Investigating the Factors influencing the Consumers to Utilize and Adopt and adapt Internet Banking: Situation of Saudi

Arabia

Introduction Internet has now been utilized globally and like any other country, Saudi Arabia has also been able to utilize and adopt and adapt it in their society through Saudi Arabia through King Abdulaziz City for Science and Technology (KACST). Conversely, it caters to only a few utilizes and most of them are researchers. Prior to this restricted internet access, the Saudi MOPTT has been able to host a service called Alwaseet that is a packet switched national data network. Various individuals utilized this network access in the earlier times through connection to their ISPs abroad. Such can be

accomplished, provided which they have existing accounts; if not, they will have to request some joint service from Alwaseet. However, such joint services which they provide were so costly and also the connection speed was so slow and low, which many started to dial in into their ISP by calling internationally to Bahrain. Nowadays, there are 10,000 Saudi Arabians which call Bahrain for internet access. But in 1997, KSA have announced which the internet would available in the locality. . This declaration came from KACST after months of anticipation by the people of KSA. The city of science and technology city has set up a special unit that would supervise the entire process of linking and connecting Saudi Arabia with the rest of the world through Internet services.

In the commercial area banking and financial firms and banking institutions were the first to adapt information technology and utilize it through the internet banking. Just like what the National Commercial Bank and Arab National Bank which adapted the concept of Internet Banking. Saudi Arabian banks are attempting to be the first to have their services online. The race is being driven, as stated by KSA bank officials, with the fear of not being able to consider online banking services which may result on clients lost. Consequently, financial firms and banking institutions the country have seen online banking as a modern trend in the industry, due to the improving numbers of clients who are utilizing online banking (Mathai, 2001). With the clients positive acceptance of the online banking in the entire region of KSA, it is then significant and essential to investigate the factors influencing clients to utilize and adapt intern banking. Primarily, the main goal of this research proposal is to conduct an investigation to determine the factors or aspects which make Saudi Arabian clients utilized or adopt and adapt the internet banking. In this proposed research and dissertation, the background of the study; the objectives as well as the research statements of the problem are given. Here, vital contexts, questions and assumptions are being stated. Lastly, overview of the methodology to be considered as well as the significance of the research is discussed. Further, this paper will include the analysis of the study.

Background of the Study

The consideration of the internet approach as part of this information technology has revolutionized the market environment. The utilization of the Internet is changing high-tech marketing overnight while various companies have been attempting to utilize it as part of their marketing approach. It does not only reconfigured the way various companies as well as the way the consumers buy goods and services but it also become instrumental in changing the value chain from manufacturers to retailers to end consumers, which generates new retail distribution channel (Donthu & Garcia, 1999). Because of these technological changes, product and service development became faster as well as better and business approaches are more organized and systematized. Indeed, the consideration of the internet to several companies has paved the way for greater profitability in the future. With this, more and more firms and companies are attempting to develop an innovative information system or information technology which would ensure their competitiveness in this stiff competition (Kalakota & Winston, 1999). It is said that one of the firms and companies which adopt and adapted and use new technology is the financial institution, particularly banking firms. The increasing competition among bank has driven them to develop new information technology and tools to enable them to stay competitive or even survive in the marketplace and to serve the changing demand of their clients. One of the examples of this new approach is the so-called internet banking or online banking. Online banking has emerged for at least two critical reasons. Firstly, it serves as a new substitute and optional channel other than conventional branch network for clients to contact banks. Presently, more and more clients, specifically younger ones who are quicker to accept new technology, are using remote channels-telephone

banking; computer banking as well as other virtual banking-to transact their financial transactions. These on-line clients demand even more control over their personal accounts and finances and value anytime, anyplace, anywhere personalized access to financial services (Jordan & Katz, 1999). The other reason for the emergence of online banking is the increase of electronic commerce that produces a corresponding demand of electronic payment processes which has been offered by financial firms and banking institutions. In addition to that, , other follow-up activities such as viewing account balances as well as viewing transaction records, bill payments, transferring funds between accounts, and also credit card soled transactions need to be processed online (Bielsi, 2001). Online banking is not the same as banking via online service. Online banking permits clients to conduct banking transactions directly from their Web-enabled computers. By maintaining a direct relationship with end clients through the Web, banks can offer additional services as well as provide a personal feeling to the interface without trying to seek the cooperation of a software company. Online services entailed and compel clients to purchase proprietary software, store data on their computers, and back up needed information for specific services (Winter, 2001). Many more banks are moving to or developing online banking since they foresee many benefits. Major advantages of this channel include: economic advantage from lower cost, development and improvement of clients satisfaction, online banking as a tool for mass customization and personalization, development of non-core business. The first benefit or advantages of online banking to banks is it enables economic

