Journal of Positive School Psychology http://journalppw.

com
2022, Vol. 6, No. 2, 763 – 771

IMPACT OF DIGITAL TRANSFORMATION OF BANKING

SECTOR IN RURAL AREAS

Dr.S.Amudhan1, Dr. Sayantani Banerjee2, Dr.J.Poornima3

1
Assistant Professor, Department of Commerce and Management, St. Joseph’s College (Autonomous),
Bengaluru

2
Department of Commerce, Assistant Professor, St. Joseph’s College (Autonomous), Bengaluru

3
Assistant Professor, Department of Professional Accounting and Finance, Kristu Jayanti College, Autonomous,
Bengaluru

Abstract
The use of digital technology to improve present processes or introduce new methods of conducting
company operations, which improves the customer experience and leads to better currency exchange
rates for the firm, is referred to as digitalization. Digital transformation in digital age means redesigning
corporate procedures. The main aim of this study was to look at the socioeconomic characteristics of
respondents who were chosen from the study area.The four main parts of digital transformation are
technology, software, data, and organizational reorganization. In India's banking system, banks play a
critical role. They are in charge of managing public finances and investing in the expansion of business
and trade. In emerging countries like India, where other financial sectors are still in their infancy, the
banking industry accounts for the majority of the financial sector. Banks' stability is vital since they act
as trustees of public funds, mobilizers, and funders of various operations at the regional and
international levels. The banking business has grown from a basic middleman to a vast commercial
enterprise.Hence, the article concluded that the impact of the digital banking services on rural customers
is significant.
Key Words: Digitalization, ICT, Rural Area, Bank Transformation and Banking Sector

Introduction increase in transaction volume, which can only

be accomplished by utilizing technology and
The banking business is through a critical providing good customer service1. As a result,
transition period in which all working visions technological progress is critical not only for
are rapidly changing, and technology is the most improving services but also for maintaining a
powerful force, allowing banks to compete by robust client base. It has changed the way people
combining knowledge with new goods or promote, advertise, distribute, price, finance,
services. As a result of the extensive use of and save money by using electronic channels
information technology at home and at work, and items. These advances need a dynamic,
many tasks are now done electronically. The aggressive, flexible, and developing workforce
Indian customer is slowly but steadily to meet the needs of customer connections,
converting to electronic banking. The use of product differentiation, values, reputation, and
ATMs and the internet is becoming more regulatory prescriptions.
common. The biggest issue facing banks is how
to protect their diminishing profitability as a Bank Transformation in Rural Area-
result of competition. A drop in profit needs an Review

Nugur Moni Das & Joyeta Deb (2017), “Regulatory

1
Indian Commercial Banks”, The IUP Journal of Bank
Capital and its Impact on Credit Risk: The case of Management, Vol.16, No.4, pp.12-14.
Dr.S.Amudhan et al. 764

Modernization and technological improvement reduced service costs and offer higher interest
were stressed in the second wave of banking rates on deposits as a result of this. Bank
reforms. The passage of the Information earnings have increased as operational costs
Systems Act of 2000 has hastened the adoption have decreased. Digital banking, according to
of e-banking. E-banking has grown into a global the report, has huge potential to reshape the
phenomenon. It is an important and visible tool landscape of financial inclusion. Digital
for significant progress, growth, modernization, banking's ease of use can hasten the economy's
and enticing competitions. Indian banking is absorption into the mainstream.
facing a fork in the road in the post-reform
period. Several transformation elements have
undergone a paradigm shift. Several internal and The Future of Digital Transformationin
external factors have influenced the bank's India's Banking Sector
decision. Banks are being forced to make major
changes in their day-to-day operations as a result According to the Economic Times, the disease
of tough competition and global pressures 2 . has completely changed how people go about
Another element requiring banks to implement their daily lives, from shopping to working to
internal and external reforms in order to handle banking. Several evolutionary changes are
the e-age problems is the WTO. anticipated in the era of internet banking. Some
consumers may expect completely autonomous
Rajeshwari (2019) 3 explored that the current banking operations due to a lack of time and
need for banking is anytime, everywhere competence, while others will demand high-
banking, which necessitates innovative, secure, level interaction. As a result, the banking
and ready-to-use solutions to satisfy the business in the future will be extremely
demands of empowered and tech-savvy adaptive. According to Deloitte, the rise of
customers. The transition from traditional digital banking is putting customers at the center
banking to a digital world is only the beginning of every digital strategy, which institutions must
of digital transformation. It is a significant shift undertake now in order to integrate successfully
in how banks and other financial organizations by 20304.
learn about their consumers, communicate with
them. Understanding digital customer behavior, In a few years, financial institutions will be
preferences, choices, expectations, and goals, required to profile their consumers methodically
among other things, is the first step toward a and precisely in order to meet legal requirements
successful digital transformation. This shift while also delivering new services that benefit
causes huge organizational shifts from a customers. Many people are interested in
product-centric to a customer-centric information solutions, and they are the future of
perspective. The role of digitization in Indian banking. Artificial intelligence, augmented
banking, variables influencing the scope of reality, distributed ledgers, and automation will
digital banking in India, digital banking trends all help to customize the banking experience
in India, and technological milestones in Indian even more. To summarize, the future of banking
banks are all discussed in this article. The data is digital change in almost every vertical, and the
used in this investigation is secondary. The sooner banks react, the better.
information was gathered from a variety of
sources, including academic papers, the
government of India publications, RBI bulletins, Need for Digital Transformation in the
and verified websites. According to the survey, Banking Sector and Its Importance
digital banking has significantly lowered bank
operating costs. Banks have been able to charge

