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

Abstract: Although millions of dollars have been spent in developing online banking infrastructures, findings revealed that consumers have yet to adopt the systems in spite of their availability and convenience. As such, the paper aims to investigate the factors that affect the adoption of online banking in Malaysia. Using a self-administered questionnaire, 231 online banking services users were tested. The finding of the study indicated that social influences, perceived usefulness, trust, perceived ease of use were positively associated with the intention to adopt online banking. Interestingly, social influences are found to be the most influential factors, contradicting with many past studies. However perceived financial cost and perceived security risk were found insignificant in this study. The results provide valuable information for both bankers and policy makers especially when formulating online banking marketing strategies.

Keywords: Online banking, Technology Acceptance Model (TAM), Malaysia

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 Pannila, 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-sawy consumers (Kolodinsky, Hogarth and Hilger, 2004). …

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