Consumer Acceptance Of Online Banking

Published Date: 02 Nov 2017

In "Consumer Acceptance of Online banking: an Extension of the Technology

Acceptance Model", authors Pikkarainen, Karjaluotu and Pahnila study the customers’ acceptance of the Internet banking revolution, using Technology Acceptance Model (TAM). The article claims that the two elements of the TAM influence the acceptance of information systems, along with four additional hypothetical factors that the authors of this article study; perceived enjoyment, the amount of information on Online banking, security and privacy, and the quality of the Internet connection. Perceived enjoyment refers to the extent to which the use of the application is enjoyable. The amount of information on Online banking refers to the extent of awareness users have on Internet banking. Studies show that low awareness of Internet banking has negative effects on its adoption. Thus the more informative consumers become regarding Online banking, the more aware they are of its benefits. Security and privacy issues are significant since clients are aware of the security risks of Online banking, but not equally aware of the security available. Finally the quality of the Internet connection is vital since Online banking is not possible without good-quality Internet connection.

Upon conducting their test on Finnish samples, the authors concluded that the most influential factors were perceived use and the amount of information on Internet banking. These two factors have a positive relationship with the adoption and use of

Online banking, where higher degrees of perceived use and/or greater amount of information on Internet banking increase the acceptance of Online banking.

In "Factors Affecting the Adoption of Internet banking in Hong Kong -

Implications for the Banking Sector", Yiu, Grant, and Edgar tackle the area of Internet banking adoption through Technology Acceptance Model (TAM) as well. They add two extra factors, personal innovativeness in IT, and perceived risk. Personal innovativeness in IT refers to the extent in which someone is receptive to adopting new technologies, with respect to other members. The authors relate the characteristics of

Internet adaptors (given that Internet banking is a new technology) to the findings of

Rogers who suggested five categories of adopters: innovators, early adaptors, early majority, late majority, and laggards. Perceived risk refers to the clients’ insecurity of trying new technologies. The study showed that the two dimensions of TAM and the two new dimensions exclusive to this article do have a direct relationship with the adoption of Online banking. Perceived ease of use, Perceived usefulness, and Personal innovativeness in IT, all have a positive relationship with Online banking adoption, while Perceived risk has a negative influence on Internet banking. Further findings were that adoption rate of Internet banking was only 32%, a low figure with respect to 83% adoption rate of Internet usage. Moreover, the most commonly applied Internet transactions were found to be balance inquiries, account transfers, interest inquiries and bill settlements. The most common barriers to Internet adoption were the risks factor involved, and the convenience of other channels, mainly ATMs. The results also matched Roger’s earlier findings that earlier adopters of innovation have higher education levels and income, and lower age. The authors conclude their study by recommending that banks in Hong Kong should use Online banking as a tool to increase their competitive advantage and eventually their market share, and should therefore take into consideration the findings that highlight the reasons behind consumers’ adoption of Internet banking. In parallel, banks should work on eliminating the barriers that discourage clients from using Internet banking, namely risk threats and security related concerns.

In Taiwan, only 19.6% of Internet users reported having ever visited Internet banking sites in 2002. The trivial size of this figure drove researchers Wang, Lin, and

Tang to study clients’ acceptance of Internet banking and the factors that influence their intention to use it. The authors give credit to the celebrated TAM model in establishing the basic dimensions for the research, but claim that its elements, perceived usefulness and perceived ease of use are not the only factors that influence Internet banking adoption. The study draws attention to another factor, perceived credibility. The lack of perceived credibility implies consumers’ concerns that Internet banking systems will share their funds or personal information with other parties or clients. Thus perceived credibility is manifested in security which is the protection of the clients’ accounts and funds from intrusions, and privacy which is the protection of the data that the consumers seek and collect while browsing bank websites. Upon testing, the results confirmed the influence of TAM factors on the intention to adopt Internet banking, and the authors’ hypothesis that perceived credibility had a positive effect on the intention to use Online banking was supported. Furthermore, the results highlighted another factor, computer self-efficacy which is the consumer’s confidence of his technical skills and abilities.

