Department of Commerce and Financial Management Assignment 2022
Added on 2022-02-14
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68
FACTORS AFFECTING TO CUSTOMER ADOPTION OF
INTERNET BANKING
H.A.H HETTIARACHCHI
Department of Commerce and Financial Management
University of Kelaniya, Sri Lanka
harshaka@kln.ac.lk
Abstract
This paper reports the findings of a study concerning the adoption of internet banking by
investigating consumer adoption within the context of Sri Lankan banking services. The
research framework was based on the extension to decomposed theory of planned behavior
which mainly includes attitude (including innovation characteristics such as relative
advantage, compatibility, complexity, trialability and risk), subjective norms, and perceived
behavioral control to assess internet banking adoption behavior. Online questionnaire survey
was conducted to gather the data and 108 complete responses were gathered from random
banking customers who were internet users from Colombo and Gampaha district. Descriptive
analysis was done to provide strength to the research study which showed that even though
considerable people were aware about internet banking, most of them were resistance to
adopt internet banking. Spearman’s rank correlation was used to examine relationship of
eleven hypotheses with actual internet banking usage. Results revealed that attitudinal and
perceived behavioral control factors rather than social influence (subjective norms) plays a
significant role in influencing adoption of internet banking. In particular relative advantage,
compatibility with values, internet skills, trialability, risk, confidence of using such services
(self-efficacy), and technology support found to influence the adoption of internet banking.
Conclusion of the research study implied that banks have to majorly influence the internet
banking adoption through ‘pull strategies’.
Keywords: Internet Banking, Sri Lanka, Resistance, Adoption, Behavior, Innovation
Introduction
Banking industry in Sri Lanka plays a vital role in managing financial assets. Conventionally
all the banking activities were carried out manually and always customers had to went to the
branch. This has consumed lot of time as well as the cost to both customer as well as bank.
Internet banking is now capturing the banking industry at a rapid phase by eliminating and
FACTORS AFFECTING TO CUSTOMER ADOPTION OF
INTERNET BANKING
H.A.H HETTIARACHCHI
Department of Commerce and Financial Management
University of Kelaniya, Sri Lanka
harshaka@kln.ac.lk
Abstract
This paper reports the findings of a study concerning the adoption of internet banking by
investigating consumer adoption within the context of Sri Lankan banking services. The
research framework was based on the extension to decomposed theory of planned behavior
which mainly includes attitude (including innovation characteristics such as relative
advantage, compatibility, complexity, trialability and risk), subjective norms, and perceived
behavioral control to assess internet banking adoption behavior. Online questionnaire survey
was conducted to gather the data and 108 complete responses were gathered from random
banking customers who were internet users from Colombo and Gampaha district. Descriptive
analysis was done to provide strength to the research study which showed that even though
considerable people were aware about internet banking, most of them were resistance to
adopt internet banking. Spearman’s rank correlation was used to examine relationship of
eleven hypotheses with actual internet banking usage. Results revealed that attitudinal and
perceived behavioral control factors rather than social influence (subjective norms) plays a
significant role in influencing adoption of internet banking. In particular relative advantage,
compatibility with values, internet skills, trialability, risk, confidence of using such services
(self-efficacy), and technology support found to influence the adoption of internet banking.
Conclusion of the research study implied that banks have to majorly influence the internet
banking adoption through ‘pull strategies’.
Keywords: Internet Banking, Sri Lanka, Resistance, Adoption, Behavior, Innovation
Introduction
Banking industry in Sri Lanka plays a vital role in managing financial assets. Conventionally
all the banking activities were carried out manually and always customers had to went to the
branch. This has consumed lot of time as well as the cost to both customer as well as bank.
Internet banking is now capturing the banking industry at a rapid phase by eliminating and
69
transforming the conventional banking activities to a web based online system. Even though
this enhancement of new technology, recent finding in Sri Lanka illustrates that customers
were more resistance toward adopting such technology even it has more sufficient relative
advantages. It was found that only less than 1% of bank customers, in general, use online
banking, mobile banking, telephone banking and internet payment gateway and although
ATM services are extensively used, the usage of other IT driven services such as online
banking, mobile banking, internet payment gateway and telephone banking is almost
insignificant (Suraweera et al, 2011).
