RESEARCH ARTICLE

DIGITAL BANKS CHALLENGES AND OPPORTUNITIES IN INDIA

SURYA KUMAR.S
B.COM, LOYOLA COLLEGE, CHENNAI 600034.

ABSTRACT
The banking industry has been rapidly developed in the past years. The use of digital banking
has become an integral part in our life. And it is the most practical and successful way in
creating customer value. Digital banks are virtual banks which is only exist in the internet.
The digital banks can be accessed through internet using smartphone, laptops, computers, and
other gadgets. Digital banks substitute the cheques and other paper work used in the
traditional banks. The advancement in computer, smartphones, internet and communication
technology can attract customer towards digital banks. This is a descriptive study which deals
with the challenges and opportunities of the digital banks in the customers perception. This
paper is aimed to identify the factor affecting customers adaptation towards digital banking
services, challenges faced by the customers and suggestions to improve the services of digital
banks. A structured questionnaire was developed, a survey conducted among 187
respondents, Percentage and Factor Analysis were used in this study. The result reveals that
respondents of various age groups prefer digital banks over traditional banks. The customers
faces some challenges while using digital banks services, The customers feel digital banks are
convenient, easy and funds are transferred instantly. The implication of the study, suggestions
to enhance digital banking services and scope for future research is also being highlighted in
this study.
INTRODUCTION
Digital bank allows the customers to do their banking transactions with the help of gadgets
and through the internet. Digital banks are known as internet banking, virtual banking, web
banking or home banking. Digital banks provide its customers all the traditional banking
services available in a local branch. Digital banks offer numerous benefits to its customers.
One of the advantages is that it eliminates geographical barriers for clients. Customers' access
to their accounts at any time and from any location. The digital bank attracts customers of the
traditional banks due to its convenience and innovative techniques. Internet-based services
are provided via digital bank; it is time-efficient, easily accessible, and has low transaction
costs. Because of the self-access technology, customer attrition has decreased and customer
loyalty has increased. The digital banking services are free from dangerous situations thanks
to the detection and prevention system and different virus control devices.

Some previous study focused on the customer perception on the digital banking(C. Mbama,
2016) and the perception of the managers(C. I. Mbama et al., 2018),factors that influencing
adaptation of digital banking (Massilamany & Nadarajan, 2017),the recent trends in digital
banking (Wewege et al., 2020) also literature review of the digital banking in the realm of
banking sector(Sardana & Singhania, 2018),What do consumers really want? In the concept
of digital banking(Barquin & Vinayak, 2015),Use of digital banking in improving services at
banks (Marlius, 2022) these helped in investigating the challenges and opportunities of the
digital banks among the consumers.

