Factors Affecting Usage of Internet Banking Services

Name: Shubhra Vohra

Student

FACULTY OF MANAGEMENT STUDIES

MODY INSTITUTE OF TECHNOLOGY AND SCIENCE

(Deemed university u/s 3 of the UGC Act, 1956)

Laxmangarh (Raj)

Email id: shubhra5.vohra@gmail.com

Mobile no.: 9530105676

Area of interest: Finance

Name: Sakshi Agrawal

Student

FACULTY OF MANAGEMENT STUDIES

MODY INSTITUTE OF TECHNOLOGY AND SCIENCE

(Deemed university u/s 3 of the UGC Act, 1956)

Laxmangarh (Raj)

Email id: sakshiagrawal89@gmail.com

Mobile no.: 8003690007

Area of interest: Finance

Electronic copy available at: http://ssrn.com/abstract=2087215

FACTORS AFFECTING CONTINUED USAGE OF INTERNET BANKING

Abstract:

Information technology Services is considered as the key driver for the changes taking place
around the world. Internet banking is the latest and most innovative service and the new trend
among the consumers. The shift from the formal banking to e-banking has been a 'leap' change.
It is a form of self-service technology. Apart from the traditional type of banking services,
customers today require more personalized products and services, and are able to access such
services at any time and any place. It is one of the advanced information technology they can
be employed to achieve a high level of customer services. Nowadays, the concept of internet
banking is getting popular among various levels of consumers but still Internet banking is still at
infancy stage in the world. This study empirically explores factors like perceived usefulness,
perceived ease of use, perceived risk, subjective or social norms and behavioral intention of
consumers affecting the usage of Internet Banking among consumers. The research is being
conducted at Jaipur and through this we have found out the impact of factors that can affect
customers' intention for using internet banking services.

Electronic copy available at: http://ssrn.com/abstract=2087215

 INTRODUCTION

Since the new millennium, Internet banking has experienced explosive growth in many countries
and transformed Traditional banking practice. Internet banking has changed the way of services
provided by the banking sectors to their customers. By offering Internet banking services,
traditional financial institutions seek to lower operating costs, Improve customer banking
services, retain customer, reduce their branch networks, and downsize the number of their
service staff (Parisa, 2006).

Traditionally, consumer behavior was concerned with examining the different phases of
consumer decision making starting from need recognition to information search to evaluation of
alternatives, purchase and finally post consumption behavior (Zeithmal and Bitner, 2003).
Many theories have examined post consumption behavior since consumer evaluation after
consumption will determine his intentions to buy the product in the future .Two main
perspectives appear in this respect. The diffusion of Innovations (DOI) perspective
(Rogers,1995)investigated determinants of information system adoption and usage, such as:
innovation characteristics, individual adopter characteristics, and information sources and
communication. The second perspective includes other theories that examined the behavioral
intentions as consequences of consumer psychological processes such as attitudes, social norms
and perceived behavioral control.

Recently, the applicability of these models to self service technologies was examined. Self –
service technologies (SST) allow customers to perform entire services on their own, without
assistance from service firm employees. Using SST provides firms with an alternative channel of
distribution that is less costly and more flexible .It allows firms more customization, recovery
from service failure, and spontaneously delighting customers (Bitner, Brown and Meuter, 2000)
.With the tremendous investment in both time and money to design, implement, and manage
these SSTs, it is critical for firms to understand the consumer
decision of whether or notto use an SST (Curran, Meuter and Suprenant, 2003). Such decision
involves many complexities that do not exist in traditional consumer decision making processes.
The purpose of this research is to examine the effect of factors like perceived usefulness,
perceived ease of use, perceived risk, subjective or social norms and behavioral intention of
consumers affecting the usage of Internet Banking among consumers.
 LITERATURE REVIEW

The banking system has been attempting to gather more and more information on aspects that
induce people to use the Internet for banking purposes (Gerrard and Cunningham, 2003; Sathye,
1999). The adoption of e-banking by consumers is being extensively investigated by several
authors (Sayar, and Wolfe, 2007; Eriksson).

In the year (2000), Tan and Teo found that attitudinal factors such as Internet experience, the
relative advantage of online banking and perceived risk, and perceived behavioral control factors
predict the intention to adopt Internet banking services.

