A Research Report on

“Barriers in Internet and Mobile Banking Adoption

in India”

Submitted in partial fulfillment of the requirements of

the MBA Degree Bangalore University

Submitted by
PREM PRAKASH

Register Number
05XQCM6066

Under the guidance of

Prof. Jai Raj Nair

M P BIRLA INSTITUTE OF MANAGEMENT

(Associate Bharatiya Vidya Bhavan)
43, Race Course Road, Bangalore-560001
2005-07

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 DECLARATION

I hereby declare that the project report titled “Barriers in Internet and
Mobile Banking Adoption in India” is a record of independent work
carried towards the partial fulfillment of the requirements for the
Masters Degree in Business Administration course of Bangalore
University, at M.P. Birla Institute of Management Associate Bharatiya
Vidya Bhavan, Bangalore –560001.

This has not been submitted for the purpose of an award or degree of
any other institution.

Place: Bangalore. (PREM PRAKASH)

Date: (Register Number: 05XQCM6066)

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 GUIDE CERTIFICATE
This is to certify that the dissertation entitled “Barriers in Internet and
Mobile Banking Adoption in India” is an original study conducted by
Prem Prakash, bearing register number 05XQCM6066, of M. P. Birla
Institute of Management, Associate Bharatiya Vidya Bhavan, under
my guidance. This has not formed the basis for the award of any
Degree/Diploma by Bangalore University or any other University.

Place: Bangalore
Date Prof. Jai Raj Nair

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 PRINCIPAL’S CERTIFICATE

This is to certify that this report titled “Barriers in Internet and Mobile
Banking Adoption in India” is the result of project work undergone
by Prem Prakash, bearing the Register Number 05XQCM6066, under
the guidance of Prof. Jai Raj Nair. This has not formed a basis for the
award of any Degree/Diploma for any
University.

Place : Bangalore
Date : Dr. Nagesh.S.Malavalli
INDEX

Item Subject Page

No.
number

1 Acknowledgement 1

2 Introduction 2-3

3 The Internet and Mobile in India 4-6

4 Internet and Mobile Banking in India 7-8

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5 Mobile Banking 9-10

6 Internet Banking 11-18

7 IT Security Infrastructure 19-37

8 The entry of Indian banks into Net 38

Banking

9 Architecture and Security Requirements 39-40

10 Literature Review 41-44

11 Research 45-46

12 Factors that affect Internet and Mobile 47-51

banking adoption

13 Comparison of Internet and Mobile 52-61

banking

14 Discussion and Implication 62-63

15 Conclusion and Recommendations 64-68

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Appendix A – Questionnaire 69-72

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 17 Bibliography 73

ACKNOWLEDGEMENT
A teacher is a perennial source of inspiration and guidance in all the
academic activities of his students throughout. I whole-heartedly
extend my deep and sincere gratitude to Prof. Jai Raj Nair, faculty for
System, MPBIM, for his continuous guidance and help provided for
completing this research study.

I am also grateful to Dr N S Malavalli, Principal, M.P Birla Institute of

Management for his full support and encouragement while I was
conducting this research.

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I am also thankful to Prof. S.S. Santhanam, M.P Birla Institute of
Management for sharing his expertise in the field of Statistics with me
whenever I approached him.

I also express my gratitude to all friends and family members for

extending their helping hand whenever I approached them. Without
their help this research could not have been presented in a proper
manner.

PREM PRAKASH

EXECUTIVE SUMMARY

More and more banks are turning to self-service technologies to

provide customers with many channels to access products and
services. Internet and Mobile are some of the least cost and
increasingly popular financial services delivery channels. In
developing countries though, the level of information and
communications technology development, the cost of Internet and the
limited bandwidth of mobile networks and other access technologies
constrain such innovation. Rapid change in the banking environment
increased completion by new players, product innovation,
globalization and technological advancement have led to a market
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situation where battle for customers has become intense. In order to
rise up to the challenges, service providers are even more interested
to enhance their understanding of consumer behavior patterns. This
research examine the forces that can act as barriers in mobile and
internet banking services adoption in India. We also compare the
differences in the perception of Internet banking and Mobile banking
and the influence factors. The findings indicate that both the adoption
intent and the perception of Internet banking users differ markedly
from Mobile banking users. The results are discussed and some
implications for banks are outlined.

A quantitative survey sheds more light on this research issue. The data
is collect from a survey in the South region of India and includes 100
respondents.

Continuing technological innovation and competition among

existing banking organisations and new entrants have allow for a much
wider array of banking products and services to become accessible
and delivered to retail and wholesale customers through an electronic
distribution channel collectively referred to as e-banking. However, the
rapid development of Internet and Mobile banking capabilities carries
risks as well as benefits.

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 1. INTRODUCTION

The purpose of this research is to compare the perceptions of Internet

banking and Mobile phone banking adoption in India. India is a middle-
income developing country. This context offers a different perspective
to that of the mainstream literature, which often assumes a developed
country context. In a globalized environment, however, these multiple
perspectives need all be accorded due attention. The banking business
has always been in the forefront of harnessing technology to improve
its services and efficiency. Banks have been quick to adopt rapidly
evolving electronic and telecommunication technologies to deliver an
extensive line of value added products and services to their customers.
By the early 1990s, direct dial-up connections, personal computers,
Mobile banking and automated teller machines (ATMs) became
common in most developed nations.

1.1 Problem Statement

The phenomenon has been undertaken keeping in view that internet

and mobile banking is the next version to wireless banking.
As internet and mobile banking has emerged in India,

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 • Why the customers are showing reluctance in using internet and
mobile banking services so frequently?
• Why the people have not accepted the technology fully, though
it provides much advantage to the banking customers as
compared to the previous technologies?

1.2 Background of the research

The banking industry is an extremely information intensive industry and

remains at the forefront of advanced use of information technology.
Most banks are continually looking for alternative ways of relating to
customers, reduce costs, improve efficiencies, and differentiate
products and services. One trend in this line is the increasing use of
self-service technologies. In the past, the introduction of Automatic
Teller Machine (ATMs) allowed access to some banking service on a
24/7 basis. Recently, more and more banks are relying on the Internet
and Mobiles to push their services to customers.
The increasing application of wireless technologies, of which mobile
phones are just one example, has also provided banks with the
opportunity to provide their services anytime and anywhere. In addition,
it offers far greater freedom of movement, customization and
personalization. A number of businesses are introducing mobile
services covering the information, communication and transaction
dimensions. To facilitate this and allow other businesses to charge for
their services, many banks are introducing mobile payments and
mobile access to customer accounts.

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 The future growth of Internet and Mobile Banking depends to a
large extent on whether or not consumers accept and use them. Thus,
much research attention has been focused on examining consumer
perceptions of new information technology, and whether they intend to
use it. These studies identify levers that can be used to enhance the
adoption rate. The theoretical basis for much of this work has been the
technology acceptance model (TAM), and the perceived
characteristics of innovation (PCI) model. However, other studies on
Internet banking combined theoretical frameworks based on the
diffusion of innovations theory, TAM and theory of planned behavior,
reflecting the trend towards developing and using unified theories of
adoption that integrate diverse sources.
In this research we explicate the influence of attitudinal factors
(relative advantage, compatibility, trial ability, complexity, risk),
subjective norm(social factors) and perceived behavioural control
factors (self-efficacy and technological support) on the adoption of
Internet and Mobile banking. We also compare the effect of attitudinal
factors on the adoption of Mobile and Internet banking.

