CHAPTER 1

1.1. INTRODUCTION

Online banking is an electronic payment system that enables customers of a financial

institution to conduct financial transaction on a website operated by the institution. Such as a
retail bank, virtual bank, credit union or building society. Online banking is also referred as
internet banking, e-banking , virtual banking and by other firms.

To access a financial institution online banking facility, a customer with internet access
would need to register with the institution for the service, and set up some password (under
various names) for customer verification. The password for online banking is normally not the
same as for telephone banking. Financial institution now routinely allocate customers numbers
(also under various names), whether or not customers have indicated an intention to access
their online banking facility. Customer’s numbers are normally not the same as account
numbers, because a number of customer’s accounts can be linked to the one customer number.
The customer can link to the customer number any account which the customer controls, which
may be Cheque, savings, loan, credit card and other accounts. Customer’s numbers will also
not be the same as any debit or credit card issued by the financial institution to the customer.

The access online banking, a customer would go to the financial institution secured
website and enter the online banking facility using the customer number and password
previously set up. Some financial institution have set up additional security steps for access to
online banking, but there is no consistency to the approach adopted.

1.2. STATEMENT OF THE PROBLEM

The rapid advancement of digital technology has transformed the banking industry,
leading to the widespread adoption of online banking services. This shift has provided
numerous opportunities for both financial institutions and customers, including enhanced
accessibility, convenience, cost efficiency, and improved financial management tools.
However, despite these advantages, online banking also presents several challenges, such as
cybersecurity risks, technical issues, fraud, digital literacy gaps, and concerns regarding data
privacy.
 This study aims to investigate the opportunities and challenges associated with online
banking, focusing on its impact on customer satisfaction, security concerns, and the
effectiveness of digital banking services. The research will explore how financial institutions
can maximize the benefits of online banking while addressing security threats, improving user
experience, and ensuring regulatory compliance. Additionally, it will examine customer
perceptions, trust levels, and the role of technological advancements in shaping the future of
online banking.

By identifying key opportunities and challenges, this study seeks to provide insights into
strategies that banks and financial institutions can adopt to enhance online banking services,
ensuring a secure, efficient, and customer-friendly digital banking experience.

1.3. OBJECTIVE OF THE STUDY

1. The main objective of this study was to understand the growth of the online banking
sector in India.
2. To study the challenges associated with the growth of online banking.
3. To study the opportunities for growth of online banking in India, since India is very
fast developing country.
4. To understand the scope and the infrastructure that is there in India for its
development.

1.4. SCOPE OF THE STUDY

Now in this modern age the entire banking structure has been changed due to widespread
internet technology. Now all the business like commerce, Trade, import, export, purchase and
sale of goods is relying upon electronic banking by using the advance electronic technology
the banking services are Fast and economical.

There is a saving time and saving money in the use of E-banking. If Any country wants
work in the world market, it will have to improve the Banking services at international level
because old traditional banking is not acceptable in the changing global economy.
 The online banking is facility has been provided by the large number of commercial
banks. On other hand credit facility is also available in the Various commercial banks. Now
every bank wants to attract the customers and for this purpose they offers latest facilities, so it
seems that no any bank will survive in the market if they fails to provide update facilities.

1.5. RESEARCH METHODOLOGY

1.5.1. Research Design :

This study will employ a mixed-methods approach, combining both qualitative and
quantitative research methodologies. A descriptive research design will be used to analyze the
opportunities and challenges of online banking, while a survey-based approach will help collect
primary data from online banking users and banking professionals.

1.5.2. Source Of Data :

Primary Data Collection :

Questionnaire distributed amoung people having bank account. A sample questionnaire
of 20 questions distributed to people.

Secondary Data Collection :

• Internet
• Reference books

1.5.3. Sample Design :

Online and offline surveys will be conducted using a structured questionnaire

1.5.4. Sample Size :

The sample size for this survey is 50.
50 online banking customers will be randomly selected from the survey
1.5.5. Tools for analysis :
Online Survay : google forms.
Offline Survay : paper based questionnaires.

1.6. LIMITATION OF THE STUDY

• Some respondents think to fill up my questionnaire was a wastage of time according to

them.
• Time constraints.
• The participants comprised a small sample, which can be generalized across the sector.
• Rapid changes in banking technology and cybersecurity threats may affect the study’s
relevance over time.
CHAPTER 2
 LITERATURE REVIEW

1. RAJANNA K. A (2018) in his article titled, Growth of cash less transactions in India:
challenges and prospects concluded that after 8thDec 2016 when Dimonitiasation
happened in our country cashless transaction became necessary for each and every
individuals. Digitalization has changed the entire financial setup of the payments mode.
We can control the corruption, black money, counterfeit currency and terror financing
by cashless economy the cashless transaction can be done by credit cards, debit cards,
net banking and the other sources of electronic payments by giving the best services to
its customers.

2. HUSSEIN M.A et al (2018)in their article titled, Effect of internet banking on

operational performance of commercial banks in NakuruCouty Kenya investigated that
bank focused theory and the technology acceptance model was the main focused point.
The internet banking is highly related with operational performance .E Banking is
essential for operational performance. Banks need to invest more in their internet
banking to improve it.

