INTRODUCTION

INTRODUCTION

IMPACT OF TECHNOLOGY
The major impact of technological revolution in banking can be stated in terms of: Paradigm shift from traditional banking to customized banking as the services can be delivered via computer and Convenient banking i.e. "Anytime, Anywhere banking". A customer can check balance by logging into banks website through a user name and password. In this way he can enquire balance, status of cheques, perform funds transfers, order drafts, request issue of cheque books etc. It has been observed that customers who adopt online banking are typically more profitable to the bank, stay with the bank longer and use more products strengthening the bank customer relationship8. Information Technology and Internet banking has bridged the information gap, which was interestingly because of human involvement. Banks can make the information of products and services available on their site, which is, an advantageous proposition. Prospective customer can gather all the information from the website and thus if he comes to the branch with queries it will be very specific and will take less time of employee. Customer can visit these websites and can compare the services offered by a bank with that of another. Customer can get all the information, by saving money and time. The trend thus emerging out is that of virtual corporate system where the human role is minimized to maximum effect. The overall banking size and structure has increased considerably. It can also be accredited to the current market characteristics. More private players and multinational banks are establishing their base in India. Earlier nationalized bank dominated the scenario. Now after deregulation private banks have emerged as a powerful force. For example with over a million customer accounts, 600 branches and a network of 2,000 ATMs across country YES bank leads the way10 in private bank category. As a result, there is a fierce competition among these players for capturing the savings of individuals and current accounts of organisations. This has been spearheaded by the liberalization in 2

the insurance industry. Insurance industry is giving fierce competition through their offerings on various policies. This sudden surge has necessitated the use of technology in offering better services competitively. Most of the banks have coupled IT with their offering to add value. Several banks have been positioning themselves as a one-stop shop financial service provider with a fairly exhaustive range of products, including deposit products, loans, credit cards, debit cards, depository (custody services), investment advice, bill payments and various transactional services. These apart, banks have also been entering into the business of selling third-party products such as mutual funds and insurance to the retail customers. To provide their customers greater flexibility and convenience as well as to reduce servicing costs, banks have been investing to computerize their branches and in new delivery channels such as ATMs, phone banking, internet banking and mobile banking.

INTERNET BANKING FEATURES & BENEFITS COMPLETE CONTROL OVER ACCOUNTS

View your bank account / credit card balances and transactions at your convenience Transfer funds online to accounts with YES and other banks in India Create and manage Fixed Deposits Get cashier's orders and demand drafts free Charges at Branches Cashier's Order Minimum Rs. 50 for amount upto Rs. 100,000 or 0.1% of value for higher amounts Charges Online FREE FREE

Demand Drafts 0.3% of draft value Request for E-Statements for your bank account and credit card

Manage your investments - buy, redeem and switch between mutual funds online You can also stop cheques, order new cheque books, redeem bonus reward points and more using HSBC's internet banking service 3

Register for E-Statements on your bank accounts and credit card and view your statements online. You can create an archive of your E-Statements and access them when you like. You can also store these E-Statements for your records.

FEATURES & BENEFITS

With instant access, view your latest accounts and credit card transactions anytime at your convenience No more worries about lost or delayed statements; Stay updated on your card dues and payment dates Participate in environmental change; reduce paper consumption when you opt for e-statements This service is available to you absolutely FREE

The main purpose that banks have been serving since their inception is keeping our money safe for us. While keeping our money safe, they also let us earn a certain amount of interest on the money deposited with them. Traditional banks have been doing this, and internet banks continue the same function. The only difference is in the way the transactions are made. Online banking has been around for quite a few years. In fact, it was introduced in the 1980s and has come a long way since then. The last decade has seen a profuse growth in internet banking transactions. Several pieces of legislation have also been introduced in this area. Though it began in the 1980s, it was only in the mid nineties that internet banking really caught on. What attracts customers to internet banking is the round the clock availability and ease of transactions. Studies estimate that internet banking still has a long way to go. There are several banks that have customers who prefer banking in the traditional ways. 4

Statistics released by the YES bank show that only 40% of the banks in the India offer internet banking facilities worth mentioning. All the others may have an online presence but do not have enough online transactions to justify their presence on the internet. Some customers have been known to turn to internet banking due to dissatisfaction with standard procedures and practices. The total absence of human interaction appeals to some people. Some customers turn to internet banking facilities for security reasons. This is mainly because of customers being assured of banks' ability to keep transactions safe and secured. Most online transactions are made using the Internet Explorer interface. The Internet Explorer has been around for more than ten years now. Security Tips The following is a summary of checks you can make to ensure your data remains secure, as detailed in this Security FAQ.

Check your browser connects using 128 bit encryption. Verify the fingerprint of the Sign In page you connect to. Never disclose your password to anyone. Do not write it down or store it on your computer. Select a password that is difficult to guess and change it regularly. Check your transactions carefully. Always Sign Out when you have finished your banking.

CUSTOMER SATISFACTION: THE FORCE DRIVING INCREASED SHARE OF WALLET, PROFITABILITY, RETENTION AND ACQUISITION
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Customer satisfaction is a key metric for banks to assess how effectively the web furthers their objectives of customer acquisition, retention and increased share of wallet. To assess the role of the online channel in meeting the needs and exceeding the expectations of customers, For See Results teamed with Forbes.com to conduct a customer satisfaction survey focused on online banking and bill payment. The goal of this survey, the second of its kind, was to use the framework of customer satisfaction to understand and quantify the role of online banking in a banks success. As banks have aggressively pursued multi-channel strategies, the online channel is growing in importance and adoption. According to Forrester Research, the number of Indian households

Banking online has more than doubled since 2000, totaling 69.3 million households in 2004. While the channel is still in a growth mode, banks have a window of opportunity to figure out how to maximize the impact of their websites to increase loyalty and share of wallet among existing customers while reaching out to new ones. Since our first survey in Summer 2003, the overall customer satisfaction of online banking customers has increased by 5.5%, as reflected by the data collected for this survey in the fourth quarter of 2004. This upswing in satisfaction is significant because satisfaction is highly correlated to the purchase of additional goods and services. The survey also found that customers who pay bills online are more satisfied than those who dont, providing banks an opportunity to increase satisfaction and loyalty by converting online bankers to online bill payers. According to our survey, banks have been effective in increasing Indiage of online bill payment, which is up 26% among our survey respondents since the summer of 2003. This year, we delved deeper into the variances and similarities in customer satisfaction among online customers of three types of financial institutions: large banks, community banks and credit unions. While scores for all three are strong, credit unions outperform both types of banks in terms of satisfaction and Indiage of most online banking features.

