Digital Banking & Payments Report

MANAGEMENT PROJECT: FINAL REPORT
Harshit Raghuwanshi- 16A1HP110 (PGDM, BATCH: 2016-18) Page 1
Digital Banking & Payments
Rising of New Era in Indian Banking
05/02/2018
PROJECT FINAL REPORT

A Management Project Final Report
On
Digital Banking & Payments
Faculty Guide:
DR. RAMBALAK YADAV
(ASSISTANT PROFESSOR – MARKETING)
Submitted by-
HARSHIT RAGHUWANSHI
ID. No-16A1HP110
PGDM 2016-18
Institute of Management Technology
Hyderabad

Copyright Notice
Copyright © 2018 by Harshit Raghuwanshi
All rights reserved. No part of this report may be reproduced in any form or by any means
without written permission form the publisher.

Undertaking
This is to certify that this is a bona fide Management Project Report submitted in
Partial fulfilment of the requirements of the PGDM Program of IMT Hyderabad.
This report document titled “Digital Banking & Payments” is a submission work
done by Harshit Raghuwanshi under the guidance of Dr. Rambalak Yadav,
Assistant Professor – Marketing, IMT Hyderabad and has been formally submitted
to him.
This report has been verified and authenticated by:
Dr. Rambalak Yadav
(Assistant Professor- Marketing)
Faculty Mentor
Institute of Management Technology, Hyderabad
Signed By:
Harshit Raghuwanshi
ID.No.- 16A1HP110
Batch: 2016-18
Institute of Management Technology, Hyderabad

Acknowledgement
A Management project is an excellent opportunity for learning and self-
development. I consider myself very lucky and honored to have so many
wonderful people help me in the completion of this project. This report would have
been quite impossible without the immense help and pleasant environment offered
at IMT Hyderabad. I am deeply grateful to the entire management of “IMT
Hyderabad” for giving me such an opportunity
.
Firstly, I would like to express my heartfelt gratitude to my Faculty Mentor
Dr. Rambalak Yadav (Assistant Professor- Marketing, IMT Hyderabad), for not
only being a guide but also a mentor and for his valuable advice, encouragement,
direction, assistance and for his tireless support during my project, without his
cheering and invaluable insights into this project, the project work would not have
been accomplished.
I am extremely grateful to my college professors and colleagues for being
involved with me throughout my project and providing a lot of relevant
information that were vital in completing the project. They took additional efforts
to bring my project to its fulfilment and completion.
Regards,
Harshit Raghuwanshi

Foreword
The pace of shift to Digital Banking and payment in India has significantly
increased with the strong move towards cashless economy. This shift wouldn't
have been possible without several factors that influence the growth and
proliferation of digitalization, including: An ever-increasing mobile phone
penetration, lower cost of service delivery, Banks encouraging customers to use
green channels, Unorganized sector supporting the digital economy and
Demonetization. Adoption of digital payments is visible when country's Honorable
Prime Minister, Shri Narendra Modi, launched a mobile application. Bharat
Interface for Money. popularly referred to as. BHIM. Two months after
announcing demonetization and this mobile application, created a world record of
sorts when it was downloaded more than 17 million times in less than two months.
Other channels such as Immediate Payment Service (IMPS), has witnessed growth
of 97 per cent with about 72 million transactions. Country’s leading mobile wallet
service provider has 150 million users as of today.
In this report, titled- “Digital Banking and Payments: Rising of New Era in Indian
Banking” I examine the digital banking & payments ecosystem in India, its
coverage over the market and customers, its impact on the Indian population.
Readiness in adoption of the technology and emergence of new industry- payment
and payments banks.

Contents
UNDERTAKING …………………………………………………………………….4
ACKNOWLEDGEMENT………………………………………………………...…5
FOREWORD…………………………………………………………………………6
EXECUTIVE SUMMARY………………………………………………….……….8
1. TITLE OF THE PROJECT…………………………………………………………9
2. DESCRIPTION OF PROJECT IN BRIEF………………………………………...9
3. INTRODUCTION……………………………………………………………..……10
4. LITEARTURE REVIEW……………………………………………………..……10
5. CHAPTER I: Banking structure in India………………………………..………..14
6. CHAPTER II: Digital Banking initiatives in Indian Banks……………...………17
7. CHAPTER III: Digital Payments ………………………………….……..………..21
8. RESEARCH OBJECTIVE …………………………………...…….…………..….26
9. PROPOSED METHODOLOGY…………………………………..……….………26
10. DATA ANALYSIS AND FINDINGS…………………………..………..…………27
11. DISCUSSION…………………………………………………..………..…………..35
12. CONCLUSION………………………………………………...…………………….36
13. MANAGERIAL IMPLICATIONS/CONTRIBUTIONS………………...……......37
14. LIMITATIONS OF THE STUDY………………………………………………….37
15. REFERENCES……………………………………………………………...…….…38
16. APPENDIX…………………………………………………..………………………39

EXECUTIVE SUMMARY
With the introduction of technology, no sector is left untouched by it, every process is now
getting digitalized no matter to which industry it belongs to. Same is the situation with the Indian
Banking industry. Digitalization has completely changed the Bank and its processes as it used to
be 10-15 years before. The banking industry's efforts to shift to digital medium have been
halting: At best a business
unit here, an upstart department there. But given the industry's financial pressures and global
economic uncertainties, there is increased urgency and opportunity to adopt a comprehensive
approach to going digital and integrating that strategy across the banking ecosystem. A full
digitalization requires end-to end modernization of a banks outdated infrastructure. It requires a
transition from an account-based view of banking customers to one that knows them as
individuals and enhances the customer experience with relevant, convenient: and personalized
products and services. Digital banking gives traditional banks a second chance. A smart:
enterprise-wide approach positions them to deepen customer satisfaction and loyalty: driving
long-term relationships and profitability However, customer focus is often a stretch for the
banking industry.
When it comes to innovation, banks have been relatively slow movers regulatory
and compliance challenges. Digital modernization gives traditional banks a second chance. A
smart, enterprise-wide approach positions them to deepen customer satisfaction and loyalty,
driving long-term relationships and profitability. Such an approach also has the potential to meet
consumers' expectations and bring banking to the bank.
While talking about the Digital Payments part the government of India's decision of
demonetization in November 2016 has boosted the country’s digital Ecosystem. With initiatives
such as the 'Digital India’ and 'Digi-Shala' , the government is trying to build a conducive
ecosystem for 'cashless economy. Some other initiatives taken by the Government includes
National Optical Fiber Network (NEON), introduction of Unified Payments Interface (UPI),
Bharat Interface for Money (BHIM- internet based mobile application).
These initiatives can help in faster adoption and transition to digital payments.
This report explores the vital changes introduced in the Indian Banking industry with the
introduction and advancement of technology i.e. Digitalization of the Banking sector, major
changes brought up in the banks after such introduction. Its impact on the Banks working,
customers, and the economy. This report covers the major changes brought in top 5 Indian banks
after the digitalization, these banks are SBI, PNB, HDFC, AXIS, ICICI.
This report also throws some light on the Digital Payment industry. The Change in Payment
modes after demonetization, creation of cashless economy and the launch of various E-wallets by
various banks and companies and launch of payments banks in India.
For getting the customers point of view regarding Digital Banking and Digital Payments we
conducted a survey among 70 people, where we got to know about various perspective of an
India customer. The key findings of the primary research are given in the report.

