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Customer Relationship Management in e-

Marketing with special reference to

Indian Banking Sector

Thesis Submitted for the award of degree of

Doctor of Philosophy

In

Business Administration

By

Md. Asadul Haque

Under the Supervision of

Dr. Asif Ali Syed

Department of Business Administration Faculty of Management Studies and Research

Aligarh Muslim University, Aligarh 2017

Copyright Transfer Certificate

Title of the Thesis : Customer Relationship Management in e-Marketing with

special reference to Indian Banking Sector

Candidate’s Name : Md. Asadul Haque

Copyright Transfer

The undersigned hereby assigns to Aligarh Muslim University, Aligarh copyright that

may exist in and for the above thesis submitted for the award of the Ph.D. degree.

Signature of the Candidate

CHAIRMAN

COURSE WORK/COMPREHENSIVE EXAMINATION/

PRE-SUBMISSION SEMINAR COMPLETION CERTIFICATE

This is to certify that Mr. Md. Asadul Haque, Department of

Business Administration, has satisfactorily completed the course work/

comprehensive examination and pre-submission seminar requirement

which are part of his Ph.D. programme.

Date:…………… Chairman

Department of Business Administration,

Faculty of Management Studies and Research

Aligarh Muslim University, Aligarh.

Phone: 2700920 (Exchange), EXT: 3580 (O)

CANDIDATE’S DECLARATION

I, Md Asadul Haque, certify that the work embodied in this Ph.D thesis is my

own bonafide work carried out by me under the supervision of Dr. Asif Ali Syed at

Department of Business Administration, Aligarh Muslim University, Aligarh. The

matter embodied in this Ph.D thesis has not been submitted for the award of any other

degree.

I declare that I have faithfully acknowledged, given credit to and referred to

the researchers wherever their works have been cited in the text and the body of the

thesis. I further certify that I have not willfully lifted up some other’s work, para, text,

data, result, etc. reported in the journals, books, magazines, reports, dissertations,

theses, etc., or available at web-sites and included them in this Ph.D. thesis and cited

as my own work.

Date: ……………….. (Signature of the Candidate)

(Md Asadul Haque)

Certificate from the Supervisor

This is to certify that the above statement made by the candidate is correct to the best

of my knowledge.

Signature of the Supervisor... ……...……

Name & Designation: Dr. Asif Ali Syed

(Assistant Professor)

Department of Business Administration

(Signature of the Chairman of the Department with seal)

Dedicated to

My Parents

ACKNOWLEDGEMENTS

In the name of ALLAH, the most Beneficient, Compassionate and Merciful who provided

me the strength to undertake this research and helped and guided me at every step of my work. I

am grateful to Allah for blessing me with the presence of so many people who helped me complete

this endeavor.

I would like to thank and express my deepest gratitude to my respected supervisor, Dr.

Asif Ali Syed. I am grateful to him for his constant help throughout my research work and the

numerous hours that he dedicated towards my work. In case of any doubts, he was always there to

help me out. He was always available, offered reassuring encouragement and showed unwavering

patience towards me and my work. He added inspiration to my research and strengthened my

passion for the concerned research work. I am grateful to him for all his valuable inputs and

suggestions that helped to improve my work. This work could not have been complete without the

guidance and supervision of my esteemed supervisor.

I accord my warm thanks to Prof. Kaleem Mohd. Khan, Prof. Mohammad Israrul Haque

(Chairman & Dean), Dr. Mohd. Naved Khan, Dr. Feza Tabassum Azmi and Dr. Asif Akhtar. I

am grateful to all the respectable faculty members of the Department of Business Administration,

AMU, Aligarh for the valuable inputs provided by them regarding my research work.

I am thankful to the Librarian of Maulana Azad Library, Aligarh Muslim University for

all the resources available there for the use of research scholars. I would like to thank the

University Grants Commission (UGC), New Delhi for providing financial assistance to me as

Junior/Senior Research Fellow, throughout the span of my research work. I express my sincere

gratitude to all the participants of my survey who were helpful enough to fill my research

instrument. I am thankful to my wonderful colleagues at the department who provided me the

support needed to make my research experience a memorable one. Dr. Ahmad Faraz Khan,

Mohd.Danish Kirmani, Mohd Tariq, Maaz Hasan Khan, Danish Hussain, Tariq Aziz,

S.M.Fatehuddin and others have made my research journey truly worth remembering.

Last but not the least; I am thankful to my parents and my siblings for their

unconditional love and support. I am grateful to the Almighty for blessing me with such a great

family that has been a source of strength for me across every situation.

Despite the support of so many persons, the flaws and inconsistencies in the work, if any,

are due to my own weaknesses.

http://www.amu.ac.in/dshowfacultydata.jsp?did=44&eid=4410

i

Contents

Page No. Chapter 1 INTRODUCTION 1-11 1.1 The Context of the Study 1

1.1.1Customer Relationship Management 1

1.1.2 E-Marketing 3

1.1.3 E-Banking 4

1.2 Research Background 4

1.3 Scope of the Study 5

1.4 Need for the Study 6

1.5 Research Problem 6

1.6 Research Objectives 7

1.7 Relevance of the Study 8

1.8 Structure of the Thesis 8

1.9 Chapter Summary 10

Chapter 2 LITERATURE REVIEW 12-63

2.1 Introduction 12

2.2 Customer Relationship Management 12

2.2.1 CRM and Relationship Marketing 13

2.2.2 CRM- Definition and Features 15

2.2.3 Evolution of CRM 19

2.2.4 Need for Customer Relationship Management 20

2.2.5 CRM as a Strategy 22

2.3 Services Sector in India 25

2.4 Overview of Banking Sector in India 28

2.4.1 Banking Structure in India 29

ii

2.4.2 Scheduled Banks in India 30

2.5 CRM in Banking Sector 33

2.6 E-Marketing 39

2.7 E-Banking 45

2.8 CRM in e-Banking 49

2.9 Factors Affecting Adoption of e-Banking 51

2.9.1 Customer Satisfaction 53

2.9.2 Customer Trust 54

2.9.3 Perceived Risk 55

2.9.4 Perceived Ease of Use 57

2.9.5 Perceived Usefulness 58

2.9.6 Awareness 59

2.9.7 Website Design 60

2.9.8 Internet Service Quality 61

2.9.9 Accessibility 61

2.10 Variables Identified for the Study 61


Chapter 3 THEORETICAL FRAMEWORK 64-73 3.1 Introduction 64 3.2 Research Gaps Identified 64

3.2.1 Research Questions 65

3.2.2 Research Objectives 65

3.3 Research Problem 66

3.4 Need for the Study 66

3.5 Scope of the Study 67

3.6 Conceptual Framework for the Study 68

3.6.1 Major Constructs of the Conceptual Framework 69

3.6.2 Hypotheses for the Study 70 3.7 Chapter Summary 73

iii

Chapter 4 RESEARCH METHODOLOGY 74-92 4.1 Introduction 74

4.2 Research Design 74

4.3 Sampling 77

4.3.1 Research Population 77

4.3.2 Sampling Frame 77

4.4 Sampling Technique 77

4.5 Sample Size 79

4.6 Data Collection Method 79

4.7 Research Instrument 80

4.7.1 Item Generation 80

4.7.2 Content Validation & Pilot Testing 83

4.7.3 Research Instrument Administration 83

4.8 Sample Adequacy 85

4.9 Exploratory Factor Analysis 86

4.10 Reliability and Validity 87

4.11 Statistical Techniques for Data Analysis 88

4.11.1 Confirmatory Factor Analysis 89

4.11.2 Structural Equation Modeling 90

4.11.3 Justification for use of SEM 91


Chapter 5 ANALYSIS AND FINDINGS 93-113 5.1 Introduction 93

5.2 Demographic Profile of Respondents 93

5.3 Factor Analysis 95

5.3.1 Exploratory Factor Analysis 95

5.3.2 Reliability and Validity 97

5.4 Structural Equation Modeling 98

5.4.1 The Measurement Model: CFA 98

iv

5.4.2 The Structural Model: SEM 102

5.5 Path Analysis and Hypotheses Testing 104

5.6 Hypothesis on Demographics 106


Chapter 6 CONCLUSIONS AND RECOMMENDATIONS 114-132 6.1 Introduction 114

6.2 Conclusions based on Results of the Study 114

6.2.1 Demographics 114

6.2.2 Customer Relationship Management Variables 120

6.3 Implications of the Study 123

6.3.1 Managerial Implications 123

6.3.2 Societal Implications 127

6.3.3 Environmental Implications 127

6.4 Recommendations 128

6.5 Directions for Future Research 130

6.6 Limitations of the Study 131

REFERENCES 133-164

APPENDICES Appendix I Questionnaire for Pilot Testing

Appendix II Final Questionnaire for Data Collection

Appendix III Recommendations of RBI Committee on Internet Banking

(2001)

Appendix IV Recommendations of Damodaran Committee on Customer

Service in Banks (2010)

Appendix V Recommendations of Gopalakrishna Committee on Electronic

Banking (2011)

Appendix VI Research Publication

v

List of Tables

Table No Title Page No

2.1 Contribution of various services in Indian GDP 27

2.2 Variables Identified for the Study 62

4.1 Breakup of responses collected 84

4.2 KMO and Bartlett's Test of Sphericity 85

5.1 Demographic Profile of Respondents 94

5.2 Factor Loadings 95

5.3 Reliability of the Instrument 98

5.4 Fit Indices of Measurement Model 101

5.5 Discriminant & Convergent Validity 101

5.6 Fit Indices of SEM structural model 104

5.7 Results of Path Analysis Hypotheses 106

5.8 Results of t-test based on gender 107

5.9 Results of ANOVA based on age 108

5.10 Results of ANOVA based on income 109

5.11 Results of ANOVA based on occupation 111

5.12 Results of hypotheses based on demographics 112

6.1 Conclusions based on results of hypotheses on demographics 119

6.2 Conclusions based on results of hypotheses on CRM

variables

122

vi

List of Figures

Figure No Title Page No

1.1 Structure of the thesis 09

2.1 Transition from Relationship Marketing to Customer

Management

15

2.2 Distinct markets at the business place 20

2.3 CRM Core Cycle of Activities 24

2.4 Scheduled Banking Structure in India 31

2.5 Evolution of e-Marketing 43

2.6 Conceptual Framework of e-Banking 52

3.1 Proposed Conceptual Framework 68

4.1 Key steps involved in the study 76

4.2 Stages in Questionnaire Development 82

5.1 CFA Measurement Model 100

5.2 SEM Structural Model 103

6.1 Revised Conceptual Model based on the results of the

study

122

vii

List of Abbreviations Used

CRM Customer Relationship Management

RTGS Real Time Gross Settlement

NEFT National Electronic Fund Transfer

RBI Reserve Bank of India

IMPS Interbank Mobile Payment System

KYC Know Your Customer

PKI Public-Key Infrastructure

IDRBT Institute for Development and Research in Banking Technology

SSL Secure Sockets Layer

TLS Transport Layer Security

ATM Automated Teller Machine

HTML HyperText Markup Language

PoS Point of Sale

IP Internet Protocol

IBA Indian Banks’ Association

ICT Information and Communication Technology

TAM Technology Acceptance Model

PRT Perceived Risk Theory

GDP Gross Domestic Product

PCA Principal Component Analysis

RMSEA Root Mean Square Error of Approximation

AGFI Adjusted Goodness of Fit Index

NFI Normed Fit Index

CFI Comparative Fit Index

AVE Average Variance Extracted

CR Composite Reliability

VIF Variable Inflation Factor

CHAPTER – 1 Introduction

Chapter -1

1

1.1 The Context of the Study

1.1.1 Customer Relationship Management

The area of marketing has seen a gradual and important change in its functioning over

the past few decades. Earlier, market leadership was determined by production

efficiency of firms or organisations. The focus of these firms was at reducing the

operational costs of every unit produced. Products and services were sold at a lower

price as a result. However, the competitors or new entrants in the market were easily

able to copy such strategies and therefore, this strategy did not sustainable over a long

period of time. With the passage of time, firms or companies have realised the

importance of customers. According to Boulding, Staelin, Ehret and Johnston (2005);

Frow and Payne (2009) and Bull and Adam (2011), relational based approach on

building and sustaining long term relationships with the customers is the focus point

of the firms now rather than a short term transaction-based selling.

Customer Relationship Management or CRM as a management terminology has been

central to strategic marketing initiative since the late nineties. Depending on the sector

in which it is being applied, the definition of CRM has different connotations for

different people. However, across all sectors CRM has led to an increase and

development of customer base by increased satisfaction. This has led to increased

loyalty from customers and increased sales and profits for the firm. Different

organizations interpreted different meanings of the acronym CRM. Although it being

defined as, Customer Relationship Marketing, people in various organisations have

agreed that CRM aims at “maintaining profitable customer relationships”. Payne and

Frow (2005) have defined as an integrated approach that aims to identify, acquire and

retain customers. Through CRM, organizations can manage and coordinate customer

interactions across different departments, channels, business lines and geographies.

CRM is also required in order to maximize the value of each interaction with the

customer and improving overall corporate performance.

In managerial terms, the philosophy of building long term relationships with

customers is Customer Relationship Management. (CRM).CRM as a strategy focuses

at improving shareholder value. This improvement can be achieved by aligning with

Chapter -1

2

the right customers. According to Richards and Jones (2006), CRM is a business

strategy that has the perfect alignment of people, process and technology. The strategy

aims at enhancing the performance of the firm through customer management.

Fagbemi and Olowokudejo (2011) have proposed that meeting the needs of the

customers by integrating these with the strategy and technology employed by the firm

is termed as Customer Relationship Management.

It is important for the businesses to retain customers in order to remain competitive.

Companies are now focusing more on retaining new customers along with acquiring

new customers. The four key factors that affect customer retention are overall

satisfaction with the firm, speaking positively about it, intentions of making

repurchases and sticking to the firm (Maxham, 2000). According to Lin and Wu

(2011), customer retention and future use of product has a statistically significant

relationship with the commitment of quality, trust and customer satisfaction. Trust

and commitment have also found to be leading directly to cooperative behaviour that

are vital for strong relationships between the customer and the firms. ThIs leads to

establishing and maintaining long term relationships with customers (Robert-Lombard

and Du Plessis, 2012).

The need for implementation of Customer Relationship Management has been

increasing over the years. This is due to the fact that although many organisations

incorporated technology into their marketing and operations, the results were not as

desired .This might have been often due to an over-reliance on technology, inadequate

segmentation, neglect of brand considerations, lack of strategic perspective, too much

reliance on data and lack of clarity with respect to the role of leadership (Fandos Roig

et al., 2006; Meuter et al., 2005; Crosby, 2002). Peppard (2000), Dibb and Meadows

(2004) and Riivari (2005) have suggested that this has led to several organisations,

particularly within the financial services sector, to realise the increased significance of

CRM in retaining and maximising the customer value .

Bohling et al. (2006) and Payne and Frow (2005) have identified that an effective

cross-functional integration of people, processes, marketing competences and

operations is required for the successful implementation of CRM initiatives.

Information technology and applications play a significant role in enabling this

Chapter -1

3

integration. This integration helps in improving the level of satisfaction of the

customer with the product or service (Kincaid, 2003). Improving on the customer

loyalty and customer lifetime value is the ultimate goal of implementation of any

CRM initiative (Licata and Chakraborty, 2009).

1.1.2 E-Marketing

Over the past decade, one of the most important trends offered by information

technology in the field of business and marketing has been the development of e-

marketing. It has revolutionised the way businesses are done. Marketing as an

operational and dynamic science, has been consistent in keeping pace with the

developments in the Information Technology revolution. Internet has proved to be a

major axis of this revolution leading to the concept of e-Marketing or Internet

Marketing. The focus of the firms or organisations remains the same-meeting the

needs of their customers, creating value for customers and develop communication

and relationship network between them and the customers.

Marketing of goods and services and exchange of information and ideas through the

use of the Internet and other electronic means is termed as e-marketing. According to

Strauss & Frost (2001),it can be viewed as a modern business practice that uses

electronic data and applications in order to plan and execute the conception,

distribution and pricing of ideas, goods and services. It helps in creating exchanges

that lead to the fulfilment of individual and organizational goals. The use of online

activities for building and maintaining customer relationships through the exchange of

products or services that fulfil the requirements of both buyers and sellers is termed as

e-marketing (Saffu and Walker, 2008). The various benefits at offer include

globalization of trade, removal of the constraints of time and space, speed, efficiency

and significant reduction in operational costs. It helps to find new customers or

suppliers and new opportunities to exploit. The evolution of Internet has led to a

change in the way businesses are conducted and has generated alternate channels for

the introduction of a new product, its competitive pricing, electronic distribution and

payments. With the increased use of the Internet to do business things, it has become

imperative for companies to conduct their businesses online also in order to maintain

their competitive advantage (Baourakis et al., 2002).

Chapter -1

4

1.1.3 E-Banking

Service organizations, in particular the financial organizations, are facing new

challenges and opportunities due to changes in the global business scenario. New

ways and direction of conducting business have evolved over the years. With

increased focus on customer relationships, financial institutions across the world have

recognized that they need to perform by keeping customer at the centre. Strategic

goals of the organisation and dynamic customer needs have to be balanced in order to

remain competitive as well as building and maintaining relationships with customers.

Banking is one of the many business sectors that have adopted the internet usage as

both banks and customers have benefitted by the introduction of e-banking services

(Kasemsan & Hunngam, 2011; Aladwani, 2001). The advent of new entrants,

competition among existing banks, and rapid increase in technological innovation

have allowed the banks to introduce electronic banking or e- banking. Customers now

have access to various services offered by banks through an electronic distribution

channel.

The two major services at offer through electronic banking includes payment service

for making and receiving payments and account management services that allow the

customers to create, maintain and control their accounts. In order to develop

sustainable competitive advantage, banks are increasing their technology based

service options. The advantages of e-banking includes reduction in operational costs,

the creation of value added services for customer, the facilitation of their employees’

jobs and the provision of self-service options for customers. In order to improve

customer satisfaction, Information Technology has an important role to play in order

to meet customer needs (Mohammed, 2012).

1.2 Research Background

Most of the service sector organisations have changed the way of doing businesses

with the advent of internet. Particularly in the banking sector, almost all the banks in

India operate from brick and mortar branches as well as provide services through e-

banking. Internet provides an ideal platform to banks to offer improved customer

services and gain competitive advantage by providing customers’ requirements and

Chapter -1

5

needs through internet-based services. With the focus of the banks on encouraging

more and more customers to adopt e-banking, it can also be used as a strategic tool to

help banks increase customer satisfaction and loyalty. The objective of any service

organisation providing online services is to not only meet customer expectations but

also try to exceed it. Customer satisfaction has an important effect on customer

retention (Sedon, 1997). In any service organisation acquiring a new customer is

costlier than retaining existing customers (Van et al.., 2001). Therefore, CRM as a

strategic tool has been paid much emphasis by banks in order to improve customer

satisfaction and loyalty.

Customer satisfaction is a critical issue for the success of any service organisation.

Advancement in the field of technology and changed marketing environment are the

reasons for existence of CRM. With the focus of banks now on switching customers

towards electronic banking, it is imperative to identify the critical factors essential for

customer satisfaction in Indian e-banking scenario. With this background, the

researcher has, in this study, tried to identify the key variables of Customer

Relationship management in Indian e-banking context.

1.3 Scope of the Study

In e-banking, the customer can perform all the banking transactions electronically and

does not need to visit a physical branch for these operations. Several services and

technologies offered by banks come under the umbrella of e-banking. ATMs were the

first use of technology used by banks in order to reduce footfall in branches. Although

ATMs are not taken in to consideration as a channel of e-banking since the use of

ATMs started some decades ago. As a result, ATMs have a different network as

compared to other channels of e-banking. So, e-banking in Indian context includes

internet banking and mobile banking.

However, in Indian banking scenario, mobile banking adoption and payments has

been less than successful Use of mobile banking has several technical issues that

include type of handset used, variety of operating systems, encryption requirements,

inter-operable platforms or the lack of it, absence of standardised communication

structures, difficulty in downloading application, time lag in activation etc. These

Chapter -1

6

technical issues get accentuated by the operational difficulties in on-boarding

merchants and customers and customer ownership issues. The interplay of these

factors has not allowed the deployment and adoption of mobile banking as an

effective and widely accepted delivery channel. Issue of coordination between banks

and telecom operators has also acted as a barrier to the adoption of mobile banking.

So, the researcher has identified internet banking as the means of using e-banking.

The scope of the study is, therefore, limited to internet banking only. Hence, the

words e-banking and internet banking have been used interchangeably across the

entire study.

1.4 Need for the Study

With the growing focus of the bank on enhancing customer satisfaction and customer

loyalty in order to avoid them from switching, it becomes imperative for the banks to

identify Customer Relationship Management as a key variable in realising these

objectives. The value of relationship is like brand equity for the banks. Higher the

satisfaction level, higher is the customer loyalty with banks. It leads to an enhanced

scope of cross-selling and up-selling also. The focus of the banks is gradually shifting

to a relationship-based approach rather than the earlier focus on marketing mix. There

is an enhanced focus on relationships rather than transactions. With increased focus

on building long-term relationships with customers, it is important to focus on

relationship building as a strategic alliance rather than a short-term profit oriented

marketing approach. Managing its customer base may help the organisation in

applying a relationship-focussed strategy. It is important to determine the satisfaction

levels of the customers in e-banking due to increased competition and options of

switching available to customers.

1.5 Research Problem

For any service organisation, it is important to establish strong relationship with the

customers. With increased competition and option of choices with the customers, new

marketing initiatives have been taken. Communicating with their customers is of

paramount importance and technology has facilitated this process. Internet has

provided an efficient tool to organisations for marketing their products and services in

Chapter -1

7

an effective, efficient and economic way. Banking sector being an information-

intensive sector has also started using this platform for providing banking services for

customers from the comfort of their homes and offices. However, in a highly

competitive industry, such as the banking sector in India, an electronic service has its

own challenges. The customer has a variety of choices with the information allowing

them to compare the services offered by different banks. For this, the various

attributes or variables of Customer Relationship Management need to be identified so

that the banks can focus on them to improve customer satisfaction and enhance

loyalty.

1.6 Research Objectives

The study aims to empirically investigate the following broad objectives:

1. To study the dimensions of Customer Relationship Management in the Indian

e-banking sector

2. To measure the customer satisfaction and intention to continue using internet

banking of Indian users.

The study aims to empirically investigate the following emergent sub-objectives from

the main objectives.

The sub-objectives identified from the first objective are:

1.1 To identify the key dimensions of Customer Relationship Management in Indian

e-banking context.

1.2 To identify the impact of these dimensions on customer satisfaction with respect

to Indian e-banking customers.

The sub-objective identified from the second objective is:

2.1 To find out what initiatives the banks may further take to encourage new

customers to use internet banking as well as retain the existing customers of e-

banking customers.

Chapter -1

8

1.7 Relevance of Study

Banking sector plays an important role in the development of the nation. The current

research focuses on identifying the key variables of Customer Relationship

Management that help improving the customer satisfaction levels of the customers.

The banking sector has a significant contribution to the Indian economy. Therefore,

an improvement in the performance of these banks is expected to have positive

bearing across all sectors in the economy.

Also, customer satisfaction is the keyword in Indian banking sector. The variables

identified under the study may help in improving the usage of e-banking channels of

the bank, thereby helping the banks in serving the customers better. This will

ultimately help in improving customer satisfaction and, thereby, loyalty.

Finally, Customer Relationship Management in e-banking helps in maintaining and

enhancing lasting relationships with the customers. With the focus of the banks on

reducing the footfall in branches, it is relevant to identify the variables of Customer

Relationship Management that may help the banks in encouraging more customers to

switch to e-banking. This study makes an effort to identify the variables of Customer

Relationship Management for improved customer satisfaction in e-banking in Indian

banking sector.

1.8 Structure of the Thesis

The thesis has been structured into Six Chapters followed by References and

Appendices comprising of research paper, research instrument and RBI reports for the

study.

Chapter One (Introduction): This chapter gives an introduction to the keywords of

the study. It also discusses the research background, need for the study along with

research questions and research objectives It also discusses the relevance of the study.

The chapter also presents an outline of the chapters.

Chapter -1

9

Chapter Two (Literature Review): This chapter provides the literature review for

this study. Definition and features of CRM are discussed from different perspectives

that include its use as a strategy and its use in banking sector. The chapter also defines

e-marketing and e-banking in detail. Further, the variables of CRM in e-banking

identified for the study through extant literature review are discussed in detail.

Fig 1.1 Structure of the Thesis

Introduction

Literature Review

Research Methodology

Conclusions and Recommendations

Analysis and Findings

Theoretical Framework

Chapter -1

10

Chapter Three (Conceptual Framework): This chapter discusses in detail the

research gaps identified, research objectives and the proposed conceptual framework

for the study. The hypotheses formulated for the study have also been discussed in

this chapter.

Chapter Four (Research Methodology): This chapter discusses in detail the

methodology employed by the researcher in order to achieve the research objectives.

It includes the research design, steps involved in questionnaire development, steps

involved in data collection and hypotheses based on demographics and variables

under study.

Chapter Five (Analysis & Findings): In this chapter, the data collected through

questionnaire has been analyzed quantitatively using Statistical SPSS 22.0 and AMOS

21.0 to test the proposed hypotheses. Structural Equation Modelling (SEM) was used

as the statistical tool to measure the relationships between the independent and

dependent variables.

Chapter Six (Conclusions & Recommendations): Conclusions based on the results

of the study are discussed in this chapter. The major conclusions of the study based on

the analysis and findings of Chapter 5 are discussed in detail. Based on these

conclusions, implications of the study are discussed followed by the suggested

recommendations. The chapter also contains the limitations of the study and

directions for future research.

1.9 Chapter Summary

The area of marketing has seen a gradual and important change in its functioning over

the past few decades. With the passage of time, firms or companies have realised the

importance of customers and there has been an increased focus on building customer

relationships. That is why Customer Relationship Management or CRM as a

management terminology has been central to strategic marketing initiative since the

late nineties. In managerial terms, the philosophy of building long term relationships

with customers is Customer Relationship Management. Customer Relationship

Chapter -1

11

Management or CRM as a management terminology has been central to strategic

marketing initiative since the late nineties. Depending on the sector in which it is

being applied, the definition of CRM has different connotations for different people.

However, across all sectors CRM has led to an increase and development of customer

base by increased satisfaction. This has led to increased loyalty from customers and

increased sales and profits for the firm. In managerial terms, the philosophy of

building long term relationships with customers is Customer Relationship

Management, (CRM). CRM as a strategy focuses at improving shareholder value.

Marketing as an operational and dynamic science, has been consistent in keeping pace

with the developments in the Information Technology revolution. Internet has proved

to be a major axis of this revolution leading to the concept of e-Marketing or Internet

Marketing. Marketing of goods and services and exchange of information and ideas

through the use of the Internet and other electronic means is termed as e-marketing.

With increased focus on customer relationships, financial institutions across the world

have recognized that they need to perform by keeping customer at the centre.

Strategic goals of the organisation and dynamic customer needs have to be balanced

in order to remain competitive as well as building and maintaining relationships with

customers. Banking is one of the many business sectors that have adopted the internet

usage as both banks and customers have benefitted by the introduction of e-banking

services In this chapter, an introduction to the context of the study that includes

Customer Relationship Management, e-marketing and e-banking has been made. It

also presents the research background, need for the study and scope of the study along

with discussing the research questions and research objectives. The next chapter

presents a detailed literature review undertaken by the researcher.

CHAPTER 2 Literature Review

Chapter -2

12

2.1 Introduction

This chapter discusses in detail the concept of Customer Relationship Management,

its definition and features. With the help of existing literature, the use of CRM as a

strategy, e-marketing, e-banking, CRM in banking and CRM in e-banking have been

elaborated in this chapter. Through the use of available literature, the chapter also

identifies the key variables of CRM in e-banking which form the basis for the study of

the researcher.

2.2 Customer Relationship Management

With the growing focus of companies on building lasting relationships with

customers, there has been an increased focus on the function of marketing in

businesses. Earlier, there was an assumption by the companies that customers would

purchase and consume anything and everything that they produced. However, with

increased competition and growing focus on customers, marketing has gradually

evolved from orientation of production has given way to relationship building

approach. Companies now try to involve customers rather than simply selling the

product and services to them. Marketing, as a strategic function, now not only focuses

on attracting new customers but aims at identifying, acquiring and retaining

customers. With increased competition and a large number of options available to

customers, they have the power to lower product prices (Perreault, Cannon, &

McCarthy, 2008).As a result, companies aim to develop lasting relationships with

customers using Customer Relationship Management (CRM).

With the increased focus on customers, CRM has emerged as a key aspect of

marketing towards creating a sustainable customer advantage. CRM basically

involves designing and integrating the business processes around the customers and

redefining the value offered to them. It is followed by implementing and monitoring

programmes for them that aim to build relationships that are long term and profitable.

With customers being the centre of focus, it leads to customer satisfaction that

eventually leads to improvement in sales and market share profitability. Enhanced

customer satisfaction leads to reduction in customer turnover that reduces service cost

and time.