KEY FINDINGS

Key findings from our measurement of customer satisfaction with the online banking experience include: 6

Online banking satisfaction has surpassed satisfaction with the overall banking experience.

The satisfaction score for people who bank online has increased 5.5% to 77, compared to the aggregate Yes Bank banking score of 75. This indicates online banking is beginning to fulfill its promise as a convenient and cost-effective channel to serve customers while increasing customer satisfaction, loyalty and share of wallet. The increase in satisfaction corresponds with increases in customer behaviors tied to loyalty.

Highly satisfied online bankers are nearly 39% more likely to purchase additional products and services from their bank than are very dissatisfied online banking customers.

Prospects for online banking cite the convenience (79%) and ability to pay bills online (38%) as key motivators to sign up for online banking services. Yet concerns about privacy continue to hold them back, as 34% cited privacy as a key issue.

Use of more online features drives satisfaction. Online bankers who use six or more online features are 15% more satisfied and 23% more likely to purchase other products and services from the bank that those who use only one or two online features.

Converting online bankers to online bill payers is a huge opportunity for banks, as customers who pay bills online cite higher levels of satisfaction and loyalty. Online bill pay customers are 17% more likely to purchase more products and services, increasing share of wallet, and 34% more likely to recommend their banks website, which fosters greater online banking and bill payment adoption.

Credit unions outperform large banks and community banks when it comes to satisfying online bankers. In addition, credit unions have higher levels of adoption of their institutions online services, except online bill payment. As financial institutions battle for greater share of wallet, credit unions find themselves well positioned to capitalize on higher levels of satisfaction to increase adoption of online bill payment.

Offline bank channels are the leading source of information about online banking.

To reach online customers and prospects outside of bank channels, online news sites are the preferred source of business news and information.

THE YES BANK: POWERFUL, PRECISE AND PREDICTIVE MEASUREMENT OF CUSTOMER SATISFACTION

Data was gathered from Forbes.com newsletter subscribers, both those who are online banking customers, and those who are not. The data was analyzed using the methodology of the Indian Customer Satisfaction Index (YES BANK), the most precise method of measuring customer satisfaction and quantifying its impact on customer behavior. The YES BANK has been a leading indicator of customer satisfaction with goods and services in the Indian economy for more than a decade. For See Results applies the YES BANK methodology to the web to assess overall customer satisfaction, determine key drivers of satisfaction with the online experience and quantify the link between satisfaction and customers future behaviors tied to loyalty, such as referrals and purchases of other products and services.

ONLINE BANKING CUSTOMERS MORE SATISFIED THAN BANKING CUSTOMERS IN GENERAL

In the latest measurement, customer satisfaction with online banking rose 5.5% to a score of 77, compared to 73 in 2003. This aggregate satisfaction score includes includes all online bankersboth those who pay bills online and those who use the website for other reasons, such as to monitor account balances. In this years survey, customer satisfaction with online banking exceeded satisfaction with banking in general, which had an YES BANK score of 75. Satisfaction with the online channel is driven by the convenience of utilizing the web for banking tasks and the consistent quality of service provided. In the past, the online banking satisfaction scores trailed the offline banking sector, a strong indicator that online banking was not fulfilling its promise. Now the online banking channel is starting to live up to its expectations of providing a channel that meets the needs and exceeds the expectations of its customers better than traditional banking channels. The rise in both satisfaction and Indiage may also reflect the effectiveness of

financial institutions at promoting the web channel as a convenient, effective and safe alternative to in-person or telephone transactions and service assistance.

SATISFACTION WITH ONLINE BANKING DRIVES LOYALTY AND INCREASES SHARE OF WALLET

Analysis of customer satisfaction provides insights into the future behaviors of online banking customers, such as ongoing loyalty and increasing share of wallet. The cause-and effect methodology of the YES BANK enables us to not only measure current levels of customer satisfaction, but to use this information to project the impact of satisfaction increases on how customers are likely to behave in the future. We looked at satisfaction with several specific behaviors tied to loyalty: likelihood to recommend the banking website to others and likelihood to purchase more products and services. For both of these key measures of loyalty, satisfaction increased from 2003. The likelihood of current online bankers to recommend the banking website to others increased 3%, from 73 to 75. At the same time, the likelihood of online bankers to purchase additional products and services via other channels an indicator of the financial institutions success at garnering additional share of walletrose from 59 to 60, a 2% increase. However, this score is still relatively low and indicates that banks could do a better job at using the web to promote products and service available via other channels. Another measure of loyalty is the number of online bankers surveyed who switched banks during the past 12 months. This percentage fell from 15% in the last survey to 8% this time, partially due to higher satisfaction with the overall banking experience, including use of the website. Satisfaction yields considerable dividends in terms of cross-selling as well. Very satisfied online bankers are nearly 40% more likely to purchase additional products and services than those who are highly dissatisfied. Additionally, online bankers who are very satisfied are 21% more likely to purchase additional products and services than moderately satisfied customers. There is clearly a quantifiable reward for banks to strive for high levels of satisfaction among online banking customers.

NAVIGATION AND TASKS & TRANSACTIONS ARE KEY DRIVERS OF CUSTOMER SATISFACTION WITH ONLINE BANKING
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Overall customer satisfaction with online banking is derived via measurement of a series of interrelated elements that are key drivers of the online experience. As part of our analysis of the data using the YES BANK methodology, we looked at specific elements, or drivers of satisfaction, with the online banking experience. Elements include general website features and functions such as navigation, tasks/transactions and content, as well as banking-specific satisfaction drivers such as bill payment and bill payee set-up.

