CUSTOMER PERCEPTION, SATISFACTION AND ITS IMPACT ON

CUSTOMER PERCEPTION, SATISFACTION AND ITS IMPACT ON

ELECTRONIC BANKING PERCEIVED FROM TAMILNADU Dr. L. Leo Franklin

Assistant Professor

PG & Research Department of Commerce

JJ College of Arts and Science (Autonomous)

Pudukkottai 622422

[email protected]

INTRODUCTION

Banks operate in a challenging world of rapid economical change, technology-

savvy customers, and increasing customer expectations. Bank has come a long way from

the time of ledger cards and other manual filing systems. Most of the banks today have

electronic systems to handle their daily voluminous tasks of information retrieval, storage

and processing. Around the world, Electronic banking services whether delivered online

or through other mechanisms, have spread quickly in recent years. Banking opportunities

are local, global and immediate in Electronic banking. There has been tremendous

increase in technology and banking opportunities.

Banking has traditionally been a brick and mortar business that required face to

face interaction. Customers were required to visit a bank's physical location in order to

complete transactions such as making deposits. Withdrawing cash or applying for loans.

Competition and the constant changes in technology and lifestyle have changed the face

of banking. Nowadays banks are seeking alternative ways to provide and differentiate

amongst their varied service. With the number of computer increasing every year, the

electronic delivery of banking service is becoming the ideal Way for the banks to meet

their client's expectations bolting Electronic banking technology reduces customer„s

dependence on personal interaction with bank staff. E- Banking processes, like direct

deposit, automatic withdrawals and online banking enable bank customers to obtain

services from their financial service providers without entering the bank. Technology has

introduced new ways of delivering banking to the customer, such as ATM, Internet

banking etc. Hence banks have found themselves at the forefront of technology adoption

for the past three decades. The banking industry is constantly responding to changes in

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Volome 8, Issue 9, September 2019

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customer preferences and needs due to increasing competition from non-banks, changes

in demographic and social trends, information technology advances, channel strategies,

and government deregulations of the financial service sector. Success or failure of many

retail banks is dependent upon the capabilities of management to anticipate and react to

such changes in the financial market place.

The evolution of Electronic banking or Virtual banking, such as Internet banking

from E-Commerce, has altered the nature of personal-customer banking relationships and

has many advantages over traditional banking delivery channels. This includes an

increased customer base, cost savings, mass customization and product innovation,

marketing and communications, development of non –core businesses and the offering of

services regardless of geographic area and time. There is faster delivery of information

from the customer and service provider, thus differentiating Internet enabled Electronic

banking system from the traditional banking operation. This transfer process makes

money to be carried in information storage medium such as cheques, credit cards, and

electronic means than its pure cash form. Electronic banking has thus become important

channel to sell products and services; leading to a paradigm shift in marketing practices,

resulting in high performance in the banking industry.

E-Banking nowadays is the common trend here in our country. No more falling in

line in banks, no more waiting for hours in the bank, no more days and Weeks of waiting.

All can be done with one card, one gadget. It‟s easy, it works and most importantly,

people like it. But still, some people are having a hard time using this kind of technology,

mostly people who are used to do things the old traditional way. With the use of

advertising, people are now motivated to E. Banking because, again it eliminates the

hassle encountered when using the old process of banking. Electronic banking has moved

real banking behavior closer to neoclassical economic theories of market functioning,

Due to the absolute transparency of the market, clients (both business at well as retail)

can compare the services of various banks more easily. For instance, on the internet,

competitors are only one click away. If clients are not happy with the products, prices or

services offered by a particular bank, they are able to change their barking partner much

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more easily than in the physical or real bank-client relationship. E-Banking has the

potential to transform the banking business as it significantly lowers transaction and

delivery costs.

To cope with the pressures of growing competition, Indian commercial banks have

adopted several initiatives and E-Banking is one of them. The competition has been

especially tough for the public sector banks (PSBs), as the newly established private

sector and foreign banks have already sharpened their competitive edge. Some of the

proactive PSBs have been striving hard to make their Structures flexible enough to

accommodate technological changes. Adoption of technology has facilitated alternative

channels for delivery within the PSBs, and employs a better skilled workforce.

The term Virtual banking that has come to be associated with electronic delivery of

services basically means that customer is not interacting with the bank‟s staff across the

counter. Less and less customers are now visiting the physical branches and that the

frequency of their visits is coming down significantly. More and more customers are now

using electronic delivery channels.

