Factors influencing the adoption

of internet banking facility

Internal assessment

Sanjana Ghadigaonkar
Msc part 1
A005

Introduction
Internet banking allows customers to perform a wide range of
banking transactions electronically via the banks Web site. When
first introduced, Internet banking was used mainly as an
information presentation medium in which banks marketed their
products and services on their Web sites. Online banking is also
referred as Internet banking, e-banking, virtual banking and by
other terms. Online banking through traditional banks enable
customers to perform all routine transactions, such as account
transfers, balance inquiries, bill payments, and stop-payment
requests, and some even offer online loan and credit card
applications. Account information can be accessed anytime, day
or night, and can be done from anywhere. A few online banks
update information in real-time, while others do it daily. From the
consumers perspective, Internet banking provides a very
convenient and effective approach to manage ones finances as it
is easily accessible 24 hours a day, and seven days a week. The
number of customers using internet banking has increased
tremendously in the past few years. Hence it will be beneficial to
understand what are the factors influencing the increase in the
number of subscribers for internet banking facility. The factors
include the demographic characteristics of the customers as well
as the five product or service characteristics.

Literature review
Rogers (1962) proposed a model of the diffusion of innovations
that included five product or service characteristics postulated to
influence consumer acceptance of new products and services:
relative advantage, compatibility, simplicity/complexity,
observability, and trialability. Both the journal papers viz. Jane M.
Kolodinsky, J.H (2004), The adoption of electronic banking
technologies by US consumers, The International Journal of Bank
Marketing, Vol. 22 No.4. and Margaret Tan, T.Teo (2000), Factors
Influencing the Adoption of Internet Banking, Journal for the
association of information systems, Vol.1 No.5. have included this
model for analysis of whether the five service characteristics
influence the adoption of internet banking facility.

Trialability refers to the ability of consumers to experiment with a

new innovation and evaluate its benefits. The extent to which
various financial institutions offer introductory e-banking to
their customers impacts the trialability and accessibility of the
innovation.
Relative advantage is the degree to which consumers perceive a
new product or service as different from and better than its
substitutes (Rogers, 1962). In the case of e-banking, savings of
time, money and convenience have been cited as relative
advantages.
Observability is the extent to which an innovation is visible and
communicable to consumers. For example, seeing ATMs on the
street corners and in grocery stores may make this technology
more observable than PC banking conducted inside the home.
Simplicity/complexity is the extent to which consumers perceive a
new innovation as easy to understand or use. For consumers
without previous computer experience, or for those who believe
that e-banking is difficult to use, adoption of these innovations
may be thwarted.
Compatibility is the extent to which a new product or service is
consistent and compatible with consumers needs, beliefs, values,
experiences, and habits.
The demographic variables included in the first research paper
were age, gender, income, marital status, education and race.
The five service qualities were measured on a four point ordinal
scale ranging from will never adopt this technology to already
have adopted this technology. Respondents were asked if they
used each of the technologies listed above. If they had already
adopted the technology, they were classified as a current user.
For those who were not current users, a follow-up question asked
how likely they were to begin using the technology in the next 12
months. If they responded that they were very likely, somewhat
likely, or there were even chances that they would adopt, they
were classified as likely to use. If they responded they were
somewhat unlikely or very unlikely to begin using the technology,
a second follow-up question asked whether they would ever
consider using the technology. Those who answered yes (that is,
they would consider using the technology in the future) were

classified as unlikely to use while those who answered no

(that is, they would not consider using the technology in the
future) were classified as will never use.
They carried out descriptive statistics, factor analysis and ordered
probit analysis. The findings of the first research paper were that
increase in income and education elicit a positive effect on
adoption, while age was found to be negatively related to
adoption of innovations. Although the findings were less robust,
men may be more likely to adopt new technology, while
minorities may be less likely. Also the adoption of e-banking was
also found to be related to the combination of marital status and
gender, with married couples more likely to adopt than either
single males or single females. Also trialability was not significant
and relative advantage, simplicity and compatibility were
significant.
In the second research paper the five service characteristics and
also the additional factors like subjective norms, perceived
behavioral support which included self- efficacy, technology
support and government support were measured on a seven point
Likert scale. The first item asked respondents the extent to which
they would be interested in using Internet banking(y) if it were
available to them. The second item asked respondents the
likelihood that they will adopt Internet banking in the next 6,12,
and 18 months. The time periods of 6, 12, and 18 months are
assigned the weights of 3/6, 2/6 and 1/6 respectively. The
summation of the responses multiplied by their respective
weights would produce a value between 1and 7 for the second
item that represents the respondents intention to adopt Internet
banking. They have carried out descriptive statistics, reliability
test and multiple linear regression taking intent to adopt internet
banking as the dependent variable and the five service
characteristics as the independent variable. The findings of the
research were that except complexity, subjective norms and
government support all the factors were significant and had a
positive impact on the intent to adopt internet banking.

Objective

The objective is to find out the factors which influence the

adoption of internet banking facility. Also to find out if the
charging fee for the internet banking facility has any effect on
the intent to adopt the facility.

Methodology

A data of size 1200 is collected from an online survey in the form

of a questionnaire. The questionnaire comprised of three parts
viz. the demographic characteristics of the respondents namely
age, gender, marital status, education and income and the
second part included their opinion regarding the five product or
service characteristics namely trailability, relative advantage,
simplicity/ complexity, observability and compatability from the
Rogers(1962) proposed model of the diffusion of innovations. Also
additional factors were included in the research namely security
and time saving. The factor security is the extent to which the
respondents find the internet banking facility to be secure. And
time saving is the extent to which the respondents find the facility
to be time saving as compared to visiting the bank physically. A
total of 1,026 usable questionnaires were collected for data
analysis. The seven product characteristics were measured on a
five point likert scale. Descriptive statistics was carried out for the
demographic variables. Two items were used to assess
respondents intentions to adopt Internet banking. The first item
asked respondents the extent to which they would be interested
in using Internet banking(y) if it were available to them. The
second item asked respondents the likelihood that they will adopt
Internet banking in the next 6,12, and 18 months. The time
periods of 6, 12, and 18 months are assigned the weights of 3/6,
2/6 and 1/6 respectively. The summation of the responses
multiplied by their respective weights would produce a value
between 1and 7 for the second item that represents the
respondents intention to adopt Internet banking. This will give us
a value and hence we can carry out multiple linear regression.
Also another descriptive analysis was carried out where preferred
internet banking charges were analyzed. The 3 charging schemes
were no fee, flat fee per month and flat fee per month plus fee
per transaction which were calculated on a 7 point Likert scale.
This analysis was carried out because generally it can be

observed that consumers intend to adopt internet banking facility

if there is no fee or minimum fee for using the facility.

Analysis
Conclusion
Suggestion
Limitations
References
Jane M. Kolodinsky, J.H (2004), The adoption of electronic
banking technologies by US consumers,The International Journal
of Bank Marketing, Vol. 22 No.4.
Margaret Tan, T.Teo (2000), Factors Influencing the Adoption of
Internet Banking, Journal for the association of information
systems, Vol.1 No.5.