1. TITLE OF THE PROJECT
Digital Banking & Payments: Rising of New Era in Indian Banking
2. DESCRIPTION OF PROJECT IN BRIEF
The banking industry plays a major role in representing the financial system in India.
It works as an intermediary between individuals, the government, financial institutions and
other stakeholders who directly or indirectly get affected by the industry. Banks in India have
witnessed a radical change from 'conventional banking to convenience banking and today, they
are inclined towards creating a new era called 'Digital Banking & Payments'. Digital Banking &
payments is the new paradigm that offers considerable benefits to banks in terms of increasing
productivity and profitability (Ref. Digital Banking Framework - idrbt) as well as the customers
in saving their time & efforts. As digital banking & payments have become an integral part of the
banking system this project will highlight the changing technology in Indian banking industry, its
impact on Banks & customers and brief comparison of banking technology used by different
banks in India.
This project will give a broad coverage over:
• Understanding the concept, features and functions of Indian Banking system
• Evolution of Banking: Traditional v/s Digital banking
• Dimensions of digital banking
• Digital payments & its various forms
• Identifying & analyzing various digital banking and payment services offered by the
banks
• Analyzing the progress made by Indian banks in adoption of technology in the banking
sector
• Study the shifts of banks from traditional to Modern day digital banking
• Studying the challenges faced by Indian banks in adoption of IT in the banking sector
• Understanding the consumer behavior and response towards the digital banking &
payment services provided by banks
• Competition analysis between different Indian banks w.r.t. digital banking and digital
payments
• Service encounters for customers in case of digital banking and digital payments
• S.W.O.T. analysis of Digital banking
• Limitations and challenges for digital banking and payments

3. INTRODUCTION TO THE TOPIC:
Banking and Financial Sector has undergone many changes and improvements in the last few
years and is in a constant state of development. Digitalization has brought the banking industry
new business models, development concepts and areas of improvements, from internet banking
to monetary transactions. These New implementations to the Financial Sector require the
employees as well as the customers to be aware of the rapidly changing banking environment
and the overall state of change in the financial sector. Now, digitalization and change
management are one of the major turbulences that are changing the banking business forever and
with bad management, the results can be long-lasting. (Ref. Digitalization of the financial sector
and change management by Lauri Piirainen) During the next decades, banking and financial
sectors are developing faster than ever and therefore change management and digitalization are
at a key position on how to gain market advantage against rivalling banks.
In Today’s Technology savvy customer base, it is very important for Banks to adapt the latest
technology, such that banks can catch up with the pace with which customer preferences
changes. Adaption of newer technology is also critical to challenge competitor banks and other
institutions in offering products and services in the market place. (Ref. Indian Banking sector in
transition). Also with the New age of Digitalization in the banking sector, the daily operations
are becoming faster, economical, and easier for customers to use and therefore every bank is
grasping to adjust their own operations to fit the needs of a demanding customer.
The main objective of this Management project is to focus on and study theoretical framework of
digitalization in the banking sector. This management project will emphasis on the technological
developments in Indian banking sector with respect to the day to day activities as well as with
the electronic payment systems. It will give a brief understanding of the digital payments and
digital payments banks with respect to Indian context.
4. LITERATURE REVIEW
This management project “Digital Banking and Payments: Rising of new Era in Indian Banking”
describes about the technological changes in Indian banking system, the movement of Indian
economy from paper to online and cash to cash less. This project describes the current state of
Digital banking and Digital payments in India and discuss its implications for the Indian banking
industry. Particularly, it seeks to examine the introduction and impact of Digital banking on
Indian banks and its customers. It will also talk about the e-payments or the digital payments
which is trending after demonetization in India.
This project will comprise both secondary and primary research. Secondary research will
comprise of various researches which were done to understand & analyze the impact of digital
platforms on Indian banks i.e. digital Banking. Under this secondary research I will be
considering how digitalization is affecting the Banking sector and what is the future of

commercial banks and bank branches and how has Indian Banks benefitted from the rapidly
developing technology.
Various researches were done to understand & analyze the changes in banking sector due to
digitalization and to determine customer perception and behavior towards these changes. The
researches were also done to determine the satisfaction level of customers towards the digital
banking and payments services provided by their bank. These researches were basically done by
the consulting, by the professors and students from various management institutes. Some of the
researches done are as follows: -
(a.) Yadav, R. et. el (2015): "Intention to adopt internet banking in an emerging
economy: a perspective of Indian youth"- This research paper tried understanding the
customers perception and intention towards internet banking adoption in Indian context.
This understanding was achieved through combining; Theory of planned behavior (TPB),
Technology acceptance model (TAM) and an additional construct, i.e. perceived risk.
The findings of this research showed that perceived usefulness, attitude, subjective norm,
and perceived behavioral control significantly influences the consumer’s intention to
adopt internet banking while perceived risk don’t have any influence on customers over
intention to adopt internet banking.
(b.) Malhotra, P. & SINGH, B. (2009): “The Impact of Internet Banking on Bank
Performance and Risk : The Indian Experience” - The paper describes the current
state of Internet banking in India and discusses its implications for the Indian banking
industry. Particularly, it seeks to examine the impact of Internet banking on banks’
performance and risk. The study done under this research tells that Internet banks are
larger banks and have efficiency ratios and profitability as compared to non-Internet
banks. Internet banks rely more heavily on core deposits for funding than non-Internet
banks do. However, the multiple regression results reveal that the profitability and
offering of Internet banking does not have any significant association, on the other hand,
Internet banking has a significant and negative association with risk profile of the banks.
(c.)Shaza W. Ezzi (2014): “A Theoretical Model for Internet Banking: Beyond
Perceived Usefulness and Ease of Use”- This Research paper tried to inquire different
types of electronic banking like ATM’s, telephone banking, and electronic funds transfer,
Internet banking like has evolved from consumers’ needs to have superior access to
banking services clear of most banks teller-staffed, normal operating hours. Internet
banking (IB) continues to govern the landscape of electronic banking as consumers
continue to use IB to complete schedule banking transactions in addition to conducting
on-line sales and purchasing. This study presents a theoretical model considered to help
researchers and practitioners better understand the acceptance and adoption of Internet
Banking.
(d.)Rakesh H M & Ramya T J (2014): “A Study on Factors Influencing Consumer
Adoption of Internet Banking in India”- This research papers tries to examine the

