A STUDY ON CONSUMER ATTITUDE TOWARDS

DIGITAL BANKING

A Project submitted to

University of Mumbai for partial completion of the Degree of

Master in commerce (Banking & Finance)

Under the Faculty of Commerce

BY

YUKTA RAJESH RAJE

Under the Guidance of

Prof. VINOD G. NAIR

Mulund College of Commerce (Autonomous)

Mulund Vanijya Mahavidyakaya Marg, Mulund (West),

Mumbai-400080

April 2022

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 CERTIFICATE

This is to certify that the project A Study on Consumer Attitude towards Digital
Banking

by Ms. Yukta Rajesh Raje

Roll No.: 2116540 completed in partial fulfillment of Second Year M.Com.- Banking &
Finance Semester IV (Choice Based) Examination during the academic year 2021 – 22
has been found satisfactory. This report had not been submitted for any other examination
and does not form part of any other course undergone by the candidate.

Course Co-ordinator Project Guide/Internal Examiner

Principal External Examiner

College Seal Date: _ _

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 DECLARATION

I the undersigned Miss Yukta Rajesh Raje hereby, declare that the work embodied in the
project work titled "A Study on Consumer attitude towards Digital Banking", forms my own
contribution to the research work carried out under the guidance of Prof. Vinod Nair is a
result of my own research work and has not been previously submitted to any other Degree/
Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography. I, here by further declare that all information of this
document has been obtained and presented in accordance with academic rules and ethical
conduct.

Yukta Rajesh Raje

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions
in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.

I would like to thank my Principal, Dr. Sonali Pednekar for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Co-ordinator Dr. Shivaji Pawar, for his moral support
and guidance.

I would also like to express my sincere gratitude towards my Project Guide Prof. Vinod
Nair whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various references books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in
the completion of the project especially my Parents and Peers who supported me throughout
my project

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 INDEX
Sr. No. Chapters Page No.
1 Overview 7 – 38
2 Research Methodology 39 – 41
1.1.Objective of the Study 39

1.2.Scope of the Study 40

1.3.Limitations of the Study 40

1.4.Selection of Problem 41

1.5.Sample Size 41

1.6.Data Collection 41
3 Review of Literature 42 – 46
4 Data Analysis And Interpretation 47 – 60
5 Findings 61
6 Conclusion 62
7 Suggestions 63
8 Bibliography 64

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 INDEX II

List of Graphs
Graphs
Figure 1 Age 47
Figure 2 Gender 48
Figure 3 Occupation 49
Figure 5 Question 1 50
Figure 6 Question 2 51
Figure 7 Question 3 52
Figure 8 Question 4 53
Figure 9 Question 5 54
Figure 10 Question 6 55
Figure 11 Question 7 56
Figure 12 Question 8 57
Figure 13 Question 9 58
Figure 14 Question 10 59
Figure 15 Question 11 60

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 OVERVIEW

1.1. Introduction

Digital banking is part of the broader context for the move to online banking, where banking
services are delivered over the internet. The shift from traditional to digital banking has been
gradual and remains ongoing, and is constituted by differing degrees of banking service
digitization. Digital banking involves high levels of process automation and web-based
services and may include APIs enabling cross-institutional service composition to deliver
banking products and provide transactions. It provides the ability for users to access financial
data through desktop, mobile and ATM services

A digital bank represents a virtual process that includes online banking and beyond. As an end-
to-end platform, digital banking must encompass the front end that consumers see, back end
that bankers see through their servers and admin control panels and the middleware that
connects these nodes. Ultimately, a digital bank should facilitate all functional levels of
banking on all service delivery platforms. In other words, it should have all the same functions
as a head office, branch office, online service, bank cards, ATM and point-of-sale (POS)
machines.

The reason digital banking is more than just a mobile or online platform is that it includes
middleware solutions. Middleware is software that bridges operating systems or databases with
other applications. Financial industry departments such as risk management, product
development and marketing must also be included in the middle and back end to truly be
considered a complete digital bank. Financial institutions must be at the forefront of the latest
technology to ensure security and compliance with government regulations.

In the old days, banking used to be a time-consuming business. If you wanted cash, for
instance, you had to go to the bank branch, hand over a cheque to a bank employee, get a token
and wait until the cashier called your number. In the first week for a month, when there was a
scramble for cash among customers, you had to wait a long time indeed.

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All that, thankfully, is a thing of the past. Digital banking has transformed the way things are
done. Now all you have to do to get cash is to get to the nearest ATM, use your card and get
cash in under a minute! Moreover, going digital allows you the perfect opportunity to enjoy a
paperless banking experience, where you no longer need to keep track of your transactions or
banking history through physical documents.

Digital banking is the incorporation of new and developing technologies throughout a financial
services entity, in concert with associated changes in internal and external corporate and
personnel relationships, to provide enhanced customer services and experiences effectively and
efficiently

Digital Banking is a generic term for development of banking services and delivering products
through electronic channels, such as Automated Teller Machines, the telephone, the internet,
the mobile phone.Customers are still waiting for new fastest banking services but India is
developing in Technology enabled banking service in a revolutionary transformation that will
bring many new features, including anytime, anywhere, ultra-fast response times in banking
transaction.

Digital Banking is the automation of traditional banking services. Digital banking enables a
bank’s customers to access banking products and services via an electronic/online platform.
Digital banking means to digitize all of the banking operations and substitute the bank’s
physical presence with an everlasting online presence, eliminating a consumer’s need to visit a
branch. The Digital Banking definition is banking done through the digital platform, doing
away with all the paperwork like cheques, pay-in slips, Demand Drafts, and so on. It means
availability of all banking activities online. Digital Banking gives you the luxury of freely
accessing and performing all traditional banking activities 24*7 without having to personally
go to a bank branch to get your work done. Digital Banking can be done either through a
laptop, tablet or your mobile phone.

Digital banking refers to accomplishment of financial transactions over the Internet through a
bank's secured websites. Digital banking enables the customers to do their banking
transactions with the help of gadgets and through the internet. Digital banking is also known as
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"internet banking" or "web banking” Online banking delivers all the traditional banking
services available in a local branch. Digital banking offers numerous benefits to its customers.
The benefits are such as it removes the geographical barriers for the customers. Anytime and
anywhere access to accounts for the customers. The digital banking attracts customers who use
traditional banking due to its convenience and innovative techniques. Digital banking offers
internet-based services and it saves time, easy to access and nominal transaction fees. Owing
to the system of self-access, it has minimized the customer attrition and maximized the
customer loyalty. The intrusion detection system to various virus control equipment made the
digital banking services free from hazardous circumstances.

Digital banking systems are much more flexible and allow banks to add and expand features
much faster than traditional systems. Digital banking relies on high-level process automation,
web-based services and APIs to provide banks and their customers with high levels of cost
efficiency, security and flexibility. Modern banking solutions enable a fully digital customer
journey, generating real-time data streams and accelerating key analytics.

While it may be used in many different ways online and elsewhere, the term digital banking,
essentially, combines online and mobile banking services under one umbrella.

Online banking means accessing banking features and services via your bank’s website from
your computer. You may log into your account to check your balance or pay your electricity
bill. You can access additional banking features, such as applying for a loan or credit card, at
many banks via your online banking portal.

Online banking lets you sit down at your computer and tackle many of your personal finance
needs without ever having to leave your home, something for which the family pet is likely
most grateful.

Online banking, also known as internet banking, web banking or home banking, is
an electronic payment system that enables customers of a bank or other financial institution to
conduct a range of financial transactions through the financial institution's website. The online
banking system will typically connect to or be part of the core banking system operated by a
bank to provide customers access to banking services in place of traditional branch banking.
Online banking significantly reduces the banks' operating cost by reducing reliance on a
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branch network, and offers greater convenience to customers in time saving in coming to a
branch and the convenience of being able to perform banking transactions even when branches
are closed. Internet banking provides personal and corporate banking services offering features
such as viewing account balances, obtaining statements, checking recent transactions,
transferring money between accounts, and making payments.

Mobile banking means using an app to access many of those same banking features via mobile
devices such as smartphones or tablets. These apps are proprietary, issued by the bank where
you hold your account, and usually use the same login information as your online banking
portal.

Designed for people on the go, mobile banking apps tend to include the most used banking
features, such as mobile check deposit, funds transfers and bill payment. They also often have
convenient features like peer-to-peer payments through systems like Zelle. Banks also may use
their mobile apps to send customers banking alerts such as fraud detection and low balance
notifications.

Here’s a visual equation that sums up (literally) digital banking:

Mobile banking is a service provided by a bank or other financial institution that allows its
customers to conduct financial transactions remotely using a mobile device such as
a smartphone or tablet. Unlike the related internet banking it uses software, usually called
an app, provided by the financial institution for the purpose. Mobile banking is usually
available on a 24-hour basis. Some financial institutions have restrictions on which accounts
may be accessed through mobile banking, as well as a limit on the amount that can be
transacted. Mobile banking is dependent on the availability of an internet or data connection to
the mobile device.

