Case Study of Online Banking in India:

User Behaviors and Design Guidelines

Jhumkee Iyengar1 and Manisha Belvalkar2

1
User in Design, Principal Consultant, 102, Gartner House, Nachiket Park, Baner Road,
Pune 411045, India
2
Pure IT Usability Research, Practice Head, Tanntrr, 1187-11, Vasantrao Deshmukh Road,
Shivajinagar, Pune, 411005, India
[email protected], [email protected]

Abstract. This paper documents online banking trends, behaviors and expecta-
tions of Indian consumers and banks. It is based on excerpts of a large industry
case study of users from 4 leading banks. While banks view online banking
essentially as a technology solution, it is a relatively new area for Indian con-
sumers and not yet self-supporting. Being a savings based culture still, Indian
consumers are cautious about their financial assets. They are also relatively re-
cent entrants to internet based services. Design of these systems must therefore
be based on an understanding of these users’ outlook and priorities through task
centric, security assured and service oriented solutions minus the technological
challenges. Design lessons suggest viewing online banking not just as a conven-
ience alone anymore but beyond it, to provide service, simplicity and security.
This will create satisfied online banking customers and therefore profitability
for the bank.

Keywords: Banking, online banking, user perception of banking, banking in

India.

1 Introduction

The Internet has revolutionized the way we live, shop, entertain and interact and also
the way we save and invest. Internet banking arrived in India in the late 1990s [1].
ICICI was the first bank to champion its usage and introduced internet banking to its
customers in 1996. With lower internet costs and increased awareness about elec-
tronic media, online banking established itself only in 1999. Other banks followed
suit, including HDFC, Citibank, IndusInd and the now redundant Times Bank [2].
Internet banking changed both the banking industry as well as banks’ services to its
customers. ‘Anywhere banking’ came to be recognized as an opportunity also for
differentiated and competitive services. Ancillary online services like checking
account status, fund transfer, ordering demand drafts, loan applications, credit card
verifications, shopping portals etc. as well as not requiring a visit to the branch during
office hours were viewed as high-value offerings and increasingly started to become a
necessity rather than a service.

D. Katre et al. (Eds.): HWID 2009, IFIP AICT 316, pp. 180–188, 2010.
© IFIP International Federation for Information Processing 2010
 Case Study of Online Banking in India: User Behaviors and Design Guidelines 181

Once banking institutions recognized the low processing cost per transaction via
the internet, they began viewing online banking as an extension of the bank rather
than as an add-on service. The motivation to introduce online banking now also in-
cluded new business potential, additional funds from new and existing customers,
expansion in geographical reach, image as a tech-savvy bank especially if targeting
the youth and the threat of customers shifting loyalty if they did not introduce it [3].
Nationalized banks initially viewed online banking as insecure and counterintuitive
and were therefore hesitant. But eventually, SBI, Canara Bank, Allahabad Bank, Pun-
jab National Bank, Bank of Baroda, Syndicate Bank and others introduced it. SBI
launched internet banking in 2001 and experienced good response. In general, internet
banking saw an exponential rise in users [4].
Today, banks encourage their customers to use online banking. Besides cost and
revenue impacts, this paradigm shift is because they also recognize that self-control
transactions have greater potential for customer satisfaction and retention. Online
banking has thus come to be among essential banking services.
The approach to adopting online banking however is often to merely stay abreast
of industry and technology and online banking is becoming a separate business unit
driven by technological possibilities. The user often has minimal place in such an
approach as evidenced by non-human centric experiences that flourish. However, the
cultural and organizational shift needed by Indian banks to draw old customers into
this new banking channel as well as to draw new customers requires a user centric
focus.
But how much have banks paid attention to the user? How is the overall experience
and how do customers perceive their bank as they struggle unaided in the comfort of
their homes? How cognizant are banks that customers silently leave after getting frus-
trated? Do they measure how much revenue they are losing because of a technology
focused approach to online banking? How do Indian consumers behave in this dichot-
omy between technology barrier and convenience?

2 Indian Banking Industry and Online Awareness of Its User Base

A large chunk of the Indian banking industry still belongs to the public sector banks
having the most extensive network of physical branches. These are followed by large
private banks and lastly by multinational banks (MNC) who have the smallest
physical network and therefore their online banking needs to be the most developed
and able to address user needs without requiring human intervention. This is depicted
in Figure 1. The fact that most government organisations have their payroll accounts
with public sector banks contributes significantly to the large customer bases of these
banks. Traditional public sector banks have existed for many years and have serviced
diverse income groups. This has resulted in their customer base being huge as well as
belonging to a wider demographic representation, given India’s heterogenous
population as well. However, most of the traditional customers prefer to bank with a
‘bank with a human touch’ and prefer public sector banks as they form an emotional
relationship with their bank personnel, which is not really encouraged by private
sector or multi-national banks [5].
182 J. Iyengar and M. Belvalkar