1.3 Objectives

 To research the changing in electronic banking services

technology environment in the 21st century.
 To understand the concept of electronic banking with relation
to internet and mobile .

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  To identify the various barriers like Access problems,
Dissatisfaction and inability of service providers in the
adoption of Internet and Mobile Banking Service.
 To suggest way to improve the performance of models at
different electronic banking services technology .
 To analyze E- banking practices and its potential in India.
2. The Internet and Mobile in India

Despite the considerable popular interest in Internet in India, the ISP

market has been in disarray. According to the telecom regulator,
there were around 180 operational ISPs in the country, after a
period of market rationalisation. Despite the large number of
providers, 10% of the ISPs have 90% of the subscribers. The state-
owned – BSNL and MTNL – have grown rapidly to hold first and
second place in terms of subscribers. The growing popularity of
cybercafes has been playing a big role in fuelling Internet
development in India.
India continues to be one of the fastest growing major telecom
markets in the world. Sweeping reforms introduced by successive
Indian governments over the last decade have dramatically
changed the nature of telecommunications in the country. The
mobile sector has grown more than tenfold from 2001 to around 60
million subscribers by mid-2005. Whilst GSM technology still
dominates, CDMA has quickly grabbed 23% of this market. The
mobile industry should continue to boom. Fixed-lines, although not
as spectacular as mobiles, is growing solidly.

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 Figure 1: Internet and Mobile Users in India

30
25
20
INTERNET
15
MOBILE
10
5
0
2000 2001 2002 2003 2004 2005

Source : Icfai journal Aug 06 Banking Management

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 3. Internet and Mobile Banking in India

Internet banking was first launched in India in the late 1990s. The
Internet banking users form a subset of Internet users, typically being
in the upper income bracket of an already affluent and/or educated
group. There are 38.5 million Internet users in India and the number is
set to grow to a 100 million by 2007-08. An estimated 4.6* million Indian
Internet users are Banking Online today and with the efforts of the
government and the industry the number is expected to grow to 16+
million by 2007-08 including both Internet and Mobile Banking.

Mobile Banking is the hottest area of development in the banking sector

and is expected to replace the credit/debit card system in future. In past
two years, mobile banking users has increased three times if we
compare the use of either debit card or credit card.
Moveover 85-90% mobile users do not own credit cards.

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 A recent estimate puts the number of Mobile banking users at about
100,000 ?C less than 1% of Mobile users, and a similarly small
percentage of bank account holders. An additional barrier to
Mobilebanking adoption is the limited use made of Mobile data services.
It is still primarily used as a voice communication device, although text
messaging has rapidly risen in popularity. Table shows that extent of
use of different channels to do banking.

Table 2: Frequency of use of alternative banking channels

Bank hall ATM Store/shop TelephoneInternet Mobile
Never (1) 56 16 100 134 129 138
Seldom (2) 46 19 10 7 7 3
A few times monthly
(3) 26 47 16 4 11 2
Weekly (4) 11 29 12 1 3 2
A few times a week (5) 19 37 13 4 5 1
Daily (6) 4 14 11 12 7 16
Average frequency of
use (1-Never, 6-Daily ) 2.4 3.6 2.1 1.6 1.6 1.6
Source : Icfai journal Aug 06 Banking Management

The data in table is extracted from the Mobile banking survey only. The
result shows that Mobile, telephone and Internet are the least
frequently used channels for accessing banking services. On the other
hand ATM is the most frequented banking channel. This is an
interesting finding and could be related to the acceptance level of
recently introduced channels and the perceived risk associated with
them.

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 4. Mobile Banking

4.1 Introduction to Mobile 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 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 India. Mobile

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banking addresses this fundamental limitation of Internet Banking, as
it reduces the customer requirement to just a mobile phone.

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.

4.2 Mobile Banking Services

Banks offering mobile access are mostly supporting some or all of the
following services:

1. Account Balance Enquiry

2. Account Statement Enquiries.
3. Cheque Status Enquiry.
4. Cheque Book Requests.
5. Fund Transfer between Accounts.
6. Credit/Debit Alerts.
7. Minimum Balance Alerts.
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 8. Bill Payment Alerts.
9. Bill Payment.
10. Recent Transaction History Requests.
11. Information Requests like Interest Rates/Exchange Rates.
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 transaction-based 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.

Based upon the above classifications, we arrive at the following

taxonomy of the services listed before:.

Push Based Pull Based

Transaction • Fund Transfer Bill

Based • Payment

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 • Other financial services like
share trading.

Enquiry Based • Credit/Debit Alerts. Account Balance Enquiry

• Minimum Balance • • Account Statement Enquiry.
Alerts • Cheque Status Enquiry.
• Cheque Book Requests.

• Bill Payment Alerts • Recent Transaction History

4.3 Technologies enabling Mobile Banking

4.3.1 IVR – Interactive Voice Response

IVR or Interactive Voice Response service operates through

prespecified 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

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is generally more expensive than sending an SMS or making data
transfer (as in WAP or Standalone clients).

4.3.2 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 transactionbased

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.

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The main advantage of deploying mobile applications over SMS is that
almost all mobile phones, including the low end, cheaper one's, 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.

Figure : SMS Network Architecture

4.3.3 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.
A WAP based service requires hosting a WAP gateway. Mobile
Application users access the bank's site through the WAP gateway to

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carry out transactions, much like internet users access a web portal for
accessing the banks services.
The following figure demonstrates the framework for enabling mobile
applications over WAP. The actually 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.

Figure :WAP Network Architecture for Mobile Applications

4.3.4 Standalone 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

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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.

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 InfoCom 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
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population has a widespread adoption of the higher-end mobiles, which
support application development.

5. Internet Banking

5.1 Introduction to Internet Banking

Globally, the banking business has always been in the forefront of

harnessing technology to improve its services and efficiency. Banks
have been quick to adopt rapidly evolving electronic and
telecommunication technologies to deliver an extensive line of value
added products and services to their customers. By the early 1990s,
direct dial-up connections, personal computers, tele banking and
automated teller machines (ATMs) became common in most
developed nations.

Internet banking evolved in the mid-1990s when Internet and the World
Wide Web began to catch on. Soon, many major banks in the US and
Europe began to use the Internet to provide banking services. Internet
banking is a web-based service that enables the bank's authorized
customers to access their account information. It allows the customers
to log on to the bank's website with the help of a bank-issued
identification and a personal identification number (PIN). The banking
system verifies the user and provides access to the requested services.

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The range of products and services offered by each bank on the
Internet differs widely in their content.
Most banks offer Internet banking as a value-added service. Internet
banking has also led to the emergence of new banks, which operate
only through the Internet and do not exist physically. Such banks are
called 'Virtual' banks or 'Internet only' banks.

