In early 2001 the bursting of the Internet bubble has created numerous assumptions that Internet services companies have lost their opportunities. The Internet companies and Internet players have been fighting for survival, and most of them have been still experiencing losses. There are still going discussions among practicing managers and academics in reaching a consent in their debate about this new technology: whether the Internet changes the basic way people do business or whether it is just an evolutionary process, offering simply a new distribution channel and communication medium (Moe and Fader, 2001).
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According to Brown (2001), the “New Economy” or e-commerce businesses are still at the early life stage. In spite of the collapse of dot.com stock prices in March 2001, Internet usage and e-commerce continued to grow at a fast speed. According to eMarketer (2003), the US B2C e-commerce returns comparing to US$51 billion in 2001reached US$70 billion in 2002, i.e., a jump of 37%. It also forecasted that revenues of the e-commerce would increase by 28% to US$90 billion by 2003; by 2004 would occur another increase of 21% to US$109 billion; and to US$133 billion, a further 22% increase, by 2005. The expected extensive growth of online purchases via the Internet will give enormous chances to businesses in general, and Internet Banking (IB) in particular.
In this study the terms IB and Online Banking (OB) are used interchangeably. IB/OB is different from Electronic Banking (e-banking) in that the latter is a higher level activity that encompasses not only IB/OB, but also Mobile Banking, SMS Banking, ATM, WAP-banking and other electronic payment systems that are not operated through the Internet. Our study will focus on IB, because it is considered as the most significant and most popular delivery channel for banking services in the cyber age.
Banks can benefit from much lower operating costs by offering IB services, which require less staff and fewer physical branches. Customers will also benefit from the convenience, speed and round-the-clock availability of IB services.
In order to be able to formulate better marketing strategies for increasing IB usage in the future banks need to study the factors that influence customers’ intention to adopt IB so that banks. This study aims to examine the behavioral intention of UUM students to use IB services with a focus on users’ perceptions of ease of use and usefulness of IB, and of security of using this new technology to meet their banking needs. In Chapter 2, we provide a review of the previous literature on innovation diffusion and technology adoption, based on which we propose a model of customers’ intention to adopt IB. We discuss the research methodology in Chapter 3.
History of internet banking in Malaysia
On June 1, 2000, the Bank Negara Malaysia let locally owned commercial banks offer Internet banking services. On June 15, 2000 the first bank to offer Internet banking services in Malaysia was Maybank, the largest domestic bank in terms of assets as well as network distribution which commands its own portal at www.maybank2U.com. Subsequently, internet banking services were offered by Hong Leong Bank, Southern Bank, Multi-Purpose Bank and etc. A review of the Malaysian banking sites in the Internet discovered that all domestic banks, which have been settled an anchor bank status by the BNM, have a web presence. This banking service is currently being provided to individual customers of the bank and the site boasts of the latest 128-bit encryption technology to dispel worries of security among bank customers. Internet banking service provided in the portal consists of banking enquiry functions, credit card payment, bill payment, accounts summary, and funds transfer as well as transaction history. In the banks providing internet banking services customer support service is provided via e-mails as well as via telephone lines and it is available daily from morning to mid-night (source: http://www.arraydev.com/commerce/JIBC/0103_01.htm).
From reviewing related articles on the current topic, we can find evidence that although consumers have had an interest in advanced internet banking services and tended to have various financial sources or tools for money transactions; they have not quickly changed their main propensity to use banking services or goods that they are already familiar with (Futurics 2001). For example, new electronic banking goods or services have not quickly substituted for traditional ones and non-online banking goods or services. Although various electronic banking services have emerged since the ATM was introduced 30 years ago, a lot of consumers still use checks as a primary source for money transactions, and banks still have a lot of “bricks and mortar” branches in the market. According to the Survey of Consumer Finances in 2001, about 60% of household heads used checks as a primary source. Furthermore, the number of bank branches expanded from about 65,000 to about 73,000 from 1994 to 2003, even though the number of U.S banks fell from about 12,500 in 1994 to about 9,000 during the same period (Hirtle & Metli, 2004). In spite of the emergence of a series of advanced electronic banking services, both consumers and banks still regard non-electronic banking as one of the important sources for money transaction.