Transactions through mobile banking depend on the features of the mobile banking app
provided and typically includes obtaining account balances and lists of latest
transactions, electronic bill payments, remote check deposits, P2P payments, and funds
transfers between a customer's or another's accounts.[1] Some apps also enable copies of
statements to be downloaded and sometimes printed at the customer's premises. Using a
mobile banking app increases ease of use, speed, flexibility and also improves security because
it integrates with the user built-in mobile device security mechanisms.[citation needed]

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From the bank's point of view, mobile banking reduces the cost of handling transactions by
reducing the need for customers to visit a bank branch for non-cash withdrawal and deposit
transactions. Mobile banking does not handle transactions involving cash, and a customer
needs to visit an ATM or bank branch for cash withdrawals or deposits. Many apps now have
a remote deposit option; using the device's camera to digitally transmit cheques to their
financial institution.

Mobile banking differs from mobile payments, which involves the use of a mobile device to
pay for goods or services either at the point of sale or remotely,[2] analogously to the use of a
debit or credit card to effect an EFTPOS payment.

Online Banking + Mobile Banking = Digital Banking

The main advantage of digital banks is that they allow users to make deposits remotely.
Besides, digital banking allows for personalization of money management services and enables
users to easily apply for loans. There are many tech-oriented startups that offer online banking.
However, traditional banking institutions also don’t lag behind and offer various online
services, such as account transfers and bill payment.

Online banking preceded the next step in the evolution of banks — mobile banking. Mobile
banking is even more convenient, as users can do all the necessary operations on their
smartphones. Today, legacy banks realize that online services are a necessity, while digital-
only banks don’t need any physical location to provide customer support. Millennials and
Generation Z want to be able to make transfers and manage their accounts from anywhere, at
any time. Therefore, digital banking will continue to evolve.

Digital banking has taken the world by storm. It has changed several elements of global
industries and evolved into a massive force to reckon with. The top industries, like banking
and financial sector, vital to the development of the economy, are under a considerable impact
of this revolutionary shift. Therefore, several top-notch banks and financial institutions are
adapting to the change faster than ever before. So far, this technology has transformed
traditional banking structures without disrupting the preexisting systems. It has led to what is
often described as a change from conventional banking to convenience banking. Let us learn
more about the importance of digital banking in the banking sector.

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With the growth of digital technology, banks have implemented several types of technological
innovations. Automation, biometrics, chatbots, machine learning, and blockchain
technology are some of the many techniques adopted by the banking sector as a move towards
digitization. With the introduction of such technological innovations, banking solutions and
products have drastically changed and improved. Internet and mobile banking are a classic
example of the digital banking revolution. Now, withdrawing, depositing and transferring
money has become a lot easier. There is no need to visit the bank branch for banking activities.
Now, it is possible to access the bank 24/7. And Cybersecurity and data protection are of
utmost importance to the banks.

Apart from this, some of the emerging trends of digital banking include technological products
and services like mobile wallets, Fintechs, cardless ATMs, asset and investment management
apps and more. Digital banking has replaced more than 90% of traditional banking methods
with newer methods of digitalization. Apart from digital banking solutions, banks now offer
personalized management solutions to improve their client’s financial situation and make
critical decisions regarding their fortune.

Digital banking is often defined as a massive move from traditional banking activities to
digitized or online banking methods. These methods are available to the customers inside or
outside the branch of the bank. In a broader context, it is referred to online banking, but it is
beyond just that. It encompasses the front and back-end activities of the bank the benefit of
which is experienced by consumers and employees equally. Improved voice-assisted banking
and customer services is an example of effective digital banking solutions to the customer. At
the back-end, this technology has reduced extensive paperwork and human efforts for data-
management in the banks.

Digital banking is relatively a new concept. The advent of ATMs and debit cards is considered
to be the first move towards digitalization of the banks and banking activities. However, only
in the 1990s, with the advent of the modern internet, India truly stepped into digital banking
technology revolution. And now, over 60% of individuals use their smartphones to carry out
banking activities. Digital banking systems have drastically changed the way banks interact
with their customers nowadays. It is to fulfill the demand for optimized convenience and user
experience.

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 1.2. TYPES

1. Banking cards
2. USSD
3. Aadhaar Enabled Payment System (AEPS)
4. UPI
5. Mobile Wallets
6. Bank pre-paid cards
7. Point of Sale (PoS)
8. Internet Banking
9. Mobile Banking
10. Bharat Interface for Money (BHIM) app

1. Banking cards

Cards are among the most widely used payment methods and come with various features
and benefits such as security of payments, convenience, etc. The main advantage of
debit/credit or prepaid banking cards is that they can be used to make other types of digital
payments. For example, customers can store card information in digital payment apps or
mobile wallets to make a cashless payment. Some of the most reputed and well-known
card payment systems are Visa, Rupay and MasterCard, among others. Banking cards can
be used for online purchases, in digital payment apps, PoS machines, online transactions,
etc.

How to get Banking cards?

 Apply with your respective bank and provide Know Your Customer (KYC) details
 The card will get activated within a week and you will be allotted a 4-digit pin, which
can be used for all transactions

2. USSD

Another type of digital payment method, *99#, can be used to carry out mobile
transactions without downloading any app. These types of payments can also be made
with no mobile data facility. This facility is backed by the USSD along with the National

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Payments Corporation of India (NPCI). The main aim of this type of digital payment
service is to create an environment of inclusion among the underserved sections of society
and integrate them into mainstream banking. This service can be used to initiate fund
transfers, get a look at bank statements and make balance queries. Another advantage of
this type of payment system is that it is also available in Hindi.

How to Use *99#?

 This service can be used by dialling *99#, after which the customer can interact with an
interactive voice menu through their mobile screen.
 To use the service the mobile number of the customer should be the same as the one
linked to the bank account
 The next step is to register for USSD, MMID (Mobile Number Identifier) and MPIN

3. AEPS

Expanded as Aadhaar Enabled Payment System, AEPS, can be used for all banking
transactions such as balance enquiry, cash withdrawal, cash deposit, payment transactions,
Aadhaar to Aadhaar fund transfers, etc. All transactions are carried out through a banking
correspondent based on Aadhaar verification. There is no need to physically visit a
branch, provide debit or credit cards, or even make a signature on a document. This
service can only be availed if your Aadhaar number is registered with the bank where you
hold an account. This is another initiative taken by the NPCI to promote digital payments
in the country.

How to use AEPS?

 It is very simple to use AEPs, all you need to do is to provide the accurate Aadhaar
number and the payment will be successfully made to the concerned merchant

4. UPI

UPI is a type of interoperable payment system through which any customer holding any
bank account can send and receive money through a UPI-based app. The service allows a
user to link more than one bank account on a UPI app on their smartphone to seamlessly
initiate fund transfers and make collect requests on a 24/7 basis and on all 365 days a year.

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The main advantage of UPI is that it enables users to transfer money without a bank
account or IFSC code. All you need is a Virtual Payment Address (VPA). There are many
UPI apps in the market and it is available on both Android and iOS platforms. To use the
service one should have a valid bank account and a registered mobile number, which is
linked to the same bank account. There are no transaction charges for using UPI. Through
this, a customer can send and receive money and make balance enquiries.

How to use UPI?

 Download the app on Android or iOS platform

 Register for the service by providing bank account details
 Create a VPA, get an MPIN

5. Mobile Wallets

A mobile wallet is a type of virtual wallet service that can be used by downloading an app.
The digital or mobile walletstores bank account or debit/credit card information or bank
account information in an encoded format to allow secure payments. One can also add
money to a mobile wallet and use the same to make payments and purchase goods and
services. This eliminated the need to use credit/debit cards or remember the CVV or 4-
digit pin. Many banks in the country have launched e-wallet services and apart from
banks, there are also many private players. Some of the mobile wallet apps in the market
are Paytm, Mobikwik, Freecharge, etc. The various services offered by mobile wallets
include sending and receiving money, making payments to merchants, online purchases,
etc. Some mobile wallets may charge a certain transaction fee for the services offered.

How to use a mobile wallet?

 Download the app

 Register for the service by following instructions and providing all details
 Load money

6. Bank pre-paid cards

A prepaid card is a type of payment instrument on to which you load money to make
purchases. The type of card may not be linked to the bank account of the customer.
However, a debit card issued by the bank is linked with the bank account of the customer.
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 How to Use a Prepaid Card?

 Apply for the card

 Get pin
 Load money from your bank account/debit card

7. PoS terminals

Traditionally, PoS terminals referred to those that were installed at all stores where
purchases were made by customers using credit/debit cards. It is usually a hand held
device that reads banking cards. However, with digitization the scope of PoS is expanding
and this service is also available on mobile platforms and through internet browsers. There
are different types of PoS terminals such as Physical PoS, Mobile PoS and Virtual PoS.
Physical PoS terminals are the ones that are kept at shops and stores. On the other hand,
mobile PoS terminals work through a tablet or smartphone. This is advantageous for small
time business owners as they do not have to invest in expensive electronic registers.
Virtual PoS systems use web-based applications to process payments.

