“NEW AGE FINANCIAL PRODUCTS & THEIR ROLE IN TRANSFORMING MODERN BANKING”

Name – Radhika Gupta Rollno – 32- MBA- 14

Semester - 3

CONTENTS

ABSTRACT INTRODUCTION REVIEW OF LITERATURE DEBIT CARDS CREDIT CARDS POS MACHINE ATM MACHINES E-BANKING SMS BANKING SURVEY ANALYSIS AND DATA INTERPRETATION CONCLUSION LIMITATIONS RECOMMENDATION REFERENCES

ABSTRACT

• The present research was conducted to assess “New age

financial products & their role in transforming modern banking”. The objective was to study that the new age banking products have played a major role in changing the buying/transactional behaviours in the recent times . A sample size of 60 respondents was taken from Jammu of J&K bank customers. The tools used for data collection were Self structured questionnaire to measure the responses. These new age banking products were studied to review how they transformed modern Banking: ATM, Credit Cards, Debit Cards, E-Banking and SMS Banking.

REVIEW OF LITERATURE

Ramalingam P. (2008) studies the usage pattern of credit card holders of SBI, ICICI and ABN banks of Kanchipuram town in Tamil Nadu. The study concludes that higher income group and married persons utilizes the cards to the maximum mainly for impulse purchases due to convenience and Citibank cards are more popular because of dominance in advertising. The study also reveals that Master and VISA cards are the leading card brands in India and suggests the banks to improve overall functioning to provide satisfied credit card services.

REVIEW OF LITERATURE• Dixit.N. et al; (2010) in her study investigates on how the

customers perceive the value of Internet banking over the traditional way of banking. Primary data was collected from 250 respondents, through a structured questionnaire. Statistical analysis, descriptive statistics and correlation were used to know the perceived service quality of Internet banking (IB) and level of satisfaction between customers in India. The finding depicts many factors such as perceived value, perceived service quality; customer satisfaction and their loyalty have significant impact on a customer acceptance of Internet banking.

REVIEW OF LITERATURE

• Gan et al; (2007) conducted a research to examine consumers' choices between electronic banking and non-electronic banking in New Zealand. Internet banking is no longer a competitive advantage but a competitive necessity for banks. The findings in the paper show that the output from the logistic regression indicates that the service quality, perceived risk factors, user input factors, employment, and education were the dominant variables that influence consumers' choice of electronic banking and non-electronic banking channels.

DEBIT CARDS

• A Debit Card (also known as a Bank card or check card) is a plastic payment card that provides the cardholder electronic access to their Bank account(s) at a financial institution. Some cards may bear a stored value with which a payment is made, while most relay a message to the cardholder's Bank to withdraw funds from a payer's designated Bank account

Types:• Instant Debit Card• Personalized Debit Card

Issuance fees of EMV instant Debit Card – RS 100/- Issuance fees of EMV personalized Debit Card – RS 200/- Annual fee EMV instant & personalised Debit Card RS 35/-

per quarter• EMV: The chip is embedded on the card and contains all

information in an encrypted format. It also comes with a personal identification number (pin). This technology has to comply with standards developed by Europay, Mastercard And VISA (EMV).

GLOBAL ACCESS CARDS - DEBIT CARDS

Features:• Pin based – Maestro/Cirrus Debit Card• Accepted at all domestic as well as International Mastercard,

Maestro, Cirrus enabled ATM’s & Point of Sale locations.• Accepted at NPCI (NFS) ATM’s• No transaction fee at J&K Bank ATM”s• Provides online access to savings or current account• No transaction fee on purchase

CREDIT CARDS

• A Credit Card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

SMART CARD:

Banks are adding chips to their current magnetic stripe cards to enhance security and offer new service, called smart cards. Smart cards allow thousands of times of information storable on magnetic stripe cards. In addition, these cards are highly secure, more reliable and perform multiple functions. They hold a large amount of personal information, from medical and health history to personal Banking and personal preferences. 

FEATURES

• Pin based -maestro / cirrus Debit Card • Provides online access to savings or current account. • Accepted at all domestic as well as International

Mastercard™, Maestro™, Cirrus™ enabled ATM's and point of sale locations.

• Accepted at National Financial Switch (NFS) ATM's. • No transaction fee at J&K Bank ATM's • No transaction fee on purchases

Particulars Charges

Issuance fee Chip based card : RS .200/- plus taxes

Annual fee RS. 300/- plus taxes

Renewal fee Chip based card : RS .300 /- plus taxes

Add – on card Chip based card : RS .300 /- plus taxes

Service charges/ intrest rate

( purchase/ cash)

2.25 per month

Payment fee RS 100/- plus taxes

Types of cards : Blue empowerment card, Silver empowerment card , Gold empowerment card

Eligibility : Annual income

For salaried -above RS 80,000.00

For self employed -above RS. 1,50,000.00

Credit limits:

 Blue empowerment card- upto RS.25,000.00

Silver empowerment card-upto RS.50,000.00

Gold empowerment card-upto RS.1,00,000.00

 Rate of interest - 2.25% per month

DEBIT & CREDIT CARDS CAN BE FUNCTIONED IN THREE WAYS:

• ATM card/withdrawal of money• Online - now a days the people can buy the commodities

online through payments by Debit Card & Credit Card• By sales at POS

POS MACHINE

• A point of sale/service (POS) machine is used to conduct retail transactions. It can provide many services, including Credit Card processing, check reading and cash transactions, depending on the model. These devices can be found virtually anywhere, from grocery stores to gas stations. The technology used in POS machines results in a speedy and secure transaction.

