Chapter -1

INTRODUCTION
 Chapter-1

INTRODUCTION

1.1 Mobile Banking: An Overview

Since Independence of India banking system till date banking system has gone
through a lot of transformation and changes in providing their services to the customers.
Technology and innovation was given much emphasis in the banking system around
1990s.Technology was used a strategy weapon in providing better quality services at a
faster speed. Mobile and Internet banking helped the customers to do their banking from
diversified areas and had provided the convenient to customers. Banks are using multi
channel i.e. ATMs, debit cards, credit cards, mobile banking, internet banking etc. for
delivering their banking services. Due to competitive pressure and global economic
scenario banking concept is now redefined as financial super market providing a number
financial service under one umbrella. Day by day banking is becoming more convenient
and the industry is growing towards digital. Mobile technology is playing a vital role in
the financial transactions. Both customers and banks need to adopt the technology for their
transactions. Automated Teller Machine (ATM) since their wide spread adoption and
around 2.7 million ATMs installed around the world in 2015 (BI Intelligence Report based
on World Bank data). Since few years, India has emerged as one of the largest economies
and fastest growing major economy in the world. Banking emerged as high growth sector
due to its value addition and making India move towards cashless economy. The driving
factors are the upward trend in the usage of mobile internet. Telecom service provider has
reduced their charges to remain competitive in the present business environment. As we
move onward, banks are spiraling towards mobile technologies to enhance user experience
and to reduce the cost. The customer’s mindset is biggest factor that prohibits the growth
of Indian mobile banking market as customers are more unconvinced about the security
and safety issues .Customers are worried about their devices of being hacked or attacked
about viruses and these issues has to be addressed in order to increase rapid adoption of
mobile banking. Mobile technology will disrupt the financial transactions in the future.
The blast of smart phones caused the mobile banking into the main stream. Mobile banks

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apps are becoming the tool for maintaining good relationship with the banks and the
lacking of this relationship may force the customer to switch to other financial institutions
for conducting their financial services. Smart phone is reshaping the future of the mobile
banking especially among young customers who will be the future usage of the mobile
banking services. Banks are thinking of to gain a competitive advantage with a banking
app as a necessary component in developing a successful mobile banking strategy.
Analyzing the mobile banking trends can help the banks to better understand the market
and the emerging market and can stay ahead of others. Branch based banking are not the
driver of growth , banks are cutting branches to focus more on mobile , online and ATM
services. Banks are looking for cost effectiveness of branches with a low number of
visitors turning around for banking activities. Mobile banking improves customer
relationship and can also optimize cross selling i.e. mobile banking customers can have
more product holdings compared to branch only customers,. Banks can only improve
customer satisfaction and loyalty through mobile banking and also can increase their
revenue and can reduce transaction costs. Meeting customer’s expectation banks are
offering a wide range of services to customer through mobile technologies. Competitive
environment, cost reduction and convenience are the driving forces forcing banks to adopt
new technology by which customers are living in a technological cluster in order to access
banking services through internet banking , mobile banking and other alternate delivery
channels . Mobile apps with the digital initiatives can reap all the mobile banking benefits.
Mobile banking increases banks revenue. Initially mobile banking attracted the technology
savvy knowledge customers and banks should meet the needs of customers with excellent
customer service through a mobile-app. Mobile banking interactions has to be faster and
easier to use as well as develop value added features that allow customers to access
essential and more complex service from the mobile phones. Mobile banking is the latest
technological wonders in attracting and retaining the customers for the competitive
advantage. Rapid adoption of smart mobile devices forces a demand for the mobile
banking services, thus encouraging banks, microfinance institutions; service providers and
IT company to offer innovative services together with new sets of products and application
designed for attracting and retaining their customers. Despite rapid usage of mobile
phones to conduct mobile banking transactions is not that widespread among customers
that which have to be expected. As per different report produced from time to time, the