STATEMENT OF THE PROBLEM In the banking industry, Information and Communication Technology have

brought about a lot of changes. It has been in the form of E-Banking, which is now

replacing the traditional banking practice. The study focuses especially on E - Banking

and the extent to which this channel in particular might replace the traditional network of

physical branches.

E-Banking has a lot of benefits which add value to customers‟ satisfaction in terms

of better quality of service offerings and at the same time enable the banks gain more

competitive advantage over other competitors. This study therefore, examines, if

customer„s adoption of Electronic banking is influenced by the quality of E-banking

services provided by banks and the demographic characteristics of respondents. The

study also focuses on the various benefits of Electronic banking as perceived by the

customers.

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The future of web-based E-Banking in Tamilnadu appears bright but consumers

face a number of barriers to successful E-Banking, including less reliable

telecommunications infrastructure and power supply, less access to online payment

mechanisms, and relatively high costs for personal computers and internet access.

This research aims to understand and explain customers continued intention to use E

banking. There are some associated risks identified in the study that seem to hinder the

success of E-Banking services and thus constitute major concern to both banks and its

customers. This study therefore, examines, what are the major reasons for the reluctance

in completely adopting virtual banking channels for banking transaction by customers.

This study also seeks to determine which gender and age group has the greatest tendency

to use Electronic banking since different age groups reflect differences in mix and types

of banking services used by the respondents. This research would also like to determine if

education and Information technology experience level plays a significant part in

differentiating respondents who are Electronic banking user and those who are not. It

would also like to determine whether more educated respondents would likely be

Electronic banking users. Lastly, it seeks to determine which income group would most

likely to be Electronic banking users. The demographic variables include age, gender,

educational qualification, information technology experience, employment and income.

Despite increasing use of E-Banking technologies, majority of bank customers still

consider bank location as the most important factor in choosing their primary financial

institution. In addition, the number of bank branches has increased considerably in recent

years. Why is bank location still important to customers? This study also investigated the

importance of antecedents of customer loyalty such as trust, service quality and overall

satisfaction. Satisfaction and trust were identified as important antecedents of loyalty.

Additionally the role of customer characteristic (gender, age, perceived risk, benefits and

technophobia) was supported by data.

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SCOPE OF THE STUDY

Being in a fiercely competitive industry, the ability of banks to differentiate themselves

on the basis of price is limited. Technology has introduced new ways of delivering

banking to the customer, Such as ATM and Internet Banking. It‟s imperative for banks to

align their strategies in response to changing customer‟s needs and developments in

technology. The new paradigm, which is the customer shift from traditional branch

banking to more Electronic banking delivery channels, was the motivation for studying

the bank customers and their behavior.

The E-Banking channels also known as virtual banking channels includes ATM, Internet

banking, Mobile banking, Credit card and Debit cards for the purpose of this research

work. In spite of the rapid introduction of Electronic banking in banks and their benefits

majority of the customers are still-reluctant in adopting most of the E-Banking channels.

This research intends to identify the factors affecting adoption of banking channels,

reasons for reluctance in using E Banking, perceived benefits and demerits as well as

security issues related to Electronic banking channels.

This research work was confined to customers of four banks, i.e. two public sector banks

namely State Bank of India (SBI) and Punjab National Bank (PNB) and two private

sector banks namely South Indian Bank (SIB) and Federal bank who are residing in

Pudukkottai district of TamilNadu.

OBJECTIVES OF THE STUDY

Specifically, the main objectives of this research are:

Electronic

banking in TamilNadu.

e the impact of Electronic banking channels on In-branch banking.

by bank

customers.

-Banking scenario concerned with ATM, Internet banking,

Mobile banking and Credit Cards in TamilNadu.

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HYPOTHESIS

To accomplish the objectives of the study following hypothesis have been

developed:

Null Hypothesis

The Electronic Banking channels have no significant impact on In- Branch

Banking;

There is no significant impact of service quality on customer satisfaction towards

Electronic banking channels

There is no positive impact of customer satisfaction on customer loyalty towards


Alternative Hypothesis

The Electronic Banking channels have significant impact on in- Branch Banking;

There is significant impact of quality on customer satisfaction towards Electronic

banking channels.

There is positive impact of customer satisfaction on customer loyalty towards


RESEARCH METHODOLOGY

Research design

The research study is descriptive in nature. While this article mainly focuses on analyzing

quantitative data, it also utilizes qualitative data. This study was conducted as a survey

using questionnaire that examines customer‟s level of adoption of Electronic banking

channels.