factors that influence internet banking adoption. Using PLS, a model is successfully
proved, and it is found that internet banking is influenced by its perceived reliability,
Perceived ease of use and Perceived usefulness. It says that in the marketing process of
internet banking services, marketing expert should emphasize these benefits. Its
awareness can also be improved to attract consumers’ attention to internet banking
services.
(e.) Yadav, R and Pathak, G (2013): “Environmental sustainability through green
banking: a study on private and public-sector banks in India”- This research paper
tells about the various Green Banking approaches which are adopted by private and
public-sector banks in India. Under this research the study was done on the top performing
banks of the public sector and the private sector. This study reveals that public-sector
banks have taken more green banking initiatives as compared to private sector banks.
(f.) Vijay M. Kumbhar (2011): “Factors Affecting the Customer Satisfaction in E-
Banking some evidences From Indian Banks”- Under this study factors which affect
customer satisfaction in internet banking were evaluated. The factors which were
considered were service quality, brand perception and perceived value. The result of the
study says that Perceived Value, Brand Perception, Cost Effectiveness, Easy to Use,
convenience, Problem Handling, Security/Assurance, and Responsiveness are important
factors in customers satisfaction in e-banking. Security/Assurance, responsiveness, Easy
to Use, Cost Effectiveness and Compensation are predictors of brand perception in e-
banking and Fulfillment, Efficiency, Security/Assurance, responsiveness, Convenience,
Cost Effectiveness, Problem Handling, and compensation are predictors of perceived
value in e-banking.
(g.)Dorra Gherib (2014): “Adoption and diffusion of internet banking”- This research
tried to observe the embracing of Internet banking in the banking industry. The aim is to
make out factors that accelerate or slow down the implementation process. The literature
enables identifying a set of variables: organizational, individual, and structural, this
research has exposed some variables that hamper the implementation of technological
innovations.
(h.) Shilpi Khandelwal (2013): “E Banking: Factors of Adoption in India”- This paper
presents the changes which the last decade has witnessed in the economic and banking
environment all over the world. It tells about the economic and financial sector reforms
introduced in India since early 1990s, and the change in operating environment for banks
in India. It says that more people are switching to electronic platforms for executing
financial transactions, internet banking has brought about a 360-degree change in the
entire banking industry. This research paper is focused on what are the drivers that drive
consumers towards adoption of E banking and how consumers have accepted internet
banking.
(i.) Pikkarainen, T. et. el (2004): “Consumer acceptance of online banking: an extension
of the technology acceptance model” This article was emphasized on increasing current
understanding of the factors that influence Online banking acceptance in the light of the

Technology acceptance model (TAM). Online banking acceptance was studied from the
information systems Acceptance point of view referring to the Idea that consumers are
using banks information system (online banking service) directly and Hence more
knowledge on the Factors that affect information
(j.) Barry Howcroft (2002): “Consumer attitude and the usage and adoption of home‐
based banking in the United Kingdom”-This paper seeks to develop Understanding of
consumer attitudes towards Bank delivery channels. Accordingly, a questionnaire was
designed to obtain Information about which delivery channels consumers had used when
acquiring four types of financial service. This information was then contrasted with Data
on how these consumers Would acquire the same services if they had to purchase them
again at some time in the future. The Questionnaire also obtained information about the
factors which consumers believed to be important in encouraging and discouraging the
adoption of home‐based banking. The paper discusses and assesses some of the strategic
implications of the study’s findings for financial service providers.
(k.)Nabil Hussein Al-Fahim (2013): “A tentative Study of Factors distressing the
Internet Banking espousal: A Qualitative Study among Postgraduate Students”-
This paper tried to find out the factors that Affect the Internet Banking espousal among
postgraduate’ students in International Islamic University Malaysia (IIUM). The results
revealed that adopters and non-adopters realized that Internet banking (IB) has quite a lot
of benefits and amenities. Non-adopters were concerned about some factors like trust,
ease of use, awareness, and security. The results also showed that adopters had positive
influence on use of online banking and they did not have problems with these factors
because they had sufficient knowledge and experience in using online banking. The
findings are important to enable bank Executives to have a better understanding of
client’s perception to adopt Internet Banking.
(l.) Meihami, B. et. el (2013): “The Effect of Using Electronic Banking on Profitability
of Bank”- In this Research the role of electronic banking (i.e. automated teller machines,
bank card, internet bank, telephone bank, point of sale) on the bank profitability is
studied. The statistical society of this research is the private banks staff of Kurdistan
province. The Research findings show there is a positive and strong relationship between
electronic banking and its five components (i.e. automated teller machines, bank card,
internet bank, telephone bank, point of sale) with Bank incomes.
While under the primary research I will look after the customer perception & behavior towards
their banks, the changes which they have observed after the introduction of digitalization in
banking and the digital banking services which they regularly use. This research will also
emphasize on the use of digital payments by customer. Overall this project will focus on what
are the drivers that drive
Banks and its consumers towards adoption of Digital banking and Digital Payment, how
customers have accepted internet banking and what are the future opportunities in the Indian
banking and payments sector.

