BBM 605 MAJOR PROJECT

RESEARCH TOPIC
Digital divide & preference to IT enabled services offered by Indian Banks An Empirical study of Agra customers UNDER THE SUPERVISION OF Dr. K Santi Swarup

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCE PREETI TITORIYA BBM (Hons.) 087536

Table of Contents
Topics S. no.

Chapter 1: Introduction 1-2 Chapter 2: IT-enabled banking services offered by Indian banks 3-6 Chapter 3: Need & Objective of study7 Chapter 4: Hypothesis7 Chapter 6: Review of Literature... 8 Chapter 7: Research Methodology.. 9 Chapter 8: Limitation of study.10 Chapter 6: Data analysis& Interpretation..11-21 Chapter 7: Hypothesis Testing.22-24 Chapter 8: Findings. 25 Chapter 8: Suggestions & Conclusion25-26 Chapter 9: References APPENDIX

DECLARATION

I Preeti Titoriya student of BBM(Hons.) at Faculty of social sciences, Dayalbagh Educational Institute (Deemed University), Agra, Declare that this Dissertation Report is my own work under the supervision of Dr. K. Santi Swarup , Department of Management, Faculty of Social Sciences at Dayalbagh Educational Institute, Agra.

Date: 7-05-2011 Place: Agra (Preeti Titoriya)

ACKNOWLEDGEMENT

I would like to acknowledge all the people who have in any contributed to the completion of my project. First of all, I owe my deepest gratitude to my supervisor Dr. K. Santi Swarup for his inspiring guidance, sympathetic encouragement and invaluable co-operation throughout the work. His sound and critical appreciation has given the work whatever is clarity of expression it should have. I am also obliged to the entire teachers who gave me opportunity to discuss matter from time to time for making this endeavor a success and especially to my guide who helped me during statistical analysis of the data. I am also thankful to librarian and other library staff of Dayalbagh Educational Institute for providing with opportunity for reviewing the related literature.

(PREETI TITORIYA)

DAYALBAGH EDUCATIONAL INSTITUTE (DEEMED UNIVERSITY) DAYALBAGH, AGRA-282005 FACULTY OF SOCIAL SCIENCES DEPARTMENT OF MANAGEMENT

CERTIFICATE
This is to certify that Ms. Preeti Titoriya a candidate for B.B.M. (Hons.) has satisfactorily worked for her major project under my supervision and the accompanying Project entitled Digital

divide & preference to IT enabled services

which she is

offered by Indian Banks, An Empirical study of Agra customers

submitting to Dayalbagh Educational Institute, Dayalbagh, Agra, for the partial fulfillment of the requirement for the degree of BBM(hons.) in Finance, embodies her original and genuine work.

Dr. K Santi Swarup (Supervisor)

Department of Management

INTRODUCTION

The Digital Divide, or the digital split, is a social issue referring to the differing amount of information between those who have access to the Internet (especially broadband access) and those who do not have access. To bridge this digital divide, the role and application of information technology has expanded tremendously during the last decade, especially in rural finance. Innovative ICT approaches adopted by the government and banks and FIs have not only helped reduce transaction costs but also enables banks to operate as branchless entities. The banking industry like many other financial service industries is facing a rapidly changing market, new technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate has presented an unprecedented set of challenges. (1) Banking is a customer oriented services industry, therefore, the customer is the focus and customer service is the differentiating factors. (2) Technology has opened up new markets, new products, new services and efficient delivery channels for the banking industry. Online electronic banking, mobile banking and internet banking are just a few examples.

(3) The IT revolution has set the stage for unprecedented increase in financial activity across the globe. The progress of technology and the development of worldwide networks have significantly reduced the cost of global funds transfer.