2
Padmaja, R, Rifana Meera, M, & Valliayil 2017,
‘Employee’s Attitude towards Adoption of 4
Karjaluoto, H 2002, Electronic Banking in Finland:
Electronic Banking Services: A Case of Public Sector Consumer Beliefs, Attitudes, Intentions, and
Banks’, International Journal of Banking, Risk and Behaviors. Ph.D thesis, University of Jyvaskyla,
Insurance, vol. 5, Issue 2, pp. 11-21 pp.195
3
Rajeshwari Shettar (2019) “Digital Banking An
Indian Perspective” Journal of Economics and
Finance,Vol. 10, ( 3) PP. 01-05
765 Journal of Positive School Psychology

The digital revolution in banking has drastically platform, but this is a daunting undertaking for
changed how banks function and service their BCs across India. Furthermore, it has been
customers. It will also continue to evolve and estimated that around 2.5 million people in
become more individualized over time, as India's rural areas have signed up for cashless
previously mentioned. Traditional banking transactions, and around 55,000 merchants have
procedures are quickly becoming obsolete. They switched to a digital payment network
take a long time to complete and require a lot of (Purmal,Alam 2013)6. However, these strategic
labour. It takes a long time to complete a shifts became apparent once India's government
process. This demonstrates the importance of implemented demonetization on November 8th.
digital transformation in accelerating and The National Payment Corporation of India has
simplifying tasks. Not to mention the impact that simplified the two payment methods, UPI and
covid-19 has had on the issue. While lockdowns USSD. Furthermore, villagers are far more at
are enforced and our health protection is ease with fingerprints than with other security
degrading, people have embraced online systems. It would, however, help to increase
banking and prefer to do every single financial enrolment rates.
operation at the tip of their fingers 5.
In fact, the future generation will be early
The Paytm Method in Rural India
Internet adopters and will be a part of a digital
society that already exists. As a result, banks The largest issue for India's government and
must begin their digital transformation today in nationalized banks was to provide affordable
order to serve them in the future. People need and accessible services to the country's rural
banks just as much as banks need people. Year population. There are around 640,868 villages in
every year, private banks introduce new value- India, with over 800 million people living in
added services, therefore every bank must rural areas. Basic infrastructure, such as
embrace digital transformation to stay transportation, education, and internet access, is
competitive. All of these elements point to a lacking in these areas. Paytm, India's largest
strong future for India's banking sector. Banks digital payments provider, has taken advantage
that go through this process should expect lower of demonetization and expanded its services into
expenses and more streamlined processes. This rural India. Paytm offered merchants the ability
connection also makes it easier for customers to to use their gateway and app to send money to
have a more pleasant and engaging experience. farmers' bank accounts when they sold their
To keep up with this fast changing online produce as part of a pilot. Paytm has also worked
environment, your staff must be digitally with a number of agricultural businesses to
unskilled. integrate their payment systems with their own
platform. Payment options can also be changed
based on the borrower's income pattern, and
Digital Payment Process in Rural India's range from quarterly to daily payments7.
By integrating more than half a million 1. Digital illiteracy: Rural people are less
volunteers, also known as banking familiar with the digital world and
correspondents, job seekers in various rural computers/Smartphones. They don't even have a
programmes have achieved a new goal. By fundamental understanding of how to use a
delivering excellent training based on cashless Smartphone or a computer.
transactions, the new goal is to enroll shops and
people in the e-economy. However, every 2. Vulnerable system and mistrust: It is a
village business is being offered a incentive for common misconception that if money is parked
achieving any kind of payment over a digital at a bank, it might be cheated or withheld,

