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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study
An Empirical Research Paper presented to the

Department of Information Systems University of Cape Town


in partial fulfillment of the requirements for the course on

Information Systems Honours (INF 414 W)


By Rudi Hoppe Paul Newman Pauline Mugera 17 October 2001

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

PREFACE
This report and the conclusions made herein are not confidential, however participant data is confidential and every effort has been made to e nsure this.

The authors would like to thank:

Mr Irwin Brown for his assistance and guidance throughout the duration of the project. The respondents to our survey Margaret Tan and Thompson S.H. Teo for allowing permission to use their questionnaire.

The authors certify that this report is their own work, and that all references are accurately reported

_________________ Rudi Hoppe

_____________________ Pauline Mugera

_________________ Paul Newman

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

ABSTRACT
A research framework based on the theory of planned behaviour and the diffusion of innovations theory developed by Tan & Teo (2000) was used to identify the attitudinal, social and perceived behavioural control factors that might influence the adoption of Internet banking. The set of questions developed by Tan & Teo (2000) for their Singapore study was then used in an online questionnaire for SA Internet users with the aim of obtaining results which could be compared with the previous results.

The results were largely in agreement with those obtained in the Singapore study. It was confirmed that attitudinal and perceived behavioural control factors, rather than social influence play a significant role in influencing the intention to adopt Internet Banking services. In particular, perceptions of relative advantage, compatibility, trialability and risk regarding Internet use were found to influence the intention to adopt these services. There were 3 notable differences in the results. Firstly, Complexity was not found to be a significant factor in Singapore, whereas it was in this study. In addition to this, Government support and banking needs were found to be factors in Singapore, but neither was found to be significant from the SA results. The implications of the study are discussed and various conclusions are reached.

Keywords : Internet Banking, Adoption, South Africa

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

TABLE OF CONTENTS

PREFACE.................................................................................................................................................................2 ABSTRACT .............................................................................................................................................................3 TABLE OF CONTENTS......................................................................................................................................4 1. INTRODUCTION..............................................................................................................................................6 2. DEFINITIONS....................................................................................................................................................7 2.1 ADVANTAGES OF INTERNET BANKING........................................................................................................8 2.2 DISADVANTAGES OF I NTERNET B ANKING .................................................................................................9 3. INTERNET BANKING IN SOUTH AFRICA..........................................................................................9 4. RESEARCH FRAMEWORK ....................................................................................................................... 11 4.1 VARIABLES AND H YPOTHESIS ................................................................................................................... 12 5. RESEARCH DESIGN .................................................................................................................................... 18 5.1 THE QUESTIONNAIRE........................................................................................................................... 19 5.2 HOSTING .................................................................................................................................................... 21 5.3 SPONSORSHIP .......................................................................................................................................... 21 5.4 ADVERTISING.......................................................................................................................................... 22 5.5 RESPONSE RATE..................................................................................................................................... 22 5.6 RELIABILITY AND VALIDITY ASSESSMENT .............................................................................. 23 6. FINDINGS AND ANALYSIS ....................................................................................................................... 24 6.1 PREFERRED INTERNET SERVICES AND PRODUCTS ................................................................ 27 7. LIMITATIONS OF TH IS STUDY ............................................................................................................. 31 8. DISCUSSIONS A ND CONCLUSIONS ............................................................................................... 32 9. BIBLIOGRAPHY ............................................................................................................................................ 34 APPENDIX A FACTOR ANALYSIS.......................................................................................................... 36 TABLE A2. VIF VALUES .................................................................................................................................38

LIST OF TABLES
TABLE 2.1 FEATURES AND FUNCTIONS ...............................................................................................................7 TABLE 3.1: INTERNET B ANKING RATES ........................................................................................................... 10 TABLE 4.2 T ABLE OF HYPOTHESISES................................................................................................................ 13 TABLE 5.1. ATTITUDE V ARIABLES ..................................................................................................................... 19 TABLE 5.2. P ERCEIVED BEHAVIOURAL CONTROL VARIABLES..................................................................... 20 TABLE 5.3 RELIABILITY ANALYSIS USING CRONBACH S ALPHA................................................................ 23

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study
TABLE 6.1 D EMOGRAPHIC PROFILE OF RESPONDENTS ................................................................................ 24 TABLE 6.2 RESULTS OF LINEAR REGRESSION.................................................................................................25 TABLE 6.3 INTERNET BANKING S ERVICES ....................................................................................................... 28 TABLE 6.4 T AN & TEOS RESULTS - INTERNET B ANKING S ERVICES.......................................................... 28 TABLE 7.1 C RITERIA FOR S ELECTING AN O NLINE BANKING S ERVICE ..................................................... 29 TABLE 7.2 T AN & TEOS RESULTS - CRITERIA FOR S ELECTING AN O NLINE B ANK S ERVICE............... 29 TABLE 7.3 P REFERRED INTERNET C HARGES ..................................................................................................30 TABLE A1. F ACTOR ANALYSIS ............................................................................................................................ 37 TABLE A2. VIF VALUES ....................................................................................................................................... 38

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

1. INTRODUCTION
In a world, which is becoming increasingly globalised through the use of the Internet and the World Wide Web (WWW), Internet banking has been gaining ground as a new opportunity for banking institutions. These new opportunities and challenges, have meant the rise of new competitors in the global banking market [Suganthil, Balachander and Balachandran 2001], Banking is a highly information-intensive industry. Customers demand accurate information regarding their accounts and this information needs to be easily accessible. As a result information technology is extensively used in the collection, processing and output of information to users and customers.

Most banks use the Inter net as a distribution channel through which financial services may be offered at lower costs to a wider spectrum of potential customers. This allows for contacts from all over the world to be established at any one time. Consequently this allows banks the opportunity to expand their operations beyond just their geographical locations. The objective of this paper is to identify and describe the factors influencing the adoption of Internet banking in South Africa and compare them with those identified in Singapore. The paper is organised as follows: firstly it provides a definition of Internet banking as well as its advantages and disadvantages, followed by an overview of Internet banking in South Africa. The research framework and research design, utilised in the study, is outlined prior to a discussion of the results obtained. The paper concludes by analysing the research implications of the findings.

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

2. DEFINITIONS
Online banking is a term used to encompass all banking services that are not traditionally used in the banking sector. These services include Electronic banking, PC banking, Telephone banking, Home banking and Internet banking.

Table 2.1 below contrasts the various features and functions offered by the alternative forms of online ba nking.