The findings revealed that this factor has positive effects on perceived usefulness and perceived ease of use, but negative influence on perceived credibility, since the client’s computer and Internet literacy increase his awareness and thus concerns. Nevertheless computer self-efficacy was identified by the authors as an external factor that has a positive total effect on the intention to adopt. Thus organizing computer training courses can increase the familiarity of consumers with Internet banking and therefore ensure the use of this technology.

In their article "Customer Acceptance of Internet banking in Estonia", researchers Eriksson, Kerem, and Nilsson study the adoption of Internet banking through studying the components of the Technology Acceptance Model (TAM).

According to the authors, the elements of this model are influenced by one another, influenced by external factors, and consequently influence Internet banking adoption.

One of the external components that were not initially included in TMA but were categorized by this study as a key factor in adoption of e–banking was trust. In the technological field, trust represents clients’ confidence in the security and reliability of the application. Clients appear to have more security concerns with Internet banking than with traditional banking. The findings revealed that trust has a positive effect on both components of the TAM, perceived usefulness and perceived ease of use. The results also showed that perceived usefulness, one of the elements of TAM, was the primary reason behind Internet banking adoption in Estonia. The second element, perceived ease of use was determined to have positive influence on perceived usefulness but not on adoption directly. Thus perceived ease of use has a secondary influence on Internet banking adoption, through adding value to the key factor, perceived usefulness.

The authors justify this by claiming that consumers are willing to overlook the difficulties of usage if the application provides the desired function, but are not ready to overlook the lack of usefulness of a system because of its easiness. The authors thus recommend that banks should emphasize usefulness and effectiveness rather than ease of use when designing Online banking strategies and promoting the technology.

Liao, Shao, Wang, and Chen, examine adoption of virtual banking from the dimensions of another behavioral theory, theory of planned behavior (TPB). The theory of planned behavior assumes that the intention to perform the behavior eventually determines the behavior. Since the activity of a virtual bank, defined as a "non-branch bank" (Liao and Shao and Wang and Cehn 1999), depends entirely on the Internet, the findings of this study might contribute to the study of adoption of Internet banking.

Intention is determined by three elements: perceived behavioral control which is the individual’s perception that he possesses the necessary proficiencies to engage in the behavior, attitude which represents whether the behavior would provide added-value to the individual through achieving the right outcome, and subjective norms which represent the client’s perception of how his social environment would view and evaluate the behavior. In "The adoption of Virtual Banking: an Empirical Study", Liao, Shao, Wang, and Chen apply these elements to virtual banking by arguing that perceived behavioral control is the client’s perception that he has the technical skills to use Online banking, attitude is the confidence that virtual banking will increase the speed and efficiency of completing transactions, and subjective norms is the client’s perception of the views that his associates form once he uses the technology. The researchers were able to verify that the intention to use virtual banking was determined by perceived behavioral control and attitude; they did not however have the necessary tools to verify the influence of subjective norms. The study also revealed that attitude was dependant on relative advantage, ease of use, compatibility, and result demonstrability.

Ever since it was initiated back in 1997, Internet banking has become a competitive tool among Turkish banks. Researchers Polatoglu and Ekin study the factors that influence consumers’ acceptance of Online banking in the Turkish banking sector. In their article "An Empirical Investigation of the Turkish Consumers’

Acceptance of Internet banking Services", the authors argue that nine factors influence the adoption of Internet banking among Turkish clients, four of which were found and presented earlier by other researchers. The existing factors were Relative Advantage,

Observability, Trialability, and Complexity; whereas the new dimensions are Compatibility, Perceived Risk, Type of Group, Type of Decision, and Marketing Effort.