advantage from lower cost (Bielski, 2001). This also enables banks to offer low-cost, high value-added financial service to their clients. Another advantage of online banking is it develops clients satisfaction. Online banking can remove the conventional branch limitation by permitting clients to access their banks 24 hours and 7 days a week with little or no waiting time regardless of the location of the client. This can create convenience for clients, thus their satisfaction toward banking services. In Saudi Arabia, it is believed that online banking is the latest e-buzzword. It can be seen that, banks in various parts of the region are rushing to provide their service through electronic means. In KSA, each bank is now looking forward to make utilize of the internet technology in order to gain clients. Online banking is gaining good reputation and fame in the region in two sectors, the retail and the corporate sectors. Saudi Banks has expanded. There are a number of banks across the region with fully operational e- banking facilities and many others are in the process of jumping on to the bandwagon. In 2002, the firms and companies which utilizes online banking includes, Arab National Bank, National Commercial Bank, Saudi British Bank, Saudi American Bank and the Riyadh Bank (Moores, 2002) with functions such as account information, money transfers, bill payment services, FX and mutual funds trading. The growing numbers of clients of internet banking had made the banking institution in Saudi to become more salient in giving quality service and provide a state of the art infrastructure to gain more clients among its competitors. With the growth of banking industries that considered

online banking, it is also important to analyze the factors that influences the behavior of the consumer with regards to using online or internet banking.

Purpose of the Study The purpose of this research is to determine the factors that influence the behavior of clients in Saudi Arabia in terms of using or considering online or internet banking. In this study, the consumption pattern with regards to their baking transaction will be given emphasis as well as identify how culture and religion affects decision of the consumers. As markets are becoming increasingly globalize, the need for understanding consumers in different markets is gaining increasing importance. This research attempts to analyze the factors influencing the consumers decision-making process within the context of Saudi Arabia. Saudi Arabia has a different and unique set of characteristics that are associated with its dynamics and other variables. Some of these are listed as below: Firstly, the fact remains that Saudi Arabia with c.5.5 million expatriates (CIA: World Fact book, 2005) on absolute basis has arguably the largest expatriate population in the GCC, and they have strong affiliation with their nations, as they cannot gain the citizenship status therewith. Secondly, Saudi Arabian nationals are not isolated from globalization and travel overseas with varying lengths of stay (depending on leisure, work or academic

pursuits) thereby interacting with individuals from various customs, backgrounds, religions, cultures, norms, etc. Thirdly, arguably as home to the twin holy cities, Islamic pilgrimage and associated trade over the past 1300 years has been a factor in influencing the resident population of particularly the Saudi west coast (Jeddah, Makkah). Fourthly, with the advent and increased acceptance of the ICT media such as the Internet, satellite television is further acting as a catalyst in impregnating foreign influences, further accelerating multi-culturalism both in the local and expatriate population. Another point of consideration is the tremendous growth that is currently taking place in Saudi Arabia, with a myriad of factors boosting consumer expenditure (c. SAR 341 Billion p.a.) in a relatively high per capita wealth; it remains a key geography for marketers in a regional context, both in scale and scope, the following support the argument: o Increase in personal income raises consumer spending: Saudi government increased salaries of all government and quasi-government employees by 15% in 2006, with a further 5% in 2007. (Euromonitor, 2008) o Borrowing on rise due to ease of consumer credit: consumer loans grew from SAR 40.6 Billion in 2001 to SAR 414.6B in 2007 (Euromonitor, 2008). o The unique demographic balance in Saudi Arabia where a large portion (c.48%) of the total population is under the age of 20 (Euromonitor, 2008).

All in all, this illustrates the fact that Saudi Arabia has been under influence of various cultures that has molded the character, customs and traditions of various individuals, which unconsciously influences the consumption decisions of individuals.

Research Hypothesis This paper will work on the following hypothesis: The Clients look at the high technological ability of the internet banking.

The Clients look at the positive benefits of using online banking in terms of time.

Saudi Arabian Clients adopt and adapt online banking due it satisfies them to have fast transaction.

Saudi Arabian decision to consider online banking were affected by their culture and religion.

Statement of the Problem The study will investigate the factors which influence the clients of Saudi Arabia to utilize and adopt and adapt internet banking. Specifically, the researcher will answer the following questions. 1. Do Saudi Arabian clients aware of the existence of online banking in the region?

