A PROJECT REPORT

ON

MOBILE BANKING"
SBI
BY KOMAL SAWANT
FOR THE PARTIAL FULFILLMENT OF THE COURSE
TYBMS (FINANCE)

K.G. JOSHI COLLEGE OF ARTS&N.G. BEDEKAR

COLLEGE OF COMMERCE
THANE
2016-2017

DECLARATION

I, KOMAL SAWANT Student of N.G. BEDEKAR COLLEGE OF

COMMERCE, BMS(Finance) Semester V (2016-2017) hereby declare that I
have completed the Project on E -Banking. as part of my Academic
Fulfillment.
The Information Submitted is true and Original to the best of my
Knowledge.

PLACE: THANE
DATE: 9/8/16

(KOMAL SAWANT)
2

Acknowledgement
I am highly indebted to DR. MRS. SHAKUNTALA A. SINGH, Principal
K.G. JOSHI COLLEGE OF ARTS & N.G. BEDEKAR COLLEGE OF
COMMERCE, for giving me an opportunity to do this project. I would like
to thank PROF. MR. D.M. MURDESHWAR, course coordinator, for his
friendly guidance and constant encouragement.
This project is a result of co-operation, hard work and good wishes of many
Well Wishers. I would like to thank my project guide Prof. VINOD
CHANDWANI for his involvement in my project work and timely
assessment that provided inspiration and valued guidance throughout my
study.
I would like to express my gratitude towards my parents, teachers of K.G.
JOSHI COLLEGE OF ARTS & N.G. BEDEKAR COLLEGE OF
COMMERCE, the library staff and my college friends whose co-operation,
encouragement and efforts have helped me in giving the final shape and
structure to the project.

INTRODUCTION
INRODUCTION TO BANKING
The Indian banking can be broadly categorized into nationalized (government owned),
private banks and specialized banking institutions. The Reserve Bank of India acts a
centralized body monitoring any discrepancies and shortcoming in the system. Since the
nationalization of banks in 1969, the public sector banks or the nationalized banks have
acquired a place of prominence and has since then seen tremendous progress. The need to
become highly customer focused has forced the slow-moving public sector banks to
adopt a fast track approach. The unleashing of products and services through the net has
galvanized players at all levels of the banking and financial institutions market grid to
look anew at their existing portfolio offering. Conservative banking practices allowed
Indian banks to be insulated partially from the Asian currency crisis.Indian banks are now
quoting al higher valuation when compared to banks in other Asian countries (viz. Hong
Kong, Singapore, Philippines etc.) that have major problems linked to huge Non
Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed
in approach and armed with efficient branch networks focus primarily on the high
revenue niche retail segments.
The Indian banking has finally worked up to the competitive dynamics of the new
Indian market and is addressing the relevant issues to take on the multifarious challenges
of globalization. Banks that employ IT solutions are perceived to be futuristic and
proactive players capable of meeting the multifarious requirements of the large customers
base. Private banks have been fast on the uptake and are reorienting their strategies using
the internet as a medium The Internet has emerged as the new and challenging frontier of
marketing with the conventional physical world tenets being just as applicable like in any
other marketing medium.
The Indian banking has come from a long way from being a sleepy business institution to
a highly proactive and dynamic entity. This transformation has been largely brought
about by the large dose of liberalization and economic reforms that allowed banks to
explore new business opportunities rather than generating revenues from conventional
streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30
banking units contributing to almost 50% of deposits and 60% of advances. Indian
nationalized banks (banks owned by the government) continue to be the major lenders in
the economy due to their sheer size and penetrative networks which assures them high
deposit mobilization.
The Indian banking can be broadly categorized into nationalized, private banks and
specialized banking institutions.
4

The Reserve Bank of India act as a centralized body monitoring any discrepancies and
shortcoming in the system. It is the foremost monitoring body in the Indian financial
sector. The nationalized banks (i.e. government-owned banks) continue to dominate the
Indian banking arena. Industry estimates indicate that out of 274 commercial banks
operating in India, 223 banks are in the public sector and 51 are in the private sector. The
private sector bank grid also includes 24 foreign banks that have started their operations
here. Under the ambit of the nationalized banks come the specialized banking institutions.
These co-operatives, rural banks focus on areas of agriculture, rural development etc.
unlike commercial banks these co-operative banks do not lend on the basis of a prime
lending rate. They also have various tax sops because of their holding pattern and lending
structure and hence have lower overheads. This enables them to give a marginally higher
percentage on savings deposits. Many of these cooperative banks diversified into
specialized areas (catering to the vast retail audience) like car finance, housing loans,
truck finance etc. in order to keep pace with their public sector and private counterparts,
the co-operative banks too have invested heavily in information technology to offer highend computerized banking services to its clients.

TYPES OF BANKS

COMMERCIAL FINANCING
The commercial financing model in Indian banking can be broadly categorized into
project finance and working capital finance. These two segments form the pivot around
which banks operate.

PROJECT FINANCE
Banks offer long term and short terms loans to business houses, corporations to set up
their projects. These loans are disbursed after the approval from the banks core credit
validating committee. In India, there are 11 national level land 46 state level financial and
investment institutions that cater to long term funding requirements of the industry. The
project finance segment is highly competitive with various players offering innovative
schemes to entice corporate.