Table 2.1 Features and Functions


Features Telephone banking Withdrawals Deposits Balance enquires Interim Statements (30 Self Service terminals ATMs Internet Banking

transactions) Transfer funds Cheque book orders Change ATM card PIN Stop payment of cheques Rates Stop orders

Source: FNB Brochure, [2001]. UNCTAD 1999 as cited by Jasimuddin, [2001] states that in the USA, Internet banking is growing at an annual rate of 60%, and that the number of Internet accounts could reach as much as15 million by 2003. In 1999, one fifth of the Finish and Swedish bank customers were online, and with numbers reportedly increasing [UNCTAD 1999 as cited by Jasimuddin, [2001]

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

Internet banking is a remote home and/or office banking service that is offered to a banks personal customers, to perform routine banking transactions through the Internet [Standard Bank, 2001]. According to Bankrate.com [1998], Internet banking allows users to dial in and use the banks own software or that of an Internet service provider. This type of banking allows customers to access bank accounts from any location provided there is Internet access [Absa Bank, 2001]. This provides customers with the ability to perform transactions via the banks website with the advantage of not being required to visit a physical branch or ATM (Automated Teller Machine).

The services available for Internet banking vary from bank to bank. According to Bankrate.com [1998] virtually all banks that offer Internet banking services allow consumers to check the balances in their accounts, transfer funds and order electronic bill payments, with the even more sophisticated Internet banking systems allowing customers to apply for loans, trade stocks or mutual funds, and even view actual images of their checks or deposit slips.

2.1 ADVANTAGES OF INTERNET BANKING Internet banking offers a certain advantages over the traditional banking methods. Some of these advantages are as follows: Time saving A customer can bank without physically visiting a branch. Convenience Accounts can be paid and funds transferred without queuing or writing out cheques. Accessibility Services are available seven days a week, twenty-four hours a day. Confirmation- Transactions are executed and confirmed almost immediately. Range. Customers can do anything from checking on an account balance to applying for a mortgage. Security Customers can choose their own PIN, preventing unauthorised access to their accounts. Safety Reduces the need to carry large amounts of cash.

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

2.2 DISADVANTAGES OF INTERNET B ANKING Internet banking also has several disadvantages these include: Cost Internet banking has certain systems requirements such as accessibility to computers, computer type, memory, screen resolution and browsers, which prove to be an additional cost to the customer when compared to traditional banking methods or other online banking services such as ATMs. Cash availability - Currently, a customer cannot ma ke deposits or withdrawals when using Internet banking. Security This can also be a disadvantage as there is the threat from computer hackers and fraudsters.

3. INTERNET BANKING IN SOUTH AFRICA


Currently, South Africa's four main domestic banks, First National Bank (FNB), Standard Bank, Nedbank and Absa are offering Internet banking services. These banks are investing billions of rands on Internet banking to encourage customers to adopt to this innovation.

According to SA.Internet.com [2001], Absa, p redicts an Internet population of 3,2 million by the end of 2002, and plans to recruit 10 000 users to the service a month. The bank has offered free Internet Service Provider service in order to encourage the use of the Internet and Internet banking. The offer includes 5 email addresses and 10 MB of free web space. Absa hopes the publicity surrounding the service will generate enough interest in Internet banking to double their customer base.

Absa currently has 153,000 customers who make use of online banking services, a 33% market share, second only to Standard Banks 35%. Nedbank has approximately 70,000 online users [Manson, 2001; SA.Internet,com, 2001].

Apart from the domestic banks, there is a new type of bank emerging in South Africa and worldwide called the virtual bank. The major difference between the virtual bank and other banks is the fact that a virtual bank does not have a physical presence, or a brick-and-mortar building. Nevertheless, this bank performs most of the services provided by the brick-and-motor banks with regard to Internet banking.

ER Project 2001 Hoppe, Mugera, Newman

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

20twenty is South Africa's first virtual bank, and it has shown phenomenal growth since it launched in July. 20twenty is a division of Saambou Bank. CEO Christo Davel is confident that the virtual bank will achieve profitability within three years if it meets its target of securing 15% of the market share [SA Computer Magazine, 2001].

According

to

banking

survey

conducted

by

consultant

group

PriceWaterhouseCoopers (PWC) in 2000, Standard Bank came out top in the category of offering the broadest range of Internet banking services [sa.internet.com, 2000]. Standard bank allows customers to perform more transactions on the Internet than Absa, FNB, Nedbank and 20twenty. With regard to Internet banking ra tes, Absas monthly fee to individual customers is lower than that charged by the 3 other big domestic banks: Standard Bank charges R19,50, First National charges R22,80 and Nedbank charges R22,80.

Table 3.1 shows a comparison of the Internet banking rates charged by the domestic banks.

Table 3.1: Internet Banking Rates


Service Monthly service fee- Individual Business fee Internal transfer Balance enquires & statement Nedbank R22.80 R22.80 R1.60 Free ABSA R11.97 R71.82 R1.50 First 5 free, after R1 p/stat. Standard Bank R19.50 R19.50 R2 Free FNB R22.80 R57.00 R2.06 Free

Source: Acuity Media Africa [2001].

Consumer acceptance and use of Internet banking in South Africa is still small, [Manson, 2001]. This figure is small in comparison to the total number of banking customers, or Internet users. Therefore, this study undertakes to provide greater insight into consumer intentions to adopt Internet banking services.

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

4. RESEARCH FRAMEWORK
The research framework used for this study was based on one developed by Tan and Teo [2000] in their study of factors affecting the adoption of Internet banking in Singapore. The reason for the use of this framework was so as to be able to compare results. The hypotheses were thus based on the Tan and Teo [2000] framework.

This framework is underpinned by the theory of planned behaviour developed by Ajzen [1985] as well as the diffusion of innovations theory developed by Rogers [1983] and was developed from a decomposed theory of planned behaviour introduced by Taylor and Todd [1995]. The decomposed theory of planned behaviour provides a comprehensive way of understanding factors that can influence a persons decision to use information technology. It postulates intention to adopt information technology is determined by:

Attitude (which describes a persons perception towards information technology) Subjective norms (which describes the social influence that may affect a persons intention to use information technology) Perceived behavioural control (which describes the beliefs about having the necessary resources and opportunities to adopt information technology)

Intention according to Ajzen [1985] is the immediate determinant of to perform behaviour. Thus intention to use a specific information technology can be seen as a determinant of actual usage of that information technology. It was therefore decided to measure intentions rather than actual usage of Internet banking as this factor is more relevant when considering the adoption process.

The decomposed framework has been designed by Tan and Teo[2000] in order to specifically examine the factors affecting Internet Banking as the information technology of interest. Intention to adopt Internet banking was considered as the dependant variable whilst Attitude, Subjective norms and Perceived behavioural controls were considered to be independent variables. Diagram 4.1 displays the framework.

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

Diagram 4.1 Framework For The Adoption of Internet Banking Attitude Relative Advantage Compatibility Values Internet Experience Banking Needs Complexity Trialability Risk Intention to Use Internet Banking Services Usage of Internet Banking Services

Subjective Norms

Perceived Behavioural Control Self-efficacy Facilitating Conditions o Availability of government Support o Availability of Technical support

Source: Tan and Teo, [2000].