Bhattacherjee in the year (2001) uses online banking customers to test his expectation-
confirmation model of IS continuance. His results suggest that users' continuance intention is
determined by their satisfaction and perceived usefulness of the application.

Mathwick, Rigdon, and Malhotra (2001) defined perceived usefulness as the extent to which a
person deems a particular system to boost his or her job performance.

Polatoglu and Ekin, (2001), in their study concluded that greater the perceived usefulness of
using electronic banking services, the more likely that electronic banking will be adopted

Bryant et al. [2002] state that "trust is an important consideration in the development and
fostering of e-Commerce relationships in the context of the knowledge-based economy"

Chung and Paynter (2002), identified consumer fears regarding transaction security as an
inhibitor to the adoption of Internet banking

Karjaluotoet al. (2002), showed that prior experience with computers and technology as well as
people’s attitudes toward computers influences both their attitude toward online banking and
their actual behavior.
Zeithaml, Parasuraman, and Malhotra (2002), stated that the degree to which an innovation is
easy to understand or use could be considered as perceived ease of use.

Gerrard and Cunningham (2003) noted that the perceived usefulness depends on the banking
services offered such as checking bank balances, applying for a loan, paying utility bills,
transferring money abroad, and obtaining information on mutual funds.

Mukherjee and Nath (2003) , found that communication had a moderate influence on trust, while
opportunistic behavior had a significant negative effect and trust in general led to a higher level
of commitment in online banking.

Rexha et al., (2003).In their study found out that customer satisfaction with banks only affected
through indirect adoption of electronic banking. They also argued that the experience of
electronic tool usages, obstacles of machine availabilities, convenient services and friendly
interface, openness, security, and information updates were among the variables which influence
customer decision.

Pikkarainen et al (2004) applied TAM in Finland and they found perceived usefulness as a
determinant of actual behavior which encouraged the user of the twenty-first century banking to
use more innovative and user-friendly self-service technologies that give them greater autonomy
in performing banking transactions, in obtaining information on financial advices, and in
purchasing other financial products.

Vatanasombut et al. (2004),New forms of online communication offer a host of new and
promising opportunities for customer retention on the World Wide Web, while at the same time
intensifying competition [

Verhagen and Tan (2004), Lowering perceived risks associated with online transactions as well
as maintaining transaction trust are vital keys to attracting and retaining customers
Siu and Mou, (2005), in their study opined that security has also been identified as a key
consumer concern in other Internet banking adoption studies

(Littler and Melanthiou, (2006) in their study concluded that Perceived risk is defined as a
consumer's perceptions of the uncertainty and the possible undesirable consequences of buying a
product or service.

(Limsombunchai and Weng, ( 2006), in their study concluded that Perceived risk is a major
factor affecting intentions to adopt or to continue using a good or a service . The use of
electronic banking involves many types of risk. These include financial risk, performance risk,
physical risk, social risk, psychological risk, and time risk.

McKechnie, Winklhofer and Ennew (2006) in their study reported that TAM is helpful in
obtaining a better understanding of factors influencing the extent of use of the internet in
financial services.

(Liu et al. 2007), in their study opined that that trust not only affects the intent to use e-banking
duties useful in reducing the perceived risk that consumers feel is present in an online
environment.
 RESEARCH METHODOLOGY

The methodology followed for conducting the study includes sample size sample design, data
collection and statistical tools used for analyzing the collected data.

Sample Size

The sample size consisting of 100 (n = 100) were selected for the study.

Sampling Design

Since it is difficult to contact the entire population, sampling technique was Convenience
sampling technique.

Data Collection Methods

It is one of the most popular methods of collecting data. The data used in this project is mainly
based on primary as well as secondary data. Primary data was collected through questionnaire
and secondary data through journals.