WORKING CAPITAL
In order to meet the diverse needs and requirements of the business community, banks
offer working capital funds to corporate. Working capital finance is specialized line of
business and is largely dominated by the commercial banks. The Indian banking saw
dramatic changes in the last decade or so ever since the advent of liberalization and
5

Indias integration with the world economy. These economic reforms and the entry of
private players saw nationalized banks revamp their service and product portfolio to
incorporate new, innovative customer-centric schemes. The Indian banking finally woke
up to the surging demands of the ever-discerning Indian consumer. The need to become
highly customer focused (generated by high competitive levels) forced the slow-moving
public sector banks to adopt a fast track approach. Taking a leaf out of the private sector
banks, the public sector banks too went for major image changes (including corporate
brand building exercises) and customer friendly schemes. These customer friendly
programs included revamping of the product and service portfolio by introducing new
product & service schemes (like credit cards, hassle-free housing loan schemes,
educational loans and flexi-deposit 13 MOBILE BANKING schemes) integration of the
branch network by using advance networking technology and customer personalization
programs (through ATMs and anytime banking etc.). Many banks have started
capitalizing on the recent stock market surge by adding (Initial Public Offering) IPO
financing options and schemes in their product mix. IPO finance has received a positive
response from the investors and is becoming popular amongst the business community.
The objective of all these strategies was very clear to bridge the service & product gap
that was inherent in the banking system. To cater to the increasing customer demands and
the surge in business volumes, many public sector banks have ploughed back funds to
invest heavily in technology upgrades and systems like LANs, WANs, and VSATs etc.
Marketing and brand building programs were also given a new thrust in the new
liberalized banking scenario. Promotional budgets were hiked to cater to the new and
large discerning target audience. Banks were now keen on marketing their products and
service though various mediums to reach their core customers. Direct marketing, Internet
marketing, hoarding, press ads, television sponsorships, image makeovers etc. became an
integral part of a banks marketing mix. To meet the personalized needs of the customer
and in order to differentiate its services, banks repositioned themselves in specialized
fields, like housing loans, car finance, educational loans etc. to optimally service the
customer. Permission marketing became the new strategy that banks began to propound
i.e. feeding the customer (with his or her consent) with product and service information
and thereby enticing him towards the banks product service portfolio.

NEW GENERATION BANKING

He liberalize policy of Government of India permitted entry to private sector in the
banking, the industry has witnessed the entry of nine new generation private banks. The
major differentiating parameter that distinguishes these banks from all the other banks in
the Indian banking is the level of service that is offered to the customer. Verify the focus
has always been centered around the customer understanding his needs, preempting
him and consequently delighting him with various configurations of benefits and a wide
portfolio of products and services. These banks have generally been established by
promoters of repute or by high value domestic financial institutions. The popularity of
these banks can be gauged by the fact that 14 MOBILE BANKING in a short span of
time, these banks have gained considerable customer confidence and consequently have
shown impressive growth rates. Today, the private banks corner almost four per cent
share of the total share of deposits. Most of the banks in this category are concentrated in
6

the high growth urban areas in metros (that account for approximately 70% of the total
banking business). With efficiency being the major focus, these banks have leveraged on
their strengths and competencies viz. Management, operational efficiency and flexibility,
superior product positioning and higher employee productivity skills. The private banks
with their focused business and service portfolio have a reputation of being niche players
in the industry. A strategy that has allowed these banks to concentrate on few reliable
high net worth companies and individuals rather than cater to the mass market. These
well-chalked out integrates strategy plans have allowed most of these banks to deliver
superlative levels of personalized services. With the Reserve Bank of India allowing
these banks to operate 70% of their businesses in urban areas, this statutory requirement
has translated into lower deposit mobilization costs and higher margins relative to public
sector banks.

INTRODUCTION TO MOBILE BANKING

Mobile Banking (also known as M-Banking, m-banking, SMS Banking, etc.) is a term
used for performing balance checks, account transactions, payments, etc., via a mobile
device such as a mobile phone. It was Internet Banking, which ushered in a new era in
banking convenience by bringing the entire operations to the computer, and now mobile
banking promises to take it to the next level.
Internet Banking helped give the customers anytime access to their banks. Customers
could check out their account details, perform transactions like transferring money to
other accounts, and pay their bills, sitting in the comfort of their homes and offices.
However, the biggest limitation of Internet Banking is the requirement of a PC with an
Internet connection, not a big obstacle if we look at the US and the European countries,
but definitely a big barrier if we consider most of the developing countries of Asia like
India and China.
Mobile Banking addresses this fundamental limitation of Internet Banking, as it reduces
the customer requirement to just a mobile phone. Mobile usage has seen an explosive
growth in most of the Asian economies like India, China and Korea. The main reason that
Mobile Banking scores over Internet Banking is that it enables 'Anywhere Anytime
Banking'.
The last time that technology had a major impact in helping banks service their
customers was with the introduction of the Internet banking. Internet Banking helped to
give the customer's anytime access to their banks. Customer's could check out their
account details, get their bank statements, perform transactions like transferring money to
other accounts and pay their bills sitting in the comfort of their homes and offices.
However the biggest limitation of Internet banking is the requirement of a PC with an
Internet connection, not a big obstacle if we look at the US and the European countries,
but definitely a big barrier if we consider most of the developing countries of Asia like
China and India. Mobile banking addresses this fundamental limitation of Internet
Banking, as it reduces the customer requirement to just a mobile phone.
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Mobile usage has seen an explosive growth in most of the Asian economies like India,
China and Korea. In fact Korea boasts about a 70% mobile penetration rate and with its
tech-savvy populace has seen one of the most aggressive rollouts of mobile banking
services.
Still, the main reason that Mobile Banking scores over Internet Banking is that it enables
Anywhere Banking'. Customers now don't need access to a computer terminal to access
their banks, they can now do so on the go when they are waiting for their bus to work,
when they are traveling or when they are waiting for their orders to come through in a
restaurant.
The scale at which Mobile banking has the potential to grow can be gauged by looking at
the pace users are getting mobile in these big Asian economies. According to the Cellular
Operators' Association of India (COAI) the mobile subscriber base in India hit 40.6
million in the August 2004. In September 2004 it added about 1.85 million more. The
explosion as most analysts say, is yet to come as India has about one of the biggest
untapped markets. China, which already witnessed the mobile boom, is expected to have
about 300 million mobile users by the end of 2004. South Korea is targeted to reach
about 42 million mobile users by the end of 2005. All three of these countries have seen
gradual roll-out of mobile banking services, the most aggressive being Korea which is
now witnessing the roll-out of some of the most advanced services like using mobile
phones to pay bills in shops and restaurants.
Mobile banking has been at the threshold of a revolution for some time. While many
operators, as well as banks, had introduced mobile banking applications, it never became
popular due to security concerns. The number of people using mobile banking services
has jumped from under 10,000 to 120,000 in two years. While the trend is growing, lack
of awareness of services, apart from perceived security issues are inhibiting faster takeoff.
There is yet another reason why the service will not spread like wild fire - the credit
environment. RBI has been tightening the banks, which have been offering unsecured and
secured loans with minimal or no customer verification. With RBI tightening liquidity,
personal loan defaults have reached 9% and banks will be very wary of giving you a
credit card on the mobile.
Though RBI has specified norms for the banks to provide secure technology and ensure
'confidentiality, integrity, authenticity and non-reputability', security remains a major
concern as well as a hurdle. However, with a few precautions and safety measures, users
can have a safer m-banking experience. The m-PIN, which is issued by the bank, should
be memorized and the PIN-mailer destroyed immediately. Change your m-PIN regularly
and do not share it with anyone. The PIN is valid only for the corresponding phone
number, which means users cannot access their accounts using other hand-sets. Thus, in
case of a loss/theft of mobile phone, inform the mobile phone operator as well as the
bank to block the banking application. Similarly, you should also inform the bank, if you
change your hand-set or SIM card.

