A PROJECT REPORT

On

“PEOPLE`S PERCEPTION TOWARDS INTERNET

BANKING”

LOVELY PROFESSIONAL UNIVERSITY

PUNJAB

Batch2009

Submitted in partial fulfillment for

BBA INTERNATONAL

Submitted by :- Under guidance of:

Abhishek Randev Ms.Ashima Kalia
10902226 Lecturar,LHSB

Batch 2009 LPU

REG. No-10902226

1
 TABLE OF CONTENTS

CHAPTER NO. TOPIC PAGE NO.

Chapter - 1 INTRODUCTION 3

Chapter - 2 OBJECTIVE OF STUDY 5

Chapter - 3 LITERATURE REVIEW 6

Chapter - 4 NEED OF RESEARCH PAPER 9

Chapter - 5 RESEARCH METHODOLOGY 10

Chapter - 6 REFRENCES 12

2
\

Introduction

Information technology plays a major role in shaping industries all over the world.
Obviously, banks rely heavily on IT in conducting their businesses and spend huge
amounts of money on such technology to reduce operation costs and gain competitive
advantage over their rivals by offering customers better services through ATMs
machines, telephone banking and more evidently in the last decade the internet banking
(IB). Researchers have found that a significant number of customers are either not aware
of the IB services or do not trust the IB as a channel to conduct their banking
transactions. Researchers also have found that customers may adapt the IB technology
only if they perceive the technology to be useful. This research paper examines
customers' perception of using IB in india. The paper can be a very useful reference for
the banking industry to improve the level of IB services and for further future research.

All industries including the bank industry in India and all over the world keep racing to
provide the latest and state of the art technology that costs them a lot of money in an
attempt to benefit from the fist mover competitive advantage, capture larger market share
and reduce operations costs. Obviously, online banking, which was introduced in 1980's,
has come a long way since then, though it was only in the mid 1990's that internet
banking caught on and emerged in the developing countries . The last decade has seen a
profuse growth in internet banking transactions. What attracts customers to internet
banking is the round the clock availability and ease of transactions. Studies estimate that
internet banking still has a long way to go. Several banks have customers who prefer
banking in the traditional ways.

The objective of this study is to know how customers perceive using online banking in
india, which will enable bank managers to understand the major factors that influence

3
customers' decision to use or not use online banking. Understanding the symptoms of the
problem of why there is a low rate of IB usage can help managers to come up with a right
solution to improve their IB service as well as to increase the rate of IB usage.

Online banking (or Internet banking) allows customers to conduct financial transactions
on a secure website operated by their retail or virtual bank, credit union or building
society.

The common features fall broadly into several categories

• Transactional (e.g., performing a financial transaction such as an account to

account transfer, paying a bill, wire transfer, apply for a loan, new account, etc.)
o Payments to third parties, including bill payments and telegraphic/wire
transfers
o Funds transfers between a customer's own transactional account and
savings accounts
o Investment purchase or sale
o Loan applications and transactions, such as repayments of enrollments

• Non-transactional (e.g., online statements, cheque links, cobrowsing, chat)

o Viewing recent transactions
o Downloading bank statements, for example in PDF format
o Viewing images of paid cheques
• Financial Institution Administration
• Management of multiple users having varying levels of authority
• Transaction approval process

Features commonly unique to Internet banking include

• Personal financial management support, such as importing data into personal

accounting software. Some online banking platforms support account aggregation
to allow the customers to monitor all of their accounts in one place whether they
are with their main bank or with other institutions.

Protection through single password authentication, as is the case in most secure Internet
shopping sites, is not considered secure enough for personal online banking applications
in some countries. Basically there exist two different security methods for online
banking.

• The PIN system where the PIN represents a password, used for the login and
representing one-time passwords to authenticate transactions. can be distributed in
different ways, the most popular one is to send a list of s to the online banking
user by postal letter. The most secure way of using is to generate them by need
using a security token. These token generated depend on the time and a unique
secret, stored in the security token (this is called two-factor authentication or

4
2FA). Usually online banking with PIN is done via a web browser using SSL
secured connections, so that there is no additional encryption needed.

5
Objectives of the study
1. To study people`s attitude towards internet banking
2: To determine the main reasons for not using internet banking.
.