8. Internet Banking

Internet banking refers to the process of carrying out banking transactions online. These
may include many services such as transferring funds, opening a new fixed or recurring
deposit, closing an account, etc. Internet banking is also referred to as e-banking or virtual
banking. Internet banking is usually used to make online fund transfers via NEFT, RTGS
or IMPS. Banks offer customers all types of banking services through their website and a
customer can log into his/her account by using a username and password. Unlike visiting a
physical bank, there are to time restrictions for internet banking services and they can be
availed at any time and on all 365 days in a year. There is a wide scope for internet
banking services.

9. Mobile Banking

Mobile banking is referred to the process of carrying out financial transactions/banking

transactions through a smartphone. The scope of mobile banking is only expanding with
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 the introduction of many mobile wallets, digital payment apps and other services like the
UPI. Many banks have their own apps and customers can download the same to carry out
banking transactions at the click of a button. Mobile banking is a wide term used for the
extensive range or umbrella of services that can be availed under this.

10. Bharat Interface for Money (BHIM) app

The BHIM app allows users to make payments using the UPI application. This also works
in collaboration with UPI and transactions can be carried out using a VPA. One can link
his/her bank account with the BHIM interface easily. It is also possible to link multiple
bank accounts. The BHIM app can be used by anyone who has a mobile number, debit
card and a valid bank account. Money can be sent to different bank accounts, virtual
addresses or to an Aadhaar number. There are also many banks that have collaborated with
the NPCI and BHIM to allow customers to use this interface.

How to Use BHIM App?

 Download and install the BHIM app

 Choose a language
 Register for the service by providing mobile number linked to bank account
 Add bank-related information and set up a UPI PIN by following the given instructions

1.3. IMPORTANCE

Earlier, banks and customers were reluctant to digital transition. However, with changing
times, bankers and customers see great potential in digital banking technology and how it
can improve customer relationships, brand image and increase the efficiency of banks. For
banks and customers, the adoption of the digital banking system is creating a significant
impact because:

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Digital platforms have increased banks and their employees’ efficiency to perform the
business by leaps and bounds. The deliverables are more accessible to achieve accelerated
productivity.
Digital transformation in banking is significant due to the reduced cost of operations.
Automated application and process have reduced redundant labor and human efforts. This
has also reduced the chances of errors and enable efficient results at lower cost.
With the introduction of machine learning and related technology, mathematical
calculations and other processes are expected to give a higher level of accuracy when it
comes to analyzing a large amount of data. Accurate accounting and simplified solutions are
some of the most significant benefits of digital banking operations.
There is an enhanced sense of security with digital solutions to tackle cybercrime and
breach of security. AI solutions use predictive methods and proactive approach to
understand human psychology that can be implemented to prevent fraud and cybercrime.
For customers, there are abundant banking features that digital banking technology has to
offer. It makes banking a lot more convenient and simplified for the customers.
Improved customer service is one of the greatest gifts of digitalization of banks. With the
help of customer feedback and a better understanding of human behavior, customer service
can be improved further.
Banks are now available round-the-clock, and the systems are updated in real-time. This
means customers do not have to stand in queues for hours to inquire about their account
details.
For businesses, it is a significant move for businesses and trading sector. In the absence of
online banking, e-commerce and similar businesses would not have been possible. Every
aspect of shopping and payments is simplified due to advanced digital banking methods.
Digital banking is one of the greatest revolutions in the modern world. It has benefited one
and all. From small to big businesses, online banking has made a valuable contribution to
the success of their businesses. Though it is a recent trend, imagining life without digital
banking system is impossible for today’s generation. It is only a beginning; experts suggest
that there is still a long way to go. It is the stepping stone of creating a cashless society that
relies on paperless and signatureless banking.
Digital transformation in the banking sector has fundamentally changed how banks operate
and how they service their customers. And as we saw earlier, it’s going to further change
and become more and more personalized with time.

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 Traditional banking systems are for the past now. They consume a significant amount of
time and require a lot of manpower. Execution of processes is tedious. This suggests a need
for digital transformation to fasten and ease the tasks.Not to forget how covid-19 has
changed the scenario. With lockdowns being imposed and the security of our health getting
worse, people have adopted net banking and prefer carrying out every single banking
activity at the tip of their fingers. The solution to this is undoubtedly going towards
digitalization. In fact, the next generations are going to be early adopters of the Internet and
are going to be a part of the already digital world. The digital wave that we have
experienced in our teens or late 20s, is going to be available to the next generation much in
advance. They are practically going to grow up with it. Thus, to be able to cater to them in
the future, the digital transformation of banks needs to start today. As much as people need
banks, it is also vice versa. Private banks are coming up with value-additions year on year,
thus to compete with them, it is important that every bank adopts digital transformation.
All these factors suggest that India’s banking sector is set for robust growth. Banks that
undertake this transformation can expect reduced costs and streamlined processes. This
integration also helps to provide a more hassle-free and engaging customer experience.
There is a severe need to digitally upskill your employees to keep up with this rapidly
changing online space.

1.4. FEATURES

Online banking allows customers the luxury of banking anytime, anywhere. Some of the
most common online banking features and services include:

 Fund transfer (now available 24×7 with IMPS)

 Viewing bank transaction history

 Printing account statements and balances

 Transfer of funds from one account to the other

 Bill payments viz., credit cards, electricity.

 Recharge for mobile phones, broadband and DTH connections, etc.

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 1. Personal Financial Planning

Through digital banking services, banks provide several financial planning tools to their
customers. These include loan calculators, budgeting, and taxation tools to help customers
analyze their investments, or invest in new funds. As a result of these tools, most of the
personal financial planning can be done efficiently without the need to personally visit the
bank.

2. Unified Payment System (UPI)

Unified Payments Interface is an instant real-time payment system developed by the

National Payments Corporation of India. This service facilitates inter-bank transactions. As
a result of the integration of the UPI with digital banking solutions, the customers can now
easily transfer money from one account to another.

3. Digital Wallet

Gone are the days when people had to carry cash to buy things. The introduction of a digital
wallet has made life quite easy for the customers as they can pay for all their requirements
by simply using their smartphone. Some of the most popular e-wallets include Paytm,
MobiKwik, and Jio Money.

4. Rewards and Loyalty Programs

To engage better with their customers, banks keep announcing rewards and loyalty
programs. Such programs allow customers to earn points based on their monthly activities
within the bank’s network as well as its partners. Customers can later redeem these points
and use them like cash for purchasing various products.

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 5. Non-Internet Based Phone Banking

Consumer banking is now available on devices that do not have an internet connection.
These services include gathering required information through SMS, missed call, and USSD
banking. These services can be accessed from even the remotest of areas since they do not
require an internet connection. To top it all, these are free services and all transactions are
completely cashless.

6. Mobile Banking

Mobile Banking is a service provided by a bank or other financial institution that allows its
customers to conduct financial transactions using a mobile device such as a smartphone or
tablet. The banks create user-friendly apps that allow customers to bank efficiently from the
comfort of their homes.

7. Automatic Bill Payments

Almost a decade ago, bill payment was a cumbersome task. Thanks to the digital revolution,
all bills can now be paid with just a click. These days banks allow customers to link their
bills directly to their bank accounts. This helps in receiving timely reminders for bill
payments which aid in clearing all bills on time.

8. Secure Message Alerts

One of the most important features of digital banking is the secure message alert. These
alert messages are received by the customers even when the slightest change is made in
their accounts. These alert messages can be life-saving for the account holder in case some
suspicious activities are identified in his/her account.

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 9. Dedicated Remote Advisor

Remote banking aims to make the banking experience seamless and hassle-free for all its
customers by dedicating a digital relationship manager for all its services at all times.
Through remote banking, customers can enjoy the privileges of all financial and service
transactions from the comfort of their homes.

With all these features, digital banking undoubtedly has an edge over traditional banking
practices. Not only is digital banking simple and hassle-free, but the level of transparency
offered through digital banking services is also unmatched. With rapid technological
developments, digital banking is bound to grow by leaps and bounds and the time is not far
when all traditional banking services will completely shift online.

1.5. ADVANTAGES

1. 24/7 Account and Service Access

Online banks are accessible 24/7, as long as you have an internet connection. Some online
banks, such as Ally Bank, take this perk one step further, giving you 24/7 phone access to a
real-life customer service agent. This can be extremely helpful if you don’t have access to
the internet, or if you feel you need the assistance of a human brain, rather than a computer
algorithm.

2. Speed and Efficiency

If you need to transfer money, apply for a new loan, or perform nearly any banking
transaction, you’ll typically have to wait in line at a bricks-and-mortar banking location.
With an online bank, there’s never any waiting. As long as you can log in, you can access

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your accounts, request a new credit card, or perform nearly any banking transaction you
desire without driving down to a bank or waiting in line.

3. Online Bill Payment

One of the great advantages of online banking is online bill pay. Rather than having to write
checks or fill out forms to pay bills, once you set up your accounts at your online bank, all it
takes is a simple click — or even less, as you can usually automate your bill payments. With
online bill pay, it’s easy to manage your accounts from one central source and to track
payments into and out of your account.