The list of elements measured is as follows: Bill Payee Set- Up Bill Payment Content Functionality Look and Feel Navigation Privacy Retail Satisfaction Site Performance Tasks & Transactions

USE OF MORE ONLINE FEATURES DRIVES SATISFACTION

The most popular online banking feature, as in last years survey, was view online statement/check, which is used by 92% of survey respondents. This was followed by check deposit balances with 88% Indiage. The third most popular online banking feature, online bill payment, saw a 26% increase in Indiage from last year: from 58% to 73%. Another online feature that gained in popularity from last year was self-service (e.g., reordering checks), which climbed 15%from Indiage of 33% in summer 2003 to 38% in fourth quarter 2004. Increases in Indiage are important because both satisfaction and the likelihood to purchase additional products and services are tied to the number of online features that a person uses

As shown above, satisfaction for people using three or more online banking features is 15% higher than those who only use one to two. Further, the likelihood to purchase additional services is 11% higher for purchase of three to five services as compared to one or two, and 23% higher when the number of services increases 10

to six or more. Despite the growing adoption of online banking, customers are still using multiple channels to conduct their banking business. Seventy-two percent of online bankers in our survey also visited a bank branch in the past 90 days, while 35% contacted their bank via phone in the same time period. While use of offline channels didnt necessarily decrease, the benefit to banks that encourage online bankers to perform more functions online is a more satisfied, more loyal customer who will reward the bank with a greater share of wallet and recommend the banks website to others, which will increase adoption These numbers show that banking truly is a multi-channel experience. Customers use multiple channels to connect with the bank, but may develop a preferred channel for particular transactions. The challenge is for the bank to meet the product needs and service expectations of its customers across channels while encouraging customers to utilize the most cost-effective online channel where it makes sense to do so. Smart banks will also take advantage of opportunities to promote products and services across channels for greater visibility and brand reinforcement.

ONLINE BILL PAYMENT IS CLOSELY TIED TO HIGHER LEVELS OF

Further proof of the importance of online bill payment is the increase in satisfaction realized as the number of bills paid online rises: Interestingly, 75% of people who pay bills online also pay bills through other providers. Since number of bills paid correlates positively with increasing satisfaction scores, banks have a tremendous opportunity to increase satisfaction and loyalty by promoting the bank as the central source for all online bill payment. Even non-customers see the value of online bill payment: 38% of prospective online bankers cite online bill payment as one of the reasons theyd consider online banking. However, banks need to overcome the common misperception held by non-users that the online bill payment process is difficult and address privacy concerns. Of customers who dont use their banks online bill payment feature but do pay bills online elsewhere, 60% do so through the service provider (e.g., utility company), 24% with a third-party payment service and 16% with another financial institution. To encourage these people to pay all of their bills online through the bank, banks should assess the need for improvements to navigation, tasks & transactions and 11

the site performance among their own online customers, which will influence their likelihood to recommend the online channel to others. As 16% of people who dont pay bills online with their bank have incomes of $175,000 or more, it is in their banks best interest to convert as many people as possible to online bill payers.

People who pay bills online also represent a prime audience for marketing. Eighty-seven percent of customers who pay bills online visit the site at least once a week (compared to 79% for non-online bill payers) and 41% visit their banks website daily. Their frequent visits to the site provide ample opportunity to reinforce the banking relationship and market new products and services through the web medium.

Significant variations in overall satisfaction by type of financial institution used for online banking services. In addition to looking at overall satisfaction for online banking customers (both those who pay bills online and those who dont) by institution, we analyzed satisfaction with various elements for large banks, community banks and credit unions. We also looked at how using different online banking features, e.g., checking deposit balances, budget management, etc., varied by type of financial institution. Customers of all three types of institutions are most satisfied with functionality and rated it the highest scoring element. Regardless of where they do their online banking, customers rate their satisfaction with bill payee set-up as the lowest of any of the measured elements. This is significant, considering the large gains in satisfaction and loyalty to be realized by encouraging people to use online bill payment, which they will be more likely to do if they are happy with the process for setting it up. The most and least popular online banking features were consistent across financial institution type, perhaps reflective of industry trends in making specific features available and promoting their use. Viewing online statements/checks was the most heavily used feature, with Indiage of 97% by online credit union customers, 92% by online customers of large banks and 89% of online community bankers. Checking deposit balances is a close second, with Indiage of 94% at credit unions, 89% at large banks and 84% at community banks.

Credit Unions: Highly Satisfied and Avid Users of Online Banking

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Credit union members report the highest level of satisfaction with the online banking experience with a score of 80. This isnt surprising, considering that credit unions, unlike banks, are actually membership organizations and may therefore have more of a members first mentality. Still, while we might have expected that large banks had more resources and expertise to offer online banking customers, we found that credit unions did a better job satisfying online banking customers, with a 2.6% advantage over large banks satisfaction score and a 5.3% advantage over community banks.

Satisfaction with most of the specific elements of the online banking experience were higher for credit unions than for large and community banks. One exception was bill payee set-up, where credit unions (73) scored higher than community banks (72), and scored lower than large banks (75). Satisfaction among credit union online bankers with content and functionality was especially high; these two elements garnered high scores of 87 and 86, respectively. While credit unions are doing a good job of meeting the needs of their members, they could experience gains in satisfaction through conversion of more members to online bill payers. Credit union members who pay bills online are 9.2% more satisfied than members who dont, with a score of 83 compared to 76. Opportunities to increase online bill payment are significant as 13% of people who currently dont use online banking to pay bills came from credit unions. In almost all cases, credit union members included in our survey have been the most eager adopters of online banking features. Indiage by credit union members exceeded that of customers of both large and community banks in all areas, except for the critical area of online bill payment, where credit union Indiage (65%) lagged Indiage by large bank customers (75%). In all features included in our survey, Indiage by large bank customers seconded use by credit union members. Even the lesser-used features were more popular among credit union members. Customers of all financial institutions named online loan application as one of the least used online features. However, nearly a quarter of respondents from credit unions say they apply for loans online, compared to 9% of large bank and 5% of community bank customers, which illustrates credit unions relative success at leveraging the web channel to grow share of wallet and overcome the limits of the branch reach of

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credit unions. Budget management was an infrequently-used feature, perhaps due to the popularity of

Quicken and other software-based budget management tools. Again, credit union customers are significantly more likely to manage their budgets online. Twentyseven percent of surveyed credit union members use this web-based feature, compared to 14% of large bank customers and only 9% of community bank customers.