So with this prevailing situation this research study will drive on to identify the significance
of why most Sri Lankans are resistant to adopt internet banking hence these findings are
useful to professionals in the banking sector, especially for developers of such information
systems and the strategy makers, towards taking the banking services to a level commonly
applicable in the developed world today. This study will be looking at in-depth regarding
actual customer perspective on adoption or non-adoption of internet banking thus objective is
to identify factors affecting to adoption of internet banking.
Literature Review
Internet Banking
Internet banking has many names such as online banking, electronic banking, e banking,
virtual banking etc. In general it is a feature introduce by the bank to its customers to log into
their individual registered domain account (through the given username and password) on
bank website (through internet) and do almost every transaction they do by visiting the bank.
Registered internet banking users can perform common banking transactions such as writing
checks, paying bills, transferring funds, printing statements, and inquiring about account
balances etc. Today many banks are internet only banks where no brick and mortar bank
branches. Internet banking services are crucial for long term survival of the banks in the
world of electronic commerce (Burnham, 1996).
Importance of Internet Banking
The main benefits of internet banking to banks are cost saving, reaching new segments of the
population, efficiency, enhancement of the bank’s reputation and better customer service and
satisfaction (Brogdon, 1999; Jayawardhena et al, 2000).Traditional banks operating cost
account for between 50% and 60% of revenues, running costs of internet banking is estimated
at between 15% and 20% of revenues (Booz-Allen & Hamilton, 1997).The cost of an
transforming the conventional banking activities to a web based online system. Even though
this enhancement of new technology, recent finding in Sri Lanka illustrates that customers
were more resistance toward adopting such technology even it has more sufficient relative
advantages. It was found that only less than 1% of bank customers, in general, use online
banking, mobile banking, telephone banking and internet payment gateway and although
ATM services are extensively used, the usage of other IT driven services such as online
banking, mobile banking, internet payment gateway and telephone banking is almost
insignificant (Suraweera et al, 2011).
So with this prevailing situation this research study will drive on to identify the significance
of why most Sri Lankans are resistant to adopt internet banking hence these findings are
useful to professionals in the banking sector, especially for developers of such information
systems and the strategy makers, towards taking the banking services to a level commonly
applicable in the developed world today. This study will be looking at in-depth regarding
actual customer perspective on adoption or non-adoption of internet banking thus objective is
to identify factors affecting to adoption of internet banking.
Literature Review
Internet Banking
Internet banking has many names such as online banking, electronic banking, e banking,
virtual banking etc. In general it is a feature introduce by the bank to its customers to log into
their individual registered domain account (through the given username and password) on
bank website (through internet) and do almost every transaction they do by visiting the bank.
Registered internet banking users can perform common banking transactions such as writing
checks, paying bills, transferring funds, printing statements, and inquiring about account
balances etc. Today many banks are internet only banks where no brick and mortar bank
branches. Internet banking services are crucial for long term survival of the banks in the
world of electronic commerce (Burnham, 1996).
Importance of Internet Banking
The main benefits of internet banking to banks are cost saving, reaching new segments of the
population, efficiency, enhancement of the bank’s reputation and better customer service and
satisfaction (Brogdon, 1999; Jayawardhena et al, 2000).Traditional banks operating cost
account for between 50% and 60% of revenues, running costs of internet banking is estimated
at between 15% and 20% of revenues (Booz-Allen & Hamilton, 1997).The cost of an
70
electronic transaction is dramatically less when done online compare to at a branch
(Robinson, 2000). The single most important driving force behind the implementation of full
service internet banking by banks is the need to create powerful barriers to customer exiting
(Sheshnoff, 2000). He argues that once a customer moves to full service internet banking, the
likelihood of that customer moving to another financial institution is significantly diminished.