4. Low Overhead Can Mean Low Fees

Online banks don’t have to pay for things like electricity, janitorial services, landscaping, or
rent, so they can pass those savings along to customers. Typically, this means that online
banks can charge fewer fees than traditional banks. For example, most online banks offer a
free online checking account with no deposit, along with other no-fee bank accounts, such
as IRAs. There are a number of online banks with free checking and no minimum balance;
if you’re worried about applying for an account with bad credit, you might be able to open a
bank account online for free, no credit check required, although there might be ongoing
fees.

5. Low Overhead Can Yield High Rates

In addition to offering low fees, online banks often have the best interest rates, whether you
are looking for a certificate of deposit, a high yield checking account or deposit accounts
with high interest, such as a money market account. Although rates fluctuate, if you look at
a current list of best CD rates or best free online checking account rates, you’ll usually find
that the banks paying the best interest rates are online banks.

23
 6. More options to pay.

Digital banking gives customers a lot of payment options. They can choose to use their
mobile device to pay when payments are enabled with a banking app or they can decide to
use their debit card. If a customer is already working on their computer, they may choose to
go the online banking route, and if they want to use a mobile payment like Zelle® to send
money or split a bill, they can. And if they want an in-person experience they can come to
your branch. Digital banking delivers on what many of the millennials and Gen Zs are
demanding (more pay options, more convenience) so they get what they want.

1.6. DISADVANTAGES

1. Technology Issues

In many ways, an online bank is only as good as your — or their — internet connection. If
there’s a power outage, or if servers go down, you might not have any access to your
account whatsoever. While some banks offer a phone number for customer service, it might
be overwhelmed if online access is down. With a real bank, you can always find someone to
talk to in the branch.

2. Security Issues

While many online banks are reputable and well-established, sometimes it can be hard to
feel comfortable with a bank that doesn’t have a physical presence, particularly when large
sums of money are involved. If a website suddenly folds up, what will happen to your
money? There’s also the risk of identity theft — or actual theft — if someone gains
unauthorized access to your account via a hacked or stolen password or log-in credentials.

24
 3. Inefficient at Complex Transactions

Online banks might be able to transfer money between accounts or pay bills, but you might
be more comfortable with an international, bricks-and-mortar bank if you have complex
transactions. Worldwide, business-oriented banks like Chase have global transaction
capabilities, such as the ability to send payments to more than 35 different currencies
worldwide, that online banks might not be able to muster. Without a real-world presence,
most online banks can’t even offer the services of a notary public, which require an in-
person visit and necessary for most important financial transactions like buying a home.

4. No Relationship With Personal Banker

Over time, you can develop a relationship with a personal banker if you visit a traditional
bricks-and-mortar location. If you’re dealing with an online bank, on the other hand, you’re
typically handed off to an anonymous customer service agent who is unlikely to know you
from the next customer. If you’re really in a bind, financially speaking, having a
relationship with someone who can help and who knows you well can be a major advantage
over a strictly online banking relationship.

5. Inconvenient to Make Deposits

It might seem counterintuitive that a bank, whose purpose is to attract assets, makes it hard
for customers to make deposits, but that can be true in the case of some online banks. With
an online bank, you can’t simply drop off cash or a check at a local branch. In fact, some
online banks, like Ally Bank, won’t accept cash deposits at all. Using Ally Bank as an
example, to make a deposit you’ll have to mail a check, transfer money from another bank
or another account, or use the bank’s e-check deposit service.

6. Inefficient at Complex Transactions

Online banks might be able to transfer money between accounts or pay bills, but you might
be more comfortable with an international, bricks-and-mortar bank if you have complex
25
 transactions. Worldwide, business-oriented banks like Chase have global transaction
capabilities, such as the ability to send payments to more than 35 different currencies
worldwide, that online banks might not be able to muster. Without a real-world presence,
most online banks can’t even offer the services of a notary public, which require an in-
person visit and necessary for most important financial transactions like buying a home.

1.7. RECENT TRENDS IN DIGITAL BANKING

1. Digitization

With the rapid development of digital technology, it became necessary for banking and
fnancial services in India to keep up with the changes and develop new digital solutions
for the tech-savvy customers. Besides the banking industry, insurance, healthcare, retail,
trade, and commerce are some of the major industries that are experiencing the massive
digital shift. To stay competitive, it is necessary for the banking industry to take the leap
on the digital bandwagon. Modern trends in digital banking system make it easier,
simpler, paperless, signature-less and branch-less with numerous features like IMPS
(Immediate Payment Service), RTGS (Real Time Gross Settlement), NEFT (National
Electronic Funds Transfer), Online Banking, and Tele-banking. Digitization has created
the comfort of “anywhere and anytime banking.” It has resulted in the cost reduction,
improved revenue generation, and reduced human error.

2. Mobile banking

Mobile banking is one of the dominant trends in digital banking industry. The use of a
Smartphone to exercise various banking services like checking account balance, money
transfer, and bill payments, without the need of visiting the branch. This trend has taken
over the conventional banking systems. In few years, mobile banking is expected to
become even more effcient and effortless to keep up with the customer demands. Mobile
banking future trends hint at the acquisition of IoT(Internet of Things) and Voice-Enabled
26
Payment Services to become the reality of tomorrow. These voiceenabled services can be
found in smart TVs, smart cars, smart homes, and smart everything.

3. Unifed Payments Interface (UPI)

Unifed Payments Interface or UPI is the one of the fastest and most secure payment
gateway that has entirely changed the way payments are made. With the use of mobile
phone it provides a real-time inter-bank transaction at anytime and anywhere. UPI
payment system is considered as the future of retail banking in India. UPI is developed by
National Payments Corporation of India and regulated by the Reserve Bank of India. This
revolutionary transactions system is launched in 2016. This system makes funds transfer
available 24x7, 365 days unlike other internet banking systems. There are approximately
more than 40 apps and 50 banks supporting UPI transaction system. In the
postdemonetization India, this system played a signifcant role. Banking is expected to
become more “open” with the help of UPI in the near future.

4. Blockchain

Blockchain is the new buzzword in the digital world. It is said to be the future technology
of banking and fnancial services that works on the principles of computer science, data
structures and cryptography and is the core component of cryptocurrency. Without the
ability to modify it, Blockchain uses technology to create blocks to process, verify and
record transactions. Niti Aayog is creating India's largest Blockchain network named
IndiaChain, which is expected to transform several industries, minimize the chances of
fraud, improve transparency, accelerate the transaction process, less human intervention
and build an unhackable database. Several aspects of banking and fnancial sector like
payments, clearance and settlement systems, stock exchanges and share markets, trade
fnance, and lending are predicted to be impacted by the introduction of IndiaChain
network.

27
5. Chatbots

Chatbots is one of the emerging trends in the Indian banking sector. As assistance in
customer support services, several private and nationalized banks in India have started to
adopt chatbots or Artifcial intelligence robots. For now, the use of this technology is at a
budding stage and usage of that is expected to grow in the near future. Banks and fnancial
institutions are expected to adopt more chatbots with the higher level of intelligence for
improved customer interaction and personalized solutions. The technology will reduce the
chances of human error and convey accurate solutions for the customers. Also, it can
identify fraudulent behavior, collate surveys and feedback and assist in fnancial decisions.

6. Fintech Companies

Financial Technology companies are ones that lead technology to the world of banking
and industry. Fintech companies have become an important part of the fnancial services
sector in India. In the past few decades, huge investment has been made in these
companies and it has emerged into a multi-billion-dollar industry globally. Fintech
companies and fntech apps have changed the way fnancial services are provided to the
customers.. Some important names that have made an impact include Paytm, PhonePe,
Policy Bazaar, MobiKwik, Shubh Loans, Lending Kart, PayU, Kissht and Faircent.
Fintech companies have led to a massive improvement in fnancial services, customer
experience, and reduced the price paid. According to a report by National Association of
Software and Services Companies (NASSCOM), things will continue to look up with
fntech market in India potentially touching 2.4 billion dollar by 2020.

7. Digital-Only Banks

We cannot ignore recent trend in the Indian fnancial system. Digital-only banks This is a
new breed of banking institutions that have emerged to create paperless and branch-less
banking systems.. These banks provide banking facilities only through various internet
platforms that can be accessed on mobile phones, computers, and tablets. It provides most
of the basic services to the customers in the most simplifed manner and gives access to
real-time data at anytime. The growing popularity of these Digital-only banks is said to be
28
a real threat to traditional banks. ICICI Pockets is India's frst digitalonly bank. Though
virtually, these banks are attractive to the customers because they provide high-speed
banking services at very transaction fees. They alleviate the need of visiting the bank and
standing in a queue, in today's fast lane life these banks suit the customer needs in best
possible manner.

8. Cloud Banking

Cloud Banking has taken the banking world by storm. It seems the technology will soon
fnd its place in the banking and fnancial services sector in India. Cloud computing will
organize and improve banking and fnancial activities. Use of cloud-based technology
means improved data security, improved exibility and scalability, increased effciency,
faster services, solution, easier integration of newer technologies and applications. In
addition, the banks will not have to invest in expensive software and hardware as updating
the information is easier on cloud-based banking models.