Sampling design

Sampling design is a definite plan for obtaining a sample from sampling

frame/population. Purposive sampling method sampling was used in the conduct of this

research study; four banks were selected from the total of 21 Public sector banks and 21

private sector banks in operation in TamilNadu as at the time of carrying out this

research. Two banks were selected from public and private sector banks each. The

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respondents were further selected from these public sector banks and private sector

banks. Respondents were active banking customers, implying those who had a bank

account for at least three months with the primary bank and had done business with the

primary bank in the past year at the time of survey.

Sample size

The data were collected from 100 respondents. A total of 50 respondents were chosen

from Public Sector Bank‟s State Bank of India and Punjab National Bank. A total of 50

customers were chosen from Private Sector Bank‟s South Indian bank and Federal bank

on 50:50 basis.

Sources of data

Pudukkottai

district using a structured questionnaire.

g sources:

Available websites in the field, Magazines, Books, Journals, Published sources

Data collection tools

The survey instrument used in the study was a pre-tested structured questionnaire based

on literature review and objectives of the study. The Questionnaire is comprised of open

ended and Likert type of questions. The Likert type questions have a five point scale

(indicating SA = strongly agree and SD = strongly disagree). The questionnaire was

divided into two sections as follows: Section A: personal details or demographic

characteristics of respondents in Pudukkottai district intended to obtain personal

background of the respondents, information regarding their age, income, and education.

The second section of the questionnaire collects necessary information as per the

objectives of the study. The instrument contained 13 questions and was administered to

about 100 respondents.

Study variables

The decision to use Electronic banking is hypothesized to be a function of the six

variables (measured on a five-point Likert-type scale) and demographic characteristics.

The variables include service quality, security, perceived benefits, perceived benefits,

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technophobia and loyalty. The demographic variables include age, gender, educational

qualification, information, technology experience, occupation and income. The dependent

variable, E-Banking, measures whether an individual is an electronic banking or non-

electronic banking user. The dependent variable is based on the questions asked in the

questionnaire. Demographic characteristics such as age, gender, education, and income

are hypothesized to influence the respondent‟s decision to use Electronic banking.

Reference period

The study was conducted in Pudukkottai district during the period of three months from

June 2019 to August 2019.

LIMITATIONS OF THE STUDY

The following limitations were observed during the research work:

1. Geographical

The study was limited to 100 customers of only 4 banks in Pudukkottai, Tamilnadu.

Therefore there may have some deviations while generalizing the research results.

2. Industry

The size and the selection of the sample for the quantitative research also reflect time

restrictions and limited financial resources. There were many limitations inherent in the

study design. The sample was limited to customers in the Pudukkottai district; different

results may have been obtained from customers in other districts. The small sample size

also represents a limitation.

Literature review

Ozuru et al. (2010), “The importance of electronic payment system in any country can

never be over emphasized, due to the dramatic transformation in technological

advancements that is being experienced by the global financial industry”. They further

argued that this new technological development may result to digital money replacing

fiduciary currency in some developed countries, for instance, E-money has become legal

tender in Singapore since 2008; while the contrast is the situation in many African

countries, which are still cash based.

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(Kamel. 2005; Masocha et al. 2011) It is therefore no doubt that E-Banking will

definitely overwhelm traditional banking in the near future: since more developing

nations seem to direct their focus on building up their infrastructure with specific

attention on e-banking, ecommerce and E-learning.

Schiffman & Kanuk, 2009. The framework for exploring consumer acceptance of new

products is drawn from the area of research known as the diffusion of innovations. The

diffusion process is concerned with low innovations spread, that is, how they are

assimilated within a market.

Results and Discussions

Major findings of the study

1) In case of frequency of usage of various Banking channels among 100 sample

respondents the following was found out :

In case of ATM usage level, it was found that majority, i.e. 36% respondents used

ATM once or twice per week, 23% used it daily, 21% Once or twice per month, 6% are

planning to use and only 2% have never used ATM.

t was found that majority, i.e. 44% of

respondents used Mobile Banking rarely, 23% respondents are planning to use, 22% of

respondents never used it, 5% used it once/ twice per month, 4% used once/ twice per

week and only 2% daily.

usage level, it was found that majority, i.e. 44.5% of

respondents never used it, 30% used it rarely, 17% of respondents are planning to use,

5% used it once/ twice per month, 2% used once/ twice per week and only 1.5% daily.

usage level, it was found that majority, i.e. 42.5% of

respondents never used it, 29.5% used it rarely, 19% of respondents are planning to use, ,

5% used it once/ twice per month, 3% used once/ twice per week and only 1 % daily.

isits, it was found that majority, i.e. 34.5% of respondents

visited bank branch once or twice per week, 30.5% visited once or twice per month, 28%

visited rarely, 7% Visited bank daily for carrying out banking transactions. No such

respondents were there who had never visited bank branch.