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Business to customer interactions can be classified as information gained from

customers and the output provided to them. This includes sales, marketing and after

sales services. For building and managing relationships with the customers, complete

and coherent technologies and processes are also required. According to Davidow &

Leigh (1998); Day(1984) and LaBarbera & Mazursky(1983), the complaining

behaviour of customers has serious implications on important factors such as brand

loyalty and intentions of repurchasing Stone, Woodcock and Wilson (1996) have

proposed that having interactions with customers that are effective can help in

improving relationships with customers. This includes having customers having

contacts with front line company staff and others, contact management with

customers through personal visits or over mail and transacting effectively in terms of

price and value. Different customers have different needs and preferences i.e. no two

customers may have the same price sensitivity or buying behaviour (Kutner and

Cripps, 1997). Loyalty of the customers is affected by these factors and in order to

increase the level of satisfaction, firms may reframe their offerings as per the needs of

the customers.

CRM aims at integrates the contact points of the company with the customer at the

centre (Eckerson & Watson, 2000).It basically aims at developing an interactive and

participatory between business and customer. Customer Relationship Management

aims at achieving a comprehensive view of the needs of the customers. It aims at

anticipating and reacting to them with effective and targeted strategies consistently.

Service providers now focus on a customer at the centre perspective rather than an

approach based on products. Services today focus on enhancing customer base and

customer loyalty that ultimately leads to increased revenues and, thereby, profits

(Kim, Suh, & Hwang, 2003; Lin, Su, & Chien, 2006; Roh, Ahn, & Han, 2005). The

strategy is known as Customer Relationship Management (CRM).

2.2.1 CRM and Relationship Marketing

Academicians and managers have often used the terms CRM and Relationship

Marketing interchangeably. An integrated attempt by service organisations at

identifying, maintaining and building up a network with individual customers is

termed as Relationship Marketing (Shani and Chalasani,1992).By the use of value

Chapter -2

14

additions and individualized and interactive contacts, the firms aim at strengthening

this network that has mutual benefits for both customers and firms. Relationship

Marketing includes the all important aspect of building relationships with customers

and enhancing their loyalty by providing customer satisfaction. Relationship

Marketing refers to the aspect of marketing that aims to attract, maintain and enhance

relationship with customers (Mckenna, 1991). The firms need to identify the kind of

relationship the firm aims to build with these customers. They need to classify them

into different segments and the optimally interacting with these segments to improve

the relationships.

Over the years, there has been an increase in the scope of Relationship Marketing is

being enlarged to include an integrated perspective on sales and marketing, after-sales

service and use of technology for customer satisfaction. Organisations are now

interested in all aspects of customer interactions with customers i.e. pre-sales, during

sales and after sales. This helps in building long term relationships that are profitable

too for the firms. The increased use of technology has evolved Relationship

Marketing to Customer Relationship Management which is used for integrating the

relationship building and retention strategies of the firm with knowledge of the

customer data base(Payne and Frow, 2005).

With the increased focus on customers, an associated term Customer Management has

also evolved that is related to the tactical aspects of implementation of CRM. relates

to the management of customer interactions. Through the use of tools such as

Campaign Management, Sales Force Automation, Web-enabled Personalization and

Call Centre Management, Customer Management aims at managing all interactions of

customers with the firm.

Model for this transition can be described as follows:-

RM CRM CM

Relationship Customer Relationship Customer

Marketing Management Management

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Fig.2.1- Transition from Relationship Marketing to Customer Management

Source: Prepared by Researcher

2.2.2 CRM – Definition and Features

Swift (2000) has defined CRM as an approach taken by an enterprise in order to

understand and influence the behaviour of customer by communicating meaningfully

with them that leads to improved customer acquisition, retention, loyalty and

profitability If the customer is satisfied, it positively affects loyalty intentions of the

customer across all products and services offered by the firm (Fornell, 1992; Fornell

et al., 1996). Regardless of the channel used for interaction, customers are offered the

convenience and simplicity of completing transactions along with customization

(Gulati & Garino, 2000). Croteau & Li (2003).have proposed that through CRM, the

firm aims to provide customised and a more responsive service to individual

customers leading to increased satisfaction and loyalty. By identifying the service

attributes that offer value to the customers, CRM aims to enhance loyalty. Through

CRM applications, customer satisfaction is affected due to perceived benefits of

individualised services, trustworthiness of consumption experiences and an effective

management of relationships (Reinartz & Kumar, 2003)

Customers are the focal point of any CRM initiative as it aims at building

relationships that are long-term and profitable. In order to understand and measure the

true value of customers, CRM can be a starting point for building relationships. CRM

helps to build the competitive advantage by attracting the repeat customers.

According to Liu (2007), it can be defined as a business strategy that, by using

information technology, aims to understand and satisfy the individualised needs of

customers .This helps in increasing the customer value and optimizing revenue of the

firm. The decisions of customer choice are the key to survival in competitive

C

C M

R

RM RM

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consumer markets. The cost of maintaining an existing customer is approximately five

times lesser than that of winning a new customer (Rosenberg & Czepiel, 1984).

Reichheld & Sasser (1990) have estimated that a firm can experience an increased

profit of nearly 80-100% by successfully retaining an additional 5% of customers.

Therefore, the use of CRM to maintain profitable relationships with customers is,

therefore, cost-effective marketing. This has led to CRM becoming a key focus area

of most service organisations (Morgan & Hunt, 1994; Kim et al., 2003).Customer

Relationship Management focuses on understanding the consumer and it can be

implemented to increase the bottom line for any business. Maddox (2002); Camaratta

(2005); Gold (2007); Krause (2007); Trembly (2007); Wettermann (2007) and Young

(2007) have identified that more and more services are using CRM to improve their

bottom line and that includes services such as banking and other financial services,

restaurants etc.

The term Customer Relationship Management has been defined from varied

viewpoints. Kalakota & Robinson (2000); Bull (2003) and Chen & Popovich (2003)

have defined CRM as a profit-making strategy that combines business process with

technology, understanding the needs of customers and maintaining and improving the

relationships. It can be defined as a business philosophy that focuses on customers’

share of wealth rather than market share for profit generation (Berry and Linoff,

2003). CRM system at seamless integration of marketing and information technology

fields that aims at improving the sales by building relationships (DaSilva and

Rahimi,2007). However, along with the benefits of CRM programmes, there are

several other barriers also to its implementation (Kalakota & Robinson, 2000;

Anderson, 2001; Barracliffe & Taylor, 2001; Bull, 2003; Chen & Popovich, 2003;

Liu, 2007; Slavens, 2001).

CRM can help in enhancing loyalty of customers by bringing free exchange of

information and quick redressal of customers’ complaints (Jamal and Naser, 2002).It

is a business strategy aimed at increasing profit margins through cost reduction by

retaining loyal customers and emphasizing on Customer’s Lifetime Value (Blattberg,

2001).Anderson (2001) has devised that segmenting customers based on their needs

and profit-potential will benefit the banks and other financial services. Bull (2003) has

proposed that targeting specific groups of customers can help increase profitability.

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Kalakota & Robinson (2000) and Trembly (2008) have identified that through

exchange of information and personalised services, CRM helps in facilitating

marketing and generating increased sales. CRM helps in proper alignment of

technology and processes leading to cost reduction in sales, marketing and services

(Barracliffe and Taylor, 2001). Through its data sharing tools, CRM helps in bringing

an approach that is more oriented towards the customer (Slavens, 2001). CRM helps

in improving profitability through a proper understanding of behaviour, habits and

needs of customers (Chen & Popovich, 2003; Kalakota & Robinson, 2000).

Potential benefits of implementation of CRM may include customizing products and

services; creating potential value for customers, enhancing customer retention and

loyalty and increased profits (Jutla, Craig, & Bodorik, 2001; Lin & Su, 2003; Lin et

al., 2006). Customer is at the centre of the concept of Customer Relationship

Management as income and profitability of the company depends on the purchasing

of goods and services. The firms focus on building long-term relationship with

customers (Gummesson, 1996; Lindgreen, Palmer, Vanhame, & Wouters, 2006). Joo

and Sohn (2008) have identified improvement in customer satisfaction as the key for

the successful implementation of any CRM strategy.

Other factors that affect satisfaction include inputs by the firm, provision of services,

quality of output and perceived value by the customer. The basic philosophy with

respect to CRM is sustaining competitiveness in the market and long-term

profitability. This can be achieved by retention of existing customers apart from

attracting new customers. According to Eklof & Westlund (1998); Gorst, Kanji &

Wallace (1998) and Lindgreen et al., (2006), the main concern of CRM is enhancing

customer loyalty that leads to intention of repeated purchases and positive word-of-

mouth. These repurchases and recommendation to others results to an increase in

profits (Hallowell, 1996; Roh et al., 2005).

Customer Relationship Management involves the use of Information Technology for

integrating marketing, sales and service in order to provide individualised attention to

customers. Winer (2001) has identified the basic elements of any CRM strategy as

preparing a database of customer activity, followed by its analysis to identify the

target customers. This is followed by devising mechanisms for building relationships

Chapter -2

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with the targeted customers ensuring the privacy of customers and measuring the

success of the CRM program after its implementation. In other words, a collective

effort aimed at improving customer identification, acquisition and retention is termed

as CRM. Business processes and technologies that seek to understand a company’s

customer is CRM (Kim et al.,2003) These sequential steps help in increasing the

intimacy and understanding between a company and the customers (Kalakota &

Robinson,2001; Tiwana,2001).

The basic purpose of all CRM initiatives is to foster mutual trust and relationship

between an organisation and its customers. These cooperative relationships must be

interdependent and should aim at building long term relationship with the customers.

CRM helps in managing and coordinating customer interactions across multiple

channels, departments, lines of business and geographies. It helps organizations in

driving superior corporate performance by maximizing the value of each interaction

with the customer. According to Payne & Frow (2005), in terms of technology, CRM

may be defined as an integrated information system that helps in planning, scheduling

and controlling the entire sales activities in an organization. It includes all aspects of

customer interactions, including the pre-sales and post sales activities.

CRM focuses on integration of processes across different functions. It may be defined

as a cross-functional strategic approach that is concerned with the creation of

improved shareholder value by developing appropriate relationships with key

customers and customer segments (Boulding et al.,2005).According to Payne and

Frow(2005), CRM typically involves identification of appropriate business and

customer strategies, the acquisition and diffusion of customer knowledge, deciding

appropriate segment granularity, managing the co-creation of customer value,

developing integrated channel strategies and the intelligent use of data and technology

solutions to create superior customer experiences.

The strategy of Customer Relationship Management acknowledges customer as the

key to success of any businesses. Hence, optimising the business-customer

relationship is the main objective of CRM. Understanding and managing the needs of

existing and potential customers is the key objective of CRM (Brown, 2000). It is a

strategic process in which a company aims at managing its enterprise based on

Chapter -2

19

customer behaviours that involves acquiring and developing knowledge about

customers. Thus, CRM may be defined as an exhaustive strategy that aims to acquire

and retain customers that helps in creating superior value for the organisation as well

as the customer. CRM aims at increasing marketing efficiency and improving

marketing effectiveness, thereby improving on marketing productivity. For the

company, these collaborative processes also help in reduction of transaction costs and

overall development costs. Relationship building and proactive customer business

development are the two important processes of CRM which ultimately leads to

superior mutual value creation.

2.2.3 Evolution of CRM

For service organisations, building relationships with customers is vital for sustaining

competitive advantage. The 4 Ps framework of marketing- product, price, place and

promotion is less valuable for services as the customer is the focus. In the early 1980s

Database Marketing was used for customer interactions that involved speaking

individually to countless customers. However, due to operational difficulties, it gave

way to Relationship Marketing. By the late 1980s, service organisations began to

focus on customers aiming to improve their level of satisfaction. This marked the

earliest form of CRM where customer was put at the middle of the business. With the

advent of technology, Relationship Marketing gradually evolved in to CRM as it

became imperative for organisations that the sales and service systems share

information for improving satisfaction.

By the late-1990s, internet had become a common mode of communication. This

growth in Internet usage has forced the service organisations to employ CRM in the

electronic markets also in order to build customer retention and loyalty. CRM, as a

business strategy, aims at a better understanding of customers and focussing on their

retention by providing them better customer experience. This leads to increased

loyalty and increased profitably as a result. Jain (2005) has suggested that a fifth P-

profiling-should be added to the marketing mix framework for complete integration of

CRM into marketing management paradigm.

Chapter -2

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2.2.4 Need for Customer Relationship Management

With a customer-centric approach to marketing, it is important for businesses to plan

their marketing activities keeping in mind the different types of markets that they

cater to .This helps in building relationships and networks with each one of them. The

distinct markets that these businesses interact with include the customer market, the

referral market that consists of customers who have been referred to the business by

word-of-mouth, the supplier market, the recruitment market, the influencer market

consisting of individuals, organisations, or institutions that directly or indirectly

impact on the business; and the internal market, comprising an organisation’s own

employees (Christopher et al., 1991). However, out of all these, customer market is

the most important as any business will be able to succeed in creating shareholder

value only if it creates superior customer value. According to Barnes (2001); Foss and

Stone (2001); Greenberg(2001)and McKenzie(2001),the concept of CRM in

marketing has gained importance in recent years as it aims at fostering closer

relationships between a business and its customers. Taking advantage of IT-based

interactivity, customer-oriented businesses focus on marketing their products and

services through relationships and interactions. (Ryals and Payne, 2001).

Fig.2.2- Distinct markets at the business place

Source: Adopted from Christopher et al, 1991

Chapter -2

21

Increasing global competition and fewer product differentiations have also enhanced

the importance of CRM. The companies have realised that it is important to move to a

customer-at-the-centre approach rather than product centric approach. Sheth and

Parvartiyar (1995) have contended that consumer is motivated to engage in relational

behaviour as reduction of choice in decision making leads to several psychological

and sociological benefits. The service organisations also motivate the customers by

offering the associated benefits and rewards through the implementation of CRM

programmes. Thus, CRM implementation has become a key strategic initiative for

most of the organisations, particularly in the services industry. Services are typically

produced and delivered at the same institution.

Therefore, in order to maintain and enhance the relationship with customers, it is

essential to have an improved interaction and exchange of information between the

service organisation and the end user of the service. According to Buttle (2004), both

defensive and offensive reasons motivate the firms to adopt CRM strategies. When a

firm’s leading competitors have adopted CRM successfully and there is a fear of

losing consumers and revenue, adoption of CRM has a defensive reasoning. When a

firm aims at improving profitability by reducing costs and increasing revenues

through improved customer satisfaction and loyalty, offensive arguments are

applicable.

Economic considerations are the basic reason for firms to focus on building

relationships with customers. When they manage their consumer base by identifying,

satisfying and retaining their most profitable consumers, they are bound to generate

better results. According to Wilmshurst & Mackay (2002) and Mudie & Cottam

(2010), there is an improvement in business performance as the implementation of

CRM initiatives leads to enhanced customer satisfaction and increased customer

loyalty. Increased customer satisfaction leads to increased profitability, reduced

employee turnover, and growth in market share (Boshoff & Tait, 1996).CRM, thus,

plays a key role for the practitioners of service marketing.

Chapter -2

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2.2.5 CRM as a Strategy

The ability of an organisation at building, maintaining and enhancing its relationship

with valued customers determines its success. Therefore, refinement of strategies for

customers, based on their value to the firm, is required. (Kim et al., 2006).With

growing competition and reduced profit margins, there is an increasing awareness of

the importance of CRM. According to Duboff(1992) and Gloy, Akridge, & Preckel

(1997), marketers often follow the 80/20 rule while determining customer

profitability. It refers to the fact i.e. 80% of the profits of the firm result from the top

20% of profitable customers while 80% of the costs incurred by the firm are caused

by top 20% of unprofitable customers. Hawkes (2000) has identified that this is where

the role of CRM as a strategy comes into play as understanding profitability of the

customers and retaining such customers form the core functions of CRM activities.

For maximising the profit potentials of customers, measurement and usage of

customer value is done by many companies (Gloy, Akridge, & Preckel, 1997). In

order to do so, they need to determine the value of these customers and strategies need

to be planned accordingly to retain such valued customers. According to Coussement

& Van den Poel (2008), as a result of the focus on creation and enhancement of long-

term relationships with these customers, Customer Relationship Management has

become a key strategy for businesses in highly competitive business environments.

The increased focus of marketing on customers and the availability of data related to

customer transactions has led to an increased interest in determining the Customer

Lifetime Value (CLV).

CLV can be viewed as the present value of the future cash flows associated with a

customer (Pfeifer, Haskins and Conroy, 2005). According to Kim & Lee (2007) and

Kumar et al., (2006), segmentation of customers and allocation of marketing

resources and efforts are improved by knowing the CLV of individual customers. This

leads to increased retention rates of customers and enhanced profitability for the firm

(Hawkes, 2000). Competitive advantage of any service organisation is determined by

the satisfaction and loyalty of its customers. Satisfaction and loyalty are enhanced if

the needs of customers are understood and satisfied by the firm (Vilares & Coelho,

2003). This can be achieved only through a proper implementation of CRM strategy.

Chapter -2

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The business process that provides the structure for developing and maintaining

relationships with customers is termed as Customer Relationship Management.

Customer Relationship Management (CRM) is now being viewed as strategic

(Lambert, 2004; Payne and Frow, 2005; Zablah, Johnstor & Bellenger., 2005),

process-oriented (Lambert, 2004; Payne and Frow, 2005; Zablah et al., 2005), cross-

functional (Lambert, 2004; Payne and Frow, 2005), value-creating for buyer and

seller (Lambert, 2004; Boulding et al., 2005; Payne and Frow, 2005), and a means of

achieving superior financial performance (Lambert, 2004; Boulding et al., 2005;

Bohling et al., 2006; Payne and Frow, 2005). CRM helps in identification of key

customers (Pels, 1992) or customer groups that the firms need to target as part of its

relationship building strategy (Rajgopal and Sanchez, 2005).

The identification of key customers is done by the evaluating the profit potential of

individual customer (Turnbull et al., 1996). According to Barnes (2001) and

Greenberg (2001), CRM as a strategy seeks to establish interaction based

relationships between a service organisation and its valued customers. Parvatiyar and

Sheth (2000) have defined Customer Relationship Management as a comprehensive

strategy aimed at creating superior value for the customers and the company by

acquiring, retaining and maintaining long-term relationship with selective customers.

CRM as a strategy builds on the notion that customer retention and profitability can

be improved by managing the Customer Relationships as valuable assets..

With increased focus on customers over the years, there has been increased use of

information technology (IT) for implementing relationship building strategies which

is the domain of Customer Relationship Management (CRM). CRM aims at an

alignment of IT and marketing strategies of the firm. According to Glazer(1997),

information-intensive strategies are required for the successful implementation of

information-enabled relationship marketing. Better usage of data helps in better

understanding of customers’ needs and implementation of improved relationship

building exercises. CRM has been defined as a data-driven marketing strategy aimed

at improving customer satisfaction and company profitability using existing customer

information and controlling further data as it accumulates over time (Peppers and

Rogers, 1995; Kutner and Cripps, 1997; Galbreath, 1998; Couldwell, 1999; Fletcher,

1999; Hobby, 1999)

Chapter -2

24

Peppers et al.(1999) has described CRM as a strategic response to individual

customer needs based on what information the firm has about the customer. It is a

revolving process that involves the interaction of firms with their customers, leading

to generation, aggregation and analysis of customer data and application of these

results for segmentation purposes is termed as Customer Relationship Management

(Seybold, 2001). Companies are motivated to manage their relationships by focussing

on the customers, that are economically valuable, as it leads to increased share of

wallet from these customers. The CRM approach improves the ability of an

organisation to understand the needs and behaviour pattern of their customers.

Fig. 2.3- CRM Core Cycle of Activities

Source: Adapted from Nykamp (2001)

Cross-functional integration between marketing and information technology,

measures taken by management and the issues of communication and culture in an

Chapter -2

25

organisation are the three vital issues that can form the axis for development and

employment of Customer Relationship Management in the services sector (Ryals and

Knox,2001). According to Xu et al. (2002) “The goal is to improve the customer’s

experience of how they interact, which hopefully, in turn, creates more satisfaction,

which yields more loyalty, which, ideally, yields more sales of products and services.

The central database within CRM is available for everybody in the enterprise. By

accessing the central customer database, everybody in the enterprise can know each

individual customer so customers will not get lost”.

A very important sub-strategy that CRM embodies is channel management. This

refers to the way of transaction of a customer with the service firm and the balance

that the firm employs between its various distribution channels. Retention or

acquiring of customers depends to a large extent on an a proper channel mix by the

firm that helps in effective distribution of products and services to customers. This

helps in increasing profitability as well as ensuring customer satisfaction. An effective

mix of channels leads to effective segmentation of customers as well as reduction in

overall input costs. The focus of the firms is building long-term profitable relationship

with the customers. CRM as a strategy aims at creating a competitive advantage by

understanding, communicating and delivering value to customers better than the

competitors. Identification of pertinent consumer values helps in increasing customer

loyalty and retention. Building a firm two-way relationship between the customers

and its business helps in reducing customer turnover, thereby, leading to increased

loyalty.

2.3 Services Sector in India

Varied activities come under the classification of services sector that includes highly

sophisticated services like telecommunications, satellite mapping and computer

software to highly capital-intensive activities like civil aviation and shipping. Services

sector also includes employment-oriented activities like tourism, real estate, and

housing. Infrastructure-related activities like railways, roadways, and ports as well as

social sector related activities like health and education fall under the broad

categorisation of services. The National Accounts classification of the services sector

incorporates trade, hotels, and restaurants; transport, storage, and communication;

Chapter -2

26

financing, insurance, real estate, and business services; and community, social, and

personal services. In the World Trade Organization (WTO) list of services and the

Reserve Bank of India classification, construction is also included.

According to McDonald & Leppard (1990),there has been an spurt in the number of

service industries across the globe. The service sector now has a major impact on

national economies. With increased contribution of services sector to the economy,

customers are the benefitted lot as they have a greater number of choices and

availability. With increasing number of new players in each category of services, the

complexity and competitiveness in the business environment has been gradually

increasing. Increased competition and changing business dynamics have led service

firms to focus on customer-centric approach in order to sustain their competitive

advantage (Teare, Moutinho & Morgan, 1990).

Marketing related activities have seen a change due to growth in the service sector

that has led to increased competition. Aggressive marketing initiatives have been

taken by firms keeping customers in the focus. According to Ballantyne et al, (1993),

service organisations now face a much more complex market scenario and require a

multifaceted approach to deal with competition. Any service firm has to identify its

current and potential customers and build long-term relationships with them (Duhan,

Johnson, Wilcox & Harrell, 1997).Delivery of service needs to be adapted to the

perceptions and specific needs of these customers. They need to focus on building

relationships with these customers and continuously improve their service offerings.

This is where Customer Relationship Management comes into play. In order to

maintain a competitive advantage, loyalty of customers is of paramount importance

for all service firms, including banking institutions. Proper alignment of CRM

strategy along with technology can ensure the satisfaction of customers resulting in

loyalty.

Chapter -2

27

Table 2.1- Contribution of various services in Indian GDP

Source: www.indiabudget.nic.in

Chapter -2

28

A wide variety of activities fall under the broad categorisation of services in India.

They include trade, hotel and restaurants, transport, storage and communication,

financing, insurance, real estate, & business services, community, social and personal

services and services associated with construction. Services in India have emerged as

a major contributor to national and states’ incomes, trade flows, foreign direct

investment (FDI) inflows and employment. The services sector has a contribution of

around 59 per cent to Indian Gross Domestic Product (GDP) and a growth rate of

about 8.1 per cent. It is the largest and fastest-growing sector of the economy. The

contribution of financial services, that includes banking and insurance services, to the

Indian GDP stands at about 13.7% as per the budget of 2014-15.

2.4 Overview of Banking Sector in India

Financial institutions like banks have an important role in the economic development

of any emerging economy. Banks ensure not only economic growth but also financial

stability for the nation. They play a pivotal role in the development of financial

markets and intermediaries and play an important role in meeting the financing needs

of corporate sector due to the absence of well-developed equity and bond markets.

Banks cater to the banking needs of a large population of the country, helping them in

managing the financial risks involved with liquidity and safety of funds. The varied

needs of the economy have led to an evolution of different forms of banking.

Deregulation, globalisation and technological advancements have led to a

transformation of the banking system. Increased competition has led to introduction of

innovative products by banks seeking newer sources of income and diversification

into non-traditional activities.

In India, Banking Regulation Act (BR Act), 1949 defines the business of banking.

According to Section 5(c) of the BR Act, 'a banking company is a company which

transacts the business of banking in India.' Further, Section 5(b) of the BR Act defines

banking as, 'accepting, for the purpose of lending or investment, of deposits of money

from the public, repayable on demand or otherwise, and withdrawal, by cheque, draft,

order or otherwise.' Thus, the three primary activities of a commercial bank include

maintenance of deposit accounts including current accounts, cheque issuance and

payments and collection of cheques for banking customers.

Chapter -2

29

The focus of commercial banks in India has traditionally been catering to the short-

term financial needs of industry, trade and agriculture. However, with the increased

sophistication and diversification of the Indian economy, there has been an increase in

the range of services offered by commercial banks. Banks have also increasingly

focussed on meeting the capital goods and project-financing needs of industry leading

to an increased share in long-term financing. The three main areas into which the

functions of a commercial bank can be classified include payment system, financial

intermediation and financial services.

All financial transactions are settled through banks. This settlement may be done by

banks through issuance and payment of cheques issued on behalf of customers.

Innovations in technology have led to an increased number of settlements through

electronic banking, wire transfers, credit card transactions etc. Banks also perform the

function of financial intermediaries by taking deposits from customers and lending

these funds to borrowers. Bank deposits ensure liquidity, safety as well as returns in

the form of interest for depositors while bank loans and investments made by banks

serve the purpose of channelling these funds into profitable as well as socially

productive uses. In addition to functioning as financial intermediaries, banks today

also offer customers a wide variety of financial services. Investment banking,

insurance-related services, government-related business, foreign exchange businesses,

wealth management services, etc. are some of the important financial services offered

by banks today that help in improving the profitability of banks.

2.4.1 Banking Structure in India

The Reserve Bank of India (RBI) performs the function of central banking and

monetary authority of India. It also regulates and supervises the functioning of all

commercial banks. It performs the function of being the central bank of the country.

As the central bank of the country, the RBI performs a wide range of functions that

include controlling the supply of money and credit, acting as the currency authority,

management of foreign exchange, strengthening and building up the financial

infrastructure of the nation, supervising the functioning of commercial banks,

performing the function of banker of banks and serving as a banker to the

Chapter -2

30

government. The functions performed by RBI with respect to commercial banks

include acting as the banker of banks and supervising the functioning of banks.

RBI acts as the banker to the banks and, therefore, banks depend on RBI for short

term funds borrowing.RBI also helps in centralised clearing and cheap and quick

remittance facilities. Banks, on their part, are required to hold a part of their csh

reserves with RBI.RBI is supposed to function as the lender of last resort and banks

may borrow from RBI only when they are not able to meet the cash shortfall from

other sources.

RBI has earmarked a certain share of liquid cash, known as Cash Reserve Ratio

(CRR),that banks need to maintain with RBI for ensuring the liquidity and solvency

of individual commercial banks and of the banking system as a whole. Money supply

in the market is controlled by CRR i.e.an increase in CRR by RBI leads to reduction

in availability of funds available with the banks for lending and thereby tightening

liquidity in the system. Alternately, if RBI reduces the CRR, it leads to an increase in

the funds available with the banks giving way to increased liquidity in the financial

system. RBI performs the function of supervisory, regulatory and controlling

authority of commercial banks. The bank's regulatory functions relating to banks

cover their establishment (i.e. licensing), branch expansion, liquidity of their assets,

management and methods of working, amalgamation, reconstruction and liquidation.

RBI controls the commercial banks through periodic inspection of banks and follow-

up action and by calling for returns and other information from them, besides holding

periodic meetings with the top management of the banks.

2.4.2 Scheduled Banks in India

Scheduled commercial banks and scheduled co-operative banks are part of the

scheduled banking system in India. More than three-fourths of all financial

institutions' assets belong to the scheduled commercial banks and, therefore, they are

the most important part of the Indian financial system. Scheduled commercial banks

include public sector banks, private sector banks, foreign banks and regional rural

banks.

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Public Sector Banks

The Government of India is a majority stakeholder in public sector banks and so,they

are the largest category in the Indian banking system. State Bank of India and its 6

associate banks (such as State Bank of Indore, State Bank of Bikaner and Jaipur etc),

19 nationalised banks (such as Allahabad Bank, Canara Bank etc) and IDBI Bank Ltd

constitute the public sector banks in India. About 85% of bank branches in India

belong to public sector banks and almost 95% branches in the rural areas.

Figure 2.4: Scheduled Banking Structure in India

Source: Adapted from Pathak (2003)

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Regional Rural Banks

The Central Government, concerned State Government and a sponsoring public sector

commercial bank jointly own the Regional Rural bank. They were established with a

view to develop the rural economy. The main function of these banks is to provide

credit to small farmers, artisans, small entrepreneurs and agricultural labourers. Over

the years, in order to improve the viability and profitability of such banks, the

Government has allowed the amalgamation of the RRBs of the same sponsored bank

within a State which has led to a consolidation of such banks in a state.