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COMPANY PROFILE

COMPANY PROFILE

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Country Industry NSE/BSE Listing Regd.& corporate office

India Banking NSE Code -532648 Nehru centre,9th floor, Discovery of India, Dr.A.B.Road, worli, Mumbai 400018 Tel:+91(22) 6669 9000 48,Nyaya Marg, Chanakyapuri, New Delhi 110021 Tel:-+91(11) 6656 9000 www.yesbank.in

Northern Regional Corporate Office Website Bank Name: Branch Name: Address: City: District: State: Phone: Fax: Email: MICR Code IFSC Code:

YES Bank Ltd MORADABAD,UTTAR PRADESH GRND AND FIRST FLOOROF KHASRA NO 267,GRAM MAJOLA,DELHI HIGHWAYMORADABAD MORADABAD,UTTAR PRADESH MORADABAD Uttar Pradesh +912266699000 +91 (22) 2490 0314 contactus@yesbank.in 244532002 YESB0000044 MORADABAD

Yes Bank, Indias new age private sector Bank is the outcome of the professional commitment of its founder Mr. Rana Kapoor supported by his highly competent top management team to establish a high quality, customer centric, service driven, private Indian Bank catering to the Future Industries of India. Yes Bank has adopted international best practices, the highest standards of service quality and operational excellence, and offers comprehensive banking and financial solutions to all its valued customers. A key strength and differentiating feature of Yes Bank is its knowledge driven approach to banking and an unprecedented customer experience for its retail and wealth management clients. Yes Bank is steadily building corporate and institutional banking, financial markets, investment banking, corporate finance, business (Small &Medium Enterprises) and 16

transaction banking, international banking, retail banking and wealth management business lines across the country. The Banks constant endeavour is to provide a delightful banking experience expressed with simplicity, empathy, and totality. Yes Bank understands the financial needs of the Government of India, in its progress and development role of a Growing India through Yes Banks Knowledge Banking approach and the objective of being the Bank for an Emerging India. Yes Bank remains committed to serving this specialized segment. Yes Banks knowledge Bankers deliver innovative, structured and comprehensive solutions through a Money Doctor approach focusing on diagnostic and prescriptive attention to detail. This is facilitated through Yes Banks Technology leadership delivering proven, easy-to-use solutions for Government Undertakings and agencies. Yes Bank has provided financial and advisory services to Ministries of the Union Government, State Governments, Central and State Public Sector Undertakings (PSUs) and Agencies. In a short span of over three and a half years the Government Relationship Management (GRM) team has developed robust relationships with over 100 entities. The GRM team is committed to the core values of client orientation, innovation and superior service experience that exemplify all Businesses at Yes Bank. GRM team is providing the Knowledge Advisory, Liquidity Management and Investment Products, Transaction Banking, trade finances, cash management services, Treasury services, Forex Remittances, debt capital markets, investment managements, corporate salary accounts, Advisory structured transactions, term loans, and cash credit limits to various government operations like IFFCO, SAIL, Airport Authority of India, IOCL, NDPL, HPCL, Bridge & Roof co.(India) ltd and many more.

Business Strategy Knowledge Banking: - One of the strengths and differentiating features of Yes Bank is its knowledge banking approach that is the essence of all offerings to its customers. Knowledge has been institutionalized as a key ingredient in all internal and external processes and utilized to create customized solutions for the clients specific requirements. 17

Technology and Operations: - As a new generation Bank, Yes Bank has the advantage of accessing the latest available technology. The Bank has taken a calibrated decision to invest in the best IT system and practices in order to make its technology platform a strategic business tool for building a competitive advantage. Responsible Banking: -Yes Bank has a vision to champion Responsible Banking in India, where the concepts of Corporate Social Responsibility (CSR) and sustainability are integrated in its Business focus. Business Lines: -Yes Bank has four distinct business segments to effectively service the differentiated needs of its targeted customers. Corporate and Institutional Banking (C&IB): -To cater to the needs of large corporate & institutional clients, MNCs, government companies and PSUs. Bank targets C&IB customers through its multifunctional branches in the key metropolitican cities.

Emerging Corporate Banking (ECB): -It is dedicated to partner with growth-focused, fast-paced enterprises, which are emerging as a leader in their respective business areas. Business Banking: -To cater to the needs of the small and medium enterprises (SME), Yes Bank has set up a dedicated business unit to focus on delivering superior banking solutions specially designed to meet the varying and dynamic needs of its SME clients.

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Retail Banking and Wealth Management: -The Bank intends to develop Retail Banking into a key value driver. Yes Bank offers its customers choice & convenience, reflected in its branch layout & design, product feature /design, options of distribution channels and superior technology enabled service quality. Yes Bank predominantly offers value added retail liability and third party wealth management products as well as retail asset offerings through its sales and service network linked to its branches.

Private Banking: - Yes Bank is focusing on personalized relationship banking for its top end High Net worth customers, supported by structured financial solutions tailor-made to suit the needs of such customers. Product lines: - Yes Bank offers a wide range of fee-based products to corporate and business banking customers to ensure a high degree of cross-sell to clients. Financial Markets: -Yes Bank financial markets was ranked second in the Best for currency strategy and best for technical analysis categories at the Asia Money 2005 foreign exchange poll for India.

Transaction Banking: -Yes Bank Transaction banking group has adopted a consultative approach and focus on knowledge and relationship banking to enable customers to address strategic financial and operating needs in the domain of: Working capital and liquidity management Asset management Treasury integration Exposure and risk management

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Yes Bank proposes to apply industry knowledge and superior technology for offering innovative structured solutions integral to a companys financial supply chain. Yes International Banking: - It offers a complete suite of international banking products and services, driven by state-of-the art technology, which includes Debt, Trade finance, corporate finance, Investment banking and business advisory services, treasury and global Indian banking. The Bank also plans to leverage its international presence, for its capital raising activities. These services will initially be through partnerships with international banks and financial institutions followed by the establishments of branches and representative offices, as per regulatory approvals. Brand Creation: - The Bank believes that its differentiation begins with its service and trust mark YES. YES represents the bank true spirit of being service-oriented. The YES brand creation effort is supported by Triton Communications, the principal advertising agency and Ad factors PR, the Banks public relation consultant.