However, in global terms the majority of private bankers are still not using internet-banking channel. There are multiple reasons for this. To start with, customers need to have an access to the internet in order to utilize the service. Furthermore, new online users need first to learn how to use the service (Mols et al., 1999). Second, nonusers often complain that internet banking has no social dimension, i.e. you are not served in the way you are in a face-to-face situation at a bank branch (Mattila et al., 2003). Third, customers have been afraid of security issues (Sathye, 1999; Hamlet and Strube, 2000; Howcroft et al., 2002).
However, this study focuses in the adoption of internet banking services by customers in evidence of the students of Universiti Utara Malaysia. Our study aims to gain a deeper understanding of the factors influencing the adoption of internet banking services by UUM students.
The study intends to answer the following questions:
How UUM students’ Attitude influence their Intention to use IB?
What relationship does the Perceived Usefulness have with the UUM students’ Attitude and Intention to use IB?
What relationship does the Perceived Ease of Use have with the UUM students’ Attitude and Intention to use IB?
Is Perceived Web Security really a concern to UUM students who are using IB?
The main aim of this study to determine the basic factors influence the usage of internet banking in UUM and to examine the factors that affect the adoption of internet banking. The specific objectives are as follow:
To investigate how UUM students’ Attitude influence their Intention to use IB;
To examine the relationship of Perceived Usefulness with the UUM students’ Attitude and Intention to use IB;
To investigate the relationship of Perceived Ease of Use with the UUM students’ Attitude and Intention to use IB;
To investigate whether Perceived Web Security is a concern for the usage of internet banking.
Significance of the Study
The study will contribute in expanding the body of knowledge in the internet and technology adoption literature.
It will provide academicians and researchers with an update on the usage and acceptance of internet in the banking sector.
This research can contribute to an improved understanding of the factors related to user’s acceptance of new technology. In particularly, this study acts as an understanding of the Technology Acceptance Model (TAM). Also, this research can stimulate the banks providing their services inside UUM Campus such as CIMB, Islamic Bank and Maybank to improve their internet banking services.
In the particular perspective, this study is significant to offer useful information for bank management in creating IB marketing strategies. For marketing practitioners, the aim is to offer a holistic and in-depth overview of how customer forms, experience and exploit their satisfaction towards services that offered by the banks.
This study contributes to the literature by formulating and validating TAM to predict IB adoption.
Although in the past most of studies’ aim were to extent of understanding of user adoption of technology, few of these studies were conducted on IB services by extending the well-established Technology Acceptance Model (TAM). It is an appropriate time to study the user adoption of IB when the numbers of global banking groups are rapidly offering and improving IB services on the rise (American Banker, 2002). Both academics and banking executives will be interested in such a study. in particular, this study investigates the students’ perception on the adoption of internet banking for their private purpose. In other words, our survey focused on UUM students’ purpose to use internet banking to handle their banking issues.
2.1. Technology Acceptance Models
Davis (1989) developed the Technology Acceptance Model, according to this model “users’ adoption of computer system” depends on their “behavioral intention to use”, which in turn depends on “attitude”, consisting of two beliefs, namely Perceived Ease of Use and Perceived Usefulness. In fact, Davis developed TAM by building upon an earlier theory, the Theory of Reasoned Action (TRA) by Fishbein and Ajzen (1975). In TRA, Fishbein and Ajzen (1975) proposed that intention is “the immediate determinant of the corresponding behavior”, which is divided into (1) “attitude toward behavior”, and (2) “subjective norm concerning behavior”. Davis posited d in TAM that the two theoretical constructs, Perceived Usefulness and Perceived Ease of Use, are fundamental determinants of system use in an organization. These constructs also provide better measures for predicting and explaining system use than other constructs (Davis, 1989).