11)Types of point of sale terminals

.

Sno. Type of

terminal

One time

installati

on

charges

Monthly charges / rentals Instrum

ent

charges

1Fixed

POSRS.500

RS.350

NilFree of monthly rentals if

average monthly sales is

minimum RS.25000/=in a

half year.*

2 GPRS

POS

RS.1500 RS.650/= ** Nil

Following two POS terminals are available for installation at merchant locations

2) CHARGES / MONTHLY RENTALS

Sno. Type of

terminal

One time

installati

on

charges

Monthly charges / rentals Instrum

ent

charges

1Fixed

POSRS.500

RS.350

NilFree of monthly rentals if

average monthly sales is

minimum RS.25000/=in a

half year.*

2 GPRS

POS

RS.1500 RS.650/= ** Nil

The installation charges and monthly rentals shall be applicable as below:

3) MERCHANT SERVICE FEE (MSF)

Type of card J&K Bank cards Other Bank cards

Debit Card

(domestic)

Up to RS.2000 0.75% 0.75%

Above RS.2000 1.00% 1.00%

Debit Card

(international)

All transactions N.a. 1.5%

Credit Card All transactions 1.3% 1.5%

Transaction charges recoverable from merchants on the transaction carried through POS are as under:

FEATURES

• POS machines offer the ability to automate many tasks that have historically required human oversight. These machines can scan Credit Cards, authorize the charge, and even accept a digital signature. POS machines can even synchronize with the local area network of the business, and automatically update balances and inventory with each completed transaction.

ATM MACHINES

•  ATM is designed to perform the most important function of Bank. It is operated by plastic card with its special features. The plastic card is replacing cheque, personal attendance of the customer, Banking hours restrictions and paper based verification. There are Debit Cards. ATMs used as spring board for electronic fund transfer. ATM itself can provide information about customers account and also receive instructions from customers - ATM cardholders.

• An ATM is an electronic fund transfer terminal capable of handling cash deposits, transfer between accounts, balance enquiries, cash withdrawals and pay bills.

• It may be on-line or 0ff-line. • Any customer Possessing ATM card issued by

the shared payment network system can go to any ATM linked to shared payment networks and perform his transactions. 

E-BANKING

• Internet Banking (or E-Banking) means any user with a personal computer and a browser can get connected to his Bank -s website to perform any of the virtual Banking functions. In internet Banking system the Bank has a centralized database that is web-enabled. All the services that the Bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service.  

E-BANKING

Banking products in India into 3 types based on the levels of access granted. They are: 

• Information Only System

• Electronic Information Transfer System

• Fully Electronic Transactional System

SERVICES PROVIDED BY E-BANKING:

• Bill payment• Fund transfer• Credit Card bills• Railway pass• Investing online• Recharging prepaid phones• Shopping

SMS BANKING

• SMS Banking is a service that allows customers to access their account information via Mobile phone. SMS Banking services are operated using both push and pull messages.

• Customers who maintain an account, with J&K Bank having internet Banking facility enabled for the account.

FEATURES

• Account balance inquiry• Transaction inquiry• Cheque status inquiry• Password change• Suspending self

SURVEY METHODOLOGY

The survey is conducted in the Jammu region of the state. The targeted population is the customers of the J&K Bank.

The collection of the necessary information to fulfil this report was through primary data and secondary data which is as follows:

Primary data: the primary data has been collected with the aid of self structured questionnaire. The self structured questionnaire was presented to the customers and the prospects with the aim to check the factors that lead to their preference of the services of the J&K Bank and try to explore some areas in which they found the services inadequate

Secondary data: this data was collected from various sources such as annual reports, magazines and from companies records i.e. Analysis of org reports, etc

A sample size of 60 respondents was taken from jammu of J&K bank customers &.Self structured questionnaire has been used to measure the responses.

DATA INTERPRETATION ANDANALYSIS

COMPETITORS OF JAMMU & KASHMIR BANK :

Some of the main competitors of Jammu & Kashmir Bank in Jammu.

• SBI BANK• PUNJAB NATIONAL BANK• ICICI BANK• HDFC BANK• AXIS BANK• UNION BANK OF INDIA

CONCLUSION• The new age financial products like Debit Card, Credit Card,

POS, SMS Banking & E- Banking have changed the scenario in past time .

• People have developed a habit of using more plastic money for their day to day transaction/ home affairs. Small needful daliy activities like recharging dish tv or paying electricity/Mobile bills is done through plastic money.

• Also while shopping they use their cards & make best use of opportunities available in the market.