Private Sector Banks

Private individuals and corporates hold the majority of share capital in such banks.

The private banks that were not nationalised include The Jammu and Kashmir Bank

Ltd., Lord Krishna Bank Ltd etc. and are together termed as old private sector banks.

As part of reforms in the banking sector and to induce competition in the banking

sector, RBI permitted the private players to enter the banking system in July 1993.

These new entrants are collectively called the new private sector banks. There are 7

new private sector banks and 15 old private sector banks operating in India.

Foreign Banks

Registered and head offices of such banks are located abroad but they operate either

through their branches in India or through wholly-owned subsidiaries. Major focus of

these banks in India has been on the corporate segment while some larger foreign

banks have included consumer financing also in their portfolios. As per RBI

regulations, these banks in India are required to adhere to regulations governing

domestic banks that also include priority-sector lending. The presence of new private

banks and foreign banks has led to an increased competition in the banking sector.

Co-operative Banks

They cater to the financing needs of agriculture, retail trade, small industry and self-

employed businessmen in urban, semi-urban and rural areas of India. Heterogeneous

nature of these banks allows such banks to have a wider access to the customers.

Urban areas are served by urban cooperative banks (UCBs) with operations generally

limited to one state while state co-operative banks, district central cooperative banks,

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SCARDBs (State Co-operative Agricultural and Rural Development Banks) and

PCARDBs (Primary Co-operative Agricultural and Rural Development Banks).

With increased competition and perceived differences in the services offered, the

demands of the customers have been increasing. This has led to increased challenges

for the banks as low switching costs have led to reduced loyalties. Recent RBI

initiatives like facility of portability of savings-account, opening of zero-balance

account with minimum facilities etc. has led banks to have an increased focus on

retaining their existing customers. Banks have to engage more with the customers,

both through physical branches as well as through electronic banking, to meet

customer expectations and enhance their level of customer satisfaction. Customer

expectations in the banking sector are shaped by various factors. Other industries in

the service sector have focussed on enhancing the content of products and services

and making the interactions more rewarding for the customers. This helps in

delivering an engaging experience to the customers.

There has been an increased influence of independent reviewers as well as word of

mouth peer conversations. The emergence of social media along with the increased

use of mobile communication has led to customers trusting their peers more than

financial experts. The use of social media has also led to amplification of any bad

customer experience that the customers share. This may lead to long term damage to

reputation of these banks. Easy access to data, research and expert views and ideas

has led to a more informed customer seeking more differentiation from the banks. An

increased choice of alternative financial products and online services has led to

reduced dependency on banks for meeting their various banking needs. These factors

have led to an increased focus on building customer relationships with the customers

in order to improve customer satisfaction and build customer loyalty that ultimately

leads to reduced operational costs and increased profitability.

2.5 CRM in Banking Sector

Today, almost all the services organisations such as banks, insurance companies etc.

have identified the importance of Customer Relationship Management (CRM) in

improving the profitability of these service organisations.CRM helps the banks in

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retaining existing customer base, acquiring new customers and maximizing the

lifetime value of these customers.. Building close relationship with customers requires

an alignment of objectives between the IT and marketing departments that helps in

providing long-term retention of selected customers. CRM, as a strategy, helps in

identifying the most profitable customers and prospects and channelling the efforts

towards building relationships with these customers through individualized

marketing, discretionary decision making, and customized service.CRM may help in

developing these relationships through the various channels that the bank uses. Proper

application of CRM in the banking sector can help in providing better customer

service, making call centres more efficient, effective cross-selling of products,

simplification of marketing and sales processes, identifying new customers,

improving the satisfaction level of existing customers and increasing customer

revenues and profitability.

Benefits for the customer include an augmentation of either the core service or on the

relationship itself. Relational benefits refer to the benefits accrued as a result of

establishing a long-term relationship with a service provider (Gwinner et al., 1998;

Reynolds and Beatty, 1999). Behavioural outcomes of customers are found to be

significantly affected by such relational benefits (Palmatier et al., 2006; Hennig-

Thurau et al., 2002; Vazquez-Carrasco and Foxall, 2006). Knowledge about

customers is a central driver of strategic marketing success and customer relationships

lie at the heart of a firm’s competitive advantage.

Bhatnagar (2013) has identified three types of CRM that are broadly adopted by

banks. This includes operational CRM, analytical CRM and collaborative CRM.

1. Operational CRM – This refers to the tracking of all interactions with customers

through CRM software. All inbound and outbound interactions of the customers

including marketing campaigns management and call centres is efficiently organised

leading to a overall support to frontline processes in sales, marketing and customer

service, through automated communications with the customers. They record contact

Customer contact history and other valuable customer information is collated to

determine the relationship of the customer with the bank. This information can be

retrieved by banking staff as per requirement. Automation of the sales force and

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enterprise marketing and improved customer service and support are the major

benefits of operational CRM to banks.

2. Analytical CRM – It refers to analysis of customer information in order to improve

upon the objectives of marketing and customer service. Analytical CRM aims at

delivering the right message to the right customer at the right time through the right

channel. It involves using data analysis to extract knowledge for optimising customer

relationships.

The major benefits of Analytical CRM to banks are:

(a) Customer Retention

(b) Fraud Detection

(c) Optimising marketing efforts as per customer life time value

(d) Credit Risk Analysis

(e) Segmentation and targeting

(f) Development of customised new products matching the specific preferences and

priorities of customers.

3. Collaborative CRM – It refers to the self-service systems offered by the banks that

facilitate customers to perform services themselves by the use of different

communication and interactive channels. It brings people process and data together

and enables channelling of data and information appropriately to bank staff for

proactive decision making and enhanced informed customer service and support

activities. It provides a means of information sharing to all concerned in timely

manner and includes customer as a creator of service. The major benefits of

collaborative CRM to banks are

(a) Providing efficient customer communication across a variety of channels

(b) Online services to reduce customer service costs

(c) Providing access to customer data while interacting with customers.

Thus, CRM can be understood as a catalyst enabling transformation of banking from

traditional ‘Transactional banking’ to ‘Relationship Banking’ by use of technology.

Over the years, various Indian banks, under the guidance of Reserve Bank of India,

have made several customer-friendly initiatives in order to improve the quality of

customer service. RBI itself has taken a number of initiatives for improving customer

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satisfaction. Banking Ombudsman Scheme has been introduced for quick and prompt

redressal grievance. A separate Customer Service Department has been set up by RBI

that helps in disseminating guidelines and instructions related to customer service.

Banking Codes and Standards Board of India (BCSBI) has been set up by RBI as an

independent autonomous watchdog to ensure that bank dealings with customers are

fair and transparent. Code of Banks' Commitments to Customers has been issued by

BCSBI which sets minimum standards of banking practice and benchmarks in

customer service for banks to follow. Commercial banks have become members of

the BCSBI and have adopted the Code as their Fair Practice Code in dealings with

customers. The main RBI directives on customer services include the following

measures to be taken by banks.

1. Customer Service Committees

A Customer Service Committee of their respective Boards is to be constituted by each

bank. This committee should include customer representatives as well as experts in

order to improve the customer service quality. Customer Service Committees are to

be established by banks at branch level and a nodal officer has to be appointed in the

Head Office and each controlling office specially catering to customer service.

Customers can approach these officers with their grievances and RBI and the Banking

Ombudsman can have liaison with for further solutions.

2. Customer Service Policies approved by the Board

Servicing the customers in the earnest way is prioritised for the banks along with

focussing on profit and meeting social obligations. A Board approved policy needs to

be implemented by banks with respect to the following:

• Policy for Comprehensive Deposit

• Policy on Cheque Collection

• Policy on compensating the customers in case of erroneous deductions, interest

payment where there is collection delay etc., and

• Policy on Redresssal of Customer Grievance

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A complaints or suggestion box needs to be placed in each branch along with a notice

informing the customers to meet the branch head in case their grievances remain

unattended to. Customers may be provided acknowledgement of their complaints as

well as the controlling office may be intimated regarding the same.

3. Publicising the Policies regarding customers

Policies related to customers should be widely publicised by the banks informing

more and more customers about the same by putting them on their website

prominently. The information regarding these policies should be disseminated to the

customers through putting them on notice-boards in branches as well as issuance of

booklets or brochures regarding the same.

4. Operations of Accounts by Special Category of Customers

Policies should be developed in order to help the operation of accounts by special

categories of customers that include sick, old, incapacitated persons, persons with

disabilities, visually impaired persons, etc. Identification of customers may be done

by customer’s thumb or toe impression further verified by two witnesses who are

independent and the bank knows them. One of these witnesses must be an official

related to the bank.

5. Obligations towards Confidentiality of Customers

There exists a contractual relationship between the banker and the customer.

Therefore, banks have an obligation towards maintaining secrecy about the accounts

of the customers. Divulging of any information to any other individual or group

regarding customer accounts is strictly prohibited except under well defined

conditions that include mandatory disclosure under compulsion of law, duty to the

public duty to divulge the details, in the interest of bank or where the details are

divulged with the express or implied consent of the customer.

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6. Collection of Customer Information for Cross-selling Purposes

Collection of additional personal information at the time of account opening may be

potentially used for cross selling of various other financial services by the banks.

Sometimes, external agencies may have access to such information that may be used

by them for furthering their own objectives. Banks have been advised by RBI to

maintain complete secrecy of confidential information provided by customers for

complying with Know Your Customer (KYC) norms and any divulgence in this

regard is in violation of the obligations of the bank towards confidentiality of

customers. Any additional information required by banks may be collected separately,

from the customers explaining the reasons for collection of any such data and where

this data may be put to use.

7. National Do Not Call Registry

There has been increasing complaints of unsolicited marketing calls received by

customers. In order to counter this menace, all banks have been advised by RBI that

all telemarketers, engaged by banks for direct marketing should be registered with the

Department of Telecommunications (DoT).

Apart from the above mentioned RBI directives on customer service, RBI has also

devised a Charter of Customer Rights for the convenience of banking customers. The

major points identified under this include:

1. Right to Fair Treatment: Both the customer and the bank need to have a mutual

right of courteous treatment. There should be no discrimination of customers

based on demographic grounds that include gender, age, religion, caste and

physical ability when any financial services or products are offered or delivered to

them.

2. Right to Transparency, Fair and Honest Dealing: Banks should ensure that rules

and regulations related to daily banking operation and other banking regulations

are communicated to a general customer. There should be a proper disclosure of

the pricing of the products, responsibility of the customers, the risks associated

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with the product and the governing terms and conditions throughout the life cycle.

Any marketing practices that are unfair or any terms of contract that are coercive

should not be employed by banks. Customers must not be subjected to exertion of

any undue influence or harassment during the entire period of relationship with

the bank.

3. Right to Suitability: Product offerings should be made keeping in mind the needs

of the customers and assessing the financial conditions and understanding of the

customers.

4. Right to Privacy: It is the bank’s responsibility to keep the personal information of

the customer confidential and such information should not be used by banks for

any cross-selling purposes unless specific consent has been given by customers or

law requires the disclosure of such information. The information may also be

shared if it is for any mandated business purpose such as credit information

companies. Privacy of the customers needs to be protected from any

communication, electronic or otherwise, which violates the privacy of the

customer.

5. Right to Grievance Redress and Compensation: Customers have a right to

grievance redressal, either from the bank end or originating from the sale of third

party products. Clear communication of the policy regarding compensation due to

mistakes, performance delays or overall non-performance must be made. Rights

and duties of customers must be clearly spelt out in case of occurrence of such

events.

2.6 e-Marketing

The marketing discipline has been exposed to various changes and strong challenges

with the introduction and diffusion of the Internet phenomenon into the business

arena. The development of e-marketing has been one of the most important and

influential trends in the field of business and marketing offered by Information

Technology over the past decade. An important difference between traditional

marketing and e-marketing is the reduced or eliminated distance between producers

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and consumers providing a medium of direct contact between originally distant

parties. However, the issue of reduced or eliminated intermediation is not always cited

as an advantage by the researchers. While the Internet can transfer title of ownership,

it cannot perform physical movement (Chang et al., 2002). Besides, many of the

valuable functions of intermediaries cannot be replaced in the online market creating

the question of how advantageous or disadvantageous disintermediation really is

(Alba et al., l997).

The internet has made marketing more customer-centric. It flows from its interactive

nature as a result of which the firms have to move from addressing mass markets to

addressing a single segment (Wind and Mahajan, 2002). Internet marketing

environment offers extensive customization opportunities. Mohammed et al. (2002)

have described the two routes of customization. Customization can be- initiated by the

user (personalization) or by the organization (tailoring). Computer-based information

and flexible manufacturing systems, commonly called mass customization, make it

possible to serve finely segmented molecular markets with tailor-made products at

low costs (Kara and Kaynak, 1997). Individuals have a much more positive attitude

toward websites those give consumers the chance to personalize it themselves in

comparison with those that tailor the content automatically (Nunes and Kambil,2001)

An increasing change in the way of conducting businesses has been caused by e-

marketing. The increased usage of social media offers a great opportunity to

marketers to enhance the future interactions of businesses and customers. E-

marketing, also known as Internet marketing, is a component of electronic commerce

ad has been gaining increased acceptability with increasing penetration of internet.

Use of digital technologies that helps in selling the various product offerings or

services is an important part of e-marketing and complements the traditional

marketing methods employed by companies. E-marketing employs the same

principles of marketing that are used in traditional marketing methods that include

creation of a strategy for delivering the right message to the right people. Adding to

the traditional methods of marketing such as advertising, sales and focussing on

improved relations with the customers, the element of e-marketing adds a new

dimension to the marketing mix by improving the flexibility and reducing the costs.

E-marketing is suitable for application across all businesses. However, the

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applicability of e-marketing increases manifolds particularly in sectors customers are

at the centre of the business.

The key benefits of e-marketing include accessibility at anytime from anywhere.

Global reach through e-marketing helps the firm in reaching the right customers at

much reduced costs through the use of properly planned and effectively targeted e-

marketing campaign. According to Szymanski and Hise (2000), convenience of 24-

hour marketing helps the customers in economizing on time and effort. Easy location

of merchants, access to increased number of items and often-attached offerings help

in optimum utilisation of time and efforts. According to Bakos (1997) and Elofson

and Robinson (1998),e-marketing helps in reducing the costs of acquiring information

about products along with the cost of transaction involved in making those purchases.

The customers can gain access to the product offerings and services even if the brick

and mortar shops or offices are closed. E-marketing lets the service organisations

reach people who want to know about their products and services instantly. For

example, many people usually carry their mobile phones and other devices wherever

they go. When combined with the personalized aspect of e-marketing, it can be used

to create very powerful and targeted campaigns. Fast availability of the information

helps the customer gain access to a larger assortment of products. According to

Ellsworth and Ellsworth (1996), e-marketing helps in faster and quicker promotion of

goods and services, giving the option of 24 hour access to customers which is a

serious limitation of traditional marketing channels.

E-Marketing allows the companies to save money since the online marketing

campaigns don’t require a large amount of investment. Since e-marketing helps in

increasing the competition among various retailers, it helps the customers in making

an informed choice. Presence on the Internet can help the expansion of the company

from a local market to national and international markets at the same time, providing

expansion possibilities to the companies. Quelch and Klein (1996) define a firm

marketing its products or services through the Internet as a global firm because

consumers, irrespective of their geography, can access it. Acting as a boundless

platform for advertisements and marketing of products and services, it functions as an

important channel of distribution that can help in generation of additional sales and

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revenue. Comparison of increased number of brands and varieties and price

comparisons help the customer in making an informed and reasonable choice.

According to Peterson et al.,(1997),in the context of internet, products and services

can be categorized along three dimensions that include cost and frequency of

purchase, value proposition, and degree of differentiation. Eight different

combinations can be constituted from these three dimensions. Purchase may be made

through e-marketing when purchase decision is regarding expensive and infrequently

purchased product or when the value proposition is intangible or informational. A

personal inspection of the product before the purchase leads to a preference towards

the traditional way of purchase. Firms need to determine the product suitability on e-

marketing based on these categorisations.

Rangaswamy and Wind (1994) have summarized the overall nature of electronic

markets along three dimensions of relevance to consumers: the psychological benefits

associated with shopping, the degree of interactivity and the flexibility of the search

process. Figure 2.5 indicates the dimensions of the electronic markets, indicating the

progression along these dimensions that describe the electronic markets of yesterday,

today and tomorrow. According to them, different e-marketing benefits vary by the

buying situations. For example, e-marketing offers more choices in new-buy

situations. As a result, a potential benefit to consumers in electronic markets is the

possibility of finding the products that best meet their needs. In repetitive buying

situations where consumers usually have high search and transaction costs, e-

marketing offers lower costs associated with these situations.

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Fig 2.5 Evolution of e-Marketing

Source: Adapted from Rangaswamy and Wind (1994)

Listing of the products in order helps in faster selection of products by customers as

compared to traditional marketing where the customer has to go around looking for

the suitability of the product required. Increased brand choices and variety of products

helps the customer in making an informed decision regarding the purchase.

Comparison of the price of different brands along with the often-reduced costs of the

product on websites helps in improving the acceptability of e-marketing. Reduced

efforts in time and energy by customers and improved decision making by customers

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helps in enhancing the credibility of the firm. Feedbacks and comments from

customers on the website of the firm help in improving the efficiency and

effectiveness of these online firms. Businesses can use this information to provide

improved services and offerings that the customers are more interested in may be

provided.

According to Rosen and Howard (2000), the operational advantages of e-marketing

include access across the globe and across different time zones. The firm has access to

business opportunities across the globe and the increased possibility for conducting

personalized, effective and interactive advertising. The added advantages of e-

marketing include reduced capital and overhead costs, reduction in operating costs,

the availability of marketing research and analysis tools and decreasing cost of

capital. E-marketing helps in increasing the efficiency of business-to-customer and

business-to-business transactions. It helps the customer in better managing flexible

ordering and better tracking of orders. All the firms are at a level playing field helping

the firm to cater to a larger number of clients and prospective clients. The image of

the firm is also enhanced as the availability of the online portal of the firm helps it to

be in alignment with changing technology and changed business scenario.

However, there are a few disadvantages also of going online or e-marketing. Most

major sales efforts employ multiple channels, both online and offline, e.g. email

advertising, outbound call handling, social networking, and so on. That means e-

marketing should be done alongside the traditional campaign and should not be tacked

at the end of the business plan. Lack of trust in the virtual world causes customers to

avoid online businesses. Customers do not like sharing their information when the

company that collects data is exposed to spammers and scammers. Firms employing

e-marketing often use electronic methods for providing customer service that includes

emailing and posting of information on the website to answer possible user questions.

Customers often perceive this as just too impersonal or uncaring leading to a reduced

usage of e-marketing channel.

According to Rosen and Howard (2000), the implementation of e-marketing involves

customer concerns regarding privacy and security and lack of control over online

transactions and measuring outcomes. High costs of entering e-business segment, the

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differences across cultures, high costs of individual delivery to the customers, the

difficulty of dealing with virtual transactions, problems about disintermediation, the

fear of technology experienced by many consumers and the lack of socialization and

tactility are some of the most commonly encountered disadvantages of going online

(Rosen and Howard, 2000). Therefore, according to Zeller and Kublank (2002),

marketers need to determine the costs and the financial outcomes of using e-

marketing in order to be sure that the pros exceed the cons for their business before

implementing it for their businesses.

2.7 e-Banking

The advent of Internet technologies has greatly influenced how the banks and banking

industry operate. Banks have applied technology in order to provide elaborated

services to existing or potential customers. The earliest use of technology to provide

better banking services is the invention and development of Automatic Teller

Machines (ATMs). Another example is the use of internet on desktops or laptops to

access banking services. These services are termed as internet banking. Mobile

phones are also a means for providing banking services to owners of such devices

through mobile banking. These technologies (Internet, ATMs, land lines and mobile

phones) constitute the main fundamental technological framework over which the

electronic banking services (e-banking) are founded (Angelakopoulos & Mihiotis,

2011).

Generally speaking e-banking covers a wide spectrum of banking transactions which

the customer can perform electronically without the need to visit a brick-and mortar

branch. According to this broad definition a lot of services and technologies constitute

what is known as e-banking. By this definition, ATMs can be considered as the first

technology utilized by bank institutions to provide e-banking services. However,

invention and deployment of ATMs have started some decades ago and therefore the

network of their ATMs is treated differently than that of their e-banking channels and

services.

Aggelis (2005) has defined e-banking as all the possible transactions of a bank which

are performed with the use of electronic means, mainly through Internet, but also

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through VPNs (Virtual Private Networks), Intranet, Extranet, phone and mobile

phone, and these transactions do not necessitate that the customer must visit a branch.

The three major types of electronic banking depending on the channel by which the

transactions are performed may be classified as:

(1) Internet banking,

(2) Phone banking

(3) Mobile banking.

(1) Internet banking (or web banking): Implemented through the internet, the banking

customer need to have access to have access to internet to use internet banking.

Improved security features for the use of internet banking include provision of one-

time password by banks, the installation of specialized software or the use of digital

signatures.

(2) Phone banking: It is further divided into two categories:

• Call centres: The customer is required to contact the agents of the bank in a call

centre. The requests of the customer are processed through these agents.

• IVRS: Interactive Voice Response Systems (IVRS) automatically processes the

request of the customer. Identification of the customer followed by a step by step

instructions helps in processing the requests of the customer.

(3) Mobile banking (or m-banking): Performed preferably through Short Message

Service system (SMS) or the Mobile Internet (Mobile Web), mobile banking is a new

way of using electronic banking. However, lack of coordination between banks and

mobile service operators and other technical reasons have led to a reduced

acceptability of mobile banking.

The opportunities, which the e-banking services and technologies offer to the banking

sector in order to fulfil existing customer needs and to attract new prospective

customers, are the driving forces for banks in order to design, develop and operate

their own e-banking systems. Except the positive effects that these technologies have,

there are also very significant risks that must be taken into consideration. Banks and

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customers must be aware of such risks and take appropriate actions in order to benefit

from such services. There is a steady increase in Internet banking acceptance since the

year 2000 (Liao & Cheung, 2002).

With a constant increase in the number of people accessing internet, an increasing

number of banks worldwide have increased their business investments in Internet

technology driven by the expectation that the Internet technology would provide

better opportunities to establish a distinctive strategic position compared to other

traditional forms of banking services (Evans & Wurster, 1997). Internet banking is

particularly well-practiced in the developed countries where more than 75 percent of

all banks offer transactional services via the Internet (Maenpaa, 2006). The

development of the Internet as a service and marketing channel has breached the

geographical and industrial barriers, creating new products, services and market

opportunities (Liao & Cheung, 2002).

Internet technologies have a great potential for changing the way the banks function.

The opportunities, which the e-banking services and technologies offer to the banking

sector in order to fulfil existing customer needs and to attract new prospective

customers, are the driving forces for banks in order to design, develop and operate

their own e-banking systems. Internet banking is developed to help banks deliver

services and products better, faster, and cheaper. According to Polatoglu and Ekin,

(200), internet banking enables customers to browse essential bank products and

services seven days a week through their personal computers and allows consumers to

perform banking transactions over the Internet anywhere and anytime.Critical issues

related to customers’ accounts include security and safety, confidentiality and privacy

issues. Ensuring the accuracy and integrity of transaction records is important for

success of internet banking.

According to Daniel (1999), major information services offered by a bank to its

customers over the medium of Internet is internet banking. All the usual banking

transactions can be carried out by a customer through internet banking that includes

funds transfer, balance check and payment of bills (Fox & Beier, 2006). According to

Basel Committee Report on Banking Supervision (1999), Internet banking services

can be defined as the availability of different banking products and services like

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management of accounts and electronic bill payment over the Internet. Use of

telecommunication network for performing various banking activities like making

payments is termed as internet banking (Mukherjee and Nath, 2003). Internet banking

has led to a change in the way financial institutions perform their distribution,

production, payment and trading activities (Llevwellyn, 1997). Increased competition

and reduced operational costs have led the banks to increasingly focus on internet

banking. Due to the various functions available in internet banking and the benefits of

fast, simple and trouble-free applications and minimal technical errors, Internet

banking also helps in generating enhanced consumer satisfaction (Methlie &

Nysveen, 1999).

Yousafzai et al (2010) have defined Internet banking as services of banks in which the

customers can make bills payment and check account information using Internet.

There is a difference between Internet banking and personal computer banking. For

using internet banking, the customers have to log into the website of the bank using

World Wide Web services with the actual software that resides on the bank’s server.

In personal computer banking, details are sent to the banks’s private network after

customers have filled in the details offline. Thus, the difference lies in the fact that

there is no need for Internet banking users to access the banks’ private network. Liu et

al., (2008) have suggested that Internet banking helps in reduction of operational

expenses incurred by banks as it allows customers to access their accounts and

perform various transactions without physically visiting the branches. The

introduction of internet banking services has transformed the business model

employed by the financial institutions.

Information technology and Internet play a key role in providing internet banking

services to its stakeholders (Pyun, Scruggs, & Nam, 2002; Siaw & Yu, 2004). In order

to create stakeholder value through internet banking and improve the customer

satisfaction levels, there is an need of the management and alignment of the core

business objectives of the banks with the new Internet banking technology through

judicious financial performance, stakeholder value, internal processes and intangible

assets (Kaplan & Norton, 2004; Vera & Crossan, 2004; Montoya-Weiss et al, 2003).

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2.8 CRM in e-Banking

There is a gradual increase in the internet penetration across the country. This has led

to electronic banking becoming a major distribution channel for financial institutions.

Majority of the banks provide customers access to all their services through this

channel which also allows personalisation of frequent operations. Electronic banking

helps in ensuring customer loyalty by building stronger ties with them through

customer satisfaction. It acts as a major cost cutting source for banks helping in

reducing the operational costs. (Herna´ndez-Murillo et al. 2010).Ensuring customer

satisfaction is of paramount importance in the electronic banking channel due to the

high costs of attracting a new customer. According to Bhattacherjee (2001), acquiring

new customers may be five times costlier than retaining an existing one. Services at

offer are the key reason for selecting a particular bank and the e-banking applications

of a financial institution serves as the differentiator from their competitors.

Electronic banking is the primary alternative channel to traditional bank branches.

Electronic banking is more convenient and globally accessible to customers. It also

helps in saving cost and time as the customer is spared from physically visiting the

branch. It leads to increased transparency of information and customers are able to

choose and compare the various services at offer by different banks. With the

increased focus of banks on offering e-banking services to their customers, RBI, as

the supervisory body of Indian banks, has formed several committees on e-banking.

Apart from other customer friendly initiatives, RBI has also constituted several

committees in order to improve the customer experience with electronic banking as

well. Major committees formed by RBI and their recommendations are discussed

below.

1. RBI Committee on Internet Banking (2001)

The major recommendations of this committee included the recommendation of use

of firewalls. Banks were suggested to use the proxy server type of firewall so that

there was no direct connection between the Internet and the bank’s system. Regarding

security infrastructure, the committee recommended the usage of at least 128-bit

SSL(Secure Socket Layer) which secured browser to web server communications and

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encryption of sensitive data like passwords in transit within the enterprise itself and

ensure server authentication and the use of client side certificates issued by the banks

themselves using a Certificate Server. It suggested banks to have a proper

infrastructure and schedules for backing up data. The backed-up data should be

periodically tested to ensure recovery without loss of transactions in a time frame as

given out in the bank’s security policy. The suggestions included acquirement of tools

for monitoring systems and the networks against intrusions and attacks. The

committee suggested regular use of these tools to prevent any security breaches.

2. Damodaran Committee (2010) on Customer Service in Banks

The major recommendations of this committee are enlisted below.

• A customer should not be made to be out of funds when any loss is suffered on

account of usage of internet banking or ATM transactions

• Banks should formulate rules that encourage consumers to feel safe about

electronic transactions.

• Robust and dynamic fraud detection and prevention systems need to be put in

place by banks.

• Fail-safe security systems for access of transactions need to be put in place by

banks in order to increase the confidence of the customers to enable migration

to electronic medium from conventional banking.

• Banks may introduce proper security checks regarding transfers to ensure

safety of transactions.

• Banks in their systems should have facility of customer behaviour or purchase

pattern analysis. This would help the banks in serving the customers better.

• Any attempt from an unknown address or suspicious debit transaction should

be first blocked and then informed over SMS to the customer.

Banks should have multi-lateral arrangements in order to deal with online

banking frauds.

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3. Gopalakrishna Committee (2011) on Electronic Banking, Information

Security, Technology Risk Management and Cyber Frauds

The key recommendations of this committee are as follows:

• Specific written or authenticated electronic requisition along with a positive

acknowledgement of the terms and conditions from the customers must be

received for provision of various electronic banking channels like ATM,debit

cards, internet banking/phone banking should be issued only at the option of

the customers based on. Customers should be well-informed about the risks

and benefits of using e-banking delivery services.

• Customers should have sufficient instruction and information regarding the

introduction of new operating features or functions, particularly those relating

to security, integrity and authentication.

• Banks should ensure suitable security measures for their web applications.

• Integrity of the data is of paramount importance and web applications should

not store sensitive information in HTML hidden fields, cookies, or any other

client-side storage.