Key Members of Yes Bank Management Team NAME 20 DESIGNATION

Mr. Rana Kapoor Mr. Sunil Gulati Mr. Deepak Gaddhyan Mr. Sumit Gupta Mr. Alok Gupta Mr. Rajnish Datta Mr. Subir Bisht Mr. Sanjay Aggarwal Mr. Varun Tuli Key Highlights & Milestones of Yes Bank. Nov 2003 May 2004 Dec 2006 Mar 2007 Dec 2007 Dec 2007 Jan 2008 Mar 2008 Apr 2008

Managing Director & CEO Group President - C&IB, Transaction Banking Group President GRM Team. Country Head Emerging Corporate Banking Country Head life sciences & technology Country Head Small business banking group Chief Risk Officer Country Head Credit Risk, Business Banking President Business Banking

Incorporation of Yes Bank Limited RBI License to commence banking business Ranked No.3 in the Business World Survey of Indias Best listed Banks Ranked No.2 among New Private Sector Banks in the Financial Express survey Won Best CSR practice award 2007 Won IT people award 2007 60 operational branches across India Ranked No.3 among New Private Sector Banks in the Financial Express-E&Y survey & overall #1 on credit quality & #2 on Growth 67 operational branches across India

OBJECTIVE OF THE 21 STUDY

OBJECTIVE OF THE STUDY

The purpose of this study is to describe the current state of Internet banking and to discuss its implications for the banking industry and regulatory policy. The study provide information on Internet banking market developments.

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SCOPE & RATIONALE OF THE STUDY

SCOPE AND RATIONALE OF THE STUDY

Though modern age banking in India has its roots in the British legacy, its journey so far has been charted by sheer Indian prudence. Post independence, India saw new age nationalized banks emerging with an aim to reach out to the largely un-banked population. Though slow and steady, the Indian banking industry did emerge from the doldrums of debt and instability to drive the country's financial revolution. With the IT revolution, the Indian banking and financial sector became the undisputed leader in adopting cutting edge technologies. So, while technology uptake was gradually taking place, the Internet also came to be used by banks. After private and foreign banks had adopted this technology, the public sector banks also began to latch on to the bandwagon. With the core banking system (CBS) 24

being adopted by all nationalized banks over the last 4 years, the transition to alternative banking channels such as the Internet, and now mobile has proved to be rather convenient and cost effective. The number of customers who choose online banking as their preferred method of dealing with their finances is growing rapidly. The future looks bright with more people using the Internet on a daily basis for electronic banking amongst various other things.

LITERATURE REVIEW 25

LITERATURE REVEW
Dos et al. [1993] studied statistical correlation between IT spending and performance measures such as profitability or stocks value. It is found that there is an insignificant correlation between IT spending and profitability measures, implying thereby that IT spending is unproductive. Brynjolfsson and Hitt [1996], however, cautioned that these findings do not account for the economic theory of equilibrium which implies that increased IT spending does not imply increased profitability. More recent firm level studies, however, point a more positive picture of IT contributions towards productivity. These findings raise several questions about mis-measurement of output by not accounting for improved variety and quality and about whether IT benefits are seen at the firm level or at the industry level.

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Such issues have been discussed in detail by Brynjolfsson [1993]and to a lesser extent by Brynjolfsson and Hitt [1996]. The study conducted by Gotlieb, and Denny [1993], is one of the studies that deals with the impact of IT on banking productivity per se. Computerisation is one of the factors which improves the efficiency of the banking transactions. They concluded that higher performance levels have been achieved without corresponding increase in the number of employees. Also, it has been possible for Public Sector Banks and Old Private Banks to improve their productivity and efficiency by using IT The success of electronic banking, as agued by many researchers, depends probably on bank service quality, customer preferences and satisfaction. Recent studies found that consumer behaviour is changing partly because of more spare time. The way of use of financial services is characterised by individuality, mobility, independence of place and time, and flexibility (Seitz and Stickel, 2004) The concept of internet has been defined in many ways (e.g. Daniel, 1999). According to Karjaluoto (2002) electronic banking is a construct that consists of several distribution channels. Daniel (1999) defines electronic banking as the delivery of banks' information and services by banks to customers via different delivery platforms that can be used with different terminal devices such as a personal computer and a mobile phone with browser or desktop software, telephone or digital television. The different forms of electronic banking are summarized in Table 1. Table 1. Different forms of banking in electronic banking (Daniel 1999) Form banking PC banking of Description The customer installs banking software on his or her personal computer. The customer has access to his or her account with that specific software. Internet banking Customer can access his or her bank account via the Internet using a TV-based PC or mobile phone and web-browser. The use of satellite or cable to deliver account information to the TV

banking screens of customers. Telephone-based Customers can access their bank and account via SMS and as well as banking by ordinary phone using services of interactive voice responses (IVR).

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It should be noted that electronic banking is a larger concept than banking via the Internet (Karjaluoto, 2002). The Internet is a main delivery channel for electronic banking and its value to customers and banks is continuously increasing (Karjaluoto, 2002; Mattila, 2001). DIFFERENT BANKING CHANNELS FOR CUSTOMERS Hadden & Whalley (2002) observe that customers often simultaneously used many banking channels. Hadden & Whalley (2002) point out that a challenge for banks is how to connect with customers and provide financial services to them through the right channels, at the right time and in the right way. The HCI-related challenges in Internet banking are related to business interaction between the bank and customer. Hadden & Whalley (2002) stress that it is crucial that the banking interaction is suited the customer's life situation. From this perspective it is important to give customers freedom to choose the most appropriate channel that best suits their preferences. In addition, the type of business affects customers choice of channel. According to Hiltunen, Laukka, & Luomala (2002), customers channel preferences vary between countries because of cultural differences, use-habits and legislation. The business interaction between the bank and the customer takes place through different channels (Hiltunen et al., 2002). According to Hiltunen et al. (2002) the interaction can be described as a continuum, which is described in Figure