5. CHAPTER-I
5.1. Banking structure in India
The word ‘Bank’ is derived from French word “Banque or Bancus” which means a
Bench. (Ref. IIBF) Bank is the lifeline of any modern economy. Banks help in economic
development of the country by financing requirements of trade, industry, and agriculture.
In India, banks are playing a crucial role in socio-economic progress of the country after
independence. The banking sector is dominant in India as it accounts for more 50 % of
the assets of the financial sector. Indian banks have been going through a fascinating
Phase through rapid Changes brought about by financial sector and Information
Technology reforms. (Ref. An introduction to Indian banking system, Shodhganga)
Indian banking system consists of “Non-scheduled banks” and “Scheduled banks”.
‘Non-scheduled banks’ refer to those that are not included in the second schedule of the
Banking Regulation Act of 1965 and thus do not satisfy the conditions laid down by that
schedule. ‘Schedule banks’ refer to those that are included in the Second Schedule of
Banking Regulation Act of 1965 and which satisfies the following conditions:
(1) Paid up capital and reserve of not less than Rs.5 lakhs and
(2) Satisfies Reserve Bank of India (RBI) that its affairs are not conducted in a
manner detrimental to the interest of its Deposits. (Ref. An introduction to Indian
banking system, Shodhganga)
Scheduled banks consist of “Scheduled commercial banks” and “Scheduled
cooperative banks”. Scheduled commercial banks is divided into public sector
banks, private sector banks, foreign banks in India and regional rural banks.

5.2. Information Technology & its impact
The advent of Information technology (IT) and its convergence with communication
technology have drastically changed the landscape of banking services across the globe.
With the Innovation in the IT, Indian Banking sector has benefited a Lot by offering new
‘Products and Services’. Information technology has helped the banking sector by
opening newer delivery channels to customers – ATMs networking in the form of shared
payment networks, internet banking, implementation of core Banking solutions, mobile
banking etc. The use of digitalization and IT in the banking sector has contributed to the
emergence of more flexible & user-friendly self-service banking technologies (SSBT) to
address the rapid and changing needs of banking customers.
5.3. Digital Banking
Digital banking is the digitization of all the traditional banking activities and programs
that were previously only available to customers when they were physically inside of a
bank branch. (Ref. Avoka) This includes activities like:
• Money Deposits, Withdrawals, and Transfers
• Checking/Saving Account Management
• Applying for Financial Products
• Loan Management
• Bill Pay
• Account Services
Currently there are 3 trends that are shaping the future of the digital banking in India. They are:
First, is the rapid growth of the nimbler Fintech players that are working to deliver
services in a manner never seen before.

Second, the experience of customers in other industries like e-commerce, healthcare,
education, or transportation, is improving at such a fast pace that they are now expecting
similar delivery and interface even in the banking industry.
Third, the whole push government is giving to digital economy in the country & which
itself is inducing a change in consumer behavior and making customers ask for more
convenience from their banks. (Ref. niti.gov.in)
5.4. Digital Payments
Digital payments are an electronic payment system through which a person can pay for
goods or services electronically, instead of using cash/check, in person or by Mail. For
ex: debit/credit Cards, USSD, AEPS, UPI, E-Wallets. Digital payment allows customer to
watch his money daily if he wants to. By keeping close tabs on funds, customer will
always be aware of what's happening in his bank account. It offers several benefits to the
customers some of them are: -
• Tracking spends
• Pay bills/bookings
• Transfer funds
• Deals & Discounts on using digital payments
• Cleaner & greener, reduced use of paper
• Ease of transaction
• Less employee requirement
Current trends in the industry are Digital cashless transaction. Recently there was plastic
money in trend which is your Credit Card or Debit Card, but even there it was a problem with
your card stealing, and information being hacked. Now a day there's boom in payment
gateways. There are currently more than 50 payment gateways running only in India and
much more around the world. In Indian market there are big players like Paytm, Freecharge,
RU Pay, PayPal etc. Most of them are independent or associated with some or other banks,
but here, Indian government has introduced their own payment gateway named BHIM.

5.5. Benefits of Digital Banking
Digital Banking provides numbers of Benefits to its customers, some of the Benefits are
as follows:
• It removes the Traditional Geographical barriers for customers, so the customers
can access their account anytime and from any part of the world
• Due to New innovative and convenient facility it attracts new customers
• It facilitates the offering of more services as these are Internet based services
which is time saving and Customer can access and regulate His account himself
• Free of charge bill reimbursement and refunds on ATM surcharges
• Simple online submissions for personal accounts, loans, and credits
• Self-access system it reduces customer attrition and Increase customer loyalty
6. CHAPTER-II: Digital Banking initiatives in Indian Banks
For the Research, I have taken top 5 largest banks in India, which includes SBI, HDFC, PNB,
ICICI, and Axis Bank. These are categorized as large banks on the basis of number of Branches,
ATM’s, Net profits, total assets managed, Market capitalization etc. (Ref. embibe.com) (Dec 4,
2017)
6.1. Housing Development Finance Corporation (HDFC)
HDFC Bank was incorporated in 1994, it has its registered office in Mumbai, India. It
provides many products and services including wholesale banking, retail banking,
treasury, auto loans, two-wheeler loans, personal loans, loans against property and credit
cards.
The latest entry in the league is 'Project AI', under which HDFC Bank, over the next few
weeks, would deploy robots at select bank branches. These robots will offer options such
as cash withdrawal or deposit, forex, fixed deposits and Demat services displaying on a
screen to customers.
As of June 30, 2017, the bank's distribution network was at 4,715 branches and 12,260
ATMs across 2,657 cities and towns. The bank also installed 4.30 Lacs POS terminals
and issued 235.7 Lacs debit cards and 85.4 Lacs credit card in FY 2017. (Ref. Financial
Express, HDFC)
Digital initiatives that HDFC Bank is undertaking:
HDFC bank has undertaken several initiatives to change the way the relationship works
between the bank and customers. They have undertaken steps on lending, payments,
transactions, communication, data analyses as well as in-house, in terms of training their
employees to understand how banking works in the digital world. These offerings are
meant to ease the way the customer interacts with the bank. They have been closely

