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Paper - Analysis of Critical Factors Influencing Adoption of E-banking

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  ANALYSIS OF CRITICAL FACTORS INFLUENCING ADOPTION OF e-BANKING Ramakrishnan N *1 , Subhrajit Dey *2 1 Associate Professor, Institute of Management, Christ University, Bangalore 1 e-mail: ramakrishnan.n@christuniversity.in 2 Scholar, Institute of Management, Christ University, Bangalore 2 e-mail: subhrajit.dey@mba.christuniversity.in   Abstract - The need for deployment of Information technology in various sectors has been a growing phenomenon. The banking industry witnessed a paradigm shift from traditional paper-based mode of operation to paperless transactions and online updates, thus fuelling the growth of e-banking. This paper focuses on analysis of critical factors for e-banking based on research studies. Keywords: Information technology, paperless transactions, e-banking, Critical factors. I INTRODUCTION The banking sector plays an active role in the emerging economy of India. There has been a perception of formal and rigid approaches being followed in banking institutions.[1] Banking institutions could provide leadership in this era of economic transformation. This has been facilitated by deployment of information technology in the shift towards paperless banking or e-banking, Electronic banking or e-banking created a revolution in the banking services sector. e-banking refers to those types of services using which customers of a bank could avail and carry out most of the banking services through computers, ATMs (Automated Teller Machines) or mobile  phones. Electronic Funds Transfer (EFT) plays an important role in the e-banking approach, and is utilized by a large segment of bank customers. Electronic funds transfer helps to minimize usage of cheques and paper-based transactions by deployment of information and communication technology. EFTs are initiated through devices like cards or codes that allow us or those whom we authorize to access our account. Most banking institutions use ATM or debit cards and Personal Identification  Numbers (PINs) for this purpose. They also use other types of debit cards requiring signature or a scan of the first holder of the account. For example, some use radio frequency identification (RFID) or other forms of “contactless” technology that scans the account-related information without direct contact. Countries also have the federal Electronic Fund Transfer Act (EFT Act) to cover some electronic consumer transactions. [2]. E-banking includes various platforms,  but not limited to ATMs, Internet Banking, Telephone Banking, and Electronic Demand Draft Creation. II. SHIFT TO e-BANKING With the advent of universal banking, the banking sector transformed to fast-paced  banking approaches and methodologies. Their core mission shifted towards customer retention through speedy and accurate online  banking. E-banking involved integration with telephonic systems and web based technologies to focus on various segments of the society. This enabled a paradigm shift from  profit-orientation to customer-orientation. Many traditional banks did not have online banking operations until a few years ago. In the recent past, such strategies have  become more prevalent. The shift to e-banking has been witnessed among the nationalized banks and also among other entities such as cooperative  banks and smaller private banking institutions. The banks may differ with regard to their underlying motivations for increasing green  products and services (e.g. to enhance long-term growth prospects, or sustainability  principles on which a firm is based). The growth, variation and innovation behind such  developments indicate that we are in the midst of a revolution in the banking industry. In the year 1986, Societe Generale Bank of Nigeria (SGBN) introduced online, real-time banking within its 5 branches in Lagos metropolis. Today, many of the consolidated banks are embracing electronic network banking. This allows their personnel and equipment to sell and deliver prompt services to the public at no extra cost as and when required. The focus is more towards customer value, that understands their requirements and satisfies them promptly, efficiently and conveniently, This is done in ways that are beneficial to the customers and the bank to facilitate survival in the midst of keen industrial global competition. Many of them had changed their old perception about consumers, products and services and the entire systems of operation. [3]/ The main economic advantages resulted out of this revolutionary shift include aspects such as steady growth, employment generation, business expansion of banks, money market growth, and participation of various banks in the International market, Studies have indicated a 130% increase in the usage of Internet banking in India between 2007 and 2011. According to the Reserve Bank of India (RBI), there has been a change in customer behaviour towards e-banking. This is evident in the increasing share (by volume) of non-cash transactions, as depicted below: Fig. 1. Rise of e-Money Some of the challenges related to e-Banking in India include safety and security, and reduced level of preparedness on the part of banks and customers in the adoption of new technological advancements, and infrastructure constraints for expansion of e-delivery channels. [5]. Users of banking services considered that Internet banking had