 39.2 6.9 4.9 100.0 Percent 49.0 39.2 6.9 4.9 100.0 Cumulative Percent 49.0 88.2 95.1 100.0

Page 55

FOR WHAT PURPOSE YOU AVAIL E-BANKING SERVICES Valid Frequency DEPOSIT WITHDRAWAL DEMAND DRAFT E-MAIL STATEMENT BALANCE ENQUIRY OTHERS Total 5 102 4.9 100.0 4.9 100.0 100.0 15 14.7 14.7 95.1 34 7 6 35 Percent 33.3 6.9 5.9 34.3 Percent 33.3 6.9 5.9 34.3 Cumulative Percent 33.3 40.2 46.1 80.4

Page 56

WHICH OF THE E-BANKING WIDELY ACCEPTED Valid Frequency INTERNET BANKING MOBILE BANKING PHONE BANKING SMS BANKING ATM OTHERS Total 8 15 17 35 3 102 7.8 14.7 16.7 34.3 2.9 100.0 7.8 14.7 16.7 34.3 2.9 100.0 31.4 46.1 62.7 97.1 100.0 24 Percent 23.5 Percent 23.5 Cumulative Percent 23.5

Page 57

HOW FREQUENTLY DO YOU USE E-BANKING SERVICES EVERY MONTH Valid Frequency 1-3 TIMES 3-8 TIMES 8-12 TIMES MORE THAN 12 TIMES Total 39 40 14 9 102 Percent 38.2 39.2 13.7 8.8 100.0 Percent 38.2 39.2 13.7 8.8 100.0 Cumulative Percent 38.2 77.5 91.2 100.0

Page 58

WOULD YOU BE COMFORTABLE WITH PROVIDING CREDIT/DEBIT CARD FOR PAYMENT Valid Frequency YES NO Total 87 15 102 Percent 85.3 14.7 100.0 Percent 85.3 14.7 100.0 Cumulative Percent 85.3 100.0

Page 59

6.2 Data analysis and interpretation

Page 60

Hypothesis

Hence, the significant of the Pearson Chi-square coefficient is more than 0.05. So H01 is not

H01: ACCEPTANCE OF E-BANKNG IS NOT DEPEND ON OCCUPATION

Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 102 12.602a 14.190 .051 df 10 10 1 sided) .247 .164 .822

rejected. It proves that acceptance of E-banking is not dependent on occupation.

H02 ACCEPTANCE OF E-BANKING IS NOT DEPEND ON GENDER

Chi-Square Tests Asymp. Sig. Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 8.730a 12.237 .000 102 Df 5 5 1 (2-sided) .120 .032 .998

Page 61

Hence, the significant of the Pearson Chi-square coefficient is more than 0.05. So H01 is not rejected. It proves that acceptance of E-banking is not dependent on gender. H03: ACCEPTANCE OF THE E-BANKING IS NOT DEPEND ON AGE
Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases . 5.020a 5.440 1.970 102 Df 5 5 1 sided) .413 .365 .160

Hence, the significant of the Pearson Chi-square coefficient is more than 0.05. So H01 is not rejected. It proves that acceptance of E-banking is not dependent on age.

H04: ACCEPTANCE OF E-BANKING IS DEPEND ON ANNUAL INCOME

Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 23.586a 27.218 2.476 102 Df 15 15 1 sided) .072 .027 .116

Page 62

Hence, the significant of the Pearson Chi-square coefficient is more than 0.10. So H01 is rejected. It proves that acceptance of E-banking is depenent on annual income. H05: FREQUENCY OF USE OF E-BANKING SERVICES IS NOT DEPEND ON CUSTOMER OCCUPATION

Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 11.948a 11.088 9.253 102 Df 6 6 1 sided) .063 .086 .002

H06: FREQUENCY OF USE OF E-BANKING SERVICES IS NOT DEPEND ON GENDER

Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 4.655a 6.560 .129 102 df 3 3 1 sided) .199 .087 .719

Page 63

Hence, the significant of the Pearson Chi-square coefficient is more than 0.05. So H01 is not rejected. It proves that the use of E-banking services is not dependent on gender.

H07: FREQUENCY OF USE OF E-BANKING SERVICES IS NOT DEPEND ON AGE

Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 2.941a 2.741 .913 102 df 3 3 1 Asymp. Sig. (2-sided) .401 .433 .339

Hence, the significant of the Pearson Chi-square coefficient is more than 0.05. So H01 is not rejected. It proves that the use of E-banking services is not dependent on customers age.
H08 : FREQUENCY OF USE OF E-BANKING SERVICES IS NOT DEPEND ON ANNUAL INCOME
Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 8.141a 7.948 1.429 102 df 9 9 1 sided) .520 .539 .232

Hence, the significant of the Pearson Chi-square coefficient is more than 0.05. So H01 is not rejected. It proves that the use of E-banking services is not depend on customers income.

Page 64

6.3: Research findings

In the study it has been found that the demographic factors like age and gender do not affect the usage of the E-banking products. In the study the occupation played a major role in using E-banking products. In the informal discussion it was found that the private sector employee were having access to web services and this made them use the E-banking services to a greater extent when compared to public sector employees. Generally the customers who are having multiple services being received from the bank are using the E-banking services to a larger extent than the customer having single business relation with the bank. When compared to the public sector bank customers private sector bank customers are using the E-banking services to a major extent.

6.4 Conclusion
The penetration of E-banking products into the rural areas will certainly change the way how INDIAN BANKS. Green environment has to be achieved and usage of E-banking services is one of the ways of achieving lower carbon foot prints. Financial inclusion is a reality only with convenience banking products like Mobile Banking.

6.5 References
Page 65

www.arraydev.com/commerce/jibc/0103-02.htm Abstract-PsycINFO www.findarticles.com www.thales-esecurity.com http://www.psychstat.missouristate.edu/introbook/sbk00.htm www.research.att.com/resources/trs/TRs/99/99.4/99.4.3/report.htm http:// www.fdic.gov/index.html http://www2.fdic.gov/sod/ http://www.fsdkenya.org http://www.bankablefrontier.com http://business.iafrica.com/features/649690.htm http://www.arraydev.com/commerce/jibc http://www.indianmba.com/

ANNEXURE
Page 66

(Questionnaire)

PERSONAL INFORMATION:

1. Your occupation: Student

Employee Female 18 30

Businessman

Others

2. Gender: 3. Age: 50 4. Annual Income: 6 Lacs

Male Below 18

30 50

Above

Below 2Lacs

2 - 4 Lacs

4 - 6 Lacs

Above

5. Are you using any type of E-banking services provided by your bank? Yes No Deposit

6. For what purpose you avail E-banking services? Withdrawal Others

Demand Draft E-mail statement Balance enquiry

7. According to you which of the E-banking services is widely accepted? Internet banking banking ATM Mobile banking Others Phone banking SMS

8. How frequently do you use E-banking services every month? (Ex. balance

enquiry, fund transfer..) 1 3 times 12 times 3 8 times 8 12 times more than

Page 67

9. Would you be comfortable with providing your credit/debit card details in

mobile/internet for payment? Yes

No

10.

Would you prefer E-banking over branch in next few years when we No

will use more advanced technology? Yes

11. Are you comfortable in accepting and adopting innovative web based

banking technologies for carrying out your bank transactions? Yes No

Page 68