Electronic banking emerged as a savior to the people of India during the 21st century. Although the process of taking banking to the next level was taken very late when the comparison is made from other developed countries of the world; but India has managed to adapt to the technology at a fine speed.
The banking system was new to India as not a lot of people believed in depositing their money to a different place, during the independence era. With lots of efforts from the side of the government, people began depositing their money in the hope of the incremental favor offered by the banking authority.
In this article, we will take a look at the overall scenario of electronic banking in India. An in-depth analysis of some major points and aspects that affected the role of electronic banking in India will be done. Also, the role of customers and their response to the advancement of technology has been taken into consideration.
In the present scenario, the condition of banking has been taken to the next level and banking services can be availed at the touch of your smartphones. The journey has been impressive, so let’s dive in to gain an insight into the impact of electronic banking on customer satisfaction.
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What is electronic banking?
Electronic banking, when explained in brief, is just the use of electronic devices for getting banking transactions done. There are no human interactions involved in the banking process. It is the process of transferring funds from one account to another using telecommunication devices, where the signals work despite the human or done in a traditional form through cash or any other form of a paper document.
The financial transactions that can occur especially in electronic banking are between financial institutions which are banks and the commercial places and credit unions. For some people, electronic banking may sound like a complex thing to understand, but it is something that has been intensively used.
The greatest example of electronic banking is the ATM (automated teller machine). ATM is used extensively by people around the world and because it comes with lots of conveniences. It is a much better option to go for than the traditional banking system, which required standing in queue for hours just for taking out a small amount of money.
Next, we have a debit card thatis given to the entire account holder, because without the card ATMs will be of no use. Both ATM and debit cards are co-dependent and these were the first form of electronic banking that was introduced to the world. With the help of a debit or credit card you can easily withdraw money, send money, check your balance and even have a look at your recent transactions on the ATM.
And it is not just limited to withdrawal of cash; you can swipe your card and make cashless payment which is quite hassle-free. These two are the two basic but most used forms of electronic banking. The whole transactions are done with the help of an electronically produced code also known as PIN, which needs to be kept a secret by the customer.
Electronic banking has made the world easy, everything can be done quickly and there is no need of waiting in line for doing such a simple task. All has been made possible by the developing IT sector and improving technology. They have played an important role in filling the gap that was present between internet banking and the traditional banking system.
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How was banking before electronic banking?
Banking services before the involvement of technology was quite easy and simple for the customers. The most important difference with the traditional banking system is the physical presence of the banks. Before the introduction of electronic banking, the customers were required to visit the bank for any query they had. And all kinds of services were available to the customers only if you visit the bank physically.
May it be the withdrawal of cash or deposit you need to take some time out from your day to get your work done with the bank! Also standing in the long queues was a normal scenario for the banks. With the traditional banking system, the banks have a head branch and several branches were operated under it. And the presence of bank was a must thing without the branches there was nothing that can be done related to the transferor withdrawal of cash.
Research has also proven that visiting the physical branch of the bank and taking in-person advice is what most of people have preferred. As the presence of a physically located place develops a sense of trust in the customers that is why many elderly people still believe that the traditional banking system is way more reliable than the electronic system.
The first step towards the bank is taken by those who want to open an account. Now, the traditional banking system required a physical presence of the person who wants to open the account. The verification process at that time was simpler and hassle-free. But now with the evolution of technology, even if a person is willing to open an account through online mode, it requires physical presence and few days are devoted for verification.
The traditional banking system was a more convenient and reliable way of dealing with money. A lot of people agree that visit the bank and getting everything in one place is one of the best features of the bank. Apart from providing all kinds of facilities to the customers, it also acted as a central place where customers need to visit in case they face any problem.
In the traditional banking system, your money was much safer than it is today. In the earlier times when the customer only knew that there is a bank that can be accessed for any problem. And if someone wanted to deposit or withdraw cash, they did it in-person, and the hand-to-hand exchange was done. But now with the involvement of technology in the banking system, people like to deposit and withdraw money through online mode, and several cases mention that the amount was credited but didn’t reflect in the account or got stolen away in the middle.