5) IT has been providing solutions to banks to take care of their accounting and back office requirements. This has, however, now given way to large scale usage in services aimed at the customer of the banks. IT also facilitates the introduction of new delivery channels--in the form of Automated Teller Machines, Net Banking, Mobile Banking and the like. Further, IT deployment has assumed such high levels that it is no longer possible for banks to manage their IT implementations on a stand alone basis with IT revolution, banks are increasingly interconnecting their computer systems not only across branches in a city but also to other geographic locations

with high-speed network infrastructure, and setting up local area and wide area networks and connecting them to the Internet. As a result, information systems and networks are now exposed to a IT enabled banking services are: 1) Internet banking 2) Mobile banking 3) ATM cards 4) Debit Card & credit Card 5) RTGS & Electronic Fund Transfer(EFT) 6) Tele Banking(Phone Banking) growing number.

IT-ENABLED BANKING SERVICES OFFERED BY INDIAN BANKS

VARIOUS FORMS OF E-BANKING

i.

INTERNET BANKING:

Internet Banking lets you handle many banking transactions via your personal computer. For instance, you may use your computer to view your account balance, request transfers between accounts, and pay bills electronically. Internet banking system and method in which a personal computer is connected by a network service provider directly to a host computer system of a bank such that customer service requests can be processed automatically without need for intervention by customer service representatives. The system is capable of distinguishing between those customer service requests which are capable of automated fulfillment and those requests which require handling by a customer service representative. The system is integrated with the host computer system of the bank so that the remote banking customer can access other automated services of the bank. The method of the invention includes the steps of inputting a customer banking request from among a menu of banking requests at a remote personnel computer; transmitting the banking requests to a host computer over a network; receiving the request at the host computer; identifying the type of customer banking request received; automatic logging of the service request, comparing the received request to a stored table of request types, each of the request types having an attribute to indicate whether the request type is capable of being fulfilled by a customer service representative or by an automated system; and, depending upon the attribute, directing the request either to a queue for handling by a customer service representative or to a queue for processing by an automated system.

ii.

MOBILE BANKING:

Mobile banking (also known as M-Banking, mbanking, SMS Banking) is a term used for performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA). The earliest mobile banking services were offered over SMS. With the introduction of the first primitive smart phones with WAP support enabling the use of the mobile web in 1999, the first European banks started to offer mobile banking on this platform to their customers Mobile banking has until recently (2010) most often been performed via SMS or the Mobile Web. Apple's initial success with iPhone and the rapid growth of phones based on Google's Android (operating system) have led to increasing use of special client programs, called apps, downloaded to the mobile device. In one academic model, mobile banking is defined as: Mobile Banking refers to provision and availment of banking- and financial services with the help of mobile telecommunication devices.The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customised information." iii. AUTOMATED TELLER MACHINES (ATM):

An automated teller machine or automatic teller machine (ATM) is an electronic computerized telecommunications device that allows a financial institution's customers to directly use a secure method of communication to access their bank accounts, order or make cash withdrawals (or cash advances using a credit card) and check their account balances without the need for a human bank

teller . Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts, top up their mobile phones' pre-paid accounts or even buy postage stamps. On most modern ATMs, the customer identifies him or herself by inserting a plastic card with a magnetic stripe or a plastic smartcard with a chip, that contains his or her account number. The customer then verifies their identity by entering a passcode, often referred to as a PIN (Personal Identification Number) of four or more digits. Upon successful entry of the PIN, the customer may perform a transaction. If the number is entered incorrectly several times in a row (usually three attempts per card insertion), some ATMs will attempt retain the card as a security precaution to prevent an unauthorised user from discovering the PIN by guesswork. Captured cards are often destroyed if the ATM owner is not the card issuing bank, as non-customer's identities cannot be reliably confirmed. The Indian market today has approximately more than 17,000 ATMs. iv. DEBIT CARD:

Debit cards are also known as check cards. Debit cards look like credit cards or ATM (automated teller machine) cards, but operate like cash or a personal check. Debit cards are different from credit cards. While a credit card is a way to "pay later," a debit card is a way to "pay now." When you use a debit card, your money is quickly deducted from your checking or savings account. Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline stations, and restaurants. You can use your card anywhere merchants display your card's brand name or logo. They offer an alternative to carrying a checkbook or cash. v. CREDIT CARD:

A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services.The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. vi. REAL TIME GROSS SETTLEMENT SYSTEM (RTGS) & NATIONAL ELECTRONIC FUND TRANSFER SYSTEM (NEFT)