• Any interruption in session should be followed by normal user identification,

authentication, and authorization. • Banks need to ensure robust security measures across various technology

layers

2.9 Factors Affecting Adoption of e-Banking

With the growing focus of financial institutions on customer satisfaction, internet

banking provides them the opportunity to serve the customers better. Internet banking

allows the customers the comfort of global access, convenience and round-the-clock

availability. Experience plays the role of moderator in predicting users’ behavior

(Lie´bana-Cabanillas et al. , 2014). Fishbein and Ajzen (1975) have stated behaviour

towards any product or service is largely affected by the individual’s positive or

negative experience with it in the past. According to Dabhokar and Sheng (2012),

self-efficacy is chiefly caused by experience. Pappas et al. (2014) have established

that customer experience plays a vital role in forming the perception of customers

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towards what they expect from online service providers. Furthermore, Liebana et al.

(2015) have found that customers who are satisfied with previous experiences have

increased self-efficacy. There exists a positive relationship between experience and

satisfaction as a better experience leads to increased satisfaction with online service

usage and leads to an increased number of completed transactions (Zhou et al., 2007).

According to Lee (2009), one of the most profitable applications in e-commerce has

been the introduction of internet banking. Xue, Hitt, & Chen (2011) have suggested

that deployment of internet banking has led to an improvement in customer service as

well as reduction in costs.). However, Bielski (2003) has found out that there has been

limited adoption of internet banking and that the expected rate of adoption has not

been achieved in many banks despite the benefits offered to the customers by internet

banking. Therefore, it is important to identify the various CRM factors at play, both

the success factors (positive factors) as well as the resistance factors (negative factors)

that impact the adoption of internet banking by customers.

Figure 2.6 Conceptual Framework of e-Banking

Source-Adopted from Ahmad, Rashid & Mujeeb (2012)

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2.9.1 Customer Satisfaction

The ideas and practices of marketing are greatly affected by the concept of customer

satisfaction (Churchill and Surprenant, 1982). Repurchases, customer loyalty and

customer retention are assumed to be determined largely by customer satisafction

(Casalo et al., 2008). Objective evaluation of purchase, consumption and usage

experience of product or service is particularly affected by customer satisfaction and

is vital in long-term consumer behaviour (Gronroos, 1991). There has been increased

attention on customer satisfaction in the financial sector due to increased competition

and recent technological developments. Since the banking products and services

offered by different financial institutions are almost similar, differentiation and

customer preference can be measured by the level of satisfaction experienced by the

customers with respect to the services offered (Bhattacherjee, 2001; Ciciretti et al.

2008; Kangogo 2013). According to Liu et al. (2008), satisfaction is a key parameter

in determining the success of information systems, e-commerce and marketing.

However, it is important to determine the cause and effect of customer satisfaction in

online banking. Although, there have been several studies to determine the

antecedents to customer satisfaction with online banking, yet there is no consensus on

the determinants of customer satisfaction (Yoon, 2010; Aldas-Manzano et al., 2011;

Fonchamnyo, 2013).

Giese and Cote (2000) and Fandos et al (2009) have identified two criteria to

approach satisfaction. These include a conceptual criterion and a referential criterion.

The type of consumer responses determines satisfaction according to the conceptual

criterion. The aspects of the situation in which these processes or responses occur is

reflected by the referential criterion. Three approaches are offered by the conceptual

criterion that includes the evaluation process, the cognitive response after a

consumption experience and the process of evaluation and affective response.

According to the referential criterion, consumer satisfaction can be conceptualised as

an evaluative judgment made by a customer after making a choice or an emotional

response by a consumer with respect to a given purchase, consumption or use. In

comparison, the referential criterion tries evaluating the customer’s overall experience

cumulatively.

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2.9.2 Customer Trust

In recent years, increased use of electronic channels has enhanced the importance of

trust across businesses. With the increased focus of banks on online banking, trust

plays a key role in maintaining and continuing relationship between the bank and the

customer (Bigne and Blesa, 2003). Different perspectives have been used to define

trust (Chung and Kwon 2009; Munoz-Leiva et al. 2012). Dwyer et al., (1987) have

defined trust from a cognitive perspective. It can be defined as the belief that a party

will reliably fulfil its obligations in an exchange relationship. A behavioural

perspective has been used by Mayer et al. (1995) to define trust. It is defined as the

willingness of a party to be vulnerable to the actions of another party based on the

expectation that the other will perform a particular action important to the concerned,

irrespective of the ability to monitor or control that other party.

The belief of a company fulfilling its commitments without any apparent benefits

from them determines trust in online marketplaces (Wu and Chen 2005). On the

Internet, trust factor plays a key role where financial transactions are involved (Gefen

et al, 2003). Yousafzai et al. (2010) have highlighted that trust plays an important role

in understanding Internet banking behaviour of customers. According to Yoon(2009);

Zhou(2011) and Lorenzo-Romero and Del Chiappa (2014), it is imperative for

financial institutions to focus on building trust towards internet banking if they want

to reduce user uncertainty and generate positive beliefs about the usage of online

services.

According to Liébana-Cabanillas et al., (2015), trust and satisfaction are two mutually

related constructs. So, high level of satisfaction among customers leads to a higher

level of trust in online applications. Similarly, trust in a product or service plays a

significant role in determining the level of satisfaction, both in an offline context (Lin

and Wang, 2006) or an online context (Chiou, 2004; Zhou, 2011; Wu et al., 2014).

The decision to use Internet banking is largely determined by their concern towards

trust and security as major issues (Jun and Cai, 2001)

According to White & Nteli (2004), trust is the most important attribute that

determines the decision of customer to use or not the internet banking services.

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Gerrard and Cunningham (2003) have suggested that despite being generally satisfied

with the services, customers having lack of trust in a virtual environment will not be

loyal. Mukherjee and Nath (2003) have suggested that users are willing to engage in

online transactions or sharing of personal sensitive information if they online services

to be trustworthy.

2.9.3 Perceived Risk

One of the major factors that affect the adoption of online banking is perceived risk.

According to researchers in the field of consumer behaviour, perceived risk can be

defined as perception of the customers about the potential adverse effects of

purchasing a good or service and the lack of trust associated with its usage. Different

category of services involves different dimensions of the risk perceived by customers.

The predictive value of each dimension in the total risk and its impact greatly depend

upon the class of the good or service. The dimension of the perceived risk plays a key

role in enhancing customer satisfaction towards internet banking services. Higher the

perceived risk, lower is the adoption or satisfaction of the customer towards internet

banking services and vice–versa.

Grewal & Dharwadkar (2002) have defined perceived risk as risk associated with

financial and privacy matters over the internet. Polatoglu and Etkin (2001) have

suggested that adoption of online banking services is largely affected by the

customer’s perception of risk towards its usage. Bradley and Stewart (2002) have

suggested that perceived risk associated with possible losses from the online banking

transactions is greater than that in traditional environments. Wang et al (2003) have

identified trust issues and risk perception to be crucial drivers of Internet banking

adoption. Yousafzai et al (2003) have pointed out that there is no consensus on the

relationship between perceived risk and trust as to which of them is the antecedent or

consequence of the other.

Perceived risk has been identified as a combination of several dimensions according

to the researchers in the field of perceived risk theory (PRT).According to

Featherman and Pavlou(2003) and Kim et al (2011), these dimensions define the

various kinds of risk that a customer associates with the adoption of online banking

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56

services. These include performance, financial, social, psychological, security,

privacy and time risk.

2.9.3.1 Time Risk

Time risk refers to the concern of customers regarding the amount of time needed to

learn how to use internet banking. It also refers to the time devoted to solving

problems caused by using internet banking (such as proving transaction errors) and

the time spent in making transactions through internet banking services.

2.9.3.2 Financial Risk

Financial risks are the major cause of concern for customers in using internet banking

services. Customers are concerned about the potential financial loss that may occur

due to erroneous entry in transaction details such as account number or amount of

money by the customer. Customers also feel that banks will not compensate in case of

errors in transaction details, leading to a loss of control of personal account and

causing financial risk.

2.9.3.3 Performance Risk

Customers perceive that efficiency of internet banking services may be affected by

lack of standardised performance by the system due to low download speed, server

pauses or website maintenance operation. This leads to a performance risk as the

performance may not match the expectations of the customer as advertised after

usage.

2.9.3.4 Social Risk

Social risk is caused by negative attitude of family, friends or colleagues towards

internet banking services and a fear of losing social position among these groups in

case of errors or frauds. Using internet banking also reduces the direct contact with

the banks’ staff members and their help in using internet banking.

2.9.3.5 Security Risk

Security risk refers to the lack of security in sending and receiving financial

information over the internet. This may be termed as internet security. Perception of

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potential losses as a result of fraud or hacking leading to a threat to the security of the

customers constitutes the internet banking security that forms part of security risk.

2.9.3.6 Privacy Risk

Privacy risk is concerned with the fact that internet banking users want to have a

control over the collection and usage of the personal data stored from them. The

perception of the customers regarding collection and registration of their private data

without their awareness, leading to a violation of privacy, causes privacy risk.

Since internet banking creates no threat to human life, physical risk has been excluded

from the dimensions of the perceived risk in internet banking adoption. Physical and

psychological risks are not considered as key dimensions of risk in adoption of

internet banking services. Therefore, physical risk and psychological risk have been

excluded from the list of dimensions of the perceived risk in internet banking

adoption (Littler and Melanthiou, 2006; Lee, 2007).

2.9.4 Perceived Ease of Use

According to Davis (1989), the perception of an individual that using a particular

system does not require any particular effort or simply easy to do is termed as

perceived ease of use. In context of electronic banking, it indicates a lack of

complexity and easy to handle. Perceived ease of use is identified as a key variable of

Technology Acceptance Model that has been employed in numerous fields to predict

the acceptance and use of new information and communication technologies such as

Internet (Moon and Kim 2001); e-learning platform (Capece and Campisi 2013);

mobile payment (Liebana- Cabanillas et al. 2013) and the use of online services (Liao

et al. 2007). Perceived usefulness and the user’s attitude towards electronic banking

are positively affected by perceived ease of use which enhances the usability of the

service (Lai and Li, 2005; Lee, 2009). Intention to use electronic banking and user’s

attitude towards internet banking services are significantly impacted by the perception

of ease of use (Liao et al., 2007). Abdinnour-Helm et al. (2005) and Cheng et al.

(2013) have found that ease of use has a significant and positive effect on customer

satisfaction towards internet banking.

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According to Pavlou (2003), there is a significant positive impact of trust on

perceived ease of use. Trusts the retailer’s website leads to ease of performing the

transaction and the buyer feels more satisfied with the situation. Fogg et al. (2002)

have suggested that perceived ease of use plays a key role in improving perceived

credibility and reliability of the website. Perceived ease of use state leads to increase

in perceived trust (Flavian et al.,2006) and negatively affects perceived risk

(Featherman and Pavlou, 2003). Hence, perceived ease of use leads to increase in the

trust in the electronic banking service.

2.9.5 Perceived Usefulness

Davis et al.(1989) have defined perceived usefulness as the subjective probability of a

potential user that job performance will be enhanced in the context of an organisation

by using a particular system. It is the perception maintained by the user that there will

be an improvement in the level and quality of their banking operations. Perceived

Usefulness can be defined as the extent to which a person perceives that

implementing various financial transactions via Internet Banking Services system

would improve the performance of his banking needs. According to Shih and Fang

(2004), it is related to the perception that facilitating easy access to the customers

through the introduction of appropriate systems helps in improving the usefulness of

the service.

User experience moderates the effect of perceived usefulness on customer satisfaction

as well as behavioural intentions (Dagger and O’Brien, 2010; Hsieh and Liao, 2011).

A customer’s intention to continue performing financial transactions over the internet

by using internet banking services are determined by the perceived usefulness of the

service, level of satisfaction with prior experience and the loyalty programmes

initiated by the financial institution (Bhattacherjee, 2001). An increment in perceived

usefulness results in enhanced customer satisfaction as well.

Extrinsic motivation is a key determinant of perceived usefulness of internet banking

services since a user can visit a website with some purpose unrelated to the actual

action of browsing (Atkinson and Kidd,1997; Gefen and Straub,2000; Shang et al.,

2005).According to Pikkarainen et al.(2004) and Guriting and Ndubisi (2006),

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perceived usefulness is one of the most important factors identified in encouraging the

adoption of internet banking and the intention to use is chiefly affected by perceived

usefulness, among other variables. According to Lee (2009), perceived usefulness of

internet banking includes increase in the speed of transactions, access to a wider range

of financial benefits, and increased transparency in the information available to

customers. According to Castañeda, Muñoz- Leiva, & Luque (2007) and Kim, Shin &

Lee (2009), perceived usefulness and the accrued relative benefits significantly

impact the intention of the customer to use electronic banking. Relative benefits

asscoiated with the usage of internet banking include access to banking services

anywhere and anytime and reduced transaction charges in financial transfers (Pavlou,

2003). Jaruwachirathanakul and Fink (2005) and Gounaris and Koritos (2008) have

made a comparison of the factors driving the adoption of internet banking and

concluded that perceived usefulness is one of the key factors in adoption of online

banking services.

2.9.6 Awareness

Information about internet banking offered by the bank as well as the technological

knowhow of using it is termed as awareness. Information to the customers about

service, facilities, advantages, and way of using Internet Banking can be regarded as

awareness. The theory proposed by Rogers and Shoemaker(1971) states that

customers pass through the process of knowledge, persuasion, decision, and

confirmation before they become ready to adopt a product or service,. In other words,

awareness of the product or service at offer and its advantages and disadvantages

leads to the acceptance or rejection of any innovation. Thus, customer awareness of

the internet banking services and its advantages and disadvantages is essential before

determining the adoption or rejection of the services.

Customer awareness of the services offered by internet banking negatively affects

Internet Banking risk perception (Aldas Manzano and Navarre, 2009). Knowledge of

the service offerings and support by banks in informing customers plays a significant

role in mitigating the risk perception and leads to an increase in the willingness to use

internet banking services (Lichtenstein and Williamson, 2006). Insufficient

information about the products and its advantages and disadvantages plays a

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60

mediating role affecting risk perception of the customers. (Littler and Melanthiou,

2003). Customers are reluctant to adopt Internet Banking as they are unaware of its

services and advantages (Howcroft et al., 2002).

Low degree of awareness or no awareness at all is a critical factor in non-adoption of

internet banking by customers(Sathye,1999). Awareness of the advantages of internet

banking and the services at offer has a significant positive effect on adoption and

usage of Internet banking (Gerrard et al.,2006; Al-Somali et al.,2009; Azouzi,2009).

The volume of information received by customers about internet banking is

considered as the found to be one of the most influential factors in adoption of this

service (Pikkarainen et al.,2004).

2.9.7 Website Design

Adoption of internet banking services by customers and their retention in e-banking

context depends to a large extent on the quality of service delivered by the website.

Since e-banking is devoid of physical or geographical provisions of branch banking,

websites are the pre-requisite to providing electronic banking services (Zineldin,

1995). It is imperative for the banks that Internet banking websites must provide all

the relevant information necessary for customers; such as account information, past

transaction record, e-statements etc. (Mols,2000).) Convenience in navigating the

website and design of the banking website are key factors in customer assessment of

the website (Szymanski and Hise, 2000). Jun & Cai (2001) have suggested that

effective evaluation and monitoring of website quality have become prerequisites for

profitable e-banking as it helps in building long term relationships with customers that

generates positive customer value on the Internet.

Assessing the quality of an e-banking website requires consideration of aspects

related not only to the product and service offerings but also the design of the website

used for navigation. Jayawardhena (2004) has identified that when a customer enters a

website, the website acts as an information system (IS) and the customer as an end

user of this Information Systems. As compared to traditional branch banking, e-

banking involves much more interaction between online Information Systems and the

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customers. Therefore, design of the website and service quality offered by the website

is also a key dimension of customer satisfaction in e-banking sector.

2.9.8 Internet Service Quality

Akinci, Aksoy & Atilgan (2004) have identified Internet service quality as a

significant factor in the success of Internet banking. Wong, Rexha & Phau (2008)

have identified internet service quality to be a key determinant in the success of

internet banking. Zeithamal et al (2001) have identified access, ease of navigation,

efficiency, flexibility, reliability, personalization, security, responsiveness, assurance,

site aesthetics, and price knowledge as key attributes of Internet service quality.

Santos (2003) has identified reliability, efficiency, support, communication, security,

and incentive as major dimensions of internet service quality.

2.9.9 Accessibility

Accessibility plays a key role in motivating the customers to use internet banking.

Developments in the arena of technology have allowed the customers to transact with

service firms from the comfort of their homes and offices. Internet banking

transactions do not require the availability of bank staffs and are available round the

clock. This is considered as one of the most beneficial features of Internet banking

and is a key determinant of customer satisfaction (Daniel, 1999; Liao & Cheung,

2002; Yang, Peterson, & Cai, 2003; Sohail & Shaikh ,2008).

2.10 Variables Identified for the Study

Several factors have been identified that affect the adoption of e-banking. However, in

the context of the study undertaken by the researcher, it is significant to identify the

key dimensions of Customer Relationship Management that impact the adoption of e-

banking services in India. The relationship between satisfaction and loyalty seems

almost intuitive. However, it has been proved from earlier researches that the strength

of the relationship may vary significantly under different conditions making it crucial

to analyse the moderating effects of variables identified under Customer Relationship

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Management such as trust, perceived risk, perceived usefulness and awareness on

customer satisfaction and intention of continuous usage of the e-banking services.

Based on the extant literature review on Customer Relationship Management in e-

banking, the variables for the study were identified. This study tries to address the

need for a further understanding of the various dimensions of CRM in e-banking.

CRM plays a pivotal role in the electronic banking channel. Therefore, this study aims

to investigate the relationship of the variables identified on customer satisfaction and

the impact of customer satisfaction on intention of continuous usage. The variables

identified form part of the customer relationship management in the e-marketing

environment and are required to study the influence of customer relationship

management on customer satisfaction.

Table 2.2 Variables Identified for the Study Variables

Identified for the Study

Measurement Criteria Supporting Articles

Trust The belief that a party will reliably fulfil its obligations in an exchange relationship

Mayer et al. (1995); Bigne´ and Blesa (2003); Gefen et al (2003); Chiou (2004); Wu and Chen (2005); Lin and Wang (2006); Chung and Kwon (2009);Yoon (2009); Zhou (2011); Mun˜oz-Leiva et al. (2012);Lorenzo-Romero and Del Chiappa (2014),Wu et al.(2014)

Perceived Risk Perception of the customers about the potential adverse effects of purchasing a good or service and the lack of trust associated with its usage.

Milind (1999); Bestavros (2000); Tan and Teo (2000); Featherman and Pavlou (2003); Forsythe and Shi (2003); Pavlou (2003);Yousafzai et al.(2003); Littler and Melanthiou (2006); Kuisma et al. (2007); Yang et al.(2007); Yiu et al. (2007)

Awareness Information about internet banking offered by the bank as well as the technological knowhow of using it

Rogers and Shoemaker(1971); Cooper (1997); Sathye(1999); Howcroft et al(2002); Littler and Melanthiou(2003); Gerrard et al (2006); Aldas Manzano and Navarre(2009); Al-Somali et al.(2009); Azouzi(2009)

Perceived Usefulness

The customers’ perception about how useful internet banking would be for their banking needs

Davis et al. (1989); Atkinson and Kidd(1997); Gefen and Straub(2000); Pikkarainen et al. (2004); Shih and Fang (2004); Shang et al. (2005); Jaruwachirathanakul and Fink (2005); Guriting and Ndubisi (2006); Gounaris and Koritos (2008); Dagger and O’Brien (2010); Hsieh and Liao(2011)

Customer Satisfaction

The expectations of the customers are met leading to loyalty

Zhou et al. (2007); Casalo´ et al. (2008); Herna´ndez-Murillo et al. (2010),Yoon (2010), Alda´s-Manzano et al. (2011), Giannakos et al. (2012), Fonchamnyo (2013), Pappas et al. (2014)

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2.11 Chapter Summary

In a competitive business environment, managing customer relationship plays a

pivotal role in the running of any business. Banking is a customer-centric sector and

hence, all banks are focussing their attention and deploying latest technological tools

for customer satisfaction and retention. This chapter discusses the literature on CRM,

CRM in banking sector, e-banking and CRM in e-banking in detail. It covers several

definitions given by various authors and offers brief discussion on the works of

several scholars on the subject who have stressed on the need for customer

satisfaction to ensure customer loyalty and retention. These authors have stressed that

CRM should not be confined to just marketing and transactions but go beyond to

include cross-functional, customer-driven, technology integrated business process

management strategy so as to establish a strong relationship with the customer.

The various kinds of CRM that are employed by banks have been discussed in detail

in this chapter. This chapter also discussed in detail the various initiatives taken by

RBI in order to improve the customer satisfaction levels in Indian banking sector.

Apart from the various CRM initiatives that RBI has asked the banks to implement for

various daily banking operations. The chapter also elaborates the recommendations of

various committees formed by RBI on internet banking services in India

This chapter discussed in detail the existing literature related to the adoption of

internet banking and identified the key variables to be used for further exploration

into this area. Extant literature review on the various dimensions of CRM in e-

banking were identified and discussed in detail. The variables for the study were then

selected and the research gaps identified. The next chapter will discuss the theoretical

framework for the study. The research variables identified of the study will be

discussed in detail along with the proposed conceptual framework for the study. The

hypothesis framed for identifying the relationship between the various independent

and dependent variable from the conceptual framework will be discussed along with

the hypothesis on demographics. This research is a small step in identifying the key

variables of CRM that can enhance and encourage the usage of e-banking in India and

encourage additional exploration in this area.

CHAPTER 3 Theoretical Framework

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64

3.1 Introduction

Based on the literature review discussed elaborately in the previous chapter, the

present chapter discusses the research gaps identified, the research objectives and the

need and scope of the study. The conceptual framework employed for the study is

presented and discussed in detail in this chapter. The various constructs of the study

and the hypotheses formulated based on these constructs and based on demographics

are presented in this chapter.

3.2 Research Gaps Identified

Based on the extant literature review, the major research gaps have been identified.

To the best of researcher’s knowledge, there is no comprehensive study that includes

all the variables identified for the study together in Indian context. There were very

few studies studying the impact of CRM variables on adoption of internet banking in

India. Not much research was available that hypothesized differences based on

demographics vis-à-vis variables identified for Customer Relationship management in

e-banking. So, only limited work has been done in Indian context to identify how

these variables may condition the effect of others, like satisfaction and specially trust,

making analysis of their interaction effect on intention to continue using particularly

important for users of internet banking.

Through this research, the researcher seeks to address these knowledge gaps by

identifying the key variables of CRM initiatives by the banks in the field of e-banking

and how these constructs impact the satisfaction level and intention to use of

customers of internet banking. The research focuses on the different variables that

constitute the usage of internet banking by customers of Indian banks. The study is

needed to determine whether the demographic variables of banking customers (such

as gender, age, income and education level) influence their view of the degree of

customer relationship management employed by banks in e-marketing channel.

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3.2.1 Research Questions

Based on the research gaps identified, the research questions that the study aims to

empirically investigate include:

1) What are the key dimensions of Customer Relationship Management in Indian e-

banking environment?

The key dimensions identified through the literature review need to be empirically

tested in Indian context.

2) What is the impact of these dimensions on customer satisfactions with respect to

Indian banking customers?

The study aims to empirically investigate how these key dimensions of e-banking

affect the customer satisfaction level of Indian internet banking users and their

intention to continue using internet banking. This may add to the existing body of

knowledge of e-banking and help the bankers to focus more on the strategic aspects of

e-banking.

3) What initiatives the banks may further take to encourage new customers for using

internet banking as also initiatives for retaining the existing internet banking

customers?

The identification of key variables and results of the study based on demographics

may help bankers to focus on the different demographic categories under study. This

may encourage more customers to adopt internet banking for their banking needs and

help the bankers to encourage new customers to adopt internet banking for their

banking needs as well as retain the existing customer base.

3.2.2 Research Objectives

The study aims to empirically investigate the following broad objectives:

1. To study the dimensions of Customer Relationship Management in the Indian

e-banking sector

2. To measure the customer satisfaction and intention to continue using internet

banking of Indian users.

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The study aims to empirically investigate the following emergent sub-objectives from

the main objectives. The sub-objectives identified from the first objective are:

1.1 To identify the key dimensions of Customer Relationship Management in Indian

e-banking context.

1.2 To identify the impact of these dimensions on customer satisfaction with respect

to Indian e-banking customers.

The sub-objective identified from the second broad objective is:

2.1 To find out what initiatives the banks may further take to encourage new

customers to use internet banking as well as retain the existing customers of e-

banking customers.

3.3 Research Problem

For any service organisation, it is important to establish strong relationship with the

customers. With increased competition and option of choices with the customers, new

marketing initiatives have been taken. Communicating with their customers is of

paramount importance and technology has facilitated this process. Internet has

provided an efficient tool to organisations for marketing their products and services in

an effective, efficient and economic way. Banking sector being an information-

intensive sector, has also started using this platform for providing banking services for

customers from the comfort of their homes and offices. However, in a highly

competitive industry, such as the banking sector in India, an electronic service has its

own challenges. The customer has a variety of choices with the information allowing

them to compare the services offered by different banks. For this, the various

attributes or variables of Customer Relationship Management need to be identified so

that the banks can focus on them to improve customer satisfaction and enhance

loyalty.

3.4 Need for the Study

With the growing focus of the bank on enhancing customer satisfaction and customer

loyalty in order to avoid them from switching, it becomes imperative for the banks to

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identify Customer Relationship Management as a key variable in realising these

objectives. The value of relationship is like brand equity for the banks. Higher the

satisfaction level, higher is the customer loyalty with banks. It leads to an enhanced

scope of cross-selling and up-selling also. The focus of the banks is gradually shifting

to a relationship-based approach rather than the earlier focus on marketing mix. There

is an enhanced focus on relationships rather than transactions. With increased focus

on building long-term relationships with customers, it is important to focus on

relationship building as a strategic alliance rather than a short-term profit oriented

marketing approach. Managing its customer base may help the organisation in

applying a relationship-focussed strategy. It is important to determine the satisfaction

levels of the customers in e-banking due to increased competition and options of

switching available to customers.

3.5 Scope of the Study

In e-banking, the customer can perform all the banking transactions electronically and

does not need to visit a physical branch for these operations. Several services and

technologies offered by banks come under the umbrella of e-banking. ATMs were the

first use of technology used by banks in order to reduce footfall in branches. Although

ATMs are not taken in to consideration as a channel of e-banking since the use of

ATMs started some decades ago. As a result, ATMs have a different network as

compared to other channels of e-banking. So, e-banking in Indian context includes

internet banking and mobile banking.

However, in Indian banking scenario, mobile banking adoption and payments has

been less than successful Use of mobile banking has several technical issues that

include type of handset used, variety of operating systems, encryption requirements,

inter-operable platforms or the lack of it, absence of standardised communication

structures, difficulty in downloading application, time lag in activation etc. These

technical issues get accentuated by the operational difficulties in on-boarding

merchants and customers and customer ownership issues. The interplay of these

factors has not allowed the deployment and adoption of mobile banking as an

effective and widely accepted delivery channel. Issue of coordination between banks

and telecom operators has also acted as a barrier to the adoption of mobile banking.

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So, the researcher has identified internet banking as the means of using e-banking.

The scope of the study is, therefore, limited to internet banking only. Hence, the

words e-banking and internet banking have been used interchangeably across the

entire study.

3.6 Conceptual Framework for the Study

A theoretical framework can be defined as the foundation on which an entire research

project is based (Sekaran, 2000). Relationship between the identified variables of the

study is described in the conceptual framework that contributes to the research

problem. It provides a clear understanding of the dynamics of the problem being

investigated and helps in the generation of hypotheses that need to be empirically

tested. The theoretical framework for this study contains six major constructs that

include trust, perceived risk, perceived usefulness, awareness, customer satisfaction

and intention of continuous usage. This study identified six variables that are

considered relevant to the research problem.

Fig 3.1-Proposed Conceptual Framework

Source: Prepared by the Researcher

Awareness

Intention of Continuous Usage

Trust



Perceived Risk

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The independent variables for this study include trust, perceived risk, perceived

usefulness and awareness while customer satisfaction is a dependent variable in

relation to the earlier mention four independent variables but an independent variable

in relation to intention of continuous usage. Intention of continuous usage is a

dependent variable in relation to customer satisfaction.

3.6.1 Major Constructs of the Conceptual Framework

The proposed conceptual model assumes that trust has a significant impact on

customer satisfaction towards internet banking services. Several earlier studies have

also investigated the relationship between trust and customer satisfaction. In recent

years, there has been an increased focus on the importance of trust between parties a

vital factor favouring the continuance of a relationship (Bigne and Blesa

2003).Several researches have focussed on the importance of trust in building

customer satisfaction towards e-banking services. Lin and Wang (2006), Chung and

Kwon (2009), Yoon (2009), Zhou (2011), Munoz-Leiva et al. (2012), Lorenzo-

Romero and Del Chiappa (2014), Wu et al.(2014) have empirically investigated the

importance of trust in building customer satisfaction towards e-banking services.