4.1 VARIABLES AND HYPOTHESIS The variables and hypothesis that form the Framework are displayed in table 4.2 and discussed thereafter.

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

Table 4.2 Table of Hypothesises H1A The greater the perceived relative advantage of using Internet banking services, the more likely that Internet banking will be adopted. H1B The greater the perceived compatibility of Internet banking with ones values, the more likely that Internet banking will be adopted. H1C H1C: The greater the experience with using the Internet the more likely that Internet banking will be adopted. H1D The greater the use of banking products and services, the more likely that Internet banking will be adopted. H1E The higher the perceived complexity of using Internet banking, the less likely that Internet banking will be adopted. H1F The greater the trialability of Internet banking, the more likely that Internet banking will be adopted. H1G The lower the perceived risk of using Internet banking, the more likely that Internet banking will be adopted. H2 The beliefs associated with subjective norms are significantly related to an individuals intention to adopt Internet banking. H3A The greater the self-efficacy towards using Internet Banking the more likely that Internet banking will be adopted. H3B The greater the extent of perceived technological support for Internet banking, the more likely that Internet banking will be adopted. H3C The greater the extent of perceived government support for electronic commerce, the more likely that Internet Banking will be adopted. Source: Tan and Teo, [2000]. Attitude: According to Gibson, Ivancevich and Donnelly [2000] an attitude is a positive or negative feeling or mental state of readiness, learned and organized through experience, that exerts specific influence on a persons response to people, objects and situations.

According to Rogers [1983] as cited by Agarwal and Prasad [1998] the different dimensions of attitudinal belief can be measured by using five attributes: Relative advantage, compatibility, complexity, trialability, and observability. Observability is

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

excluded from the framework on the basis that privacy is an important aspect of performing Internet banking and thus the possibility of observing individuals performing banking is rather difficult. The different dimensions of attitudinal belief used in this study are discussed below.

Relative advantage: Agarwal and Prasad [1998] show that relative advantage of an innovation is positively related to its rate of adoption. This construct is similar to the perceived usefulness in the Technology Acceptance Model, defined as the degree to which a person believes that a particular information technology would enhance his or her job performance. It has also been shown to be a contributing factor towards Internet adoption. [Leaderer, Maupin, Sena and Zhuang, 1999]

It is therefore possible to suggest that the advantages that Internet banking offer over and above regular banking methods could affect its rate of adoption. For example, the possibility of performing transactions at any time of the day from any location with Internet access would be a source of real advantage to people who have extremely tight schedules. This provides support for the hypothesis

H1A: The greater the perceived relative advantage of using Internet banking services, the more likely that Internet banking will be adopted.

Compatibility: The term compatibility refers to the fact that an innovation is more likely to be adopted when it is compatible with an individuals job responsibilities and value system [Agarwal and Prasad,1998]. Therefore the more an individual uses the Internet and the more he or she perceives the Internet as compatible with his or her lifestyle, the more likely that individual will adopt Internet Banking This provides support for hypot hesis: H1B: The greater the perceived compatibility of Internet banking with ones values, the more likely that Internet banking will be adopted.

Experience: Jiang, Hsu, Klein and Lin [2001] state that the more experienced an Internet user is the more likely they are to adopt new Internet technologies.. The Hypothesis formulated was thus ER Project 2001 Hoppe, Mugera, Newman 14

Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

H1C: The greater the experience with using the Internet the more likely that Internet banking will be adopted.

Banking Needs: According to Goldman [2001], Internet ba nking offers customers a comprehensive array of banking services, which help them manage multiple accounts. Since individuals with multiple accounts are likely to require a large number of financial services the usage of Internet banking could allow for the easier management of such a number of accounts and financial services. The hypothesis was thus formulated:

H1D: The greater the use of banking products and services, the more likely that Internet banking will be adopted.

Complexity: Is defined as the degree to which an innovation is considered relatively difficult to understand and use and has been found to negatively influence the adoption of the Internet. [Cheung, Chang and Lai, 2000]. Complexity can be considered as the exact opposite of Ease of Use in the Technology Acceptance Model, which has been found to directly impact the adoption of the Internet [Lederer et al, 1999].Therefore the greater the requirement of technical skills the less likely an individual would be to adopt a new technology. Consequently the adoption of Internet banking is likely to be less when the level of complexity of the Internet banking process is high. This lead to the following hypothesis:

H1E: The higher the perceived complexity of using Internet banking, the less likely that Internet banking will be adopted. Trialabilty: Rogers [1983] as cited by Agarwal and Prasad [1998] when stating that potential adopters of a new technology who are allowed to experiment with it will feel comfortable with it and thus be more likely to adopt it. This leads to the hypothesis that:

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

H1F: The greater the trialability of Internet banking, the more likely that Internet banking will be adopted. Risk: One of the major influencing factors around the establishment and use of Internet banking is that of security. According to Liu and Arnett [1999] the need for secure transactions are critical to the success of not only Internet banking but that of any e-commerce related website. Consequently the lower the perception of risks involved in using Internet banking the more likely an individual would be prepared to use it. Thus the hypothesis formulated was:

H1G: The lower the perceived risk of using Internet banking, the more likely that Internet banking will be adopted.

Subjective Norms: Refers to a persons perception that most people who are important to him think he should or should not perform the behaviour in question (Fishbein and Ajzen [1975] as cited by Venkatesh and Davis [2000]. Cheung et al [2000] state that the Internet is such a broadly discussed topic that social pressure plays an important part in explaining its usage. It follows, therefore, that Internet banking may also be affected by social pressures. Social pressures can emanate from any group such as parents, colleagues and even friends. Whilst it would be difficult to predict how a particular group could influence an individual in the adoption of Internet banking it is never the less possible to assert that there is some influence by others on an individuals intention to adopt Internet banking. The hypothesis is thus:

H2: The beliefs associated with subjective norms are significantly related to an individuals intention to adopt Internet banking.

Perceived Behavioural Control: Refers to the factors that may promote the performance of a particular behaviour. This definition has two components [Taylor and Todd, 1995]. The first component is that of self-efficacy.

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

Self-efficacy: refers to the belief of an individual in his ability to perform a specific behaviour. Taylor and Todd [1995] state that that the higher the level of self-efficacy the more likely the adoption of an information technology. Thus in the case of Internet banking it would be that an individual who is confident in his technical computer skills would be more likely to adopt Internet Banking. Thus the hypothesis was formulated that:

H3A: The greater the self-efficacy towards using Internet banking the more likely that Internet banking will be adopted.

The second component is that of facilitating conditions. Facilitating conditions: refers to objective factors in the environment that make an act easy to perform.[Cheung et al, 2000]. In terms of Internet usage this would refer to technological resources and infrastructure that are available. Thus the perception of South Africans as to the quality of Internet infrastructure within South Africa could affect the attitude of individuals towards adopting Internet Banking. The hypothesis formulated is thus:

H3B: The greater the extent of perceived technological support for Internet banking, the more likely that Internet banking will be adopted.