monitoring trends that have emerged in the fintech (financial technologies) and startup
space to keep looking for ideas how they can improve their offerings. They are working
with a lot of fintech startups to bring in solutions that they can offer to their customers.
The impact of these initiatives is showing. Ten years ago, the share of Internet and
mobile banking transactions [as a percentage of total transactions] stood at 13 percent. In
FY13, it stood at 44 percent, in FY14, it was 55 percent. In FY15, the number was at 63
percent. Last fiscal, it has gone up to 71 percent. The share of branch transactions today
has gone down to 11 percent. Last year, they launched the 10-second personal loan where
pre-approved customers get funds credited into the bank accounts within 10 seconds of
filling up their applications digitally. That was setting a benchmark of digital. They also
introduced a recharge-on-missed-call feature that allows our customers to recharge their
prepaid mobile phones on the go.
6.2. State Bank of India
State Bank of India (SBI) is an Indian Multinational, public sector banking and financial
services company. It is India's largest Bank with a Balance sheet size of ₹33 trillion,
278,000 employees, 420 million customers, and more than 24,000 branches and 59,000
ATMs. It has 198 offices in 37 countries, 301 correspondents in 72 countries. The
company is ranked 232nd on the Fortune Global 500 list of the world's biggest
corporations as of 2016. (Ref. SBI website)
Digital initiatives by SBI
The bank is conducting hackathons, it has published its APIs for fintech companies to
leverage and build apps, and has gone on an Overdrive with respect to using mobile and
cloud platforms. It has launched ‘No Queue’ app on mobile, which Enables customers to
book a Virtual Queue Ticket (e-Token) for select services at select SBI branches, through
this the customers can generate e-tokens before reaching the branch. It has started
‘Missed Call Banking’ in which users only need to give a missed call to pre-defined
mobile numbers & avail of services such as balance enquiry & mini statement. Another
initiative called the ‘SBI Digi Voucher’ has been undertaken with the intention of cutting
down paper-based transactions. The bank has also embarked upon an initiative called
‘SBI Scribe’, which facilitates digitization of customer acquisition & the account
opening process. A customer needs to only fill-up paper forms on the digital pad, which
has customer handwriting recognition capability.
SBI is one of the first enterprises in India to go in for network Virtualization for multiple
purposes, by Using technology from VMware. The bank’s Private cloud has been
enhanced and grown further to Host resilient, stable and virtualized branch applications,
which will make it one of the largest hosted private clouds deployed by any bank.

6.3. Industrial Credit and Investment Corporation of India (ICICI)
ICICI is the 3rd
largest bank in India in terms of assets and third in term of market
capitalization. It offers a wide range of banking merchandise & financial services for
corporate and retail customers through a variety of delivery channels and specialized
subsidiaries in the areas of Investment banking, asset management, life & non-life
insurance, and venture capital. The Bank has a broad network of 4,850 branches &
14,404 ATMs in India, and has a presence in 19 countries including India.
(Ref. ICICI Bank.com.)
ICICI Bank won an award in the BFSI Leadership Summit and Awards in the 'Best
Phone Banking for End-users' category. Additionally, it has also won ‘Best Retail Bank
in India’ award three years in a row, at the Asian Banker International Excellence in
Retail Financial Services Awards 2016.
Digital initiatives by ICICI
• Digital Village: The Bank is helping in the transformation of 100 villages across
India into ‘ICICI Digital Villages’ in 100 days. Under this the bank will provide
villagers with digital channels for banking, payments transactions and cashless
payments to retail stores.
• iMobile SmartKeys: It’s a smartphone payment service that will help users in
making quick & secure payments on any mobile application, including chat,
messenger, email, games, or search browser, without having to exit their current
application on their smartphone.
• Smart Vault: Smart Vault’ are fully Automated lockers available 24x7 Including
weekends and post banking hours were launched in August 2015. The ‘Smart
Vault’ uses Robotic Technology to access the lockers from the safe vault
conveniently at any time of their preference in total privacy, without any
intervention of the Branch staff.
• Pockets: Pockets is the Digital wallet of ICICI Bank. The Wallet can be opened
by anyone and can conduct transactions like Recharge, shopping, transfer money
using the Virtual visa card which is issued when signing up for the Wallet.
• Contactless Credit and Debit Cards: ICICI launched country’s first
‘Contactless’ Debit and Credit cards, enabling its customers to make Electronic
payments by just waving the Cards near the merchant terminal in lieu of dipping
or swiping them. These cards are based on the Near Field Communication (NFC)
Technology, which provides customers the improved convenience of speed as
these cards require significantly less time than Traditional Cards to complete a
transaction along with enhanced security as they remain in control of the
customer.

6.4. Punjab National Bank (PNB)
PNB was founded in 1894, the bank has over 80 million customers, 6,937 branches, and
10681 ATMs across 764 cities in India. PNB has the distinction of Being the first Indian
bank to have been started solely with Indian capital that has survived to the present. It had
the privilege of maintaining accounts of national leaders such as Mahatma Gandhi,
Jawahar Lal Nehru, Lal Bahadur Shastri, Indira Gandhi.
Digital initiatives by PNB
PNB has taken several Digital initiatives in the recent past, including an App to locate its
ATMs & another one to educate its customers on basic banking. It has also launched a
green PIN and PNB ATM Assit, Android App, it will help its customers to reach the
nearest ATM of the bank. The app, using GPS, will also assist the customers to instantly
take up operational issues, reducing the resolution time considerably. The green PIN
facility helps the customer to obtain duplicate PIN for Debit cards instantly through SMS
request. The bank has also offered customers an SMS facility to block and unblock
internet banking and mobile banking.
6.5. AXIS Bank
Axis Bank Ltd is the 3rd
largest of the private-sector banks in India offering a
comprehensive suite of financial products. It has 3304 branches, 14,003 ATMs, and 9
international offices. The bank employs over 55,000 people and had a market
capitalization of ₹1.28 trillion (as on March 31, 2017). (Ref. "DISCLOSURE ON
REMUNERATION". Axisbank.com)
Digital initiatives by AXIS Bank
• Axis Pay: It’s a UPI based platform to facilitate banking transactions using only a
single 'Virtual Payment Address' (VPA), while transferring money to an account,
the sender now doesn’t have to fill details like the account number and bank's
IFSC Code, he can transact using only the VPA
• Ping Pay: It is a Multi-social payment solution that allows customers to transfer
funds using their Smart phones to Both Axis Bank accounts and other banks
account holders
• Insta Personal Loan: Under this the bank provide ‘24X7 Instant Personal Loan’
on smartphones and ATM kiosks where customers can get instant loan approval
and disbursement, which gets credited directly into their account.
• Locker booking: The Bank has launched an online locker booking facility
through the Mobile app to allow customers to check availability from their homes
and Book instantly.