• Now, they prefer to withdraw their money through ATM by Debit Cards which in turn reduces the footfall of customers in Banks with the purpose of withdrawl of small amounts from their own accounts.

CONCLUSION• The customers get instant accounts update through SMS

Banking• It has been observed that people prefer doing online transaction

through Debit Cards; they don’t want to rely on undue credit from Bank.

• Now they have transformed themselves with the modern Banking tools by dealing with their accounts through E-Banking, however for inter Bank transfer they prefer to personally deposit but they should inculcate a habit through E-Banking and make their transaction easy.

• For shopping, leisure, and basic needs people have transformed themselves from cash to cards.

CONCLUSION• They are also satisfied by the services provided by Bank.• Flow of plastic money has increased from the past in

Jammu as such but there is still a good market available for these products which can be done through marketing intelligence ( marketing intelligence system).

• So, it has been analysed through our study that the new age banking products have played a major role in changing the buying/transactional behaviours in the recent times and thus have changed modern Banking scenario.

LIMITATIONS OF THE STUDY

• Some of the persons were not so responsive.• Possibility of error in data collection because many of investors

may have not given actual answers of my questionnaire. • Sample size is limited to 60 visitors of Jammu & Kashmir Bank.• The research is confined to a certain part of Jammu• To maintain the secrecy full information is not given by the

company.• As I was involved in the sales team time was the constraint to

complete the study.• The accuracy of the result is limited to the reliability of methods of

investigation and analysis of data.

RECOMMENDATIONS

• The Jammu and Kashmir Bank should appoint Direct Selling Agents (DSA’S), which has almost become a necessity in modernized Banking culture to attract new businesses.

• J&K Bank should devise some aggressive marketing strategies to expand its market

• The financial services like Credit Cards should be advertise in the various branches of the Bank and the customers should be made aware of the services via SMS and E-mail

• The process cycle should take less time to response in providing financial services to the customers so as to increase the customer satisfaction

RECOMMENDATIONS• The J&K Bank generally pay less heed in providing loans to

the salaried people in the private sector, whereas their competitors like the ICICI Bank are. This is an avenue, which J&K Bank should walk.

• The loyal merchants should be given some more discounts so that they would not switch to other vendors it can be like that at the merchant’s location a small card should be kept depicting about the attractive schemes of the Bank and benefits of using Credit Cards.

• The billing system of the Credit Cards should be made easy for the customers. It may be like that the payment should be debited from the customer’s account automatically with the customer consent.

REFERENCES

• Amin, H.,“Internet Banking Adoption among Young Intellectuals,”Journal of Internet Banking and Commerce, vol. 12, no.3.2007.

• Chan, S. C. & Lu, M. T. 2004.Understanding Internet banking adoption and use behavior: a Hong Kong perspective, Journal of Global Information Management, 12(3), 21-43.

• Dixit.N., Saroj.K.D “Customer Perception On Internet Banking And Their Impact On Customer Satisfaction & Loyalty: A Study In Indian Context.Journal Of Computing, Volume 2, Issue 7, July 2010.

 • El-Sherbini, A. M., & Roas, C. P., & Mohamed, M. & Wugayan, A.

(2007).Bank customer Behavior perspectives towards internet banking services in Kuwait.Advances in Global Business Research,4.1. 28-35.

REFERENCES

• Eriksson, K., Kerem, M., Nilsson,D.”Consumer acceptance of internet banking in Estonia”.International Journal of Bank Marketing, 23 (2), 200-216

• Gan, C., Clemes, M., Limsombunchai, V., Weng, A “ A logic analysis of electronic banking in New Zealand”. International Journal of Bank Marketing, 24 (6), 360-383.

• Kadir. H.K.,Nasim .R.,Reza.M.”Impacts of service quality on customer satisfaction:Study of Online banking and ATM services inMalaysia” International Journal of Trade, Economics and Finance, Vol.2, No.1, February, 2011

• Madhavankutty, G. (2007), ‘Indian Banking - Towards Global Best Practices’. Bankers Conference Proceedings, November Issue, 84-86

REFERENCES

• Qureshi .T.M., Muhammad K.Z,Muhammad.B.K.,”Customer Acceptance of Online Banking in Developing Economies” Journal of Internet Banking and Commerce, April 2008, vol. 13, no.1.

• Ramalingam P. (2008), ‘Usage Pattern of Credit Card Holders’, Indian Journal of Finance, Volume 3(4), April, pp 7-18 

• Safeena. R, Hema.D. and Abdullah.K.,” Internet Banking Adoption in an Emerging Economy: Indian Consumer’s Perspective”, International Arab Journal of e-Technology, Vol. 2, No. 1, January 2011pg 56- 64.  

• Sathye, M., “Adoption of Internet banking by Australian consumers: an empirical investigation,” International Journal of Bank Marketing, vol. 17, no. 7, pp. 324-334, 1999.

• Uppal R. K. and N. K. Jha (2008), Online Banking in India, New Delhi: Anmol Publications Pvt. Ltd. • WEBSITE: www. jkbank.net