Internet-based e-banking and consumer attitudes: an empirical study
Introduction
Commercial banking is undergoing rapid change, as the international economy expands and advances towards institutional and market completeness. A major force behind these developments is technology, which is breaching geographical, industrial and regulatory barriers, creating new products, services and market opportunities, and developing more information- and systems-oriented business and management processes. In Singapore, commercial banks have been quick to realize the importance of this factor to competitive advantage. Since the 1980s, they have continuously innovated through technology-enhanced products and services, such as multi-function automatic teller machines (ATMs), electronic share application, tele-banking, TV-banking, electronic transfers, electronic cash cards, and Internet-based e-banking.
Virtual retail banking over the Internet was introduced into Singapore in 1997–1998 by the Development Bank of Singapore, the Post Office Savings Bank, the Overseas Chinese Banking Corporation, and the United Overseas Bank. This paper reports the findings of a project to study the market acceptance of Internet-based e-retail banking. We employed survey data and regression analysis to measure consumer attitudes toward this financial innovation, and explore its viability and prospects on the demand side. Since Internet e-retail banking was (and still is) in the introductory stage in Singapore, its products and services would tend to be relatively standardized. We can, therefore, defer consideration of the ‘lemon’ problem associated with quality under asymmetric information [2], until a later time when more product and service differentiation emerges. In line with this observation, our survey was concerned to elicit information regarding consumer perceptions toward retail banking as a whole. Following the standard approach [14], we then framed the questionnaire in terms of the closest substitute to Internet-based e-retail banking, viz. traditional branch-based retail banking. Though electronic products and services (such as ATMs and cash cards) offered by the latter would not qualify as distinct substitutes at this level of aggregation, their effects can be taken into account indirectly. The research was conducted in Singapore, because its geography and well-developed infrastructure meant that shoe-leather (physical communication) and telecommunication costs would be similar and small, thereby allowing the differences qua banking between Internet-based and traditional retail banking to be thrown into sharper relief.
By empirically measuring consumer attitudes at the time when Internet e-retail banking was introduced, we may help to explain the slowing growth recently reported in the sector [17] in terms of demand-side changes relative to an initial position. As a result of the study’s specific time focus, therefore, the tendency of Internet-related data to ‘age’ does not represent a problem. Following the approach of [43], suggestions are offered to support the development of demand-viable Internet e-banking systems. In particular, we present empirical estimates to predict the marginal effects of the factors underlying perceived usefulness and willingness to use, and the substitutability between them. Combined with a previous work [36], it is hoped that this paper can contribute to research into the complementary relationships between e-banking, business-to-business (B2B), and business-to-consumer (B2C) e-commerce over the Internet.
Section snippets
Consumer response to technology-based innovations
Research in consumer response to product-service innovations has focused in the first place on classification based on usage [15], [28], [30], [52] and demographics [18], [24]. Interpreting usage in terms of post-purchase behavior, Barczak et al. [4] investigated the introduction of financial products and services such as ATMs, tele-banking, and debit cards. Another line of research sought to discover directly why consumers adopt or reject innovations [32], [37], [38], [47]. Among the factors
Transactions speed
In advanced societies, consumers tend to be highly sensitive to the speed of service delivery [6], [46], [50]. Situations have been identified in which individuals would rather opt for self-service if this reduced delivery time [40], while according to [35] time-saving was an essential consideration for users of conventional electronic retail banking facilities like ATMs. Extending these observations to Internet e-retail banking with due emphasis on the role of expectations, perceptions, and
Measuring perceived usefulness
Proposition 1, Proposition 2, Proposition 3, Proposition 4, Proposition 5, Proposition 6, Proposition 7 were tested in terms of survey data obtained according to standard procedure [1]. A questionnaire invited individuals to evaluate (a) the various quality attributes of Internet-based e-retail banking; (b) the usefulness of this financial innovation on the basis of these attributes; and to state (c) whether in consequence they intend to (incrementally) use this product-service. To more
Regression analysis of willingness to use
As a matter of language, under survey-based market research methodology [31] perceptions of usefulness are generally presented in a one-by-one format, notwithstanding the fact that cross effects often exist in the minds of respondents. The relationship between perceived usefulness and willingness to use [27], [39] provides a means by which interdependencies between the quality attributes identified and tested in the previous sections can be made explicit. Exploiting the survey data (with 314
Concluding remarks
This paper employed survey data and regression analysis to measure consumer attitudes toward Internet-based e-retail banking as a financial innovation, and to explore its viability and prospects on the demand side. We found that individual expectations regarding accuracy, security, transactions speed, user-friendliness, user involvement, and convenience were the most important quality attributes in the perceived usefulness of Internet-based e-retail banking. In addition, willingness to use
Acknowledgements
The authors are indebted to the editor and anonymous referees for extremely helpful comments and to A. Lim, A. Leow for assistance.
Ziqi Liao received his PhD from the University of Queensland. He has been professionally associated with academic institutions, private companies and public organisations in Australia, China, Hong Kong, Singapore, and the United States. Liao’s research interests lie in emerging technology management, electronic commerce, information systems management, and IT investment assessment. His articles have appeared in Information & Management, IEEE Transactions on Engineering Management, Journal of
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Ziqi Liao received his PhD from the University of Queensland. He has been professionally associated with academic institutions, private companies and public organisations in Australia, China, Hong Kong, Singapore, and the United States. Liao’s research interests lie in emerging technology management, electronic commerce, information systems management, and IT investment assessment. His articles have appeared in Information & Management, IEEE Transactions on Engineering Management, Journal of High Technology Management Research, Systems Research and Behavioral Science, and International Journal of Innovation Management.
Michael Tow Cheung is Associate Professor in the School of Economics and Finance, University of Hong Kong, Hong Kong. After receiving a PhD from London University, Cheung has been professionally associated with academic and research institutions in Canada, Hong Kong, Singapore, Sweden, the United Kingdom, and the United States. His research has mainly been in economic and financial modeling and applied mathematics, and the present paper is his second publication in Information & Management.