Relative advantage refers to the extra benefits that Online banking offers with respect to the branch, in terms of convenience, cost, time, etc... Observability refers to the fact that the more the consumers can observe the merits of Internet banking, the greater the possibility of its acceptance and thus success. Trialability refers to the ability of the consumers to try and explore Internet banking with no extra cost since it’s a free channel. Complexity implies that the more complex the service is, the harder and slower its adoption becomes. Compatibility refers to the extent that the application complies with the norms and values of environment it is implemented at. The authors present the example of the American society which has had the habit of shopping online for a significant period of time, in comparison with the Turkish society which might still favor personal interactions. Perceived risk implies security issues which have been associated with rejection causes of Online banking. Type of group refers to the different mentalities among different clients with varying economic, demographic, and social backgrounds that tend to influence their choice of channel, where for example young educated customers welcome change more easily. Type of decision represents the number of individuals involved in the choice of the channel, where the less the persons involved, the easier and faster the decision can be taken. Finally marketing effort refers to the promotional tools utilized to encourage the switch to Internet banking. The authors conclude by emphasizing that their study has shown an overall satisfaction of clients with Internet banking, and by suggesting that banks focus on developing this technology since it can definitely have significant increases in their market shares.

Durkin, Jennings, Mulholland, and Worthington studied the adoption of Internet banking from a different angle. In "Key Influencers and Inhibitors on Adoption of the Internet for Banking", the authors reveal that Internet banking adoption, like other self-service technologies, is a function of the service complexity. Service complexity was defined in earlier studies as "the number and intricacy of steps required to perform it" (Durkin, Jennings, Mulholland &Worthington, 2007), and accordingly bank services were later classified into different categories depending on factors like their frequency, regularity, level of contact, etc… The article uses the rationale that simple services are easy to understand, have high certainty of outcome, and few stages of process (such as credit cards and current accounts), whereas complex services are difficult to understand, have low certainty of outcome, and varied stages of process (such as pension plans and mortgage). Medium services are all the remaining services that do not fall on either extreme. When applied to Internet banking, the results revealed that this classification had many implications on Internet banking adoption. Complex services require further reassurance and more personal interaction; which decreases the likeliness of Online banking adoption for this category of services. For simple services which do not require information search and personal recommendation, the Internet is a more convenient channel. As a result of these findings, the authors recommend that since high net worth clients who are involved in complex transactions offer the highest value and profits, banks should enhance and develop Online banking in a way that increases the confidence of this segment of consumers in the technology, thus propelling them to use it regularly.

In "Adoption of Internet banking Proposition and Implementation of an

Integrated Methodology Approach", Hernandez and Mazzon set the observation of the different influential factors in Brazil. The researchers use an integrated theoretical model which combines all previous models suggested in studying adoption of Online banking. Furthermore, the authors use a joint sampling process that includes both the actual adopters and user of Internet banking, and the prospective users who have the intention of adopting the technology. Their research shows that the dimensions that influence the intention to use/continue to use Online banking are not the same dimensions that influence adoption. The latter is influenced by age, the availability of a computer at home, and college degree, factors that do not affect the intention to use Internet banking. Thus the authors suggest that banks should primarily focus on clients who already have a pc, a high education, and a young age since they are likely to be quick adaptors of Internet banking. The study also showed that Internet users who do not use Internet banking have very similar perceptions of Online banking as non- Internet users have. This finding contradicts the belief that Internet users are more likely to be more knowledgeable about Online banking than non-Internet user. Finally, the authors propose the development of marketing and managerial programs that encourage the adoption of Online banking through the use of the influential factors. Banks for example can use the compatibility with lifestyle factor by conveying messages that communicate how Internet banking fit to every lifestyle differently.

Akinci, Aksoy, and Atilgan also study Internet banking in the Turkish financial markets. The authors observe the adoption of Internet banking by studying the different behavior and demographics of clients, rather than studying the elements of the technology itself. In "Adoption of Internet banking among sophisticated Consumer Segment in an Advanced Developing Country", they begin their research by deriving from earlier studies that the key factors in the development of distribution channel structure for bank services are consumer behavior, attitudes, acceptance, PC literacy, and Internet usage. The results revealed that the majority of Internet banking users was mid-aged consumers whose ages ranged between 31 and 50. For Internet banking users, this channel that provided convenience and efficiency was the most preferred, while non-users showed preference for ATM and branches. Unlike Internet banking users, non-users did not have confidence in the technology and were under the impression that it had limited benefits and operational facilities, while the branch could perform any transaction or solve any problem. The findings also reveal that the most important three attributes in the adoption of Internet banking were security of the web sit, reliability, and privacy. Other less significant factors were speed, user friendliness, and innovativeness. Accordingly, the consumers were clustered into three categories:

"Speed Seekers" who gave importance to speed, "Cautious Users" who valued reliability and security, and "Exposed Users" who took advertising and suggestions of others into consideration. The authors conclude by suggesting that banks use the above classification in their marketing and promotional strategies, through addressing each category according to its Online banking needs (for example promotions for "Cautious Users" can intensively address the factor of security). Moreover, the article highlights the importance of highly educated customers which represent an immediately profitable low-cost segment due to its literacy in computers and Internet activities.

In "Customers’ Adoption of Banking Channels in Honk Kong", researchers

Wan, Chow, and Luk also hypothesize that the choice of banking channel not only depends on the channels’ characteristics, but also on differences among customers, their demographics, and their preferences. The effect of gender on Internet banking adoption was significant in the findings, where Internet banking was more likely to be adopted by males than by females. In the other three channels, branch banking, telephone banking, and ATM, adoption did not differ between males and females. Age was also another influential factor, where Internet banking adoption was highest among mid-aged customers and lower for younger clients who favored ATMs and older clients who preferred branch banking. Tests on household income showed that it was a major factor in Online banking adoption as well. Clients with low income were less likely to adopt Internet banking than moderate income holders since the former did not have as many financial resources to manage. On the other hand, clients who were very affluent tended to distribute their transactions among Internet banking, telephone banking, and branch banking. The educational level of the clients was yet another prominent dimension in Online banking adoption. The study established that consumers with low education levels relied on traditional banking, whereas moderately and/or highly educated customers who are more receptive to new technologies tend to use Online banking. The findings revealed the influence of clients’ occupations on Internet banking adoption as well. Employees and laborers who had to abide to working hours tend to rely on Online banking because of their inability to walk away from their positions liberally. Clients with high-level occupations, including managers and professionals, also adopt Internet banking because of their high time cost, and unwillingness to visit the bank branch. In contrast, customers who had high-autonomy occupations, including the retired, the unemployed and the self-employed, had the freedom to run errands outside the premises of their houses and offices, thus favoring to personally visit the branch.

In "Understanding Consumer Adoption of Internet banking: an Interpretive

Study in the Australian Banking Context", the authors provide a model that includes influential factors connected to both the technology and the consumer. Lichtenstein and Williamson conducted their studies on Australian samples in order to determine the factors that influenced Internet banking adoption. According to the authors, Internet banking should primarily attract the clients’ attention, before it can be adopted. The research revealed, like earlier investigations, that many of the non-users’ attentions were not directed to Online banking, which suggests the need for banks to launch marketing or training campaigns that motivate the customers into experiencing the technology.

Accessibility was also found to be a major factor in Internet banking usage, since clients are unlikely to consider banking online unless they are regularly connected to the Internet. Self-efficacy was highlighted in the findings of this study, as consumers’ perception of their technical proficiencies influenced their decision of adopting Internet banking or not. The influence of usability was also visible in these findings where consumers stressed the complexity of the technology as a determinant of its adoption or rejection. Security, privacy concerns, and trust were combined in this study under the title risk, which has threatens Online banking adoption if not minimized. The factor that this research revealed as the most important in adopting Online banking was convenience, which included many qualities like time saving, easy access, etc…

Previous studies did disclose the element of convenience but Williamson and

Lichtenstein claim that their study was the first to classify it as the leading factor.

Another factor which was exclusive to this study was the importance of providing support and knowledge. Sources of assistance should be made available through direct interaction with bank personnel, in order to guide consumers in their early interface with the new technology. Furthermore, the presence of these personnel at the early stages of Online banking encourages clients who are more inclined towards human interaction and less inclined towards the technology.