9. Wearable Technology

With the development smartwatch technology, the banking and fnancial services
technology is also aiming to develop wearables for retail banking customers and in which
provide more control and easy access to their account. Wearables have entirely changed
the way of performing our daily activities. Therefore, this technology is expected to be the
trend in the future retail banking by providing major banking services with just a click on
a user-friendly interface on their wearable device.

10. Biometrics

Essentially for security reasons, a Biometric Authentication system is altering the national
identity policies and the impact is expected to be extensive. Banking and fnancial services
are just one of the many other industries that going to experience the impact. With a
combination of encryption technology and OTPs, biometric authentication is forecasted to
create a highly-secure database protecting it from leaks and hackers attempts. To ensure
sophisticated security to customers' account and capital fnancial institutions in India are
exploring the potential of this powerful technology
29
1.8. OPPORTUNITIES OF DIGITAL BANKING SYSTEM IN INDIA

1. Internet Penetration

Most of the telecom companies in India offering affordable data tariff packages for the last
recent years after the launch of Reliance Jio which were started with unbelievable data
offers. According to the Market research agency Kantar IMRB, India's internet users
expected to register 62.7 crores in 2019, driven by rapid internet growth in rural areas. The
increasing number internet users in India open up a sea of opportunities for digital banking
industry. They should utilise this opportunity by offering modern and innovative banking
services at reasonable cost to attract more internet users to adopt digital banking services.

2. Usage of Smart phone

Smart phone have become like an organ for the human beings. In the recent times it
becomes one of the essential parts of our daily life. According to a joint study by
Associated Chambers of Commerce and Industry of India and PwC, the number of
smartphone users in India expected to rise by 84% to 85.9 crores by 2022. With the help
mobile applications of banker, customers can handle bank account at their fnger tips. Both
volume and value of mobile banking are signifcantly growing. Besides websites, most of
the banks in India developed their own advanced mobile applications to facilitate easy and
quick transactions.

3. Initiatives of Government

Government of India with a vision to transform India into a digitally empowered society
and knowledge economy, govt. initiated programs such as Pradhan Mantri Jan Dhan
Yojana and Digital India, led to the development of economy by way of fnancial
inclusion. The government has asked all departments to enable electronic payment options
such as Bhim-UPI QR code at their cash counters as part of plans to boost digital
transactions. Now almost all the payments to government such as taxes, duties even fnes
also started collect through digital mode.
30
4. Digital Banking Solutions

GoI and RBI are encouraging the emergence of innovative digital banking solutions like
fntech start-ups. Fintech startups pave a way for a fnancially smart India with global
recognition. According to NASSCOM, things will continue to look up with Indian fntech
market potentially touching 240 crores by 2020. To add to the ongoing momentum and
scale heights, fntech ecosystem will have to innovate and specialise in key sectors. That
seems most plausible and promising with intelligent automation, artifcial intelligence and
blockchain.

5. E-Commerce

Ecommerce allows people to carry out businesses without the barriers of time or distance.
One can log on to the internet at any point of time, be it day or night and purchase or sell
anything one desires at a single click of the mouse. Intensifcation of Ecommerce highly
contributing towards digital transactions. Digital banking has several other benefts. Users
can shop online, buy tickets, make advanced bookings, etc.

6. Untapped Rural Market

As India second largest populous country and the ¾ population lives in rural areas and
there is a proper need to divert the efforts the entire areas city as well as villages. The
Indian government seeks to digitize banking in rural areas, as an attempt to bring the
entire country into the Digital Era. Increasing the use of cashless transactions in rural
villages has the potential to alleviate cash-based crimes (e.g. bribes, robbery). Digital
banking helps to create a safer space and more fnancial freedom within rural areas.

31
1.9. ORIGIN

Digital banking means the digitalization of the traditional banking activities and services
that were earlier only available when customers visited the bank branch in person. Banking
is done through digital platforms. The banking services can be accessed through
smartphones, laptops, etc.

The need for computerization of the banking sector was felt in the late 1980s. Therefore the
Reserve Bank set up a committee in this regard in 1988 headed by Dr. C. Rangarajan.
Banks started using information technology initially with the introduction of standalone
Personal Computers and migrated to Local Area Network connectivity. Then with further
evolution, banks adopted the core banking platform. It was when branch banking was
changed to bank banking.
Core banking solution allowed banks to raise the comfort aspect to the customers, and it
was hailed as a promising step towards improving customer convenience through the so-
called “Anywhere and Anytime Banking.”
Thereafter the process of computerization kicked up with the opening of the economy in the
early 90s. A major propeller for this transformation was due to the rising competition from
private and foreign banks. Many commercial banks started adopting digital customer
services to stay competitive.

In 2016, the government launched the UPI system, a banking system that allows people to
easily transfer money to and from bank accounts. The UPI system kicked up a digital
revolution in India and brought about the so-called “Mobile Banking.” This form of digital
money transferring was provided to account holders prior to 2016; however, it was not
accessible to everyone as that wasn’t based on mobile systems. Now with UPI, anyone can
open a bank account and make transactions via a mobile phone.
The government has also asked the customers to link their bank accounts with their Aadhaar
number. This is to ensure that the person accessing the bank account is the person who owns
it. With digital banking, a person can easily open a bank account in India and that too,
without even visiting the bank branch.

32
 The Indian Government has been promoting digital transactions like never before. The
launch of UPI and BHIM by National Payments Corporation of India[1] has been steps of
innovation in the domain of Payment system.
Today banks are looking to provide fast, accurate, and quality experience of banking to
customers, and Digitalization has become one of the top priorities of banks in India.

1.10. HISTORY

The earliest forms of digital banking trace back to the advent of ATMs and cards launched
in the 1960s. As the internet emerged in the 1980s with early broadband, digital networks
began to connect retailers with suppliers and consumers to develop needs for early online
catalogues and inventory software systems.[2]
By the 1990s the Internet became widely available and online banking started becoming the
norm. The improvement of broadband and ecommerce systems in the early 2000s led to
what resembled the modern digital banking world today. The proliferation
of smartphones through the next decade opened the door for transactions on the go beyond
ATM machines. Over 60% of consumers now use their smartphones as the preferred
method for digital banking.[3]
The challenge for banks is now to facilitate demands that connect vendors with money
through channels determined by the consumer. This dynamic shapes the basis of customer
satisfaction, which can be nurtured with Customer Relationship Management (CRM)
software. Therefore, CRM must be integrated into a digital banking system, since it
provides means for banks to directly communicate with their customers.
There is a demand for end-to-end consistency and for services, optimized
on convenience and user experience. The market provides cross platform front ends,
enabling purchase decisions based on available technology such as mobile devices, with a
desktop or Smart TV at home. In order for banks to meet consumer demands, they need to
keep focusing on improving digital technology that
provides agility, scalability and efficiency.

