Virtual Banking - Does it really work


By

Y. Rama Krishna
Head
D. Venkoba Rao
Asst. Professor
Department of Business Management
Aristotle PG College
Hyderabad
 


Introduction

Indian Banking industry is witnessing an unprecedented competition. To stay ahead, Banks are coming up with plethora of services to lure customers. Services like 24hour banking, Service at door step, Telephone banking, Internet banking, Extended Business Hours (EBH), Speedy processing are only a few to mention. Greater part of today's bank transactions take place somewhere else other than in branch premises. This shows the growth of "virtual" banks in India. With convenience, speed, efficiency and effectiveness, these virtual banks, in effect have opened up a new world of possibilities and brought major changes in providing a broad range of services. Virtual banks are now seen as an answer to the challenge of designing a new service channel that is fully secure, functional and which customers can readily learn to use and trust it. Virtual banking -- a powerful "value added" tool -- has become the focal point for banks to attract and retain customers.

Though, the aim of these services is to satisfy customers, there is a need to understand customer awareness, perception and importantly the level of satisfaction. In this paper we measured these issues on four virtual banking services offered by Indian private banks in Hyderabad city. These services include Automated Teller Machine (ATM), Telephone Banking, Internet Banking and Integrated Voice Response System (IVRS). Based on findings of the study, we conclude that, banks have to do a lot to take advantage of virtual banking services. We also penned down few suggestions that would help banks to provide better service.

Objective of the Study

The objective of this study is to measure the customers' awareness, perception, and the level of satisfaction with regard to virtual banking services offered by the Indian private banks in the city of Hyderabad.

Questionnaire Development

For the purpose of this study, a structured questionnaire was developed in two stages. In the first stage, an exploratory study was carried out using personal and focus group interviews. This was done to understand the factors influencing customers' preferences. In the second stage, based on findings of the exploratory study, a 30-item 3-point Likert scale was developed. Items in the questionnaire covered four important services i.e., Telephone Banking, IVRS, Internet Banking, and ATM services offered by Indian private banks.

The Questionnaire has two parts. Issues of awareness, perception and the level of satisfaction were covered in part I and demographics of the customer in Part II.

Collection of Data

The above mentioned questionnaire was used to collect the primary data. For secondary data, research papers, journals and magazines were referred.

Sample Technique

Simple random sampling method was used to collect data from 200 customers of various Indian private banks. The questionnaire was administered near the banks' branch premises and ATM's in the city of Hyderabad. To maintain heterogeneity in the sample, two different time periods in a day, i.e., Morning Hours (8 a.m. to 12 a.m.) and Evening Hours (4 p.m. to 8 p.m.) were chosen. Of the total sample size, 170 customers returned the questionnaires. 10 questionnaires were found incomplete and were withdrawn. A total of One Hundred Sixty (N=160) questionnaires were found suitable for the study. This represents 80% of the total sample size. The collection of data began in the month of December 2005 and was completed in January 2006.

Limitations of the Study

This study suffers from few limitations.

  • The study was restricted to the city of Hyderabad.
  • The sample is 160. This may not be the true representation of total population.
  • Perceptions, attitudes, and time constraints of the customers would have influenced their responses.

Data Analysis & Interpretation

Demographics

Table 1: Age wise classification of respondents

Under Graduate

Graduate

Post Graduate

Others

18 (11.25%)

108 (67.5%)

29 (18.12%)

5 (3.12%)


Graduates represent 67.5% of the respondents followed by Post Graduates (18.1%). This states that banking customers in Hyderabad are well qualified.

Table 3: Nature of employment of respondents

Unemployed

Self Employed

Govt. Service

Private service

11(6.87%)

19 (11.87%)

43 (26.87%)

87 (54.37%)


Table 3 reveals that 87 i.e., 54.37% of the respondents work in Private Sector. 43 i.e., 26.87% of the respondents work in Government Sector. Self Employed consist of 11.87% of the total respondents.

Table 4: Type of relationship with bank

Savings a/c

Salary a/c

Current a/c

Demat a/c

61 (38.12%)

83 (51.87%)

11(6.87%)

5 (3.12%)


Of the respondents, a significant 52% (83) have a Salary a/c relationship with the Bank. This is followed by Saving a/c with 38% and Current a/c 7%.

Table 5: Monthly income of the respondents

< 5000

5000-10000

10000-15000

>15000

23 (14.37%)

116 (72.5%)

14 (8.75%)

7 (4.37%)


In our study, it was found that 73% of the respondents were in the income group of Rs.5000-Rs.10000. Less than 5% have an income above Rs.15000.

Table 6: Time period associated with the bank

< 1yr

1 -- 3

3 – 5

> 5

56 (35%)

85 (53.12%)

13 (8.12%)

6 (3.75%)


Half of the Respondents have 1year to 3 years association with their banks. 35% of the respondents associate themselves with their bank for a period less than 1 year.