5.2 Internet Banking Services

The products and services offered by the banks on the Internet can be
divided into three types:

• Information Kiosks: It includes providing information regarding

various products and services offered by the bank to its
customers and others in general. The bank's site receives and
answers queries of customers through e-mails.
• Basic Internet Banking: It includes enabling customers to open
new accounts, check account balance and pay utility bills.
• E-commerce Banking: Banks function as electronic market
places (e-market place) enabling customers to use their
accounts for money transfers, bills payment, purchase and sale
of securities and online real time purchases and payments.

Internet banking products and services can include wholesale products

for corporate customers as well as retail and fiduciary products for
consumers. Ultimately, the products and services obtained through

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Internet banking may mirror products and services offered through
other bank delivery channels.
Some examples of wholesale products and services include:
• Cash management.
• Wire transfer.
• Automated clearinghouse (ACH) transactions.
• Bill presentment and payment.
Examples of retail and fiduciary products and services include:

• Balance inquiry.
• Funds transfer.
• Downloading transaction information.
• Bill presentment and payment.
• Loan applications.
• Investment activity.
• Other value-added services.

Other Internet banking services may include providing Internet access

as an Internet Service Provider (ISP). The OCC has determined that a
national bank subsidiary may provide home banking services through
an Internet connection to the bank’s home banking system and,
incidental to that service, may also provide Internet access to bank
customers using that service . Historically, banks have used
information systems technology to process checks (item processing),
drive ATM machines (transaction processing), and produce reports
(management information systems). In the past, the computer systems
that made the information systems operate were rarely noticed by
customers. Today, Web sites, electronic mail, and electronic bill

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presentment and payment systems are an important way for banks to
reach their customers.

National banks have experimented with various forms of online banking

for many years. Some of the early experiments involved closed
systems where the customers accessed banks through a dialin or
cable TV connection. These systems limited a bank’s potential
customer base because they required out-of area customers to either
incur long-distance charges on their phone bills or subscribe to a
particular cable TV service to access the bank. With the widespread
growth of the Internet, customers can use this technology anywhere in
the world to access a bank’s network. The Internet, as an enabling
technology, has made banking products and services available to more
customers and eliminated geographic and proprietary systems barriers.
With an expanded market, banks also may have opportunities to
expand or change their product and service offerings.

5.3 Growth in Internet Banking

Numerous factors: including competitive cost, customer service, and

demographic considerations are motivating banks to evaluate their
technology and assess their electronic commerce and Internet banking
strategies. Many researchers expect rapid growth in customers using
online banking products and services. The challenge for national banks
is to make sure the savings from Internet banking technology more
than offset the costs and risks associated with conducting business in
cyberspace.
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Marketing strategies will vary as national banks seek to expand their
markets and employ lower cost delivery channels. Examiners will need
to understand the strategies used and technologies employed on a
bank-by-bank basis to assess the risk. Evaluating a bank’s data on the
use of their Web sites, may help examiners determine the bank’s
strategic objectives, how well the bank is meeting its Internet banking
product plan, and whether the business is expected to be profitable.
Some of the market factors that may drive a bank’s strategy include the
following:

Competition: Studies show that competitive pressure is the chief

driving force behind increasing use of Internet banking technology,
ranking ahead of cost reduction and revenue enhancement, in second
and third place respectively. Banks see Internet banking as a way to
keep existing customers and attract new ones to the bank.

Cost Efficiencies: National banks can deliver banking services on the

Internet at transaction costs far lower than traditional brick-andmortar
branches. The actual costs to execute a transaction will vary
depending on the delivery channel used. For example, according to
Booz, Allen & Hamilton, as of mid- 1999, the cost to deliver manual
transactions at a branch was typically more than a dollar, ATM and call
center transactions cost about 25 cents, and Internet transactions cost
about a penny. These costs are expected to continue to decline.

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 National banks have significant reasons to develop the
technologies that will help them deliver banking products and services
by the most cost-effective channels. Many bankers believe that shifting
only a small portion of the estimated 19-billion payments mailed
annually in the U.S. to electronic delivery channels could save banks
and other businesses substantial sums of money. However, national
banks should use care in making product decisions. Management
should include in their decision making the development and ongoing
costs associated with a new product or service, including the
technology, marketing, maintenance, and customer support functions.
This will help management exercise due diligence, make more
informed decisions, and measure the success of their business venture.

Geographical Reach: Internet banking allows expanded customer

contact through increased geographical reach and lower cost delivery
channels. In fact some banks are doing business exclusively via the
Internet they do not have traditional banking offices and only reach
their customers online. Other financial institutions are using the Internet
as an alternative delivery channel to reach existing customers and
attract new customers.

Branding: Relationship building is a strategic priority for many national

banks. Internet banking technology and products can provide a means
for national banks to develop and maintain an ongoing relationship with
their customers by offering easy access to a broad array of products
and services.

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By capitalizing on brand identification and by providing a broad array
of financial services, banks hope to build customer loyalty, cross-sell,
and enhance repeat business.

Customer Demographics: Internet banking allows national banks to

offer a wide array of options to their banking customers. Some
customers will rely on traditional branches to conduct their banking
business. For many, this is the most comfortable way for them to
transact their banking business. Those customers place a premium on
person-to-person contact. Other customers are early adopters of new
technologies that arrive in the marketplace. These customers were the
first to obtain PCs and the first to employ them in conducting their
banking business. The demographics of banking customers will
continue to change. The challenge to national banks is to understand
their customer base and find the right mix of delivery channels to
deliver products and services profitably to their various market
segments.

5.4 Types of Internet Banking

Understanding the various types of Internet banking products will help

examiners assess the risks involved. Currently, the following three
basic kinds of Internet banking are being employed in the marketplace:
Informational: This is the basic level of Internet banking. Typically, the
bank has marketing information about the bank’s products and
services on a stand-alone server. The risk is relatively low, as
informational systems typically have no path between the server and
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the bank’s internal network. This level of Internet banking can be
provided by the bank or outsourced. While the risk to a bank is
relatively low, the server or Web site may be vulnerable to alteration.
Appropriate controls therefore must be in place to prevent
unauthorized alterations to the bank’s server or Web site.

Communicative: This type of Internet banking system allows some

interaction between the bank’s systems and the customer. The
interaction may be limited to electronic mail, account inquiry, loan
applications, or static file updates (name and address changes).
Because these servers may have a path to the bank’s internal networks,
the risk is higher with this configuration than with informational systems.
Appropriate controls need to be in place to prevent, monitor, and alert
management of any unauthorized attempt to access the bank’s internal
networks and computer systems. Virus controls also become much
more critical in this environment.

Transactional: This level of Internet banking allows customers to

execute transactions. Since a path typically exists between the server
and the bank’s or outsourcer’s internal network, this is the highest risk
architecture and must have the strongest controls. Customer
transactions can include accessing accounts, paying bills, transferring
funds, etc.