33
1.11. FUTURE OF DIGITAL BANKING

With the augmentation of digital technologies, consumers have become more demanding of
virtual experiences in today’s time. The pandemic has only amplified the need for easy
access to banking products, services and information and surged the need for stress-free
access to banking products and services. The future of banking will be driven by major
technological changes and will transform drastically. The future of banking is ‘Digital’. The
COVID-19 pandemic has re-designed our lives in terms of how we shop, work, even how
we bank, and this has led to a major change in customer behaviour.
However, the digitization of the banking sector is not quite sudden. Financial sector
digitization began in the early 90s when Automated Teller Machine (ATM) and Electronic
Fund Transfers (EFT) were introduced. Consequently, internet banking was permitted in
India, followed by the National Electronic Fund Transfer (NEFT), Immediate Payment
System (IMPS), RTGS, etc. Lately, India has been heavily relying on the UPI or digital
wallet payment system. Intending to digitize the economy, the Government brought in
demonetization in 2016, and then GST was introduced in 2017. With such bold initiatives,
the Government of India has voiced its intention loud and clear – to make the banking and
financial services sector truly digital. Furthermore, these steps have conceded incredible
results. The transactions through debit and credit cards, UPI platforms have seen an
upsurge, especially over last year due to the pandemic.
Digital banks, neobanks, challenger banks, etc. today (also bolstered by the pandemic
driven demand for remote services) are making concepts like geography, location and
branches in banking obsolete. Instead, banking accessible on a device instead of at a branch
(via smartphones, etc.) or financial services available on-demand (at merchant checkout
say), are catching on. Technological progress and customer convenience are driving a
change to the very way in which banking is done, naturally catching the regulator’s
attention.
Alongside the first steps from the RBI and Niti Aayog to introduce regulatory tracks for
digital banks for the first time, 75 new ‘digital banking units’ at 75 districts were announced
recently in the Budget. Additionally, 100% integration of post offices with the core banking
system was announced. These promise multiple new customer touchpoints, indicating that
the government has also recognized the potential of digital banking as a strategy for
financial inclusion. Collectively these developments hold promise not only for digital banks
but also for end-consumers and for BaaS players.
34
Replacing bank branches with BaaS
Traditionally, banking regulation takes a ‘branch’ based approach. All licensed banks in
India are required to have a specified minimum number of branches. Digital banks like
SBI’s YONO, Kotak 811, etc. are on a different footing from neobanks, being the digital-
only units of traditional, licensed banks. For new-age banking, meeting these requirements
for ‘branches’, which are ‘fixed points of service delivery’, manned by staff and providing
specified services like accepting deposits, encashing cheques, loans, etc., prevents a digital-
only approach.
Technological progress has nevertheless changed things. Internet banking, mobile banking,
etc. were initial digitized banking touch-points. These also eased the work of business
correspondents (‘BCs’), which was developed initially as a system for the last-mile delivery
of banking services. BCs were previously tied to a specific bank branch, required to
be within 30 km of its base branch. This, known as the ‘distance criteria’, was relaxed in
2014, paving the way for digital-only BCs, which in fact is one of the modes utilized by
neobanks today.
With API driven disruption, traditional branch-based banking is gradually being replaced by
branchless, digitized banking touchpoints, today also taking the form of neobanks, digital
banks and the like. A significant benefit these bring is in their target for an enhanced
customer experience, targeting niche segments like millennials, SMEs, low-income
segments, etc. For customers, this means a high level of customisation, with services
ranging from account opening and linking, recurring/ fixed deposit related services,
requesting payments instruments like cards or wallets, accessing loans or credit lines, and so
on, all via their smartphone.
The regulatory roadmap for digital banks
While partnerships with regulated entities largely drive neobanks, etc., in India, there is also
a fair amount of activity towards introducing proper regulations here. Globally, digital-only
bank licenses can be found in jurisdictions like Singapore, Hong Kong, UK, etc. Here,
the RBI’s recent report on Digital Lending suggested bringing operations of digital banks/
neobanks under its purview, via a bank licensing model and also guidance for the bank-
fintech partnership model. Niti Aayog in its recent Discussion Paper on Digital Banks has
proposed a roadmap for phased licensing of full-stack digital-only banks, which will be
branchless.
Post the Budget now, an Indian Bank Association’s Committee is reported to be formed
post RBI directions to this effect, which will define what exactly ‘digital banking units’ are

35
and what services they will provide. DBUs after all are a new concept, with other parallels
being ‘offshore banking units’ (bank branch in an SEZ) and ‘IFSC banking units’ (foreign
bank’s branch in an IFSC), which undertake specific and defined activities.
With only proposals in place and deliberations ongoing, the Indian regulatory approach to
digital banking, be it light-touch or flexible or stringent, is yet to be defined. The actual
implications for neobanks and BaaS players themselves will thus be discovered soon after.
India has traditionally taken a hybrid approach to BaaS, encouraging both regulatory driven
BaaS (the Account Aggregator framework, UPI, etc.) and allowing market driven BaaS via
the bank-fintech partnerships. The Niti Aayog paper for example proposes the regulatory
sandbox to facilitate experimentation and relaxations with digital bank operations, while the
RBI paper is clearly open to both models. Recent regulations like the Digital Payment
Security Controls are also progressive in their unrestrictive approach. This flexibility bodes
well for the future of digital banking in India as well.
Creating opportunity and bringing scalability to BaaS
These developments thus create an opportunity- for neobanks to work on a licensed model
in addition to the contractual model, and for customers to access previously inaccessible (or
difficult-to-access) or new-age banking services from anywhere. The increasing demand for
digital banking and for BaaS, driven by customers and now also the government via the
Budget announcements, also creates the potential for BaaS intermediaries, which play a
crucial role in the BaaS ecosystem as enablers of scale and faster go-to-market.
From a banking point of view, these intermediaries enable services like savings/ current
account opening and management, deposit management, debit cards issuance, etc., all via
API, SDK and ‘no-code’ solutions. The lowered costs and flexibility of a single integration
with these solutions allows targeting new customer segments, new geographies or new use-
cases more easily. These may thus be able to bring the same benefits here- aiding the large-
scale integration of post offices with the core banking system to offer banking services, and
in partnering with SCBs to help launch the DBUs.
The recent budget announcements are a good step towards using technology to tackle
financial inclusion. While more details on the regulatory approach are awaited, the
ecosystem is poised to build a new face of banking in India. The future of digital banking is
thus promising.

36
1.12. DIGITAL BANKING VS TRADITIONAL BANKING

Traditional banking is the financial institution that is dedicated to the administration of the
money that its clients deposit in custody and, on the other hand, the bank uses that money to
grant it as a loan to individuals or companies, charging them interest. This is essentially the
commercial activity to which traditional banking has always been dedicated. Since the
internet has become an essential part of anyone’s life, this traditional banking has been
displaced, giving rise to Fintech companies that have revolutionized the way of seeing the
economy by introducing the use of cryptocurrencies in their transactions . Next, some of the
disadvantages that traditional banking represents against cryptocurrencies.

Parameter of
Digital Banking Traditional Banking
Comparison

Customers can have Customers can have a direct face

Contact only electronic or online to face communication from their
contacts. bankers.

In traditional banks, the

employees and staff members of
The customers of the
the bank can attend only a
Customer bank don’t have to stand
limited number of the customers.
service in lines to perform their
And customers have to stand in
banking transactions.
line to perform their banking
transactions.

No costs are incurred

There are many operating and
in digital banking as
Costs fixed costs that are incurred by
they do not have a
traditional banks.
physical appearance.

Customers have to visit the bank

Customers can operate
Accessibility for their work only in working
their accounts anytime,
hours.

37
 anywhere using their
mobile phones.

Digital banking is not a

Traditional banking drains a lot
time taking process as
of time from the customers as
Time customers do not have
they have to visit their branch to
to visit their branches to
obtain access to their accounts.
operate their accounts

Digital banking is the tempting

Traditional banking target for hackers. Security is one
Security does not encounter e- of the problems faced by
security threats. customers in accessing accounts
through internet.

Customers who often

Customers who often travel
Finance travel abroad cannot pay
abroad can have greater control
Control close attention and
over their finances.
control of their finances.

38
 RESEARCH METHODOLOGY

1.1. OBJECTIVE OF STUDY

 To study the concept of Digital Banking

 To see the Importance of Digital Banking

 To study the Impact of Digital Banking

 To study what is Digital Banking

 To understand the concept of Digital Banking

 To analyze consumers attitude towards Digital Banking

 To study the advantages and disadvantages of Digital Banking.

 To study various types of Digital Banking

 To understand the role of Digital Banking

 To understand recent trends in Digital Banking.

 To identify the factors that induce the customers to prefer digital banking services over
conventional banking services.

39
1.2. SCOPE OF THE STUDY

 This project will provide us with better understanding about the History Growth
and various aspects of Digital Banking.

 It will help us to understand the behavior of the Indian consumers towards

Digital Banking.

 It will also help us to understand the importance of Digital Banking.

 It will help us to know the different types of Digital Banking.

 It will help us to understanding consumers point of view towards Digital

Banking.

1.3. LIMITATIONS OF THE STUDY

 The sample size is limited so we may not know what exactly most of the people think about
Digital Banking.

 The data is collected from some specific regions only so it becomes difficult to understand
everyone’s perception towards digital banking.

 The implications of the study are subject to the limitations of sample size, psychological and
emotional characteristics of surveyed population.

40
1.4. SELECTION OF THE PROBLEM

 This problem is selected mainly to know how much knowledge people have about Digital
Banking.

 Whether people are aware of the benefits of Digital Banking or not.

1.5. SAMPLE SIZE

The sample size which I have used in this study is 50. I have collected 50 samples for
conducting this study.

1.6. DATA COLLECTION

The data was collected by the questionnaire method. I had prepared a questionnaire with eleven
variables in it and circulated it questionnaire via WhatsApp
I received 57 responses from people in 15 days.

41
 REVIEW OF LITERATURE

In general, digital banking is digital bank that conduct a virtual process where banking
services are delivered over the internet. The digitization of service that offered by the bank
from traditional to digital banking on, from manual-based to automatic-based activity and
from offline to online transaction. While financial inclusion generally is referred to
endeavors to make financial service and product accessible and moderate to all people and
organizations, paying little heed to their own total assets or organization size. Financial
inclusion strives to eliminate the hindrances that prohibit individuals from partaking in the
financial area and utilizing these services to improve their lives. As it can be perceived,
Financial inclusion is provided in advance through digital banking.

According to (Peterson K. Ozili, 2018), from a practitioner's opinion, digital banking is

financial services delivered through mobile phones, personal computers, the internet or
cards linked to a reliable digital banking system. This includes services like money deposits,
withdrawals and transfers. Meanwhile, according to (Carmen Cuesta, 2015) the concept of
digital banking is a mechanism for generating the supply, distribution channel for of
financial products and services virtually, an advancement technology to know customers
better and anticipate their needs swiftly and suitably, and an omni-channel solution, or the
medium to the customers in communicating with their bank directly via mobile phones and
internet.