REVIEW OF LITERATURE
Digital Banking, Customer Experience and Bank Financial Performance: UK
Customers’ Perception:
The study looks at how digital banking affects UK banks' financial performance, customer
experience, and loyalty. Through surveys and financial report analysis, it determines
important elements including perceived value, risk perception, and service quality. There are
strong relationships between financial performance, customer experience, satisfaction, and
loyalty. The findings have global implications for bank management, although being centred
around UK banks. Financial performance and marketing insights for banks are offered, with a
focus on customer qualities in digital banking. Innovative use of financial ratios and Net
Promoter Score as dependent variables improves comprehension of the relationships between
research factors.(C. Mbama, 2016)
Disruptions and Digital Banking Trends:
The study looks at how customer-focused offerings from fintech companies and tech-media
carriers are challenging traditional banking. With a focus on transactions between individuals
and digital wallets, digital neo-banks offer loans, microfinance, and payment services.
Fintechs are viewed as partners for traditional banks in their digital transformation, despite
issues with scale and trust. It draws attention to the disruptive potential of technology and
calls for infrastructure investment in data security and connection as well as teamwork. The
progress of digital banking will be shaped by the incorporation of future fintech technologies,
which will need standardizing APIs within regulatory frameworks. (Wewege et al., 2020)
Digital technology in the realm of banking:
The theoretical literature on digital technology in the Indian banking industry is reviewed in
this study. It pays attention to how the development of digital technologies has brought about
major disruptions and new practices in banking, most notably digital banking. Advancements
in technology are reflected in the development of digital banking products such as mobile
payments, ATMs, and deposits. For banks, utilizing digital infrastructure opens a world of
possibilities, both locally and globally. Banks are forced to implement new digital models for
value creation in the face of heightened competition. The study looks into how the breadth
and direction of Indian banking have been affected by digital technologies.(Sardana &
Singhania, 2018)
Digital Banking in Asia: What do consumers really want?
This study illustrates that Asia is witnessing a surge in digital banking due to a strong
environment and rising smartphone, internet, and e-commerce usage. As customer demand
swings toward enticing digital solutions, incumbent institutions are facing substantial risks.
According to survey data, a significant part of respondents are willing to transfer different
account balances and are open to transferring holdings to banks that offer alluring digital
services. Digital banking may seem appealing, but physical banking is still significant in
Asia. This means that digital cost-effectiveness and the requirements of customers and
regulators for physical presence must be balanced.(Barquin & Vinayak, 2015)
Digital banking challenges and opportunities in India:
This study finds that one major advancement that offers marketers challenges as well as
opportunities is online banking. Minimal spending plans, conventional banking practices,
security worries, technical issues, and transactional difficulties are some of the challenges.
Notwithstanding these obstacles, the industry is in high demand, which creates opportunities
for increased sophistication and wealth. Online banking has many advantages, but it also has
drawbacks that require careful consideration and skilful management on the part of marketers
in order to satisfy customer demands and preserve operational effectiveness.(P, 2019)
Banking Business Innovations: Conceptual Foundations of Modern Economy
Development.
The purpose of this study is to give a scientific basis for the theoretical and methodological
aspects of the notion of digital banking, which is a significant advance in the banking
industry. Using a variety of scientific techniques, such as analysis, generalization, modelling,
and abstraction, the study reveals important processes of innovation in banking services,
which is indicative of the innovative development of the modern economy. The study
concludes with recommendations for developing a mobile payments ecosystem for
commercial banks, highlighting the significance of digital banking in today's financial
environments.(Yeremenko & Rudskaya, 2016)
Digital Banking, Customer Experience and Financial Performance: UK Bank
Managers’ Perceptions:
The effect of digital banking on customer experience and financial performance is examined
from the perspective of managers in this study. A thematic study of senior UK bank managers'
interviews reveals the relationships between the elements that impact the digital banking
experience and how they affect consumer satisfaction, loyalty, and financial performance.
Although unique to the UK, the results can be repeated in other industrialized nations,
providing worldwide applicable insights. The suggested model clarifies the motivations
behind and results of the customer experience, offering theoretical support for more
investigation. Practical ramifications include highlighting the value of employee-customer
contact, service customisation, and digital innovation, as well as enhancing interactive
marketing and digital banking design to improve customer experience and financial
performance. This study provides novel insights into the efficacy of digital banking, which
are essential for multichannel marketing and improving financial performance as a whole.(C.
I. Mbama et al., 2018)
Use of Digital Banking in Improving Services at Banks:
Using qualitative data analysis based on the experiences of digital banking users and
customers who used digital applications in 2021, this study investigates the impact that digital
banking deployment plays in improving banking services for customers. The impact on
customer loyalty and service quality, as well as the alignment with Bank Indonesia criteria,
are evaluated in the study. The findings show that the adoption of digital banking satisfies
legal requirements, improves banking offerings, and fosters greater client loyalty. This study
provides information on how digital banking can be used in practice to enhance overall
banking experiences and customer satisfaction. (Marlius, 2022)
How Digital Banking Has Brought Innovative Products and Services to India:
Banking was revolutionized by digitalization, which replaced laborious procedures with
paperless transactions and completely changed both the client and banking experiences. In
India, the development of technology spurred industry growth and banks innovated to satisfy
customers. Products and services were redefined by digitalization, making transactions easy,
quick, and convenient. This change underscored the significance of digital technologies, as
seen by the need for all industries to adapt by 2020. (Haralayya, 2021)
RESEARCH OBJECTIVES
  To identify the challenges faced by digital bank users.
 To identify the challenges in using the digital banks services in the perception of
common people.
 To identify the difficulties in adapting digital banks in the perception of non-digital
bank users.
 To examine and provide suggestion to the development of digital banks in India.
 To examine the opportunities of the digital bank sector in India.
SCOPE OF THE STUDY
The main objectives of the research is to understand the idea of digital bank services in India
and to pinpoint the elements that lead consumers to choose these services over traditional
banking options. Additionally, this study suggests banks on how to make their products and
services more widely known to both their customers and their potential customers. Both
public and private banking institutions can use the survey to measure customer sentiment.
RESEARCH GAP
The reviews of the literature that related to the outcome of the digital banking idea are
thoroughly examined from number of angles. Every study has made an effort to examine how
consumers see online, mobile, and digital banking services using a variety of frameworks.
Identifying the perception of digital banking services was one of the many creative ideas that
emerged from the study of the review of literature. While some researches have examined
aspects affecting continuing usage of digital banking, such as service quality, impact, and
customer satisfaction, most studies have concentrated on the level of digital banking
adoption. As a result, most of the research only looked at one or two aspects of online
banking. The main objective of this study is to determine the major factors influencing Indian
consumers' perceptions of digital banks and their services. Digital India campaign has the
potential to transform the traditional banking methods. As a result, further study is needed to
identify the major factors impacting customers' adoption of digital banks in India's digital
economy. This was determined to be a research gap following a careful examination of the
literature.

RESEARCH METHODOLOGY
A methodical approach to the research problem is called methodology. It can be thought of as
the science of analysing scientific research methods. The study is descriptive in nature.
Finding out what makes consumers think that digital banks and their services are better than
traditional banking.
Data collection: A well-structured questionnaire was used to help collect primary data.
Books, journals, research articles, etc. are referrals to secondary sources.