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trends suggest a significant growth leading to prediction of massive increase in the number
of mobile banking users. Mobile banking service was first adopted by Kenya as a
developing country and main driving force was the increased acceptance of mobile
devices providing capability of getting services at any time and any place. Mobile banking
services works on two principles i.e. freedom of time and the cost savings and thus
provides market growth for the service providers. Mobile banking provides many services
i.e. checking balance, checking account history, insurance policy management, balance
checking in account, pin change etc. The functionalities are available: Funds transfer,
Immediate Payment Services, Balance Enquiry/Mini Statement (Enquiry services),
Cheque book request, Demat Enquiry Service, Bill Payment(Credit cards, Insurance
Premium, Utility bills) , Mobile / DTH Top up, Merchant Payments, M-Commerce etc. In
order to effectively deliver these functionalities now a days banks are competing with each
other in adoption the technology for providing better customer service as well as
enhancing their core value of banking, modifying the digital adoption strategy and moving
towards a digital transformation. Migrating from cash to cash less and growing in a
changing risk management and grappling with financial addition, empowering employees,
Accelerating modernization. Initially private and foreign banks started the concept of
mobile banking. Since so many years of Independence, many people do not have access to
banking services and the principle lying behind is the use of mobile banking as a product
to promote financial inclusion. Acesss to finance is necessary for all individual. Rapid
adoption of mobile banking has a number constraint i.e. high concerns about security
aspects, different types of devices, types of operating system used in mobile, mobile apps
launched by mobile company and banks, unwillingness of customers for learning new
technology ,awareness of mobile platform and lack of initiatives from the banks towards
suing this channel . In case of India the adoption of mobile banking has a gained a little
importance or less attention has been contributed to the literature. And thus the study will
bridge the gap. In this context the study will investigate the mobile banking adoption by
customers with precise focus on public and private sector banks in India. Hence it is
important to study the customer’s adoption of mobile banking by users, non users as well
as rural customers.

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1.2 Relevance of the Study

Despite the rapid use of mobile devices by customers, still the wide acceptance of
mobile banking among customers is in infancy stage and keeping in view of low
acceptance of mobile banking, it becomes essential to find out the factors affecting the
adoption of mobile banking and their intention to use in future. The awareness how rural
customers perceive the mobile banking service , to understand what customers want value
in mobile banking transaction for attracting as well as retaining the existing. Apart from
this there is a need for customer’s perspectives to identify the determinants that influence
the adoption of mobile banking. Customers experience or perceptions towards the bank
aren’t too positive as the transactions being conducted by customers are involved. Services
provided by banks, transaction queues; hassle in handing the transaction has some sort of
negative association in the customer’s minds. Mobile banking provides some opportunities
for banks to improve that way they are perceived by helping the customers to increase their
overall experience in banks. Mobile banking saves their time and thus enhances their lives
in a small way. Mobile banking is the promising likely delighting the customers and their
by increasing their loyalty towards the bank. Delighting their customers and providing
excellent experiences on mobile banking makes people lives easier and is the best of form
of marketing by banks. The study is predictable to append to the mobile banking adoption
literature and sharp in the area of mobile banking. The contribution from the study can be
used by banks for better decision making by banks in designing their strategy and
improving their mobile banking services. Banks and their IT department can work
collaboratively in designing their mobile banking services for the customers. The
framework contributed through the study can help banks in delivering the banking services
through the mobile devices effectively. It will equips banks with an understanding for
mobile banking customers and the relevant managerial decisions in harnessing drives of
mobile banking adoption.

1.3 Research Problem Statement

The development of the mobile banking can be credited to the combination of

increasing usage of smart phone and mobile internet in India. Also demonetization in India
had provided a rewarding prospect for mobile banking in India. Rapid adoption and

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implementation of mobile technology by banking industry have been carried out but still
banks have not taken the maximum advantage of the implementation due to the lack of
acceptance by customers’. Adoption of mobile banking by customers has not been widely
accepted and adoption rate is not high. The adoption of new technology enabled delivery
channel i.e. mobile banking success depends on the customer’s acceptance. Despite
mobile banking offering much advantage still then the adoption rate in India is not that
encouraging as in other developing as well as developed countries. Adoption of mobile
banking is in infancy stage and that to in Odisha state is very less in comparison to other
states of India. Consequently the research focused to explore the determinants motivating
customer’s adoption of mobile banking, from the customer’s perspective in Odisha, by
means of orientation to the different technological adoption model developed from time to
time. Much research on this area has been done in developed countries but analysis in
developing countries is lacking so it is essential to study the adoption of mobile banking
and to investigate from the customers perspectives. Technological innovation in India is
being rapidly adopted by customers and there is a positive shift of customers migrating
towards adoption of different technology. Research on adoption of mobile banking in
Odisha is absent and thus the research study tries to bridge this gap in the subject
substance mentioned.

1.3.1 Research Questions

Hence the following questions arise:

 How do trust and risk perceptions at the individual level influence the adoption of
mobile banking?

 How the role of satisfaction, benefits and costs in one platform, results in the
formation of perceived switching value to another channel?

 How the demographic variables affect the adoption of mobile banking?