Moreover, the concept of digital banking could be referred as a process of the digitization
(from offline based to online based) of all the traditional banking services and product that
historically were only can be accessed by the customers when they come to the bank
branch. The services encompass cash deposits, cash withdrawals and transfers, checking or
saving account management, applying for financial products, credit and loan management,
bill payment and account services (Darryl Proctor, 2019). According to Yoonseock Son
(2016) digital banking technology has affected the core of the banking business and has
changed financial services operating system, which had been dominated by offline
employee-oriented services had turned to online based oriented. The digital banking has
improved efficiency and cost-effectiveness of technology-enabled service delivery
processes have shifted the managerial focus toward enhancing the efficiency of digital
channel operations to reduce operational costs. All the more 4 significantly, as an expanding
42
number of banks are providing digital banking services, it is imperative that banks
understand how customers use the digital services and employ their benefits to foster better
customer relationships (Yoonseock Son, 2016).

(Loh, 2020) argued that digital banking has affected many banks in downsizing their
physical operations in which occurred in the bank branch. The establishing of digital bank
had turned bank client to not rely on transaction inside of bank branch. Moreover, digital
banking offers the changes to the banking industry through cost reduction compared to
traditional banking and provide abroad accessibility to its customers (Loh, 2020). Last but
not least, digital banking can be describes as a new instrument of banking and finance,
services or practices, introduction to the new method uses of money, new channels of funds
or new ways of handling daily transactions in which all these efforts are becoming part of
existing financial institutions and the emergence of new markets. This digital banking is a
competitive advantage to the banks to beat the competition, lower their exposure to risk and
manage risk better in case it occurs while at the same time responding to the needs of their
customer and respond to the market changes (Emily, 2017).

Meanwhile, the concept of financial inclusion is referred to “access to all, at an affordable

cost or price, to varied financial services and products in which available with the existing
financial institutions that have the ability to maintain themselves. These endeavors directed
towards financial inclusion, whereby to focus on every customer or household have the
access to utilize the essential financial services and product without taking consideration of
income level (World Bank, 2012).

According to (Howard Thomas, 2019) the concept of financial inclusion can be referred as a
process that ensures smooth accessibility, availability, and actively utilize of the formal
financial system and services to members of an economy, academics, society and
practitioner. Importantly, financial inclusion means that individuals and firms not only be
able to access the financial services and product and also have availability of financial
services but they also capable and willing to utilize them. Based on the World Bank,
financial inclusion and access to finance are different concepts. Financial inclusion is
determined as a group of adult people who utilize financial services and product offered by
financial institution. However, lack of use does not necessarily mean lack of access. Some
people may have access to financial services at affordable prices, but they choose not to use

43
them for religious and other reasons, while other 5 people’s access may be restricted by
high costs for these services or regulatory barriers. Therefore, the key issue is the extent to
which lack of inclusion stems from the lack of demand or the presence of barriers that avoid
individuals and firms from accessing financial services (World Bank, 2014).

The lack of financial inclusion to formal financial services reduces the level of social
welfare and also their social protection that may lead to the increasing social tension in
society, which ultimately slows the development of the country’s economy as a whole as
well as social development (Svitlana Naumenkova, 2019). In addition, according to (Ulf
Thoene, 2017) numerous countries around the world has made financial inclusion as a key
topic on governmental agendas. Governments formulate policies and stimulate social
development aimed at establishing the opportunities for individuals excluded from the
financial system. Financial inclusion not only offers access to banking products, but also
tends to raise the purchasing power and standard of living of low-income populations.
Financial inclusion is necessary to boost a country’s economy and sustainability (Ulf
Thoene, 2017).

Dr. Arunangshu Giri and Ipsita Paria (2018) the article entitled “A Literature Review on
Impact of Digitalization on Indian Rural Banking System and Rural Economy”. The present
paper focuses on the review and summarizes various studies which were made by different
researcher of different location across India on the impact of digitalization on rural banking
system of India. The study found that, digital banking is having enormous potential to
change the landscape of financial inclusion. The study also found that, with the features as
low cost, easy of use digital banking can accelerate the integration of unbanked economy to
the mainstream.

K. Hema Divya and K. Suma Vally (2018) the article entitled “A Study on Digital Payments
in India with Perspective of Consumer’s Adoption”. The present paper focuses on the
analysis of the adoption level of the digital payment systems by customers. Primary data
was collected from 183 respondents in Hyderabad. The collected data through questionnaire
were analyzed by using chi-square technique. The study found that, the deployment of
technology for digital payments have improved the performance of banking sector and able
to achieve the motive cash less country.

44
Anthony Rahul Golden S. (2017) the article entitled “An Overview of Digitalization in
Indian Banking Sector”. In this article an attempt has been made to study the overview of
digitalization in Indian Banking sector. Banks are not just a part of our lives but have a
significant role in our daily lives. Thus banks always try to adopt latest technologies to
enhance customer experience. The study found that, due to the adoption of this
digitalization, the banking sectors in India face some remarkable changes as well as hurdles.
The study also found that, as we are in the digital era, it is not possible to avoid the growth
and services or digital banking.

Santiago Carbo - Valverde (2017) the article entitled “The Impact on Digitalization on
Banking and Financial Stability”. In this article an attempt has been made to discuss the
impact of digitalization on banking activities and challenges that imposes for financial
stability. The study found that, digitalization is an opportunity to reduce marginal costs and
increase productivity in financial services.

The Benefit of Digital Banking

The advancement of digital banking currently helps in economic growth and social
development in a numerous country all around the world. There are a lot of benefits that can
gain from digital banking while achieving financial inclusion encompass all level of
household and financial institutions.

According to (John Vong, 2016) digital banking can benefit both the rural population and
the rural bank branches in which aims to reduce poverty and improves the standard of living
of the rural population. As such, the financial sector not only contributes to GDP growth but
also reduces poverty. Digital banking is cost effective time efficiency, and flexibility to a
bank to deliver banking services by reaching the rural population. Moreover, based on (Ivo
Jenik and Kate Lauer, 2017) digital banking may improve financial inclusion in which
offering new, affordable products or services that address the needs of the excluded and
underserved customer segments. Besides that, digital banking is a distribution channels that
can conveniently reach out to unbanked populations smoothly in remote and rural areas.

6 In addition, (Ivo Jenik and Kate Lauer, 2017) also argued that digital banking offered
operational efficiencies that allow financial services providers to serve low-margin clients

45
profitably and business models that allow financial services providers to serve marginalized
clients to achieve scale. Last but not least, the adoption of digital banking may increase the
competition to the financial institutions that may prompt incumbents to focus more attention
on unserved and underserved segments to keep their revenues steady.

In term of customers perspective, (North, 2018) had stressed that digital banking has
benefiting customers in term of time constraints in which the customer no need to spend
time and expenses as they are not compulsory to travel to the bank branch in order carry out
transactions. They also do not need to wait in unending queues solely to conduct simple
transaction like transfer the money or even pay for utility bills and so the online bill
payment (North, 2018). In the other hand, according to (GDS Modellica, 2020) digital
banking offered 24 hours per day and the customer no need to wait to make banking
transaction as it can make it possible for customer to sit in the comfort whether in home or
office, or in a vehicle while travelling, and carry out transactions without having to wait for
longer time.

Digital banking also provides more product information through online whereby the users
can easily find information about services and products features. All of this helps customers
keep in touch with the bank and better attended to. Increased user confidence: electronic
banking has the tools, protocols and levels of security that make searches and transactions
safe and secure. These protocols range from security certificates to strengthened data
encryption. (GDS Modellica, 2020) stressed in the article that digital banking can increase
transparency in services and transactions are made completely secure through the use of
complex encryption methods to prevent from cybercrime (GDS Modellica, 2020).

46
 DATA ANALYSIS AND INTERPRETATION

Age No of Respondents
Below 18 2
18 - 30 29
31 – 45 10
46 – 60 9
Above 60 0

Total respondents are 50 (100%),

Below 18 years are 2 respondents (4%),
18-30 years are 29 respondents (58%),
31-45 years are 10 respondents (20%)
46-60 years are 9 respondents (18%),
Above 60 are 0 respondents

47
 Gender No of Respondents
Male 21
Female 29

Total respondents are 50 (100%),

21 respondents are Male (42%),
29 respondents are Female (58%)

48
 Occupation No of Respondents
Students 17
Self Employed 2
Salaried 26
Retired 0
Others 5

Total respondents are 50 (100%),

17 respondents are Students (34%),
2 respondents are Self Employed (4%),
26 respondents are Salaried people (52%),
0 respondents are Retired (0%),
5 respondents belong to Others (10%)

49
 Preferred communication with your No of Respondents
bank
Online via personal computer 17
Online via mobile 33
Call centre 0
Visit to bank 0
Atm 0
Others 0

Total respondents are 50 (100%),

17 respondents use personal computer for banking (12.5%),
33 respondents are mobile for banking (87.5%),
0 respondents communicate through call centres (0%),
0 respondents use ATMs (0%),
0 respondents belong to Others (0%)

50
 Use online banking No of Respondents
Yes 50
No 0

Total respondents are 50 (100%),

All of the respondents use Online Banking.