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2. In case of retail banking channel preference among 200 sample respondents the

following was found out :

banking

transactions rather than virtual banking channels. Majority of the respondents i .e, 100%,

52%, 90%, 98%, 61%, 74% and 98% preferred bank branch for depositing cash, check

account balance & transaction history, research products & services, apply for loan, bill

payments, money transfer and Customer support & enquiries respectively. In case of cash

withdrawal and shopping majority of the respondents i.e. 75% and 57% preferred ATM

card respectively

3) The study revealed that despite the widespread use of Electronic banking products,

bank location remained the most important factor customers considered while selecting

their bank. Fewer respondents considered number of innovative services offered by bank

as a determining factor, while more respondents said that security, confidentiality and

personal relationship were most important.

4) The study throws more light on the respondents‟ assessment of the service quality of

Electronic banking products against the attributes. It was found that only few respondents

had difficulty in understanding technical features in Banking and majority of the

respondents opined that their expectations on E-Banking were met.

5) The respondents‟ assessment of the security features in Electronic banking products

was that they expected little more security on their passwords and E-Banking

transactions. They opined that their bank offered secure storage of personal information

and privacy protection in case of E-Banking.

6) The reasons given by the respondents that are not comfortable are: security concern

(37%); lack of knowledge (25%); unreliability (20%) and preference for face to face

contact (18%). The survey further revealed that greater proportion (74%) of the

respondents do E-Banking themselves while 26% sort help when doing E-Banking.

7) It was found that majority of the respondents never faced such risks. The most

common risk faced by them was regarding ATM system failure. The expected associated

risks of E-Banking identified by the respondents from the study are: cyber fraud; cyber

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theft; security concerns; risk of hackers; Leaked customer information; making closed

system open up; third party intervention; transaction process and wrong information/code

from sender and others such as card retrieval problem, delay due to wrong codes,

unreliable power supply, slow internet connectivity, system failure/error and lack of

knowledge.

8) The psychological attributes of customers such as technophobia which is crucial when

measuring loyalty and E-Banking adoption was also assessed. The majority of

respondents opined that it took long time for them to complete E-Banking transactions

and they felt frustrated when using it.

9) Customer loyalty towards E-Banking was also studied. The respondents gave

unfavorable response which means that they are not loyal to EBanking.

10) The study also revealed respondent‟s opinion on most secured and trusted banking

channel. 76% of respondents opined that they trust bank branch most, 12% trust ATM/

Debit card, 5.5% feels Mobile banking is secure, 4.5% trusts Credit card and only 2%

trusts Internet banking .

11) To evaluate this in the extreme, the customers were asked if they would consider

doing business with "an Electronic bank a financial institution with no retail branches,

operating only on the Internet", if it offered better rates. It was concluded that Electronic

banking has not replaced Iii-branch banking or traditional banking practices. The

majority of sample respondents still prefer In-branch banking over Electronic banking.

SUGGESTIONS

Suggestions to Customers:

To benefit from the Electronic Banking solution, the E-Banking users need to understand:

How to use the cards: Where revenue streams are dependent on transaction based

income, it may be more important to ensure customers are familiar with the multiple

ways in which a card may be used than to simply increase the number of card holders.

W hat to do when things go wrong: When service delivery fails, clear instructions need to

be given on how the expected service can be obtained, for example, through the provision

of a call centre number or a location guide to ATMs in a particular area. Financial

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institutions have developed a number of innovations to assist their customers to access

services.

These include:

Customer training: To educate customers, it employed customer service advisers to

physically demonstrate the use of ATMs to skeptical customers. It took time even for a

literate market to learn to trust a mechanical service.

ATM innovations: Banks can develop its own range of Smart Card ATMS, combined

with digital fingerprint recognition technology, as well as standalone, voice driven smart

ATMs in local languages with colour coded touch screens etc.

Assisted ATMs: A simplified menu structure can be placed on dedicated ATMs that were

easier for clients to follow. . Customer communication material: Banks can design

communications materials based on photographs, with minimal text aimed at explaining

the operation of its debit car d to semi literate customers.

Training merchants: While merchants are not members of the issuing bank‟s staff, if the

business case has been carefully constructed, they stand to gain from increasing usage of

the card. Providing training and support materials to merchants to better enable them to

assist customers should significantly improve the effectiveness of a communications

campaign.

