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Procedia Computer
Procedia Science
Computer 00122
Science (2017) 000–000
(2017) 463–470
www.elsevier.com/locate/procedia

Information Technology and Quantitative Management (ITQM2017)

An Empirical Study on Customer Preference towards Payment

Banks over Universal Banks in Delhi NCR
Shalini Mittala,*,Anoop Panta,Shailesh Singh Bhadauriab
a
School of Business Studies, Sharda University, Greater Noida, India
b
The Smart Cube, Noida, India

Abstract

Indian banking is witnessing a dynamic phase due to the continuous change in polices of RBI and the government of India.
In 2015, RBI issued licenses for the first time to 11 entities to start payment banksin order to improve banking penetration.
Of these 11, three entities have started their payment banks and are trying to woo customers through technology driven
services. Riding on technology to achieve competitive advantage, these banks will aid to make banking more convenient for
the customers. The paper focuses on assessing customers’ preference in using services of payment banks over universal
banks by using bivariate correlation analysis. The paper talks about the services that the customers prefer from the payment
banks. It also captures how convenience/ease is helping payment banks to expand customer base. The role of educational
background, occupation and age group as deciding factors for customers in choosing payment banks is studied in this paper.
The paper further studies the effect of reference groups on the customer’s decision to choose a bank.

©
© 2017 The Authors.Published
2017The Authors. PublishedbybyElsevier
ElsevierB.V.
B.V.
Peer-review under responsibility of the scientific committee of the 5th International Conference on Information Technology and
Selection and/or peer-review under responsibility of the organizers ofITQM 2017
Quantitative Management, ITQM 2017.
Keywords:Differentiated banks; technology; customer preference; reference groups

1. Introduction

With the integration of economies in rural and urban areas and migration of people from rural to urban areas,
the financial requirements and needs have changed over time. To fulfil these changing needs, the banking
industry has evolved its products and services over the years. Initially, customers were reluctant in using
electronic methods of banking except for ATMs [1]. Though urban educated customers use ATM services, but
for a very long time,they were still wary of using the electronic modes of banking like internet, mobile banking,
etc.However, the customer perception is changing with the ease of internet availability [2].The increase in
internet penetration is directly and positively impacting the service industry. There is a significant positive

*
Corresponding author. Tel.: +91 9717896174
E-mail address: shalini.mittal@sharda.ac.in

1877-0509 © 2017 The Authors. Published by Elsevier B.V.

Peer-review under responsibility of the scientific committee of the 5th International Conference on Information Technology and
Quantitative Management, ITQM 2017.
10.1016/j.procs.2017.11.394
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Shalini Mittal, et al. / Procedia Computer Science 00 (2017) 000–000

impact on the customer in choosing a bank based upon service quality, security, usefulness and readiness to
help the customer through e-banking [3].Banking is majorly affected by ease in using the banking
facilityespecially through the internet [4]. For a customer as convenience increases in using the banking
services, there is more likeliness that the customer will use the services again. With technology, the banks will
also be able to cater to the customers in a timely manner as the response time for operating and managing
services can be reduced to a great extent[5][6].
In 2015,payment bank licenses were granted to 11 entities[7]. This will help in increasing the competition
in the banking industry and providing better and competitive services to customers at affordable rates. RBI has
given strict guidelines to these payment banks failing which their licenses can be cancelled. The most important
factor on which these payment banksare operating is technology.The interface to interact with the clients is
based on their applications that can be easily used through smart phones. Mobile applications developed by
banks can be operated through smart phones. Thus, customerscan be connected with the banks 24×7 from any
location. In addition, customersfind it easier to transact just by clicking on their mobile phones. These payment
banks have tie ups with different service providers so that customers can use several serviceslike online
shopping, payment of bills and utility services, payment for cabs, etc. The banksnot only make
thesetransactionseasier but also more secure. This result in a win-win situation for customers and bankswhere
the formerenrichesexperience and the latterincreasesits profitability[8].
Universal banks are financial service conglomeratesthat offer retail banking, wholesale banking and
investment banking services under one roof and work with combined synergies. It was the most preferred
model of banking after the global financial crisis in the last decade as investment banks failed during that time
[9]. The scenario has been changed by RBI after the issuances of differentiated banking license as the focus
have been shifted to development by individual approach.
Therefore, the current study analyses the preference of customers in using the services of payment banks
over the services provided by universal banks. The services provided by payment banks are different than the
products and services of universal banks and there has been constant and continuous increase in the customer
base of payment banks. The paper will analyze the reasons for shift and the factors that influence the behavior
of the customer in taking such decisions.

2. Theoretical Background

Today banking is having its most dynamic phase. New products and services have been continuously
introduced basis the needs and requirements of the customers. Additionally, the services are constantly
upgraded to provide enriching experience to the customers [10], [11].There are several factors that affect the
decision making process of a customer.