Reserve Bank of India has set-up the Mobile Payments Forum of India (MPFI), a
'Working Group on Mobile Banking' to examine different aspects of Mobile Banking (Mbanking). The Group had focused on three major areas of M-banking, i.e.,
(i)
(ii)
(iii)

technology and security issues,

business issues, and
regulatory and supervisory issues.

Each stake-holder group has the following expectations: a) To meet the following expectations of Consumer: Personalized service
Minimal learning curve
Trust, privacy and security
Ubiquitous - anywhere, anytime and any currency
Low or zero cost of usage
Interoperability between different network operators, banks and devices
Anonymity of payments like cash
Person to person transfers
b) To meet the following expectations of Merchant: Faster transaction time
Low or zero cost in using the system
Integration with existing payment systems
High security
Being able to customize the service
Real time status of the mobile payment service
Minimum settlement and payment time
c) To meet the following expectations of Telecom Network Providers: Generating new income by increase in traffic
Increased Average Revenue Per User (ARPU) and reduced chur
(increased

loyalty)

Become an attractive partner to content providers

d) To meet the following expectations of Mobile Device Manufacturers: Large market adoption with embedded mobile payment application
Low time to market
Increase in Average Revenue Per User (ARPU)
e) To meet the following expectations of Banks: Network operator independent solutions
Payment applications designed by the bank
Exceptional branding opportunities for banks
9

 Better volumes in banking - more card payments and less cash transactions
Customer loyalty

f) To meet the following expectations of Software & Technology Providers:

Large markets
g) To meet the following expectations of Government: Revenue through taxation of m-payments
Standards
There are lots of evidences that not only big cities are using mobile banking, but even
thousands of people fi3rom rural areas across 12 states are also likely to get their social
security pension and wages paid under the National Rural Employment Guarantee Act
(NREGA) Scheme with the help of mobiles over the coming few months. Bharti Airtel,
too, is in the process of tying-up with two leading banks to extend its mobile remittance
services to rural areas, according to its President (Mobile Services), Sanjay Kapoor.
Airtel has already partnered with the Indian Farmers' Fertilizers Cooperative Limited
(IFFCO) to set up IFFCO Kisan Sanchar Limited in Rajasthan. Under this initiative, the
cooperative department will provide mobile hand-sets to farmers at marginal price
through its out-lets in the rural areas. These handsets would be loaded with green SIM
cards, which will flash daily updates on agricultural practices and weather forecasts free
of cost.

MOBILE BANKING SERVICES

Mobile banking can offer services such as the following :

Account Information
1. Mini-statements and checking of account history
2. Alerts on account activity or passing of set thresholds
3. Monitoring of term deposits
4. Access to loan statements
5. Access to card statements
6. Mutual funds / equity statements
7. Insurance policy management
8. Pension plan management
9. Status on cheque, stop payment on cheque
10. Ordering check books
11. Balance checking in the account
12. Recent transactions
13. Due date of payment (functionality for stop, change and deleting of payments)
14. PIN provision, Change of PIN and reminder over the Internet
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15. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

1. Domestic and international fund transfers
2. Micro-payment handling
3. Mobile recharging
4. Commercial payment processing
5. Bill payment processing
6. Peer to peer payments
7. Withdrawal at banking agent
8. Deposit at banking agent
Especially for clients in remote locations, it will be important to help them deposit and
withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into
electronic funds and vice versa. The feasibility of such banking agents depends on local
regulation which enables retail outlets to take deposits or not.
A specific sequence of SMS messages will enable the system to verify if the client has
sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at
the agent. When depositing money, the merchant receives cash and the system credits the
client's bank account or mobile wallet. In the same way the client can also withdraw
money at the merchant: through exchanging sms to provide authorization, the merchant
hands the client cash and debits the client's account.

Investments
1. Portfolio management services
2. Real-time stock quotes
3. Personalized alerts and notifications on security prices

Support
1. Status of requests for credit, including mortgage approval, and insurance coverage
2. Check (cheque) book and card requests
3. Exchange of data messages and email, including complaint submission and
tracking
4. ATM Location

Content Services
1. General information such as weather updates, news
2. Loyalty-related offers
3. Location-based services

11

Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the
younger, more "tech-savvy" customer segment. A third of mobile phone users say that
they may consider performing some kind of financial transaction through their mobile
phone. But most of the users are interested in performing basic transactions such as
querying for account balance and making bill payment.
One way to classify these services depending on the originator of a service session is the
Push/Pull' nature. Push' is when the bank sends out information based upon an agreed
set of rules, for example your banks sends out an alert when your account balance goes
below a threshold level Pull' is when the customer explicitly requests a service or
information from the bank, so a request for your last five transactions statement is a Pull
based offering. .
The other way to categorize the mobile banking services, by the nature of the service,
gives us two kind of services Transaction based and Enquiry Based. So a request for
your bank statement is an enquiry based service and a request for your fund's transfer to
some other account is a transactionbased service. Transaction based services are also
differentiated from enquiry based services in the sense that they require additional
security across the channel from the mobile phone to the banks data servers.
The new generation of mobile phones offers the speedy GPRS, EDGE or 3G data
transmission standards and has large, high-definition colour displays. Prices are coming
down and services and features are now considerably easier to handle on the mobile.
Mobile Banking, in particular, has finally become a fast, user-friendly and affordable
service. India's leading telecom companies started their services for Mobile Banking,
basically they use these services as a marketing tool to advertise there services on this
basis. Here are few giants of telecom industries in India who are offering Mobile Banking
in various states.