Before the intervention of technology, the cost of depositing or withdrawing the amount was zero. All someone needed to put was the effort of visiting the bank. But with the involvement of technology in the banking system, a lot of middlemen or merchants aroused and as they were providing the ease of doing banking transactions minor charges were taken by them for providing the service, and from the cost of depositing and withdrawing money comes with a price.
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How were customers before the introduction of electronic banking?
The situation of customers before the introduction of electronic banking was not quite good. But as the people of India experienced banking very late in their lives, and the whole experience was new to them and adjusting to the new form of banking where technology is involved as well, it becomes a far cry for them.
Before the introduction of electronic banking,the customer had simple things and a lot agree that because of the centricity of the banks it was more convenient back in the days of the traditional approach of banks. It is believed that the electronic approach towards things should be started with customers first.
The paperwork done and provided by the bank acted as solid proof before the introduction of electronic banking. As the concept of electronic banking was introduced in India, it was something new to the people of the country. But technological involvement was initiated because ofthe increased use of mobile phones in the country. India was one of the largest mobile phone users in the world, so if a large number of people in our country were electronically connected, so should be their banks.
The evolution of mobile phones in the world had a great impact on the banking industry. The need for communication in the Indian culture was because of the emotional attachments people have with their relatives and friends. In India, the cost of mobile phones was decreasing continuously which was attracting even more customers every day. As the connectivity was getting enhanced, the need for getting updated with your money and the bank account was also felt.
The journey of e-banking in India began from Automatic teller machines and messaging system on the mobile phone. The older people were not willing to accept the technology but the youth has already understood and benefitted from it. One of the factors held liable for the progress of electronic banking is that, when an individual tries out the technology and its working, and the results are positive, their mindset accepts and gets impressed with it. But in the case of failure of the technology in the first phase, it becomes a matter that is taken lightly by the people.
But in the case of India, the technology worked, and people were satisfied with the ease of receiving notifications about their bank details and transactions. With a little assurance and guidance from the side of the banks, the concept of electronic banking was able to emerge in our country.
There are several factors responsible for the emergence of electronic banking in India, and the customer’s response to it. One of the prominent factors is the psychological reasons and trust that was built up during the emergence. For the success of any new system, product, or services, the acceptance of the new technology and the trust factors plays a major role. In India when electronic banking was initiated step by step the process worked without notifying high failure rate, and that boosted the banking system and took them to another level.
Customers before the introduction of electronic banking had no other option but to reach the bank if they wanted to know the status of the transactions from their account. Even if the bank is deducting some amount or adding some, the account holders weren’t informed immediately. It was all dependent on the customer’s approach, but with the introduction of electronic banking, the security and instant information provided to the customers built up satisfaction within the bank’s customers.
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Importance of Electronic banking
Electronic banking has played a significant role in shaping the future of banking in India. So, let’s have a look at its importance.
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Convenience
The greatest advantage that technology has given to people is convenience. Earlier going to the bank for getting things done required time, and energy, but as the technology has evolved so much it has become very quick and convenient. Earlier transferring a small sum of the amount required a few hours, but now this transaction is done within a few seconds, and all this is possible because of the presence of technology. You don’t even need to get your passbook updated for tracking your transactions and checking the account balance; all can be done at the tap of your fingers.
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Security
The problem of security with traditional banking was nowhere to be seen. Even if some amounts were deducted the account holders remain unaware. But with the involvement of technology in the banking system, everything can be tracked, and the best thing is its security. The idea of taking banking online invited fraudulent activities as well, but the banking system is highly secure. Banks use encryption to secure their transactions and customer’s privacy.
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Free of cost
Doing your transactions through the internet or mobile doesn’t cost you a penny. All you need a phone with an internet connection or else you can visit your nearest ATM for getting your transactions done. The online payment of bills and the transfer of money everything is possible with the help of the electronic banking system. Earlier the banks charged a nominal amount of money on transactions done online, and because of the amount is very small people were willing to go for it because of the convenience provided to the customers.