5.5 Technology: In-House or Outsourced?

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The different levels of complexity associated with certain areas
involving security, operations, planning, and monitoring have caused
many national banks to outsource all or parts of their Internet banking
operations. Banks should periodically reassess their sources of
technology support to determine whether a given solution continues to
fit their business plan and is flexible enough to meet anticipated future
needs. Regardless of whether technology services are provided in-
house or through a third-party service provider, national banks need to
have a strong link between their technology provider and their strategic
planning process. This will enable the bank to link new products and
services with the existing technology and product mix.

There are pros and cons to offering technology-based products and

services in house versus contracting with a vendor. Larger national
banks with substantial resources may choose to purchase computer
hardware and operating systems and/or develop the necessary
application software in-house. This option may provide the greatest
flexibility to customize product offerings.

Other banks may choose to purchase a “turnkey” system from a vendor.

In this arrangement the vendor typically provides the hardware,
operating systems, and applications software necessary to enable the
bank to offer the particular product or service to its customers. The
vendor will typically provide the service and maintenance for the
turnkey system. A variation is to outsource the service. Using this
option, national banks contract with a vendor to operate their Internet
banking Web sites at the vendor’s location. This option may be
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especially well suited for banks that do not have the technical expertise
to develop this service in-house. However, such banks need to place
additional emphasis on their due diligence to ensure that security is not
compromised.

Several companies are responding to the developing markets for Web

pages, Internet banking applications, and bill presentment and
payment services.

Although many companies in this market are prosperous and well

managed, some are start-up companies with unproven products,
services, or track records.

National banks need to perform due diligence before selecting a vendor

to provide Internet banking services. They should have a formal service
agreement with the vendor that clearly addresses the duties and
responsibilities of the parties involved. National banks need to monitor
their vendor’s operational performance, financial condition, and
capability to stay current with evolving technologies. National banks
typically fulfill their responsibility to assure their vendors have sound
internal controls by obtaining internal or thirdparty audit reports.

5.6 Issues in Internet Banking

Financial institutions, their card associations, and vendors are working

to develop an Internet payment infrastructure to help make electronic
commerce secure. Many in the banking industry expect significant

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growth in the use of the Internet for the purchase of goods and services
and electronic data interchange. The banking industry also recognizes
that the Internet must be secure to achieve a high level of confidence
with both consumers and businesses.

Sound management of banking products and services, especially

those provided over the Internet, is fundamental to maintaining a high
level of public confidence not only in the individual bank and its brand
name but also in the banking system as a whole. Key components that
will help maintain a high level of public confidence in an open network
environment include:

• Security
• Authentication
• Trust
• Non repudiation
• Privacy
• Availability

Security: Security is an issue in Internet banking systems. The OCC

expects national banks to provide a level of logical and physical
security commensurate with the sensitivity of the information and the
individual bank’s risk tolerance.

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Some national banks allow for direct dial-in access to their systems
over a private network while others provide network access through the
Internet. Although the publicly accessible Internet generally may be
less secure, both types of connections are vulnerable to interception
and alteration. For example, hardware or software “sniffers” can obtain
passwords, account numbers, credit card numbers, etc. without regard
to the means of access. National banks therefore must have a sound
system of internal controls to protect against security breaches for all
forms of electronic access. A sound system of preventive, detective,
and corrective controls will help assure the integrity of the network and
the information it handles. for a discussion of online attacks.

Firewalls are frequently used on Internet banking systems as a security

measure to protect internal systems and should be considered for any
system connected to an outside network. Firewalls are a combination
of hardware and software placed between two networks through which
all traffic must pass, regardless of the direction of flow. They provide a
gateway to guard against unauthorized individuals gaining access to
the bank’s network.

The mere presence of a firewall does not assure logical security and
firewalls are not impenetrable: firewalls must be configured to meet a
specific operating environment and they must be evaluated and
maintained on a regular basis to assure their effectiveness and
efficiency. Individuals who are technically competent must perform the
installation, configuration, evaluation, and maintenance of firewalls.
The specific risks involved may require a broad range of security

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controls. Appendix A contains a more detailed discussion of firewalls
and associated controls.

Authentication: Authentication is another issue in a Internet banking

system. Transactions on the Internet or any other telecommunication
network must be secure to achieve a high level of public confidence. In
cyberspace, as in the physical world, customers, banks, and
merchants need assurances that they will receive the service as
ordered or the merchandise as requested, and that they know the
identity of the person they are dealing with.

Banks typically use symmetric (private key) encryption technology to

secure messages and asymmetric (public/private key) cryptography to
authenticate parties. Asymmetric cryptography employs two keys a
public key and a private key. These two keys are mathematically tied
but one key cannot be deduced from the other. For example, to
authenticate that a message came from the sender, the sender
encrypts the message using their private key. Only the sender knows
the private key. But, once sent, the message can be read only using
the sender’s public key. Since the message can only be read using the
sender’s public key, the receiver knows the message came from the
expected sender.

Internet banking systems should employ a level of encryption that is

appropriate to the level or risk present in the systems. OCC is aware
that stronger levels of encryption may slow or degrade performance
and, accordingly, management must balance security needs with
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performance and cost issues. Thus, a national bank should conduct a
risk assessment in deciding upon its appropriate level of encryption.

The OCC does not mandate a particular strength or type of encryption.

Rather, it expects management to evaluate security risks, review the
cost and benefit of different encryption systems, and decide on an
appropriate level of encryption as a business decision. Management
should be able to explain the supporting analysis for their decision.

A common asymmetric cryptography system is RSA, which uses key

lengths up to 1,024 bits. By using the two forms of cryptography
together, symmetric to protect the message and asymmetric to
authenticate the parties involved, banks can secure the message and
have a high level of confidence in the identity of the parties involved.
See appendix B of this handbook for examples of how this technology
works.
Biometric devices are an advanced form of authentication. These
devices may take the form of a retina scan, finger or thumb print scan,
facial scan, or voice print scan. Use of biometrics is not yet considered
mainstream, but may be used by some banks for authentication.
Examiners should evaluate biometric activities based on
management’s understanding of risks, internal or external reviews, and
the overall performance of these devices.

Trust: Trust is another issue in Internet banking systems. As noted in

the previous discussion, public and private key cryptographic systems
can be used to secure information and authenticate parties in
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transactions in cyberspace. A trusted third party is a necessary part of
the process. That third party is the certificate authority.

A certificate authority is a trusted third party that verifies identities in

cyberspace. Some people think of the certificate authority functioning
like an online notary. The basic concept is that a bank, or other third
party, uses its good name to validate parties in transactions. This is
similar to the historic role banks have played with letters of credit,
where neither the buyer nor seller knew each other but both parties
were known to the bank. Thus the bank uses its good name to facilitate
the transaction, for a fee. “Certification Authority Services,” for more
information on this topic.

Banks also may need a way to validate themselves in cyberspace, as

theft of identity has taken place. perpetrators have copied legitimate
brokerage-firm Web sites, altered addresses for customers to contact
(and send checks), then put the fraudulent Web site back on the
Internet. Except for the post office box and possibly the URL,
everything on the Web site could appear legitimate. Banks will have to
guard against a variety of frauds and scams as banking on the Internet
becomes more prominent. A proper mix of preventive, detective, and
corrective controls can help protect national banks from these pitfalls.
Digital certificates may play an important role in authenticating parties
and thus establishing trust in Internet banking systems.