 Do Perceived Credibility ,Perceived Ease of Use, , Perceived Risk, Perceived

Usefulness and Awareness of Its Benefits influence the intention to adopt mobile
banking

 What factors contribute to customer’s intention to adopt mobile banking?

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  Which dimensions influences the customer adoption in mobile banking?

 To what extent of distinction and difference in mobile banking services adoption on

the customer in public and private sector banks?

The literature knowledge will be enriched by understanding the factors motivating

for adoption of mobile banking by customers and thus providing valuable information to
banks in aligning their strategy and to have a competitive advantage over their competitors

1.4 Research Objectives

The rationale behind the study is in investigating factors affecting adoption of

Mobile Banking Services and also focuses on adoption of Mobile banking in rural and
urban area separately so that suggestion for improvement of various factors effecting
mobile banking can be provided. Many people in India are not aware of the mobile banking
as modern observable fact and customer’s mind set is the main issue in adoption of mobile
banking.

1. To analyze the present mobile banking model and status of mobile banking
services of India.

2. To identify and measure the factors along with its importance affecting mobile
banking adoption by customers.

3. To explain the importance of trust and risk perception affecting the adoption of
mobile banking.

4. To investigate the effect of socio-economic factors of customers on the

adoption process of mobile banking

5. To analyze customer adoption of mobile banking from technology perception

and task technology fit.

6. To understand the mobile banking adoption by customers living in rural areas.

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Hypotheses of the Study

Hypotheses were framed and tested through the present study.

The following hypotheses are framed and tested in the present study.

H1 : Technology and Task characteristics of mobile banking positively affect the Task
Technology Fit.

H2 : Task Technology Fit has a significant effect on customer adoption of mobile

banking.

H3: Performance expectancy has a positive effect on customer adoption of mobile

banking.

H4: Social influence has a significant effect on customer adoption of mobile banking.

H5: Facilitating conditions have a positive effect on the customer adoption of mobile
banking.

H6: Risk and trust are positively associated with the customer adoption of mobile
banking.

H7: Perceived usefulness, perceived ease of use and perceived credibility, personal
innovativeness, perceived self efficacy have no significant on customer adoption
of mobile banking.

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 Fig. 1.1: Proposed Conceptual Model

Note : 1. Perecive ease of use , Perceived usefulness adopted from TAM Model.
2. Task chatactertsics , Technology chacraterstics adopte from TTF model.
3.Performance expectancy, Effoft expectancy adopted from UTAUT model.

1.5 Research Design and Method of Study

1.5.1 Research Design

Research design encompasses with the data collection, measurement and analysis
of data and landing at a conclusion. The study is an exploratory type of study based on field
survey and major emphasis is on discovery of ideas. The concepts are clearly developed;
priorities are being established with the aim of improving the final research design. Primary
and secondary data were collected through structured questionnaires from customers using
as well as not using mobile banking. Technology adoption theories were reviewed and the
research framework was developed that had taken into the consideration of factors that
might influence the adoption of mobile banking by customers in Odisha. Formulation of
hypotheses were laid down to explore the impact of these determinants through the data

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collected in from sample taken from population of Odisha .The study is exploratory in
nature and focuses on analyzing the insight of customers towards the adoption of mobile
banking services in urban as well as rural areas.

1.5.2 Research Approach

The approach of the research was to gain an understanding of individuals, group

and to analyze the influence of each other. This study has a quantitative approach with little
emphasis on qualitative approach and intends to gain an understanding of adoption of
mobile banking in Odisha context. Hypothesis was formulated using the logical reasoning
in related to the finding of prior studies done by researchers. Hypothesis was tested with the
data collected from structured questionnaire and had tried to selected samples that represent
the characteristics of Odisha population.

1.5.3 Sample Design

The Sample: The sample of the study constituted of 580 respondents availing
mobile banking services offered by public and private sector banks. The respondents were
selected through non-probability convenience sampling method. The study had been
conducted in the state of Odisha. Sample for both the surveys were selected from the city of
Odisha.