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Ease of keeping track
another best advantage of using an electronic banking system is the ease of tracking transactions. In the initial step of electronic banking registered bank accounts holders received the information regarding the amount debited and credited along with the total balance that is present in the account. Later with the evolution of technology and the introduction of smartphones, banking applications came into the picture, which reduced all the efforts people made earlier. The need of visiting the bank became irrelevant and minute, as all the details are available on the application which can be accessed anytime.
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Minor banking errors
Not a lot think about it now, because everything is done online. Earlier when the technology in the banking industry was nowhere to be seen everything was done in the pen-paper mode. And that increased the chances of clerical mistakes that ultimately caused big blunders. But now as the technology has been involved either the amount has been transferred by the account holders or from the side of the banks, whatever is done it is recorded on the sheets which can be accessed anytime anywhere. In earlier times paper records were used and if any accidents incurred all the information vanished away, and that is not the case in the present time.
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International transfer
In the initial phase of India’s development, transferring money within the country was a big task, and transferring money to international borders was like an achievement. But today this task has become quite easy. All you need to do is feed the account details in the mobile applications and the amount gets be transferred.
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Types of E-banking
Electronic banking is not a single term it is a vast concept. E-banking has various aspects which are covered under it. Because electronic banking is not done just by one to two modes, there are more than 10 ways by which banking facilities can be availed, and these are:
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Telebanking
It is like the first step taken towards the banking industry which allowed the customers in communicating with the bank. Telebanking helped the customers in making a financial transaction over the call. In this facility, the need of visiting the bank or automated teller machine gets eliminated. The best fact about telebanking is that it remains open for more period than the bank. Nowadays, helpline overcall is available 24×7 throughout the year.
The transactions that can be made through telebanking have some limits. Many banks have imposed restrictions on the types of accounts that can be accessed through the telebanking mode. You can check your account balance through telebanking. If you have issued a cheque then its status can be checked. Other facilities offered by banks through telephone are opening of time deposit account, requesting a new checkbook or passbook and you can also transfer funds between two accounts even to the third party.
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ATM
Automated Teller Machine is one of the first steps taken by banking towards getting technologically involved. It is an electronic computerized telecommunication device, which is totally under the control of financial institutions. You can visit the ATM for withdrawal of money and other account-related queries. At the time when ATM was introduced the account holders had an electronic strip or chip inserted card which helped in the withdrawal of money from the account.
But now, the ATM has gone through its evolution, and you can even deposit cash in the ATM, but it has not been popularized yet and are not available everywhere in India. Other facilities available at ATMs are the opening of fixed deposit and withdrawal from the fixed deposit account. You can do mobile recharge and even pay off your income tax and bills just by visiting the nearest ATM. You can even apply for loans and pay your insurance premium here.
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Debit Card
Debit cards are used for withdrawing money from the automated teller machine. It’s a small plastic card embedded with a chip, which helps in providing lots of information about the bank account holder. The best thing about debit cards is that it has reduced the need to carrying cash with us all the time. By using debit cards the amount gets debited directly from your savings account.
You can make purchases from any shops who keep the card swapping machine, which means that if you carry your debit card with yourself, the need for withdrawing cash also gets eliminated. You can make purchases with the help of debit cards, but the amount is limited to what you have kept in your savings account. For shopping beyond the limit overdraft facility has been provided to reputed customers. The cards have daily purchase and withdrawal limits as well.
There are other ways by which electronic banking was used and these included uses of smart cards that are similar in appearance to debit or credit cards. You can do a lot of transactions using a smart card, like using it in transportation, withdrawal of money, and recharging it quite easily. Next, we have an electronic cheque which works just like the paper cheque; it’s just the electronic representation of the physical one. And some other forms of electronic banking include electronic bill payment, using stored cash value, and direct depositing of amount through various payment applications.
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Is electronic banking and internet banking the same?
There always have been a slight confusion between electronic banking and internet banking, some people often use these terms simultaneously. So, to avoid confusion having an understanding of both the terms is important.
Internet banking
Also known as the online banking mode or net banking, internet banking uses the electronic mode of payment which helps the customers in making various types of transactions without the need of visiting the bank. Using internet banking is very convenient and easy. Any bank account holder can register on the website of their banks for getting the transactions done from the ease of their homes.