5
Ramachandran, R 2012, ‘Indian Banking: 7
Rangaswamy, N., & Arora, P. (2016). The mobile
Visualizing the next stage’, Journal of Banking and internet in the wild and every day: Digital leisure in
Finance, Vol. 32, No.3, pp. 38-40. the slums of urban India. International Journal of
Cultural Studies, 19(6), 611–626.
6
Purmal, K., Alam, M. K., & Zam Zam, N. M.
(2013). Cephalometric norms of Malaysian adult
Indian. Journal of Internal Medicine, 20(2), 192–196
Dr.S.Amudhan et al. 766

making people even more apprehensive of banks require customers. As a result, financial
digital transactions. Furthermore, the frauds that institutions can no longer take a passive
occur aggravate the situation. approach to attracting financial services
customers. The good news is that there is a less
3. Selective to non-acceptance of digital expensive and simpler way to attract these
payments: In rural locations, where there are customers to your business. The Internet
few entities to conduct transactions, non- provides excellent channels for reaching out to
acceptance by any of these few entities may these potential customers directly through their
quickly result in non-digital payment method, devices. This makes it easier to influence them,
notwithstanding a readiness to pay. which increases the likelihood that they will
4. Limited number of transactions: A large come to you. It's also known as Content
number of transactions with the same retailer Marketing, and it's the new buzzword. It
may cause a person to gravitate toward payment increases interaction and builds confidence
convenience. among prospects and customers.

5. Inadequate infrastructure: Smartphone 3. Personalized Offering: As a result of digital

adoption, internet access, electricity, and transformation, financial institutions can better
banking services are all lacking. Even India's understand what their customers want. They
largest nationalized banks are struggling to may tailor their financial services and offers to
deliver basic banking services to the rural meet the needs of their customers rather than
people. The Jan Dhan Yojana increased relying on guesswork. Banks may now increase
financial inclusion, yet most of the accounts client connection with customized services
opened under the scheme are dormant, with little thanks to new creative technical breakthroughs.
or no activity. 4. Facilitates Innovation and Adaptability:
6. Rural economy: Because most of the Digital Transformation enables financial
demands of rural people are met through cash institutions to respond to technological and
transactions, introducing the concept of digital market developments and grow their operations
payments is a difficult issue. Because the rural with incremental success. Only through
economy is generally informal or unstructured, upgrading an institution be able to meet the
cash serves better than digital transactions. needs of the next generation of clients. The rise
of shopping portals, social media platforms, and
7. Poor economy: India's rural population integrated mobile apps has given banks new
remains impoverished, with per capita income avenues to reach out to their clients. Banking
far below the national average. The rural institutions must embrace the digital world by
populace is unable to afford even the most basic undergoing a digital transformation. A
essentials as a result of this. fascinating statistic: Millennials are more
inclined to watch a three-minute YouTube video
than read a lengthy brochure. As a result, videos
The Advantages of Digital Banking are becoming increasingly popular because they
Transformation: are both succinct and engaging. Along with
videos, firms have begun to use a variety of
1.Trustworthiness: Nowadays, other kinds of digital marketing. Here are some
trustworthiness is earned online; customers digital marketing trends to consider as part of
choose their banks based on their perceptions of your Digital Transformation strategy.
the institution. The way a financial institution
displays itself online has an impact on their
perception. Banks will be able to develop Significance of Study
confidence in the eyes of the public if they are
able to execute some decent web marketing. In recent years, the banking business has seen
There are many ways to develop a relationship numerous changes. Banking services are
with a customer, but one strategy in particular required at all times and in all places. The
has yielded excellent results. demand for these services is growing by the day,
necessitating a shift to more efficient and
2. Getting new clients is less expensive and
convenient offerings. As a result, there has been
easier.Consumers require banks just as much as
a push for the use of electronic banking
767 Journal of Positive School Psychology

technologies, which lowers the cost of providing 2. To investigate the influence of the
banking services, keeps clients, boosts digital revolution on rural banking.
profitability, and allows banks to compete in the
market. As a result, digital Transformation of
banking sector in Rural Areasregarded Research Methodology
important.
The study is indented to understand the
impact of the digital banking on the rural
Statement of the Problem customers. For which, 300 rural customers
accessing digital banking were selected in the
Banking has offered customers more control Bangalore district using convenient sampling
over their banking habits. In this competitive technique. The primary data were collected
market, developing a deep understanding through the Google forms.
between staff and customers is critical. It's
crucial to understand how bank staff and
customers feel about the transition from Findings
traditional to digital banking. Whether they'll be
able to adapt to the new approach is a significant Socio-economic characteristics
question mark. As a result, it's critical to
comprehend their perspectives on the transition The rural customers of banks may have different
attitude and behaviour from the urban
and assess the challenges that arise as a result of
customers. They also face some difficulties in
the modifications. In this context, it's important
their rural area due to availability of branches
to make an attempt to study the on impact of
and services. 300 sample respondents have
digital transformation of banking sector in Rural
selected for the study and their four factors are
Areas.
considered for analysis i.e., age, number of
family members (for considering their size of the
family), annual income and their experience
Research objectives with their banks. The details are given below.
1. To study the socio-economic
characteristics of the sample respondents
selected from the study area