2.1. Age

More and more banks are moving towards cashless services and are trying to make banking convenient so
that the customer does not have to walk to the branch for any of the services.Digitalization is the key factor of
banking. Maximum services are operated through the internet,though there is a difference between the usages
of technology with age group [12]. The younger generation is more technology prone in comparison to the
older section of society. To encourageolder people to use technology, such services should be made easier to
operate and understand [13].
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2.2. Gender

In today’s society, both men and women are actively participating in the financial decision making. The
banking industry is leaving no stone unturned to provide benefits to the female section of society [14].
Fromofferingfemale-specific accounts to providing special interest rates, all the activities are done to make
them independent. For women, an important factor to choose a financial service is ease of use [15] whereas for
males apart from ease of use, the comparative advantage they get over the other banks is also an important
factor to choose a bank.

2.3. Qualification

Banking serves all the sections of the society. They have products and services that can fulfill the needs of
all the people, but like gender, even qualification has a huge impact on the adaptation of technology in the
banking sector [16]. It has been observed that the more qualified a person is the higher the chances of him
adopting a new method or technology. Hence, the study will also find the relation between the customer’s
educational background and his use of banking technology with reference to payment banks.

2.4. Occupation

The need of financial services also changes with the change in occupation of the customer. For instances, an
entrepreneur would be interested in current account, whereas a student will be interested in a zero balance
saving account. Occupation plays a major role in deciding which bank a customer is using [17]. Internet
banking or banking based on technology affects different occupations differently and hence, people’s
perception in using these services also differ [18].

2.5. Products and Services

Universal banks in India provide a wide variety of products and services to its customers such as different
types of accounts, loans, demat services, mutual fund services, etc.,while RBI has put a restriction on the
number of products and services a payment bank can offer [19].As per RBI, these payment banks should help
in increasing the financial service penetration in the country with the help of technology. As products and
services offered by payment banks are getting popular,universal banks have also started to replicate them. The
products and services that payment banks offered were eventually also provided by universal banks [20] [21].

2.6. Usage of Services

A company always triesto retain a customer instead of just acquiring him/her. The cost that a company bears
to retain a customer is far less than acquiring a new customer [22]. To retain a customer, it is important that the
customers keep on using the products and services offered by banks. With the help of technology, banks are
now enabling the customers to use the services at their own convenience. They are providing mobile banking
through applications that is making the banking easier. This will increase the number of times the customer will
use the banking service [23]. This also increases the chance that the customer can use more number of products
offered by the bank, thus increasing the profitability of the business [24] [11].
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2.7. Ease of Use

Ease of use means convenience to use. A technology is easy to use when a customer can use it without any
difficulty or effort [25]. Ease of use was particularly an important factor for women and older people to use any
technology-based service [15] [13]. With the ease in using the technology,the customer can increase the use of
banking services [16].

2.8. Ease of Learning

People are always apprehensive in using a service if they are not comfortable in operating it. Technology
poses a problem to the customers that are not tech savvy. Hence, banks have to develop an interface where the
customers can easily learn to operate the service [26] [27]. The interface should not only be easy to learn, but
also be useful for the customer [28]. The requirement that a customer has can be fulfilled by such technology
interface.

2.9. Responsiveness of Service

The trust of the customers can be gained by responding to their queries and problems in a timely manner.
The financial sector is primarily a people centric industry as it provides financial services to individuals and
companies. The banks need to operate efficiently as all the services are directed towards the needs of the clients
[29]. The response time of serving a customer should be lowest that could help bank in winning the trust and
retaining the customer, which in turn will help bank in improvingits profitability. If internet only banks are
responsive towards their customers, the customers do not differentiate between them and traditional banks [30].

2.10. Influence of Reference Groups

A person lives in a society and is largely affected by people around him. Friends and family have great
influence on the decision taken by an individual. Likewise an individual has a great influence on the decision
taken by his friends and family [31]. The trust of a customer in using a banking service is greatly increased if
the same service is being used by his reference group [32] [33].

2.11. Security

Any financial transaction or information is highly sensitive for customers. Hence, security is one of the main
features that a customer looks before adopting any financial technology. Internet banking requires effective
methods and procedures to make banking service secure [34] [35]. The technology used should not only be
useful but also secure to use. Such security and privacy will have a positive impact on the reputation of internet
banking and customer’s commitment [36].

3. 3. Hypotheses

To understand the effect of age, gender, qualification and occupation on the use of services of payment
banks,thepaper aims to validate the following hypothesis:
H1a: There exists a positive relation between males and convenience to use banking service.
H1b: There exists a positive relation between females and convenience to use banking service.
H2a: There exists a negative relation between age of customer and convenience to use banking service.
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H2b: There exists a negative relation between age of customer and ease in learning to use banking service.
H2c: There exists a negative relation between age of customer and security provided by banks.
H2d: There exists a negative relation between age of customer and number of times banking service used per
month.
H3: There exists a positive relation between improvement in efficiency of banks and the number of times
banking service used per month.
H4: There exists a positive relation between customer’s qualificationand ease of learningbanking service.
H5: There exists a positive relation between occupation of customer and improvement in efficiency of
customer to use banking service.
H6: There exists a negative relation between the number of services offered by a bank and customer’s
inclination to use services offered by other bank.