Figure Different banking channels

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Figure 1 shows the different banking channels presented as a continuum where left side channels are limited by time and place and channels on the right side are more free from these constraints (Hiltunen, et al 2002). The physical interaction between the bank and customer takes place in branch offices, which are limited in both time and location. By contrast Internet banking and mobile banking are the most flexible banking channels that are more free from constraints such as time and place (Hiltunen et al., 2002). It has been proposed that a branch office is the primary channel for purchasing many financial products because it offers the customer a secure physical location for the transaction of complex financial business with real people (Hadden et al., 2002) However, The Finnish Banker's Association (2004b) concludes that Finnish retail banking differs in many ways from typical retail banking in Europe. In Finland, the current trend is the movement from traditional branch banking to electronic banking, which provides many benefits, challenges, and opportunities for the whole banking sector (Karjaluoto, 2002) From the customer's point of view, Internet banking offers new value to customer because it makes available a full range of services that are not offered in branch offices (Karjaluoto, 2002). Modern Internet technology makes it possible to create customized banking services for every individual customer (Mattila, 2001). According to Daniel (1999), customers' value features in Internet banking such as convenience, increased choice of access to the bank, improved control over their banking activities and finances, ease of use, speed and security. From the banks perspective the main benefits of electronic banking are cost savings, reaching new segments of the population, efficiency, cross selling, third-party integration, and customer satisfaction (Hiltunen et al., 2004; Joseph, 1999). Wah (1999) remarks that the success of banks operating via the Internet depends on their ability to attract and keep customers. Sheshunoff (2000) admits that banks implement Internet banking services in an attempt to create powerful barriers to customers exiting. In general, it has been reported that Internet banking saves time and money, provides convenience and accessibility, and has a positive impact on customer satisfaction (Karjaluoto, 2002; 29

Mattila, 2001). To summarize, Internet banking offers many benefits both to banks and their customers (Karjaluoto, 2002; Mattila, 2001). Despite of these benefits Internet banking includes many challenges. HCI-related challenge of Internet banking is how to satisfy new online customer segments. Hiltunen et al. (2002) argue that a key factor in this competition for online customers is the quality of customer service, which includes usable user interfaces of Internet banking. From this perspective the usability of Internet banking becomes an essential factor in the competition for online customers. DEFINITIONS OF USABILITY The concept of usability has been defined in many ways in the academic literature (Nielsen, 1993; Shneiderman & Plaisant, 2005). Nielsen (1993) stresses that usability is not a single, one-dimensional property of a user interface, and argues that usability could be defined by using five attributes, which are learnability, efficiency, memorability, errors and satisfaction. A formal and stricter definition of the term is derived from the ISO 9241-11 (1998) standard, which defines usability as: The extent to which a product can be used by specified users to achieve specified goals with effectiveness, efficiency and satisfaction in a specified context of use.

FRAMEWORK TO MEASURE THE USER SATISFACTION The concept of user satisfaction has been used since the early 1980 (Bailey & Pearson, 1983; Ives, Olson, & Baroudi, 1983) and the end user computing satisfactions have been studied since the 1980 (Bailey & Pearson, 1983; J. Chin, Diehl, & Norman, 1988; Ives et al., 1983; Rivard & Huff, 1988; Rushinek & Rushinek, 1986). Bailey et al. (1983) state that several factors affect the user satisfaction and it can be seen as a bi-dimensional attitude. The user satisfaction can be seen sum of users feeling and attitudes toward several factors that affect the usage situation (Bailey et al., 1983).

30

Recently, there has been growing interest in user experience (Hiltunen et al., 2002; Lindgaard & Dudek, 2003; Wilson & Sasse, 2004), which can be seen as much larger concept than user satisfaction. User experience has become an important factor in ebusiness because the end user often pays for the majority of new products and services, which indicates that new products characteristics such as perceived usability, usefulness, appeal and value of money must be matched or exceeded with user expectations toward the product (Wilson & Sasse, 2004). From this perspective, assessing the user experience is essential for many technology products and services (Wilson & Sasse, 2004). Lindgaard & Dudek (2003) state that user experience consists of some senses of "satisfaction". They define user satisfaction as a subjective sum of the interactive experience. Recently, Tractinsky, Katz, & Ikar (2000) show that perceived aesthetics and perceived usability correlated strongly with each other. They argue that "beauty" or "appeal" is linked to the perceived usability, and consequently what is seen as beautiful is also perceived as usable. However, Lindgaard & Dudek (2003) argue that those business to consumer (B2C) web sites which got high appeal scores but low perceived usability score from users yielded very high satisfaction, but low perceived usability scores, suggesting that what is perceived as beautiful need not also be perceived to be usable. Lindgaard & Dudek (2003) emphasize that aesthetics, emotion, expectation, likeability and usability all influence the interactive experience, but their significance depends on the current situation. Furthermore, they argue that usability is a important factor in experiencing interactive B2C sites, but it is not known is user interaction with B2C sites whether usability- or satisfaction driven. Their results suggested that web designers should pay attention to both visual appeal and usability. Bailey et al., (1983) report that the HCI research needs a clear definition of user satisfaction, including a complete and valid set of factors and instrument that measures this phenomenon. Lindgaard & Dudek (2003) add that HCI researchers should formulate a clear user experience notion, where the relationship between satisfaction, appeal, perceived and actual usability would be determined. User satisfaction and usability measurements will be next clarified. In general, user interfaces can be evaluated in many ways (J. Chin et al., 1988). In addition, it has been stated that each component of usability such as effectiveness, efficiency and satisfaction can be examined by using either objective or subjective 31