Bank offers Real Time Gross Settlement System (RTGS) & National Electronic Fund Transfer system (NEFT) which enables an efficient, secure, economical and reliable system of transfer of funds from bank to bank as well as from remitters account in a particular bank to the beneficiarys account in another bank across the country. 1. RTGS: An electronic payment system in which payment instructions between banks are processed and settled individually and continuously, on a real time basis, throughout the day. Available for transaction value of Rs.2.00 lacs and above. 2. NEFT : Another electronic payment system in which payment instructions between banks are processed and settled on deferred net settlement (DNS) basis at fixed times during the day. There is no minimum or maximum stipulated transaction value for using this facility.

vii.

TELE BANKING: By dialing the given Telebanking number through a landline or a mobile from anywhere, the customer can access his account and by following the user-friendly menu, entire banking can be done through Interactive Voice Response (IVR) system. With sufficient numbers of hunting lines

made available, customer call will hardly fail. The system is bi-lingual and has following facilities offered Automatic balance voice out for the default account. Balance inquiry and transaction inquiry in all Inquiry of all term deposit account Statement of account by Fax, e-mail or ordinary mail. Cheque book request Stop payment which is on-line and instantaneous

Transfer of funds with CBS which is automatic and instantaneous Utility Bill Payments Renewal of term deposit which is automatic and instantaneous Voice out of last five transactions.

PROBLEM STATEMENT
Digital divide & preference to IT enabled services offered by Indian Banks

An Empirical study of Agra customers

NEED OF THE STUDY

The study focused upon the customer preference towards IT-enabled banking services & analyzes their usage pattern of a particular service.

OBJECTIVE OF THE STUDY

The objectives of the Study are as follows: 1) Evaluation of customer awareness of IT enabled services of banks. 2) To know the frequency, usage & ease of use operations in case of IT enabled Banking services. 3) To assess how IT enabled Customer services provided by banks are helpful in bridging the Digital Divide in India. 4) To examine the reasons for using a particular IT enabled Banking Services.

HYPOTHESIS

Ho: There exists an inverse relationship between the awareness/frequency of usage of multiple IT-enabled banking services & the users of these services.

REVIEW OF LITERATURE
Rahman, Ilyas-Ur (2007) Role of information technology in banking industry.

Rupa Rege Nitsure(2003) E-banking has the potential to transform the banking business as it significantly lowers transaction and delivery costs. The paper discusses some of the problems developing countries, which have a low penetration of information and telecommunication technology, face in realizing the advantages of e-banking initiatives. Major concerns such as the digital divide between the rich and poor, the different operational environments for public and private sector banks, problems of security and authentication, management and regulation; and inadequate financing of small and medium scale enterprises (SMEs) are highlighted

According to VP Shetty (2006), globalization in banking is based on four important pillars viz. 1) trade in goods and services; 2) flow of capital and movement of human beings across boundaries; 3) harmonization of regulatory framework in different countries; and 4) developments in technology, particularly those in information technology. R K Uppal ; In the post-LPG (Liberalization, Privatization and Globalization) era and Information Technology (IT) era, transformation in Indian banks is taking place with different parameters and the contours of banking services are dynamically altering the face of banking, as banks are stepping towards e-banking from traditional banking. On the basis of five-point likert-type scale, this paper empirically analyzes the quality of e-banking services in the changing environment. With different statistical tools such as weighted average method and ranking, the paper concludes that most of the customers of e-banks are satisfied with the different e-channels and their services, but the lack of awareness is a major obstacle in the spread of e-banking services. The paper also suggests some measures to make e-banking services more effective in the future.

RESEARCH METHODOLOGY
SCOPE OF THE STUDY:

The study confines to examining 1.The customers preference to IT enabled services offered by Indian Banks. 2. To assess the Customers' awareness Level towards the Use of Information Technology related Services in the Banks. RESEARCH DESIGN: Exploratory Research, Survey research have been used in accomplishing the Objective of the study. DATA COLLECTION METHODS: Data Source: The studies have used both Primary and Secondary Source of data. For the purpose of the study, both primary and secondary data will be collected. The secondary data has been collected from magazines, journals, Internet searches, libraries etc. The primary data has been collected with the help of customers of different banks through questionnaire method. DATA ANALYSIS TOOLS: Statistical Tools like bar graph, pie chart, Doughnut, Percentage method & Regression analysis have been used. For testing hypothesis Quantitative test have used, ANOVA. SAMPLING: Judgmental Sampling Technique has been used to select the Customers of the Banks in a Sample Size of 142.