4. 4. Research Methodology

We studied to verify the customer preference in using the services of payment banks over universal banks.
We have chosen Delhi NCR as our area of research. We wanted to explore the effect of age and gender on the
use of services provided by payment banks. For this, we have applied Bivariate Correlation Analysis [37]. A
sample of 300 respondents having bank accounts was taken through convenience sampling. Out of the
responses that we received, 255 responses were fit for the study. The perception of customers with different
background in terms of gender, age, occupation and qualification in using a service wascorrelated with
technology, ease andsecurity.The effect of normative belief of reference groups was also studied to assess their
influence on customers in taking decisions for using banking services.

5. 5. Results

Table 1: Correlation coefficient of different factors

Factors Correlation Coefficient

H1a 0.51
H1b 0.69
H2a -0.14
H2b -0.29
H2c -0.08
H2d -0.38
H3 0.84
H4 0.05
H5 0.68
H6 -0.04
The study highlighted that customers rated “convenience to use”as an important factor for choosing payment
banks. Both males and females perceived the services of payment banks easy to use, and females’ perception of
convenience was higher than the males [15]. Females werefound to be more influenced by reference groups
than males. Likewise,females also influenced their reference group to a greater extent than their male
counterparts.
Age of customer has huge impact on the way they use services from payment banks. It has been observed
that customers found it difficult to use the services of payment banks with increasing age whilethe younger
generation found it convenient as they are more technology savvy. With increase in age, customers are more
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reluctant to adapt new technology [12] and face difficulty in learning the new technology provided by payment
banks. Customers above fifty years also felt that the security provided by these payment banks was not enough
and hence, they use these services only for limited purposes.

100%
80%
60%
40%
20%
0%
Offer more Learning to More Increase Influenced Encourage Secure to
convenience operate was responsive efficiency by friends friends and use
easy towards and family family
queries

Strongly Agree Agree Neutral Disagree Strongly Disagree

Fig. 1. Males’ behaviour towards payment banks

100%
80%
60%
40%
20%
0%
Offer more Learning to More Increase Influenced Encourage Secure to
convenience operate was responsive efficiency by friends friends and use
easy towards and family family
queries

Strongly Agree Agree Neutral Disagree Strongly Disagree

Fig. 2. Females’ behaviour towards payment banks

It can be observed that if customers feel that technology is easy to use, they tend to use it more [16]. The
relation between convenience and usage of service is very high. Payment banks have made the services easy to
operate with variety of features and hence, customers perform more number of transactions from these banks.
Qualification has impact in the use of technology. The more educated a customer is, the easier it is for
him/her to use technology [16]. From the data that was analysed, there has been very less significance between
qualification and use of technology, as students who were pursuing their education were among the highest
users of these payment banks.
Contrary to qualification, occupation has a huge impact in using the services of payment banks [18].
Students, private employees and professionals were using the services of payment banks more than government
employees and other people like housewives.
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Mobile recharge
Bill payment eg – Grocery
Restaurants
Booking of cabs
Utility bill payment
Mobile transfer
Use as saving banks
For high interest rates
Others

Fig.3. Payment banks’ services used by customers

It has also been observed that a customer had other bank’s account even when his/her primary bank was
providing many products and services, indicating low degree of correlation between the number of services
offered by a bank and customer’s inclination to use services offered by other bank. The customer can keep
relationship with more than one bank [23] as different banks are satisfying different needs of the customer.
It has been observed that the customers mostly use payment banks for mobile recharge, followed by bill
payments for food at restaurants and bill payments like purchase of grocery. Customers did not prefer using
payment banks as savings bank account even when payment banks offered high interest rates. Hence,
customers did not have higher amounts in their payment banks.

6. Conclusion

The paper investigated the reasons that can affect the usage of payment banks by the customers in Delhi
NCR. It suggests that convenience or ease in use of technology has a positive impact on the use of payment
banks, but other factors like gender, qualification and occupation also impact the customer to avail the services
of a payment bank. It is further observed that, a bank can retain a customer with many products and services,
but he/she can also be using the services of other banks too as the need of the customer from different banks
can be entirely different. The customer typically use payment banks for services such as mobile recharge and
payment of bills, while they still prefer universal banks for savings. The mind-set of the customers can be
changed with proper promotion and awareness by the payment banks. Since RBI has put many restrictions on
payment banks with regards to their operations,they can be made more competitive by easing some restrictions.

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