• eKYC: Axis Bank has collaborated with Visa to launch 'eKYC' facility. It is the
first organization in India to introduce biometrics-based KYC, Offering
convenience, speed, and ease to Aadhaar-registered individuals to open bank
accounts. (Ref. The Financial Express, The Economic Times)
7. CHAPTER-III: Digital Payments
Digital Payment: The big picture came into existence after demonetization, from that point the
digital payment industry started booming in India. As of now the digital payment landscape in
India is undergoing a massive transformation. Indian consumers have shown tremendous
inclination towards digital technologies with growth rates for mobile phones and ecommerce
adoption taking India ahead of various developed economies. The Government of India's 'Digital
India' initiative is aimed at transforming India into a digitally empowered society and knowledge
economy is expected to further accelerate awareness, availability, and adoption of digital
technologies.
Digital payment is acting as a catalyst for accelerating financial inclusion. In fact, troves of
insights available through customers' payment transaction patterns can be leveraged to
offer fit-for-purpose products and solutions.
7.1. The Digital Payment Ecosystem in India
Digital Payments includes payment transactions which are carried out by using a variety
of electronic modes such as Debit/Credit cards, mobile or internet-based set ups, to send
and receive money. The ecosystem consists of buyer (customer), seller (merchant, service

provider) and Payment Service Provider (PSP) that enables transfer of money from buyer
to seller for the product/ service availed. The PSPs in India consist of both bank and non-
bank players. As of July 2016, PSP segment had 44 authorized Pre-Paid Payment
Instruments (PPIs) including mobile wallets, prepaid cards providers and eight authorized
payments banks, eight authorized cross-border money transfer operators and eight
authorized white-label Automatic Teller Machines (ATM) operators. These PSPs offer
the following digital payment modes:
• National Electronic Funds Transfer (NEFT)
• National Electronic Clearing Services (NECS)/ Automated Clearing House
(ACH)
• Bank cards (credit, debit, pre-paid)
• Internet banking
• Mobile banking
• Wallets (PPIs)
• Aadhaar Enabled Payment System (AEPS)
• Immediate Payment Service (IMPS)
• UPI
• Bharat Bill Payment System (BBPS)
• Aadhar Pay
• India QR
Frequency of Digital Payments through different modes:

7.2. Factors supporting the Digital Payment
• India: 3rd
largest internet user base in the world, 300 million users, nearly 50% per
cent i.e.160 million users are mobile-only internet users but only 19% uses mobile
internet i.e. less internet penetration, more chance of development of digital
payment industry. (REF: Live Mint, 24th
March,2017)
• The Government of India has taken upon itself to create an ecosystem for cashless
digital economy. This means fostering an environment conducive for growth and
innovation in the FinTech industry. (REF: KPMG- NASSCOM, JUNE 2016)
• The RBI has also responded to the growing trend in its report, 'Vision 2018' —
where It states that new policies with focus on electronic payments will influence
the trends in electronic payment systems in the country. (REF: RBI’s VISION
2018, Live Mint, 24th
March,2017)
• The government's focus on banking for the unbanked through schemes such as the
'Jan Dhan Yojana' where 200 million unbanked individuals were brought into the
banking sector. Also, the extension of Aadhaar to pension and Provident Fund has
helped in financial inclusion. (REF: KPMG- NASSCOM, JUNE 2016)
• Mobile and internet banking transactions has increased to 27 per cent overall
transactions in April 2016, an increase from 8 per cent in March 2012. There has
also been an increase in card-based transactions. (REF: KPMG- NASSCOM,
JUNE 2016)
• There has been significant growth in the e-commerce market place. India's e-
commerce market (revenues) grew from USD 3.8 billion in 2009 to USD 23
billion in 2016.The trends of online shopping are also tending significantly
towards mobile devices. (REF: ASSOCHAM INDIA, JANUARY 2016)

7.3. E-Wallets and competitors in the industry
The major share in Digital payments is of E-wallets. The businesses of these e wallets has
boomed post demonetization. The Indian mobile E-wallet market is highly fragmented
and competitive. Players in the market have used heavy discounting to attract users to
their platforms.
Major players in the E-wallet space in India
(Source: Deloitte- Leading the cashless charge – Evolution of the digital wallet industry in
India,2017)
7.4. Challenges in the Digital Payment Industry
• Inertia in adoption: Cash transactions have been the dominant payment mode
for Indians for every long time Even though the penetration of digital payments
has been rapidly increasing, concerns regarding security, privacy end
transparency of charges were still prevalent among consumers. Industry players
will need to invest significant effort to overcome this barrier, not only through
marketing campaigns, but also through actual continuous product improvement.
• Risk of security breaches and fraud: The risks of breach leading to financial
loss is a very important decision factor for adoption of digital payment
technologies. Ensuring the security of the technological system is key, since
singular events of breaches can lead to large reputations and financial losses for
companies. Maintaining privacy of the consumers is also an important challenge,
as an increased amount of data is collected and stored.
• Competition from Credit & Debit Cards

• Consolidation in the industry: Despite the surge in the user base and popularity,
mobile payment companies are increasingly moving towards consolidation in the
e-wallet space. As mentioned earlier, Payo acquired Citrus Payments, Flipkart
took over the payments app, PhonePe, while Shopclues acquired Momoe, the
mobile wallet for offline stores. Lack of funding and growth in transactions
between merchants and existing customers of wallet companies has forced
consolidation in this space. Investors are looking at minimizing costs and
changing the business model, issues the firms will need to address in the future
• Impact of UPI: Introduction of UPI has created greeter competition for mobile
wallets but in the short-term, mobile wallets are not expected to face a great
impact. UPI powered apps will need to deliver on many fronts including
transaction costs and ease of use that rivals that of mobile wallets. However, there
is scope for some future cannibalization, and is a challenge the industry must face
in the long-run Moving beyond core services.
(Source: Deloitte- Leading the cashless charge-
Evolution of the digital wallet industry in India,2017)