Features of Mobile Commerce

Mobile Commerce is characterised by some unique features that equip it with certain
advantages against conventional forms of commercial transactions, including Electronic
Commerce:
i) Ubiquity:
Ubiquity means that the user can avail of services and carry out transactions largely
independent of his current geographic location (the anywhere feature).
ii) Immediacy:
Closely related to the feature of ubiquity is the possibility of real-time availment of
services (the anytime feature). This feature is particularly attractive for services that are
time-critical and demand a fast reaction, e.g. stock market information.
iii) Localization:

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Positioning technologies, such as the Global Positioning System (GPS), allow companies
to offer goods and services to the user specific to his current location. LBS can thus cater
to consumers needs and wishes for localized content and services.
iv) Instant connectivity:
Ever since the introduction of the General Packet Radio Service (GPRS) mobile devices
are constantly online, i.e. in touch with the network (the always-on feature). This
feature brings convenience to the user, as time-consuming dialup or boot processes are
not necessary.
v) Pro-active functionality:
Mobile Commerce opens, by the virtue of its ability to be immediate, local and personal,
new avenues for business. The user may choose the products, and services, which he
wants to be kept informed about. The Short Message Service (SMS) can be used to send
brief text messages to customers ensuring that the right (relevant) information is
provided to the user at the right place, at the right time.
vi) Simple authentication procedure:
Mobile devices function with an electronic chip called 49 MOBILE BANKING
Subscriber Identity Module (SIM). The SIM is registered with the network operator and
the owner is thus unambiguously identifiable. The clear identification of the user in
combination with an individual Personal Identification Number (PIN) makes any further
time-consuming, complicated and potentially inefficient authentication process
redundant.

ADVANTAGES OF MOBILE BANKING

The biggest advantage that mobile banking offers to banks is that it drastically cuts down
the costs of providing service to the customers. For example an average teller or phone
transaction costs about $2.36 each, whereas an electronic transaction costs only about
$0.10 each. Additionally, this new channel gives the bank ability to cross-sell up-sell their
other complex banking products and services such as vehicle loans, credit cards etc.
For service providers, Mobile banking offers the next surest way to achieve growth.
Countries like Korea where mobile penetration is nearing saturation, mobile banking is
helping service providers increase revenues from the now static subscriber base. Also
service providers are increasingly using the complexity of their supported mobile banking
services to attract new customers and retain old ones.
1. user experience of browsing the internet from a mobile device is familiar and offers a
rich UI experience.
2. allows end user to access corporate association.
3. secure connection can be established on most of the mobile browsers.
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DISADVANTAGES OF MOBILE BANKING

Many non-standards variables including handsets, browsers and operating system.
Inconsistent user experience due to varying connection speed and different handset.
User needs to have a data plan, which may be a barrier to adoption among price
sensitive demographics.
No offline (out of the coverage) capability.

TECHNOLOGIES ENABLING MOBILE BANKING

Technically speaking most of these services can be deployed using more than one
channel. Presently, Mobile Banking is being deployed using mobile applications
developed on one of the following four channels.
1.
2.
3.
4.

IVR (Interactive Voice Response)

SMS (Short Messaging Service)
WAP (Wireless Access Protocol)
Standalone Mobile Application Clients

1. IVR (Interactive Voice Response)

IVR or Interactive Voice Response service operates through pre-specified numbers
that banks advertise to their customers. Customer's make a call at the IVR number
and are usually greeted by a stored electronic message followed by a menu of
different options. Customers can choose options by pressing the corresponding
number in their keypads, and are then read out the corresponding information, mostly
using a text to speech program.
Mobile banking based on IVR has some major limitations that they can be used only
for Enquiry based services. Also, IVR is more expensive as compared to other
channels as it involves making a voice call which is generally more expensive than
sending an SMS or making data transfer (as in WAP or Standalone clients).
One way to enable IVR is by deploying a PBX system that can host IVR dial plans.
Banks looking to go the low cost way should consider evaluating Asterisk , which is
an open source Linux PBX system
Asterisk, due to its open source nature has caught on in a big way and is being sold as
an PBX solutions by quite a few companies commercially. However there has been
considerable noise on multiple Asterisk related forums over the stability of Asterisk
based systems. Companies planning to use Asterisk for their IVR solutions should
14

certainly do a rigorous evaluation of its capabilities before committing their long term
future on it.

2. SMS (Short Messaging Service)

SMS uses the popular text-messaging standard to enable mobile application based
banking. The way this works is that the customer requests for information by sending
an SMS containing a service command to a pre-specified number. The bank responds
with a reply SMS containing the specific information.
For example, customers of the HDFC Bank in India can get their account balance
details by sending the keyword HDFCBAL' and receive their balance information
again by SMS. Most of the services rolled out by major banks using SMS have been
limited to the Enquiry based ones.
However there have been few instances where even transaction-based services have
been made available to customer using SMS. For instance, customers of the Bank of
Punjab can make fund transfer by sending the SMS TRN(A/c No)(PIN No)
(Amount)'.
One of the major reasons that transaction based services have not taken of on SMS is
because of concerns about security and because SMS doesn't enable the banks to
deliver a custom user interface to make it convenient for customers to access more
complex services such as transactions.
The main advantage of deploying mobile applications over SMS is that almost all
mobile phones, including the low end, cheaper ones, which are most popular in
countries like India and China are SMS enabled.
An SMS based service is hosted on a SMS gateway that further connects to the
Mobile service providers SMS Centre. There are a couple of hosted IP based SMS
gateways available in the market and also some open source ones like Kannel.