3. SATHIYAVANY N et al (2018)in their article titled E banking service qualities, E

customer satisfaction and E loyalty: A Conceptual model wrote that in today‟s scenario
internet has become the backbone of any banking system. From the customers point of
view it is a time saving process. In this paper authors describes the e banking service
quality, satisfaction and loyalty in consumer‟s opinion. The main purpose is to create
an outlay of satisfaction in the internet banking users. By improving the level of
confidence and flexibility can satisfy the customers.

4. DEVULAPALLI S et al (2017)in their article resulted that before demonetization

people were using e banking in several ways but after that it became mandatory for
mass also to adopt and utilize it fully. In a sample size of 150, only 92 respond in which
 we got to know the e-banking habits of Indian population 42% of them using internet
banking in a week and followed by 28.3% every single day.

5. AGARWAL M.K (2017)in his article titled , E banking scenario and its impact on
customers satisfaction in India wrote about e banking scenario regarding ATM‟s , credit
cards, mobile banking etc and its effect on customers. The satisfaction level about ATM
is very high as compared to other e banking services. E banking services is still unused
by the rural area customers .bank should design their e banking services as according
to the customers comfort.

6. PANDA S.K et al (2017)in their article titled, Customer perception on E banking : An

empirical study on rural banks in the selected districts of Odisha concluded that most
of the customers of rural bank are satisfied with the e banking facilities especially the
security and privacy . the banks particularly the rural banks can appropriate the net
banking to a larger extent for the satisfaction of the customers. This will bring the rural
customers as well as the banks to a win win position.

7. AMUTHA D (2016) in his article titled, A study of consumer awareness towards

ebanking wrote that mostly customers are familiar with the services of e-banking in
Tamilnadu .Banks should have to take many important steps to educate the people
regarding the new technology and services. By doing the friendly approach banks can
attract the new customers. It will automatically increase the service quality and
development of banks.

8. RAHMAN M.A et al (2016) in their article titled, Banking access for the poor:
Adoption and strategies in rural areas of Bangladesh concluded that the progress of e-
banking is unsatisfied in rural area of Bangladesh .to sort out this problem they used a
primary data of users. Financial inclusion is a most effecting factor in development. it
is observed that after launching E-banking in Bangladesh it is not more liked by the
customers than the other parts or the world. Trust, usefulness and satisfaction have most
significant negative effect on E-Banking.
 9. BHOSHAN A (2016) in his article titled, Success of electronic banking in rural area:
A field survey of mewat of Haryana advised that the government of India needs to take
few steps to expend the utilization of virtual system. There is a need to build a
familiarity with its customers regarding electronic keeping money items in India and
take a work shop to teach them about e-banking service usages.

10. ANAND N.M (2015) in his article titled, E-banking trends in India: Evolution,
challenges and opportunities proved that the new generation of the electronic banking
transactions make many opportunities as well as challenges to the exiting banks,
financial institution and customers in India. Only big banks introduced it. E- Banking
is a strategy for future development the success or failure of e banking in India is only
depends on many dimensions such as consumers trust in a particular bank, service
quality offered by the bank and consumers satisfaction
CHAPTER 3
 THEORITICAL FRAME WORK

For a study on online banking opportunities and challenges, the theoretical framework can
be built upon the following theories:

Technology Acceptance Model (TAM)

• Proposed by Davis (1989), the Technology Acceptance Model (TAM) explains how
users accept and use technology.
• It consists of two main factors:
o Perceived Usefulness (PU): The degree to which a user believes online banking
will enhance their banking experience.
o Perceived Ease of Use (PEOU): The extent to which a user finds online
banking easy to use.
• TAM is relevant because it helps understand customer adoption and satisfaction with
online banking.

Diffusion of Innovation Theory (DOI)

• Developed by Rogers (1962), this theory explains how new technologies spread among
users.
• It categorizes users into five groups: innovators, early adopters, early majority, late
majority, and laggards.
• This theory is useful in analyzing how customers adopt online banking services and
what factors encourage or discourage them from using digital banking solutions.

Unified Theory of Acceptance and Use of Technology (UTAUT)

• Developed by Venkatesh et al. (2003), UTAUT expands on TAM and includes
additional factors that influence technology adoption:
o Performance Expectancy: The degree to which online banking improves
financial transactions.
o Effort Expectancy: How easy it is to use online banking platforms.
o Social Influence: The impact of peer recommendations and bank promotions.
o Facilitating Conditions: Availability of support systems, such as customer
service and security measures.
Perceived Risk Theory
• This theory suggests that users evaluate potential risks before adopting a new
technology.
• Key risks in online banking include:
o Security risk: Fear of fraud, hacking, and identity theft.
o Privacy risk: Concerns about personal data protection.
o Financial risk: Risk of financial loss due to cyber threats.
• Understanding perceived risks helps in addressing security challenges and improving
trust in online banking.

Trust Theory in E-Banking

• Trust is a critical factor in online banking adoption. This theory suggests that trust is
built based on:
o Competence: The bank’s ability to provide secure and efficient online services.
o Integrity: Transparency in transactions and policies.
o Benevolence: Customer support and problem resolution mechanisms.