The proposed conceptual model assumes that perceived risk has a significant impact

on customer satisfaction towards internet banking services. The customers’ perception

about lack of trust and the potential adverse effects of purchasing a good or service

can be termed as perceived risk. It can be identified as a consumer’s perception about

the uncertainty and the adverse consequences of a transaction performed by a seller

(Gupta and Kim (2010).The relationship between perceived risk and customer

satisfaction has been identified by several earlier researches. Milind (1999), Bestavros

(2000), Tan and Teo( 2000); Featherman and Pavlou (2003), Forsythe and Shi (2003),

Pavlou (2003), Yousafzai et al.(2003), Littler and Melanthiou (2006), Yiu et al.

(2007), Yang et al.(2007). Kuisma et al. (2007) have studied the importance of

mitigating perceived risk to enhance customer satisfaction.

The proposed conceptual model assumes that perceived use has a significant impact

on customer satisfaction towards internet banking services. The customers’ perception

about how useful internet banking would be for their banking needs is termed as

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perceived usefulness. The implementation of systems that facilitate access by

customers in an easier and more agile manner leads to perceived usefulness in the

eyes of the customer, thereby leading to customer satisfaction. There are multiple

studies suggesting that the perceived usefulness has a decisive influence on

satisfaction. Pikkarainen et al.(2004), Jaruwachirathanakul and Fink (2005), Guriting

and Ndubisi (2006), Gounaris and Koritos (2008),. Zhou and Lu (2011) and Wu

(2013) have identified perceived usefulness as a key variable of customer satisfaction.

The proposed conceptual model assumes that awareness use has a significant impact

on customer satisfaction towards internet banking services. Information about internet

banking offered by the bank as well as the technological knowhow of using may be

termed as awareness. Several earlier studies have studied the importance of awareness

in determining customer satisfaction. Gerrard et al (2006), Al-Somali et al.(2009),

Azouzi(2009) have identified awareness as an important factor in determining

customer satisfaction.

The proposed conceptual model assumes that customer satisfaction has a significant

impact on intention of continuous usage towards internet banking services.

Satisfaction with the service may result in intention of continuous usage. If the

expectations of the customers are met, the customer may continue using the services

leading to loyalty. Several earlier studies have studied the significance of customer

satisfaction in e-banking services. Zhou et al. (2007), Casalo´ et al. (2008),

Herna´ndez-Murillo et al. (2010), Yoon (2010), Alda´s-Manzano et al. (2011),

Giannakos et al. (2011), Fonchamnyo (2013), Pappas et al. (2014) etc have studied

the importance of customer satisfaction in e-banking services on the intention to use.

3.6.2 Hypotheses for the Study

Based on the proposed relationship between these constructs in the conceptual model,

following hypotheses have been formulated in order to be empirically tested by the

researcher.

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Hypotheses on Demographics

H1: There is a significant difference based on gender towards the various variables

under study

H1a. There is a significant difference between males and females regarding trust

towards internet banking services.

H1b. There is a significant difference between males and females regarding perceived

risk towards internet banking services

H1c. There is a significant difference between males and females regarding awareness

towards internet banking services

H1d. There is a significant difference between males and females regarding perceived

usefulness towards internet banking services

H1e. There is a significant difference between males and females regarding customer

satisfaction towards internet banking services

H1f. There is a significant difference between males and females regarding intention

of continuous usage of internet banking services

H2: There is a significant difference based on age towards the various variables under

study.

H2a. There is a significant difference among different age groups regarding trust


H2b. There is a significant difference among different age groups regarding perceived


H2c. There is a significant difference among different age groups regarding awareness


H2d. There is a significant difference among different age groups regarding perceived


H2e. There is a significant difference among different age groups regarding customer


H2f. There is a significant difference among different age groups regarding intention


H3: There is a significant difference based on income towards the various variables

under study.

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H3a. There is a significant difference among different income groups regarding trust


H3b. There is a significant difference among different income groups regarding

perceived risk towards internet banking services

H3c. There is a significant difference among different income groups regarding

awareness towards internet banking services

H3d. There is a significant difference among different income groups regarding

perceived usefulness towards internet banking services

H3e. There is a significant difference among different income groups regarding

customer satisfaction towards internet banking services

H3f. There is a significant difference among different income groups regarding

intention of continuous usage of internet banking services

H4: There is a significant difference based on occupation towards the various

variables under study.

H4a. There is a significant difference among different occupations regarding trust


H4b. There is a significant difference among different occupations regarding perceived


H4c. There is a significant difference among different occupations regarding


H4d. There is a significant difference among different occupations regarding perceived


H4e. There is a significant difference among different occupations regarding customer


H4f. There is a significant difference among different occupations regarding intention


Hypotheses on Variables under Study

H5 Trust has a significant impact on customer satisfaction towards internet banking

services.

H6 Perceived risk has a significant impact on customer satisfaction towards internet

banking services.

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73

H7 Awareness has a significant impact on customer satisfaction towards internet

banking services.

H8 Perceived usefulness has a significant impact on customer satisfaction towards

internet banking services.

H9 Customer satisfaction has a significant impact on intention of continuous usage of


3.7 Chapter Summary

This chapter discusses the research gaps identified, research objectives, research

problem and the need of the study. Scope of the study has also been discussed along

with the proposed conceptual framework for the study. The theoretical framework for

this study contains six major constructs that include trust, perceived risk, perceived

usefulness, awareness, customer satisfaction and intention of continuous usage. This

study identified six variables that are considered relevant to the research problem. The

independent variables for this study include trust, perceived risk, perceived usefulness

and awareness while customer satisfaction is a dependent variable in relation to the

earlier mention four independent variables but an independent variable in relation to

intention of continuous usage. Intention of continuous usage is a dependent variable

in relation to customer satisfaction. Based on the conceptual model, hypotheses on

demographics and the variable of the study have been framed. The next chapter will

discuss the research methodology employed for the study in detail.

CHAPTER 4 Research Methodology

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4.1 Introduction

The present chapter discusses the research methodology employed for the study. This

includes the details of research design used, sampling methodology employed, data

collection method, research instrument used ,exploratory factor analysis and statistical

techniques used for data analysis that includes Confirmatory Factor Analysis(CFA)

and Structural Equation Modeling (SEM).

Research methodology may be defined as the procedural framework specified for

conducting the research. Remenyi et al. (1998) have defined research methodology as

an optional framework for placement of facts so that they can be interpreted

accordingly. It is a very extensive concept and can also be termed as a problem

solving tool or a defined way for conducting and gathering new knowledge. The

methods to be used depend upon the formulation of problem as different problems

require different methods or applications. On the basis of the research gaps that have

been identified in the previous chapter, research methodology employed by the

researcher has been discussed in detail in this chapter. This chapter discusses the

research process, research design, the development of survey instrument, method of

development, pilot testing, sample plan, sampling design and data collection

procedure used for the study.

4.2 Research Design

According to Babbie & Mouton (2006), research design can be defined as a research

plan, which can be used as an architectural blueprint of the research study It is the

structure designed for answering the research questions. According to Allison et al

(2000) a research design includes the procedure planned for the research as well as the

procedure for collection of data and further analysis. For answering the research

questions, research design helps in increasing the efficiency of the research by

identifying the required research operations. According to Burns & Bush (2002),

research design can be defined as a set of decisions that the researcher has to take in

advance that help in specification of methods and procedures to be employed for

collection and analysis of the related information. Allison et al(2000); Hair et

al.(2003) and Churchill & Iacobucci (2004) have suggested that it is important to

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75

specify the research design for clearly determining the kind of data required,

techniques to be employed for data collection and analysis and methodology for

sampling. It helps in determining the schedule and the budget of the research and

aligning the methodology employed to the research problems and research objectives

identified.

According to Hartman and Heblom (1979); Crimp et al.(1993) and Aaker et al.(2000),

research design can be classified as exploratory or descriptive. Researchers may

utilize multiple research designs in order to meet the objectives of the research i.e.

exploratory study may be employed by the researcher at the beginning which will

provide the essential background information that is required for conducting a

descriptive study (Burns & Bush, 2002). The present work employs both these

research designs in order to achieve the objectives of this study. Thus, the study

undertaken by the researcher is exploratory cum descriptive in nature. This study aims

to identify the dimensions of Customer Relationship Management in Indian e-banking

context and their impact on customer satisfaction and intention of continuous usage.

Therefore, the research design of this study is exploratory cum descriptive in nature.

Parasuraman (1991) and Malhotra (1999) have devised that conducting exploratory

research at the beginning helps in developing initial insights into the research

undertaken and directions for any further research needed are provided. It is

essentially required for specific definition of the research problem more specifically

and identification of specific objectives that need to be addressed through further

research in the area. The researcher employed this design as it is important to identify

the key dimensions of CRM in e-banking before further studying their relationships.

According to Burns and Bush (2002); Hair (2003) and Churchill and Iacobucci

(2004), descriptive research designs are mostly quantitative in nature and are used to

describe the relation between independent and dependent variables. It has a structured

research design conducted normally through surveys. According to Hair (2003), two

basic techniques used for conducting descriptive research include cross-sectional and

longitudinal techniques Collection of information only once at a given point of time

from a given population sample is used for conducting cross-sectional studies. It is

also referred to as sample survey method as response of selected individuals to a set

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of standardized and structured questions is collected, measured and analysed. Under

cross sectional design, when the sample of respondents drawn from the target

population is required for data collection only once, it is termed as single cross-

sectional design. In contrast, collection of information from sample unit of population

is done over a period of time in longitudinal studies (Burns and Bush 2002). Single

cross-sectional study was employed by the researcher for conducting this study.

Fig.4.1 Key steps involved in the study

Source: Prepared by the Researcher

Identification of research variables

Formulation of Research objectives, hypotheses and model for the study

Scale Development and Final Research Instrument

Pilot testing (for checking reliability & validity of the instrument)

Questionnaire Administration

Analysis & Interpretation of Results

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4.3 Sampling

4.3.1 Research Population

Since the scope of the study was limited to internet banking only, so the users of

internet banking across the country were taken into consideration as the research

population The research population for the study were defined as users of internet

banking across India.

4.3.2 Sampling Frame

The source from which a sample can be drawn for data collection is defined as

sampling frame. According to Oates (2006), sampling frame can be defined as a list of

all those within a population who can be sampled and may include individuals or

institutions. The sampling frame can be defined as a set of elements from which a

researcher can select a sample of the target population. As it is difficult for the

researcher to have access to the entire population of interest, it is important to identify

the sampling frame that represents all of the elements of the population of interest.

The survey sample may be chosen based on the sampling frame defined. As per

Reserve Bank of India guidelines, banks are not allowed to disclose or share the

details of their internet banking customers. Therefore, the sampling frame for the

study is not precisely defined.

4.4 Sampling Technique

Bryman & Bell (2003) have categorised sampling into probability sampling and non-

probability sampling. Selection of participants for a study based on the belief that

each member of the population has an equal and non-zero chance of being selected is

termed as probability sampling. Random selection of sample is made in probability

sampling techniques and the basic assumption is that the sample represents the entire

population under study. According to Oates (2006),probability sampling can be

further classified as random sampling, stratified sampling, systematic sampling or

cluster sampling.

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However, in applied social research, due to certain constraints and circumstances, it is

not practically possible or feasible to apply probability sampling. Therefore, non-

probability sampling is employed in such cases. According to Saunders et al. (2003),

based on certain specific characteristics, if the participants of a survey are pre-

selected, this is termed as probability sampling. Non-probability sampling may also

be used where the sampling frame is not defined. Techniques of non-probability

sampling include convenience sampling where relative ease of access is the criteria

for selection of members of the population as respondents. Convenience sampling is

used to draw a sample from the population without any underlying probability-based

selection method. The advantages of convenience sampling include short duration of

time required for data collection its cost effectiveness.

Snowball sampling is another type of non-probability sampling which helps a

researcher identify users who otherwise might not have been included in the sample

(Oates, 2006). Advantages of snowball sampling include its access to individuals

from a large population beyond any known segments of a given population and its

cost effectiveness, particularly when it is done through the internet. Reduction in the

individual response time as well as the time needed between contacts is also an added

advantage of snowball sampling when potential respondents are contacted via email.

Judgmental sampling or purposive sampling is another type of non-probability

sampling technique where the sample selected is based on the knowledge of the

researcher about the population and the purpose of the study. The respondents are

selected because of some particular features that the researcher thinks would be

appropriate for the study.

Non-probability sampling was used by the researcher for this study. Convenience

sampling was used to contact respondents who were approached physically in the

branches of different banks while snowball sampling was used for respondents who

were approached by sending the questionnaire via email. The customers who were

available and willing to participate in the study were contacted for responding to the

questionnaire. The sampling unit for the study were the different banks operating in

India. The researcher included both public as well as private banks for the study. All

leading banks in both public sector and private sector like State Bank of India, Punjab

National Bank, Bank of Baroda, ICICI, HDFC etc were included as sampling unit by

http://en.wikipedia.org/wiki/Snowball_sampling

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the researcher. The sampling element for the study was an individual user of Internet

Banking services of any bank.

4.5 Sample Size

After determining sampling population, sampling frame, sampling unit and sampling

element, it was essential to determine the sample size. According to Malhotra (1999),

the sample size to be determined depends various factors that include proposed data

analysis techniques, financial constraints and access that the researcher has to the

sampling frame. The proposed data analysis technique for this research is Structural

Equation Modeling According to Tabachnick and Fidell (2001), Structural Equation

Modeling is very sensitive to sample size and less stable when estimated from small

samples. For factor analysis, some general recommendations specify the minimum

sample size required. Kline (1979), Gorsuch (1983) and MacCallum et al (1999) have

recommended at least 100 respondents for data analysis. Hutcheson and Sofroniou

(1999) have recommended at least 150 - 300 cases, more toward the 150 end when

there are a few highly correlated variables. Guilford (1954) has suggested that number

of respondents should be at least 200 cases. Cattell (1978) has claimed the minimum

desirable number of respondents to be 250.So, the final sample size found fit for final

data analysis was 450 respondents which is in alignment with the above mentioned

studies.

4.6 Data Collection Method

The instrument used for the study was questionnaire. A questionnaire can be defined

as a pre-defined set of questions for solving or analysing a specific problem. The

respondents are then asked to answer these questions. The researcher may approach

the respondent with the questionnaire either physically or electronically sends it to the

proposed respondent. This helps the researcher to gain access to data that can be

further analysed using appropriate techniques to draw conclusions based on the

hypotheses formulated. A questionnaire is essentially an instrument used for data

capturing. All the questions that that the researcher wants the respondents to reply to

are listed in the questionnaire and the responses are recorded. Large samples can be

surveyed using questionnaires as a research tool as the same set of questions is

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presented to each respondent. It is an effective way of response collection from a large

sample. As compared to interviews, less skill and sensitivity is required to administer

questionnaires and the possibility of interviewer bias is also negated.

Survey method was used for data collection in this study. According to Aaker et al.,

(2000), sampling, type of population, question format, question content, response rate,

costs and duration of data collection are important factors that need to be considered

before selecting the method of data collection. For studies that are related to

individual users or customers, survey method is the preferred approach as

convenience, cost to be incurred, time duration of the study and accessibility are key

factors that need to be taken into account (Dwivedi, 2005).The present study aimed at

identifying the key dimensions of CRM in e-banking and their relationship with

intention of continuous usage. So, survey method was found to be appropriate for data

collection for this study in order to get responses from maximum possible number of

respondents.

4.7 Research Instrument

4.7.1 Item Generation

The research instrument consisted of a structured questionnaire drafted in English.

Close ended questions were used and the respondents were requested to mark their

responses. Past researches were extensively reviewed by the researcher for

identification of related measures. Based on extensive literature review, a pool of 40

items was generated. Items were taken from existing research instruments as well as

developed by the researcher. Each item was generated as a statement capturing one

of the six variables of the study. The construct of customer satisfaction was measured

using items proposed by Srijumpa et al. (2007). The construct of perceived

usefulness was measured using items proposed by Ho and Ko (2008). The items for

trust were based on Ndubisi (2007) and Chung and Kwon (2009). To measure

intentions to continue to use and to recommend, items were adapted from previously

developed scales from Yiu et al (2007) and Prompattanapakdee (2009). To measure

perceived risk, items were adapted from Littler and Melanthiou (2003), Aldas-

Manazano et al (2009), Lee (2009) and Zhao et al (2008). For measuring awareness,

items from previous studies of Al-Somali et al(2009) and Pikkarainen et al(2004)

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was used. The researcher employed due diligence in analysing each item in order to

avoid confusing, gratuitous or leading questions. Close ended questions were used in the instrument as restriction of answer set makes

the calculation of percentages and other statistical data over the entire group or any

subgroup of respondents easier to calculate. The researcher is spared from useless or

extreme answers that the respondents may provide in open ended questions. The

research instrument consisted of structured questionnaire and the respondents were

required to indicate their responses. Questionnaire survey has been widely

acknowledged as an efficient tool for assessing the experience of individuals on a

particular subject. Pilot testing of the measurement instrument was necessary to

validate the items and the whole scale. This is because some of the measurement

items were developed or modified for the purpose of this research and because the

questions in the instrument were newly compiled to form a new questionnaire.

The instrument employed for the study comprised of questions on demographics,

usage of internet banking and the various variables identified for the study. The

survey instrument was divided into three sections. The first section related to the

demographic profile of the respondents like gender, age, family income etc. Opening

questions on demographics were multiple choice questions in order to get the general

information about each customer. The second section was related to the usage of

internet banking by the respondents. This section included the name of the bank the

customer was associated with, the frequency of usage of internet banking, purpose of

usage etc. General information related to the usage of internet banking services was

sought in this section. The third section consisted of 40 close-ended questions. Scale

questions were sued for the third part of the questionnaire where each item would be

measured using five point Likert scale.

The reason for selection of a five-point Likert scale was because according to

Oppenheim (1986), respondents may get confused by an increase in the scale and any

increase in the scale doesn’t necessarily lead to an improvement in the reliability of

the responses. Malhotra (1999); Parasuraman (1991) and Sekaran (2000) have also

identified a five-point scale to be an ideal scale for measurement. Therefore, a five-

point Likert scale was used in the questionnaire. The questionnaire consisted of 40

items followed by a Likert scale which ranged from 1 to 5 where 1 corresponded the

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response to “Strongly Disagree” ; 2 as “Disagree” ; 3 as “Neither Agree Nor

Disagree” ; 4 as “Agree” while 5 corresponded to “Strongly Agree”.

Fig 4.2- Stages in Questionnaire Development

Source: Prepared by researcher

Selection of survey method

Developing the questionnaire • Measurement scale (Question contents and wordings) • Response format • Sequence of questions • Physical layout

Pilot Testing

Revision in questionnaire

Factor Analysis Reliability Sample Adequacy

Finalisation of Questionnaire

Questionnaire Distribution and Administration

Identification of variables and related items

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4.7.2 Content Validation & Pilot Testing

After the finalisation of the research instrument, academic experts were then

consulted in order to determine the content validity and face validity of the

instrument. Feedback of the experts was required in order to ensure the content,

layout, wording and ease of understanding the measurement items. Suggestions

regarding the improvement in the proposed scale were sought for enhancing the

clarity, readability and content adequacy of the research instrument. According to

Burns & Bush (2002), it is important to ensure that the research instrument is free

from ambiguous wording or an error before the survey is launched at large. 3

statements were deleted after consultation with the experts.

A pilot study was then conducted by the researcher in order to detect the weaknesses

in design and instrumentation. By drawing the respondents from the target population,

pilot survey helps in finalizing the wording of questionnaire, sequencing and layout of

questionnaire and analytical tools to be used. Simulating the protocols and procedures

designed for data collection, a pilot survey can be considered a smaller version of the

larger survey and relates particularly to questionnaire survey. To test questionnaire, a

pilot test was implemented to a convenience sample of 105 users of internet banking

in Aligarh city. The aim was to ensure that the instrument was free of any error before

the survey was carried out on a large scale. Exploratory Factor Analysis was then

carried out to classify the items of the questionnaire. A total of 5 statements got

deleted in Exploratory Factor Analysis leading to a total of 32 statements for the final

questionnaire.

4.7.3 Research Instrument Administration

The final research instrument consisted of 32 items measuring the different variables

of CRM under study. The questionnaire had a separate part eliciting demographic

details. Measurement scheme adopted was five-point Likert scale (strongly agree to

strongly disagree). Data collection was done over a period of six months from June

2014 to December 2014. Convenience sampling and snowball sampling techniques

were used. The researcher physically visited the banks in different cities for data

collection. A web-link of the questionnaire was also prepared and was used for

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snowball sampling. In the first stage, six cities across India were identified for the

study that included Delhi/NCR, Hyderabad, Lucknow, Patna, Aligarh and

Bulandshahar. These cities were identified for the study based on their classification

as Tier I, II and III cities. Delhi- NCR and Hyderabad are metropolitans having a

large number of working class populations and hence maximum usage of Internet

banking. Lucknow and Patna are high growth cities and more and more customers are

using internet banking for their various banking needs. Aligarh and Bulandshahar are

emerging cities and hence considered appropriate for as a part of the study. In the

second stage, the banks to be used for data collection were identified from each city.

Finally, within the banks, convenience sampling was used for data collection. In

convenience sampling, the sample is selected on the basis of the convenience of the

respondents and the researcher. The customers who were available and willing to

participate in the study were selected for the survey. The breakup of the responses

gained from physical collection and online responses received is as follows:

Table 4.1- Breakup of responses collected

Questionnaires

distributed

physically

(Hard copy

response)

Questionnaire

sent via email

(Soft copy

response)

Total

Number of

Respondents

Approached with

Questionnaire

438 1273 1711

No response 58 1154 1212

Incomplete

Responses 27 22 49

Questionnaires

found fit for final

analysis

353 97 450

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85

A total of 438 respondents were approached physically by the researcher at various

banks in the cities listed above. The researcher received no response from 58

respondents while 27 responses were found to be incomplete. Hence, a total of 353

physical responses were found fit for final analysis. The questionnaire was sent

attached via emails to 1273 respondents. Out of that, 119 were received out of which

97 found fit for final analysis. So, the total sample size for final analysis was found to

be 450.

4.8 Sample Adequacy

According to Comrey (1978), for factor analysis, pre-analysis testing in order to

determine the suitability for the entire sample is required. Sampling adequacy is

measured using Kaiser-Meyer-Olkin (KMO) test (Field, 2005; Kaiser, 1974). A

minimum value of 0.5 is recommended by Kaiser et al. (1974). According to;

Hutcheson & Sofroniou (1999) and Field (2009), values between 0.5-0.7 are

considered mediocre; between 0.7-0.8 are good; between 0.8-0.9 are great and values

greater than 0.9 are superb. For the current study, KMO value was found to be 0.866

which indicates the adequacy of the sample for conducting factor analysis.

The Bartlett’s test of sphericity (Bartlett, 1954) is another test that is used to indicate

the strength of relationship among variables. It is used to test the null hypothesis that

the original correlation matrix is an identity matrix indicating that the variables are

unrelated in the population. A significant test will favour rejection of the null

hypothesis and indicate there are some relationships among the variables, thus

confirming the appropriateness of applying factor analysis. In the present study,

Bartlett’s test was significant (p<0.01) indicating the fitness of the sample for factor

analysis

Table 4.2 KMO and Bartlett's Test of Sphericity

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .866

Bartlett's Test of Sphericity

Approx. Chi-Square 3811.004

Df 300

Sig. .000

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4.9 Exploratory Factor Analysis

Factor analysis is a multivariate statistical procedure used primarily for reduction of

data and its summarization. A large number of correlated variables are reduced to a

set of independent underlying factors. Structure of interrelationships among large

number of variables can thus be studied by defining a set of common underlying

dimensions, known as factors or dimensions. According to Hair et al. (2010),

exploratory factor analysis can be used to for condensing the information contained in

the original variables into a smaller set of factors with a minimum loss of information.

This helps the researcher in a clear and precise understanding of the set of measured

variables. Choice of extraction method depends on the objectives. The researchers can

choose from any of the basic factor extraction methods (Hair et al., 2010). Principal

Component Analysis (PCA), Common Factor Analysis, Principal Axis Factoring

(PAF) and Maximum Likelihood Method are some of the common methods used for

conducting factor analysis.

Variance of the variable is a key term that actually determines the type of extraction.

In common parlance, there are three types of variance: Common Variance is the

variance that is shared by all the variables present in the analysis. Specific Variance,

also referred to as unique variance, is associated with only a specific variable. Error

Variance is the variance which cannot be explained by the correlations with other

variables. All three variances combine to form the total variance. When the variables

are strongly correlated, it leads to a strong correlation among variables leads to an

increase in common variance. Principal Component Analysis takes into account the

total variance and extracts factors that hold little percentage of unique variance.

Whereas, common factor analysis considers only common or shared variance

presuming that the unique variance and error variance are not of significance.

However, the use of Principal Component Analysis is not considered as a true factor

analysis (Costello & Osborne, 2004). However, other researchers have argued that

Principal Component Analysis is one of the key methods for conducting factor

analysis (Arrindell & van der Ende, 1985; Guadagnoli and Velicer, 1988; Steiger,

1990; Velicer & Jackson, 1990) If the data is found to be relatively normally

distributed Maximum Likelihood factor analysis should be used whereas if the

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assumption of multivariate normality is not met, use of Principal Axis Factoring

method should be used (Fabrigar, Wegener, MacCallum & Strahan, 1999).Another

important concern is the type of rotation to be employed. When the primary goal is to

reduce the data researchers usually go for orthogonal rotation. Oblique rotation is

used when the objective is to obtain varied theoretically meaningful factors or

constructs (Hair et al., 2010).

4.10 Reliability and Validity

It is necessary to develop valid and reliable measures as this enables proper framework

for establishing dimensions under study. Standardizing the measurement scales is

difficult till the establishment of reliability and validity. Without reliability and

validity, it is difficult to determine that the scales actually measures what they are

supposed to measure. In present study, the data collected through a questionnaire was

subjected to factor analysis in order to classify the various items under different

dimensions. Reliability and validity tests were then carried out to ensure

operationability and standardization of the measurement scale.

Sound measurement must meet the tests of reliability and validity. The validity of a

measurement instrument refers to how well it captures what it is designed to measure.

It refers to the extent to which these inferences are sound. Accurate conclusions about

the variable can be drawn if the researcher’s interpretation of a score is valid. Validity

is, therefore, related to the interpretation and use of the results of the measurement

scale and not a characteristic of the research instrument itself. Validity and reliability

of the measure of variables helps the researcher in drawing valid inferences from the

research.

In this study, the content and face validity of measurement instrument was assessed

by asking subject experts to examine it and provide feedback for revision. After the

finalisation of the research instrument, academic experts were consulted in order to

determine the content validity and face validity of the instrument. Feedback of the

experts was required in order to ensure the content, layout, wording and ease of

understanding the measurement items. Suggestions regarding the improvement in the

proposed scale were sought for enhancing the clarity, readability and content

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adequacy of the research instrument. According to Burns & Bush (2002), it is

important to ensure that the research instrument is free from ambiguous wording or

errors before the research instrument is used for final data collection.

A pilot study was then conducted by the researcher in order to detect the weaknesses

in design and instrumentation. By drawing the respondents from the target

population, pilot survey helps in finalizing the wording of questionnaire, sequencing

and layout of questionnaire and analytical tools to be used. Simulating the protocols

and procedures designed for data collection, a pilot survey can be considered a

smaller version of the larger survey and relates particularly to questionnaire survey.

Each question was examined for its clarity and relevance to the purpose of the

research resulting in modifications to wording of some questions. Pilot testing is a

subjective but systematic evaluation of how well the content of scale represents the

measurement task at hand.

Reliability refers to how consistent the measurement results are and the extent of

accuracy and stability of results. Reliability deals with the consistency of identical

results being produced by identical measures. has two dimensions of Repeatability

and internal consistency are the two dimensions of reliability. The ability of a scale

item to correlate with other items in the scale that are intended to measure the same

construct is termed as internal consistency. These same construct items are supposed

to be positively correlated with each other. Cronbach’s alpha is a common measure

for determining the internal consistency of a measurement instrument. A Cronbach’s

alpha value of greater than 0.70 ensures that the scale is reliable enough for

measuring the construct (Hair et al, 1998). In this research, the multi item scales

measuring the various items and dimensions were checked for reliability by

determining Cronbach Alpha and an Alpha value of 0.70 or greater were considered.

4.11 Statistical Techniques for Data Analysis

According to Malhotra (1999), it is important to determine the appropriate statistical

technique to be employed for data analysis based on the research problem, research

objectives, data characteristics of the data and the underlying properties of the

statistical techniques proposed to be employed. In order to appropriately address the

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research problem, following statistical techniques were employed by the the

researcher.