significant advantage in Usefulness and purpose. [6]. Online banking was also suggested to be the cheapest channel for delivery of banking services [7]. III. STUDIES AND ANALYSIS RELATED TO e-BANKING Research on e-Banking: A case from literature The e-banking scenario in Nigeria was highlighted in a research conducted by Sunday Tunmibi Emmanuel Falayi. The research was done using accidental sampling method with a sample size of 40. The sample was drawn from 9 different banks using structured questionnaires. Descriptive statistical methods were used for analysis. [4] One of the key perspectives of the research involved study of the percentage of trust in e-banking with reference to various age groups. Fig. 2. Percentage of trust in e-banking across age groups [4] Another perspective was the analysis of the influence of network and other banking-related issues on e-banking.    Fig. 3. Influence of network and other banking issues on e-banking [4] A higher percentage of respondents (nearly 60%) agreed that network may not be always reliable. About 70% agreed that there are occasions when the ATM will make deductions from their account without any withdrawal of cash, while only 40% agreed that they have had an experience of fraudulent acts with scammers during mobile money transfer. On e-banking, only 4 5 % of the respondents agreed that the Nigeria  banking system is stable enough for e-banking and about 77% agreed that insecurity in the financial institutions in Nigeria may jeopardize e-banking in Nigeria. [4] Study on E-Banking: Indian Scenario A research was conducted in a leading  Nationalised bank in India with the aim of finding the Acceptance and Satisfaction of e- Banking Services among the bank’s customers. The exploratory research was conducted to find whether the customers of the  bank have accepted e-banking services, and also whether they were satisfied or not. Both primary and secondary sources of data were used for the research. The secondary data was derived from the issues and complaints of customers which included the e-banking measures like, ATMs, Internet  banking, Mobile banking. Primary data was derived through usage of structured questionnaires. The findings of the research are depicted in the following chart: Fig. 4. Internet penetration in customers of the bank The study with reference to a customer sample in a particular bank revealed that 64% of customers were Internet users. The preference of banking services as  perceived by customers is depicted in the following chart. Fig. 5. Preference of Services   As indicated, only 23% of the customers preferred Internet banking services. The key parameters which influenced adoption of e-banking services as indicated by the respondents were Convenience of access to the e-banking service, Security, and User-friendliness. Fig. 6. Convenience of access as an influencing factor in the adoption of e-banking   64% 36% Internet penetration in customers of the bank users of internetnon-users of internetATM 69% INTERNET BANKING 23% MOBILE BANKING 0% OTHERS 8% PREFERENCE OF SERVICES 27.30% 81.80% 18.20% Convenience ImportantIndifferentNot Important    Fig. 7. Security as an influencing factor in the adoption of e-banking   Fig. 8. User-friendliness as an influencing factor in the adoption of e-banking  While around 27% of the respondents expressed that convenience of access to e- banking services was important, 82% of the respondents felt that security in e-banking was important or highly important. About 73% of the respondents expressed that user-friendliness was either important or very important in e-banking IV. CONCLUSION   The focus on e-banking and its utilization has been continuously increasing, and various approaches are being adopted by  banking institutions across the globe. However, there is scope for an enhanced level of e-banking services considering the need to  be competitive and to offer increasingly efficient banking services to customers. Banks could also exploit the emerging technological trends in the Information Technology and Communications arena for better sustainability. REFERENCE [1] D. B. R. B. a. A. Malhotra, Green Banking Strategies: Sustainibility through Corporate Entrepreneurship, Greener Journalof Business and Management Studies, vol. 3, no. 4, pp. 180-193, 2013. [2] Federal Trade Commission, Electronic Banking, p. 1, August 2012. [3] B. a. N. N. N. Abefe-Balogun, National Development: The Significance of E-Banking,  Advances in Arts, Social Sciences and Education Research, pp. 121-128, 2012. [4] S. Tunmibi and E. Falayi, IT Security and E-Banking in Nigeria, Greener Journal of Internet Information and Communication Systems, August 2013, pp. 2354-2373. [5] R. Lal, and R. Saluja, “E -Banking: The Indian Scenario”, Asia Pacific Journal of Markting & Management Review, vol. 4, Dec. 2012. [6] T. Natarajan, S. A. Balasubrmanian, and S. Manickavasagam, Customer’s choice amongst self service technology (SST) channels in retail banking: A study using analytical hoierarchy process (AHP),”  Journal of Internet Banking and Commerce , Vol. 15, No. 2: 1-16, 2010. [7] N. Koening-Lewis, A. Palmer, and A. Moll, “Predicting young consumers’ take up of mobile banking services,” International Journal of Banking Marketing , Vol. 28, No. 5:, pp. 410-432, 2010.   55% 27% 9% Security Very ImportantImportantIndifferentNot Important46% 27% 9% 18% User-Friendliness Most ImportantImportantIndifferentNot Important
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