TAM has been widely used for predicting the acceptance and use of information systems, and recently has been applied to predict Internet adoption as well. In a recent study, Lederer et al. (2000) adapted TAM to study World Wide Web (WWW) usage and found evidence to support TAM. Another study of applying TAM in the WWW context was conducted by Moon and Kim (2001). They introduced the construct Playfulness to predict Attitude. Data were collected from 152 graduate students of management in Korea. Although the results of findings of test of TAM-related hypotheses showed that they were all supported, the results deviated from the basic belief of TAM that Perceived Usefulness is the key determinant of user acceptance of IT. The results of Moon and Kim (2001) revealed that Perceived Ease of Use has a more significant relationship with Attitude than Perceived Usefulness in the WWW context, and Perceived Playfulness (an intrinsic motivational factor) has a more positive effect on Attitude than Perceived Usefulness (an extrinsic motivational factor).
2.2. Theoretical Model for IB Adoption
IB is a new distribution channel for the delivery of banking services. From both academic and practical perspectives, it is interesting to understand and assess customers’ intention to use IB services. We have chosen TAM as the baseline model for this study because it is a well-tested model concerning users’ acceptance of technology. We augment TAM with the construct Perceived Web Security. Specifically, we hypothesize that Intention to Use is influenced by Attitude, Perceived Usefulness, Perceived Ease of Use and Perceived Web Security. We will test the strength of the hypothesized relationships embedded in the theoretical model and the robustness of the model in predicting students’ intention to adopt IB in Universiti Utara Malaysia Campus.
TAM has been used by various researchers to predict users’ intention to accept or adopt a variety of technologies and computer systems. The technologies include electronic mail, text editor, word processing systems, and graphics software (Davis, 1989; Davis et al., 1989), spreadsheets (Hendrickson et al., 1993), Database Management Systems (Szajna, 1994), voice-mail and word processors (Adams et al., 1992; Chin and Todd, 1995). We use TAM with the constructs Perceived Usefulness and Perceived Ease of Use to assess the determinants of students’ Attitude and Intention to Use (equivalent to the construct Behavioral Intention in TAM). While we adopt the original TAM in this study, we use Behavioral Intention as the dependent variable and skip the construct Actual Usage. On the theoretical front, an abundance of research studies have reported a strong and significant causal relationship between behavioral intention and usage of technology or targeted behavior (Sheppard et al., 1988; Venkatesh and Morris, 2000). It is therefore theoretically justifiable to use Behavioral Intention as a dependent variable to examine the acceptance of IB (Mathieson, 1991). Agarwal and Prasad (1999) also argued that for a survey-based research design, Behavioral Intention is more appropriate than Actual Usage as “they are measured contemporaneously with beliefs” and our study is survey-based research. On the practical front, it is worth noting that IB is still at an early stage of development among UUM students. The percentage of usage is not relatively high. Therefore, the choice of Behavioral Intention, rather than Actual Usage, as the dependent variable is considered both appropriate and necessary.
In addition, Salisbury et al. (2001) argue that feeling secure in doing transactions on the Web is often cited by users as a major factor that removes their concerns about the efficient use of the Internet for making online purchases. Therefore, we include the construct Perceived Web Security as a predictor of Attitude and Intention to Use, as in the earlier study conducted by Salisbury et al. (2001). In their study, Salisbury et al. (2001) developed a set of four items to measure Perceived Web Security using a 7-point Likert scale. The results of their study showed that the three constructs, namely Perceived Web Security, Perceived Ease of Use and Perceived Usefulness, have a positive relationship with intention to purchase online. However, we will include the construct Attitude in our theoretical model.
