Academic journal article International Journal of Business and Management Science

The Adoption of Online Banking in Malaysia: An Empirical Analysis

Academic journal article International Journal of Business and Management Science

The Adoption of Online Banking in Malaysia: An Empirical Analysis

Article excerpt

INTRODUCTION

The advancement of technology especially the internet has changed the way how organizations conduct their business. Nowhere has the revolution of internet been more apparent than in the banking and financial services industry. Gone were the days, when traditional banks were the only mean to conduct banking transactions. Today, through online banking, customers could conduct a wide range of banking services electronically, anytime and anywhere (Sonja and Rita, 2008). Online banking brings about speed, convenience and round-the-clock availability of banking services (Cheng, Lam and Yeung, 2006; Abu Shanab and Pearson, 2007). Online banking in this context of study is defined as an internet portal, through which customers can use different kinds of banking services (Teo and Tan, 2000; Pikkarainen, Pikkarainen, Karjaluoto and Pahnila, 2004). The services include balance enquiries, transfer funds, ordering check, requesting credit card advances and bill payment (Chou and Chou, 2000; Ainin, Lim and Wee, 2005). From the bank's perspective, online banking offers lower operating costs (Sathye, 1999; Polasik and Wisniewski, 2009). For example, Booz and Hamilton (1997) explained that internet banks can operate at an expense ratio of 15-20 percent compared to 50-60 percent for the average banks. Lichtenstein and Williamson (2006) on the other hand, associate online banking with improvement on consumer banking services, consumer retention and higher market share. In essence, online banking has become a 'one stop service and information unit' that promises great benefits for both banks and consumers (Teo and Tan, 2000).

Despite of the advantages of online banking, recent views suggest that online banking may not achieve the levels of transformation as predicted (Cuevas, 1998; Canniffe, 2000). Likewise, similar sentiment was echoed by White and Nteli (2004), in which the adoption of online banking in many countries has not risen as strongly as expected. According to Wang, Wang, Lin and Tang (2003), only 1 to 3 percent of banking transactions in Taiwan were conducted via internet while in Hong Kong the penetration rate remains low at 23.8 percent (Cheng et al., 2006). Furthermore the adoption rate for online banking in Germany and Greece is at 40 and 10 percent respectively (Meyer, 2006). However, according to Alsajjan and Dennis (2010), there are 17.0 millions online banking users in the United Kingdom in 2006. Studies also revealed positive adoption rate in Brazil (Hernandez and Mazzon, 2007), Nordic countries (Celik, 2008) and Australia (Sathye, 1999). As the results are mixed, there is a need to understand the elements which could influence the embracement of online banking. Through a clearer understanding, the appropriate marketing strategies could be implemented to promote new forms of online banking systems (Wang et al., 2003). This is vital so that online banking can be embraced by a majority instead of only a few techno-savvy consumers (Kolodinsky, Hogarth and Hilger, 2004).

Although a number of discussions have examined issues related to the adoption of online banking such as in the United States (Pikkarainen et al., 2004; Kolodinsky et al., 2004), United Kingdom (Bradley and Stewart, 2003), Spain (Joaquin, Carlos, Carla and Silvia, 2009), Finland (Pikkarainen et al., 2004), Hong Kong (Cheng et al., 2006), Taiwan (Wang et al., 2003; Shih and Fang, 2004), India (Geetika and Ashwani, 2008) there have been little scholarly research pertaining to the adoption of online banking from the specific context of Malaysia apart from Poon (2008), Lallmahamood (2007), Ainin et al. (2005), Suganthi, Balachandher and Balachandran (2001), and etc. Moreover, the results remain inconclusive due to the mix results (Ndubisi and Sinti, 2006). As reports also have shown that online banking adoption in Malaysia is still relatively low (Ndubisi and Sinti, 2006) and at infancy stage, we hope to close the gap by presenting a study on the adoption determinants in accepting online banking among consumers in Malaysia. …

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