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Internet Banking: A Case Study of the Factors influencing its Adoption in Mauritius Dinesh RAMDHONY * and Deerajen RAMASAWMY Abstract Purpose – The purpose of this paper is to investigate the factors that influence bank customers in Mauritius to adopt Internet Banking (IB). Methodology – An online survey was conducted with a response rate of 73%. Findings – Around 54% of the respondents were IB users. The commonly used services were for information inquiry and transfer of funds. Factor Analysis reveals that from a user’s point of view ‘availability of infrastructure’ and ‘perceived ease of use’ are the most important factors in determining adoption of IB. In contrast, for non-users of IB, it was ‘trust and security issues’. Based on Logistic Regression analysis, household income group and age group were found to be the most significant demographic variables that determine adoption of IB. Practical implications – The results can be used by banks to devise strategies in increasing their customer base by catering for the needs of actual users and taking on board non-users. Research limitation – The use of convenience sampling weakens the objectivity of this research. Originality – This study considers the factors leading to actual usage or non-usage of IB unlike other studies which investigate the intention to use IB. Keywords: Internet Banking, Internet Banking Adoption, Technological Acceptance Model, Mauritius Introduction Advances in information technology have significantly changed the way banks deliver services to their customers and the way the latter undertake their regular banking transactions. Pressured by rising costs, ever more demanding customers, and the need to preserve profitability while standing out from the competition, banks found themselves forced to invest in new customer service channels such as internet banking (IB) (Hernandez and Mazon, 2007:72). The trend is evident in several developing countries such as Malaysia (Hway-Boon and Yu, 2003) and Thailand (Rotchanakitumnuai and Speece, 2003). Mauritian banks have joined the bandwagon and offer a multiplechannel strategy to meet the needs of their clients. Internet banking offers a multitude of benefits to both the user and the provider. Studies in Spain and Italy have found a positive correlation between provision of online services and financial performance (Hernando and Nieto, 2007, Hasan et al., 2005). Other benefits include cost savings, increased customer base, delivery of services in an innovative manner, increased marketing and communication possibilities, mass customisation and development of noncore businesses (Jayawardhena and Foley, 2000). From a user’s perspective the decision to adopt internet banking is mainly motivated by convenience and efficiency (Bruno, 2003). Customers can access their bank account and effect transactions anywhere at any time. Internet banking has been found to be the cheapest delivery channel for standardised banking transactions such as account services and transfer of funds (Polatoglu and Ekin, 2001). A study on the adoption of internet banking in Mauritius was carried out by Padachi, Seetanah and Rojid (2006). However, the study lacked theoretical underpinning. The last five years witnessed several cuts in the rates of internet access coupled with various initiatives by the local and central government to provide internet access in public places which justifies a new study on the adoption of internet banking. The paper sets out to investigate the factors influencing the use of internet banking in Mauritius and tries to draw the profile of the Mauritian Internet banking user. The findings are expected to be of great use to policy makers, financial institutions willing to launch IB services and more particularly to commercial banks already offering IB facilities in devising strategies towards greater customer satisfaction and increasing their customer base. The paper is organised as follows. The next part contains a discussion of the theoretical models used to explain technology acceptance and findings of other studies regarding the adoption of internet banking. Then, the paper outlines the research methodology and presents the findings from the data analysis. From the findings, conclusions are drawn and recommendations are provided for assisting banks in devising strategies to increase their customer base. Theoretical framework Several theories have been used to explain the determinants of IT adoption for individuals; the Theory of Reasoned Action (Fishbein & Ajzen, 1975), the Theory of Planned Behaviour (Ajzen, 1991) and the Technological Acceptance Model (TAM). Yousafzai et al. (2010) compared the three previously named theories in predicting IB behaviour. They concluded that TAM is superior to other models. Chang and Hamid (2010) and Eriksson (1995) have also used the TAM for explaining IB adoption. This paper uses to a large extent the constructs of the TAM to explain IB adoption / nonadoption in Mauritius. TAM involves two primary predictors for the potential adopter, namely Perceived Usefulness and Perceived Ease of Use. Perceived Usefulness is defined as “the degree to which a technology is able to provide a means-end relationship, that is, the given technology as a means to a desired end” (Doll et al., 1998). The work of Wai-Ching Poon (2008) emphasised on the degree of convenience that customers can www.theinternationaljournal.org > RJSITM: Volume: 01, Number: 08, June-2012 Page 10