There exists virtually no research examining UUM students’ behavioral intention to adopt IB services by extending TAM. To fill this gap, we will conduct a survey study for hypothesis testing using the framework of the original TAM as the foundation to determine the predictors of students’ Intention to use IB in UUM. To collect data, we will design a questionnaire by adapting the instrument and scales developed for TAM. We will augment TAM by adding the construct Perceived Web Security developed by Salisbury et al. (2001) and adapting their instrument and scale to measure this construct in our questionnaire.
3.1. Sample Size
This study aims to investigate the self-reported behaviors of students’ and their intention to use IB services for their private purposes in UUM. We will request respondents to return their completed questionnaires. We will collect data from UUM students who use internet banking. We will as to fill in the survey questionnaires to a sample of 250 randomly students selected from a total of over 25,000 students in UUM.
3.2. Measurement of the Constructs
In devising a useful measurement instrument for this study, we want to adapt an instrument and scales developed and validated in previous studies. We will base on TAM instrument, which has been replicated and widely used in other studies. In this study we use the adapted question items as the instrument to measure the respective constructs below, using a 7-point Likert scale for each item (with 1 = strongly disagree, 2 = disagree, 3 = slightly disagree, 4 = neutral, 5 = slightly agree, 6 = agree, and 7 = strongly agree). The constructs are defined in the following:
Perceived Ease of Use (PEOU) – defined by Davis (1989) as “the degree to which a person believes that using a particular system would enhance his job performance”.
Perceived Usefulness (PU) – defined by Davis (1989) as “the degree to which a person believes that using a particular system would be free of effort”.
Perceived Web Security (PWS) – defined by Salisbury et al. (2001) as “the extent to which one believes that the World Wide Web is secure for transmitting sensitive information.” It is also noted that “the adoption of purchasing products on the World Wide Web may involve a greater degree of risk than the adoption of other IT innovations. When one purchases products online, there may be a perception of risk involved in transmitting sensitive information such as credit card numbers across the World Wide Web.”
Attitude (ATT) – refers to an individual’s positive or negative feelings (evaluative affect) about performing a particular behavior (Fishbein and Ajzen, 1975).
Intention to Use (INT) – refers to customers’ intention to use, as opposed to their actual use of, IB services.
3.3. Survey Questionnaire
Based on the hypothesized model developed through a detailed review of the related literature on user acceptance of technology and new technology diffusion, we will devise a questionnaire as a measurement scale for the research. The questionnaire will be developed in English. We will try to make the questionnaire readable and ensure its accuracy and appropriateness. A factor analysis will be performed on the data collected from the pilot study.
Total 85 research questionnaires were distributed to and collected from the respondents in the library building of Universiti Utara Malaysia. The sample period consists of 3 weeks from August 22 to September 12, 2010. Factor analysis was done by using SPSS with the data collected by distributing questionnaires.
4.1. Respondents’ Demographic Characteristics
The analysis of the statistics of the demographic characteristics of the respondents’ is presented in Table 1. Of the 85 respondents, 47.1% were female and 52.9% male; 37.6% were in the 21-25 age group, 41.2% were 26-30 in age, and 20% were 31-40 in age. As the research was done among master students, any respondent was not under the age of 20, and only one of them was over 40.
Demographics of respondents
Rogers (1983) has found the characteristics of innovation adopters as having high levels of education, and social status as well as income. Moreover, Gefen (1997) and Teo & Lim (2000) by testing the gender differences which affect the awareness of e-mail and the Internet usage, found similar results with Rogers (1983).
4.2. Factor Analysis
Using SPSS we conducted our exploratory factor analysis on our survey data. Table 2 presents the rotated factor matrix which is a result from independent variables’ Varimax rotated principal axis factor extraction. The 1.0 eigenvalue cut-off criterion was used for the independent variables factor extraction. The table points out that five factors which are the variables used for our research emerged and reports their factor loadings.