2. Do Saudi Arabian clients have tried to utilize online banking in their banking transactions? 3. What are the possible factors which influence the clients to utilize internet banking? 4. What are the possible factors which influence the clients not to utilize internet banking? 5. Do their religion and culture play a crucial role in their decisions on considering internet banking? 6. What is the overall perception of the Saudi Arabian Clients regarding internet banking?

Scope and Delimitation Online banking is definitely new in the contemporary Saudi Arabia. And this concept has been utilized by various banking institutions in order to gain clients from various parts of the region. Hence, this study will be conducted to determine the factors which influence the clients of Saudi Arabia to utilize or adopt and adapt the internet banking. The outcome of this study will be limited only to the information gathered from books and journals and from the primary data gathered from the result of the questionnaire survey and interview which will be conducted by the researcher. As the research was completed in a relatively short period of time other factors and variables are not considered. This might have an impact on the results of the study.

Personal Learning Objectives

For this research study, the key motivation is to gain a deeper understanding of consumer behaviour to help business establishments to retain or gain loyal consumers. Through this study, the researcher will be able to determine the latest trends in marketing environment, specifically in internet banking regarding the consumption patterns of the clients and how the banking institutions attempted to meet these patterns. This may have wider learning outcomes both from a topical perspective (which may lead to practical implication on work related aspects) and procedural perspective wherein through the scope of this project I expect to test and further develop my understanding of various tools such as data analysis, project management, analysing and framing the problem and conducting efficient exploratory research. Furthermore, through the scope of this project I wish to further build on the conceptual knowledge acquired over the term of the study and build on my knowledge through the project process and a deeper understanding of what motivates consumers and translate that into building and delivering incremental value to consumers in my current work role (business development).

Sources of Data

The information mainly required will be to assess the total quantum of consumer spend and the major product categories that it comprises of in Saudi Arabia. In addition with a view to resolve the research question(s) primary data collection will attempt to Identify main influences on consumer behavior in adapting or using online banking Identify which aspects dominate in which buying situations. Identify main socio-cultural influences that dominate consumer behavior. Effect of marketing strategies on Consumers.

Primary Data The key quantitative methods that will be used will be interviews, focus groups and questionnaire developed, within that it is intentioned that more than one focus group may be needed that may be organized around age group, length of stay, country of origin and gender (in consideration of the conservative culture of Saudi Arabia). In addition it is also being considered to interview select marketers who have a long association with Saudi consumer markets to fill knowledge gaps from a practitioners perspective.

Secondary Data 1. Government Sources/Publications: a. Saudi Arabian monetary authority; economic release b. Saudi Arabian Market information resource and directory (SAMIRAD) c. Central Department of statistics: Ministry of Economy and planning d. Saudi Press Agency. e. Saudi Arabian General Investment Authority (SAGIA) f. King Fahad University of petroleum and minerals. Research institute g. Riyadh Chamber of commerce. 2. Non-Government /Consumer research services a. Economist Intelligence unit: Country profile and reports b. Nationsmaster.com c. Global market information database (Euromonitor) d. Business insight reports 3. Annual report of key Industry players in the Saudi FMCG sector (for retail trend analyze

Proposed Methodology

The study intends to determine the factors that influence Saudi Arabian customers in buying products or availing services. For this study, primary research and secondary research will be used. Primary research will be conducted using the data that comes from consumers. The data will be analyzed and compiled for the correlation of the hypothesis. The data about the respondents perception regarding internet banking will then be presented by means of graphical representations and illustration. Primary research is conducted using questionnaire surveys that will be sent to the Saudi Arabian customers. Here, the questionnaires will be used to collect quantitative data and the interviews will be used to provide qualitative insights into the data collected. As stated above, this research will partially base its findings through quantitative research methods because this permits a flexible and iterative approach. During data gathering the choice and design of methods are constantly modified, based on ongoing analysis. This study will also employ qualitative research method because it will try to find and build theories that will explain the relationship of one variable with another variable through qualitative elements in research. Through this method, qualitative elements that do not have standard measures such as behavior, attitudes, opinions, and beliefs about internet banking will be analyzed.