Nonrepudiation is the undeniable proof of participation by both the

sender and receiver in a transaction. It is the reason public key
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encryption was developed, i.e., to authenticate electronic messages
and prevent denial or repudiation by the sender or receiver.

Although technology has provided an answer to nonrepudiation, state

laws are not uniform in the treatment of electronic authentication and
digital signatures.

The application of state laws to these activities is a new and emerging

area of the law.

Privacy is a consumer issue of increasing importance. National banks

that recognize and respond to privacy issues in a proactive way make
this a positive attribute for the bank and a benefit for its customers.

Public concerns over the proper versus improper accumulation and use
of personal information are likely to increase with the continued growth
of electronic commerce and the Internet. Providers who are sensitive
to these concerns have an advantage over those who do not. For a
more complete discussion of this topic.

Availability is another component in maintaining a high level of public

confidence in a network environment. All of the previous components
are of little value if the network is not available and convenient to
customers. Users of a network expect access to systems 24 hours per
day, seven days a week.

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Among the considerations associated with system availability are
capacity, performance monitoring, redundance, and business
resumption. National banks and their vendors who provide Internet
banking products and services need to make certain they have the
capacity in terms of hardware and software to consistently deliver a
high level of service.

In addition, performance monitoring techniques will provide

management with information such as the volume of traffic, the
duration of transactions, and the amount of time customers must wait
for service. Monitoring capacity, downtime, and performance on a
regular basis will help management assure a high level of availability
for their Internet banking system.

It is also important to evaluate network vulnerabilities to prevent

outages due to component failures. An entire network can become
inoperable when a single hardware component or software module
malfunctions. Often national banks and their vendors will employ
redundant hardware in critical areas or have the ability to switch to
alternate processing locations. The latter is often referred to as
contingency planning.

5.7 Technologies enabling Internet Banking

The purpose of computer networking is sharing of computing resources

and data across the whole organization and the outside world.

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Computer Networks can be primarily divided into two categories based
on speed of data transfers and geographical reach.

A Local area network (LAN) connects many servers and workstations

within a small geographical area, such as a floor or a building. The data
transfer rates here are very high. They commonly use broadcast mode
of data transfer.

The Wide Area Network (WAN), on the other hand, is designed to carry
data over great distances and are generally point-to-point. Connectivity
in WAN set-up is provided by using dial-up modems on the Public
Switched Telephone Network (PSTN) or leased lines. The different
topologies, technologies and data communication protocols have
different implications on safety and security of services.

To standardize on communications between systems, the International

Organization of Standards developed the OSI model (the Open System
Interconnection Reference Model) in 1977. The OSI breaks up the
communication process into 7 layers and describe the functions and
interfaces of each layer. The important services provided by some of
the layers are mentioned below. It is necessary to have a good
understanding of these layers for developing applications and for
deploying firewalls (described later).

1. Application Layer Network Management, File Transfer Protocol,

Information validation, Application-level access security checking.
2. Session Layer: establishing, managing and terminating
connections (sessions) between applications

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 3. Transport Layer: Reliable transparent transfer of data between
end points, end to end recovery & flow control.
4. Network Layer: Routing, switching, traffic monitoring and
congestion control, control of network connections, logical
channels and data flow.
5. Data Link Layer: Reliable transfer of data across physical link and
control of flow of data from one machine to another.

6. IT SECURITY INFRASTRUCTURE

The Bank has an IT security policy in place which can be modified

suitably to cater to the requirements of CBS. Considering its IT Security
assets and the vulnerabilities associated with Internet Banking, the
Bank has designed suitable security architecture. To Secure the
Network, Communications, Systems and Application software, Data
bases, Data, Information etc. and ensure the availability of resources

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to authorised users without any disruption or degradation, the bank
plans to put robust security framework as per the Information Security
Policy approved by the Bank. The Bank wants to utilise the services of
Information Security Auditor to audit our Information Security
framework for Internet Banking/ Network infrastructure and other
integrated computer applications implemented by security
integrator/implementer as per Information Security Policy adopted by
the Bank which may be modified to the requirements of Core Banking,
if needed.

7. The entry of Indian banks into Net Banking

Internet banking, both as a medium of delivery of banking services and

as a strategic tool for business development, has gained wide
acceptance internationally and is fast catching up in India with more
and more banks entering the fray. India can be said to be on the
threshold of a major banking revolution with net banking having already
been unveiled. A recent questionnaire to which 46 banks responded,
has revealed that at present, 11 banks in India are providing Internet
banking services at different levels, 22 banks propose to offer Internet
banking in near future while the remaining 13 banks have no immediate
plans to offer such facility.

At present, the total Internet users in the country are estimated at 9

lakh. However, this is expected to grow exponentially to 90 lakh by
2003. Only about 1% of Internet users did banking online in 1998. This

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increased to 16.7% in March 2000* The growth potential is, therefore,
immense. Further incentives provided by banks would dissuade
customers from visiting physical branches, and thus get ‘hooked’ to the
convenience of arm-chair banking. The facility of accessing their
accounts from anywhere in the world by using a home computer with
Internet connection, is particularly fascinating to NonResident Indians
and High Networth Individuals having multiple bank accounts.

Costs of banking service through the Internet form a fraction of costs

through conventional methods. Rough estimates assume teller cost at
Re.1 per transaction, ATM transaction cost at 45 paise, phone banking
at 35 paise, debit cards at 20 paise and Internet banking at 10 paise
per transaction. The cost-conscious banks in the country have
therefore actively considered use of the Internet as a channel for
providing services. Fully computerized banks, with better management
of their customer base are in a stronger position to cross-sell their
products through this channel.
*Source : India Research May 29 , 2002 , Kotak Securities.

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8. Architecture and Security Requirements

8.1. Internet Architecture

Figure shows the basic architecture of an Internet electronic banking

system. There are two participating entities: the user and the bank.

Figure : Internet banking structure.

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When the user has a PC with a network connection, the most common
way to communicate with the bank is via a Web browser, hence
banking through the World Wide Web or Web banking. The standard
protocol for communication between the browser and the bankers Web
server is then used. It is often referred to as HTTPS, which is the HTTP
protocol on top of a security layer. HTTP is the communication
language of the WWW.
A bank will mostly require more security functionality than an ordinary
browser is able to provide. This extra security functionality included
strong cryptography.
A dedicated standalone client/server application is therefore an
alternative way to realize communication between the user and the
bank. The same protocol as used by the Web browser/server can be
used here to provide security. However, the bank must provide the user
with the necessary software, as the electronic banking system does not
rely on the browser that is already installed on the users computer.
To avoid the problem of distribution and installation of extra software
on the users computer, banks often deploy an intermediate solution.
An ordinary browser is used at the client side, but to increase the
functionality, a Java applet is downloaded from the banks website. This
applet is a relatively small piece of software code that runs within the
users browser, and that will provide extra security functionality. A big
advantage of this approach is that the applet technology allows the
bank to easily maintain and update the client software. Clients will
automatically download and use new versions of the software. Banks
do not need to distribute new software in an old-fashioned way.