The individual needs to have a bank account for handling internet banking, and it is not just easy it is also a secure way of handling the banking related transactions. The portals of banks are secured as users need to put their ID and passwords for getting access into the bank account, and without it is just a website.
Some feature that internet banking has includes the facility of availing financial as well as non-financial services. You can check your account balance through internet banking. You can transfer the amount from one account to another and pay your bills off as well. These were few basic facilities, now a few additional things that can be done using internet banking are to keep a check on the loan, or mortgage that is linked with your savings account.
The processes of availing of these services are fully secured as the ID and Passwords are known only to the users. You can even ask for a checkbook through the internet. Buying insurance with the help of internet banking has become quite common these days. You can set auto payments of bills or insurance premiums. And one of the best things you can do with the help of internet banking is keeping a track of your investment which is linked with your savings account. Even IMPS fund transfer can be done easily with the help of internet banking along with the opening of a fixed deposit account.
The availability of internet banking is 24×7 which makes it one of the best products of technological evolution. The ease of use and convenience has acted as the backbone of its success. All the necessary information is available on the screen of your device you just need to login securely. May it be an NEFT, RTGS, or IMPS transfer all can be done from the comfort of your home.
Electronic banking
Coming to the electronic way of banking, it is mean by which transactions are done. Electronic banking is a wide concept and internet banking is a part of it. Internet banking is not possible without the presence of electronic banking. Because e-banking acts as a bridge that fills the gap by providing necessary means or way through with banking facilities can be availed. A small example of electronic banking is the payment of bills through the internet but the transaction won’t be possible if you don’t have a debit card with you.
Electronic banking services include internet banking, automated teller machines, mobile banking, and debit cards. From the modes by which electronic banking is done, it is clear that without the modes the further steps of using internet banking won’t be possible. It is the base of all the further steps.
The process of using internet banking requires downloading banking applications or registration on the website, but in the case of electronic banking, a person needs to have the basic requirements. They need to have an account in the bank, and a debit card, check book, and passbook are required. With these few things, you can get started with the further steps of advanced banking. Even though electronic banking revolves around the modes of payment but we can still access the basic facilities of withdrawing cash.
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What are the impacts of electronic banking in India?
India saw the rise of technology very late in the phase of rapid development. When the other countries were witnessing technological involvement in the mid-20th century, India was busy with its domestic issues and freedom fighting. Even after Independence India didn’t begin stabilizing its economy; and things got more complex. India took a step towards the nationalization of banks, in 1969; where it merged all the small banks into one big bank and involved the government’s share as well.
Later in the early 1990s, the World Bank interfered with the matter of the Indian economy. The World Bank advised India to makes things easy for the people and ease of doing business should be increased. With the introduction of liberalization, privatization, and globalization, the economy of India started increasing at a rapid pace. And by the mid-phase of the 2000s, India started experiencing technological involvement in the banking system. With the introduction of the telephone and a large number of users, the banking industry took an initiative towards upgrading their system.
With the rapid progress in the IT sector, the Indian economy has seen a prominent rise and the future seems optimistic. The central banking authority of India RBI (Reserve Bank of India) has taken a few points out of the issues that are arising in the process of electronic banking. The issue that the banking system of our country is facing includes security issues, few legal issues, and regulatory and supervisory issues. Electronic banking has been accepted by the citizens of our country, the acceptance has been slow but it has indicated positive promising growth.
The impact of the electronic banking system in India has displayed a positive growth, as lots of technological growth has happened for making the system better. Technological growth has been so immense that it has been the key driver of the economy. With technological advancement, few errors and issues arrived on the way. For eradicating the issues a law has been passed in the year 2000.
RBI has played a major role in uplifting the image of the electronic banking system in India. It has passed laws and special departments are dedicated just to tracking fraudulent activities that are happening online. Today in the condition of the Indian economy in terms of electronic banking has become appreciable. In the emerging phase, only the youth of the country showed a little interest in getting things done online. The payment applications and banking were not commonly accepted by every individual and small business.