A survey in Denmark argued that internet banking might be useful for strengthening cross-
selling and price differentiation (Mols, 1998). Online banking is very useful and powerful
means which leads banking industry towards development, growth. It helps to enhance the
competitiveness of institutions (Kamel, 2005).
From the consumer’s perspective, internet banking provides a very convenient and effective
approach to manage one’s finances as it is easily accessible 24 hours a day, and seven days a
week. Besides, the information is current. With the help of the internet, banking is no longer
bound to time or geography. It has also been argued that electronic banks are more likely to
change in response to customers demand (Brogdon, 1999).Customers can manage their
banking affairs when they want, and they can enjoy more privacy while interacting with their
bank. It has been claimed that internet banking offers the customer more benefits at lower
costs (Mols, 1998).For users, convenience was the key benefit of internet banking
(Dassanayake, 2003). Internet banking is extremely beneficial to customers because of the
saving in costs, time and space it offers, its quick response to complaints, and its delivery of
improved services, all of which benefits make easier banking (Turban, 2000).
Status of Internet Banking in Sri Lanka
As per records in central bank of Sri Lanka currently (2012) there are 24 listed commercial
banks in Sri Lanka from that 12 are local banks who already have the internet banking facility
except Amana bank.
But the dark side of the internet banking in Sri Lanka is, even though majority of the
customers in the country were aware about e-banking facilities, most of them had not been
tried those facilities by themselves. They still pay their bills, withdraw money, check
balances, and deposit cheques at their bank counters much as the traditional way (Jayasiri &
Weerathunga, 2008). Although the banking professionals interviewed by the researchers
themselves are not pleased with this situation, they appear to be contented with the status quo
(Suraweera et al, 2011).Since now internet banking expanding its position from desktop PC
to mobile phone but Sri Lankans still resistance to adopt internet banking is becoming a huge
electronic transaction is dramatically less when done online compare to at a branch
(Robinson, 2000). The single most important driving force behind the implementation of full
service internet banking by banks is the need to create powerful barriers to customer exiting
(Sheshnoff, 2000). He argues that once a customer moves to full service internet banking, the
likelihood of that customer moving to another financial institution is significantly diminished.
A survey in Denmark argued that internet banking might be useful for strengthening cross-
selling and price differentiation (Mols, 1998). Online banking is very useful and powerful
means which leads banking industry towards development, growth. It helps to enhance the
competitiveness of institutions (Kamel, 2005).
From the consumer’s perspective, internet banking provides a very convenient and effective
approach to manage one’s finances as it is easily accessible 24 hours a day, and seven days a
week. Besides, the information is current. With the help of the internet, banking is no longer
bound to time or geography. It has also been argued that electronic banks are more likely to
change in response to customers demand (Brogdon, 1999).Customers can manage their
banking affairs when they want, and they can enjoy more privacy while interacting with their
bank. It has been claimed that internet banking offers the customer more benefits at lower
costs (Mols, 1998).For users, convenience was the key benefit of internet banking
(Dassanayake, 2003). Internet banking is extremely beneficial to customers because of the
saving in costs, time and space it offers, its quick response to complaints, and its delivery of
improved services, all of which benefits make easier banking (Turban, 2000).
Status of Internet Banking in Sri Lanka
As per records in central bank of Sri Lanka currently (2012) there are 24 listed commercial
banks in Sri Lanka from that 12 are local banks who already have the internet banking facility
except Amana bank.
But the dark side of the internet banking in Sri Lanka is, even though majority of the
customers in the country were aware about e-banking facilities, most of them had not been
tried those facilities by themselves. They still pay their bills, withdraw money, check
balances, and deposit cheques at their bank counters much as the traditional way (Jayasiri &
Weerathunga, 2008). Although the banking professionals interviewed by the researchers
themselves are not pleased with this situation, they appear to be contented with the status quo
(Suraweera et al, 2011).Since now internet banking expanding its position from desktop PC
to mobile phone but Sri Lankans still resistance to adopt internet banking is becoming a huge
71
problem. Due to majority of Sri Lankans are not technology savvy, the banks tend to adopt a
wait and see attitude (Suraweera et al, 2011).