measures (Nielsen, 1993; ISO 9241-11, 1998). User satisfaction has mainly been examined with subjective measurements such as a multiple-item user questionnaire (J. Chin et al., 1988; Lewis, 2002; Lindgaard & Dudek, 2003). Furthermore, the subject satisfaction, which is measured in user test, has been also used as a indicator of user satisfaction, but results are contradictory (Notes & Swan, 2003). Recently, other approaches such as the objective measurement of user experience have been introduced (Wilson & Sasse, 2004). Wilson & Sasse (2004) show that in some cases objective psychophysiological measures such as skin conductance, heart rate and blood volume pulse can reveal users responses toward product which they are either not aware of, or cannot recall at subjective assessment session after the test. However, there are several problems in using physiological measures to analyze user satisfaction and user experience. For example, data analysis and learning to use the equipment are time consuming, and equipment and sensors are financial costly (Wilson & Sasse, 2004). Furthermore, interpretation of users mental process and experiences contain difficult problems even in studies where a clear cause and effect relationship has been revealed (Ward & Marsden, 2004). Because of these problems of physiological measures, this research concentrated on examining how the user experience of Internet banking can be evaluated by using subjective measures. Many studies have concentrated on developing tools to measuring user satisfaction (J. Chin et al., 1988; Rivard & Huff, 1988), user information satisfaction (W. Chin & Lee, 2000; Ives et al., 1983) and usability (Lin, Choong, & Salvendy, 1997). In general, the user satisfaction measurements have been questionnaire scales for which either a Likert or a semantic differential scale have been used.

32

RESEARCH 33 METHODOLOGY

RESEARCH METHODOLOGY
Descriptive research
Descriptive research is also called Statistical Research. The main goal of this type of research is to describe the data and characteristics about what is being studied. The idea behind this type of research is to study frequencies, averages, and other statistical calculations. Although this research is highly accurate, it does not gather the causes behind a situation. Descriptive research is mainly done when a researcher wants to gain a better understanding of a topic for example, a frozen ready meals company learns that there is a growing demand for fresh ready meals but does not know much about the area 34

of fresh food and so has to carry out research in order to gain a better understanding. It is quantitative and susses surveys and panels and also the use of probability sampling. Descriptive research is the exploration of the existing certain phenomena. The details of the facts wont be known. The existing phenomenas facts are not known to the persons. Sample Size Sample unit Types of data Primary data Secondary data Sampling procedure source : : : : : : 30 Employee of Yes Bank Primary And Secondary Data Questionnaires. Internet and Books Non probability Convenience Sampling.

DATA ANALYSIS & 35 INTERPRETATION

DATA ANALYSIS & INTERPRETATION

Q.1. Computerized banking system is better than the manual system a ) Yes b) No 83% 17%

36

Interpretation:
83% respondent say Computerized banking system is better than the manual system and 17% say no.

Q.2. ATM service is useful to withdraw cash & cheques a ) Yes b) No 77% 23%

37

Interpretation:
77% respondent say ATM service is useful to withdraw cash & cheques and 23% say no.

Q.3. Are you using internet banking? a ) Yes b) No 63% 37%

38

Interpretation:
63% respondent using internet banking and 37% respondent are not using internet banking.

Q.4. Core banking system helps you to transfer funds from the different branches a ) Yes b) No 75% 25%

39

Interpretation:
75% respondent say Core banking system helps you to transfer funds from the different branches and 25% say no.

Q.5. Internet banking helps to secure your personal information a ) Yes b) No 68% 32%

40

Interpretation:
68% respondent say Internet banking helps to secure your persona information and 32% respondent say no.

Q.6. Which types of computerized banking services do you prefer? a) ATM b) Internet Banking c) Core banking system 41 55% 25% 15%

d) Other services

5%

Interpretation:
55% respondent prefer ATM services, 25% prefer Internet banking, 15% prefer core banking system and 5% prefer other services of computerized banking

Q.7 Do you think that online banking is important in these days? a ) Yes b) No 94% 6%

42

Interpretation:
94% respondent say online banking is important in these days and 6% say no.

Q.8 Have you banks internet banking? a ) Yes b) No 94% 6%

43

Interpretation:
94% respondent say yes Yes Bank internet banking is better and 6% say no.

Q.9 Which kind of problem you faced in online banking? (a) Knowledge (b) Lack of information (c) Speed of internet service 44 15% 20% 35%

(d) Any other

30%

Interpretation:
15% respondent problem. knowledge problem faced in online banking, 20% respondent lack of information problem, 35% faced speed of internet service and 30% faced any other

Q.10. By which bank you do online banking? (a) SBI (b) PNB (c) Yes Bank 45 30% 15% 45%

(d) ICICI (e) Any other

5% 5%

Interpretation:
30% respondent banking. use SBI online banking, 15% use PNB online banking, 45% use Yes Bank online banking , 5% use ICICI online banking and 5% use other bank online

Q.11 why do you prefer for online banking? (a) Time saving (b) For best service (c) Security (d) any other reason 20% 25% 46 45% 10%

Interpretation:
45% respondent say that time saving go for online banking, 10% say for best service, 20% sy security and 25% say any other reason for go online banking

Q.12 Are you satisfied with the online banking? a) Yes b) No 95% 5%

47

Interpretation:
95% respondent online banking. are satisfied with the online banking and5% are not satisfied with the

48

RESULTS / FINDINGS

RESULTS / FINDINGS
Most of the respondent say Computerized banking system is better than the Most of the respondent say ATM service is useful to withdraw cash & cheques. 49

manual system .

Most of respondent using internet banking. Most of the respondent say Core banking system helps you to transfer funds Most of the respondents say Internet banking helps to secure your personal Most of the respondent prefer ATM services. Most of the respondent say online banking is important in these days. Most of the respondent say yes Yes Bank internet banking is better . Most of the respondent problem faced speed of internet service. Most of the respondent used Yes Bank online banking. Most of the respondent say that time saving go for online banking. Most of the respondent are satisfied with the online banking.

from the different branches. information.