After the historic decision of demonetization that happened in the year 2018, changed the way the Indian economy worked. The demonetization left the citizen feeling helpless as cash was the most prominent way of making payment. A crisis of cash was felt immensely at that time. It was a great opportunity for technology to step in and provide a helping hand. The slow downed economy of India.
From this landmark event, Paytm emerged as the savior of the people. It is an online payment application from which the amount can be transferred from one party to another. From then on new applications came into the action. In today’s scenario every individual accepts the online payment method. Even small hawkers and business accepts payment through online mode. The method of making payment by using a smartphone became a popular way that provided relief to people. It has helped the economy is standing on its feet again.
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What are some cons of electronic banking?
Till now we continuously saw that electronic banking is full of benefits. It only has a good side, but unfortunately, that is not the case. With the introduction of the new system, some loopholes always arise, and similar is the case with electronic banking.
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Difficult to use
For the youth adoption of new technology is not a big issue. The technology has become a part of education now. So when you are aware of something from the early stage of your life exploring some other features doesn’t take much time. Now coming to the older and mature generation of the country. Half of the population had education at the time when technology wasn’t even a part of our education. It became difficult for people to understand things. One of the biggest problems was the language barrier because not every facility was available in the regional language.
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Access was limited
Although the banking system became electronic in the early phase of the 2000s. It was not much popular or commonly accepted. A majority of the population in India didn’t have internet access and online banking was a far cry at that time. In India, the internet was not affordable until the late 2010s. The access was very limited and a majority of the population had a hard time accepting and adapting the technology. And a lot of people preferred getting things done traditionally only.
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Fear of getting hacked
Hacking spread a new fear in the people who relied on the facilities of internet banking and electronic banking. The withdrawal of the amount from your bank without even your knowledge is something that can shake your trust. And several reports were filed complaining about the deduction of the amount from their account.
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No privacy
The bank claims that all your banking details are safe and secure with them. And the chances of getting cheating are zero. But in reality, the cases represent a different scenario. Several reports indicate the loopholes and issues that arise because of privacy. The debit card details are one of the important details an account holder has. If someone takes your details and misuses them, then all your hard-earned money will get vanished within a few seconds.
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Failed transaction
One of the most annoying things that can happen while internet banking is the failed transaction; as in this case the amount gets debited and no money is received. Several reports have been the witness of these situations. A failed transaction sometimes reflects a reduced balance in your account. You haven’t withdrawn money or the payment hasn’t been received by the other party. And when transaction failures become a frequent event the trust of people is decreased.
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Undo facility
One of the pros of using banking facilities through online mode is you cannot undo the event. If the transaction has been done, it will be get debited. And if you have entered the wrong details there is nothing you can do. The banking system has not introduced the facility of reversing the transaction yet. That initiative will unbalance the accounting system as a whole. A person who wants to transfer the amount to another party needs to be very careful with the details. Once the amount is gone, there’s nothing you can do as the responsibility falls on you.
Some other cons that the electronic banking system has included the issue with the bank sever. Sometimes because of technical issues the serves get down and no transactions take place. The notifications and messages sent by banks are one of the cons of electronic banking. If someone starts messaging you for 3 to 5 times on daily basis things start getting annoying and irritating.
These were a few important aspects taken into consideration for the study of electronic banking and customer satisfaction. Electronic banking is a wide concept. This gave rise to a lot of other facilities that are now available at the tap of our fingers. We understood the concept of electronic banking and the response of customers towards this initiative.
India still is in its developing phase experienced some hard times. People struggle towards an understanding of the electronic banking system workings. We saw how things were done in India when the traditional method of banking was followed and practiced. There were lots of human errors and records were accident-prone.
Even though the banking system wasn’t efficient enough people relied on and trusted the traditional banking approach. The negligence of technology adoption was due to a lack of education and technological awareness. Then we came across the importance of electronic banking in India. The process took time but in today’s scenario, the method of electronic banking has been accepted.
Lastly, we came across the cons electronic banking system has, there are many issues with the system. There are transaction failures, account hacking, the requirement of internet connection, and most important is the need for basic understanding. Even though there are several issues with the system the government is continuously working for improvement.