Tan and Teo [2000] cited by Goh [1995] as stating that government can influence the adoption of new technologies depending on the level of support that they provide. Whilst it is not in the scope of this study to measure the level of commitment and support by the South African government, it is possible to measure the perception of individuals as to the level of support. The greater the level of government support perceived by an individual the more likely he or she would be to adopt Internet Banking. The hypothesis thus formulated is:

H3C: The greater the extent of perceived government support for electronic commerce, the more likely that Internet Banking will be adopted.

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

5. RESEARCH DESIGN
An online questionnaire was used to collect empirical data for this study. This was considered to be most appropriate, because the questions are only relevant to Internet users and the hypotheses are best tested using a sample of this group rather than the general South African population. A few hardcopies of the questionnaire were also prepared, but it was found that due to the length of the questionnaire, it took a long time to get a small number filled in. Capturing the data from the hard copies was also very time consuming, so the online method was certainly more effective with a questionnaire of this size.

The aim of the study was to collect South African data in order to test out the hypotheses regarding the factors, which affect adoption of Internet banking and compare these results with those collected in other countries. In order to ensure that our results are directly comparable, it was decided that the same questionnaire that was used in the Tan & Teo study [2000] done in Singapore would be used, with some minor adjustments to account for local conditions. The reasons for limiting the study to South African responses only include the following:

There are a huge numbers of Internet users worldwide, making it impractical to survey If done worldwide, there would be more complexity, e.g: whether enough responses have been received from different regions, relative numbers of Internet users in different regions

In order to be able to use the results to compare South Africa to other studies done elsewhere specifically those collected in Singapore.

Another advantage of using the questions from the Singapore study is that they have already been tested in terms of how suitable they are for a university study. Having been used successfully in a previous study, the questions were less likely to cause confusion and had effectively been put through a very thorough pilot test. However, another pilot study was deemed appropriate to account for different conditions in the two countries. This involved testing the questionnaire out with 3 test

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

subjects, two male and one female who felt that whilst very long, the questionnaire was generally understandable.

5.1 THE QUESTIONNAIRE The questionnaire consists of three sections: Section 1 gathers information about banking habits and Internet usage. Section 2 consists of two parts. The first obtains views on feelings about the Internet, and the second asks respondents about their feelings towards the use of Internet banking. The third section gathers demogra phic information. The 7 point Likert scale is used for most questions, ranging from 1 - strongly disagree to 7 strongly agree.

The following two tables [Tan & Teo, 2000] show the variables and items used, that are relevant to the hypotheses:

Table 5.1. Attitude Variables


Variable Relative Advantage (RELADV) Item RELADV1 RELADV2 RELADV3 RELADV4 RELADV5 RELADV6 Compatibility with COMPAT1 Values COMPAT2 (COMPAT) COMPAT3 Internet ExperienceINTUSE1 (INTEXP) INTUSE2 INTUSE3 INTUSE4 INTSKILL1 INTSKILL2 INTSKILL3 Description Internet banking makes it easier for me to conduct my banking transactions. Internet banking gives me greater control over my finances. Internet banking allows me to manage my finances more efficiently. Internet banking is a convenient way to manage my finances. Internet banking allows me to manage my finances more effectively. I find Internet banking useful for managing my financial resources. Internet banking is compatible with my lifestyle. Using Internet banking fits well with the way I like to manage my finances. Using the Internet to conduct banking transactions fits into my working style. Span of Internet usage. Frequency of Internet usage. Intensity of Internet usage. Diversity of Internet usage. I am very skilled at using the Internet. I consider myself knowledgeable about good search techniques on the Internet. I know less about using the Internet than most users. (R)

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study
INTSKILL4 Banking Needs BNKNDS (BNKNDS) Complexity COMPLEX1 (COMPLEX) COMPLEX2 COMPLEX3 Trialability (TRIAL) TRIAL1 TRIAL2
RIS 1 K RISK2

I know how to find what I want on the Internet using a search engine. Number of banking products and services currently using. Using Internet banking requires a lot of mental effort. Using Internet banking can be frustrating. Internet banking is an easy way to conduct banking transactions. (R) I want to be able to try Internet banking for at least one month. I want to be able to sue Internet banking on a trial basis to see what it can do.
I am confident over the security aspects of Internet banking in SA. (R) Information concerning my Internet banking transactions will be known to others. Information concerning my Internet banking transactions can be tampered with by others. (R)

Risk (RISK)

(R) - Reverse-scored RISK3 item

Source: Tan & Teo (2000) Pgs. 16 -17 Table 5.2. Perceived behavioural control variables
Variable Self-efficacy (SELFEFF) Item SELFEFF1 SELFEFF2 SELFEFF3 SELFEFF4 SELFEFF5 Government Support (GOVSUPP) GOVSUPP1 GOVSUPP2 GOVSUPP3 Technology Support (TECHSUPP) Description I am confident of using Internet banking if I have only the online instructions for reference. I am confident of using Internet banking even if there is no one around to show me how to do it. I am confident of using Internet banking even if I have never used such a system before. I am confident of using Internet banking if I have just seen someone using it before trying it myself. I am confident of using Internet banking if I have just the online "help" function for assistance. The government endorses Internet commerce in Singapore. The Singapore government is active in setting up the facilities to enable Internet commerce. The Singapore government promotes the use of the Internet for commerce.

TECHSUPP1 Advances in Internet security technology provide for safer Internet banking. TECSUPP2 Faster Internet access speed is important for Internet banking.

TECHSUPP3 Internet technology, like the Singapore ONE network, makes Internet banking more feasible.

Source: Tan & Teo [2000] Pg. 18

Before using the above questions on our questionnaire it was decided to email Tan & Teo at the National University of Singapore to obtain their permission. It was also

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

hoped that they might have some advice or comments regarding their study to pass on to us. Permission to use the questions was granted, and an acknowledgement of this was included on our online questionnaire page. The final questionnaire used required a few changes where a banking product was not offered in South Africa. One question was added to Section 2B (perceptions of Internet banking) which read:

Cell phone technology like WAP, makes Internet banking more feasible.

This question was thought to be very relevant to the current South African business environment, and it replaced a question which SA users did not really understand during the pilot study-testing phase.

5.2 HOSTING The questionnaire was hosted on the commerce facultys server, under the information systems resources section. Unf ortunately, whilst the page was up and running very soon, problems with the JavaScript validation delayed the actual collection of data by almost two months. It was felt that JavaScript validation to check that the respondents had answered all the questions was essential with a questionnaire of this size, as users tended to get bored and try to skip sections. Results from each submit were posted to a comma separated text file on the server.