50

CONCLUSION

51

CONCLUSION
As use of the Internet expands, more banks are using it to offer products and services to their consumers. However, despite Web potential for safe and convenient new ways for financial services and banking business, the scary truth is that online banking fraud is on the rise and there are a number of ways it can be done. Also, there are a number of ways how you can protect your credit card and bank account if you transact over the internet. Dont use the same password for everything Never give your passwords to anyone Customers should never access their Internet banking accounts through hyperlinks embedded in e-mails, suspicious pop-up windows, or Internet search engines. keep your computer secure and the access to it;

52

SUGGESTIONS

53

SUGGESTIONS

As use of the Internet expands, more banks are using it to offer products and services to their consumers. However, despite Web potential for safe and convenient new ways for financial services and banking business, the scary truth is that online banking fraud is on the rise and there are a number of ways it can be done. Also, there are a number of ways how you can protect your credit card and bank account if you transact over the internet. CHECK THE BANK First, you have to confirm that an online bank is legitimate and that your deposits are insured. You will do that if you follow these steps: 1. Read key information about the bank posted on its Web site Most Banks Web sites have an "About Us" section that describes the institution. There can be found useful info about history of the bank, name and address of the banks headquarters, insurance, etc. 2. Protect yourself from fraudulent Web sites Watch out for copycat Web sites that deliberately use a name or Web address very similar to, but not the same as, that of a real financial institution. The intent is to lure you into clicking onto their Web site and giving your personal information, such as your account number and password. Always check to see that you have typed the correct Web site address for your bank before conducting a transaction. Also, fraud can be done through the spam emails you receive every day. Although, the link in those emails can be the same of your bank, always check the validity of the links. That means that fraudulent links will be different from the bank links in the mail. that can be checked by simple looking at the bottom of your email client (Gmail, Yahoo, or Outlook if you use it) or using the Right Click/Properties option on link itself. CHOOSE AND PROTECT ID AND PASSWORD * After you chose your bank, youll have to create an account. for that youll need an ID and a password. * Keep in mind that your security is our top priority, especially in this part 54

which is the most vulnerable to attacks. * While ID is static and can be change usually by the bank per request, you can change your password yourself. * Its been recommended that you should change your password frequently. HERE ARE SOME QUICK PASSWORD TIPS: Dont use the same password for everything Dont use a predictable password Dont use your birthday , your SSN, your childs birthday or pets name. Use something that makes sense to you and that you will easily remember. If you must write down your passwords, store them in a safe place. Never give your passwords to anyone

THESE ARE TIPS THAT EVERY USER OF ONLINE BANKING SHOULD KNOW: 1. First, bank customers should never access their Internet banking accounts through hyperlinks embedded in e-mails, suspicious pop-up windows, or Internet search engines. 2. Second, as has been said above, users should be aware of opening unexpected e-mails with attachments or click on suspicious links in the emails. Users should access their bank accounts by typing the website addresses at the address bar of the browser, or even better, by bookmarking the genuine website and using that function to access own accounts. 3. Thirdly, its a good idea to always have installed personal firewall software and anti-virus and antispyware software, and regularly download the latest updates available. This software will be of great help in defending the users from the attempts by fraudsters to plant harmful viruses or worms in their personal computers. FOR THE END, THERE IS A RESUME OF THE TIPS FOR SAFE INTERNET BANKING: Keep your computer secure and the access to it; Don't send credit card or account details by e-mail;

55

Reject any email that asks you to follow a link to website and input account details for verification - even if the website looks authentic, its probably a fake replicamake sure you log out of your online account when finished - especially at work, libraries and net cafes.

Deal only with established and reputable merchants; Only make payments to secure websites - look for the padlock symbol in the bottomright of your browser and click for details If using a new site, do business first in a small way; Check your accounts and report discrepancies immediately; Ignore the "remember my password option" on banking and shopping sites

MORE INFORMATION TAKE CARE Delete without opening emails requesting personal details such as PINs or passwords legitimate financial institutions and companies will not ask you to provide PINs or passwords. Delete suspicious emails with attachments and never open the attachments. Check for a secure connection. (Secure website addresses have https at the start. The s indicates secure. They will also have a padlock icon on the bottom right corner. Double clicking the icon will show who owns the certificate). Follow your own path to the site you choose it is possible to create a link on a web page or in an email and make it look as if it is taking you to a bona fide website when it is sending you elsewhere. Your safest course is to check that you have the correct address (URL) and then type it each time into your address bar. Consider whether the message you have received is a message that you would expect to receive is it one you have received from your financial institution before? (Incorrect grammar or spelling is usually an immediate indicator of a suspect email or website). Are there related announcements on the financial institutions or companys website? Reconcile your account(s) either on-line or by statements frequently and regularly.

56

LIMITATIONS

57

LIMITATIONS

Difficulties in the identification of the source. The facilities or capabilities of the agency that originally collected the data might be questionable. The data may not fit into the needs of investigation. There may be difference in the units of measurement, there may be surrogated data, discrepancy of class & data may pertain to some other period of time. Difficulty to find secondary data that exactly the needs of some specific research investigation. It is observed that it is rather difficult to measure the degree of approximation used in the collection of information as well as the competence of the investigator in motivating the persons to supply the desired information.

58

BIBLIOGRAPHY

59

BIBLIOGRAPHY
Books:
Kothari C.R Research MethodologySecond Edition,Wishwa PraKashan,2000 Gupta S.L., Marketing Research, Excel Books Kotler Philip, Marketing Management: Prentice Hall of India Pvt.

Webliography http://www.en.articlesgratuits.com/online-banking-the-pros-and-cons-id843.php http://www.bhg.com/health-family/finances/tips/the-pros-and-cons-of-bankingonline/ http://www.essortment.com/home/onlinebankingp_scde.htm

60

ANNEXURE (QUESTIONNAIRE)

61

QUESTIONNAIRE

Q.1. Computerized banking system is better than the manual system. a ) Yes b) No Q.2. ATM service are useful to deposit cash & cheques. a ) Yes b) No Q.3. Are you using internet banking? a ) Yes b) No Q.4. Core banking system helps you to transfer funds from the different branches. a ) Yes b) No Q.5. Internet banking helps to secure your persona information. a ) Yes b) No Q.6. Which types of computerized banking services do you prefer? a) ATM b) Internet Banking c) Core banking system d) Other services Q.7 Do you think that online banking is important in these days? a ) Yes b) No Q.8 Have you banks internet banking? a ) Yes

62

b) No

Q.9 Which kind of problem you faced in online banking? (a) Knowledge (b) Lack of information (c)speed of internet service (d) Any other Q.10. By which bank you do online banking? (a) SBI (b) PNB (c) Yes Bank (d) ICICI (e) Any other Q.11 why do you prefer for online banking? (a) Time saving (b) For best service (c) Security (d) any other reason Q.12 Are you satisfied with the online banking? a) Yes 63

b) No

64