3. WAP (Wireless Access Protocol)

WAP uses a concept similar to that used in Internet banking. Banks maintain WAP
sites which customer's access using a WAP compatible browser on their mobile
phones. WAP sites offer the familiar form based interface and can also implement
security quite effectively.
Bank of America offers a WAP based service channel to its customers in Hong Kong.
The banks customers can now have an anytime, anywhere access to a secure reliable
service that allows them to access all enquiry and transaction based services and also
more complex transaction like trade in securities through their phone
A WAP based service requires hosting a WAP gateway. Mobile Application users
access the bank's site through the WAP gateway to carry out transactions, much like
internet users access a web portal for accessing the banks services.

15

The following figure demonstrates the framework for enabling mobile applications
over WAP. The actualy forms that go into a mobile application are stored on a WAP
server, and served on demand. The WAP Gateway forms an access point to the
internet from the mobile network.

4. STANALONE MOBILE APPLICATION CLIENTS

Standalone mobile applications are the ones that hold out the most promise as they
are most suitable to implement complex banking transactions like trading in
securities. They can be easily customized according to the user interface complexity
supported by the mobile. In addition, mobile applications enable the implementation
of a very secure and reliable channel of communication.
One requirement of mobile applications clients is that they require to be downloaded
on the client device before they can be used, which further requires the mobile device
to support one of the many development environments like J2ME or Qualcomm's
BREW. J2ME is fast becoming an industry standard to deploy mobile applications
and requires the mobile phone to support Java.
The major disadvantage of mobile application clients is that the applications needs to
be customized to each mobile phone on which it might finally run. J2ME ties together
the API for mobile phones which have the similar functionality in what it calls
'profiles'. However, the rapid proliferation of mobile phones which support different
functionality has resulted in a huge number of profiles, which are further significantly
driving up development costs. This scale of this problem can be gauged by the fact
that companies implementing mobile application clients might need to spend as much
as 50% of their development time and resources on just customizing their applications
to meet the needs of different mobile profiles.
Out of J2ME and BREW, J2ME seems to have an edge right now as Nokia has made
the development tools open to developers which has further fostered a huge online
community focused in developing applications based on J2ME. Nokia has gone an
additional mile by providing an open online market place for developers where they
can sell their applications to major cellular operators around the world. BREW on the
other hand has seen limited popularity among the developer community, mostly
because of the proprietary nature of its business and because of the steep prices it
charges for its development tools.
Quite a few mobile software product companies have rolled out solutions, which
enable J2ME mobile applications based banking. One such product is Wireless Ibanco. The mobile user downloads and installs the wireless Ibanco application on
their J2ME pone. The J2ME client connects to the wireless I-banco server through the
service providers GSM network to enable users to access information about their
accounts and perform transactions. One of the other big advantages of using a mobile
application client is that it can implement a very secure channel with end-to-end
encryption.
16

However countries like India face a serious obstacle in the proliferation of such
clients as few users have mobiles, which support J2ME or BREW. However, one of
the biggest CDMA players in the Indian telecom industry, Reliance Infocomm has
about 7.01 million users all of which have handsets, which support J2ME. Reliance
has unveiled one of the most ambitious data services deployment program in the
country. On the other hand a country like South Korea with its tech-savvy population
has a widespread adoption of the higher-end mobiles, which support application
development.

17

CHAPTER- 2
REVIEW OF LITERATUR
1. Wenninger (2000)
evaluated the emerging role of electronic commerce in banks. E-commerce had created
new form of competition and compelled banks to make choices about the services they
offer, the size of their branch network and extent of their support to inter- bank payments
network. The main objective of the study was to understand the changes that had taken
place with the introduction of electronic commerce. Development of e-banking products
such as electronic billing, establishing internet portals, electronic checks, ATM, etc. had
provided additional services to customers. The author also emphasized upon the strategic
and operational risks which arise in banking sector. These could be minimized with a cost
efficient electronic process.

2. Kamesam (2001)
studied the changes that took place in the Indian banking industry which emphasized on
technological advancements and profitability in banks. Technology has helped in
centralized data storage with decentralized processing which has helped in reduction of
costs and NPAs. Further, emergence of services such as electronic data interchange
(EDI), usage of smart cards, RTGS, e-commerce; all resulted in increasing the level of
profitability and productivity of banks. The author concluded that in order to reduce
crimes, security audit should be done which will be helpful in improving customer
service, increase systematic efficiency and thus increased productivity and profitability.

3. Unninthan (2001)
described the impact of e-banking adaptation on Australian and Indian banking sectors
with the help of qualitative and quantitative analysis. The researcher found that Australia
had a strong platform for e-banking growth with 37.7 per cent of population willing to
engage in e-banking mostly in urban areas due to literate young working population with
discretionary income. However, India by comparison was played by weak infrastructure,
low PC penetration and consumer reluctance in rural sector. But the professionals are
compelling the government and bureaucracy in the country to support and develop new
initiatives at a faster speed of internet banking. However, in both the countries, e-banking

18

was a successful strategic weapon for banks to remain profitable in a volatile and
competitive market place

4. Yakhlef (2001)
evaluated the services provided through internet and website. The researcher explored the
major services of Swedish banks provided via internet. The objective of the study was to
see whether internet banking services were compliment or competitive to brick and
mortar bank branches. The results of the study indicated that although internet banking
provided more safe, convenient and efficient services to the customers, yet as far as
personal contact and direct information was concerned, brick and mortar was more
preferable than internet. Internet has reduced number of branches of banks, added value
to the customers, attracted new customers and developed more customized services but at
the same time it also requires huge investment, infrastructure and trained employees of
bank. So, internet was not a substitute rather compliment of brick and mortar concept.