6
Literature review
C.K. REDDY (2003) investigated why corporate customers do not accept Internet
banking, which can assist banks to implement this self-service technology more
efficiently. Many banks are currently implementing Internet banking. Banks that offer
service via this channel claim that it reduces costs and makes them more competitive.
However, many corporate customers are not highly enthusiastic about Internet banking.

JOHN PAUL (2003) was interested to identify the factors that determine acceptance of
Internet banking by the users. According to the technology acceptance model (TAM),
perceived ease of use and perceived usefulness constructs are believed to be fundamental
in determining the acceptance and use of various IT. These beliefs may however not fully
explain the user's behavior toward newly emerging IT, such as Internet banking. Using
the TAM as a theoretical framework, this study introduces “perceived credibility” as a
new factor that reflects the user's security and privacy concerns in the acceptance of
Internet banking. It also examines the effect of computer self-efficacy on the intention to
use Internet banking. The results strongly support the extended TAM in predicting the
intention of users to adopt Internet banking. It also demonstrates the significant effect of
computer self-efficacy on behavioral intention through perceived ease of use, perceived
usefulness, and perceived credibility

GERRERD AND JOHN (2003) conducted a study to understand why users are more
accepting of internet banking services, which in turn should help bank managers
implement the self-service technology that costs millions of dollars. Exploratory
interviews were conducted and the study identifies eight characteristics that influenced
the rate of adoption. Two of these characteristics, namely accessibility and
confidentiality, are new to the literature. The results showed that adopters of Internet
banking perceive the service to be more convenient, less complex, more compatible to
them and more suited to those who are PC proficient. Adopters were also found to be
more financially innovative. The perceptions that adopters had about social desirability,
confidentiality, accessibility and economic benefits were viewed no differently when
adopters were compared with non-adopters

The rapid changes in indian banking system have created a new dimension in the
banking industry with the emergence of Internet banking. The study also explores the
consumer’s adoption behaviour driven by the evolution of new, banking technology in
india. The result implies that a social norm effect dominates Internet banking adoption
This paper presents the profile of the internet banking adopter in india based on a large
scale survey. A logistic model is used to estimate the probability of a bank customer
adopting internet banking. The profile of the adopter is constructed using demographic,
social economic and technological capacity indicators. The method is a very simple one,
which can be used by financial institutions to gain better understanding of their own
internet banking customers.

7
BY SANMUGAN(shan@binary.edu.my)

The determinants of consumer adoption of internet banking are characterised using

survey data from india in both static and dynamic framework. There is evidence that
adoption of internet banking is influenced by sex, age, marital status, degree of exposure
to internet banking, and the characteristics of the banks. A duration analysis shows no
evidence of first mover advantage (order effects) in internet banking whilst the largest
bank (rank effects) in commercial banking remains dominant in internet banking. The
results imply that the internet banking adoption is dominated by social norm effects.

October 2005
By AMAN SHARMA

Internet banking has attracted the attention of banks, securities trading firms, brokerage
houses, insurance companies, regulators and lawmakers in developing nations since the
late 1990s. With the rapid and significant growth in electronic commerce, it is obvious
that electronic (Internet) banking and payments are likely to advance. Researches show
that impact of Internet banking on cost savings, revenue growth and increased customer
satisfaction on Industry is tremendous and can be a potential tool for building a sound
strategy. However, it has raised many public policy issues before the banking regulators
and government agencies. Interestingly, reliable and systematic information on the scope
of Internet banking in Indian context is still not sufficient, particularly what it means to
the consumers and the bankers. The paper fills significant gaps in knowledge about the
consumer’s perspective of Internet banking, trace its present growth and project the
likely scenario. The paper presents the data, drawn from a survey of Internet banking
consumers and the services providers (banks) that offer Internet banking and develops a
functional model for maximizing value to the consumers, which the banks may choose to
adopt Internet banking strategically. The paper identifies the weaknesses of
conventional banking and explores the consumer awareness, use patterns, satisfaction
and preferences for Internet banking vis-à-vis conventional form of banking and also
highlights the factors that may affect the bank’s strategy to adopt Internet banking. It
also addresses the regulatory and supervisory concerns of Internet banking.

By PANKAJ GUPTA

India is predominantly an agricultural country and its about 70 % of the population

resides in rural areas . With the spread of higher education hubs towards rural areas in the
shape of spread of more and more technology and management institutes towards rural
areas , dimension of acceptance of technology banking products is increasing in rural
clientele and the fear of security in use of the same is also likely to have change because
the new generation of rural clientele is gradually learning more and more .