attribute to the service and accordingly, 82% of the respondents agreed that e-banking is time saving and 53% strongly agreed that no queuing at the banks’ branches is advantageous. Sayar and Wolfe (2007) stated that customers find IB attractive as it is possible to conduct transactions anytime and anywhere, faster and lower fees are incurred compared to using traditional bank branches. Perceived Ease of Use refers to “the extent to which a person believes that using a particular system would be free of effort” (Davis et al., 1989). Rogers (1962) theorised that perceived ease of use demonstrates the degree to which an invention is seen as being not too difficult to understand, learn or operate. One of the attributes of Perceived Ease of Use as suggested by Taylor and Todd (1995) is the complexity associated with the innovation, and in their study the latter was found to have the most significant relationship with adoption across a broad range of innovation types. Several other factors apart from Perceived Usefulness and Perceived Ease of Use, have been identified as influencing the decision to adopt IB. Davies (1989) refers to them as external variables. Some examples are: security or safety, the level of consumer trust, the risks associated with online banking, the infrastructure available, and eventually technological knowledge or awareness. Security or Safety The banking industry has declared information privacy and security to be major obstacles in the development of consumer related electronic commerce (Thomas et al., 2002). Fear and anguish among the consumers psychological state that may bar them from using the system may be intensified if there exists any lapse of security in internet usage. Customers will not be willing to use the service if it is perceived as being easily susceptible to fraud (Al-Somali et al., 2009). This point was corroborated in a research conducted by Al-Hajri and Tatnall (2007). Most respondents were concerned about the problem of internet security as bank customers cannot put their full trust in internet technology due to possible fraud and privacy violation problems. In addition, feeling secure in doing transactions on the Web is often cited by users as a major factor that removes their concerns about the effective use of the Internet for making online transactions (Salisbury et al., 2001). Trust The existence of a great deal of scepticism about the security of online transactions makes the element of trust a crucial factor when it comes to deciding upon the use of e- banking. Wai-Ching Poon (2008) confirmed that 69% respondents agreed that trust is affecting their demand for e- banking services. There could be a limitation of the opportunities from web technology if there is a dearth of trust by the consumers in the system (Rotchanakitumnuai and Speece, 2003). Customers usually do not have faith in internet based technology for reasons like security of the system, distrust of service providers, and anxiety regarding the dependability and consistency of the internet services (Rotchanakitumnuai and Speece, 2003). Finally, in a research by Fassnacht and Kose (2007), the customers‟ level of trust in e-banking was confirmed to have a considerable effect on the consumer’s choice of adopting this technology and for its continued usage. Awareness of the Service In general, customers will seek out those financial products which offer the best value for money and about which they are educated. Once customers become aware of the integrated and secure services available somewhere, they are likely to switch to the providers of such services (Kalakota and Frei, 1998). El-Nawawy and Ismail (1999) in their study of e-commerce adoption by SMEs in Egypt reported that the main factors revolve around awareness and education. An innovative product will not achieve great heights if consumers are not aware of its existence and the potential benefits it presents. An Australian study by Sathye (1999) highlighted awareness as one of the main factors hindering the migration of consumers to IB. Availability of Infrastructure O’Connell (1996) identified lack of access to computers or internet as one of the possible reasons for slow adoption of IB. The study by Wai-Ching Poon (2008) divulged that a majority of the respondents (81%) agreed that internet accessibility is an advantage for users’ satisfaction in adopting e-banking services. Likewise, through observations and narrative analysis of IB customers, Broderick and Vachirapornpuk (2002) identified issues like slowness, poor navigational possibilities, poor interactivity and critical incidents such as lack of help by the providers of IB service to be capable of deterring customers from adopting the service. Other Factors Many studies have investigated the effects of the customers’ demographic characteristics; age (Czaja et al., 2001), gender (Venkatesh and Morris, 2000, Burke, 2002), financial income (Venkatesh and Morris, 2000), and education level (Burke, 2002). For example, it was found that older customers generally have negative attitudes towards technology and innovations; younger adults on the other hand were seen to be more interested in using new technologies (Czaja et al., 2001). Income was found by Venkatesh and Morris, (2000) to potentially exert a strong effect on the adoption and diffusion of technology. Similarly, gender and education level also played a significant role with regards to attitude towards technology use (Burke, 2002). Internet Banking in Mauritius The banking sector is a major component of the financial system in Mauritius. The sector is constantly growing and has attracted new players in the last five years. Presently the banking industry comprises of 20 banks holding a banking licence from the Bank of Mauritius, of which 7 are local banks, 8 are foreign owned subsidiaries, 1 is a joint venture and 4 are branches of foreign banks. The sector has been at the forefront of technological innovations offering several banking channels via telephone / PC / terminal / Internet. The Mauritius Commercial Bank was the first bank to launch internet banking services in 1998 followed by the State Bank of Mauritius in 1999. As evidenced by Table I, www.theinternationaljournal.org > RJSITM: Volume: 01, Number: 08, June-2012 Page 11
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