4.11.1 Confirmatory Factor Analysis

In exploratory factor analysis, a subjective assessment of factor loadings, cross-

loadings and factor independence limits the interpretation of results. According to

(Lee, 2008), use of confirmatory factor analysis (CFA) is recommended for

overcoming these limitations of EFA. A multivariate statistical procedure, CFA is

used to determine how well the constructs under study are represented by the

measured variables. Although both Confirmatory factor analysis (CFA) and

exploratory factor analysis (EFA) are techniques that are similar in nature, exploratory

simply explores the data and information regarding the number of factors required to

represent the data is provided. Every latent variable is related to all measured

variables in exploratory factor analysis but in confirmatory factor analysis (CFA), the

number of factors required for the data can be specified by the researcher that helps in

determining the relationship between latent variables and measured variables. A

measurement theory can be rejected or confirmed using the tool of confirmatory

factor analysis.

According to Fox (2010), hypothesis studying the relationship between the observed

variables and their underlying latent constructs can be empirically tested using CFA.

According to Noar (2003), theoretical knowledge, empirical research, or both can be

used by the researcher to formulate a hypothesis that can be statistically verified using

CFA. A population covariance matrix, estimated from the hypothesised model, is then

compared with the observed covariance matrix. to examine the extent of inter-

relationships and co variation among the constructs.

According to Floyd & Widaman (1995) and Reise, Waller & Comrey (2000), CFA is

an important research tool for rationally evaluating the hypothesized structure among

the factors both within and between populations. Fit indices are used to determine the

CFA output. According to Crowley and Fan (1997), although there are no set rules for

assessing the model fit per se but it is advisable to report a variety of indices. For the

present study, most commonly reported fit indices have been chosen which include

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Root Mean Square Error of approximation (RMSEA), which is an absolute fit index;

Goodness of fit (GFI); Adjusted Goodness of Fit (AGFI) and; Comparative Fit Index

(CFI).

CFA is a special case of the structural equation model (SEM), also known as the

covariance structure (Byrne, 2006). SEM consists of two components: a measurement

model that links a set of observed variables to a usually smaller set of latent variables

and a structural model that links the latent variables through a series of recursive and

non-recursive relationships. CFA corresponds to the measurement model of SEM and

as such is estimated using SEM software.

According to Truxillo (2003),the process of CFA involves the reviewing of the

relevant theory supported by extant literature to specify a conceptual model,

determining the model identification (e.g., if unique values can be found for

parameter estimation or the number of degrees of freedom, df, for model testing is

positive),data collection, conducting preliminary descriptive statistical analysis (e.g.,

scaling, missing data, collinearity issues, outlier detection),estimation of model

parameters, assessment of model fits and interpretation and presentation of results. A

minimum number of four constructs and three items per construct should be present in

the conceptual model. The validity of the measurement model can be assessed by

various fitness statistics such as GFI, NFI, AGFI, RMSEA etc. These indicators help

in the measurement of the validity of the model.

4.11.2 Structural Equation Modeling

According to Bagozzi (1980), researchers employing theory testing in marketing

practices have long been using multivariate data analysis using structural equation

modeling (SEM). Structural equation models go over and above the ordinary

regression models as multiple independent and dependent variables are incorporated

that also includes hypothetical latent constructs represented by observed variables.

Specified set of relationships among observed and latent variables can be tested as a

whole and testing of theory is allowed. Consequently, SEM has vast applications

across all the social and behavioural sciences (MacCallum & Austin, 2000). SEM has

two parts: a measurement model and a structural model. The measurement model

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consists of a multivariate regression model that describes the relationships between a

set of observed dependent variable and a set of continuous latent variables. Using one

set of multivariate regression equations, the structural model describes three types of

relationships that include the relationships among factors, the relationships among

observed variables, and the relationship between factors and observed variables that

are not factor indicators. These relationships are described by a set of linear regression

equations for the continuous observed dependent variable.

According to Benter and Chou (1987); Hatcher(1994); Hoyle (1995) and Hu and

Bentler (1999),using SEM has several advantages for the researcher as the

assumptions underlying the statistical analyses are clear and testable, giving the

investigator full control and potentially further understanding of the analyses. SEM

provides overall tests of model fit and individual parameter estimate tests

simultaneously. Regression coefficients, means, and variances may be compared

simultaneously, even across multiple between-subjects groups. Measurement and

confirmatory factor analysis models can be used to purge errors, making estimated

relationships among latent variables less contaminated by measurement error. It

provides a unifying framework under which numerous linear models may be fit using

flexible and powerful software.

4.11.3 Justification for use of SEM

According to Bentler (1980) and Cheng (2001), evolution of SEM has taken from

techniques employed in regression and builds on the assumptions of regression.SEM

can also be used for predicting and explaining relationships. Merging the logic of

multiple regression and path analysis with a single analytical framework, SEM can be

used to determine the presence of a mediating variable between exogenous

(independent) variables and endogenous (dependent) variables. Extensive application

of SEM has been made in the fields of customer behaviour (Laroche et al., 1999);

services marketing (Caruana et al., 1999; Babakus et al., 1999); relationship

marketing (Nielson, 1996), banking services (Heaney & Goldsmith, 1999), human

resources (Elangovan, 2001) and supply chain management (Tracey & Tan, 2001).

SEM is preferred to other multivariate analyses because it enables a complex study of

interrelationships between independent variables and multiple dependent variables,

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even when a dependent variable becomes an independent variable in other

relationships.

4.12 Chapter Summary

Research methodology employed for the study is discussed in detail in this chapter.

The present chapter discussed the details of research design used, sampling

methodology employed, data collection method, research instrument used

,exploratory factor analysis and statistical techniques used for data analysis that

includes Confirmatory Factor Analysis(CFA) and Structural Equation Modeling

(SEM).The research design used for the study is descriptive cum exploratory in

nature. Convenience sampling and snowball sampling are used for data collection.

Development of the questionnaire used for the study is elaborately discussed in this

chapter. Measurement scales for each construct have been identified, based on well-

known previously tested scales. The data collection tool used in this research was a

self-administrated questionnaire. A pilot study was conducted to measure the

reliability and validity of the questionnaire before the actual full scale study. Upon

completion of the study, the data was coded and entered into SPSS-22.00 for further

analysis. The testing of the hypotheses and the relationships between independent and

dependent variables is presented in the next chapter which deals with the validation of

the conceptual model for the study through CFA and SEM. Hypothesis attesting and

other findings will also be discussed in the next chapter.

CHAPTER 5 Analysis and Findings

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5.1 Introduction

The results of data analysis and various findings are presented in this chapter.

Computer based statistical tools Statistical Package for Social Sciences (SPSS-22),

Analysis of Moment Structure (AMOS-21) were employed to analyse the data. Data

descriptions and summaries are presented through tables and figures. Assumptions of

multivariate regression have also been described. Model development is carried out

using Structural Equation Modeling (SEM). Significant differences and relationships

among variables are identified using techniques such as independent sample t-test and

one-way ANOVA.

The chapter begins with the demographic profile of respondents. It is followed by

measurement model (CFA) to ascertain the items loading on a particular variable. It is

followed by the structural model (SEM) that validates the relationship between the

independent and dependent variables. Independent sample t-test and one-way

ANOVA test findings are then discussed for understanding the influence of

demographics on various variables impacting the usage of e-banking services offered

by the banks. A summarized table indicates the summary of hypotheses whether they

have been supported or not supported.

5.2 Demographic Profile of Respondents

The demographic profile of 450 respondents to the questionnaire has been discussed

below. The demographics taken under consideration included gender of the

respondent, age of the respondent, monthly family income occupation of the

respondents. The questionnaire also included items asking the respondents to name

the bank whose internet banking services they were using, for how long they were

using those services and the frequency of their usage. These details are listed in a

tabular form.

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Table 5.1-Demographic Profile of Respondents

Variable Categories Frequency Percentage Cumulative Percentage

Gender Male 306 68.00 68.00

Female 144 32.00 100.00

20-30 297 66.00 66.00

Age (in years) 30-40 126 28.00 94.00

Above 40 27 6.00 100.00

Below 20000 99 22.00 22.00

Income (in INR) 20000-40000 133 29.60 51.60

40000-60000 101 22.20 73.80

Above 60000 117 26.20 100.00

Student 184 40.90 40.90

Unemployed but not student 14 3.10 44.00

Occupation Private Sector employee 180 40.00 84.00

Government employee 53 11.80 95.80

Self employed 19 4.20 100.00

SBI/SBI Group Bank 159 35.34 35.34

ICICI 77 17.14 52.48

HDFC 89 19.78 72.26

Name of Bank PNB 33 7.33 79.59

Axis Bank 43 9.55 89.14

Bank of Baroda 23 5.11 94.25

Others (Andhra Bank, J& K Bank, Allahabad

Bank etc) 26 5.75 100.00

<1 year 70 15.55 15.55

Duration of Usage (in

years) 1-2 years 109 24.22 39.77

2-3 years 79 17.55 57.32

> 3 years 192 42.68 100.00

1-3 times 109 24.22 24.22

4-6 times 182 40.45 64.67

Frequency of Usage 7-10 times 77 17.11 81.78

More than 10 times 82 18.22 100.00

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5.3 Factor Analysis

5.3.1 Exploratory Factor Analysis

For the present study, the researcher employed Principal Component Analysis with

varimax rotation. Exploratory Factor Analysis was carried out to identify the items

under the various variables under study.7 statements had a factor loading of less than

0.4 and hence, were not considered for further analysis. The factor loading of various

statements is discussed below. The statements identified through EFA are classified

under various constructs of the study.

Table 5.2 - Factor Loadings

S. No. Statement Factor Loading

Identified Under (Variable Name)

1 Provision of One Time Password ensures safety of every transaction I do through Internet banking

0.873 Trust

2 I am confident that my transaction through internet banking will always be transparent because of RBI

regulations

0.867 Trust

3 My bank is consistent in providing quality online service

0.844 Trust

4 I have confidence in the internet banking services of my bank

0.718 Trust

5 Based on my experience, I can say that using internet banking is safe and trustworthy

0.704 Trust

6 Overall, I am satisfied with the internet banking services of my bank

0.581 Trust

7 While using internet banking, I fear an erroneous entry of account number or denomination may

result in money loss and not being compensated by the bank

0.832 Perceived Risk

8 While using internet banking, I fear losing control of my account


9 While using internet banking, I fear the process may not work properly or correctly


10 While using internet banking, I fear increased possibility of unwanted emails


11 While using internet banking, I feel unsecure about sending and receiving my financial information on

internet banking system


12 I think the bank informs the customers about the advantages of internet banking

0.797 Awareness

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S. No. Statement Factor Loading

Identified Under (Variable Name)

13 I think the bank encourages the customers to use internet banking

0.783 Awareness

14 I think I get enough information about the services offered by internet banking and its advantages

0.711 Awareness

15 Overall, I find internet banking very useful for carrying out my banking activities

0.815 Perceived Usefulness

16 I think I get enough information about how to open an internet banking account and operate it


17 My bank promptly informs me whenever anything goes wrong with any of my transactions.


18 Using internet banking improves functioning of my banking activities

0.815 Customer Satisfaction

19 Internet banking allows me to manage my banking activities more conveniently and quickly


20 The time taken to process a transaction or query is fast and quick in internet banking


21 I will use the internet banking services more regularly and add it to my favourite links

0.610 Intention of Continuous Usage

22 I will speak favourably about the internet banking services to other people


23 I will recommend the use of internet banking if someone asks for my advice


24 I will encourage my friends and family to use internet banking services


25 I feel that it is not always safe and reliable to transfer money using internet banking


26 The instructions provided on my internet banking website are clear and understandable

0.325 Item Deleted

27 All service options, attributes and information are well designed and presented.

0.274 Item Deleted

28 The screen design of my internet banking website (i.e. colours, boxes, menus, navigation tools, etc.)

is good and well presented.

0.194 Item Deleted

29 While using internet banking, I fear internet banking systems can be accessed by unauthorised

people

0.382 Item Deleted

30 My bank will never make my personal information accessible to others

0.145 Item Deleted

31 The issue of ‘Amount deducted from account but transaction not complete’ is not addressed quickly

by my bank (maximum 3 days)

0.283 Item Deleted

32 While using internet banking, I fear not having enough information about internet banking in

general

0.178 Item Deleted

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The six-factor model had a total variance explained of 59.4%, with all extracted

factors having eigen values above 1.0.The items that were deleted after EFA are listed

below. These items were deleted as they had a factor loading of less than 0.4

Items Deleted:

• The instructions provided on my internet banking website are clear and

understandable (Factor Loading 0.325)

• All service options, attributes and information are well designed and

presented. (Factor Loading 0.274)

• The screen design of my internet banking website (i.e. colours, boxes, menus,

navigation tools, etc.) is good and well presented.(Factor Loading 0.194)

• While using internet banking, I fear internet banking systems can be accessed

by unauthorised people (Factor Loading 0.382)

• My bank will never make my personal information accessible to others (Factor

Loading 0.145)

• The issue of ‘Amount deducted from account but transaction not complete’ is

not addressed quickly by my bank (maximum 3 days) (Factor Loading 0.283)

• While using internet banking, I fear not having enough information about

internet banking in general (Factor Loading 0.178)

5.3.2 Reliability and Validity

As discussed in the previous chapter, it is important to determine the reliability and

validity of the instrument. Reliability of the instrument was found to be 0.847 which

is satisfactory enough to be used for data collection. Reliability of individual variables

identified for the study was also tested. Cronbach’s alpha value for each item was

found to be above 0.7.Thus, the instrument used for data collection was found to be

reliable enough to be used further analysis. The validity of the instrument has been

established as discussed in the previous chapter. The value of Cronbach’s alpha for

the entire instrument as well as individual variables is presented in a tabular from

below.

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Table 5.3- Reliability of the Instrument

Cronbach's Alpha N of Items

.847 32

Variable Identified Cronbach's Alpha

Trust 0.892

Perceived Risk 0.855

Awareness 0.791

Perceived Usefulness 0.745

Customer Satisfaction 0.795

Intention of Continuous Usage 0.866

From the above table and discussion, reliability and validity of the research

instrument developed for the study is established.

5.4 Structural Equation Modeling

According to Hair et al.(1998), SEM is the most efficient estimation technique for

simultaneous estimation of a series of separate multiple regression techniques as it has

the ability to combine statistical data with qualitative causal assumptions of the

researcher. It comprises of a measurement model and a structural model. In the

measurement model, the contribution of each scale item is assessed. It further

establishes the ability of the scale to measure the concepts into the estimation of

relationships between dependent and independent variables (Hair et al., 1998). Hence,

the measurement model provides the base for assessing the validity of the structural

model. The structural model, allows the researcher to test the predicted relationships

between dependent and independent variables.

5.4.1 The Measurement Model: CFA

All the variables retained after conducting exploratory factor analysis and reliability

test are included in the CFA measurement model. As discussed in the previous

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chapter, reporting a variety of fit indices is recommended for assessing the model fit

(Crowley & Fan, 1997). The model fit indices can be classified into three categories,

viz. Absolute indices, Parsimonious indices and Incremental indices. According to

Meuller & Hancock (2008), absolute indices evaluate the overall incongruity between

observed and implied covariance matrices. Commonly reported absolute indices are

chi-square test, GFI (Goodness of Fit Index) and SRMR (Standardized Root Mean

Square Residual).

Parsimonious indices appraise the discrepancy between observed and expected

covariance matrices while taking into account the model’s complexity. RMSEA (root

mean square error of approximation) and AGFI (Adjusted Goodness of Fit Index) are

usually reported parsimonious indices. According to Joreskog & Sorbom (1993),

incremental or comparative indices compare the performance of the proposed model

with the baseline or null model. NFI (Normed Fit Index) and CFI (Comparative Fit

Index) are common incremental indices.

According to McDonald & Ho(2002), the most commonly reported indices have been

CFI, GFI and NFI. Hair et al., (2010) have suggested the reporting of chi-square

statistic, CFI and RMSEA are advised. Specific indices appropriate for this study

include Chi square/df, GFI, AGFI, RMSEA, NFI and CFI. Chin et al., (1997) and

Salisbury et al.,( 2002) have suggested a value between 1 and 5 as appropriate for chi-

square/df. According to Kline (2004), a value of less than 3 is considered good.

According to Bentler & Bonnet (1980) and Joreskog & Sorbom (1993), for GFI and

AGFI, scores above 0.9 are considered a good fit. Hadjistavropoulos et al. (1999) and

Hair et al.,(1998) have suggested a GFI greater than 0.85 and AGFI greater than 0.80

as acceptable. RMSEA value below 1.00 indicates a good fit (Salisbury et al., 2002;

Schumacker & Lomax, 2004). For NFI value greater than 0.9 are recommended

(Salisbury et al., 2002), whereas, values greater than 0.80 are also acceptable

(Hadjistavropoulos et al. 1999; Hair et al., 1998). CFI values should be greater than

0.90 (Bentler & Bonnet, 1980; Salisbury et al., 2002).

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Fig 5.1 CFA Measurement Model

TR=Trust; PR=Perceived Risk; AWARE=Awareness; PUSE=Perceived Usefulness;

CSAT=Customer Satisfaction; IOCU=Intention of Continuous Usage

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Fit indices of CFA Measurement Model

Table 5.4-Fit Indices

Fit Index Recommended Values Test Value

Chi-square/df <3 2.151

GFI >0.90 0.910

AGFI >0.90 0.907

RMSEA <0.05: good fit

<0.08 : reasonable fit

0.051

NFI >0.90 0.908

CFI >0.90 0.948

(Recommended Values adopted from Bagozzi and Yi, 1988; Bentler &Bonnet,1980;

Baumgartner and Homburg, 1996; Chin et al., 1997 Cote et al., 2001;

Diamantopoulos and Siguaw, 2000; Hadjistavropoulos et al.,1999; Hair et al.,1998;

Joreskog & Sorbom,1993; Kline ,2004; MacCallum et al., 1996; Ping ,2004; Salisbury

et al., 2002; Schumacker & Lomax, 2004)

Table 5.5-Discriminant & Convergent Validity

CR AVE CSAT TR PRISK AWARE PUSE IOCU

CSAT 0.805 0.584 0.764

TR 0.892 0.585 0.670 0.762

PRISK 0.850 0.537 -0.161 -0.297 0.733

AWARE 0.799 0.572 0.352 0.512 -0.030 0.756

PUSE 0.702 0.513 0.293 0.266 0.137 0.277 0.622

IOCU 0.882 0.607 0.684 0.762 -0.145 0.294 0.266 0.779

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Convergent validity of the measurement model was calculated using Average

Variance Extracted(AVE). For all factors, the AVE was above 0.50 demonstrating

adequate convergent validity to proceed to the structural model. To test for

discriminant validity, the square root of the AVE (on the diagonal in figure 5.5) was

compared to all inter-factor correlations. All factors demonstrated adequate

discriminant validity because the diagonal values are greater than the correlations.

Composite reliability for each factor was also calculated. In all cases the CR was

above the minimum threshold of 0.70, indicating reliability in each of the factors.

5.4.2 The Structural Model: SEM

Multivariate Assumptions

Before testing the model, the researcher verified the dataset for multivariate

assumptions. Gaskin (2012a) has suggested the tests of linearity, multicollinearity and

homoscedasticity, before testing structural model. Homoscedasticity or homogeneity

of variance was tested by conducting Levene’s test for equality of variances which

was found to be satisfactory i.e there was homogeneity of variance in the dataset. For

checking linearity, the researcher employed Curve Estimation Test in SPSS. The

researcher concluded that all relationships were sufficiently linear to be tested using

co-variance based SEM algorithm. The researcher also conducted multicollinearity

test for the constructs of the study and the values of VIF ranged from 1.014 to 1.379.

These values are far below the cut off values of 10. Thus, it can be concluded that the

dataset fulfilled all the multivariate assumptions.

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Fig.5.2-The SEM Structural Model

TR=Trust; PR=Perceived Risk; AWARE=Awareness; PUSE=Perceived Usefulness;

CSAT=Customer Satisfaction; IOCU=Intention of Continuous Usage

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Fit indices of SEM Structural Model

Table 5.6-Fit Indices of SEM structural model

Fit Index Recommended Values Value

Chi-square/df <3 2.363

GFI >0.90 0.908

AGFI >0.90 0.903

RMSEA <0.05: good fit

<0.08 : reasonable fit

0.055

NFI >0.90 0.918

CFI >0.90 0.938

(Recommended Values adopted from Bagozzi and Yi, 1988; Bentler &Bonnet,1980;

Baumgartner and Homburg, 1996; Chin et al., 1997 Cote et al., 2001;

Diamantopoulos and Siguaw, 2000; Hadjistavropoulos et al.,1999; Hair et al.,1998;

Joreskog & Sorbom,1993; Kline ,2004; MacCallum et al., 1996; Ping ,2004; Salisbury

et al., 2002; Schumacker & Lomax, 2004)

5.5 Path Analysis and Hypotheses Testing

Maximum Likelihood Estimation was employed using AMOS 21 for calculating path

estimates. According to Chou and Bentler (1995), use of Maximum Likelihood

method is robust and logically tolerant of normality violations which are common in

psycho-behavioural studies. Path analysis specifies the predictive ordering of

variables. It provides estimation of the magnitude of the hypothesized effects in the

model and also tests the model for consistency with the observed data.

H5: Trust and Customer Satisfaction

H5 proposed that there is a significant relationship between Trust (TR) and Customer

Satisfaction (CSAT).The relationship between TR and CSAT was significant (p-value

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0.005; C.R. = 9.860) and well supported. The high value of CR indicates a strong

positive relationship between Trust and Customer Satisfaction.

H6: Perceived Risk and Customer Satisfaction

H6 proposed that there is a significant relationship between Perceived Risk (PRISK)

and Customer Satisfaction (CSAT).The relationship between PRISK and CSAT was

significant (p-value 0.031; C.R. = -2.156) and well supported. This value of CR

indicates a significant negative relationship between Perceived Risk and Customer

Satisfaction.

H7: Awareness and Customer Satisfaction

H7 proposed that there is a significant relationship between Awareness(AWARE) and

Customer Satisfaction(CSAT).The relationship between Awareness and Customer

Satisfaction is not significant as p –value is greater than 0.05 (p-value 0.573). This

value of p-value indicates that there is no relationship between Awareness and

Customer Satisfaction.

H8: Perceived Usefulness and Customer Satisfaction

H8 proposed that there is a significant relationship between Perceived Usefulness

(PUSE) and Customer Satisfaction (CSAT).The relationship between PUSE and

CSAT was significant (p-value 0.010; C.R. = 2.590) and well supported. This value of

CR indicates a positive relationship between Perceived Usefulness and Customer

Satisfaction.

H9: Customer Satisfaction and Intention of Continuous Usage

H9 proposed that there is a significant relationship between Customer Satisfaction

(CSAT) and Intention of Continuous Usage (IOCU). The relationship between CSAT

and IOCU was significant (p-value 0.008; C.R. = 9.756) and well supported. The high

value of CR indicates a strong positive relationship between Customer Satisfaction

and Intention of Continuous Usage.

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Table 5.7-Results of Path Analysis Hypotheses

Hypothesis Path

Standardized

Regression

Weights (β)

p-value Critical

Ratio

Result

H5 TR CSAT 0.677 0.005 9.860 Supported

H6 PRISK CSAT 0.066 0.031 -2.156 Supported

H7 AWARE CSAT 0.026 0.573 0.564 Not

Supported

H8 PUSE CSAT 0.141 0.010 2.590 Supported

H9 CSAT IOCU 1.032 0.008 9.756 Supported

5.6 Hypothesis on Demographics

Hypotheses 1 to 4 were tested using t-test and ANOVA to study the relationship

between various demographic variables and the constructs of the study. The

demographic variables are tested and presented one by one beginning from gender,

age, income and occupation.

Based on the results of t-test, the results of hypotheses H1a to H1f can be discussed as

follows.

H1a: Since the significant value > 0.05(Sig.0.292), so the hypothesis is not supported

i.e. There is no significant difference between males and females regarding trust


H1b: Since the significant value < 0.05(Sig.0.009), so the hypothesis is supported i.e.

There is a significant difference between males and females regarding perceived risk

towards internet banking services. Females have a higher mean than males regarding

perceived risk that is females consider perceived risk to be a key concern regarding

customer satisfaction towards internet banking services.

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Table 5.8 : Results of t-test based on gender

Demographic Variable- Gender

Variable

Male Female t-value

P-value

(2-tailed) Mean SD Mean SD

Trust 4.04 0.70 3.96 0.62 1.056 0.292

Perceived Risk 2.83 0.94 3.08 0.98 -2.632 0.009

Awareness 3.56 0.85 3.57 0.88 -0.112 0.911

Perceived

Usefulness 3.41 0.94 3.47 0.91 -.627 0.531

Customer

Satisfaction 4.24 0.70 4.18 0.79 0.889 0.374

Intention of

Continuous

Usage

4.01 0.77 3.89 0.76 1.569 0.117

H1c: Since the significant value > 0.05(Sig.0.911),so the hypothesis is not supported

i.e. There is no significant difference between males and females regarding awareness


H1d: Since the significant value > 0.05(Sig.0.531),so the hypothesis is not supported

i.e. There is no significant difference between males and females regarding perceived

usefulness towards internet banking services.

H1e: Since the significant value > 0.05(Sig.0.374),so the hypothesis is not supported

i.e. There is no significant difference between males and females regarding customer


H1f: Since the significant value > 0.05(Sig.0.117),so the hypothesis is not supported

i.e. There is no significant difference between males and females regarding intention


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Table 5.9 : Results of ANOVA based on age

Demographic Variable- Age

Variable

20-30 Years 30-40

Years

Above 40

years

F-value P-value

Mean SD Mean SD Mean SD

Trust 4.04 0.64 3.98 0.72 3.89 0.83 0.756 0.470

Perceived

Risk

2.94 0.96 2.85 0.95 2.93 0.97 0.361 0.697

Awareness 3.55 0.84 3.62 0.87 3.52 0.93 0.392 0.676

Perceived

Usefulness

3.54 0.91 3.31 0.98 2.89 0.93 7.028 0.001

Customer

Satisfaction

4.22 0.72 4.28 0.72 4.04 0.93 1.238 0.291

Intention of

Continuous

Usage

3.99 0.74 3.92 0.82 3.95 0.86 0.383 0.682

Based on the results of ANOVA, the results of hypotheses H2a to H2f can be discussed

as follows.

H2a: Since the significant value > 0.05(Sig.0.470), so the hypothesis is not supported

i.e. There is no significant difference between different age groups regarding trust


H2b: Since the significant value > 0.05(Sig.0.697), so the hypothesis is not supported

i.e. There is no significant difference between different age groups regarding

perceived risk towards internet banking services.


i.e. There is no significant difference between different age groups regarding

awareness towards internet banking services.

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H2d: Since the significant value < 0.05(Sig.0.001),so the hypothesis is supported i.e

There is a significant difference between different age groups regarding perceived

usefulness towards internet banking services. Age group 20-30 finds it most useful to

use internet banking as the value of mean for this age group is highest among the

three age groups.

H2e: Since the significant value > 0.05(Sig.0.291),so the hypothesis is not supported

i.e. There is a significant difference between different age groups regarding customer

satisfaction towards internet banking services.

H2f: Since the significant value > 0.05(Sig.0.682),so the hypothesis is not supported

i.e. There is a significant difference between different age groups regarding intention


Table 5.10: Results of ANOVA based on income

Demographic Variable- Income

Variable Below

20000

20000-

40000

40000-

60000

Above

60000

F-

value

p-

value

Mean SD Mean SD Mean SD Mean SD

Trust 3.95 0.78 4.04 0.62 4.11 0.61 4.03 0.70 3.189 0.024

Perceived

Risk

2.95 0.94 2.89 0.97 2.88 0.92 2.92 0.98 0.076 0.973

Awareness 3.51 0.92 3.50 0.83 3.63 0.74 3.62 0.92 1.497 0.243

Perceived

Usefulness

3.43 0.97 3.37 0.99 3.47 0.89 3.48 0.98 0.292 0.831

Customer

Satisfaction

4.10 0.88 4.18 0.67 4.32 0.67 4.29 0.70 1.029 0.336

Intention of

Continuous

Usage

3.87 0.80 3.93 0.74 4.02 0.77 4.05 0.78 1.233 0.297

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Based on the results of ANOVA, the results of hypotheses H3a to H3f can be

discussed as follows.

H3a: Since the significant value < 0.05(Sig.0.024),so the hypothesis is supported i.e.

There is a significant difference between different income groups regarding trust

towards internet banking services. Income group 40,000-60,000 is found to have the

maximum trust towards internet banking services.

H3b: Since the significant value > 0.05(Sig.0.973),so the hypothesis is not supported

i.e. There is a significant difference between different income groups regarding




awareness towards internet banking services. Income group 40000-60000 has the

highest awareness towards internet banking services.

H3d: Since the significant value >0.05(Sig.0.831),so the hypothesis is not supported

i.e There is no significant difference between different income groups regarding

perceived usefulness towards internet banking services.

