Despite the national demonetisation initiative in India, digital banking is struggling to get off the ground across the country, according to a new study from Oracle.

The 2017 Oracle JD Power India Retail Banking study, which surveyed over 5,300 retail banking customers in India, found that branches continue to dominate banking channels, with 94 per cent of customers having visited a branch at least once in the past 12 months.

Gordon Shields, senior director at JD Power, said: “Most banking relationships still begin and continue at the branch. However, there is great potential for banks to move more into the digital space.

“Only 51 per cent of retail banking customers have a reliable online banking experience with their main financial institution. If this is the alternative to in-person banking at the branch, a stronger emphasis must be placed on improving overall service.”

Despite mobile banking ranking higher than in-person interactions for customer satisfaction, online nine per cent of Indian retail banking customers use mobile banking for everyday transactions.

The report suggested that communication is key to achieving higher satisfaction rates, which in turn leads to higher adoption rates. Nearly three quarters of customers believed that their financial needs were not fully understood before they were offered new products, with only seven per cent having had fees and pricing of products explained.

Kumar Kesavarapu, APAC leader at Oracle, concluded: “As India embarks on its digitisation agenda, results on the ground exhibit a contrary reality. A large majority of India’s urban retail banking consumers still prefer to go to a bank – our study estimates this to be as high as 94 per cent.

“This at a time when digital banking is paving the way for a new economy and one that is going to be a dominant metric of success for the government, banks and citizens alike. We believe the issue lies in customer engagement models that Indian banks employ today and related security uncertainties when transacting online. This can be addressed easily and quickly.”

In November last year, prime minister Narendra Modi gave only four hours’ notice that much of the country’s cash would cease to be legal tender, in a demonetisation move designed to curb the ‘black money’ element of India’s predominantly cash economy. The declaration meant that 1,000 and 500 rupee notes – which represented 86 per cent of the currency in circulation at the time – would no longer be valid, and have to be exchanged at banks for newly issued notes.

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