LIMITATIONS
The following are the limitations with this report 1. More faith on the conventional banking system.

People have more faith on the conventional banking system rather than the internet banking 2. Busy schedule. People were mostly unwilling to talk because of their heavy schedule or they get annoyed with the phone calls or even if they are asked about this face to face. 3. Risky profile. Some people think that transferring money is having a lot of risk and rather a waste of time so they dont want to transfer their money in from their respective accounts 4. Fraud The very common difficulty in online trading is Fraud which can be faced by any customer. Fraud can take place in many ways like stolen of Password, online fund transfer to some other account, hacking etc. So some strict guidelines or actions should be taken by RBI in order to stop this kind of fraud which prevails online. 5. Slow web interface Sometimes, customers have to face the problem of slow interface which is not satisfactory from the customers point of view. Sometimes the network fails in middle of their transaction making them worried as to whether their transactions got completed of not. 6. Lack of knowledge Customers who do transfers online face the problem of proper knowledge regarding the use of their accounts. And all the services which the banks provide them with their accounts.

DATA ANALYSIS& INTERPRETATION

DATA CHARACTERISTICS:

EDUCATION LEVEL Below Graduation Graduation Master's & above

RESPONSE 25 43 53

COMPUTER LITERACY High Medium Low Nil

RESPONSE 33 83 9 11

In Agra 44% people are postgraduate &above .

61% people have medium computer knowledge.

INTERNET ACCESS Yes No

RESPONSE OCCUPATION LEVEL 109 Service 25 Business Professionals students Housewife

RESPONSE 31 6 13 81 4

81% People have internet access.

Most of the respondents occupation levels are student.

INCOME LEVEL Below 10,000 10,000-50,000 Above 50,000

RESPONSE 21 38 7 AGE Below 20 yrs. 20-40yrs. 40-60yrs. RESPONSE 22 101 13

60 & above

11

Income level fall in range of 10,000-50,000. 69% people are fall in the age of 20-40

GENDER Male Female

RESPONSE 78 63

55% people are male respondents.

Q.1 In which types of bank you have an account?

a. b. c.

Public sector Private Sector Both

More people in Agra have their a/c in public sector banks, reason can be that they are preferring these banks services.They trust more the public sector banks.

Q.2 Nature of A/c you have with Bank?

a. Savings A/c b. Current A/c c. Demat A/c d. Recurring deposit e. Fixed deposit

Most of the people in Agra have Savings a/c & have fixed deposit as a second choice. It shows that people needs security of their money & wants to secure their future.

Q.3 Frequency of visiting the existing branch of the bank?

a. Daily b. Weekly c. Fortnightly d. Monthly e. Others

Most of the people visit to the branch monthly as because of their busy schedule. It may be possible that people are using e-channels .

Q.4 Which IT-enabled Banking services awareness, usage & frequency you have? a. Online Banking b. Mobile Banking
c. ATM card

d. Debit card/Credit card e. RTGS/NEFT( fund transfer) f. Phone Banking

Most of the people are aware of ATM service & most of them who are aware are using it as compare to other services. They are frequently using ATM service because of easy access, convenient, faster, lower transaction cost & safety.

Q.5 IT-enabled Banking services according to you are

a. Convenient (easy to use) b. Faster c. Necessity d. Lower transaction cost e. Safe f. Other

Most of the people using IT-enabled banking services because they are convenient as it is rated 1.

