Adoption of I-Banking among the Working Group

 

K. Shobha¹*and V. Vinitha²

 

¹Associate Professor in Economics, Government Arts College, Coimbatore-18

 

ABSTRACT:

The role of internet is becoming inevitable to corporate and society. The usage of i-banking is on rise among the Indian customers, i-banking has revolutionized the banking industry and under pressure to offer new services and products to attract the customers. However to succeed in today’s electronic markets, a strategic and focused approach is required. Though slow when compared to developed countries yet steadily Indian customers is moving towards i-banking. In a study by Internet and Mobile Association of India (IAMAI), it was found that ATM users were more when compared to internet users. About 23% of the online users preferred internet banking but 53% preferred ATM. Out of the 6,365 internet users sampled, 35% used online banking in India. This shows that a significant number of online users do not use internet banking, and hence there is a need to analyze the reasons for not using it.    

 

 

INTRODUCTION:

The marvelous kinds of innovation in technology and hard line blend of it with information technology made a paradigm shift in the banking industry. Technology itself created its world in the globe of human beings. Advent of Internet banking happened in early 1990(Rajesh Kumar Srivastava, 2007). Internet banking (or E-banking) means any user with a personal computer and a browser can get connected to his bank -s website to perform any of the virtual banking functions. In internet banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It could do a borderless entity permitting anytime, anywhere and anyhow banking.

 

Internet banking is a result of explored possibility to use internet application in one of the various domains of commerce. It is difficult to infer whether the internet tool has been applied for convenience of bankers or for the customers’ convenience. But ultimately it contributes in increasing the efficiency of the banking operation as well providing more convenience to customers. Without even interacting with the bankers, customers transact from one corner of the country to another corner (Divya Singhal and Padhmanabhan, 2008).

 

In an effort to become more efficient, flexible and competitive in today’s changing business environment, banks are increasingly acknowledging the benefits of internet in satisfying the needs of the modern consumer.

Since the introduction of internet to business applications, the number of commercial internet servers and private users has been increasing at an extraordinary pace. The internet has become a powerful tool in service delivery and results in improved business performance in terms of profitability, growth, market share, goodwill, image, as well as customer loyalty. Internet banking has made it possible for customers to conduct their banking transactions anytime and anywhere, as well as faster as compared to traditional services offered by banks. Home-based internet banking has resulted in an increasing number of customers switching from the traditional face-to-face encounters to an internet service delivery channel (Munhurrun and Naidoo).

 

Private Banks in India were the first to implement internet banking services in the banking industry. Private Banks, due to late entry into the industry, understood that the establishing network in remote corners of the country is a very difficult task. It was clear to them that the only way to stay connected to the customers at any place and at anytime is through internet applications. They took the internet applications as a weapon of competitive advantage to corner the great monoliths like State Bank of India, Indian Bank etc. Private Banks are pioneer in India to explore the versatility of internet applications in delivering services to customers (Divya Singhal and Padhmanabhan, 2008). This study aims to identify the important parameters affecting the service quality of i-banking.

 

OBJECTIVES:

The objectives of the study are

Ø  To examine the demographic profile of the sample respondents.

Ø  To analyze the service quality of i-banking from customer’s perspective.

 

METHODOLOGY:

Based on purposive sampling technique about 100 respondents were selected from Coimbatore city. Only those who had one year experience in i-banking were selected. The responses were elicited through a detailed interview schedule personally administered. The required data were collected through personal interview method. Using the limited category response method, the respondents were asked to mark their perception on a five point scale and factor analysis was used.

 

FINDINGS:

Demographic profile of the respondents.

Out of the 100 respondents, 84% were men and 16 % were women. About 53% of the respondents belonged to the age group 30 to 40 years. Only 2% of the respondents were above 50 years.

 

 

Table-1: Selected Demographic Characteristics

Source: Calculations based on primary data

 

Around 53% of the respondents worked in IT Company, 16% were in teaching line, 22% were entrepreneurs and 9% were doctors by profession. About 47% of the respondents had completed their UG degree, 43% were PG degree holders and 10 % of the respondents had a doctorate degree. Around 51 % of the respondents earned less than Rs. 30,000 per month, but 44 % of the respondents earned Rs. 30,000 to Rs. 60,000, only 5% of the respondents earned an amount of above Rs.60,000 per month. About 54% of respondents had account in private banks but 46% had account in government banks. Around 22% of the respondents had been associated with their bank for less than 4 years, but 43 % respondents had 4 to 8 years of association and 35% respondents had above 8 years of association with their banks. All the respondents preferred to operate their account in home rather than Cybercafé. About 64% of the respondents had a good experience with their bank in the matter of i-banking but 17% of the respondents were neutral to this opinion.  In the field of i-banking around 15% of the respondents felt that the performance of the bank was excellent.