5.3 SPONSORSHIP In order to provide an incentive for people to answer the questionnaire a sponsor was sought out. All of the South African banks currently providing banking services online were contacted and asked if they would like to provide a small prize for the respondents. In exchange, we offered to put their logo on the questionnaire, the banks name on all of our advertising, and provide them with this paper when the research was completed. Two banks expressed an interest - Standard Bank and 20twenty. Both were relatively slow to come to a decision on whether they would be willing to sponsor the study. Eventually 20twenty agreed to sponsor a R200 prize for one of our respondents. Following this we included 20twentys logo on the page and changed the colours to be in line with their company colours.

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

5.4 ADVERTISING In order to promote the questionnaire and attract respondents, a strategy of mailing employees in medium to large companies was used. It was hoped that these emails would be forwarded on to friends in other companies, thus increasing the total number of responses. Some university advertising was also carried out, including posters in major computer labs on UCT campus, and personal emails to those email addresses that we could get access to. Unfortunately sending out an email advert to a large group of students proved impossible despite the prize on offer due to regulations surrounding the use of campus email.

A once off advert was also placed in local newsgroups and in the Cape based classified ads paper Cape Ads. The combination of the different forms of advertising had the advantage of reaching a wide range of people, both from the working and academic world.

5.5 RESPONSE RATE When the time period allocated to data collection had elapsed, a total of 102 responses had been recorded. This was significantly lower than the figure of 637 responses recorded by Tan & Teo [2000]. The relatively low response rate can be attributed to several factors. Firstly, the questionnaire was very long, and during pilot testing, users consistently complained that it took too long to fill in all the questions. Several emails were also received from respondents who did not finish filling out the questionnaire as they felt it was taking too much time. This suggests that many of those who did begin filling out the questionnaire abandoned it halfway. Due to the client side validation included on the html page, it was not possible to submit the questionnaire if it was only half filled in. Another important factor was the period during which the questionnaire was available to rec ord results. Due to problems with the JavaScript validation, completion of the questionnaire was delayed, and it was only available to record results for a total of 3 weeks. The prize offered did provide some incentive, but was inferior to the 300 phone cards valued at $2 each for the first 300 respondents offered by Tan & Teo [2000], which was a more effective in attracting large numbers of respondents. ER Project 2001 Hoppe, Mugera, Newman 22

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5.6 RELIABILITY AND VALIDITY ASSESSMENT Prior to analysis of the results using linear regression, the research instrument was tested for its reliability and validity. To check for convergent and discriminate validity of the constructs, factor analysis was used, and in conjunction with this the Cronbachs Alpha test was used to test for reliability (see table 3). The results of the factor analysis are shown in the Appendix, and in general the results show that both discriminant validities are satisfied. There are also no apparent problems with heteroskedasticity or multicollinearity, details of which can also be found in the appendix.

A minimum Cronbachs Alpha value of 0.6 indicates reliability of constructs. The Cronbachs Alpha values for all constructs exceeded 0.6 except that of Internet experience and skill at 0.5783. This construct presented some problems due to the fact that it is essentially a combination of two distinct constructs, experience and skill. The final construct used includes 3 experience variables and one variable which is the average of the 4 skill variables. This configuration was used for 3 reasons. Firstly, this allows experience and skill to load onto one factor and thus be used more effectively for testing the hypothesis relating to Internet experience and skill. Secondly, this arrangement actually provides a Cronbachs Alpha larger and closer to 0.6 than the two sets of variables considered separately. Thirdly, this is apparently the technique used by Tan & Teo (2000) when producing their results. In order to be able to make use of the experience and skill data at all, it was decided to use this arrangement of the variables despite the Cronbachs Alpha being slightly below the suggested 0.6.

Table 5.3 Reliability Analysis using Cronbachs Alpha Variable Relative advantage Compatibility with values Internet experience and skill Complexity Trialability Risk Subjective norms Self-efficacy Government support Cronbach's Alpha 0.9564 0.9436 0.5783 0.6282 0.9502 0.9389 0.8212 0.9152 0.8231

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6. FINDINGS AND ANALYSIS


The respondents demographics profile is presented in Table 6.1 and graphically represented in Appendix B. Table 6.1 Demographic Profile of Respondents
Frequency Gender Male Female Age: under 20 20-29 30-39 40-49 50-59 Over 59 Highest Education : Bachelor's Degree Primary School Secondary School Junior College Masters Degree Doctorate Degree Other Current Profession Student Professional Academic Self-employed Manager Executive Technician Retiree/Housewives Other Income Less than R2000 R2000-3999 R4000-4999 R5000-9999 R10 000 - 14 999 R15 000 or more Not Answered 55 47 1 76 10 10 4 1 54 0 20 2 11 3 12 53 11 17 1 5 2 1 1 10 46 8 5 15 14 11 3 Percent 53.9% 46.1% 1.0% 74.5% 9.8% 9.8% 3.9% 1.0% 52.9% 0.0% 19.6% 2.0% 10.8% 2.9% 11.8% 52.0% 10.8% 16.7% 1.0% 4.9% 2.0% 1.0% 1.0% 9.8% 45.1% 7.8% 4.9% 14.7% 13.7% 10.8% 2.9%

The number of male Internet users as opposed to female users is almost even with male users being 53.9% and females 46.1% of the respondents. This represents a more balanced sample than that of Tan and Teo [2000] in which the number of male respondents was as high as 80%.

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The respondents were relatively young with 74.5% of respondents being between the ages of 20-29. This is consistent with Tan and Teos [2000] study in which 64.1% of respondents were between 20-29 and supported by Teo and Lims [1999] findings that the majority of Internet users are youths and young adults.

The majority of respondents were those with Bachelors degrees (52.9%) followed by those with secondary level of education (19.6%). As with Tan and Teos [2000] study the indication is that respondents are generally of sound educational background

In terms of professions most respondents were students (52%). Of those earning an income the majority earned an income less than R2000 per month. This is attributed to the high level of respondents that were students.

Eleven hypotheses were formulated for the study, but the one relating to technology support (H3B) was removed from the analysis following factor analysis as it did not load as a single factor. In order to test the remaining 10 hypotheses, linear regression was used, regressing each of the independent variables on to intention to adopt as the dependent variable. The results are shown in table 5

Table 6.2 Results of Linear Regression Factor Attitude Hypothesis H1A H1B H1C H1D H1E H1F H1G H2 H3A H3B H3C Variable Relative advantage Compatability with values Internet Experience/skill Banking Needs Complexity Trialability Risk Subjective Norms Self-Efficacy Technology Support Government Support Beta 0.582 0.605 0.539 0.100 -0.343 0.197 -0.221 0.049 0.500 n/a 0.154 p-value 0.000 0.000 0.003 0.075 0.001 0.005 0.004 0.567 0.000 n/a 0.172

Subjective Norms Percieved Behavioural Control

As seen in the table, the only hypotheses which are not supported are H1D (banking needs), H2 (subjective norms), and H3C (government support).