Q.6 How would you rate the IT-enabled services of your existing Bank as compared to the visit to the local branch of the bank. (Rank them * 1 Least Useful, * 5 completely Useful)

a. Online Banking b. Mobile Banking c. ATM Service d. Debit Card /Credit Card e. RTGS/NEFT f. Phone Banking

Most of the people rated *5(completely useful) to ATM service. It means this service is completely useful to them. Most of the people rated *1(least useful) to Online banking services because of lack of awareness, lack of computer literacy & internet access , lack of security. Q.7 In your opinion IT-enabled banking services provided by banks are helpful in bridging the Digital divide( gap in access to digital and information technology ) in India?

a. Yes. b. No.

In people opinion IT-enabled banking services provided by banks are helpful in bridging the Digital divide in India

Q.8 How to increase the usage level of IT-enabled banking services? a. By educating customers b. By making banking services user friendly c. By giving incentives for using E- services
d. By giving feedback on the benefits to customers as well as bank

e. By making transactions more secure f. Any other suggestion (please specify)

SEMANTIC DIFFERENTAL PROFILE FOR SUGGESTIONS Most of the people think that to increase the usage level of IT-enabled banking services it is necessary to educate customers.

HYPOTHESIS TESTING
Table 1
No. of Services IT-enabled Banking Services ATM Service ATM, Mobile Banking ATM, Mobile , Online ATM, Mobile , Online, Cards ATM, Mobile, Online, Cards, Phone Banking ATM, Mobile , Online, Cards, Phone, RTGS/NEFT x 1 2 3 4 5 6 Cumulative Frequency 116 190 263 331 396 440 Growth Rate of awareness (%) Y 63.79 38.42 25.85 19.63 11.11

Y=a+ bx a = 67.17 b =-11.63 Fs= 62.39

Table 2
No. of Services x 1 2 3 4 5 6 Growth Rate of once in a while use (%) Y 24.69 24.75 25.39 6.32 7.73

Y=a+bx

a = 34.17 b =-5.53 Fs=18.69089

Hence we are rejecting null hypothesis.

Table 3
No. of Services x 1 2 3 4 5 6 Growth Rate of frequently use (%) Y 17.64 11.25 28.08 2.63 1.7

a = 24.44 b = -4.065 Fs= 3.610662 FINDINGS

More people in Agra have their a/c in public sector banks, reason can be that they are preferring these banks services.They trust more the public sector banks. Most of the people in Agra have Savings a/c & have fixed deposit as a second choice. It shows that people needs security of their money & wants to secure their future. Most of the people visit to the branch monthly as because of their busy schedule. It may be possible that people are using e-channels . Most of the people are aware of ATM service & most of them who are aware are using it as compare to other services. They are frequently using ATM service because of easy access, convenient, faster, lower transaction cost & safety. Most of the people using IT-enabled banking services because they are convenient as it is rated 1.

 Most of the people rated *5(completely useful) to ATM service. It means this service is completely useful to them. Most of the people rated *1(least useful) to Online banking services because of lack of awareness, lack of computer literacy & internet access , lack of security. In people opinion IT-enabled banking services provided by banks are helpful in bridging the Digital divide in India Most of the people think that to increase the usage level of IT-enabled banking services it is necessary to educate customers.

SUGGESTIONS
To prevent online banking from remaining an expensive additional channel that does little The first and most obvious step they should take is to see to it that the basic problem The banks should take up responsibility of educating the customers and all the benefits of There is a need felt for the banks to promote the online banking services and proper Banks need to appeal to customers who may not be technologically sophisticated, and Banks should ensure transparency in use of IT enabled banking services. Banks should create awareness of how to use these services for bridging the

to retain footloose customers, banks must act quickly. fueling dissatisfaction have been addressed. IT-enabled banking services. promotional activities are not taking place. should not require an engineering degree to get started or use the service.

Digital divide in our country.