For evaluation of the Cronbach’s alpha we tested the data using the SPSS Exploratory Factor Analysis (EFA), where the Cronbach’s alpha ranged from 0.896 to 0.914. To ensure convergent validity and item reliability we evaluated each of the items individually. All factor loadings except for b7, b10 and b15 (0.478; 0.424 and 0.486, respectively) were larger than 0.5, which characterize an acceptable significant level of internal validity. The factor loadings vary from 0.554 to 0.744 for Perceived Ease of Use, 0.478 to 0.686 for Perceived Usefulness, 0.424 to 0.642 for Perceived Web Security, 0.486 to 0.536 for Attitude, and 0.539 to 0.621 for Intention to Use. All 19 questionnaire items were held on to further analysis, because all factor loadings were found to be of an acceptable significant level.
Reliability and factor analysis (from SPSS analysis)
Perceived Ease of Use
B/b1-Using the Internet Banking (IB) service is easy for me
B/b2-I find my interaction with the IB services clear and understandable
B/b3-It is easy for me to become skillful in the use of the IB services
B/b4-Overall, I find the use of the IB services easy
Perceived Usefulness (PU)
B/b5-Using the IB would enable me to accomplish my tasks more quickly
B/b6-Using the IB would make it easier for me to carry out my tasks
B/b7-I would find the IB useful
B/b8-Overall, I would find using the IB to be advantageous
Perceived Web Security (PWS)
B/b9-I would feel secure sending sensitive information across the IB
B/b10-The IB is a secure means through which to send sensitive information
B/b11-I would feel totally safe providing sensitive information about myself over the IB
B/b12-Overall, the IB is a safe place to transmit sensitive information
B/b13-Using the IB is a good idea
B/b14-I would feel that using the IB is pleasant
B/b15-In my opinion, it would be desirable to use the IB
B/b16-In my view, using the IB is a wise idea
Intention to Use (IU)
B/b17-I would use the IB for my banking needs
B/b18-Using the IB for handling my banking transactions is something I would do
B/b19-I would see myself using the IB for handling my banking transactions
4.3. Reliability test
For reliability tests, the Cronbach’s alpha ranged from 0.925 to 0.929 for both Perceived Ease of Use and Perceived Usefulness, from 0.924 to 0.927 for Perceived Web Security, while it ranged from 0.927 to 0.928 for Attitude and from 0.925 to 0.926 for Intention to Use.
Correlation analyses of variables show that estimation ranges from 0.620 to 0.778 with significant P for all variables as shown in Table 3. Perceived Ease of Use has a direct impact on Perceived Usefulness with 0.000 significant level. Perceived Usefulness, Perceived Ease of Use and Perceived Web Security significantly impacts on Attitude at the 0.000 level. Consequently, Attitude, Perceived Usefulness and Perceived Web Security significantly effect Intention to Use.
Correlation of variables
**. Correlation is significant at the 0.01 level (2-tailed).
Since our research was performed with time limitation, as with other crossectional studies, it is not without limitations. A wider study for more fully investigation of the pre-launch stage, the promotion stage and the post-launch stage of IB would surely be an important donation to the IB literature in the future.
Our research only covers Web security construction. Future research might concentrate on security and privacy separately, as the latter is arousing rising concentration in the Web literature (Jarvenpaa and Todd, 1997). Moreover, the measurement instrument for Web security could be further developed to increase its validity in future studies.
Our research was carried out in Universiti Utara Malaysia among international master students only. It may not represent all the students of UUM, as well as other territories and people.
The findings of our empirical study support the theoretical model implementing TAM and the put up Perceived Web Security. From the results of our study Perceived Ease of Use and Perceived Web Security are supported as predicting variables, which have an effect on intervening variables, Perceived Usefulness and Attitude, and the dependent variable Intention to Use IB. Perceived Usefulness and Perceived Web Security as well as Perceived Ease of Use directly effect Intention to Use.
Perceived Web Security effects on Intention to Use directly, rather than passing through Attitude which is the intervening variable. It is consistent with the findings of empirical studies provided earlier (Salisbury et al., 2001).
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