H3e: Since the significant value >0.05(Sig.0.336),so the hypothesis is not supported


customer satisfaction towards internet banking services

H3f: Since the significant value > 0.05(Sig.0.297), so the hypothesis is not supported

i.e. There is no significant difference between different income groups regarding

intention of continuous usage of internet banking services

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Table 5.11: Results of ANOVA based on Occupation

Demographic Variable- Occupation Variable Student

Unemployed

but not

Student

Private

Sector

Employee

Government

Employee

Self-

Employed

F-

value

p-

value

Mean SD Mean SD Mean SD Mean SD Mean SD

Trust 4.02 0.66 4.08 0.53 4.31 0.71 4.17 0.67 3.73 0.61 2.923 0.041

Perceived

Risk

2.91 0.94 2.94 0.80 2.98 0.97 2.68 0.97 2.94 0.56 1.015 0.399

Awareness 3.52 0.83 3.50 0.61 3.64 0.85 3.66 0.89 3.09 0.95 2.144 0.074

Perceived

Usefulness

3.43 0.93 3.33 0.95 3.50 0.97 3.42 0.98 2.91 0.76 1.242 0.292

Customer

Satisfaction

4.16 0.74 4.24 0.65 4.30 0.69 4.36 0.66 3.67 0.94 4.260 0.002

Intention of

Continuous

Usage

3.95 0.69 3.91 0.59 3.99 0.82 4.08 0.73 3.54 0.99 1.932 0.104

Based on the results of ANOVA, the results of hypotheses H4a to H4f can be

discussed as follows.

H4a: Since the significant value < 0.05(Sig.0.0.041),so the hypothesis is supported i.e.

There is a significant difference between different occupations regarding trust

towards internet banking services. Private sector employees have the maximum trust


H4b: Since the significant value > 0.05(Sig.0.399), so the hypothesis is not supported

i.e. There is no significant difference between different occupations regarding


H4c: Since the significant value > 0.05(Sig.0.084), so the hypothesis is not supported



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H4d: Since the significant value >0.05(Sig.0.292),so the hypothesis is not supported

i.e There is no significant difference between different occupations regarding

perceived usefulness towards internet banking services.

H4e: Since the significant value <0.05(Sig.0.006),so the hypothesis is accepted i.e.

There is a significant difference between different occupations regarding customer

satisfaction towards internet banking services. Government employees have the

highest level of customer satisfaction towards internet banking services.

H4f: Since the significant value > 0.05(Sig.0.104), so the hypothesis is not accepted


intention of continuous usage of internet banking services.

The results of the various hypotheses based on demographics are presented in a

tabular form below.

Table 5.12: Results of hypotheses based on demographics

Hypothesis Variable of the Hypothesis Result

H1a Gender- Trust Not supported

H1b Gender- Perceived Risk Supported

H1c Gender- Awareness Not Supported

H1d Gender- Perceived Usefulness Not Supported

H1e Gender- Customer Satisfaction Not Supported

H1f Gender- Intention of Continuous

Usage

Not Supported

H2a Age -Trust Not Supported

H2b Age-Perceived Risk Not Supported

H2c Age- Awareness Not Supported

H2d Age- Perceived Usefulness Supported

H2e Age- Customer Satisfaction Not Supported

H2f Age- Intention of Continuous

Usage

Not Supported

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H3a Income-Trust Supported

H3b Income-Perceived Risk Not Supported

H3c Income-Awareness Not Supported

H3d Income-Perceived Usefulness Not Supported

H3e Income-Customer Satisfaction Not Supported

H3f Income-Intention of Continuous

Usage

Not Supported

H4a Occupation- Trust Supported

H4b Occupation- Perceived Risk Not Supported

H4c Occupation- Awareness Not Supported

H4d Occupation- Perceived

Usefulness

Not Supported

H4e Occupation - Customer

Satisfaction

Supported

H4f Occupation - Intention of

Continuous Usage

Not Supported

5.7 Chapter Summary

Results and findings based on data analysis were presented in this chapter. SPSS-22.0

and AMOS-21.0 were used for analysing the data. Demographic profile of

respondents is presented followed by Confirmatory Factor Analysis and Structural

Equation Modeling. Based on the statistical results, trust, perceived risk and perceived

usefulness are found to have a significant impact on customer satisfaction towards

internet banking services while awareness is found to have no significant impact on

customer satisfaction. Customer satisfaction is found to have a significant impact on

intention of continuous usage towards internet banking services. Independent sample

t-test and one-way ANOVA test findings were used to understand the influence of

demographics on various variables under study. The results of path analysis and

hypothesis on demographics are presented through tables and figures. The next

chapter discusses the major conclusions and recommendations based on the results

and findings elaborately discussed in this chapter.

CHAPTER 6 Conclusions

and Recommendations

Chapter -6

114

6.1 Introduction

The study “Customer Relationship Management in e-Marketing with special reference

to Indian Banking sector” analysed the objectives proposed after literature review.

The data analysis presented findings to research hypothesis established in the study.

Furthermore, the conclusions from the findings of the study are presented separately

for demographics and relationship concern variables. Major implications and the

recommendations are prescribed from these conclusions. Limitations of the study and

directions for future research are also discussed at the end of the chapter.

6.2 Conclusions based on Results of the Study

6.2.1 Demographics

Hypothesis H1 studied the difference between males and females regarding trust,

perceived risk, awareness, perceived usefulness, customer satisfaction and intention of

continuous usage towards internet banking services.

The hypothesis H1a establishing significant difference between genders with respect

to trust was not accepted. As the value was not in the acceptable range, hence both

males and females consider trust, as an important factor regarding internet banking

services.

The hypothesis H1b having evaluated with a significant value < 0.05(Sig.0.009),

tested the second formulated hypothesis as acceptable i.e. a significant difference

exists between males and females regarding perceived risk towards internet banking

services. Implying that females have a higher mean score than males regarding

perceived risk further meaning that females considered perceived risk to be a key

concern regarding internet banking services, as visible from the findings of the study.

The hypothesis H1c stating no difference existing between gender regarding awareness

towards internet banking services was not found empirically, in the acceptable range,

hence as far as awareness is concerned, both males and females consider it as an

important factor regarding internet banking services

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115

The hypothesis H1d stating no difference existing between gender regarding perceived

usefulness towards internet banking services was not found empirically, in the

acceptable range, hence as far as perceived usefulness is concerned, both males and

females consider it as an important factor regarding internet banking services

The hypothesis H1e stating no difference existing between gender regarding customer

satisfaction towards internet banking services was not found empirically, in the

acceptable range, hence as far as customer satisfaction is concerned, both males and

females consider it as an important factor regarding internet banking services.

The hypothesis H1f stating no difference existing between gender regarding intention

of continuous usage towards internet banking services was not found empirically, in

the acceptable range, hence as far as intention of continuous usage is concerned, both

males and females consider it as an important factor regarding internet banking

services.

Hypothesis H2 studied the difference among the various age groups towards trust,



Hypothesis H2a explored the difference among various age groups towards trust as an

important factor regarding internet banking services. Since the significant value is

found to be >0.05 (Sig.0.470), so the hypothesis is not supported i.e. no significant

difference exists among different age groups regarding trust towards internet banking

services. All the age groups consider trust an important factor regarding satisfaction


Hypothesis H2b explored the difference among various age groups towards perceived

risk as an important factor regarding internet banking services. Since the significant

value > 0.05 (Sig.0.697), so the hypothesis is not supported i.e. no significant

difference exists among different age groups regarding perceived risk towards

internet banking services. All the age groups consider perceived risk as an important

factor regarding satisfaction towards internet banking services.

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116

Hypothesis H2c explored the difference among various age groups towards awareness

as an important factor regarding internet banking services. Since the significant value

> 0.05(Sig.0.676),so the hypothesis is not supported i.e. no significant difference

exists among different age groups regarding awareness towards internet banking

services.

Hypothesis H2d explored the difference among various age groups towards perceived

usefulness as an important factor regarding internet banking services. Since the

significant value < 0.05(Sig.0.001), so the hypothesis is is supported i.e a significant

difference exists among different age groups regarding perceived usefulness towards

internet banking services. Age group 20-30 finds it most useful to use internet

banking as the value of mean for this age group is highest among the three age

groups.

Hypothesis H2e explored the difference among various age groups towards customer

satisfaction as an important factor regarding internet banking services. Since the

significant value > 0.05(Sig.0.291),so the hypothesis is not supported i.e. no

significant difference exists among different age groups regarding customer

satisfaction towards internet banking services.

Hypothesis H2f explored the difference between various age groups towards intention

of continuous usage as an important factor regarding internet banking services. Since

the significant value > 0.05(Sig.0.682),so the hypothesis is not supported i.e. no

significant difference exists among different age groups regarding intention of

continuous usage of internet banking services

Hypothesis H3 studied the difference among the various income groups regarding

trust, perceived risk, awareness, perceived usefulness, customer satisfaction and

intention of continuous usage towards internet banking services.

In hypothesis H3a, since the significant value < 0.05(Sig.0.024),so the hypothesis is

supported i.e. a significant difference exists among different income groups regarding

trust towards internet banking services. Income group 40,000-60,000 is found to have

the maximum trust towards internet banking services.

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117

In hypothesis H3b, since the significant value > 0.05(Sig.0.973),so the hypothesis is

not supported i.e. no significant difference exists among different income groups

regarding perceived risk towards internet banking services

In hypothesis H3c since the significant value >0.05(Sig.0.243),so the hypothesis is not

supported i.e. no significant difference exists among different income groups

regarding awareness towards internet banking services.

In hypothesis H3d, since the significant value >0.05(Sig.0.831),so the hypothesis is


regarding perceived usefulness towards internet banking services.

In hypothesis H3e, since the significant value >0.05(Sig.0.336),so the hypothesis is

not supported i.e. no significant difference exists among income groups regarding

customer satisfaction towards internet banking services.

In hypothesis H3f, since the significant value > 0.05(Sig.0.297), so the hypothesis is


regarding intention of continuous usage of internet banking services.

Hypothesis H4 studied the difference among the various occupations regarding trust,



Hypothesis H4 studied the difference between the various occupations towards trust,



In hypothesis H4a, since the significant value < 0.05(Sig.0.0.041), so the hypothesis is

supported i.e. a significant difference exists among different occupations regarding

trust towards internet banking services. Private Sector employees have the maximum

trust towards internet banking services.

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118

In hypothesis H4b, since the significant value > 0.05(Sig.0.399), so the hypothesis is

not supported i.e. no significant difference exists among different occupations

regarding perceived risk towards internet banking services

In hypothesis H4c, since the significant value > 0.05(Sig.0.084),so the hypothesis is


regarding awareness towards internet banking services

In hypothesis H4d, since the significant value >0.05(Sig.0.292),so the hypothesis is

not supported i.e no significant difference exists among different occupations

regarding perceived usefulness towards internet banking services.

In hypothesis H4e, since the significant value <0.05(Sig.0.006),so the hypothesis is

supported i.e. a significant difference exists among different occupations regarding

customer satisfaction towards internet banking services. Government employees have

the highest level of customer satisfaction towards internet banking services.

In hypothesis H4f, since the significant value > 0.05(Sig.0.104), so the hypothesis is


regarding intention of continuous usage of internet banking services.

The results of the various hypotheses on demographics are presented in a tabular from

below.

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119

Table 6.1- Conclusions based on results of hypotheses on demographics

Variable of the Hypothesis Result Conclusion Gender- Trust Not supported No significant difference

Gender- Perceived Risk

Supported

Females have a higher perception of perceived risk

Gender- Awareness Not Supported No significant difference Gender- Perceived Usefulness Not Supported No significant difference Gender- Customer Satisfaction Not Supported No significant difference

Gender- Intention of Continuous Usage

Not Supported No significant difference

Age -Trust Not Supported No significant difference Age-Perceived Risk Not Supported No significant difference

Age- Awareness Not Supported No significant difference Age- Perceived Usefulness Supported Age group 20-30 finds it most

useful to use internet banking. Age- Customer Satisfaction Not Supported No significant difference

Age- Intention of Continuous

Usage Not Supported No significant difference

Income-Trust Supported Income group 40000-60000 has the

maximum trust towards internet banking services

Income-Perceived Risk Not Supported No significant difference Income-Awareness Not Supported No significant difference

Income-Perceived Usefulness Not Supported No significant difference Income-Customer Satisfaction Not Supported No significant difference

Income-Intention of Continuous Usage

Not Supported No significant difference

Occupation- Trust Supported Private sector employees have the maximum trust in the internet

banking services Occupation- Perceived Risk Not Supported No significant difference

Occupation- Awareness Not Supported No significant difference Occupation- Perceived

Usefulness Not Supported No significant difference

Occupation - Customer Satisfaction

Supported Government sector employees are most satisfied by internet banking

services. Occupation - Intention of

Continuous Usage Not Supported No significant difference

Source : Prepared by researcher

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120

Table 6.1 has a tabular depiction of the conclusions of the study for the demographic

variable set comprising Gender, Age, Occupation and monthly income with the

internet banking service variables i.e., Trust, Perceived Risk, Awareness, Perceived

usefulness, customer satisfaction and intention of continuous usage. The major

conclusions from the results of the demographics on variables of the study indicate

that females have a higher perception of perceived risk. Internet banking service users

within the Age group 20-30 years find it most useful to use internet banking. On the

occupation front, private sector employees are found to have maximum trust towards

internet banking services while government sector employees are most satisfied by

internet banking services. Internet banking service users within Income group of Rs.

40,000- 60,000 had the maximum trust towards internet banking.

6.2.2 Customer Relationship Management Variables

H5 proposed that there is a significant impact of Trust (TR) on Customer Satisfaction

(CSAT) towards internet banking services. The relationship between TR and CSAT

was significant (p-value 0.005; C.R. = 9.860) and well supported. The high value of

CR indicates a strong positive relationship between Trust and Customer Satisfaction.

Thus, trust has a significant positive impact on customer satisfaction. Hence, the

hypothesis H5 is accepted.

H6 proposed that there is a significant impact of Perceived Risk (PRISK) on

Customer Satisfaction (CSAT) towards internet banking services. The relationship

between PRISK and CSAT was significant (p-value 0.031; C.R. = -2.156) and well

supported. This value of CR indicates a negative relationship between Perceived Risk

and Customer Satisfaction. Thus, perceived risk has a significant negative impact on

customer satisfaction. Hence, the hypothesis H6 is accepted.

H7 proposed that there is a significant impact of Awareness (AWARE) on Customer

Satisfaction (CSAT) towards internet banking services. The relationship between

Awareness and Customer Satisfaction is not significant as p –value is greater than

0.05 (p-value 0.573). This value of p-value indicates that there is no relationship

between Awareness and Customer Satisfaction. Thus, awareness has no significant

impact on customer satisfaction. Hence, the hypothesis H7 is not accepted.

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121

H8 proposed that there is a significant impact of Perceived Usefulness (PUSE) on

Customer Satisfaction (CSAT) towards internet banking services. The relationship

between PUSE and CSAT was significant (p-value 0.010; C.R. = 2.590) and well

supported. This value of CR indicates a positive relationship between Perceived

Usefulness and Customer Satisfaction. Thus, perceived usefulness has a significant

positive impact on customer satisfaction. Hence, the hypothesis is H8 is accepted.

H9 proposed that there is a significant impact of Customer Satisfaction (CSAT) on

Intention of Continuous Usage (IOCU) of internet banking services. The relationship

between CSAT and IOCU was significant (p-value 0.008; C.R. = 9.756) and well

supported. The high value of CR indicates a strong positive relationship between

Customer Satisfaction and Intention of Continuous Usage. Thus, customer satisfaction

has a significant positive impact on intention of continuous usage of internet banking

services. Hence, the hypothesis H9 is accepted.

The major conclusions from the study indicate that Trust is found to have a positive

significant impact on customer satisfaction towards internet banking

services.Perceived Risk has a negative significant impact on customer

satisfaction.Awareness does not have any impact on Customer Satisfaction.Perceived

Usefulness has a positive significant impact on customer satisfaction.Customer

Satisfaction has a positive significant impact on Intention of Continuous Usage of

internet banking services.These results have been depicted in a tabular form below.

Based on the results of the study, the research model identified for the study was

revised. Trust and perceived usefulness were found to have a significant positive

impact on customer satisfaction towards internet banking services while perceived

risk was found to have a significant negative impact on customer satisfaction.

Similarly, customer satisfaction was found to have a significant positive impact on

intention of continuous usage of internet banking services. Based on the results of the

study, awareness was found to have no significant impact on customer satisfaction


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122

Table 6.2 - Conclusions based on results of hypotheses on CRM variables

Path of the Hypothesis

Result Conclusion

TR CSAT Supported Trust has a positive significant impact on customer satisfaction

PRISK CSAT Supported Perceived Risk has a significant negative impact on customer satisfaction

AWARE CSAT Not Supported

Awareness does not have any impact on Customer Satisfaction.

PUSE CSAT Supported Perceived Usefulness has a positive significant impact on customer satisfaction

CSAT IOCU Supported Customer Satisfaction has a positive significant impact on Intention of Continuous Usage of internet banking services.

Fig 6.1-Revised Conceptual Model based on the results of the study

Source : Prepared by the researcher

Intention of Continuous Usage

Trust



Perceived Risk

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123

6.3 Implications of the Study

6.3.1 Managerial Implications

The results of the study implied that the hypothesis “There is a significant difference

between males and females regarding perceived risk towards internet banking

services” was supported. This means that there is a significant difference between

males and females regarding perceived risk. Based on the results, females have a

higher perception of perceived risk towards internet banking services. The reasons for

such an outcome of the study may be the low comfort level with machine interactions

by females. Fear of financial transactions going wrong may be another reason. Also,

the number of female respondents in the study was less as compared to males.

The results of the study for the hypothesis “There is a significant difference between

different age groups regarding perceived usefulness towards internet banking

services” was supported. It implies that there is a significant difference between

different age groups regarding perceived usefulness towards internet banking services

Based on the results of the study, Age group 20-30 finds it most useful to use internet

banking. The reasons for such an outcome of the study may be because this age group

is the most tech savvy amongst all age groups. Also, it majorly consists of young

earning people or students who are not averse to using technology. The respondents of

the study consisted of a large section of this age group. They, usually, are the first to

embrace any new technology and hence, can be considered a major target group by

the banks for encouraging the use of internet banking.


between different occupations regarding trust towards internet banking services” was

supported. It implies that there is a significant difference between different occupation

groups regarding trust towards internet banking services Based on the results of the

study, private sector employees are found to have maximum trust in using internet

banking for their banking needs. The possible reasons for such an outcome may be the

possible dearth of time that they may have. This may also be attributed to their urge to

meet most of the banking needs from the comfort of their office or home rather than

visiting banks. Usually, they are friendly towards technology and hence, tend to

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124

perceive internet banking to be more useful for their banking needs more than any

other occupation group as per the results of the study.

The implications arrived out of the hypothesis “There is a significant difference

between different occupations regarding customer satisfaction towards internet

banking services” was supported. It implies that there is a significant difference

between different occupation groups regarding customer satisfaction towards internet

banking services Based on the results of the study, government sector employees have

the most satisfaction with the use of internet banking services. This may be attributed

to the fact that government sector employees find using internet banking satisfying as

it saves time, money and energy spent on physically visiting a branch. It is also helped

by the fact that, although they are not all friendly with technology but, if their banking

experience is good they find it most satisfactory to use any new technology, in this

case it being internet banking.


between different income groups regarding trust towards internet banking services”

was accepted. It implies that there is a significant difference between different income

groups regarding trust towards internet banking services Based on the results of the

study, Income group Rs.40000-60000 has the maximum trust towards the use of

internet banking services. This may be attributed to the fact that they usually tend to

make less visits to branches and instead aim at using alternate channels of banking.

So, they tend to have maximum trust towards internet banking in general, based on

the results of the study.

Regarding the relationship concern variables, trust is found to have a positive

significant impact on customer satisfaction towards internet banking

services.Perceived Risk is found to have a negative significant impact on customer

satisfaction.Awareness does not have any impact on Customer Satisfaction.Perceived

Usefulness has a positive significant impact on customer satisfaction.Customer

Satisfaction has a positive significant impact on Intention of Continuous Usage of


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The constructs of trust, perceived risk, perceived usefulness and customer satisfaction

are found to be of key concern for banks in order to encourage the usage of internet

banking. The construct of trust is of key concern for banks to attract customers to use

internet banking. Customers expect a user-friendly interface and security of Internet

transactions. However, banks need to recognize that while usefulness and efficiency

of internet banking services are of paramount importance, involvement and

enhancement of the trust of the customer and its antecedents forms an integral part of

this relationship and plays a significant role in enhancing its value. The findings of the

current study corroborate the findings of Yousafzai et al., (2005) according to which

trust plays a key role in the adoption of internet banking services.

Website of the banks should include mechanisms for trust-building apart from the

ease of usefulness. Effective trust-building strategies need to be introduced by banks

in order to ensure and enhance the trust of internet banking users, both existing and

prospective. Introduction of a concise and specific privacy policy may help in

reducing the perceived risk of the customers and enhancing their trust towards internet

banking services. Customers may be more inclined towards the usage of internet

banking services if banks are able to generate the confidence of being there for them

in case of any mistake. Rather than just a technical issue, e-banking needs to be

viewed as a critical business initiative that helps in reduction of operational costs and

increases the efficiency of banking transactions. Thus, focus of the banks needs to be

alignment of trust-building strategies in e-banking with the internal integration within

the bank that includes channels, technology and business process integration.

In the present study, perceived usefulness is found to play a significant role in the

adoption of internet banking services. The results of the study further corroborate the

results of studies earlier conducted by Abbasi et al., (2011); Chatzoglou et al.,(2010);

Chong et al., (2010); Yousafzai et al., (2010) and Guriting and Ndubisi(2006).

According to Venkatesh et al. (2003), the decision of an individual to use the service

mainly depends on the perceived benefits accrued from its usage that include saving

of time and cost and reduction in efforts in making transactions by physically visiting

a branch. Perceived usefulness may be also associated with characteristics of the

system in terms of the variety of services that are offered apart from the usability of

the system.

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In the present study, customer satisfaction is found to be an important attribute of

CRM impacts intention of continuous usage. The results of the study further

corroborate the findings of Mattila (2001); Kim and Prabhakar (2004); Ranaweera et

al.(2005); Casalo et al., (2008); Aldas Manzano et al.,(2011 and Liebana-Cabanillas et

al.,(2013) who found customer satisfaction as an important determinant in facilitating

banking products and customisation of services, helping in developing and

maintaining long-term relationships, enhancement of loyalty and thereby improved

profitability, reduction in turnover and increased usage of these electronic services.

Satisfied customers spread positive WOM about the services and the bank at large

leading to attraction of new customers towards these services. According to Kim and

Prabhakar (2004), customer satisfaction of existing customers plays a key role in the

adoption of internet banking services by new customers. Increased satisfaction leads

to increased loyalty (Alda´s-Manzano et al., 2011) and increased customer retention

(Lie´bana-Cabanillas et al., 2013),ultimately leading to increased profitability.

Perceived risk is another important factor that is found to directly affect customer

satisfaction. Perceived risk has been found to be a key factor in the adoption of

internet banking services in earlier studies conducted by Lee(2009). Banks need to

incorporate policies that may assist in inspiring confidence among potential customers

and reduce their apprehensions regarding the potential risks associated with the usage

of internet banking. Protection of personal information and security of transactions

must be the priority of banks to ensure privacy concerns. Ultra secure systems with

firewalls and encryption systems may help in reducing the perceived risk concern

among customers.

Banks should present a clear and concise privacy policy regarding internet banking

ensuring the customers about the safety of their transactions and the safety of the

virtual environment in which they are transacting. This may help the banks in building

a trustworthy image and may encourage more customers to adopt internet banking

services. Banks need to focus more on these informative issues that may help in

building an atmosphere of trust and alleviate perceived risk concerns.

With increased competition, it is imperative for the banks to reduce operational costs

and increase profitability. This can be done only when there is an extension of the

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range of services offered to customers. Banks need to ensure a balance between the

traditional branch banking and internet banking services. Internet banking may not

totally eliminate the services offered through branches but it may help in reducing the

footfall in branches leading to a reduction in operational costs incurred by banks as

well as better service to the customers, both physically and in the virtual environment.

A better understanding of the factors that influence the adoption of electronic banking

services may help the banks in designing a comprehensive, efficient, customer-

friendly and profitable banking system that embraces technology and improves the

service offered to customers.

6.3.2 Societal Implications

The main positive social impact for using internet banking is convenience of banking

transactions. It also makes banking easier for people with disabilities.

Availability of internet banking round the clock i.e. 24 hours a day and 7 days a week

ensures that the customer is exempted from visiting the branches physically for the

various banking needs. Reduced visits to the branches also help the banks in serving

the customers better. The customers do not have to wait in queues in the branches for

making their financial transactions. Most of the banking needs of the customers can

be met with from the comfort of their offices or homes.

6.3.3 Environmental Implications`

Use of internet banking not only increases the convenience of banking transactions

but also leads to a reduction in the usage of paper-based documents and banking

office space used. This leads to reduction in the transfer costs made by internet as

compared to branch banking. Paperless transactions, access to electronic statements of

bank accounts and reduction of carbon dioxide emissions are added advantage of

using internet banking. Using electronic bank statements provides an faster and more

convenient way of accessing account detilas apart from contributing to a sustainable

environment by saving paper and the energy used for production, transportation and

its disposal thereof. Therefore, apart from the benefits for customers and society at

large, usage of internet banking has vital environmental implications as well and

hence need to be considered as an integral part of the banks’ marketing strategy.

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6.4 Recommendations

Banks need to ensure the female customers that the use of internet banking is secure

and trust worthy. The banks need to put the various policies regarding financial

transactions on their websites making it easily accessible for all the customers. They

may encourage the female customers to use internet banking by telling them about the

various benefits at offer and the reduced time and effort in using internet banking.

Banks may encourage customers above the age of 30 to embrace the usage of internet

banking as it helps in reducing the footfall in branches. The banks can service the

customers better and it also helps the customers in transacting from the comfort of

their homes or offices. Banks catering to employees and accounts with the public and

private sector enterprises should create enterprise and employee centric e-marketing

and e-service strategies in order to cut on employee banking cost and time and also

improve their banking experience. Example of marketing strategies for new banking

products and services created, exclusively for government sector employees who are

motivated to use e-banking for making electronic purchases at a discounted value

offering.

Advertisements and promotions may be deployed for improving the efficacy of

communication regarding e-banking. Banks may particularly target younger

consumers who are comfortable with the use of online retail banking. Role models or

opinion leaders may be identified and employed for discussing the advantages of e-

banking in alignment with the target markets chosen .This helps in increasing

awareness about the services, adds to the credibility and improves trust and

confidence in the bank and services offered. Educating and imparting training to

employees of one branch in every district regarding e-banking services may help in

reshaping the customer attitude towards internet banking services. This will help in

increasing awareness about internet banking as well the alleviation of any

confidentiality concerns that the customers might have.

Based on the findings of the study, one of the recommendations to the banks may be

to have increased focus on the requirements of low-income customers. This customer

segment forms a major portion of the population and, despite having access to

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internet, does not use internet banking due to financial concerns. The banks may

target this segment by developing services specifically aimed to suit their

requirements. This will not only encourage many more customers to adopt internet

banking but also help in increasing their satisfaction level with the bank.

Segmentation of markets may help the banks in developing e-banking services

according to the specific need of the high and low income groups.

The results of the study indicate a difference among various demographic variables

towards the internet banking services. The demographic differences combined play a

significant role in the adoption of internet banking services. Therefore, banks need to

emphasise on customers’ differences that exist between different categories of bank

customers related to their gender, age, occupation and income. Services need to be

aligned to meet the values, requirements and personal differences among customers.

Focus of the banks should be on a constant increase in the range of services offered.

Based on the findings of the study, perceived usefulness, trust, perceived risk and

customer satisfaction have been identified as key factors that determine the adoption

and usage of internet banking services. Banks need to emphasise on the potential

benefits resulting from the usage of internet banking services. Convenience, time-

saving, low cost and availability of information are some of the key advantages that

need to be advertised at large. Banks need to advertise the advantages of 24 hour

banking along with the advantages of managing one’s account from the convenience

of home or office, payment of bills and no hassles of visiting the branch.

The key factors influencing the decision to adopt or not to adopt internet banking

services depend on the customers’ about the performance of internet banking and the

expected and accompanying benefits. Banks need to advertise these services

emphasising on the benefits and advantages of using these services and the accrued

improvement in the performance and productivity of users. The current active users of

these services can be leveraged by banks. Efforts made by banks can be amplified by

using the social network and influence of existing users. Provision of incentives and

promotions for each referral made by such customers may help in increasing the reach

of such advertisements, thereby, the message of benefits and advantages of such

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services reaching a larger audience. This may ultimately help in increasing the

customer base of internet banking users..

6.5 Directions for Future Research

The directions for future research can be identified from the gaps of the study. In the

current study, the study respondents were mainly from 6 cities across India. Future

studies may be conducted in other regions on a larger scale to generalize the results

across different groups of e-banking users in India. Further, a comparative study

among the different regions of India may be conducted which would help the banks in

getting a fair idea where to focus and target more. Future studies may take a larger

sample in order to verify the results of the present study.

A comparative study based on internet banking services may be done on public sector

banks and private sector banks that are operating in India. A comparison between the

retail customers and the corporate customers may be done to to study the usage

pattern among the two customer segments. With the growing number of internet-

based transactions in business-to–business, future studies may investigate the

relationships between the variables of CRM and customer satisfaction in business–to-

business sector.