The information technology is becoming an important factor in the future development of

financial services industry and specially banking industry. Banks are faced with a number

8
of important questions, for example, how to take full advantage of new technology
opportunities, how e-developments change the ways customers interact with the financial
services provider etc. Some contemporary CEOs have expressed concern and desired
need of researches in Indian context on the marketing issues accompanied by the delivery
channels in banking.

According to the data available world has 111crore internet users against the world
population of 657 crores. Going by the data the figure seems to be comfortable . If we
analyze the data according to subcontinent , percentage for Asia is not comfortable . We
may have so many justifications for this low percentage which may or may not be
justifiable. Like developing countries , underdeveloped countries but there are some
other factors which need attention and analysis .

By DILIP VERMA

SATHYE (1999) analyzed the factors affecting the adoption of Internet banking by
Australian consumers. His sample was from individual residents and business firms in
Australia. The study focused on the capital cities where use of internet and population
was likely to be high. White and yellow pages were used as the frame of reference for
personal and business customers, respectively. The findings suggest that security
concerns and lack of awareness about Internet banking and its benefits stand out as being
the obstacles to the adoption of Internet banking in Australia. He also suggests some of
the ways to address these impediments. Further, he suggests that delivery of financial
services over the Internet should be a part of overall customer service and distribution
strategy. These measures could help in rapid migration of customers to Internet banking,
resulting in considerable savings in operating costs for banks.

9
Need of the Research Paper
This research, which is about customers' perception of online banking in india, should be
very important because not much studies has been conducted which can give a conclusive
result of it. Therefore, the outcome of the study can be of great importance to the bank
industry in india, especially that banks spend a lot of money to utilize the IB services
facility in an attempt to reduce their operation costs by reducing the number of customers
that tend to visit their branches.

10
METHODOLOGY

5.1 RESEARCH DESIGN

It is conceptual structure within which research is conducted .The current research is a
Conclusive Research. Within Conclusive research it covers two main types of research
designs. It is:
 Descriptive Research,

5.2SOURCES FOR DATA COLLECTION

Data Source : This refers to the sources that is used for collecting the data. Mainly it
consists of two sources .
5.2.1Secondary Sources : Out of the various secondary sources mainly newspapers and
internet have been used for the study.
5.2.2Primary Sources : The survey was conducted through an unstructured
questionnaire consisting of closed ended as well as open ended questions.

5.3 SAMPLING PLAN

A sample design is a defined plan for obtaining a sample from a given population .
While developing the sampling design following aspects are covered

5.3.1 Sample Size : In current research , 100 respondents are covered

5.3.2 Sample Unit: In current research , the sample unit consists of
 Business class people
 Professionals / Service Class people
 All the people who have bank accounts

5.3.3 Universe of the study :

11
 • Theoretical population: In the current research , the
universe consist of all the respondents that are aware
having bank accounts
• Accessible population: The respondents within Punjab i.e
Ludhiana have been covered under the study.
5.3.4 Sampling Technique : In current research , non- probability technique have been
used under non- probability technique, convenience technique have been used .

12
Refrences
Abdullah, Z. (1985), A critical review of the impact of ATMs in Malaysia. Bankers
Journal india. April 1985. pp. 13-16.

Chang, Y.T. (2004), Dynamics of Banking Technology Adoption: An Application to

Internet Banking. http://www.uea.ac.uk/~j106/IB.pdf, accessed 8 Jan. 2005.
IDC (2002), IDC predicts youths and road warriors to lead wireless data adoption.

http://www.idc.com.sg/Press/2002/AP-PR-unwiring.html, accessed 19 March 2002.

Moore, C. and Benbasat, I. (1991), ``Development of an instrument to measure the
perceptions of adopting an information technology innovation", Information Systems
Research, Vol. 2 No. 3, pp. 192-222.

Rogers, E. (1995), Diffusion of Innovations , 4th ed., The Free Press, New York, NY.
Sathye, M. (1999), "Adoption of Internet banking by indian consumers: an empirical
investigation", International Journal of Bank Marketing, Vol. 17 No. 7, pp. 324-34.

Teo, T. (2001), "Demographic and motivation variables associated with Internet

usage activities" Internet Research: Electronic Networking Applications and Policy,
Vol. 11 No. 2, pp. 125-37.

13