Theoretical Framework
This research study is mainly focus on identifying the factors influencing to adoption of
internet banking in Sri Lanka. The research framework for this study is based on the
extension to decomposed theory of planned behavior (Tan & Teo, 2000).
Extension to Decomposed Theory of Planned Behavior
The theory of planned behavior (TPB) is widely studied model from social psychology which
was extended from the theory of reasoned action (TRA). TPB hypothesized by individual’s
behavioral intension (BI) to perform a behavior is jointly determined by the individual’s
attitude toward performing the behavior (ATB), subjective norm (SN) and perceived
behavioral control (PBC). Taylor and Todd (1995) extended theory of planned behavior by
decomposing the attitude component (as relative advantage, compatibility, complexity, which
were mentioned in diffusion of innovation theory by Rogers, 1983) and perceived behavioral
control component (as self-efficacy and facilitating conditions). Based on the above
decomposed theory of planned behavior, Tan & Teo (2000) extended it to identify the factors
influencing internet banking adoption behavior on Singapore. So this research study is mainly
based on this extended theory of planned behavior and it is composed with;
1) Attitude
Attitude is defined as an individual’s positive and negative feelings (evaluative effect) about
performing target behavior (Fishbein & Ajzen, 1975). The different dimensions of attitudinal
belief toward an innovation can be measured using the five perceived attributes (relative
advantage, compatibility, complexity, trialability and observability) specifically first three
attributes of an innovation (Taylor & Todd, 1995). These attributes were originally proposed
in the diffusion of innovations theory (Rogers, 1983), were applied in this framework with
the exception of observability, which is defined as the degree to which the results of an
innovation are visible to others (Rogers, 1983). Observability was considered irrelevant in
this study because an important characteristic of doing banking is ‘privacy’. Therefore,
observing others using internet banking services may prove difficult unless one makes a
conscious effort to do so (Tan & Teo, 2000).
problem. Due to majority of Sri Lankans are not technology savvy, the banks tend to adopt a
wait and see attitude (Suraweera et al, 2011).
Theoretical Framework
This research study is mainly focus on identifying the factors influencing to adoption of
internet banking in Sri Lanka. The research framework for this study is based on the
extension to decomposed theory of planned behavior (Tan & Teo, 2000).
Extension to Decomposed Theory of Planned Behavior
The theory of planned behavior (TPB) is widely studied model from social psychology which
was extended from the theory of reasoned action (TRA). TPB hypothesized by individual’s
behavioral intension (BI) to perform a behavior is jointly determined by the individual’s
attitude toward performing the behavior (ATB), subjective norm (SN) and perceived
behavioral control (PBC). Taylor and Todd (1995) extended theory of planned behavior by
decomposing the attitude component (as relative advantage, compatibility, complexity, which
were mentioned in diffusion of innovation theory by Rogers, 1983) and perceived behavioral
control component (as self-efficacy and facilitating conditions). Based on the above
decomposed theory of planned behavior, Tan & Teo (2000) extended it to identify the factors
influencing internet banking adoption behavior on Singapore. So this research study is mainly
based on this extended theory of planned behavior and it is composed with;
1) Attitude
Attitude is defined as an individual’s positive and negative feelings (evaluative effect) about
performing target behavior (Fishbein & Ajzen, 1975). The different dimensions of attitudinal
belief toward an innovation can be measured using the five perceived attributes (relative
advantage, compatibility, complexity, trialability and observability) specifically first three
attributes of an innovation (Taylor & Todd, 1995). These attributes were originally proposed
in the diffusion of innovations theory (Rogers, 1983), were applied in this framework with
the exception of observability, which is defined as the degree to which the results of an
innovation are visible to others (Rogers, 1983). Observability was considered irrelevant in
this study because an important characteristic of doing banking is ‘privacy’. Therefore,
observing others using internet banking services may prove difficult unless one makes a
conscious effort to do so (Tan & Teo, 2000).
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