Sampling: The survey method was used in the study. Randomly Urban and Rural
areas of Odisha were selected for collecting the data from the customers. Both Urban and
rural areas customers was selected for the sample size. Questionnaire was distributed to the
different cities in different private and public banks. Questionnaire were sent personally as
well as sent through the mail to the respondents. In different cities different banks were
chosen and their consent was taken the data collection from the customers who are visiting
the bank during official hours for the branch banking. Respondents were from both urban
and rural areas while determining the sample size, geographical location of the place was
considered to have both the representative from urban and rural areas. The survey
instrument i.e. questionnaire used for the research work in collecting the data from mobile
banking users as well as non users. Respondents considered for the study was identified to
be knowledgeable with the question at hand. The respondents were employed /

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Unemployed, Physicians, Pensioners/Retired Business man, Educationist, etc belong to
different level of society. Rural customers were selected on the basis of possession of
mobile and the usage. A self-structured questionnaire was used for the purpose of
collecting data from the mobile banking users as well as non users. Questions constructed
was based on the objectives of the research work .The questionnaire adopted in this study
consisted of independent variables for collecting responses on mobile banking services
offered by banks. Seven point Likert scale was used in agreement/ disagreements with
statements, ranging from 1 being “Strongly Disagree” to 7 being “Strongly Agree”.

Sample Size:

The samples of respondents represent customers of various public and private sector
banks in Odisha who are either using mobile banking services or non users of mobile
banking services. A total of 580 respondents’ were considered as sample. Customers from
public and private bank were selected and population of the study consisted of customers of
various private and public sector banks across various Governmental / Private organization
industries, sectors, institutions, employed or unemployed. While selecting customers’
emphasis was given on mobile usage, mobile internet experience, educational levels,
income which were found to provide a gap between mobile users and non mobile users.

1.5.4 Data Collection methods and Techniques

Techniques of data Collection: Primary and Secondary data collection techniques

was used for the specific purpose of study .The collected data was used to examine the
theories of adoption and the data were used to analyze and answer the research question in
order to achieve the objective of the research objectives. A structured questionnaire was
design to collect the data focusing on the review of literature, feedback from bankers,
experts and outcome of others researchers. Pilot testing of questionnaire was done first and
was pre tested on samples customers to ensure the quality of questionnaire for avoiding any
misleading as well as ambiguity in questionnaire. After the changes the final questionnaire
was drafted for collecting the data. The questions designed consist of different sections:
Customer profile including age, gender, income ,occupation ,possession of smart phones.,
usage of mobile banking and general use of money, payment behavior, marketing and
advertising, financial literacy, attitude and perceptions, benefits of mobile banking, future

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demand and willingness. A questionnaire was also designed for the rural customers
regarding their occupation, mobile usage, time in spending in branch banking, ATM usage.
The constructs used in the study were “Technology Characteristics, Task Technology fit,
Performance Expectancy, Effort Expectancy and Facilitating Conditions, Structural
assurance, personal propensity, firm reputation , Behavioral intention “ (Kim er al 2009).
Cranach’s alpha test was applied to the individual items for checking the internal
consistency Reliability of the measures was assessed with the use of Cronbach’s alpha .7 is
a good indicator of reliability as being considered as a general rule. In the present study, the
reliability of the questionnaire comes to be more than .7. Hence, the questionnaire was
considered reliable for the study. Multiple regression models are used for the study to
explore and maximize prediction. The items and the scales were adopted from previous
research i.e TAM Constructs Davis’(1989), TTF constructs (Zhou et al. (2010 & Goodhue
and Thompson (1995)) , UTAUT constructs (Zhou et al. (2010) and Venkatesh et al.
(2003)), trust construct (Kim et al. (2009)). Online survey was conducted for collecting the
data from respondents. The scales used to measure which established their reliability and
validity. Factor analysis with varimax rotation was performed to ascertain that distinct
constructs. Path analysis was used for measuring the influence of explanatory variables
along each separate path in a system and finding the degree to which variation of a given
effect is determined by each particular cause. Path analysis multivariate analytical
methodology was used for finding out linear causal relationships.

1.5.5 Tools and Techniques for Data Analysis and Modeling

SPSS (Statistical Package for Social Sciences) was used for analysis of survey data
collected and was used for graphical representation, frequency distribution as well as for
using different statistical techniques. Reliability testing was done with Cronbach’s alpha
coefficient using SPSS.Socio demographic profile was presented in the form of frequency
percentage. The reliability testing was done for the research variable. Linear regression
analysis was used for testing the hypotheses “Multi-linear regression analysis was used to
test models’ prediction capabilities. To test whether or not the observed differences of two
samples means drawn from independent populations are significant, is tested through t-test.
The multivariate technique, Factor analysis with Principal Component method is applied to
identify the dimensionality underlying various characteristics of mobile banking services.