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8.2. WAP Architecture

Figure shows the basic architecture of an electronic banking system

using the Wireless Application Protocol (WAP). There are again two
participating entities: the user and the bank.

Figure 2: WAP banking structure.

When the user has a WAP-enabled mobile phone, he can connect to
the bank via a wireless link. WAP is essentially a wireless equivalent
to the Internet protocol stack (TCP/IP). To connect the wireless domain
to the Internet, a WAP proxy or gateway is needed to translate the
protocols used in WAP to the protocols used on the Internet. For
example, the WAP proxy encodes/decodes the content to reduce the
size of the data that has to be sent over the wireless link.
Just as for the WWW, the user interface to the electronic banking
application is via a mini browser in the mobile phone. The
communication between the mobile phone and the WAP proxy is
secured with a protocol that is very similar to the one used in the
Internet case.
A major difference in a WAP banking system is that there is no endto-
end connection between the client and the banks (Web) server. Banks
should therefore not rely on the clients default (and untrusted) gateway,
but have their own trusted and secure gateway within a secure
environment together with their server (WAP is currently often

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deployed over the bearer GSM Global System for Mobile
communications. Switching from the gateway of the clients provider, to
the banks gateway can then for example be done by sending a Short
Message Service (SMS) message).

8.3. Security Requirements

The following general security requirements also apply to electronic

banking systems:
- Confidentiality ensures that only authorized entities have access
to the content of the exchanged information. E.g., an eavesdropper
should not be able to find out what transactions a particular user is
executing.
- Entity authentication: users should be sure that they are
communicating with the real bank, before sending sensitive information
to it; banks should know the identity of a user before processing its
transactions.
- Data authentication i.e., data origin authentication and data
integrity allows one to detect manipulation and replay of data, by
unauthorized parties; data manipulation includes insertion, deletion
and substitution. E.g., users and the bank want to be sure that the
information they receive is genuine and fresh (not replayed).
- Non-repudiation prevents an entity from denying previous
commitments or actions. E.g., a bank should be able to prove to a third

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party that a user performed a certain transaction, in case that user
denies having performed it.

9. Literature Review

Suornata, Mattila and Munnukka (2005), Al-Sabbagh and Molla (2004),

Al-Ashban and Burney (2001)all explore the various inhibitors and
drivers of electronic banking adoption. They believe there are relatively
few empirical analyses of the impact of electronic banking service
technology on customers. Research, that has investigated the product
characteristics of innovation, has generally endorsed evaluating the
innovation along the product characteristics that involve five constructs:
relative advantage, compatibility, complexity, trialability and
observability. The concept of perceived risk is often included as
augmented by Bauer (1960). Particularly in banking services the
perceived risk associated with the financial product itself as well as with
electronic delivery channel is higher than in basic consumer goods,
and hence the increase in the importance of this attribute of innovation
(Harrison, 2002). Ensuring security and confidentiality are the
fundamental prerequisites before any banking activity involving
sensitive information can take place (Jayawardhena and Foley, 2000).

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Relative advantage, compatibility, trialability and observability are
positively related to adoption of an innovation and the remaining two,
complexity and perceived risk, negatively related (Rogers, 1995).
Gatignon and Robertson (1985) made an interesting finding on the
basis of their review of adoption research. Within adoption framework
technology based innovation, where no prior data of a totally new
product or service concept exists, some conclusions may be drawn
from adoption experiences of other products within the product
category. Similarly, Hirschman (1980) has suggested that prior
experience with a product category (e.g., Internet Banking) may lead
to greater acceptability of new product (e.g., mobile banking). The
influence of these innovation attributes on the adoption of mobile
banking services are detailed under empirical implications.

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 10. Research

10.1. Research Objectives

 To research the change in electronic banking services

technology environment in the 21st century.
 To understand the concept of electronic banking with relation
to internet and mobile .
 To identify the various barriers like Access problems,
Dissatisfaction and inability of service providers in the
adoption of Internet and Mobile Banking Service.
 To suggest ways to improve the performance of models at
different electronic banking services technology .
 To analyze E- banking practices and its potential in India.

10.2. Research Design

The data have been grouped into two main categories - primary and
secondary data.

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The secondary data have been compiled from newspaper, journals,
magazines, and web links and also research papers.
The primary data have been collected through an exploratory research
– Questionnaire with user and non user of internet and mobile banking
basically Businessmen, servicemen, professionals, students etc.

10.3. Research Methodology

10.3.1. Type of Research

For the present research, the researcher has based his theme on
Exploratory Research. The major emphasis of Exploratory Research
is on the discovery of ideas. Through Exploration, the researcher
develops concepts more clearly, establish priorities, develop
operational definitions, and improve the final research design. This
research is both quantitative and qualitative. This research is based
on the data collected through “Questionnaire” with Internet and Mobile
banking User and Non-user.

10.3.2. Sources of data

Data has been collected from various sources; there is a combination

of both primary and secondary data that has been used in this research.

(a) Primary Data

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 The data for the research is extracted from a serves conducted in
Bangalore in India. A total of 100 respondents participated in the
research of Internet Banking where as 100 replied in the research of
Mobile banking. The demographic profile of respondents in each
research is shown in Table and chart. The data collected through this
method was adequate enough to make projections in the research.
Approximately 90% of the Internet banking respondents were
graduates whilst only 40% of Mobile banking respondents were in this
category. The banking needs of Internet banking respondents were
shown to be greater than for the Mobile banking respondents, perhaps
a reflection of the greater affluence of this group.

Table : Demographic Profile of Respondents

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 Male

Female

Male and Female Profile of Respondents

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The analysis proceeded first by identifying the most important and least
important factors that respondents perceived as affecting their Internet
and Mobile banking usage. Then a comparative analysis is performed.
To facilitate the comparison, the point scale is normalized to
Percentage. In addition, to improve accuracy of comparison, only the
constructs that are present in both studies are included in the analysis.
Relative advantage, compatibility, trial ability, and risk has been
measured in each research with multiple items for each construct. The
wording and number of items, however, differed across the studies,
and thus only the items that are present in both studies are included in
the analysis.

(a) Secondary Data

• Articles have been sourced from magazines and journals

dealing with current issues in Internet and mobile banking
adoption.
• Internet & Text books related to Internet and mobile
banking & Research Methodology have been a major
secondary source for the extraction of the expert’s opinion.

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 11. Factors that affect Internet and Mobile banking adoption

In order to identify the top and least five perceived items in affecting
the adoption intention of Internet and Mobile banking, we computed
the Percentage score of the respondents? replies. Table provides the
result.