Design and size: The results from both users and non-users of digital banks were gathered by
convenience sampling. The study's statistical analysis used the 187 respondents who
completed the questionnaires.
Structure and design: The questionnaires designed with demographic profile and the factors
influencing the customers perception on digital banks. It is designed for both users and non-
users of digital banks.
Statistical analysis: The collected data were statistically analysed using SPSS. The statistical
tools used are Percentage analysis, Exploratory factor analysis.
DATA ANALYSIS AND INTERPRETATION
This section explains the procedure for statistically analysing the data and producing the
findings. The demographic information gathered using structured questionnaire was used for
the study's statistical analysis.
Frequency analysis: The respondents are asked with demographic questions and the
evaluated results are portraited in the following table.
Demographic variables Categories Frequencies Percentages
Gender Male 86 46.0
Female 101 54.0
Total 187 100.0
Age 15 -20 years 143 76.5
20-30 years 30 16.0
30-40 years 7 3.7
40 years above 7 3.7
Total 187 100.0
Educational qualification SSLC 15 8.0
HSC 31 16.6
UG/PG 141 75.4
Total 187 100.0
Aware of Digital banks Yes 170 90.9
No 17 9.1
Total 187 100.0
Source: Collected data.
The frequency analysis reveals the demographic profile distribution of the respondents-
Majority 54% are Females. In age wise classification majority of the respondents are in the
age group of 15-20 years.75.4% of the people are Under graduates and Post graduates.90.9%
respondents were aware of digital banks and its services.
Factor analysis: The exploratory factor analysis was executed by using Principal Component
Matrix Method and Varimax Rotation, to identify the challenges of the digital banks in the
perception of the customers. Totally 11 variables were taken up for analysis out of which 1
variable is eliminated since the factor loading was very low and the rest 10 variables were
reduced to 5 factors. The result of the rotated component matrix is given below.
Factor
Factor Naming Variables
Loadings
Do you agree that digital banking save time and energy 0.748
Factor-1 by eliminating the need to stand in line at banks or pay
utility bills in person?
Transaction
By using new technologies to speed up transactions 0.721
speed and Time. processing and improve transaction speed is important for
digital banks operating in India?
Conducting transactions through digital banks in regions 0.602
with limited or unstable internet connectivity is
challenging for users?
Factor-2 Users often experience inconvenience or a lack of 0.797
benefits when using digital banks compared to traditional
Inconvenience
banking methods.
& Security The security measures implemented by digital banks are 0.700
effective in protecting customer data and transactions.
Factor-3 Compatibility issues with devices or software frequently 0.638
result in longer transaction processing times for users of
Compatibility
digital banks.
Digital banks need to differentiate themselves from 0.835
traditional banks to attract more users and demonstrate
the benefits of digital banking in India.
Factor-4 Data privacy, frauds and scams prevents people from 0.856
opening an account in a digital bank.
Data privacy
Factor-5 Digital banks transfers are completed quickly when 0.877
compared to traditional banks.
Benefit &
Regulatory compliance and security standards are 0.528
Customer trust
essential for digital banks operating in India to earn
customer trust
Source: Computed Data
CONCLUSION
The result of the study illustrates that majority of the respondents are in the millennial age
group. The customers prefer to do digital banking transaction always rather than visiting the
bank. The customers prefer digital banks over traditional banks since it is compatible for
them. Most of the respondents are aware of the existence of digital banks. The users digital
banking transactions are influenced by the factors such as Transaction speed, Compatibility,
Data and Security. These factors are significant towards the adoption of the digital banks.
Customers agrees that digital banking transactions saves their time. The funds are transferred
instantly just by a click. Using digital bank’s services are easy and convenient.
SUGGESTIONS TO IMPROVE THE SERVICES OF DIGITAL BANKS
 Online bank services need to attract and hold customers attention through more
effective marketing and advertising tactics. Consumers should be aware of the
features, benefits, and conveniences of using the services of digital banks.
 To increase the application of security and privacy of the digital bank services,
bankers should reassure customers and give information regarding trust of digital
banks.
 To improve the quality of digital banks services, bankers should work with consumers
to establish secure digital banking practices and implement appropriate risk
management.
 An improvement in the level of customer expediency will raise the degree of
customer satisfaction. Focus on providing appropriate network knowledge and digital
infrastructure education.
 Digital banks should upgrade their customer service systems and expand the scope of
their management strategies. By providing reward points and other incentives,
consumers will be encouraged to use the digital banks' services.

IMPLICATION
 The major suggestion is to deal with the privacy and security concerns.
 It is important for banks to develop trust with both their current and future
customers.
 They need to ensure that using the services of digital banks is reliable, secure,
safe, and steadfast.
 Customers should be given a guarantee by the banks that their financial and
personal information is kept private.
 Customer attraction towards digital banks can be achieved by improving the
digital banking experience and offering quick, accessible services at affordable
costs.
  The government has to focus on enhancing internet accessibility while taking
measures against hackers and cyber fraudsters.
 All of these will increase consumer trust, which will increase the adoption of
digital banks.

DIRECTIONS FOR FUTURE RESEARCH

This study focuses on both users and non-users perception on the digital banks. And the
primary goal of the study is to identify the challenges and opportunities if the digital banks,
The future research can be performed on businessmen, bankers and corporates perception.
The perception of digital banks users only can be done. A comparative study on identifying
the primary reason of adopting digital banks can be carried out.

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