Aki (2002)
highlighted the impact of technology in banking sector. New technologies cannot replace
the branch network but these can support old methods of delivering the services. The
author evaluated the structural change in Finnish banking sector from the period 1993 to
2002 which showed that 42 per cent of households have internet connection with banks
and 90 per cent have mobile banking services. ICT has had both inter-sectoral and intrasectoral impact. The author concluded that main goals of management of technology
were to improve customer satisfaction, reduce cost and develop new methods to collect
and analyze the customer information.

Alu et al. (2002)

reviewed that information technology was rapidly changing the banking industry. The
study evaluated the impact of IT on the banking industry in Nigeria. The analysis was
done through a structured questionnaire and out of 260 respondents, 86 per cent agreed
that IT was really helping the banks, 83.1 per cent agreed that IT had a great positive
impact on services rendered by the banks and 66.5 per cent disagreed that IT had an
effect on services rendered by the banks. The study revealed that IT had appreciable
effect on banks productivity, cashiers work, banking transactions, bank patronage, bank
service delivery and customers services. This affects the growth of banking industry
because now customers can withdraw money from any branch of their bank. The study
also revealed that telephones, computer systems, LANs were available and being used by
all the banks, while WANs, EFT and wireless phones were available in some of the
banks. To make an effective use of e-banking, there should be adequate supply of power
and thats the major deterrent of e-banking technique used in Nigeria.

Gurau (2002)
analyzed the situation of online banking in USA and Europe. The author described that
there were more than 1500 websites of banks all over the world. Most of banks in USA
had internet presence, while in Europe, most of banking websites were from UK,
19

Germany, Spain, Italy and France. The author also found that in 2005,distribution
channels used by banks included 10 per cent internet banking, 65 per cent multichannel,10 per cent telephone banking and 15 per cent through bank branches, whereas in
1998, it was only 15 per cent direct banking and 85 per cent in branch banking. The
author concluded that successful introduction of e-banking services proved to be a
complex operation which requires the harmonization of all interacting elements of
economic and financial system.

Harris and Spence (2002),

In their paper, explored the ethics of business to business electronic commerce with focus
on banking sector. The researchers had chosen a case study of online foreign exchange
developments at an investment bank. The important areas include freedom of choice,
trust and transparency of business-to-business transaction and limits to responsibility with
regard to facilitation of fraud. The authors found that e-banking had forced the banking
sector to recognize, restructure and reconsider its institutional arrangements. The
challenges of e-banking services would be successful for banks only if fraudulent
activities could be controlled, transparency in transaction could be maintained, ethical
rules and regulation to be followed so that e-banking could be widely acceptable among
customers.

Durkin and Howcroft (2003)

evaluated that the banker-customer relationship was improved through mobile, phone and
internet banking. The authors found that new technology has made the banks very
competitive and profitable and internet has played a key role in it. Perception of bankers
and customers regarding the use of internet was examined. They pointed out that as
consumer usage of remote bank delivery channels increases, relationship management
will become more important. Further, the combination of traditional and new delivery
channels, if followed, can help to improve their productivity and profitability.

Joseph and Stone (2003),

in their paper, explored that customer friendly technology such as ATM, internet banking
and telephone banking has been used by the banks to reduce the cost of providing
services, and to increase the customer loyalty and market share. Technology plays a vital
role in delivery of banking service. The study highlighted that access, location, security
and ease of use of ATM machines appears to be the most important component for
banking customers for the adoption of e-banking. However, banks should emphasize
more on providing speedy and efficient service to the customers. Further, bank managers
should conduct periodic marketing studies to understand the level of technological
services by the customers so that adequate service could be delivered at the right time. 47

Lustik (2003)

20

Analyzed the main criteria for successful inter-bank strategy and brought out benefits of
e-banking from the viewpoint of banks, their clients and the economy in general. The
author explained that banks in Estonia had achieved significant success in the
implementation of electronic banking. The findings of the paper were helpful to
understand the main reasons and factors responsible for the rapid growth of electronic
banking. The author further revealed that making payment via e-banking creates overall
economy savings to the amount of 0.93 per cent of GDP. Electronic banking was not a
small application to computer fans and innovative adopters, and a profound research was
needed to map its customer base for the enhancement of value creation process.

Mattila et al. (2003)

Evaluated the electronic banking adoption in Finland. The study showed that the
proportion of people in Finland, who have adopted online banking, was higher than
anywhere else in the world. All the Finnish banks offered a full range of internet banking
services. The researchers also found that different people have different attitude towards
new technology. Some were innovators, who were interested in new technology and
positive towards it. Some were early adopters and some were late adopters who have
negative attitude towards it. Laggards had extremely negative attitude towards it. The
study also found that matured customers were late adopters of internet banking. However,
expensive start up, security and lack of personal service were main hindrances in the use
of electronic banking. The study brought out that most customers found insufficient or
non-existent training as the main reasons in the use of new technology, and also found
web pages confusing and difficult to understand.

Sureshchander and Rajendran (2003),

in their paper, focused on investigating the important factors of customers perceived
quality in banks of developing economy like India. The authors had taken 15 public
sector banks, 14 private banks and 14 foreign banks for the period under study. The
researchers found that there seems to be a great variation in respect of services offered by
three groups of banks. They used core services such as human element, systemization of
services, tangibility of services and social responsibility as critical factors. They analyzed
that three groups of banks in India seem to vary significantly in terms of service quality
factors but from the customer perception of service quality, it could be acceptable only if
customers need could be satisfied at the right time in a right manner.

Yu and Boon (2003),

In their study, examined the implications of technological advances in the banking sector
in Malaysia. An empirical study was made through a structured questionnaire. The results
highlighted that electronic channels provide alternatives for faster delivery of banking
services to the customers. They described that prior to adoption of electronic channels
like ATMs, kiosks, internet banking; investment costs must be identified to ensure a more
cost-effective and efficient execution of echannel services. The authors analyzed the
commercial banks in Malaysia via frequency analysis and factor analysis. The results of
21

the study indicated that banks operation management was the main factor affecting the
success of ATMs, PC and branch banking, while product innovation and knowledge
development factors were found to have most significant effect on the success of banking
kiosks and phone banking respectively.