Primary data are collected for a specific purpose of addressing the problem at hand. It was
collected by using questionnaires. The questionnaire had 16 questions excluding the
demographic information. A five pointLikert scale was designed for the study ranging from 5 =
strongly agree to 1 = strongly disagree, and 3 = neutral or neither satisfied, nor dissatisfied. It
was designed taking into consideration various factors such as perceived usefulness, perceived
ease of use, perceived risk, subjective or social norms and behavioral intention of the
respondents.
 ANANLYSIS AND INTERPRETATION

Table 1

Reliability Statistics

Cronbach's
Alpha N of Items

.594 16

Reliability is an assessment of the degree of consistency between multiple measurements of a

variable (Hair, Anderson and Tatham, 1998, p.117). Cronbach's alpha was used to assess the
consistency of the entire scale.Hence all reliability coefficients were acceptable.

Kaiser-Meyer-Olkin (KMO) and Bartlett's Test

Two tests or measures should be done first to quantify the appropriateness of factor analysis. One
such measure is "The Bartlett test of Sphericity", which is a statistical test used to examine the
presence of correlations among the variables. Another measure is “Kaiser-Meyer-Olkin Measure
of Sampling Adequacy” also called as (MSA).

Table 2

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .616

Bartlett's Test of Sphericity Approx. Chi-Square 571.004

df 120

Sig. .000
This index ranges from zero to one, reaching one when each variable is perfectly predicted
without error by the other variables. The above table shows that KMO value is above 0.5. Also,
Bartlett test is highly significant (p<0.001), this tests the null hypothesis that the correlation
matrix is an identity matrix. An identity matrix is matrix in which all of the diagonal elements
are 1 and all off diagonal elements are 0. Hence, reject this null hypothesis and thus factor
analysis is appropriate.

Table 3

Rotated Component Matrix

Component

1 2 3 4 5

pu1 .778

. pu2 .777

pu3 .812

pu4 .747

peou1 .835

peou2 .810

peou3 .786

pr1 .830

pr2 .783

pr3 .788

pr4 .720

sn1 .929

sn2 .943

bi1 .854

bi2 .794

bi3 .868
Rotation matrix basically reduces the number of factors on which the variables under
investigation have high loadings; with the help of rotation interpretation of the analysis becomes
easier. The above table depicts that perceived usefulness 1,2,3,4 are loaded on component 2,
while Perceived Ease of Use 1, 2, 3 are loaded on component 4, Perceived Risk 1,2,3,4 are
loaded on component 1, Social Norms 1,&2 are substantially loaded on component 5 and
Behavioral Intention 1,2,&3 are loaded on component3. Therefore, these factors can be used as
variables for further analysis.
Also the Anti-Image Correlation values came above .5 which shows it is appropriate for further
analysis.

LIMITATAIONS

There were many limitations inherent in the study design.

 The sample was limited to customers in the city of Jaipur, different results may have been
obtained from customers in other cities.
 The small sample size also represents a limitation as sample size for this study was 100 if
it would have been more than it would have delivered more productive and useful results.
 Future research examining internet banking adoption and continued usage may overcome
these limitations.
 CONCLUSION

The study has attempted to describe and analyze the factors that can affect customers' intention
to continue using internet banking services.

Five factors were taken into considerations i.e. perceived usefulness, perceived ease of use,
perceived risk, subjective or social norms and behavioral intention, out of which social norms
had a major impact which shows that reference groups play an important role on adoption of
Internet banking.

Behavioral intention proves to be one of the maximum influencing factors as majority of the
respondents had a positive response. This shows that with the help of Internet banking, people
with a very short time can visit several online banks to compare what they offering, savings and
checking account deals as well as their interest rates. Also it offers a great deal more
convenience than from a conventional bank.

The factor Perceived Risk came lower which showed that respondents believe that their
information over the internet is not secure, somewhere people believe that there is no privacy
using this service and a possibility of facing problems while making transactions and there is
high uncertainty about banks action with errors occurring during online transactions and this
should be taken care of properly. As this factor has already been discussed in detail in the studies
of Chung and Paynter (2002), Siu and Mou, (2005) and (Limsombunchai and Weng, (2006) and
the similar results came out of their studies.

The usage of Internet Banking is not much affected by the global recession period and the
number of users didn’t decline in any of the past years. The users are continuously growing as
Internet Banking provides easy and one stop solution to all the banking facilities and is safe and
secure if accessed through the proper banking channel. The average numbers of transactions for
internet banking are 7 per customer per month in 2011 which is high then the previous years.
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