Electronic banking can be described as provision of banking services to customers through internet technology (Daniel, 1999). Banking services can be provided through various technologic distribution channels such as internet technology, video banking technology, telephone banking technology, and WAP technology. However, internet technology is the main electronic distribution channel in the banking industry (Krjaluoto et al., 2002).
Tan and Teo (2000) note that the challenge to expand and maintain banking market share has influenced many banks to invest more in making better use of the internet because customers today are demanding much more from banking service. They want new level of convenience and flexibility (Birch and Young, 1997; Lagouttle, 1996) on top of powerful and easy to use financial management tools and products and services that traditional retail banking could not offer.
So the emergence of e-banking has prompted many banks to rethink their strategies in order to stay competitive. The banks that fail to respond to the emergence of e-banking in the market are likely to lose customers and that the cost of offering e-banking services is less than the cost of keeping branch banking.
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Furthermore, internet banking has allowed banks and financial institutions to provide these services by exploiting extensive public network infrastructure (Ternullo, 1997). In the future, internet banking will recede in importance strategic application to become a competitive necessity that must be adopted.
An attitude is a positive or negative feeling or mental state of readiness, learned and organized through experience, which exerts specific influence on a person response to people, object and situation (Gibson, Ivancevich and Donnelly, 2000).
According to Roger (1995) the different dimension of attitudinal belief can be measured by using five attributed which are relative advantage, compatibility, complexity, trialability and observability. The five characteristic should not be considered as creating an exhaustive list but ones which have commonly been found in a wide range of studies (Roger, 1995). The discussion for different dimensions of attitudinal belief is used in this study as below.
2.1.2 Relative Advantage
Relative advantage is "the degree to which an innovation is perceived as being better than the idea it supersedes" (Roger, 1995). Most often, relative advantage is viewed as the perceived economic benefit (Loudon and Della Bitta, 1993; Black et al., 2001; Polatoglu and Ekin, 2001) of an innovation relative to alternative it seeks to replace. The benefit can be in form of reduced costs, such as decrease in time, effort, or dollars.
Convenience has been found to be a measure of relative advantage in some innovation studies (Loudon and Della Bitta, 1993; Black et al; Polatoglu and Ekin, 2001; Suganthi et al. 2001). According to BankAway, 2001; GurÄƒu, 2002), the convenience of internet banking is increased comfort and time saving, quick and continuous access to information.
Polatoglu and Ekin (2001) consider performance as being a measure of relative advantage, while Black et al. (2001) identify the elimination of the need to rely on others. In other words, internet bank users, at all times, remain in full control of what they are doing through the commands they enter via their PC's keyboard.
According to Rogers and Shoemaker (1971), the compatibility of an innovation is "the degree to which an innovation is perceived as being consistent with the existing values, past experiences and need of the receivers." Hence, compatibility refers to how well a technology fits with an individual's working, lifestyle, values and needs. Compatibility may refer to compatibility with the values or norm of the potential adopters or may represent congruence with the existing practices of the adopters. The author brown, et al. (2004) looked into what extend using internet banking fits with working style, with the way preferred to manage finance affairs and lifestyle among the two contexts.
In the first interpretation implies a kind of normative or cognitive compatibility which is compatibility with what people feel or think about a technology while for second suggests is a more practical or operational compatibility which is compatibility with what people do. Compatibility studies did not actually measure compatibility in any direct way but it is simply inferred that the innovation was compatibility to the potential group of users. For instance the operational or practical compatibility provided by Brander (1959) who inferred that the farming innovation hybrid sorghum was most compatible to those farmers who had previously adopted hybrid corn.
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The normative or cognitive compatibility, for instance Black et al. (2001) stressed that past experiences and the values of consumers in the UK appear to have a significant impact on their willingness to adopt Internet banking. Those consumers indicated they were comfortable with the internet were more positive about internet banking. (Polatoglu and Ekin, 2001) found that in Turkey the respondents view internet banking as being far less compatible due to low level of e-mail usage and a preference for using over the counter delivery at bank branches.