Lustik (2004),
In his study, tried to assess the profitability of electronic banking services for the banks.
In order to analyze the cost structure for traditional and electronic channel transactions,
the author explored the implementation techniques of activity based costing (ABC). The
results of the study indicated that electronic channels provide cost saving for banks and
their clients. The study revealed that with help of ABC technique, banks can reduce and
regulate some costs. It was also found that the decrease in transaction costs after
introduction of electronic channels was slower than expected as existing traditional
channels could not be closed at the same speed as the new electronic channels were
introduced.

Lympero and Chaniotakir (2004)

evaluated the implication of e-banking adoption through a survey of the branch
employees perception. The researchers framed a questionnaire of 527 branch employees
and analyzed the existence of four distinct factors which were hard advantages, soft
advantages, market effects and risks. The authors selected 17 commercial banks for the
study. They highlighted the advantages which influence the employees feel easy to adopt
e-banking, i.e., cost alienation, customers service and foreign competition. They focused
that branch employees perception toward e- banking depends upon their position in
branch hierarchy, qualification, employers size and type of ownership. So, in order to
facilitate the promotion of e-banking services, bank managers should make systematic
efforts in exploiting internet marketing processes such as continuous education, flawless
information and an attempt to minimize negative perception.

Suleiman et al. (2005)

Studied the impact of E-banking on Malaysian banking sector. The study aimed at
providing an overview of E-banking adoption in Malaysia. Out of 53.9 per cent, who
used e-banking, 85 per cent used it for savings bank facility, 55.8 per cent for current
account facility, 37 per cent for bill payment, 35.3 per cent for visa /master card and 30.8
per cent used for third party transfer. The researchers analyzed websites of the banks in
order to know the impact of e-banking. Evaluation of websites contained 32 elements,
and a survey was conducted to obtained customers perspective of e-banking. The
researchers overviewed that results of the study cannot be generalized to the general
population. Nevertheless, the results provide a fair indication of what services e-banking
users find useful and which group of customers were likely to use the services more.

Heng Michael et al. (2006)

Analyzed the impact of e-banking on brick and mortar banks through innovation model.
The researchers analyzed 8 core capabilities to assist the banks migrated to e-banking
22

environment. Their capabilities fall into two groups relating to configuration of existing
business model. They suggested that banks need to develop uniquely innovative services
and products on the one hand and innovative business model that changes the way banks
operate on the other. They concluded that eight core capabilities (technical dynamic
capabilities and business dynamic capabilities) provided a blue print for sustaining a
banks ability to exploit e-banking.

Siam (2006)
Evaluated the effects of electronic banking on the profitability of Jordanian banks. The
study investigated the reasons behind providing electronic banking services through
internet, their impact on banking services in general, and banks profitability in particular.
The results of the study revealed that electronic banking services had a negative impact
on the profitability of banks in the short run because of increased capital costs involved in
technical and electronic infrastructure, cost of training to employees and also the cost
involved in creation of environment where the banks can operate smoothly. However,
these services had a positive impact in the long run on the profitability of banks. The
researcher recommended that banks need to carry out awareness and promotion
campaigns to educate clients and aware them of feasibility through reduced time, cost,
effort and also to hold training courses for employees to understand the e-banking
business strategies.

Manoharan (2007)
Highlighted the e-payment system in India and its performance impact on Indian banking
sector. The author described that competition in banking industry had forced the banks to
rethink the way they operate their business. So, e-banking has made it possible to find
alternate banking practices. In the paper, the author divided the payment system in India
into three parts, i.e., large value payment system, retail payment system, and retail
electronic system. Each one includes different categories of e-payment. The author
studied the performance of various Indian payment systems in the last three years in
which RTGS emerged as the principal payment system in India for wholesale payment.
The study focused that having a huge opportunity of epayment system in India still 90 per
cent of transactions were cash based. So, an effort should be made to increase the use of
e-payment, and RBI should make efforts to strengthen the legal framework of electronic
banking system.

Ramani (2007)
Studied the impact of e-payment system on Indian banking sector. E-payment was
required for handling large volume of business payment and remittances for hassle free,
quicker and faster payment remittances at low cost, and paperless transactions. The
researcher highlighted various steps taken by RBI for the e-payment. It includes RTGS,
deferred net settlement system such as electronic clearing services debit and credit,
electronic fund transfer and NEFT. The researcher studied that these methods had
increased the use of core banking solutions, data warehousing and data mining. Epayment had reduced the chances of fraud, improved customer service by cutting the
delay in payment obligation.
23

Singh and Malhotra (2007)

Made an attempt to discover factors affecting a banks decision to adopt internet banking
in India. The study was based on 88 banks comprising of public, private and foreign
banks covering financial years from 1997 to 2005. The results of the study showed that
large banks having high fixed expenses, high income and expenditure tend to use more
technology. Banks had used internet banking as complementary channel to existing
branch network. However, the private and foreign banks were quick adopter to internet
banking than public sector banks. The adoption of this innovation by other banks
increases the probability that a decision to adapt will be made as it has increased the
profitability and productivity of banks.

Kautish (2008)
Described the paradigm shift of banking sector from traditional banking to online
banking. The objective of the paper was to discuss the derivation of value added tool of
online banking system which was used to attract new customers and retain the existing
ones. It helped the banks to acquire more business from existing customers. People
preferred to use online banking because of its availability, better performance, ubiquity,
speed and its effectiveness. Further, the author discussed two bank models integrated
banking model where the banks provide internet banking services as an extension to their
basic services like ATM and phone banking. So, it is a kind of hybrid approach and the
other was stand alone internet banking model, where the banks totally rely on the online
channel. To improve the services through e-banking, banks should think from the
customers perspective and there should be creativity and innovation in designing and
implementation of e-banking processes. The author concluded that as e-banking was a
relatively new concept in the global banking scenario so the best of this concept was yet
to come.