Research Plan For this research design, the researcher will: A) Gather data pertaining to demographics, consumption criteria, collate published studies from different local and foreign universities and articles from academic journals; and make a content analysis of the collected documentary and verbal material related to the factors that might influence customer behavior, as well as the overall definition and perception about marketing strategy and consumption. B) Questionnaire Survey: Primary data will be collected from 100-150 consumers between the ages of 18-30, 30-45 who uses online banking or internet banking

The next stage is empirical where propositions from preliminary stages are tested and the range of methodologies is utilized, the researcher will summarize all the information, make a conclusion based on the null hypotheses posited and provide insightful recommendations on the possible things that must be consider by the Saudi Arabian banking industries. The quantitative and qualitative research techniques that will be employed in this present study are discussed in detail below.

Respondents of the Study The research will target persons who live in key metropolitan areas of Riyadh, Jeddah and Al-Khobar in Saudi Arabia and using online banking. The sample will be randomly selected and a self-administered questionnaire (please refer to anticipated problems) will be used to measure the theoretical constructs of consumers attitudes, preferences and choices. A 5 point scale with end points like "strongly agree", "strongly disagree", "very important", "not important at all", "absolutely right" and "absolutely wrong" will be used to measure the items. On the scale, number 1 indicates the absolute positive response and number 5 indicates the opposite extreme. The main purpose of this research is to investigate the factors that affect the consumer behavior in Saudi Arabia. Hence, the respondents of this study include 100-150 consumers, specifically shoppers between the ages of 18-30, 30-45. The consumers are chosen because the respondents find them more reliable for this study. The true identity of the respondents may not be revealed in consideration of the customs in Saudi Arabia (particularly in context of Saudi Women). After selecting the appropriate population, the researcher will use inferential statistics in order to draw a concrete conclusion. Inferential statistics will be used to be able to know a populations attribution through a direct observation of the chosen population or simply the sample. This is because it is easier to observe a portion or a part than observe the whole population. However using a sample has also its own

disadvantages; hence, the need to choose the most suitable sample from any population is recognized at the outset.

The quantitative approach is currently envisaged to be iterative with feedback loops from the pilot, exploratory research phase and theoretical review to make the overall process more robust with the aim of achieving quality and managing issues such as sampling error.

Anticipated Problems

To provide a backdrop and further frame certain challenges in gaining access to information Tunclap (1988) while studying the marketing research scene in Saudi Arabia indicated that lack of market research was largely attributed to a production oriented economy with monopolistic manufacturing and lack of competitive activity in the past. Since then fast paced evolution coupled with a strategic intent to diversify economic activity, as evidenced by SAGIA 10/10 vision (to position Saudi Arabia amongst the top 10 most competitive economies by 2010) compared to a historic basis has vastly improved the availability of data.

Given the scope of the project and the changes in the Saudi Arabian Landscape a considerable amount of macro-economic data exists in the secondary data space for estimation of market size, key product category consumption etc.

Conservative culture inertia can hinder effectively carrying out focus group discussions, data collection this can be limitedly overcome by For each focus group session keeping a homogenous group (cultural background, age etc) by and large mixed gender environment are deemed acceptable by most expatriates, for the representation of Saudi female views select respondents known will be used, should it materially hinder the empirical process seeking research assistance from females will be considered. To draw meaningful conclusions of the interview process careful selection of interviewees those are experts on the subject area, opinion leaders. To pursue an iterative process both in survey design and the spread of measurable for more robust analysis, a more thorough understanding of the empirical methods will have to be developed, knowledge gaps to be addressed by revisiting relevant theory. The challenge of having a sample size that is representative of the geographical context and the research issues means that innovative ways for speedier questionnaire distribution and maximization of response rates will have to be considered and may include distribution through graduate

students (it is currently being explored with the king Fahad university of petroleum management).

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Outline of Chapters

1. Introduction: a. Background, b. Analyzing the Problem c. Research purpose and question, d. Outline of the geographic environment, demographics, size of the market etc. 2. Literature Review: a. Evaluation of relevant past literature and contemporary/emergent thoughts on the subject area, studies around the subject area in a regional context. b. Generic Factors Influencing Consumption (Perceived Service quality and value, Customer satisfaction, Trust, Product Image and Brand reputation, Service attributes etc). c. Project Specific factors influencing consumption (e.g. nationality, religion, language, country of origin etc) d. Theoretical Conclusions, critique.

3. Methodology Review: a. Overview b. Research philosophy and approach design (exploratory research,), c. Data collection and translation (analysis), d. Pilot study, Choice of questionnaire, sample, Issues (Validity, Reliability). 4. Findings: a. Overview, b. Discussion and conclusion of findings (Consequence for the hypothesis) c. Implications 5. Limitations: a. Limitations, critique b. Suggestions for further research.

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