Table : Most and Least Perceived Factors in Internet and Mobile

Banking Adoption

Internet Banking Mobile Banking

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(Percentage of using Internet banking
population )
Items % Items
Faster Internet access speed is 77
important for Internet banking.
Internet banking makes it 61
easier to do banking
Internet banking is a 35
convenient way to manage my
finances
Internet banking is compatible 58
with my lifestyle
Using Internet banking fits into 47
my working style
Information concerning my 35
Internet banking transactions
can be tampered with.
Information concerning my 30
Internet banking transactions
will be known to others.
My decision to adopt Internet 30
banking is influenced by my
family
Using Internet banking requires 62
a lot of mental effort
Internet banking is a difficult 57
way to conduct banking
transactions
-
(Percentage of using Mobile banking
population ))
%
I would use Mobile banking if I 81
could use it on a trial basis first
to see what it can offer
I would use Mobile banking if I 76
could see a trial demo first
I would use Mobile banking if I 75
could test Mobile banking first
I would use or be more likely to 45
use Mobile banking if Mobile
banking was compatible with my
lifestyle
I would use or be more likely to 35
use Mobile banking if using my
Mobile to conduct banking
transactions fits into my working
style
Mobile banking is a risky mode 54
of banking to use
Mobile banking would allow me 44
to manage my finances more
efficiently
Mobile banking would be 60
complex to use
I would use Mobile banking if 71
Mobile banking increased my
status
Mobile banking would require a 63
lot of mental effort
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For Internet banking

1. Faster Internet access speed is important for Internet banking?

Faster Internet access speed is

important for Internet banking.

Yes

No

2. Internet banking makes it easier to do banking?

Internet banking makes it easier to do

banking

Yes

No

3. Internet banking is a convenient way to manage my finances?

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 Internet banking is a convenient way
to manage my finances

Yes

No

4. Internet banking is compatible with my lifestyle?

Internet banking is compatible with my

lifestyle

Yes

No

5. Using Internet banking fits into my working style?

Using Internet banking fits into my

working style

Yes

No

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6. Information concerning my Internet banking transactions can be
tampered with?

Information concerning my Internet

banking transactions can be tampered
with.

Yes

No

7. Information concerning my Internet banking transactions will be

known to others?

Information concerning my Internet

banking transactions will be known to
others.

Yes

No

8. My decision to adopt Internet banking is influenced by my family?

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 My decision to adopt Internet banking
is influenced by my family

Yes

No

9. Using Internet banking requires a lot of mental effort?

Using Internet banking requires a lot of
mental effort

Yes

No

10. Internet banking is a difficult way to conduct banking transactions?

Internet banking is a difficult way to

conduct banking transactions

Yes

No

For Mobile Banking

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1. I would use Mobile banking if I could use it on a trial basis first to
see what it can offer?

I would use Mobile banking if I could

use it on a trial basis first to see what it
can offer

Yes

No

2. I would use Mobile banking if I could see a trial demo first?

I would use Mobile banking if I could
see a trial demo first

Yes

No

3. I would use Mobile banking if I could test Mobile banking first?

I would use Mobile banking if I could test
Mobile banking first

Yes

No

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4. I would use or be more likely to use Mobile banking if Mobile
banking was compatible with my lifestyle?
I would use or be more likely to use
Mobile banking if Mobile banking was
compatible with my lifestyle

Yes

No

5. I would use or be more likely to use Mobile banking if using my

Mobile to conduct banking transactions fits into my working style?
I would use or be more likely to use
Mobile banking if using my Mobile to
conduct banking transactions fits into
my working style

Yes

No

6. Mobile banking is a risky mode of banking to use?

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 Mobile banking is a risky mode of
banking to use

Yes

No

7. Mobile banking would allow me to manage my finances more

efficiently?
Mobile banking would allow me to
manage my finances more efficiently

Yes

No

8. Mobile banking would be complex to use?

Mobile banking would be complex to
use

Yes

No

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9. I would use Mobile banking if Mobile banking increased my status?
I would use Mobile banking if Mobile
banking increased my status

Yes

No

10. Mobile banking would require a lot of mental effort?

Mobile banking would require a lot of
mental effort

Yes

No

The findings in table indicate that perceived behavioral control

(technology support), relative advantage and compatibility are the
major factors that appear to affect adoption of Internet Banking. On the
other hand, adoption of Mobile banking appears to be influenced by its
trialibility and compatibility. Regarding the least perceived items that
affect Internet banking adoption, these seem to be related to
complexity, subjective norm and perceived risk. Likewise, items related
to the complexity, relative advantage and perceived risk of Mobile
banking are perceived as factors least affecting its adoption. This
exploratory result shows that while there are some common factors

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that affect the adoption of Mobile banking and Internet banking, there
are also differences. Given this context we then set out to compare
differences in perceptions and adoption intentions. The perceptions to
be compared are the ones that were found to be an influence on
Internet banking, Mobile banking, or both.

12. Comparison of Internet and Mobile banking

Because of the demographic differences of the Internet and Mobile

users; the time differences in the launch of Internet and Mobile banking
services, the differences in the technology, and users experience with
these application, it is tenable to expect differences in the adoption
intention and the perception of the determinants of adoption. Table
shows that there are statistically significant differences in the
Percentage scores of the intention to adopt Mobile and Internet
banking and the factors that affect such intention.

Table : Results of percentage comparison

Internet Mobile
Banking Banking
Relative Advantage 61% 52%
Compatibility 51% 46%
Trial ability 44% 59%
Risk 77% 64%

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 Complexity 34% 49%
Adoption Intent 58% 40%

Chat: Results of percentage comparison

90%
80%
70%
60%
50% Internet Banking
40% Mobile Banking
30%
20%
10%
0%
Relative CompatibilityTrial ability Risk Complexity Adoption
Advantage Intent

Factor 1: Access Problems

It is the most important factor, Accessing Problem statements such as

`Possibility of error is higher than Internet Banking , Using key code list
with mobile phone is complicated and Mobile phone is an unpractical
device for banking emerge with good positive correlations. The great
influence on the adopters not to have mobile banking services.

Factor 2: Dissatisfaction

Four variables load on to this factor. `Dissatisfaction' is the second

significant factor, which accounts of the variations. The statements
`Data transmission is very slow , Mobile banking services are risky and
not secure, Mobile banking services are not enough versatile and Its
use has been a disappointment by others signify that the nonadopters
have seen the dissatisfaction among the users of mobile banking
services.

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Factor 3: Inability to Provide Knowledge

This is another crucial factor, which reflects of variations. The

statements Insufficient guidance is there for using mobile banking and
Its use is complicated reflect that consumer behavior tends to be based
on how a given problem is to be solved. In this research, the non-
adopters of mobile banking are afraid of being the usage of new
technology due to the complications in the systems and, moreover, no
proper guidance is provided to them.
13. Discussion and Implication

This research indicates that both the adoption intent and perceptions
of Internet banking amongst Internet users differ markedly from Mobile
phone banking amongst Mobile phone users. This implies that success
with one channel cannot be automatically translated into another
channel, as the demographic profile and social context for each
innovation differs. Therefore there is a need for providers of these
services to take the adoption context into account. As indicted in figure,
there are far more Mobile phone users than the Internet users in India.
In addition the demographic profile of Mobile phone users cut across
economic and social groupings. It might then be argued that Mobile
phone banking is a channel that can spread banking services to the
previously unbanked portion of the society. However, the slow uptake
of Mobile phone banking defies this logic. The results of this analysis
furthermore confirm the lukewarm response to Mobile phone banking,
especially when compared against Internet banking.