 

To have an insight into the responses collected, factor analysis was used. It was used to remove the redundant variables from the survey data and to reduce the number of variables into definite number of dimensions. The application was done using SPSS 11.5. The factor analysis was performed using the principal component extraction method with varimax rotation. The reliability scores of all the dimensions were found to exceed the threshold; all measures demonstrated good levels of reliability (greater than 0.80). The Kaiser-Meyar- Olkin (KMO) was 0.829 and significant Barlett’s test of sphericity (4469.935) supported the use of  factor analysis in order to extract independent variable associated with the various services provided by the bank relating to i-banking. The degrees of variance were meritorious, which reflects that the factor extracted will account for good amount of variance. Factor one explains 38.114% of total variance where as subsequent factor explained only small amount of variation (factor 2-28.63% and factor 3-17.91%).  In the initial application, the number of variables was reduced from 27 to 23. In the second application, these 23 variables were classified under three dimensions based on their factor-loading score. The sorted rotated values of factor loading with minimum value of 0.5 or more were considered. Based on the results of factor analysis, the variables were classified into three dimensions – customer friendly, responsiveness and efficiency.

 

The dimensions and the corresponding variables are shown below in Table -2.

 

 

Based on the results of factor analysis the variables were classified into three dimensions. The dimensions and the corresponding variables are ‘Customer friendly-variables 1-13’, ‘Responsiveness variables 14-19’and ‘Efficiency-variables 20-23’. Generally, factor loading represents how much a factor explains a variable. High loading indicates that the factor strongly influences the variable. Assuming a factor loading of more than 0.80 as having high impact on the variables, it is concluded from the above Table 2 that some variables which are less than 0.80 need attention for the quality improvement of i-banking. 

 

Correlation analysis

To find the degree of association between the dimensions identified correlation analysis was applied. The correlation coefficients between the various dimensions are calculated. There existed significant positive correlation between customer friendly and responsiveness (0.767). A high degree of significant positive correlation was also observed between responsiveness (0.641) and customer friendly (0.597) with that of efficiency.

 

 

Table-2: Sorted Rotated Factor Loadings

Extraction Method: Principal Component Analysis. 

Rotation Method: Varimax with Kaiser Normalization.

Regression analysis

To find the relationship between the service quality of i-banking and the identified dimensions, regression analysis was used. The three dimensions were treated as independent variables for the regression equation. These are: ‘efficiency’ (X1), ‘responsiveness’ (X2) and ‘customer friendly’ (X3) and the dependent variable used in the regression analysis is the perception of the customers on the service of i-banking.

 

Table-3 Regression Co-efficients

Independent variable	Co-efficients	Standard error	t	Significance
Constant	2.791	0.100	27.921	0.000
Efficiency*	0.076	0.075	1.014	0.313
Responsiveness	0.609	0.086	7.039	0.000
Customer friendly	0.355	0.121	2.930	0.004

R2 = 74%; R2 (adj.) = 73.2%.

*Statistically not significant.

 

It is observed from Table 3 that the relationship between the overall service quality (Y) and  dimensions like responsiveness and customer friendly are  statistically significant at 95% confidence level (p < 0.05). Also, the adjusted R2 value is 0.73, which indicates that the relationship is statistically significant.  So 73% of the variance is due to the above dimensions. However, ‘efficiency (X1) is not statistically significant, indicating further improvement in this dimension.

 

 

 

CONCLUSION:

Customers were satisfied with the dimensions customer friendly and responsiveness provided by the banks but they were not very much satisfied with the dimension efficiency. So the bankers should provide better services. Bank should redesign their internet banking site and make it easier to use. Bank can encourage customers to adopt i-banking by highlighting its benefits and security features.

 

REFERENCE:

Munhurrun and Naidoo ,The Impact of Internet Banking Service Quality on Satisfaction and Behavioral Intentions , www.google.com.

 

Divya Singhal and  Padhmanabhan (2008),A Study on Customer Perception Towards Internet Banking: Identifying Major Contributing Factors,  The Journal of Nepalese Business Studies Vol.V,No.1,December, pp-101-102.

 

Rajesh Kumar Srivastava,(2007),Customer’s perception on usage of internet banking, Innovative Marketing, Volume 3, Issue 4, pp 68-73.