In this research project, the term "ease of use" is used instead of "complexity". According to Bennett and Bennett (2003), Complexity is the degree to which an innovation is perceived as relatively difficult to understand and use by its potential adopters. Complexity has also been measured in relation to perceptions about the purpose of the respective innovation, its intended use and the ease with which it can be used. Martins et al. (2004) also revealed that complexity has little influence towards the adoption of the Internet as teaching tool at a foreign language school. Although the complexity has little implication towards adoption, but the complexity issue is still exist. Since, innovative technologies that are perceived to be easier to use and less complex have a higher possibility of acceptance and use by potential users. Thus, complexity would be expected to have negative relationship to attitude.
Davis et al., (1989) shows that, complexity has been found to be an important factor in the technology adoption decision as the internet is very user friendly with its "point and click" interface. It is likely that potential customers may feel that Internet banking services are more easy to use, and hence more likely to use them.
Besides that, Reibstein (2002) found that ease of use includes aspects such as functionality, accessibility of information, ease of ordering and navigation. Therefore, consumers may access the websites based on how easy they are used and how effective they are in helping them accomplish their task (Zeithmal, V.A., Parasuraman, A., and A., M. 2002).
Viewing point of Polatoglu and Ekin (2001), a well-educated people who are with the internet and e-mail, should not find Internet banking to be complex. From Black et al., (2001) found that complexity in conducting financial transactions over the internet was inversely related to a consumer's experience with computers. Hewer and Howcoft (1999), in a similar vein, say: "e-banking requires a certain minimum level of technical experience and competence, irrespective of whether this relates to the use of a computer or in the Internet". Suganthi et al. (2001) label one of their dimensions "ease of use", which Rogers (1995) considered to be a measure of complexity.
Trialability is the degree to which an innovation maybe experimented with on a limited basis (Rogers, 1995). Trialability allows individuals to "test drive" an innovation before it is being adopted. Examples of efforts to promote a trial include offering free samples of consumer packaged goods, allowing test drive of automobiles, allowing "demo-ing" of new skies and setting up demonstration model of popular consumer in stores and kiosks.
By being able to test a product, consumer can assess the product relative advantages and potential risk, product that are easy to try tend to diffuse through the market more quickly than those that do not.. As the trailability of product increase, the rate of product adoption also increase (John t. Gourville, 2006)
Some banks in the west have responded to this need by developing websites which allow potential users to try out internet banking (Hewer and Howcroft, 1999). Trailability is often quiet important to innovators and early adopters because they have little else on which to base the value of the innovation. However, trialability also can be less important for later adopters, who are likely to know many people who have already adopted the innovation and who can therefore speak to its efficacy (Hoyer and Macinnis, 2009).
In internet banking, security is the most important future challenges facing banks operator (Aladwini, 2001; Black et al., 2001; Gerrard and Cunningham, 2003; Sathye, 1999 ). Participants considered internet-based risk in making banking channel choices. According to Ostlund (1974), the perception about risk was a characteristic which influences the rate of adoption. Risk is defined as "the uncertainty about what the innovation gives". Perceived risks can be defined as either the psychosocial risks or risks in general that are attributed to a product or its performance.
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Bauer (1960), Webster (1969) and Ostlund (1974) introduced risk as an additional dimension in diffusion and adoption. Furthermore, Polatoglu and Ekin (2001) consider risk in terms of financial, physical and social characteristics. Researchers in non-banking contexts during the 1980s, such as Labay and Kinner (1981) and Holak (1988) identified risk as an innovation characteristic.
A common and widely recognized obstacle to electronic commerce adoption has been the lack of security and privacy over the internet (Bhimani 1996; Cockburn and Wilson 1996; Quelch and Klein 1996; Rhee and Riggins 1997). This has led many people to view internet commerce as a risky undertaking. Thus, it is expected that only individuals who perceive using internet banking as a low risk undertaking would be inclined to adopt it. Cooper (1997) identified the level of risk as an important characteristic from a consumer's perspective in the adoption of innovation. Online customers typically expect their personal information and records to be kept accurately and securely (Miyazaki and Fernandez, 2001).