Fig. 1. Indian Banking Scenario Fig. 2. Indian Internet Banking Land-

(representative only, not to scale) scape (representative only, not to scale

The new generation which has been banking for less than a decade prefers faster
transactions and more professional relationships as compared to the traditional
customer. For them, opening a bank account is incidental and connected to their direct
deposit salary accounts. The private sector bank has captured the corporates and IT
sector as compared to the public sector bank. As a result, banks in the public sector
tend to have a huge user base, but very few of their customers have the technology
orientation or the inclination to use electronic media for banking. This is depicted in
Figure 2. Therefore, the awareness of customers of public sector banks about online
banking as an active banking tool is relatively lower. To tap this type of user base that
has an inherent barrier to and not an obvious need for internet usage, just adding an
internet banking channel to a bank’s lists of services may not be enough of an
incentive. A streamlined, simple and customer satisfaction oriented approach to
service novice users only can help banks achieve better internet banking penetration.

3 User Research Study

3.1 Objectives

User research studies of four banks were conducted to understand users’ current rela-
tions with their bank, their perception of offline and online banking services and to offer
recommendations for more customer-focused services. We specifically investigated:
• Users’ offline and online expectations of their bank and association with its
brand
• Homepage as a touch point for encouraging online banking
• Customer engagement barriers for online banking services
• Concept of new online services like branchless banking.

3.2 Methodology

The methodology involved recruiting and studying users from the banks’ customer
database, categorized on the basis of usage and transactional behaviours. The 3 types
of users interviewed were:
 Case Study of Online Banking in India: User Behaviors and Design Guidelines 183

• Non-users who don’t bank online

• Users who bank online but only check account status and don’t do any transactions
• Users who perform extensive online transaction via their bank account

Table 1. Classification of studies conducted and methodology applied

No. Objective of Study Method and No of Cities

Techniques Users
1. Offline and online Quantitative research 800 Mumbai,
expectations and association Ahmedabad,
with the brand Qualitative research 96 Delhi, Jaipur
2. Homepage as touch point Usability Test and 48 Mumbai, Pune
for encouraging online One-on-one Interview
banking
3. Identify customer Usability Test and 48 Mumbai, Pune
engagement barriers in One-on-one Interview
online banking
4. Concept Testing for new Focus Group 48 Bangalore,
online services Discussion Mumbai, Delhi

4 Findings: User Perceptions and Attitudes to Online Banking

In response to how they perceived their general banking experience, users mentioned
requirements mentioned below that have been detailed in Table 2:
• zero minimum balance
• presence of ATM ‘everywhere’ (redundant now as all ATMs are connected)

Table 2. User perceptions and expectations

Priority
Users’ Perception Total
1 2 3

Zero minimum balance 410 135 95 640

Presence of bank’s ATM 372 150 58 580

“everywhere

Proximity from home/work 220 115 105 440

Fast growing and high savings 77 55 228 360

interest rates

Air-conditioned interiors 40 80 200 320

Responsive banking 15 160 125 300

Base – 800 respondents (Multiple responses).

184 J. Iyengar and M. Belvalkar

• proximity from home/work

• fast growing and high savings interest rates
• air-conditioned interiors
• responsive banking
It was seen that the ability to bank without visiting the branch was a high priority.
Responses to queries about their online banking experience, expectations and con-
cerns by user segments have been generalized and detailed in Table 3 below.

Table 3. Issues of different types of users with online banking

Non-users Non-transactors Transactors

Inhibited about security of Felt lost in content jungle Looked for error-free
sensitive information transaction experience
Found the entire process Concerned about online Valued advanced options
complex security that saved time
Absence of an online demo for Did not find clear directions Wanted online, the entire
initiation is a roadblock & action points spectrum of services of the
bank

Broadly, all users emphasized 3 major attributes they considered important for
their online banking experience: Simplicity, Security, Service.

4.1 Simplicity

Users and non-users expect online banking to be further simplified than what they see
today. Some expectations:
• Better link label clarity suggestive of action required
• Better navigation that highlights and presents relevant information in context
and at the right time needed
• Better content partitioning according to popularity and priority of action.

4.2 Security

Non-transactors and non-users reported that they did not transact online because:
• concerns about the security of their banking information is not fully addressed
• technical glitches and unreliability create confusion and anxiety
• additional security gateways were absent.

4.3 Service

Almost all transactors demanded better service. They wanted:

• More services to be available online
• Better and faster customer support channels like online chat to solve banking
hurdles
• Innovative and intuitive interface.
 Case Study of Online Banking in India: User Behaviors and Design Guidelines 185

This is depicted in Figure 3 below.