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The support for H1A (relative advantage) and H1B (compatability with values) is in line with the results found by Tan & Teo (2000). This shows quiet conclusively that across different populations, perceived relative advantage has a positive influence on the adoption of Internet Banking and that Internet users who feel that Internet banking is compatible with their values are more inclined to adopt.

Support for H1C is also in line with the results of Tan & Teo (2000). This shows strong support for the suggestion that users who are more experienced at using the Internet are more likely to adopt than those who have not had much exposure to it.

The first difference between the SA and Singapore results occurs with the rejection of H1D (banking needs). Tan & Teo accepted this hypotheses, but the data collected in this study does not support it. In other words there was no evidence to suggest that the more banking products a respondent was currently using the more likely he or she was to adopt Internet banking. A possible reason for the rejection of this hypothesis might be the list of banking products provided on the questionnaire for respondents to choose from. The list was taken from the original questionnaire used in Singapore, and whilst banking products are relatively similar, the list may have omitted some banking products relevant to the SA banking consumer and adversely affected the results.

H1E (Complexity) is accepted, and whilst this is in contrast to the results obtained by Tan & Teo (2000), it is in agreement with a wide range of previous findings (Cheung et al, 2000; Lederer et al 1999). All of these sources suggest that the more complex a new technology is perceived to be, the less likely it is that it will be adopted.

The acceptance of both H1G (risk) and H1F (trialability) is in agreement with the findings of Tan & Teo (2000) as well as a range of other sources (Agarwal and Prasad, 1998). Similarly, the acceptance of H3A (self-efficacy) is in agreement with Tan & Teo, further adding support to the argument that users who are confident of their abilities to use Internet banking will be more likely to adopt such services. Another point on which both s of results strongly agree is the strong rejection of ets hypothesis H2 (subjective norms). The results of this study provide an even higher pER Project 2001 Hoppe, Mugera, Newman 26

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value than that obtained in Singapore for this hypothesis and this indicates that adoption is not affected by subjective norms. In other words, opinions of friends, family or peers are not considered an important factor when deciding whether to adopt Internet banking services. A possible reason for this is that Internet banking services are seen as an extension of other banking services. Whilst the decision to bank at a particular bank may be affected by subjective norms or what peers might think of that bank, once the bank has been accepted, the decision to adopt an additional service at this particular bank (i.e: Internet banking) would be unaffected by peer opinions. Another possible explanation is that information regarding Internet banking is widely available online and on the banks sites, reducing the need for potential adopters to seek out the opinions of friends and family.

The final hypothesis, H3C (Government support) is rejected, but was accepted by Tan & Teo (2000). This is interesting as it suggests a difference in the way in which respondents in SA and Singapore regard the views of the government. This ma y indicate that government image differs between the two countries. Possibly respondents simply felt unsure of what the governments position is on issues such as e-commerce or Internet security.

6.1 PREFERRED INTERNET SERVICES AND PRODUCTS Table 6.3 shows a range of possible Internet Banking products, and how useful respondents felt that they were. Most respondents rated Account information as the highest or most important product, followed by bill payments, fund transfers, and generation of transaction summary reports. Other suggested useful products/services included financial advice, handling fixed deposit accounts, tools to aid in reducing bank charges, and information relating to fees/interest rates. Respondents seemed relatively indifferent regarding cheque functionality, and the lowest scores included financial planning, loan applications and share margin trading. These results are remarkably similar to those obtained by Tan & Teo (shown below in table 6.4). In fact the means of the top two (account information and electronic bill payments) are almost identical, and the order is identical except for one swap around. This is very interesting to see, as there is a clear indication that the banking products

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or services considered most important to the consumer do not differ between the two countries despite apparent differences in culture. Both sets of data had a high percentage of student respondents, who may have influenced the popularity of financial planning analysis and share margin trading both products that would be less important to extremely low -income earners like full time students.

Table 6.3 Internet Banking Services Variable Internet Banking Service Mean* 6.471 6.078 5.912 4.510 4.059 3.725 3.657 2.990 Std Deviation 1.054 1.460 1.609 1.872 2.013 1.851 1.810 1.922 1.943

IBNKSVCa Account info IBNKSVCb Electronic bill payments IBNKSVCc Funds transfer IBNKSVCh Cheque cancellation IBNKSVCg Chequebook application IBNKSVCe Financial planning and analysis IBNKSVCd Loan application IBNKSVCi Share margin trading

IBNKSVCf Generate summary reports of bank transactions 5.353

*Respondents rated usefulness using scale of 1(not useful) to 7(very useful) Table 6.4 Tan & Teos results - Internet Banking Services Variable Internet Banking Service Mean* 6.54 6.13 Std Deviation 0.94 1.30 1.51 1.60 1.65 1.65 1.92 1.92 2.00

IBNKSVCa Account info IBNKSVCb Electronic bill payments

IBNKSVCf Generate summary reports of bank transactions 5.78 IBNKSVCc Funds transfer IBNKSVCh Cheque cancellation IBNKSVCg Cheque book application IBNKSVCe Financial planning and analysis IBNKSVCd Loan application IBNKSVCi Share margin trading 5.63 5.59 5.41 4.48 4.38 4.09

Source: Tan & Teo (2000) pg.28

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When the criteria used for selecting an online bank were examined (table 7.1), the results were once again very similar to those obtained in Singapore (table 7.2) In both cases, the banks reputation and the variety of services offered were ranked number one and two respectively. Tan & Teo [2000] omit the familiarity wit h the bank from their results, but the order of the remaining factors is identical in both sets of results. Clearly whether the bank is owned locally or internationally is not important when considering adoption.

Table 7.1 Criteria for Selecting an Online Banking Service Variable Criteria Mean* 6.480 5.863 5.657 4.618 4.167 3.373 Std Deviation 0.841 1.357 1.472 1.490 1.904 1.757

IBNKCRIe Reputation of the bank IBNKCRIf Variety of services offered by the bank IBNKCRIa Familiarity with the bank IBNKCRId Size of the bank IBNKCRIb Ownership of the bank- Local IBNKCRIc Ownership of the bank- Overseas

Table 7.2 Tan & Teos results - Criteria for Selecting an Online Bank Service Variable Criteria Mean* 6.33 6.31 5.53 4.84 4.31 Std Deviation 0.98 0.95 1.39 1.84 1.83

IBNKCRIe Reputation of the bank IBNKCRIf Variety of services offered by the bank IBNKCRId Size of the bank IBNKCRIb Ownership of the bank- Local IBNKCRIc Ownership of the bank- Overseas

Source: Tan & Teo (2000) pg.28 Not surprisingly, r spondents were most likely to adopt Internet banking of it was e free. This particular option was part of Tan & Teos (2000) options, and we left it in for completeness, even though the result obtained is predictable and banks are unlikely to consider offer ing the services completely for free. (See table 7.3)