8. RESEARCH OBJECTIVE
Following are the objectives of the study:
• To study the nature, growth, and extent of digital banking & payments services in the
Indian banking sector
• To assess the impact of digital banking on consumers and their behavior
• To examine the impact of digital banking on the operations, payment and clearing system
in the banking sector
• Comparative analysis of different banks on the basis of their digital banking products and
performances
• Study the rise of electronic payment system in India, e-wallets & payment banks
• Future growth aspects and challenges in digital banking and payments
9. PROPOSED METHODOLOGY
• Empirical / Qualitative: Qualitative
• Data Collection Method: The research is both primary & secondary in nature.
Primary data will be collected from the batchmates, students of the college and
other banking customers with the help of questionnaire. This survey was
undertaken in Institute of Management Technology, Hyderabad.
Secondary data will be collected from various researches conducted previously,
books, magazine, journals, newspapers as well as from the different Banks
website and information present over the internet.
• The project requires a brief understanding of working of banks in India, their digital
banking & payments products, and the major changes which have taken place in banking
sector after digitalization
• Sample Size: Sample size is 70
• Respondents: The respondents of the study would be the students and professors of my
college and other customers of banks retailers

10. DATA ANALYSIS AND FINDINGS
A primary research was done in order to understand customer perceptions towards Digital
Banking and Digital Payments. There was a total of 70 respondents. The analysis of the data
received from the survey are as follows:
Out of the total responses received 57.1%
were from males and 42.9% from females.
Responses were from different age groups
but majority of the responses (72.9%)
were from 18-25 age followed by 26-35
age group (22.9%). This mix will help us
understand the perception of digital
banking and payments across all age
groups
This question has been asked to
understand which aspect of digital
payments is being used more according to
their profession. Majority of the
respondents were students (88.6%)
followed by 10% who were employed. A
very small fraction of the responses were
from people who are doing a business

Majority of people i.e. 44.3% of the respondents had a bank account in SBI bank, followed by
HDFC and ICICI bank.
This question was asked to understand the penetration of the knowledge of digital banking
services. 97.1% of the respondents were aware of the digital banking services that their bank
provides.

This question was asked to understand which service is used more widely. It was found that ATM’s
was the most commonly used digital banking service. This was followed by debit/credit cards and
Internet banking.
The frequency of use digital payments was assessed with this question. 40% of the respondents used
these services 10 or more than 10 times per month.

Most of the respondents preferred to use online/ internet banking (Desktop) closely followed by
smartphone applications.
This question was asked to understand comfortability smooth functioning of the digital services that
banks provide. Most of the respondents were happy with the functioning of these services.

The respondents had seen more changes in the cash withdrawal/ cash deposit, passbook and
statement printing and transfer of funds methodology of banks at the technological front
Most of the respondents are satisfied by the Digital banking services provided by their banks

Digital payments through E-wallets
Paytm comes out to be the favorite E-wallet. Among the respondents with 94.3% uses Paytm. The
other E- wallets were at the same level, like Bhim (15.7%), google Tez (12.9%).
38.4% of the respondents use their E-wallet more than 20 times a month. This shows that people are
starting to head towards cashless payments.

Respondents majorly use the E-wallets to send money to their friends and for recharges of all types.
Majority of the respondents like the interface, transaction speed and ease of use of their E-wallets.
Majority says that it is their one stop solution for banking needs.

People have preferred the use of other E wallets like Paytm/Freecharge over their
banks e-wallet or digital Bank E-wallet. This might be because other e-wallets has
more user-friendly interface

11. DISCUSSION
After the study it can be said that the Indian banking sector has suffered revolutionary
changes in terms of technological advancement. The major changes can be seen in the
Digital banking services which are provided now these days. This report discussed about
the Indian banking structures, the impact of information technology on the sector. We
came to understand the difference between Digital Banking and Digital Payments.
Through the comparison of the Indian banks on the basis of initiatives taken by them to
enhance Digital Banking and Payments we can say that all the major Banks in India are
trying to promote its online banking and payment services in the country including the
rural parts of the country.
While through the data gathered by the research we can say that:
• The young generation is guiding the change in the sector, they are the first to
adopt the technology
• People are now moving from public sector banks to private banks as services
provided by them are far better then compared to public banks
• Private sector banks are first to adopt the new technology
• People are majorly satisfied by the services provided by their banks
• After the introduction of Digital Banking, people mostly use the ATM and card
services
• Internet banking through desktop and Smartphone applications are the most
availed digital banking service
• The discrepancies arising though bank online platforms has decreased
consecutively
• People has majorly observed technological impact on services like cash
withdrawal/transfer, passbook printing
• Paytm is the most used E-Wallet
• E-wallets are majorly used for money transfer and instead of cash in the daily
chores such as booking of a movie ticket
• People are mostly influenced by the interface of payment application, its ease of
use, secure money transfer and availability of various services at a single platform

Despite all these rosy data and increased corporate activity, the Indian Internet banking
system is also facing many challenges which include operational risks, security risks,
system architecture risks, reputational risks, and legal risks.
Apart from the security issues, there are a host of other problems like:
• PC user base in India is extremely low compared to global standards.
• The Internet user base is limited.
• Lack of infrastructure to advanced technology-based banking services.
• The absence of a regulatory framework for Internet banking transactions in India.
• The mindset of the Indian consumer, who prefers personal interactions and is not
very comfortable, doing transactions through the Internet.
However, banks are working towards addressing these problems. The security issues can
be tackled by having the bank's systems technologically equipped to evade operational
and security risks.
12. CONCLUSION
Digital banking and Digital Payments has become an important part of the Indian
banking sector and of people life, and it seems it will facilitate both in the upcoming
years. The banking today is re-defined and re-engineered with the use of Information
Technology and it is sure that the future of banking will offer more sophisticated services
to the customers with the continuous product and process Innovations. Thus, there is a
change in basic assumptions from the seller's market to buyer's market in the industry and
finally it affected at the banker’s level to change their approach from "conventional
banking to convenience banking" and "mass banking to class banking". The shift has also
increased the degree of accessibility of a common man to bank for his variety of needs
and requirements.
It will be the customer preference which will drive the industry. Customers with new
expectations and the need to build trusted relationships are forcing incumbents seek value
propositions where experience, transaction efficiency and transparency are key elements.
Digital adoption and moving away from cash would not be easy but the one who will
address these problems efficiently and provide new solutions and bring new innovations
will maximize the opportunities and will emerge as the winner.