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Differing perceptions and intentions to adopt the innovations may be
as a result of the social context in which the Internet and Mobile phone
respectively are used, and relatedly the characteristics of the typical
user of each. There is support for this assertion from diffusion of
innovations theory, where it is noted that the social system in which the
innovation exists influences the process of adoption. According to the
demographic findings, while Internet banking users fit the archetypal
Internet user - young, educated and/or middle and high income, Mobile
phone users cut across different age, educational and economic
groupings. Many Mobile phone users use the Mobile phone as
primarily a communicative device, and thus this perception needs to
firstly be addressed. New generation Mobile phones with added
functionality such as web access are changing this, and will continue
to do so as they begin to diffuse more widely. The average Mobile
phone user earns a smaller income than a typical Internet user, which
means many don't qualify for some banking products such as cheque
accounts, credit cards, and mortgages. The primary need is for a
savings account, and the ability to deposit and withdraw funds. Thus,
Banks that simply duplicate services available on the Internet to Mobile
phone banking will not add much value. Those services might suit the
upper income Internet user, but not the typical Mobile phone user.

The result also shows that Mobile phone banking users need more time
to try the technology before accepting it. Mobile phone banking in India
as it stands now may be suitable to attract current Internet banking
users, who are looking for a convenient channel, compatible with a
busy lifestyle, in which there is little time to be visiting bank halls or

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ATM machines. However to distribute banking services to the less
affluent part of the society, banks need to offer more time to try the
service. They need to put in place strategies that showcase this
application and give potential users hands on experience.

14. Conclusion and Recommendations

The banks providing internet and mobile banking services to their

customers, wishing to increase their customer share by removing all
the above-discussed hurdles in the way of adoption of internet and
mobile banking services, may find relevant information from the
findings. The factors appear to be defined by a mix of items that are
reflections of problems in supplier side of the services and functionality
of a internet and mobile phone as delivery medium for banking services
from the customer side. As the Internet banking is still in its growing
stage, mobile banking has emerged as the next advance way of doing
banking. Since the pace of technologyadvancement is not matching
with the adoption rate, problems will arise if this widened gap is not
going to be filled up with suitable measures. This negative effect of
accelerating pace of development is manifested in services that are
launched at an early stage of development process due to
competitiveness and cost pressures. As a consequence, competence
of service quality, does not reach an adequate level; consumers feel
that service-providers are not responding to their needs. An example

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of that is the support for the item services are not enough versatile. In
addition, emphasizing technology in service offering may result in
ignoring certain fundamental prerequisites required for acceptance.
Technology is an enabler a way to build up a new delivery channel, but
communicating only technological features other elements of services
such as service content. Technology-based electronic delivery medium
does not constitute service offering and creates value alone, but
service content has to function properly and the way of usage has to
be known. Another main impediment seems to be functionality of a
internet and mobile phone as delivery medium for banking services.
Mobile phone, obviously is not designed for this type of services: For
instance, key board is relatively small, which makes it more prone for
correcting errors in keeping the figures.

Results indicate that consumers get disheartened by the complicated

functions while accessing the internet and mobile banking services
which lead them to the dissatisfaction level as no proper guidance is to
be provided to them. The fact is that the factor risk and security are the
most considerable significant factors for banking service adoption, and
particularly in relation to `new' electronic environment. The result of
perceived risk on the adoption of internet and mobile banking services
appears to indicate that consumers are serious about the risk of
conducting banking via a wireless channel, measured in terms of
overall security and trustworthiness of the services offered.

On the basis of the findings, we suggest that service providers be

aware of the problems of their customer base using mobile services.

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This kind of data has its value when designing new services and
products or implementing market communications. In addition,
information gained from experience with Internet banking and other
modes of electronic banking cannot be straightforward implemented to
mobile banking service customers. Given the increased competition
and pressures to cut expenses, financial institutions have to be able to
make informed decisions on resource allocation. Thus, research of this
kind is of critical importance.
It should be noted that this research examine internet and mobile
banking only in a India, which can be regarded as one of the most
advanced regions in new technology adoption and where technological
advancement has been extended in banking services too. Research
perspective is focused on only consumers and on a certain limited
number of non-adopters characteristics. In addition to extending our
understanding of consumer behavior in internet and mobile banking
context, the research presented also has practical implications for
managers and policymakers who have to make strategies and decision
in order to cater to this hitherto unexplored new technologies-based
service market. Even though the sky of internet and mobile banking is
now going to be blue and clear, the thunderclouds may arise if the
barriers pointed out in this research are not thoroughly investigated.

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Appendix A – Questionnaire

Name:

Address:

SECTION A (INTERNET BANKING)

1. Faster Internet access speed is important for me to do Internet

banking?

o Yes
o No

2. Internet banking makes it easier for me to do banking?

o Yes
o No

3. Internet banking is a convenient way to manage my finances?

o Yes
o No

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 4. Internet banking is compatible with my lifestyle?

o Yes
o No

5. Using Internet banking fits into my working style?

o Yes
o No

6. Information concerning my Internet banking transactions can be

tampered with?

o Yes
o No

7. Information concerning my Internet banking transactions will be

known to others?

o Yes
o No

8. My decision to adopt Internet banking is influenced by my family?

o Yes
o No

9. Using Internet banking requires a lot of mental effort?

o Yes
o No

10. Internet banking is a difficult way to conduct banking

transactions?

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 o Yes
o No

SECTION B (MOBILE BANKING)

1. I would use Mobile banking if I could use it on a trial basis

first to see what it can offer?

o Yes
o No

2. I would use Mobile banking if I could see a trial demo first?

o Yes
o No

3. I would use Mobile banking if I could test Mobile banking first?

o Yes
o No

4. I would use or be more likely to use Mobile banking if Mobile

banking was compatible with my lifestyle?

o Yes
o No

5. I would use or be more likely to use Mobile banking if using my

Mobile to conduct banking transactions fits into my working style?

o Yes
o No

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 6. Mobile banking is a risky mode of banking to use?

o Yes
o No

7. Mobile banking would allow me to manage my finances more

efficiently?

o Yes
o No

8. Mobile banking would be complex to use?

o Yes
o No

9. I would use Mobile banking if Mobile banking increased my

status?

o Yes
o No

10. Mobile banking would require a lot of mental effort?

o Yes
o No

If you wish to add any other remark, please do so

………………………………………………………………………………
………………………………………………………………………………
………………………………………………………………………………
………………………………………………

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 Thank you for your valuable time!

Conducted by: Prem Prakash

4th Sem. MBA student
MPBIM College, Bangalore

BIBLIOGRAPHY

World Wide Web

The Internet, was used to collect information on Dotcom industry. In
which the following websites were employed to be used:

www.businessweek.com
www.Icicibank.com
www.hdfcbank.com
www.utibank.com www.google.com
www.interbrand.com

Magazines & Dailies

Business magazines & dailies in Bangalore as well as from overseas:

Business Week
Business World
Computer World
The Economist
The Economic Times
Far Eastern Economic Review
Strategic Management

Books & Journals

Journal of Banking and System

ICFAI Journal of System

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