51
 Use of Online Banking Services No of Respondents
Less than 6 months 5
6 months to 1 year 8
1 year to 2 years 23
More than 2 years 14

Total respondents are 50 (100%),

5 respondents have been using online banking services for less than 6 months,
8 respondents have been using online banking services for less than an year but more than 6
months,
23 respondents have been using online banking services for 1 to 2 years,
14 respondents have been using online banking services for more than 2 years

52
 Where did you hear about online No of Respondents
banking services
Family and friends 30
Banks 14
Mass media 5
Newspaper 1
Others 0

Total respondents are 50 (100%),

30 of the respondents have heard about online banking through family and friends,
14 of the respondents have heard about online banking through Banks,
5 of the respondents have heard about online banking through Mass Media,
1 of the respondent have heard about online banking through Newspaper

53
 What is your opinion on Benefits of E- No of Respondents
banking Services
Time saving 27
Inexpensive 0
Easy processing 11
Easy fund transfer 12
Others 0

Total respondents were 50,

Out of 50 respondents, 27 of the respondents think e banking services are time saving
(54%),
None of the respondents think e banking services is inexpensive,
11 of the respondents think e banking services have easy processing (22%),
12 of the respondents think e banking services have easy transferability (24%)

54
 How often do you make transaction No of Respondents
online
Weekly once 6
Weekly several times 30
Monthly once 2
Monthly several times 12
Occasionally 0

Total respondents are 50 (100%)

6 of the respondents use online banking once a week (12%),
30 of the respondents use online banking several times a week (60%),
2 of the respondents use online banking once a month (4%),
12 of the respondents use online banking several times a month (24%)

55
 Type of Financial Transactions you No of Respondents
perform through Online Banking
Funds transfer 12
Balance inquiry / Bank statement 5
Savings 6
Purchasing 20
Bill payment 5
Others 2

Total respondents are 50 (100%)

12 of the respondents use online banking for transferring funds (24%),
5 of the respondents use online banking for Balance inquiry (10%),
6 of the respondents use online banking for savings (12%)
20 of the respondents use online banking for purchasing (40%),
5 of the respondents use online banking for bill payments (10%),
2 of the respondents use online banking for other transactions (4%)

56
 What are the factors that influence you No of Respondents
the most to Use of Online Banking
Services
Privacy 0
Convenience 11
Time saving 9
Safe and secure 0
Better rates 10
Avaibility 20
Others 0

Total respondents were 50

Out of 50 respondents, none were using online banking services for privacy reason,
11 respondents use online banking services because it is convenience,
9 respondents use online banking services because it is time saving,
None of the respondents consider online banking services for safety and security as a factor,
10 respondents use online banking services because of better rates,
20 respondents use online banking services because it is available all time.

57
 Rate how much convenient online No of Respondents
banking is
4 15
3 27
2 8
1 0

Total respondents were 50,

Out of 50 respondents 15 respondents have rated online banking is very much convenient
(30%),
27 respondents think online banking is convenient (54%),
8 respondents were neutral (16%),
And none of the respondents rated for online banking being inconvenient.

58
 Satisfaction towards online banking No of Respondents
services
Completely Satisfied 17
Satisfied 30
Neutral 3
Dissatisfied 0
Completely Dissatisfied 0

Total respondents were 50

Out of 50 respondents 17 respondents were completely satisfied (34%),
30 respondents were satisfied, (60%),
3 respondents were neutral, (6%),
None of the respondents were dissatisfied or completely dissatisfied.

59
 Do you think Online banking services No of Respondents
provided by banks are safe?
Yes 17
No 5
Maybe 28

Total respondents were 50,

Out of 50 respondents 17 respondents think online banking is safe (34%),
5 respondents thinks online banking is not safe (10%),
28 respondents are not sure whether online banking is safe (56%)

60
 FINDINGS

 Majority of respondents preferred communication with theirs banks was online via
smartphone.
 Majority of respondents use Online Banking.
 Majority of respondents have been using Online Banking for more than 2 years.
 Majority of respondents have heard about Digital Banking from their family and
friends followed by banks.
 Majority of respondents think the benefit of E banking is time saving.
 Majority of respondents use Online mode of banking multiple times a week.
 Majority of respondents use Online banking for Purchasing followed by transferring
funds.
 Majority of respondents use Digital banking as it is convenience followed by banking
providing better rates and all time availability.
 Majority of respondents think Digital banking is Convenient.
 Majority of respondents are satisfied with Digital banking services.
 Majority of respondents are not sure whether digital banking is safe.

61
 CONCLUSION

In the development of Indian Economy, Banking sector plays a very important and crucial
role. With the use of technology there had been an increase in penetration, productivity and
efficiency. Banking is an integral part of financial activity today and digital banking in India
is highly advanced. Information technology has empowered customers and businesses with
information needed to make better investment decisions. At the same time, technology is
allowing banks to offer new products, operate more efficiently, raise productivity, expand
geographically and compete globally. A more efficient, productive banking industry is
providing services of greater quality and value.
Digital banking has been a great boon to the masses. It’s a blessing for many business
enterprises. A majority of the respondents were positive about Digital banking and its effect
on their lives. Round the clock services, ease of doing transactions, anywhere banking, and
time management were some of the positive aspects of Digital banking and people adapted
to this technology quiet well than expected. Convenience and ease of doing transaction was
the hallmark quality of Digital banking. Similarly safety and security was a big concern for
most of the people. If these issues are addressed, Digital banking adaptability would
definitely increase and it will be a level playing field for everyone.
The rise of digital banking is redefining business relationships and the most successful
banks will be those that can truly strengthen their relationship with their customers.

62
 SUGGESTIONS

 Banks should provide the customer reassurance and information regarding trust of
digital banking activities, which will certainly improve the application of security
and privacy of the digital banking services.
 To enhance the digital banking services, the bankers should help the customers by
developing the secured practices in digital banking and management of risk should
be made aptly.
 Government must concentrate on developing the internet facility, information and
communication technology to promote digital banking facilities in India.
 The knowledge of digital banking service uses should be provided to the customers,
specially to gadgets illiterate customers through workshops and seminars which will
certainly enhance the digital banking value and volume.
 Offering of reward points, incentives to users will motivate them to use digital
banking services.
 Customer support system should be enhanced for digital banking services and
improve the dimensions of management strategies.
 All the deposits and withdrawals to be linked with SMS alert
 Better internet penetration and affordable tariff will pave way for more people using
data for daily use.

63
 BILIBOGRAPHY

https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=9865&context=libphilprac

www.bankersonline.com

https://en.wikipedia.org/wiki/Digital_banking

Enabling E-Commerce in India – www.giic.org

Internet Banking Comptroller’s Handbook, Comptroller of the Currency October 1999

Journal of Internet Banking and Commerce -- www.Arraydev.com/commerce/jibc

https://www.bizencyclopedia.com/article/latest-trends-in-banking-and-financial-services-in-
india

https://www.gobankingrates.com/banking/banks/online-banks-pros-and-cons/

www.bankofindia.com

www.rbi.co.in

www.indiananoon.org/doc/1223029/

www.ehow.com/about 6717015 electronic-banking- efinition.html#ixzz2zvIelEiv

https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=9865&context=libphilprac

https://www.iosrjournals.org/iosr-jef/papers/Vol10-Issue3/SEries-2/A1003020105.pdf

64
 QUESTIONIARE

1 Age
 Below 18
 18 – 30
 31 – 45
 46 – 60
 Above 60

2 Gender
 Male
 Female

3 Occupation
 Student
 Self employed
 Salaried
 Retired
 Others

4 What is your preferred communication with your bank?

 Online via personal computer
 Online via mobile
 Call centre
 Visit to bank
 ATM
 Others

5 Do you use Online Banking?

 Yes
 No

65
6 How long have you been using Online Banking Services
 Less than 6 months
 6 months to 1 year
 1 year to 2 years
 More than 2 years

7 Where did you hear about online banking services

 Family and friends
 Banks
 Mass media
 Newspaper
 Others

8 What is your opinion on Benefits of E-banking Services

 Time saving
 Inexpensive
 Easy processing
 Easy fund transfer
 Others

9 How often do you make transaction online?

 Weekly once
 Weekly several times
 Monthly once
 Monthly several times
 Occasionally

10 Type of Financial Transactions you perform through Online

Banking
 Funds transfer
 Balance inquiry / Bank statement
 Savings
 Purchases

66
  Bill payments
 Others

11 What are the factors that influence you the most to Use of Online
Banking Services
 Privacy
 Convenience
 Time saving
 Safe and secure
 Better rates
 Availiblity
 Others

12 Please rate how much convenient do you think Online banking is (5

being the highest and 2 being the lowest)
 4
 3
 2
 1

13 Satisfaction towards Online Banking Service

 Completely Satisfied
 Satisfied
 Neutral
 Dissatisfied
 Completely Dissatisfied

14 Do you think Online banking services provided by banks are safe?

 Yes
 No
 Maybe

67