13. MANAGERIAL IMPLICATIONS/CONTRIBUTIONS
• This project took us through the radical changes which have taken place in Indian
banking sector after digitalization
• Provided with proper understanding of digital banking and digital payments as per Indian
context
• Understanding of impact of Digital banking and payments on business of banks as well as
on behavior of bank-customers
• Helped in pointing out the perception of customers of banks regarding the demand and
awareness of various digital banking & payment services
• Understanding the ‘Digital Health’ of different banks i.e. analysis of their digital banking
strength
• Highlight the comparative positions of Indian banks with respect to other banks (foreign)
based on digitalization, which would help the Indian banks to know where it stands with
respect to foreign banks
• Understanding of different types of digital payment services
• Understanding of e-wallets and their competitive scenario in India
• Perception of Indian customers towards their bank and its digital banking services
• Perception of Indian customers towards usage of Digital Payments services through e-
wallets
• Understanding of customers wants in the Digital phase, i.e. what all things customer
wants in the Digital Banking and Payment Services.
14. LIMITATIONS OF THE STUDY
Despite best of efforts to minimize all limitations that might creep in course of the project,
there are certain constraints which fill affect the project. These are discussed below –
• Applicability of the study- As most of the responses will be collected from the
students, which are young and tech-savvy, the outcomes of the research may not be
applicable to all set of banking customers and banks.
• Time constraints- Due to the less availability of time, the number of responses
collected will be less. If it would have been more, the validity of the outcomes will be
better
• For Primary data, non-response error cannot be ruled out

15. REFERENCES
• Aliyu, A. and Tasmin, R. (2012), “The Impact of Information and Communication
• Akinci, S., Aksoy, S. and Atilgan E., “Adoption of Internet banking among sophisticated
consumer segments in an advanced developing country”, International Journal of Bank
Marketing, Vol. 22, No. 3, 2004, pp. 212-232
• Bradley, L. and Stewart, K. (2003), “A Delphi study of the drivers and inhibitors of
Internet banking”, The International Journal of Bank Marketing, Vol. 20 No. 6, pp. 250-
60
• Dorra Gherib (2014): “Adoption and diffusion of internet banking”
• George, A. and Kumar, G. (2017), “Internet Banking- A Theoretical and practical
exploration”. 1st
ed. India: New Delhi.
• Nabil Hussein Al-Fahim (2013): “A tentative Study of Factors distressing the Internet
Banking espousal: A Qualitative Study among Postgraduate Students”, Global Journal of
Management and Business Research Finance, Volume 13 Issue 8 Version 1.0 Year 2013
• Malhotra, P. & SINGH, B. (2009): “The Impact of Internet Banking on Bank
Performance and Risk : The Indian Experience”, Eurasian Journal of Business and
Economics 2009, 2 (4), 43-62
• Yadav, R and Pathak, G (2013): “Environmental sustainability through green banking: a
study on private and public-sector banks in India”
• Pikkarainen, T. et. el (2004): “Consumer acceptance of online banking: an extension of
the technology acceptance model”, Volume 14 · Number 3 · 2004 · 224–235
• Shaza W. Ezzi (2014): “A Theoretical Model for Internet Banking: Beyond Perceived
Usefulness and Ease of Use”, Society for science and education, Vol 2, No 2 (2014)
• Technology on Banks‟ Performance and Customer Service Delivery in the Banking
Industry”, Latest Trends Fin. Eco. Sc., Vol.2, No.1, 2012, pp.80-90.
• Digitalization of the financial sector and change management. (2017, Nov 21). Retrieved
from
https://www.theseus.fi/bitstream/handle/10024/123538/Piirainen_Lauri.pdf?sequence=1
• Banking in digital world. (2017, Nov 19). Retrieved from
https://www.atkearney.de/documents/856314/3998533/Banking+in+a+digital+world.pdf/
44829263-4c00-4925-ae05-9fc37217d6bb.
• This is how future of digital banking looks like. (2017, Nov 21). Retrieved from
https://www.hdfcbank.com/htdocs/aboutus/News_Room/pdf/MEDIA_COVERAGE_Mr_
Nitin_Chugh_This_is_how_future_of_digital_banking_looks_like.pdf.
• Digital Banking: Enhancing Customer Experience; Generating Long-Term Loyalty.
(2017, Nov 15). https://www.cognizant.com/InsightsWhitepapers/Digital-Banking-
Enhancing-Customer-Experience-Generating-Long-Term-Loyalty.pdf.
• The Digital Revolution in Banking. (2017, Nov 22)
http://www.group30.org/images/uploads/publications/G30_DigitalRevolutionBanking.pd
f.

• Digital banking framework. (2017,Nov 23)
http://www.idrbt.ac.in/assets/publications/Best%20Practices/Digital%20Banking%20Fra
mework_Nov2016.pdf
• An introduction to Indian banking system. (2017, Nov 23)
http://shodhganga.inflibnet.ac.in/bitstream/10603/36957/8/08_chapter%201.pdf
• What is Digital Banking? (2017, Nov 23) https://www.avoka.com/blog/what-is-digital-
banking/P
• Digitalization of the financial sector and change management by Lauri Piirainen.
https://www.theseus.fi/bitstream/handle/10024/123538/Piirainen_Lauri.pdf?sequence=1
(2017, Dec 27)
• Express computer (2017, Jan 03): SBI: The rise of the digital bank
http://computer.expressbpd.com/news/sbi-the-rise-of-the-digital-bank/20196/ accessed on
(2018 Jan 02)
• The Economic Times (2017, Aug 05): Axis Bank ready with UPI app, to tie-up with
Freecharge https://economictimes.indiatimes.com/industry/banking/finance/banking/axis-
bank-ready-with-upi-app-to-tie-up-with
freecharge/articleshow/53560618.cms%20accessed%20on%20 (2018, Jan 02)
APPENDIX:
This questionnaire is related to the research initiative to understand the customer perception and
behavior towards Digital banking and Digital payments.
Survey questionnaire is in the next page.

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