Observability is the extent to which an innovation is visible and communicable to consumers. On the other word, observability is the degree of visibility of the new innovation results. According to Rogers and Shoemaker, 1971, observability is "the degree to which the results of an innovation are visible to others". What is observed is what can be communicated, and this could affect diffusion depending on the outcome of what has been observed. The more likely the innovation will be quickly adopted and implemented.
The characteristic of observability has been defined by Black et al. (2001) as the extent to which an innovation is visible to other members in a social system. One of the difficulties concerning the dimension of observability is that it does not appear to be a contributor to the adoption of internet banking.
2.2 Review of Relevant Theoretical Models
Figure 2.3 The relationship among characteristic of innovation and adoption of internet banking, attitude towards adopting of internet banking and adoption intention
Adoption of Internet Banking
Intention to use internet banking
Source: Taylor and Todd (1995)
The research model adopted in this study depicts what should occur given the constructs that have been put forward by Rogers (1995) concerning the adoption of a technology. The model indicates that the six constructs: relative advantage, compatibility, complexity, trialability, observability and risk. The analysis showed that the characteristics of innovation affect the attitude towards adopting of internet banking and adoption of internet banking. Furthermore, the attitude towards adopting of internet banking and adoption of internet banking are significantly related with senior citizen's adoption intention. This research was intended to measure the adoption of internet banking among senior citizens in Malaysia.
2.3 Proposed Theoretical/Conceptual Framework
Figure 2.3 The Different dimensions of Attitudinal Belief Toward Adoption of Internet Banking
Adoption of Internet Banking
The proposed conceptual framework has been adapted from Rogers (1995) and Lockett and Littler (1997). There are six independent variables (Relative advantage, Compatibility, Complexity, Trialability, Observability, and Risk) and one dependent variable (adoption of Internet banking). In this study, the relationship between these six independent variables and adoption of internet banking among senior citizen in Malaysia has been examined.
Through the study of previous research, the dimension of attitudinal belief toward adoption of internet banking is reformulated in order to fit into the objectives and purpose of this study. The findings of the study imply that the
2.4 Hypothesis Development
2.4.1 The Relationship between Relative Advantage and Adoption of Internet Banking among Senior Citizens in Malaysia
H1a. There is no significant relationship between relative advantage and adoption of internet banking.
H1b. There is a significant positive relationship between relative advantage and adoption of internet banking.
Several empirical studies affirm the significance of the relative advantage in predicting attitudes and intention on adoption of internet banking. The cost and social status motivation aspects of innovation are element of relative advantage (Rogers, 2003). Rogers categorized innovations into two types: preventive and incremental innovations. According to Rogers (2003), a preventive innovation is a new idea that an individual adopts now in order to lower the probability of some unwanted future event. Preventive innovations usually have a slow rate of adoption so their relative advantage is highly uncertain.
However, incremental innovations provide beneficial outcomes in a short period. An innovation has to be perceived as offering advantages relative to existing comparable products or services. Senior citizens has more chance to adopt to internet banking if they see that the technology has value in their instructions, then they will use it. This has lead to positive relationship regarding the adoption of internet banking.
According to Rogers (2003), to increase the rate of adopting innovations and to make relative advantage more effective, direct or indirect financial payment incentives may be used to support the individuals of a social system in adopting an innovation. In order to increase the adopting of senior citizens, some benefit must provide to senior citizens. The relationship between the relative advantage and the adopting of internet banking among senior citizens in Malaysia is highly correlated.
The relative advantage variable are positively related to the adoption of innovation, in which the greater the perceived relative advantage of an innovation, the more rapid its rate of adoption is likely to be. On the other hand, the economic benefits have been found as good predictors of innovation's relative advantages, which have been cited by several researchers (e.g., Kolodinsky & Hogarth, 2001; Black, et al., 2001; Polatoglu & Ekin, 2001 and Gerrard & Cunningham, 2003).
