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A study of online banking in rural areas

Last updated on 28.07.2020


Banking is an important industry and is at the heart of any nations economy. It enables financing for major projects by providing credit. Many small scale & medium industries avail their seed money through financing options from banks. This brings a lot of opportunities to the common man and serves at a go-to platform for aspirational locals who cannot turn to financing options like IPOs and selling Bonds. Banks also provide a unified platform for people to safe keep their assets and their schemes & products like Fixed Deposits give secure & risk-free long-term investment options to the common people who are wary of investments in stocks.

Thus, banking is beneficial for the masses and hence for the nation’s economy as a whole. To strengthen it, getting more people involved with banking is important. Also, with more people keeping their money with the bank, the total cash with the bank increases and this enables it to give bigger loans, fund capital intensive projects & contribute to the development activities of the country. To enable this, banks need to acquire customers. The prime minister of India, for this reason, has launched the Jan Dhan Yojana. Schemes like these are bringing common masses to formal banking. Today, India has 80% of its adults with a bank account.

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Basic concept

However, having a bank account doesn’t necessarily signify that the customers are using the banking facilities & schemes initiated by Banks. Customer engagement is an important concept which impacts product utilization. Businesses try to interact with customers to get them to know about various products & changes their service experience; thus, getting them to aspire for more. Ever since the IT revolution of the 1990s, businesses have moved online & they use online platforms to sell & advertise about their products. Banks are not far behind. Online banking was first introduced in the early 1980s in New York, United States.

Other essay:   Background of study

Literature Review

What is Online Banking: Online banking is using of internet & electronic devices like computers, mobile phones, laptops, etc. to perform banking operations like making online payments, transferring money, checking balance, opening accounts & other banking transactions without actually going to the bank. Online banking facilities are offered by almost all banks today, and it has become a differentiating service factor. Also, with most of the transactions moving online, online banking will be used as a tool to complement business activities that are conducted online by its online payment services.

Advantages of Online Banking

A major advantage of online banking is that it is fast. Since there is no human intervention in processes, service delivery is very fast due to reduced time required in the monitoring of records & data. Additionally, Online banking is hassle-free since it does not require you to go to the banks physically. It is also cost-effective to the banks as the transactional & bureaucratic costs incurred due to human involvement gets reduced, and this can translate to higher interest rates.

However, Online banking has many disadvantages or rather hurdles in its full-fledged utilization. Security concerns among consumers remain an issue despite banks adopting proper security measures. Only 51% of Indians use online banking channels. Awareness about the availability of online options and ease of online use also play a factor. In this paper, we aim to understand how perception of the operational simplicity of online banking facilities & awareness about the various e-banking options impacts their usage.

Research Objectives

  1. To establish whether customers are aware of the online services provided by the banks.
  2. To establish whether ease of use of online services impacts the utilization of services offered.

Research Methodology

To understand how awareness and ease of use impacts the use of online service, we floated a questionnaire focused on understanding respondent’s perceptions regarding the use of online banking, their willingness to adopt online banking, the problems they face, etc. Please refer to ‘Appendix 1’ for the questions. The questions were floated as a mix of questions answered as multiple-choice, dichotomous questions, and Likert scale. We received responses from 72 total respondents.

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The sample selected included various people from the area of Vasai comprising of students, businessmen & people doing service. The data collected from them is representative of the mix of different educational qualifications, regions, age groups, etc. Based on this, we try to identify how different variables used to identify our main constructs, i.e. Awareness & Ease of Use correlates among each other & based on these we try to infer their impact on constructs.

Observations & Inference

  1. Almost 78% of the respondents use Online Banking. There no correlation between the use of online banking & occupation and age. However, all retired respondents, beyond 40 don’t use online banking.
  2. Bassein Catholic bank has the largest share of almost 50% among consumers that use online banking while, SBI Bank of India, HDFC, ICICI & Axis sharing 33% of the total share.
  3. The most common medium for people to find out about online banking has been bank communication.
  4. More than 50% receive regular updates about the new online facilities launched by the bank. There is a significant correlation (.027) between ease & frequency of use for online banking, although the correlation coefficient is weak.
  5. There is a significant correlation between how well-informed customers are regarding online banking facilities and the ease of use they feel in online banking. The correlation coefficient is 0.424. With this, it is possible to infer that providing updates about using online facilities to customers is playing a factor in influencing the ease that they perceive in using online banking.
  6. Around 32% of respondents shifted back to traditional Banking because they found Online banking complicated. There is a significant correlation (.003) between customer’s willingness to recommend online banking to others & if they had to shift back from online banking to traditional. However, the correlation is weak with a coefficient of .281
  7. On the other hand, the correlation between ease of using online banking and propensity to recommend it to others is significant with a stronger correlation coefficient of 0.433. Almost 50% of the respondents are unable to use more online features due to the complexity involved.
Other essay:   Study plan


From the survey results, we observe that almost all banks provide regular updates to the customers regarding its online services & the customers are well informed about the online facilities. Thus, we can conclude that customers are well aware of the online services that the banks provide. Customer’s who find online banking easy to use are likely to recommend them to others & also they use online banking more frequently. Thus, easy to use online banking systems, do increase their usage.


Banks should focus on making the online platforms more user-friendly to bring more customers to their online platforms & enable current users to start availing more facilities that it provides. Banks can send regular updates & float online tutorials through platforms like YouTube to train the customer; thus, making him more informed. This will eventually make the online activities easy for them to perform; which will benefit both: the banks as well as the customers.


This study focuses on the perceptions of customers who use bank services. To improve the significance of the study, it is important to take inputs from banks such as how their numbers for online users changed in response to various initiatives/programs that they launched concerning online banking. The respondent’s group was accessed through online reach with google forms & hence other data collection methods shall be used like interviewing, manual form floating, etc. to include those users who may not have access to online infrastructure.

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