Additional features of CRM that have not been included in this study can be used for

future researches. Addition of service quality dimensions in e-banking along with the

CRM variables may form part of future researches. Also, this study was conducted to

find the relationship between various dimensions of CRM and customer satisfaction

from the customer's viewpoint. Future studies may focus on exploring these

relationships from the viewpoint of banks. Results of such future studies may help in

confirming or adding to the results of this study.

The researcher in the current study has taken five dimensions of CRM in e-banking.

Future researches may focus on incorporating other factors that may play an important

role in the adoption of internet banking services such as variety of services offered,

perceptions of support and service quality, corporate image or bank reputation. Future

samples may include users as well as non-users. This may further verify the

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131

potentially different factors impacting the decision of using or not using internet

banking among the various groups. Future researches may focus on assessing the

actual internet banking usage, employing both subjective (self-report) and objective

measures in order to improve the reliability of the findings.

6.6 Limitations of the Study

The present study aimed at identifying the various dimensions of CRM in e-banking

and effect on customer satisfaction and their intention to use internet banking. As is

the case with any study, this study also had its own limitations. However, the

limitations of the study offer opportunities for future research.

The convenience sample of 450 respondents may not be representative. Hence the

findings may not be generalised across various regions and different categories of

users of internet banking. A bigger and more representative sample which includes

respondents from all walks of life would have been more appropriate.

There was no uniform representation across categories in the demographic variables

considered for the study. In future studies, at least on a broader level, sample should

be chosen so that there is uniform representation across categories in the demographic

variables.

The sample for this study came from users of internet banking in the business-to-

customers context. Therefore, the results are limited to e-banking environment for

business-to-customers and may not be applicable to business-to- business

relationships at large.

Further, the study had its geographical limitations, due to constraints of time and

resources, as the study was conducted in only 6 cities across the country. A region

specific study may give a better insight into the usage pattern of internet banking

.This may prove valuable for the bankers in that particular region.

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132

Another aspect may be a pan-India study on a larger scale, that is covering a larger

number of respondents. This may help the banks in deciding which regions to focus

on and which dimensions of CRM to focus more so that it helps in encouraging the

customers to adopt internet banking as well as retaining the customers. Use of self-

report scales to measure the different constructs of theoretical model may have led to

errors due to common method and social desirability bias.

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APPENDICES

Appendices

Appendix I

Questionnaire for Pilot Testing Dear Respondent, This survey aims to understand your overall attitude, perception and intention towards usage of Internet Banking services. Please be assured that the data collected through this questionnaire will be used for academic purpose only and the information shall not be shared with anybody. SECTION I (Respondent’s Profile) I. Gender : O Male O Female II. Age (in Years): O 20-30 years O 30-40 years O above 40 years III. Marital Status: O Married O Unmarried IV. Monthly family income (in Indian Rupees): O Below 20,000 O 20,000-40,000 O 40,000-60,000 O Above 60,000 V. Occupation O Student O Unemployed but not student O Private Employee O Government Employee O Self-employed SECTION II (Mark the option best suited as your answer)

1. Name/Names of the bank/banks whose Internet Banking Services you regularly use O SBI/SBI Group bank O ICICI O HDFC O Punjab National Bank O Axis Bank O Bank of Baroda O Others (Please specify______________________________)

2. Since how long have you been using Internet Banking Services (IBS)? O Less than 1 year O 1 -2 Years

O 2 –3 Years O More than 3 Years 3. On an average, how many times do you use Internet Banking Service a week? O 1-3 times O 4 - 6 times

O 7 - 10 times O more than 10 times 4. Mark the following activities in order of frequency of use.

ACTIVITY NEVER SOMETIMES OFTEN FREQUENTLY ALWAYS Account Summary

Funds Transfer Mobile/ DTH Recharge

Railway/flight ticket booking

Online purchase/ e-shopping

Paying Bills On the next page are some statements measuring your attitude and intention towards usage of internet banking. Please rank them on a scale ranging from STRONGLY DISAGREE to STRONGLY AGREE SD= Strongly Disagree D= Disagree NAND= Neither Agree Nor Disagree A=Agree SA= Strongly Agree S.

No. Statement S

D D NAND A S

A 1 Using internet banking improves functioning of my banking activities 2 Internet banking allows me to manage my banking activities more

conveniently and quickly

3 Overall, I do not find internet banking very useful for carrying out my banking activities.

4 Internet banking allows me to know most of the financial services the bank

Appendices

Thanks for your valuable time and support...

offers 5 The time taken to process a transaction or query is fast and quick in internet

banking

6 In general, I find using branch banking more advantageous than internet banking

7 It is easy to use internet banking 8 The actual process of using internet banking service is pleasant and enjoyable 9 It is difficult to navigate through the internet banking website I use

10 The instructions provided on my internet banking website are clear and understandable

11 All service options, service attributes and service information are well designed and presented.

12 The screen design of my internet banking website (i.e. colours, boxes, menus, navigation tools, etc.) is good and well presented.

13 I think the bank informs the customers about the advantages of internet banking

14 I think the bank encourages the customers to use internet banking 15 I think I do not get enough information about how to open an internet banking

account and operate it

16 I think I get enough information about the services offered by internet banking and its advantages

17 While using internet banking, I fear an erroneous entry of account number or denomination may result in money loss and not being compensated by the bank

18 While using internet banking, I fear losing control of my account 19 While using internet banking, I fear the process may not work properly or

correctly

20 While using internet banking, I fear Internet banking might not provide the advantages advertised

21 While using internet banking, I fear if any mistake or fraud happens in my transactions, I will lose my good position among my friends, family and colleagues

22 While using internet banking, I miss not having direct relations with bank staff and using their help

23 While using internet banking, I feel Internet banking systems can never be accessed by unauthorized people

24 While using internet banking, I fear increased possibility of unwanted emails 25 While using internet banking, I feel unsecure about sending and receiving my

financial information on internet banking system

26 My bank will never make my personal information accessible to others 27 I fear not having enough information about Internet Banking in general 28 The issue of ‘Amount deducted from account but transaction not complete’ is

addressed quickly by my bank

29 I think that I will continue using branch banking more than internet banking in future

30 I will use the internet banking services more regularly and add it to my favourite links

31 I will speak favourably about the internet banking services to other people. 32 I will recommend the use of internet banking if someone asks for my advice 33 I will encourage my friends and family to use internet banking services 34 I feel that it is not always safe and reliable to transfer money using internet

banking

35 My bank promptly informs me whenever anything goes wrong with any of my transactions.

36 Provision of One Time Password ensures safety of every transaction I do through Internet banking

37 I am confident that my transaction through internet banking will always be transparent because of RBI regulations

38 My bank is not consistent in providing quality online service 39 I have confidence in the internet banking services of my bank 40 Based on my experience, I can say that using internet banking is safe and

trustworthy

Appendices

Appendix II

Final Questionnaire for Data Collection Dear Respondent, This survey aims to study consumer experience towards Internet Banking services. The data collected will be used only for academic purpose and information confidentiality shall be maintained. Respondent’s Profile (Please Tick)

1. Gender Male □ Female □ 2. Age (in Years) 20-30 years □ 30-40 years □ above 40

years □ 3. Marital Status Married □ Unmarried □ 4. Monthly family income (in Indian Rupees): Below 20,000 □ 20,000-40,000 □ 40,000-60,000 □ Above 60,000 □ 5. Occupation Student □ Unemployed but not student □ Private Sector Employee □ Government Employee □ Self-employed □

Internet Banking Usage (Please Tick)

1. Name of the bank whose Internet Banking Services you regularly use SBI/SBI Group bank □ ICICI □ HDFC □ Punjab National Bank □ Axis Bank □ Bank of Baroda □ Others (Please specify______________________________)

2. Since how long have you been using Internet Banking Services (IBS)? Less than 1 year □ 1 - 2 Years □

2 –3 Years □ More than 3 Years □

3. On an average, how many times do you use Internet Banking Services a week? 1 - 3 times □ 4 - 6 times □

7 - 10 times □ More than 10 times □

4. Internet Banking Activity

ACTIVITY NEVER SOMETIMES OFTEN FREQUENTLY ALWAYS Account Summary

Funds Transfer Mobile/ DTH Recharge

Railway/flight ticket booking

Online purchase/ e-shopping

Paying Bills

Appendices

Tick your opinion towards Internet Banking against the following statements SD= Strongly Disagree D= Disagree NAND= Neither Agree Nor Disagree A=Agree SA= Strongly Agree

Appendices

Thanks for your valuable time and support...

Appendix III

RBI Committee on Internet Banking (2001)

Recommendations of the Committee

Keeping in view the terms of reference, the Group has made a number of

recommendations in preceding chapters. A summary of these recommendations is

given below.

9.1 Technology and Security Standards:

9.1.1 The role of the network and database administrator is pivotal in securing the

information system of any organization. Some of the important functions of the

administrator via-a-vis system security are to ensure that only the latest versions of

the licensed software with latest patches are installed in the system, proper user

groups with access privileges are created and users are assigned to appropriate groups

as per their business roles, a proper system of back up of data and software is in place

and is strictly adhered to, business continuity plan is in place and frequently tested

and there is a robust system of keeping log of all network activity and analyzing the

same.(Para 6.2.4)

9.1.2 Organizations should make explicit security plan and document it. There should

be a separate Security Officer / Group dealing exclusively with information systems

security. The Information Technology Division will actually implement the computer

systems while the Computer Security Officer will deal with its security. The

Information Systems Auditor will audit the information systems. (Para 6.3.10, 6.4.1)

9.1.3 Access Control: Logical access controls should be implemented on data,

systems, application software, utilities, telecommunication lines, libraries, system

software, etc. Logical access control techniques may include user-ids, passwords,

smart cards or other biometric technologies. (Para 6.4.2)

9.1.4 Firewalls: At the minimum, banks should use the proxy server type of firewall

so that there is no direct connection between the Internet and the bank’s system. It

facilitates a high level of control and in-depth monitoring using logging and auditing

tools. For sensitive systems, a stateful inspection firewall is recommended which

thoroughly inspects all packets of information, and past and present transactions are

compared.These generally include a real-time security alert. (Para 6.4.3)

9.1.5 Isolation of Dial Up Services: All the systems supporting dial up services

through modem on the same LAN as the application server should be isolated to

prevent intrusions into the network as this may bypass the proxy server. (Para 6.4.4)

9.1.6 Security Infrastructure: PKI is the most favoured technology for secure Internet

banking services. However, it is not yet commonly available. While PKI

infrastructure is strongly recommended, during the transition period, until IDRBT or

Government puts in place the PKI infrastructure, the following options are

recommended

1. Usage of SSL, which ensures server authentication and the use of client side

certificates issued by the banks themselves using a Certificate Server.

2. The use of at least 128-bit SSL for securing browser to web server communications

and, in addition, encryption of sensitive data like passwords in transit within the

enterprise itself.(Para 6.4.5)

9.1.7 Isolation of Application Servers: It is also recommended that all unnecessary

services on the application server such as ftp, telnet should be disabled. The

application server should be isolated from the e-mail server.(Para 6.4.6)

9.1.8 Security Log (audit Trail): All computer accesses, including messages received,

should be logged. All computer access and security violations (suspected or

attempted) should be reported and follow up action taken as the organization’s

escalation policy.(Para 6.4.7)

9.1.9 Penetration Testing: The information security officer and the information

system auditor should undertake periodic penetration tests of the system, which

should include:

1. Attempting to guess passwords using password-cracking tools.

2. Search for back door traps in the programs.

3. Attempt to overload the system using DdoS (Distributed Denial of Service) & DoS

(Denial of Service) attacks.

4. Check if commonly known holes in the software, especially the browser and the

mail software exist.

5. The penetration testing may also be carried out by engaging outside experts (often

called ‘Ethical Hackers’).(Para 6.4.8)

9.1.10 Physical Access Controls: Though generally overlooked, physical access

controls should be strictly enforced. The physical security should cover all the

information systems and sites where they are housed both against internal and

external threats. (Para 6.4.9)

9.1.11 Back up & Recovery: The bank should have a proper infrastructure and

schedules for backing up data. The backed-up data should be periodically tested to

ensure recovery without loss of transactions in a time frame as given out in the bank’s

security policy. Business continuity should be ensured by having disaster recovery

sites, where backed-up data is stored. These facilities should also be tested

periodically.(Para 6.4.10)

9.1.12 Monitoring against threats: The banks should acquire tools for monitoring

systems and the networks against intrusions and attacks. These tools should be used

regularly to avoid security breaches. (Para 6.4.11)

9.1.13 Education & Review: The banks should review their security infrastructure and

security policies regularly and optimize them in the light of their own experiences and

changing technologies. They should educate on a continuous basis their security

personnel and also the end-users. (Para 6.4.12)

9.1.14 Log of Messages: The banking applications run by the bank should have proper

record keeping facilities for legal purposes. It may be necessary to keep all received

and sent messages both in encrypted and decrypted form. (When stored in encrypted

form it should be possible to decrypt the information for legal purpose by obtaining

keys with owners’ consent.) (Para 6.4.13)

9.1.15 Certified Products: The banks should use only those security

solutions/products which are properly certified for security and for record keeping by

independent agencies (such as IDRBT).

9.1.16 Maintenance of Infrastructure: Security infrastructure should be properly

tested before using the systems and applications for normal operations. The bank

should upgrade the systems by installing patches released by developers to remove

bugs and loopholes, and upgrade to newer versions which give better security and

control. (Para 6.4.15)

9.1.17 Approval for I-banking: All banks having operations in India and intending to

offer Internet banking services to public must obtain an approval for the same from

RBI. The application for approval should clearly cover the systems and products that

the bank plans to use as well as the security plans and infrastructure. It should include

sufficient details for RBI to evaluate security, reliability, availability, auditability,

recoverability, and other important aspects of the services. RBI may provide model

documents for Security Policy, Security Architecture, and Operations Manual. (Para

6.4.16)

9.3 Regulatory and Supervisory Issues

9.3.1 All banks, which propose to offer transactional services on the Internet should

obtain approval from RBI prior to commencing these services. Bank’s application for

such permission should indicate its business plan, analysis of cost and benefit,

operational arrangements like technology adopted, business partners and third party

service providers and systems and control procedures the bank proposes to adopt for

managing risks, etc. The bank should also submit a security policy covering

recommendations made in chapter-6 of this report and a certificate from an

independent auditor that the minimum requirements prescribed there have been met.

After the initial approval the banks will be obliged to inform RBI any material

changes in the services / products offered by them. (Para 8.4.1, 8.4.2)

9.3.2 RBI may require banks to periodically obtain certificates from specialist

external auditors certifying their security control and procedures. The banks will

report to RBI every breach or failure of security systems and procedure and the latter,

at its discretion, may decide to commission special audit / inspection of such banks.

(Para 8.4.3)

9.3.3 To a large extent the supervisory concerns on Internet banking are the same as

those of electronic banking in general. The guidelines issued by RBI on ‘Risks and

Controls in Computers and Telecommunications’ will equally apply to Internet

banking. The RBI as supervisor would cover the entire risks associated with

electronic banking as a part of its regular inspections of banks and develop the

requisite expertise for such inspections. Till such capability is built up, RBI may

outsource this function to qualified EDP auditors. (Para 8.4.4, 8.4.5)

9.3.4 Record maintenance and their availability for inspection and audit is a major

supervisory focus. RBI’s guidelines on ‘Preservation and Record Maintenance’ will

need to be updated to include risks heightened by banking on the net. The

enhancements will include access to electronic record only by authorized officials,

regular archiving of data, a sufficiently senior officer to be in charge of archived data

with well defined responsibilities, use of proper software platform and tools to

prevent unauthorized alteration of archived data, availability of data on-line, etc. If

not available on-line, the system should be capable of making available the data for

the same financial year within 24 hours and past data within a period of maximum 48

hours. (Para 8.4.6)

9.3.5 Banks should develop outsourcing guidelines to manage effectively, risks

arising out of third party service providers such as risks of disruption in service,

defective services and personnel of service providers gaining intimate knowledge of

banks’ systems and misutilizing the same, etc. Alternatively, IBA or IDBRT may

develop broad guidelines for use of the banking community. (Para 8.4.7)

9.3.6 With the increasing popularity of e-commerce, i.e, buying and selling over the

Internet, it has become imperative to set up ‘Inter-bank Payment Gateways’ for

settlement of such transactions. The Group have suggested a protocol for transactions

between the customer, the bank and the portal and have recommended a framework

for setting up of payment gateways. In their capacity as regulator of banks and

payment systems of the country, the RBI should formulate norms for eligibility of an

institution to set up a payment gateway and the eligible institution should seek RBI’s

approval for setting up the same. (Para 8.4.7, 8.4.9.1 – 8.4.9.5)

9.3.7 Only institutions who are members of the cheque clearing system in the country

may be permitted to participate in Inter-bank payment gateways for Internet payment.

Each gateway must nominate a bank as the clearing bank to settle all transactions.

Only direct debits and credits to accounts maintained with the participating banks by

parties to an e-commerce transaction may be routed through a payment gateway.

Payments effected using credit cards, payments arising out of cross border e-

commerce transactions and all intra-bank payments (i.e., transactions involving only

one bank) should be excluded for settlement through an inter-bank payment gateway.

9.3.8 Inter-bank payment gateways must have capabilities for both net and gross

settlement. All settlement should be intra-day and as far as possible, in real time. It

must be obligatory for payment gateways to maintain complete trace of any payment

transaction covering such details like date and time of origin of transaction, payee,

payer and a unique transaction reference number (TRN). (Para 8.4.7)

9.3.9 Connectivity between the gateway and the computer system of the member bank

should be achieved using a leased line network (not through Internet) with appropriate

data encryption standard. All transactions must be authenticated using user-id and

password. Once, the regulatory framework is in place, the transactions should be

digitally certified by any licensed certifying agency. SSL / 128 bit encryption must be

used as minimum level of security. Adequate firewalls and related security measures

must be taken to ensure privacy to the participating institutions in a payment gateway.

Internationally accepted standards such as ISO8583 must be used for transmitting

payment and settlement messages over the network. (Para 8.4.7 )

9.3.10 The RBI may have a panel of auditors who will be required to certify the

security of the entire infrastructure both at the payment gateway end and the

participating institutions end prior to making the facility available for customers use.

(Para8.4.7 )

9.3.11 The credit risk associated with each payment transaction will be on the payee

bank. The legal basis for such transactions and settlement will be the bilateral

contracts between the payee and payee’s bank, the participating banks and service

provider and the banks themselves. The rights and obligations of each party must be

clearly stated in the mandate and should be valid in a court of law. (Para 8.4.7)

9.3.12 It will be necessary to make customers aware of risks inherent in doing

business over the Internet. This requirement will be met by making mandatory

disclosures of risks, responsibilities and liabilities to the customers through a

disclosure template. The banks should also provide their latest published financial

results over the net. (Para 8.4.9)

Appendix IV

Damodaran Commitee on Customer Service in Banks (2010)

B. TECHNOLOGY AND CUSTOMER SERVICE

B.1. INTERNET BANKING

1. There should be a secure total protection policy / zero-liability against loss for

any customer induced transaction utilising technology through ATMs/

PoS/Online banking etc. A customer should not be made to be out of funds

when any loss is suffered on account of Net/ATM banking transactions. All

the rules in respect of internet banking should be so designed as to encourage

consumers to feel safe about electronic transactions. In all the above scenarios,

an immediate temporary credit, pending investigation, should be afforded.

2. Banks have to necessarily ensure that all internet banking is made failsafe by

putting in place robust and dynamic fraud detection and prevention systems.

Computerised / network delivery channels have enhanced customer ease of

operations and reduced costs for banks. Banks have to put in place fail-safe

security systems for access / transactions to increase the confidence of the

bank customers to enable migration to electronic medium from conventional

banking. The banks must ensure that the customers have the confidence in the

systems that are being offered to them.

3. Banks may introduce mechanisms whereby a customer has a choice of

restricting account to account transfers to be done only from particular IP

addresses or a choice of addresses. A customer should also have the option of

requesting blocking the transaction if the IP address is from a different

country. In fact, this should be the default option. Any change of option should

be possible with ease through the Call centre or Online.

4. Banks may introduce systems whereby fund transfer facilities can be activated

by the Call centre on a need basis and deactivated once the transfer is

completed. The facility should also be auto-closed (deactivation) after certain

time (say 30 minutes).

5. Banks in their systems should have facility of customer behaviour/purchase

pattern analysis and any attempt from an unknown address / suspicious outlier

debit transaction should be first blocked and then informed over SMS to the

customer (Provision of dynamic scoring models with inbuilt processes and

controls to trigger transactions which are not normal). The transaction should

be allowed only after the customer authorises the transaction.

6. Banks should put in place secure systems like Multi-factor Authentication to

minimise the fraud instances.

7. There must be multi-lateral arrangements amongst banks to deal with on-line

banking frauds. Presently, there is lack of such an arrangement amongst banks

and the customer is required to interact with different banks / organisations

when more than one bank / organisation is involved.IBA could provide such

type of arrangements for all the banks.

8. Banks may restrict the amounts that can be transferred online by way of

prescribing a day cap or by way of prescribing a ceiling amount per transfer.

Additional factors of authentication should be taken and higher amounts

should also be permitted for online transfers.

9. It was felt that additional factors of authentication should be taken and higher

amounts should also be permitted for online transfers as the present limits are

seen to be restrictive for encouraging online money transfers.

10. Banks should create customer access to banking for withdrawal of cash and

for transactions by creating a chain of human ATM network of business

correspondents of banks which will help enhance banking access all over the

country. This is possible by hand-held devices and mobile phones working

online/offline with CBS systems of banks.

Appendix V

Gopalakrishna Committee on Electronic Banking (2011)

Major Recommendations

. Any changes to an application system/data need to be justified by genuine business

need and approvals supported by documentation and subjected to a robust change

management process.

• For all critical applications, either source code must be received from the vendor or

a software escrow agreement needs to be in place with a third party to ensure

source code availability in case the vendor goes out of business. It needs to be

ensured that product updates and programme fixes are also included in the escrow

agreement.

• Data transfer from one process to another or from one application to another,

particularly in respect of critical or financial applications, should not have any

manual intervention in order to prevent any unauthorized modification. The

process needs to be automated and properly integrated through “Straight Through

Processing” methodology with an appropriate authentication mechanism and audit

trails.

• In the event of data pertaining to Indian operations being stored and/or processed

abroad, for example, by foreign banks, there needs to be suitable controls like

segregation of data and strict access controls based on ‘need to know’ and robust

change controls. The bank should be in a position to adequately prove the same to

the regulator. Regulator’s access to such data/records and other relevant

information should not be impeded in any manner and RBI would have the right

to cause an inspection to be made of the processing centre/data centre and its

books and accounts by one or more of its officers or employees or other persons.

• Robust system security testing needs to be carried out.

• Multi-tier application architecture needs to be implemented for critical e-banking

systems like internet banking which differentiate session control, presentation

logic, server side input validation, business logic and database access.

• A bank needs to have a documented migration policy specifying a systematic

process for data migration and for ensuring data integrity, completeness and

consistency. Explicit sign offs from users/application owners need to be obtained

after each stage of migration and also after the migration process has been completed.

Audit trails need to be available to document the conversion, including data mappings

and transformations.

• Banks need to carry out due diligence with regard to new technologies/systems since

they can potentially introduce additional risk exposures

• Any new business products introduced, along with the underlying information

systems, need to be assessed as part of a formal product approval process which

incorporates, inter-alia, security related aspects and fulfilment of relevant legal

and regulatory prescriptions.

. Cryptographic techniques need to be used to control access to critical and sensitive

data/information in transit and storage. Banks should only select encryption

algorithms which are well established international standards and which have been

subjected to rigorous scrutiny by an international community of cryptographers or

approved by authoritative professional bodies, reputable security vendors or

government agencies.

• Normally, a minimum of 128-bit SSL encryption is expected. Constant advances in

computer hardware, cryptanalysis and distributed brute force techniques may

induce use of larger key lengths periodically. It is expected that banks will

properly evaluate security requirements associated with their internet banking

systems and other relevant systems and adopt an encryption solution that is

commensurate with the degree of confidentiality and integrity required.

• Banks need to scan frequently for vulnerabilities and address discovered flaws

proactively to avoid the likelihood of having their computer systems

compromised. Automated vulnerability scanning tools need to be used against all

systems in their networks on a periodic basis.

• Banks need to have monitoring processes in place to identify suspicious events and

unusual behavioural patterns that could impact the security of IT assets. The

strength of the monitoring controls should be based on the criticality of an IT

asset. A bank would need to establish a clear allocation of responsibility for

regular monitoring mechanism, and the tools and processes in this regard need to

be commensurate with the level of monitoring required.

• Critical functions , for example relating to financial, regulatory and legal, MIS and

risk management, need to be done through proper application systems and not

manually or in a semi-automated manner through spreadsheets which pose risks

relating to data integrity and reliability. Use of spreadsheets in this regard should

be restricted and should be replaced by appropriate IT applications in a phased

manner within a definite timeframe.

• A robust process needs to be in place for “effective malware control”. Typical

controls to protect against malicious code use layered combinations of technology,

policies and procedures and training. The controls are of the preventive and

detective/corrective in nature.

• Establishing a robust network protection strategy and layered security based on the

principle of defence-in-depth is an absolute necessity for banks.

• There should be arrangements for monitoring and reporting of the information

security condition of the organization, which are documented, agreed with top

management and performed regularly. Security related metrics can be used to

measure security policy implementation.

• Given the multiplicity of devices and systems, banks should deploy suitable

automated tools for log aggregation and consolidation from multiple

machines/systems and for log correlation and analysis.

• Security and Audit Processes of Critical service providers/vendors need to be

assessed regularly since ineffective third-party controls can weaken the ability of a

bank to achieve its control objectives.

• Commercial banks should implement ISO 27001 based Information Security

Management System (ISMS) best practices for their critical functions.

Additionally, other reputed security/IT control frameworks may also be

considered by banks.

• Strong controls need to be initiated against any remote access facility. The

management should establish policies restricting remote access and be aware of

all remote-access devices attached to the bank’s systems. These devices should be

strictly controlled.

• Events that trigger the implementation of a business continuity plan may have

security implications. Risk assessments should consider the changing risks that

appear in business continuity scenarios and different security postures that may

need to be established.

• Information security assurance needs to be obtained through periodic penetration

testing exercises, audits and vulnerability assessments. The assurance work needs

to be performed by appropriately trained and independent information security

experts/auditors. The strengths and weaknesses of critical internet-based

applications, other critical systems and networks needs to be carried out before

each initial implementation, and at least annually thereafter. Any findings needs to

be reported and monitored using a systematic audit remediation or compliance

tracking methodology.

• Provision of various electronic banking channels like ATM/debit cards/internet

banking/phone banking should be issued only at the option of the customers based

on specific written or authenticated electronic requisition along with a positive

acknowledgement of the terms and conditions from the customer. A customer

should not be forced to opt for services in this regard. Banks should provide clear

information to their customers about the risks and benefits of using e-banking

delivery services to enable customers to decide on choosing such services.

• In view of the proliferation of cyber attacks and their potential consequences, banks

should implement two-factor authentication for critical activities like fund

transfers and changing customer related details through internet banking facility.

. The implementation of appropriate authentication methodologies should be based on

an assessment of the risk posed by the institution’s internet banking systems. The

risk should be evaluated in light of the type of customer (e.g., retail or

corporate/commercial); customer transactional capabilities (e.g., bill payment,

fund transfer), the sensitivity of customer information being communicated to the

bank and the volume of transactions involved.

• While not using the asymmetric cryptosystem and hash function is a source of legal

risk, the banks, at the least, need to implement dynamic two-factor authentication

through user id/password combination and second factor like (a) OTP/dynamic

access code through various modes like SMS over mobile phones or hardware

token or (b) a digital signature, through a card/token containing a digital

certificate and associated private key (preferably for corporate customers).

• To enhance online processing security, confirmatory second channel procedures(like

telephony, SMS, email etc.) should be applied with regard to transactions above

pre-set values, creation of new account linkages, registration of third party payee

details, changing account details or revision to funds transfer limits. In devising

these security features, the bank should take into account their efficacy and

differing customer preferences for additional online protection.

• Based on mutual authentication protocols, customers could also authenticate the

bank’s web site through security mechanisms such as personal assurance

messages/images, exchange of challenge response security codes and/or the secure

sockets layer (SSL) server certificate verification. In recent times, Extended

Validation Secure Sockets Layer (EV-SSL) Certificates are increasingly being

used. It should, however, be noted that SSL does not provide end-to-end

encryption security at the application layer but is only designed to encrypt data in

transit at the network transport layer.

• A risk based transaction monitoring or surveillance process needs to be put in place.

The banks may consider dynamic scoring models and related processes to trigger

or alert transactions which are not normal to improve preventive/detective

capability. Study of customer transaction behavioral patterns and stopping

irregular transactions or obtaining prior confirmation from customers for outlier

transactions may be incorporated as part of the process.

• Chip based cards house data on microchips instead of magnetic stripes, making data

more difficult to steal and cards more difficult to reproduce. It is recommended

that RBI may consider moving over to chip based cards along with requiring

upgradation of necessary infrastructure like ATMs/POS terminals in this regard in

a phased manner.

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