Table 7: Respondents ATM service usage

Regularly

Once in a Week

Once in a Month

Never

Respondents

%

Respondents

%

Respondents

%

Respondents

%

115

71.88

27

16.88

18

11.25

0

0.00


It was found that 72% of the respondents use ATM service regularly, i.e., more than once in a week. 27 (16.88%) respondents said that they use ATM once in a week and 11.25% of the respondents use ATM once in a month.

Table 8: Transaction time at ATM

Less Than 1Minute

1-3 Minutes

3-5 Minutes

More than 5 Minutes

Respondents

%

Respondents

%

Respondents

%

Respondents

%

10

6.25

104

65.00

25

15.63

21

13.13


Majority (65%) of the respondents feel that it will take 1-3 minute's time to finish their transaction. For 25 (15.63%) of the respondents time taken at ATM is 3-5 minute's. Very few respondents (6.25%) felt that they spend less than 1 minute to complete their transaction.

Table 9: Awareness of all ATM Locations of the bank in Hyderabad city

Yes

No

Respondents

%

Respondents

%

119

74.38

41

25.63



From the above table it is clear that 74% of the respondents are aware of all the ATM locations in the city of their respective banks. What is interesting to note is that 26% of the respondents are unaware.

Table 10: Frequently Used ATM Location

Near to home

Near to office

at your branch

Any where in the city

Respondents

%

Respondents

%

Respondents

%

Respondents

%

101

63.13

23

14.38

13

8.13

23

14.38


From the above table it is evident that most of the respondents use ATMs which are nearer to their home. Next preferable ATM location is the one nearer to Office and any other location in the city. Customers using ATMs at their bank branch is found negligible.

Table 11: Level of Satisfaction with ATM service

 

Not Satisfied

Satisfied

Very Satisfied

 

Respondents

%

Respondents

%

Respondents

%

ATM banking services

7

4.38

117

73.13

36

22.50

Continuous Service

81

50.63

41

25.63

38

23.75

Variety of Transactions

53

33.13

84

52.50

23

14.38

Ease of Screen use

75

46.88

61

38.13

24

15.00


The above table shows the extent of satisfaction with regard to ATM service. Satisfaction was measured on four dimensions. It was found that 73% of the respondents were satisfied with the overall ATM services. However, customers have varied opinions on dimensions of continuous service, variety of transactions and ease of screen use. 51% of respondents were not satisfied with continuous service, 47% with Ease of screen use and 33% with variety of transactions. The level of satisfaction was found more with 53% in variety of transaction being offered through ATM, followed by Ease of Screen use (38%) and Continuous Service (26%). Surprisingly, on all the dimensions, less than 25% were found very satisfied.

Table 12: Telephone-banking Usage

Regularly

 

Once in a Week

 

Once in a Month

 

Never

 

Respondents

%

Respondents

%

Respondents

%

Respondents

%

47

29.38

19

11.88

17

10.63

77

48.13


The above observations reveal that 47 respondents (29%) regularly use Telephone-banking in Hyderabad city. While a considerable 77 (48%) respondents replied that they never used Telephone-banking.

Table 13: Average Call answering time

Less Than 1Minute

 

1-3 Minutes

 

3-5 Minutes

 

More than 5 Minutes

 

Respondents

%

Respondents

%

Respondents

%

Respondents

%

8

9.41

16

18.82

43

50.59

18

21.18


It is clear from the above table that 43 (51%) respondents opined that the average time taken to answer a telephone call is 3-5 minutes. 21% of the respondents said that it takes more than 5 minutes. Very few respondents had an experience of receiving an answer to their calls in a time less than 1 minute.

Table 14: Level of satisfaction on telephone banking

Regularly

 

Once in a Week

 

Once in a Month

 

Never

 

Respondents

%

Respondents

%

Respondents

%

Respondents

%

37

23.13

14

8.75

7

4.37

102

63.75


Table 14 indicates that 55% of the respondents were found satisfied with the customer service representative attending the telephone-call. Respondents were asked to rate their level of satisfaction on other issues relating to telephone call like speed of operations, representatives' knowledge about products, manner of replying to questions and communication skills of the representative. 54% of the respondents said that they are very satisfied with the product knowledge of representatives. 48% of the respondents reported satisfaction with the speed of operations. Only 54% (30.5% +23.5%) of the respondents replied affirmative when asked about satisfaction on replies of representatives to their questions. 38% were not satisfied with the communication skills of the representatives.

Table 15: Access Internet Banking

 

Not Satisfied

Satisfied

Very Satisfied

 

Respondents

%

Respondents

%

Respondents

%

Customer Service Rep.

32

37.65

47

55.29

6

7.06

Speed of Operations

18

21.18

41

48.24

26

30.59

Knowledge about Products

12

14.12

27

31.76

46

54.12

Replying Queries

39

45.88

26

30.59

20

23.53

Communication Skill

33

38.82

29

34.12

23

27.06


From the selected sample size, 64% of the respondents reported having never used to internet banking. 9% of the respondents use internet banking once in a week and 4% use once in a month. Only 23% use internet banking regularly.