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The second most popular option is that of a flat fee per month, followed by a flat fee plus per transaction fee. Once again, the order of importance is identical to the Singapore results, which have not been included here. Table 7.3 Preferred Internet Charges Variable Charging Scheme Mean* INTENTCd no fee for using Internet banking 6.598 INTENTCa A flat fee per month for using Internet 5.265 banking. INTENTCb A flat fee per month plus a fee per transaction 3.265 for using Internet banking. INTENTCc a time-based usage fee for using Internet 3.176 banking Std Deviation 1.074 1.712 1.829 1.804

One very interesting difference between the results lies not in the order of the options, but the means. Whilst the mean for no fee was virtually identical, the means for the flat fee and the flat fee plus transaction fee were 2.45 and 1.76 respectively in the Singapore study. These very low means showed that respondents in Singapore were unlikely to adopt Internet banking as soon as there were costs involved. South African respondents were far more willing to pay for online banking services, and were in fact quite likely to adopt Internet banking if only a flat fee per month was charged. At present the o options available from South African banks are fee structures nly which include both a monthly fee and a per transaction charge. Based on the figures above, it would appear that per transaction charges are a big deterrent to adoption and as so whilst it is impossible to eliminate them, banks should aim to minimise them.

In terms of the characteristics of the website, the factors considered important were: Clear, comprehensible instructions which are easy to read Prompt processing of transactions Communication with service personal by phone or fax in the event of a problem Must be able to connect quickly and download time must be short

Resemblance of the site to the physical bank was considered only moderately important, as was the extent to which the site was interactive and the ability to customise the display of the site. ER Project 2001 Hoppe, Mugera, Newman 30

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Music, animation and other entertainment features were considered by respondents to not be useful.

7. LIMITATIONS OF THIS STUDY


Whilst every effort was made to make this study as com prehensive as possible, certain limitations were present:

The response rate was lower than was hoped for, and this is mainly attributed to difficulties in advertising the questionnaire. Organisations that were approached were extremely reluctant to send o bulk emails to personnel. Due to the low ut response rate, the results are less statistically significant, and this may mean that some of the rejected hypotheses would have been accepted had the sample sizes been much larger, and significance levels thus higher.

The second limitation was the fact that the questionnaire was designed for respondents who had not adopted Internet banking. Respondents who had already adopted Internet banking may thus have found certain questions irrelevant or difficult to understand. Consequently the answers to certain questions in this regard may have been answered inaccurately. Tan & Teo (2000) assumed that most users had not yet adopted when formulating the questions, but in the case of this study it would have been more appr opriate to modify the sections relating to adoption to provide options for those who had already adopted.

The third limitation was the fact that a large number of the respondents were students. This could be attributed to the fact that the most accessible demographic group in terms of possible respondents was students, and the most effective advertising options available were those targeting students This did however limit the variety of results and thus the value of the scope of the findings.

By offering a R200 prize, results may have been skewed slightly towards those Internet users who consider a R200 prize to be worth the effort of answering the questionnaire. This is supported by the data, which shows a high portion of low income earners (although it is worth noting that students, who received most of the advertising are generally low income earners).

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8. DISCUSSIONS AND CONCLUSIONS


The results show that intention to adopt Internet banking can be predicted by attitudinal factors, perceived behavioural control factors to a lesser degree, and not by subjective norms. All attitudinal factors except banking needs are found to be significant, with complexity and risk showing a negative relationship. Possible reasons why banking needs are not related include the design of the measuring instrument. Possibly not enough was done to localise the list of banking products provided for respondents to choose from.

The opinions of friends, family and other consumer-relevant groups are found to have no significant relationship with the intention to adopt Internet banking. This is in agreement with the results obtained in Singapore, and suggests that the opinions of peers is not important with an innovation such as Internet banking. Availability of information about Internet banking online may reduce the need for potential adopters to seek out the opinions of peer groups.

Of the three perceived behavioural control factors, technology support could not be included as a factor do to inadequate factor loading, and so could not be tested. Selfefficacy was found to be an influential factor, and government support was not. Support for self-efficacy is in agreement with the results obtained in Singapore, whereas rejection of government support is in contrast with them. Possible reasons for this would include differences in how government is viewed in the two countries and may also include differences in how government policy relates to online security and e-commerce in the two countries.

The findings of this study are of interest for two different reasons. Firstly, they provide a set of South African results which can be directly compared with those obtained previously in Singapore. Secondly, the study provides information of interest to the South African banking industry.

In cases where the findings from the two countries have supported each other, this is able to lend even more credibility to the acceptance of the hypotheses, and in cases where the findings contradict the earlier study, insights into the effects of different

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conditions across the countries obtained. The results obtained in this study are remarkably similar to those obtained in the previous study. Of the eight hypotheses tested, only 3 contradicted the Singapore study, and in terms of the usefulness of Internet banking products and the criteria used for selecting a bank, the results were almost identical. These results by and large validate those of the previous study.

Differences to note for SA banks relate to the 3 hypotheses which were not in agreement with the results obtained in Singapore. The rejection of H1D (banking needs) may be related to the instrument, but banks could conclude that their Internet banking services should be marketed to all customers, rather than those who are extensive users of a wide range of banking products. Similarly, as complexity is found to have a negative effect on the intention to adopt Internet banking services, banks should aim to make their Internet banking services as simple and easy to use as possible so that potential adopters do not perceive them as being complicated or difficult to use. The rejection of H3C (government support) is not particularly relevant to the banking industry, but may be of Interest to government policy makers, and non governmental organisations aiming to promote IT and e-commerce such (e.g: CITI).

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9. BIBLIOGRAPHY
1. Absa Bank. (2001) Absa Electronic Banking. Brochure. 2. Ajzen, I.. From Intentions to Actions: A theory of planned Behaviour,, Action Control: From cognition to Behaviour, J Kuhl and J Beckman (eds.), New York: Springer-Verlag, 1985, pp.11-39 3. Africa Internet Statistics, {1998-2000) [Online]. Available: http://www.hitechmarketing.co.za/stats_africa.htm Accessed 2001, May 01. 4. Agarwal, R. and Prasad, J. (1998) A Conceptual and Operational Definition of Personal Innovativeness in the Domain of Information Technology. Information Systems Research, vol. 9, Issue 2, pp. 204. 5. Agarwal, R. and Prasad, J. (1998) The Antecede nts and Consequents of User Perceptions in Information Technology Adoption. Decision Support Systems, no. 22, pp. 15-29. 6. Bankrate.com. (1998) Online Banking [Online]. Available: http//www.bankrate.com/brm/olstep2.asp. Accessed 2001, October 05. 7. Cheung, W., Chang, M. K. and Lai, V. S. (2000) Prediction of Internet and World Wide Web Usage At Work: A Test of am Extended Triandis Model. Decision Support Systems, no. 30, (April 2000) pp. 83-100. 8. Drury, D. H. and Farhoomand, A. F. (1996) Factors Influencing Electronic Data Interchange Success. Data base, vol. 33, no. 6, pp. 45-57. 9. Eberhard, S. and Juergen S. (1998) Internet Banking An Overview. Journal of Internet Banking and Commerce, vol. 3, no. 1, (January 1998). 10. Eduardo D. (1998) Web Banking in USA. Journal of Internet Banking and Commerce, vol. 3, no. 2, (June 1998). 11. First National Bank. (2001) FNB Electronic Banking. Brochure. 12. Fishbein, M. and Ajzen, I., Belief, Attitude, Intention and Behaviour: An Introduction to Theory and Research , Reading, MA: Addison-Wesley,1975 13. Gibson, J.L., Ivancevich, J.M. & Donnely Jr, J.H. (2000) Organisations: Bahaviour, Structure, Process, Mcgraw -Hill. 14. Goh, H.P. The diffusion of Internet in Singapore, Academic Exercise, Faculty of Business Administration, National University of Singapore, 1995. 15. Goldman, L. (2001) Online Banking. Forbes, Spring 2001 Best of the Web, vol. 167, Issue 5, pp. 81.