Suggestions to Banks:

Based on the findings of this study, the following suggestions are made that:

Banks should ensure that E-Banking is safe and secure for financial transaction like

traditional banking. Banks should organize seminar and conference to educate the

customer regarding uses of E-Banking as well as security and privacy of their accounts.

Some customers are hindered by lack of computer skills. They need to be educated on

basic skills required to conduct online banking.

Banks must emphasize the convenience that virtual banking can provide to people, such

as avoiding long queue, in or der to motivate them to use it. Banks must emphasize the

cost saving that E banking can provide to the people, such as reduce transaction cost by

use of online banking.

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Banks should provide more functional infrastructures to strengthen their business

transactions. More ATMS must be deployed, at least two per bank building and in

designated areas such as airports, seaports etc to make more cash accessible to more

customers and check queues in banking halls wherever there is system break down.

Trained and talented personnel especially in computer engineering, information

technology and marketing and accounting should be employed to man core areas in the

banking business. This would promote better quality service delivery, customer

relationship and patronage, and help to reduce the incident of fraud, systems breakdown

and other systemic risks Standby electric power generating sets and inverters is provided

to power the banking halls, information technology equipment and ATMs respectively

whenever there is public power failure to ensure continued smooth operations. Banks

should train and enlighten their staff, customers and the public/society on the use and

safety precautions of various E-service facilities for efficient and convenient services to

enhance stability and confidence in the economy.

Conclusion

The Electronic Banking revolution has fundamentally changed the business of banking

by sealing borders and has brought about new Opportunities. In India also, it has strongly

impacted the strategic business considerations for banks (including the PSBs) by

significantly cutting down costs of delivery and transactions. It must be noted, however,

that while E-banking provides many benefits to customers and banks, it also aggravates

traditional banking risks. In India there is a major risk of the emergence of a digital

divide as the poor are excluded from the internet and so from the financial system.

Though there has been higher acceptance of technology by public sector banks, they are

at a different level in the computerization spectrum as compared to private and foreign

banks. This has endangered their position in the immediate period due to the lack of

adequate systems for customer and investor protection. PSBs are more susceptible to

breaches of security and to disruptions in the system‟s availability and hence to

reputational risk.

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The study revealed that most of the bank customers are reluctant in adopting Electronic

banking because of concern about security, privacy and technophobia. They preferred to

visit bank branch for carrying out major transactions. The study revealed that if banks

provide them necessary guidance and ensure more security features and confidentiality of

personal information, they are willing to adopt E - Banking.

Although the use of electronic banking products has grown significantly, the importance

of bank location still remains strong. Location remains relevant regardless of how

recently an account was opened or the proximity of the bank location. Why is bank

location still important? Several possibilities exist, including whether E-banking products

or services are suitable substitutes for bank branches or if Electronic processes and

physical locations are complementary services that increase convenience. Customers

want the convenience of E-Banking products, but they also want the convenience of

nearby hanks. A large percent of customers still do not use E-Banking technologies or all

the features of these services.

Scope for further research

Some key issues addressed in the present study about the E -banking include:

Customer acceptance and satisfaction, services rendered, value added for the banks and

consumers, privacy concerns and profitability. Future research could include a study on

attitude and intention towards Electronic banking, E -Banking in Rural Area taking into

account operational risks, and competition from nonbanking institutions.

Future research avenues include validating this study on a set of banks in different

geographical regions as a case study, in order to confirm its level of representativeness. In

addition, the study could be replicated using other E-banking technologies like EFT,

SWIFT or smartcards. A comparative study on E –banking services between different

countries could be done. Another area for further research is to conduct a comparative

study about the issues in the current E-banking services among the young consumers

between different nations. For future research, more similar small and local community

banks can be selected to further collect the information about their newest trends and

development in their E-banking operations to enhance managerial implications.

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Schiffman, I..G., &Kanuk L.L. (2009) Consumer behaviour. New Jersey, Pearson

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Ozuru, H. N; Chikwe, J. E and Idika Uduma (2010). The use of traditional

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Kamel s (2005). The use of Information technology to transform the Banking

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312.

Masocha, R; N Chiliya and S Zindiye (2011). E Banking adoption by customers in

the rural milleus of South Africa: A Case of Alice, Eastem Cape, South Africa.

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http://methodofsdolutions.com/2010/06/22/advantages-and-disadvantages-ofonline-

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CUSTOMER PERCEPTION, SATISFACTION AND ITS IMPACT ON