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The significance of difference in group mean perception scores is tested with t-test for two
groups and with F-test (also called one-way ANOVA) for more than two groups. The
cross-tabulation analysis between two factors is also used and association between two
factors is tested using chi-square analysis. The unique impact of demographic and other
independent factors on adoption of mobile banking services is evaluated with the help of
multiple regression technique. For structural equation modeling purpose, AMOS-20
software was used. Structural models were tested on the basis of path analysis. Chi-squared
Automatic Interaction Detection (CHAID) decision tree technique was used for prediction
and classification of the customer’s demographic profile”. “CHAID analysis provides
multivariate relationship and its tree structure output is easy to interpret. The Neural
network procedure was used in producing a predictive model for one or more dependent
(target) variables based on values of the predictor variables”.

1.6 Scope of the study and Limitations

Banking innovation in the present cashless economy is relevant in India, around 1

billion usage of mobile phones and also lack of knowledge and less complicated phones
becomes a restriction for the smooth functioning in adoption of mobile banking. Mobile
banking Public and Private sector banks in India are competing with each other in
designing their roadmap for the digital transformation as well as building their world class
digital infrastructure. Banks are customizing their functionalities in order to match the
needs of the customers. Without understanding their needs banks will be incurring huge
monetary loss as well as losing the customer base which will provide a thought for
migrating the customer from one bank to another banks. The present study will provide
many insights to bankers in knowing the customer’s needs and preferences and thus it help
the banks in redesigning their strategy in adoption for digital platform. This will lead to
enhanced customer satisfaction as well as customer loyalty. Therefore in the present digital
era, there is a need for empirical research on the adoption of mobile banking by customers.
Many studies have been done in foreign countries on mobile banking adoption from
customers perspectives but as per Indian context it is insufficient. Therefore, this study is
significance to bridge this gap. “Hence, there is a need to assess the impact of mobile
banking services on customers’ satisfaction in Indian context to study the level of
satisfaction, problems and areas of further improvements. “The most immediate relevance

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of the study is imbedded in the ability of its results to provide a concrete set of indicators to
indicate the potentials for new investments in the field of alternative banking services.
From this angle, the study is relevant to bankers seeking to explore new and unique areas
for their investments in technology. Although this research is primarily based on the
primary data from the users of mobile banking services offered by banks, the findings
cannot be generalized, as the research is based on non-probability sampling. The growth of
mobile banking adoption in the near future has a wide scope. Customers willing for a
cashless society and carrying hard cash will be obsolete. Customers will be able to perform
their banking transaction through the mobile and mobile will acting as both credit and debit
card just as the two side of coin. Mobile banking is the fastest, convenient and the latest
technology adopted by banks for delivering their financial services. It has a wide spread
scope as day by day number of mobile users is increasing. Having a mobile device with net
connection customers can be able to perform all financial transaction through it. Samples of
only Odisha state were taken which may not adequately represent the entire nation. The
study focused on technology enabled banking services focusing on mobile banking
adoption and had not focused on the usage of mobile banking.”No study had focused on
intention to use mobile banking and the actual usage of mobile banking by users in context
of Odisha”. Sampling method adopted was convenience sampling which is not an adequate
way of representing the entire population. Low response rate and unwilling to participate
by respondents is a limitation. It is hard to predict the model proposed will be application to
other technology adoption.

1.7 Summary of Chapters

The study is divided into eight chapters.

Chapter One: is the introductory chapter, which introduces the background to the
research topic regarding mobile banking adoption, which highlights introduction, relevance
of the study, Research Problems, Objective and significance of the research, Research
Methodology adopted, Scope & Limitations, Chapterisation and references.

Chapter Two: It gives a bird’s eye view of banking system in India, technology
adoption in banking system and technological adoption in context of mobile banking.

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 Chapter Three: Reveals the review of literature on theoretical background of
technology adoption in context of mobile banking i.e. Technology Acceptance Model
(TAM), Theory of Reasoned Action (TRA), Theory of Planned Behaviour (TPB), and
Diffusion of Innovation (DOI), Social Cognitive Theory (SCT), and Institutional Theory
(IST) .It depicts the research model.

Chapter Four Data analysis based on primary data collected through questionnaire
among adopters and non adopters of mobile banking were being analyzed. It provides a
overall picture of customers adoption of mobile baking .it also focuses on the analysis of
rural bank customers regarding mobile banking services.

Chapter Five: This chapter contains Path analysis and Structural equation
modeling (SEM) with the model result and test of goodness of fit.

Chapter Six: This chapter focuses on Customers segmentation analysis using

CHAID and clustering techniques.

Chapter Seven: This chapter presents the forecasting of customer adoption of

mobile banking based on the neural network model and model summary and results are
being displayed.

Chapter Eight: This chapter provides the summary of the study. It gives a clear
preview of findings of the study; suggestions and future research are recommended.

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