CONCLUSION
From all of this, we have learnt that information technology has empowered customers and businesses with information needed to make better investment decisions. At the same time, technology is allowing banks to offer new products, operate more efficiently, raise productivity, expand geographically and compete globally. A more efficient, productive banking industry is providing services of greater quality and value. E-banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. Today, the click of the mouse offers customers banking services at a much lower cost and also empowers them with unprecedented freedom in choosing vendors for their financial service needs. No country today has a choice whether to implement E-banking or not given the global and competitive nature of the economy. The invasion of banking by technology has created an information age and commoditization of banking services. Banks have come to

realize that survival in the new e-economy depends on delivering some or all of their banking services on the Internet while continuing to support their traditional infrastructure. The rise of E-banking is redefining business relationships and the most successful banks will be those that can truly strengthen their relationship with their customers. Technology innovation and fierce competition among existing banks have enable a wide array of banking products and services, being made available to retail and wholesale customer through an electronic distribution channel, collectively referred to as e-banking. Banks have traditionally been in the forefront of harnessing technology to improve product and efficiency. Technology is altering the relationships between banks and its internal and external customers. Technology has also eroded the entry barriers faced by many industries. With one time investment, technology has brought about superior products and channel management with a special focus on customer relationship. The incremental costs incurred for expansion and diversification are also more beneficial

REFERENCES
Books & Journals:
Uppal, R.K. & Jha, N.K.; Online Banking in India; Anmol Publication Pvt. Ltd. New Delhi, 2008 Banking Finance, Journal , January 2011;Impact of IT in Banking Sector http://econpapers.repec.org/article/icficfjbm/v_3a7_3ay_3a2008_3ai_3a1_3ap_3a6378.htm
http://findarticles.com/p/articles/mi_7058/is_1-2_17/ai_n28556199/?tag=content;col1

Internet Sites:

http://www.itu.int/wsis/docs/background/themes/digital_divide/fink-kenny.pdf http://www.wyse.com/digitalinclusion/Wyse_BridgingtheDigitalDivide_India.pdf http://www.iiaonline.in/newsletter/iia_aug09.pdf http://www.infogile.com/pdf/Mobile_Banking.pdf

Annexure
QUESTIONNAIRE Dear respondent, Kindly help me in filling this questionnaire. I assure you that the information gathered would be used only for the academic purpose. PERSONAL DETAILS Name: Address: Age: Sex: Below 20 Yrs Male 20-40 Yrs Female Below graduation High Yes Graduation Medium No Masters &above Low Nil 40-60 Yrs 60 & above

Educational Qualification: Computer Literacy: Internet Access:

Occupation: specify)

Service

Business Rs. 10,000

Professional Student Housewife Rs. 10,000-50,000

others (please

Income (monthly): Contact No.

Above Rs. 50,000

Q.1In which types of bank you have an account? Public sector Private Sector Both

Q.2 Nature of A/c you have with Bank? (You may tick more than one box) i. ii. iii. iv. v. Savings A/c Current A/c Demat A/c Recurring deposit Fixed deposit

Q.3 Frequency of visiting the existing branch of the bank? Daily Weekly Fortnightly Monthly Others (specify)

Q.4 Which IT-enabled Banking services awareness, usage & frequency you have? (You may tick more than one box) BKG. SERVICES i. ii. iii. iv. v. vi. Online Banking Mobile Banking ATM card Debit card/Credit card RTGS/NEFT( fund transfer) Phone Banking AWARENESS USE FREQUENTLY USE

Q.5 IT-enabled Banking services according to you are (Rank them from 1 to 6) Convenient (easy to use) Safe Faster Necessity Lower transaction cost

Any other (please specify)

Q.6 How would you rate the IT-enabled services of your existing Bank as compared to the visit to the local branch of the bank. (Rank them * 1 Least Useful, * 5 completely Useful) BANKING SERVICES Online Banking Mobile Banking ATM Service Debit Card /Credit Card RTGS/NEFT Phone Banking Q.7 what is the reason for using a particular e- service of your existing bank over visiting the bank? *1 2 3 4 *5

Q.8 what more services your bank should offer?

Q.9 In your opinion IT-enabled banking services provided by banks are helpful in bridging the Digital divide ( gap in access to digital and information technology ) in India? Yes. i. ii. No.

Q.10 How to increase the usage level of IT-enabled banking services? By educating customers By making banking services user friendly

iii. iv.

By giving incentives for using E- services By giving feedback on the benefits to customers as well as bank

v. vi.

By making transactions more secure Any other suggestion (please specify)

Thanking You! Preeti Titoriya Dayalbagh Educational Institute