Fig. 3. Users' emphasis on attributes according to their usage

5 Banking Industry Perspective and Approach to Users

Based on our client interactions before and after the studies, we found that banks view
online banking as an important medium of servicing its customer base. While they
recognize it as a direct cost savings, they do not necessarily recognize it as a point of
service and hence do not give it the attention they give customer service at the branch
where they take great pains to satisfy the customer, and to address the smallest of que-
ries common in live banking.
A simple example is their changing banking terminology without realizing its im-
pact on the customer that can leave an average customer baffled. A label like ‘E-
monies National Funds Transfer’ is very confusing for the customer. Changing it to a
simpler ‘Funds Transfer’ reduces confusion and allows the customer to complete their
transaction. Another example is use of marketing gimmicks resulting in loss of usabil-
ity. If other banking portals have a link called ‘SMS Alert’, then coining a similar
link called ‘InstaAlert’ only serves to create confusion.
Many banks have now understood that online banking is here to stay and that they
need to upgrade and enhance their offerings for simple solutions and desired security
to retain and attract customers [6]. They also need to recognize that they must offer
the same convenience and service that people have come to expect at the branch as
well as in other areas of their life like shopping online [1]. Payment for shopping too
requires users to invariably go through the online banking portals. Banks need to also
understand that transition of a new user to an advanced one is a gradual process that
needs to be supported by encouraging users to explore with confidence by offering
intuitive processes and user-friendly nomenclature. Only when users feel confident
with the system, will it be easy for them to explore new services through cross-sell
banners and other means that are popular and successful in banking.
186 J. Iyengar and M. Belvalkar

Banks are however yet to regard online banking as a ‘person-less’ service counter
where the user is left to fend for himself/herself amidst stiff usability barriers and re-
alize that it costs them. The attention they accord their other points of service are
therefore deficient in online. (See Fig. 4) Setting up the hardware for online banking,
which is viewed as the end point for the bank is often the beginning from a user’s
perspective. That a methodical user-centric rather than a technology-centric design
approach is a systemic investment that creates satisfied customers, reduces costs and
increases revenue is yet to be accepted by the banking industry.

Fig. 4. Services offered via various banking channels

6 Design Lessons and Recommendations

Banking is a task-focused activity and also deals with people’s money. Both need
ease of use and psychological comfort of the user as fundamental requirements, for
example, giving feedback like ‘your money will be transferred in 24 hours’. It specifi-
cally needs a clear task flow, clarity of language and terminology and support
available at all times. Further, if a task completion process is intuitive and logical, the
user is more likely to gain confidence and increase usage of the internet for all their
banking needs, thus increasing revenue potential for the bank. An online demo of the
service is an easy way to address both the task centric nature of banking as well as
address the comfort level of the wide variety and vast numbers of novice users.
An example of customer focused online banking would be specialized banking for
the Islamic community. It is a huge business opportunity. To capitalize on that oppor-
tunity, banks must understand and design for highly specialized user behavior, expec-
tations and critical aspects of the various Islamic cultures. Many Islamic cultures are
exceptionally collective in decision-making and tend to be more concrete and risk-
averse [7].
There is a wide variety and large numbers of novice users among Indian online
banking customers today. Their view goes beyond the novelty of online banking.
 Case Study of Online Banking in India: User Behaviors and Design Guidelines 187

They expect their experience to be similar to what they get at a service counter. The
unfamiliar virtual experience cannot be completely different from their familiar
physical experience. Indian users have shown their readiness to accept online banking
as a sales channel by purchasing through cross selling online. But this is possible only
if they are able to navigate the bank site. Banks need to view and reflect this through
thoughtful designs of their offerings. While banks have clarity of their market seg-
mentation, they must progress to behavior-based segmentation and user-centred
methods and move beyond predesigned technology solutions. Online banking design
must create a 'quick in and out' experience, ensure success in transactions users under-
take, arouse curiosity and attract the customer to explore. Studying users, defining
user types, benchmarking designs and testing for ease of use are critical for this. Spe-
cific needs therefore are: clear task flows, brevity and clarity of language and terms,
basic functions made obvious to average users and support available at all times. Be-
sides short-term solutions, the long-term strategy needed is to not just create but also
measure user performance with the design to ensure it is self-evident and transactions
are truly self-controlled.

7 Conclusions
It is clearly in the interest of banks to encourage their customer base to use online
banking. Current designs of online banking systems do not address users’ needs and
expectations of online banking. User-centred design methods can achieve this. Inter-
net, phone, paper statements, ATM and visit to the branch all need to appear as one
holistic experience [8] for the customer who is ‘anybody. In India, banking, like sev-
eral other transactions, continues to be relation-based and in need of human assurance
and intervention, technology notwithstanding. Hence this is particularly significant.
True benefits will be seen when banks use this technology to offload customer service
costs and increase sales by maximizing self-service. As 21st century banking users
entrust the care of one of their most important assets to cyber space, a seamless, stress
free and successful experience is essential. Design with users’ success as focus, con-
tent understandable by ‘anybody’, supported with demos and help to reduce intimida-
tion, will justify investment in online through increased usage by satisfied customers.

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