Suresh (2008)
Highlighted that recently developed e-banking technology had created unpredicted
opportunities for the banks to organize their financial products, profits, service delivery
and marketing. The objectives of the study were to evaluate the difference between
traditional and e-banking, and to identify the core capabilities for the best use of ebanking. The author analyzed that e-banking will be an innovation if it preserved both
business model and technology knowledge, and disruptive if it destroys both the model
and knowledge. He also differentiated e-banking from traditional banking in five ways,
namely, value proportion, market scope, cost structure, profit potential and value
network. However, in order to exploit technical and business capabilities of ebanking,
banks should generate more customers inside and outside India so that more revenues
could be generated that lead to better future of Indian economy.

24

CHAPTER 03
3.1. Statement of the Problem
Worldwide the way in which banks deliver services has undergone a paradigm shift with
the banks increasingly going in for electronic provisioning of services in the self service
mode through the various electronic channels. In India too this trend is visible. Tough
competition and increasing customer expectations have forced all major commercial
banks, irrespective of the sectors, to adopt the provision of banking services through
ATMs, internet banking, tele banking and mobile banking.
The services through these channels offer tremendous advantage both to the banks and
their customers. For the banks, the advantages are reduced transaction costs and lesser
crowding in their branches. For the customers, these channels offer the convenience of
doing bank transactions from the places of their choice, even homes and conducting them
any time of the day they want. Despite the huge investments made by the banks in
providing the services through these electronic channels and the aforementioned benefits
it offers, it has been found that except for ATMs, adoption i.e., the acceptance and
continued use of a product or service, of other channels like internet banking, tele
banking and mobile banking are yet to pick up in a big way among the bank customers.
The widespread adoption and usage of ATMs is testified by the Banknet Indias ATM
User Survey Report 2006 in which 95% of the respondents preferred banking via ATMs
over the conventional branch banking. According to Internet & Mobile Association of
Indias (IAMAI) Report Online Banking 2006, only about 12% of the internet users
avail internet banking facility, which shows that the internet banking has not really picked
up in India. The previous studies in other countries and a few studies conducted in
India have shown various reasons for the apathy of the bank consumers towards these
services such as security concerns and lack of confidence in using them. But meanwhile,
there is evidence in the literature and other sources that certain segments of the bank
customers, especially those belonging to the welleducated, young, relatively well-off and
residing mainly in urban areas, taking to internet banking and other forms of electronic
banking self-services. This is also evident from the reduction in the branch transactions
and the increase in the net transactions in many of the banks. For instance ICICI banks
net transactions as a percentage of its total transactions rose from 2 percent in the year
2000 to over 18 percent in 2006 and HDFC banks net transactions grew to 16 percent in
2006 from 3 percent in 2001. Examination of published works revealed that even though
several Zstudies were conducted mainly in developed countries and a few in developing
countries about the adoption of technology enabled banking self services Mols (1999)
in Denmark, Minna Mattila (2006) in Finland, Patricia et al. (2003) in France, Daniel. E
(1999) in U K, Line Ricard (2001) in France, Milind Sathye (1999) in Australia, Laforet
& Li (2005) in China, Polatoglu and Ekin (2001) in Turkey, Erikson et al. (2005) in
Estonia to name a few such studies the studies pertaining to this topic done in India are
limited in number. Hence there is a gap in the understanding of how Indian bank
customers, users as well as non-users, perceive the services delivered through these self
service delivery channels and the level of satisfaction of users. There is a need to
understand and analyse the antecedent factors which include demographic, beliefs and
attitudinal aspects of the respondents that aid the adoption of these self services as well as
25

those which hinder the adoption. There is also a requirement to find out the relationship
of these antecedent factors and the resultant adoption consequences. The level or degree
of adoption by the users, extent of usage satisfaction, the respondents usage of each type
of electronic banking channel, and the intensity of usage of various functions provided
through each electronic self-service channel could all be considered as a consequence of
adoption of these technology-enabled banking self-services. Even the few published
studies done in India deal with only aspects pertaining to any one of the technologyenabled banking self-services such as ATM (Thamaraiselvan and Raja, 2007) or internet
banking ( Singh and Malhotra, 2005; Mukherjee and Nath, 2003). As the customers tend
to use the various services of the different banking channels in a complimentary manner,
the research confined to aspects pertaining to only one channel is deemed incomplete to
capture the banking transaction-specific consumer behaviour in totality. Hence there is a
strong agenda for the study taking multiple self service banking delivery channels
together such as ATMs, internet banking, telebanking and mobile banking.

3.2. Objectives of the study

The objectives of the study are the following:
To study the usage pattern of technology-enabled banking self-services such as
ATMs,
internet banking, tele banking and mobile banking by bank customers
.To study the effect of demographic factors on the adoption levels of these
technology-enabled banking self-services by bank customers.
To develop a framework to understand the perceived beliefs and the consumer
attitudinal factors that influence the adoption levels of the users of these services.
To study the relationships among the beliefs, attitudes and the usage intentions
about them, and relate them to the usage of the technologyenabled self-services.
To find out the factors which facilitate and hinder the adoption of these services.
To study the satisfaction level and quality perceptions of bank customers who
are using these services.
To compare the customer perceptions across various categories of banks and
geographical locations.

3.3. Hypotheses
The following hypotheses which are linked to the objectives of the study are proposed:
H1.The adoption levels of technology-enabled banking self-services by bank
customers vary with the type of bank group (foreign, private or public sectors) they deal
with.
H2.The adoption levels of the technology-enabled banking self-services by bank
customers vary significantly with the variation in their demographic factors such as
gender (H2a), age (H2b), income (H2c) and occupation (H2d).

26

 H3.The adoption levels of technology-enabled banking self-services by bank

customers
are related to their self efficacy in using them.
H4.The adoption levels of technology-enabled banking self-services bybank customers
are related to their perception of relative advantage in
using them.
H5.The adoption levels of technology-enabled banking self-services by bank
customers are related to their perception of risk in using them.
H6.The adoption levels of technology-enabled banking self-services by bank
customers are related to their innovativeness.
H7.The adoption levels of technology-enabled banking self-services by bank
customers are related to their need for personal contact.

27