Table 1: Socio-Economic characteristics of the sample respondents

Characters Mean Std. Deviation N
Age 31.23 10.918 300
Number of family members 4.49 1.258 300
Annual income 421516.67 713019.114 300
Experience 7.06 5.152 300

The Table 1 indicates that average of the sample the preference of the customers are analyzed as
respondents is 31.23, number of family below.
members is 4.49, annual income is Rs.4, 21,516
and average experience with their banks is 7.06.
Further, various digital services of the banks and
Table 2: Benefits of the digital banking
Digital banking services Mean Std. Deviation
Account-to-account payments 4.00 1.274
Dr.S.Amudhan et al. 768

Personal Finance Management 3.64 0.899

Intuitive loan applications 3.41 0.851
Valuable loyalty benefits 3.02 1.124
Convenient account opening in minutes 2.80 1.460
Timely notifications 3.35 1.157
Personal digital card management 3.26 1.067
Straightforward digital insurance 3.09 1.276
Anytime banking 4.30 1.045
Trustworthy security 3.61 0.891

There are many digital services are introduced The impact of digital banking on rural
by the bakers every day. The development of customers
technology and communication, the banking
sector is adding more services to their The digital banking is preferred by the
customers. Based on the previous studies, top customers in the modern era. The technology
ten services of the digital banking are considered development improves the services in different
for the study. The Table 2 shows that availability folds. The usage of the digital banking services
of anytime banking service through the digital are ranking in the above table. The mean of the
banking is priority given by the rural customers services of the digital banking shows the
(4.30). The rural customers need more effort and customers prefer all the services (The means are
time to utilize the physical banking services. The more than 2.5). In order to find the impact of the
digital banking services help them to avail the digital banking in the rural customers, the
banking services at any time. Digital payment influence of the nature of the customers on the
method is also (4.00) preferred by the rural digital banking services is measured with the
customers most. The payment system is made help of the regression analysis. There are so
easy through the digital banking. Thirdly, the many reasons to influence on their preference
personal financial management is made simple and behaviour. The educational level, awareness
and effective through the digital banking (3.64). about the digital banking, talent and skill
The digital banking also helps to apply for loan required, gender, etc., are some of the factors
through e-form. It is also preferred by the rural could influence on the preferring digital banking
customers (3.41). Other features of the digital services. But in this study, only these four (Age,
banking follow the ranking. family size, annual income and experience)
factors are considered. The overall score from
the 10 statements are computed and summed up
for measuring the preference of the digital
banking services. The result is given below.

Table 3: Descriptive Statistics

Variable N Mean Std. Deviation
Digital banking 300 34.4733 5.54543

The Table 3 depicts that out of the 10 statements respondent can score a maximum of 50 (5X10)
mentioning various digital services of banks are and minimum of 10 (1 X 10). But the average
calculated from 5 point Likert scale. A score is calculated at 34.4733. It is more than 25
769 Journal of Positive School Psychology

(Median). Hence, it is concluded that overall

preference of the customers towards the digital
banking services is good. The result of the
regression analysis is summarized below.
Table 4: Model summary

Adjusted R Std. Error of the

Model R R Square
Square Estimate

1 0.369 0.137 0.125 5.18784

The R value is 0.369 and R square is 0.137. The 13.7%. It shows that the influence of other
adjusted R square value is 0.137. It is understood factors is more on the preference over the digital
from the value that the dependent variable banking services. The overall model is tested
digital banking services is explained in its with the help of ANOVA as below.
variance by the independent variables only at
Table 5: ANOVA
Model Sum of Squares Df Mean Square F Sig.
Regression 1255.256 4 313.814 11.660 0.000
1 Residual 7939.530 295 26.914
Total 9194.787 299
a. Dependent Variable: Digital banking
b. Predictors: (Constant), Experience, Number of family members, age, Annual income

The influence of the constant and other value (11.550) for the degree of freedom 4 is
predictors on the digital banking services is significant at 1% level (p-0.000<0.01).
found significant from the ANOVA test. The F

Table 6: Regression coefficients

Unstandardized Standardized 95.0% Confidence
Coefficients Coefficients Interval for B
Model t Sig.
Std. Lower Upper
B Beta
Error Bound Bound
(Constant) 30.622 1.449 21.130 0.000 27.770 33.474
Age -0.066 0.028 -0.129 -2.339 0.020 -0.121 -0.010
Number of family
1 0.839 0.244 0.190 3.446 0.001 0.360 1.318
members
Annual income 0.000001 0.000 0.153 2.704 0.007 0.000 0.000
Experience 0.230 0.059 0.214 3.910 0.000 0.114 0.347
Dr.S.Amudhan et al. 770

a. Dependent Variable: Digital banking services

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