Table 16: Preferred place to access Internet Banking

 

Respondents

%

Respondents

%

Respondents

%

Internet Banking Services

35

60.34

12

20.69

11

18.97

Page Setup

43

74.14

14

24.14

1

1.72

Ease use

34

58.62

13

22.41

11

18.97

Speed Loading

9

15.52

11

18.97

38

65.52

Sufficiency

28

48.28

25

43.10

5

8.62

Transactions

10

17.24

38

65.52

10

17.24

Visual design

38

65.52

9

15.52

11

18.97


Majority of the respondents (62%) are operating internet banking from home. Around 17% of the respondents check it at cyber cafes and 4% at office. 14% of the respondents use their mobiles to access internet banking.

Table 17: Level of satisfaction related to Internet banking

At Cyber Café

 

At Home

 

At Office

 

With Mobile Phone

 

Respondents

%

Respondents

%

Respondents

%

Respondents

 

10

17.24

36

62.07

4

6.90

8

13.79


Among the internet banking users, 60% of the respondents were not satisfied with overall internet banking services. They were asked to rate on Menu flow, navigation, page loading, content, variety and visual design. Though 65% of the respondents were found very satisfied with the speed of page loading, 74% were not satisfied with page setup, 59% with ease of usage, 66% with visual design and 48% with content and sufficiency. 66% of the respondents reported satisfaction with variety of transactions being offered over internet.

Table 18: Customers using IVRS

Regularly

 

Once in a Week

 

Once in a Month

 

Never

 

Respondents

%

Respondents

%

Respondents

%

Respondents

%

17

10.63

8

5.00

13

8.13

122

76.25


Above table explains that integrated voice reply system was found never used by 76% of the respondents. Only 11% of the respondents use it regularly. The usage of IVRS once in a week and once in a month is found negligible.

Table 19: IVRS Replying

Not Effective

 

Effective

 

Very Effective

 

Respondents

%

Respondents

%

Respondents

 

23

60.53

9

23.68

6

15.79


Of those who use IVRS, 61% of the respondents rated as not effective in replying to the questions of the respondents. This is followed by a rating of 24% for effective and 16% for very effective.

Table 20: Respondents level of satisfaction on IVRS

 

Not Satisfied

 

Satisfied

 

Very Satisfied

 

Respondents

%

Respondents

%

Respondents

%

Understandable

31

81.58

5

13.16

2

5.26

Transactions

21

55.26

14

36.84

3

7.89

User- friendliness

28

73.68

6

15.79

4

10.53

View IVE

24

63.16

11

28.95

3

7.89


The respondents were asked to rate on understandable menu, user friendliness and sufficient choice of transactions in IVRS along with respondents views of the concept of IVRS. 63% were not satisfied with the IVRS. 29% were satisfied and 8% were very satisfied. Regarding understandable menu, 82% rated not satisfied. 74% were not satisfied with user friendliness and 55% with variety of transactions. Except on variety of transactions, where 37% rated satisfied, percentage of respondents being satisfied and very satisfied was below 30% on all the issues of IVRS.

Findings

ATM usage was found regular and more than once in a week. On the contrary, ¾ of the respondents never used IVRS. Usage of the internet banking and telephone banking was found notably low at 64% and 48% respectively.

The average time spent at ATM's varies between 1-5 minutes and in telephone banking, the time spent was 3-5 minutes and above. ATMs that are nearer to their home are preferred. Home is the preferred place for 62% of the respondents to access internet banking. About 25% of the customers were unaware of all the ATM locations of their banks in the city.

Customers expressed satisfaction with the overall ATM banking services. However, they were not satisfied with continuous service of ATMs. It was found that there was difficulty in using the ATM screen.

Regarding telephone banking, respondents expressed satisfaction on CSR's speed of operations, knowledge about products and communication skills. An interesting point to note though was that customers were not satisfied with the replies of CSR's to their queries.

The overall level of satisfaction on Internet banking was found unsatisfactory and they expressed their inconvenience on issues like content sufficiency, page setup, ease of use and visual design. On the other hand, they were satisfied with variety of transactions and loading speed of web pages.

The customers were not satisfied with IVRS. Surprisingly, all attributes like understandable menu, choice of transactions, user friendliness and faster service were rated unsatisfactory.

Suggestions

Banks should focus on creating further awareness on availability of their ATM locations, other than the one that customers regularly use. This result in lower waiting time spent at ATMs and avoidance of customer inconvenience due to system break down or money feeding process.

Banks should lay emphasis on training their CSR's on the important aspect of being empathetic. CSR's should be taught on understanding the customer queries and giving appropriate, relevant, timely and satisfying answers.

The overall satisfaction level of customers on Internet banking services is found unsatisfactory. Customers' expressed their inconvenience on issues like content sufficiency, page setup, ease of use and visual design. Nevertheless, they are satisfied with variety of transactions and page loading speed aspects of Internet banking. Banks should concentrate on redesigning their websites.
 


Y. Rama Krishna
Head
D. Venkoba Rao
Asst. Professor
Department of Business Management
Aristotle PG College
Hyderabad
 

Source: E-mail May 28, 2006

     

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