According to Suganthi, et al. (2001), cost of computers and Internet access has been found to be significantly stood in the way of consumer adoption of Internet banking in Malaysia. Dimensions of the construct of relative advantage according to Black, et al (2001)'s study have some generality including reduced costs and greater convenience. This has lead to a positive relationship between relative advantage and adoption of internet banking.
Based on the literature reviewed above, we assume that relative advantage is hypothesized to have significant relationship to the senior citizens in Malaysia to adopt internet banking.
2.4.2 The Relationship between Compatibility and Adoption of Internet Banking among Senior Citizens in Malaysia
H2a. There is no significant relationship between compatibility and adoption of online banking
H2b. There is a significant positive relationship between compatibility and adoption of online banking.
According to Rogers (2003), an innovation that is compatible with theÂ experiences, values and needsÂ of its potential buyers will be adopted more rapidly than one that isn't compatible. In addition, an idea that is incompatible with the values and norms of a social system will not be adopted as rapidly as an innovation that is compatible.
Compatibility is a measure of the values or beliefs of individuals, the ideas they have adopted in the past, and the ability of an innovation to meet their needs (Gerrard and Cunningham, 2003). As noted by Ndubisi and Sinti (2006), "given that individuals have already established personal banking norms, lifestyle, finance management system, and account monitoring mechanism prior to the advent of Internet banking, their acceptance or rejection of this new mode will rely greatly on the extent this new mode accommodates or rejects all or some of the past values." (p. 24).
A lack of compatibility in IT with individual needs may negatively affect the individual's IT use (McKenzie, 2001; Sherry, 1997). If an innovation is compatible with an individual's needs, then uncertainty will decrease and the rate of adoption of the innovation will increase. This leads to positive interrelationship between compatibility and adoption of internet banking.
On the other hand, lack of compatibility may be a factor hindering the adoption of Internet banking Polatoglu and Ekin(2001) and it could be applicable that those who indicated they were comfortable with the Internet were more positive about Internet banking. A better understanding of innovation allows the consumer to better appreciate the benefit brought by new innovation improvements and compatibility
Based on the above discussions, we postulate that compatibility is hypothesized to have significant relationship to the senior citizens in Malaysia to adopt internet banking.
2.4.3 The Relationship between Complexity and Adoption of Internet Banking among Senior Citizens in Malaysia
H3a. There is no significant relationship between complexity and adoption of senior citizens on online banking.
H3b. There is a significant positive relationship between complexity and adoption of senior citizens on online banking.
As Rogers stated, opposite to the other attributes, complexity is negatively correlated with the rate of adoption. Thus, excessive complexity of an innovation is an important obstacle in its adoption. Furthermore, new ideas that are simpler to understand are adopted more rapidly than innovations that require the adopter to develop new skills and understandings.
Black, et al. (2001) found that complexity in conducting financial transactions over the Internet inversely related to a user's experience of computers. If a user finds Internet Banking services difficult to access, he or she might be very frustrated and would therefore form a negative perception on Internet banking as complex services. Thus, this have lead senior citizen less likely to adopt internet banking. In addition, Kolodinsky and Hogarth (2001) have demonstrated difficulty of use and fix errors as a form of complexity that significantly influenced e-banking adoption.
On the other hand, Sathye (1999) used another dimension for the construct of complexity, which is "respondents reluctant to change". The resistance to change dimension according to Sathye (1999), shows that only 32 percent of the respondents consider this factor as the reason for non-adoption but the resistance to change found to be much higher, in the case of personal customers than in the case of business customers.
Based on the above discussions, we postulate that complexity is hypothesized to have significant relationship to the senior citizens in Malaysia to adopt internet banking.
2.4.4 The Relationship between Trialability and Adoption of Internet Banking among Senior Citizens in Malaysia
H4a. There is no significant relationship between trial ability and adoption of senior citizens on online banking.
H4b. There is a significant positive relationship between trial ability and adoption of senior citizens on online banking.
Trialability enabling users to try out Internet Banking services beforehand might fit with certain customer's needs toward exploring that particular innovation (Internet banking) in that way they can test out the system before adoption. Also, trialability is positively correlated with the rate of adoption. The more an innovation is tried, the faster its adoption is. Furthermore, an innovation that is trialable represents less uncertainty to the individual who is considering it for adoption, who can learn by doing.
Customers demand to be able to use Internet Banking services on a trial basis first at least for a month found a major influence on Internet banking adoption in South Africa and in Singapore (Brown, et al. 2004). Polatoglu and Ekin (2001) demonstrated that the more rapid diffusion occurs when consumers can have low-cost or low-risk trial of the service.
In addition, Gerrard and Cunningham (2003) reported that, some banks in the US and EU countries have responded to this need by developing Web sites, which allow potential users somehow to do practice trail of Internet banking.
Based on the above discussions, we postulate that trialability is hypothesized to have significant relationship to the senior citizens in Malaysia to adopt internet banking.
2.4.5 The Relationship between Observability and Adoption of Internet Banking among Senior Citizens in Malaysia
H4a. There is no significant relationship between observability and adoption of senior citizens on online banking.
H4b. There is a significant positive relationship between observability and adoption of senior citizens on online banking.
Roger (2003) defined observability is "the degree to which the results of an innovation are visible to others". Whereas Parisot (1997) state that role modeling or peer observation is the key motivational factor in the adoption and diffusion of technology. Black et al. (2001) point out that the characteristic of observability as the extent to which an innovation is visible to other members in a social system. The easier it is for individuals to see the results of an innovation, the more likely they are to adopt it.
On the other hand, Polatoglu and Ekin (2001) stressed that the more easily consumers can observe the positive effect of adoption, the greater its chances of success. In addition, the greater using internet banking being observable, the more likely that it will be adopted. In this connection, Moore and Benbasat (1991) stated that the issue of observability variable within an alternative instrument to measure the perception of adopting information technology innovation.
According to Moore and Benbasat (1991), observability variable substituted with demonstrability and visibility. Moreover, Moore and Benbasat (1991) pointed the potential adopters mere exposure to objects is capable of making an indivisual's attitude toward these objects more positive. Similar to relative advantage, compatibility, and trialability, observability also is positively correlated with the rate of adoption of an innovation.
Accordingly, we postulate that observability is hypothesized to have significant relationship to the senior citizens in Malaysia to adopt internet banking.
2.4.6 The Relationship between Risk and Adoption of Internet Banking among Senior Citizens in Malaysia
H6a. There is no significant relationship between risk and adoption of senior citizens on online banking.
H6b. There is a significant positive relationship between risk and adoption of senior citizens on online banking.
In the context of Internet Banking, Black et al. (2001), while not specifically using the word "risk", suggest that errors and the security afforded might be considered as measures of risk. Security is one of the very important factors in determining the decision of consumers to use Internet banking.
Personal awareness of security or risk is crucial to consumer intention to adopt the internet banking. According to Ostlund (1974), the perception about risk was a characteristic which influences the rate of adoption. The Walls report (1997) also reported that unless security is improved, more households would be willing to conduct their transactions over the Internet. In USA, Thorton Consulting (1996) which conducted a survey focusing on banks concluded that 67 percent of US banks feel that "security concerns" is the major barriers for Internet banking.
On the other hand, the study of Booz et al. (1997) reveals that security concern among customers was the top-ranking obstacle for non-adoption of Internet banking in Latin America.
Online customers typically expect their personal information and records to be kept accurately and securely (Miyazaki and Fernandez, 2001).
Accordingly, we postulate that risk is hypothesized to have significant relationship to the senior citizens in Malaysia to adopt internet banking.
As a summary, Chapter 2 provides a review of literature background which includes the dependent variable and 6 independent variables for explaining the current research study. Besides that, this chapter also shows the relevant theoretical models and also defined the relationship between each independent variable with diffusion of internet banking toward online banking service.