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16. Grover, V., Jeong, S. R. and Segars, A. H. (1996) Information Systems Effectiveness: The Construct Space and Patterns of Application. Information and Management, no. 31, pp. 177-191. 17. Jassimuddin, S. M. (2001) Saudi Arabian Banks on the Web. Journal of Internet Banking and Commerce , vol. 6, no. 1, (May 2001). 18. Leaderer, A.L., Maupin, D.J., Sena, M.P. and Zhuang, Y.(2000) The technology acceptance model and the World Wide Web. Decision Support Systems, vol. 29, pp. 269 282, (April 2000) 19. Lai, R.Y., Lim, K.G. and Teo, S.H. (1999) Intrinsic and extrinsic motivation in Internet usage, Omega International Journal of Management Science, vol 27, pp. 25-37, (March 1998) 20. Liu, C. and Arnett, K. P. (1999) Exploring the Factors Associated with Website Success in the Context of Electronic Commerce. Information and Management, no. 38, pp. 23-33. 21. Rogers, E.M, Diffusions of Innovations, New York: Free Press,1983 . 22. Standard Bank. (2001) Internet Banking. Brochure. 23. Suganthi, Balachandher and Balachandran. (2001) Internet Banking Patronage: An Investigation of Malaysia. Journal of Internet Banking and Commerce , [Online]. Available: http://www.arraydev.com/commerce/jibc/0103_01.htm. Accessed: 2001, May 02. 24. Tan, M. and Teo, T. S. H. (2000) Factors Influencing the Adoption of Internet Banking. Journal of th e Association for Information Systems , vol. 13, no. 5, (July 2000). 25. Taylor, T. and Todd, A. P. (1995) Understanding Information Technology Usage A Test of Competing Models. Information Systems Research, vol. 6, no. 2, pp. 144. 26. Venkatesh, v. and Davis, D. F. A Theoretical Extension of the Technology Acceptance Model: Four Longitudinal Field Studies. Management Science, vol. 46, no. 2, (February 2000) pp. 186-204.

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APPENDIX A FACTOR ANALYSIS Factor analysis was applied to the results in line with the analysis used in by Tan & Teo (2000). Similarly, variances with loadings greater than 0.4 were accepted. Two rounds of factor analysis were performed in order to produce the end results shown in Table A1. The analysis produced 8 factors with eigenval es greater than 1.0, and these 8 factors u explained 77.74% of the variance. Unfortunately, in order to isolate these 8 factors, some of the data had to be excluded. This was due to cross loading, caused in particular by the three variable relating to tech support. It was decided to remove the tech support variables from all further analysis. Similarly, COMPLEX3 and RISK1 were removed due to conflicts with other factors. The results show some similarity with those of Tan & Teo (2000). All of the items meas uring compatibility with values loaded together with those measuring relative advantage. Tan & Teo (2000) suggest that respondents who perceived banking on the Internet as compatible with their values might tend to view them more favourably, and hence would be more likely to perceive Internet banking services as an advantageous innovation. The results of the factor analysis suggest that the conditions of convergent and discriminant validity are satisfactorily met (with minimum factor loadings of 0.4)

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Table A1. Factor Analysis


Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8
EXP1 EXP2 EXP3 SKILL RELADV1 RELADV2 RELADV3 RELADV4 RELADV5 RELADV6 COMPAT1 COMPAT2 COMPAT3 COMPLEX1 COMPLEX2 TRIAL1 TRIAL2 RISK2 RISK3 GOVSUPP1 GOVSUPP2 GOVSUPP3 CONFI1 CONFI2 CONFI3 CONFI4 CONFI5 SOCINF1 SOCINF2 SOCINF3 Expl.Var Prp.Totl Eigenvalue Variance % Cum Var % 0.040 -0.004 0.015 0.134 0.823 0.812 0.910 0.915 0.833 0.847 0.783 0.867 0.893 -0.181 -0.098 0.146 0.060 -0.135 -0.178 0.091 0.117 0.124 0.364 0.359 0.292 0.285 0.308 0.137 0.024 0.133 7.311 0.244 9.820 32.734 32.734 -0.046 0.019 0.207 0.385 0.133 0.242 0.164 0.193 0.205 0.183 0.288 0.260 0.218 -0.166 -0.118 0.074 -0.041 -0.165 -0.119 0.024 -0.008 -0.055 0.781 0.784 0.862 0.810 0.799 -0.027 0.017 0.048 3.968 0.132 2.899 9.664 42.398 0.110 -0.052 0.053 -0.020 0.085 0.047 0.056 0.046 0.062 0.129 0.063 0.032 0.000 0.038 -0.039 0.049 0.068 0.026 -0.009 -0.029 -0.087 0.003 0.050 -0.014 0.036 -0.016 0.010 0.884 0.779 0.880 2.244 0.075 2.382 7.939 50.337 -0.196 0.034 0.058 0.107 0.027 0.141 0.074 0.040 0.176 -0.032 -0.040 -0.002 0.019 -0.001 -0.046 0.945 0.963 -0.041 0.004 0.169 0.003 0.000 -0.064 -0.101 0.013 0.042 0.135 -0.051 0.149 0.018 2.028 0.068 2.126 7.087 57.424 0.150 -0.054 0.008 -0.065 -0.064 0.100 0.075 0.049 0.096 0.145 0.057 0.101 0.054 0.060 -0.062 0.057 0.098 -0.030 -0.008 0.796 0.901 0.838 -0.030 -0.007 -0.074 0.038 0.016 0.030 -0.135 -0.005 2.294 0.076 1.839 6.130 63.554 -0.131 0.006 0.208 0.309 0.110 0.102 0.028 0.014 0.061 0.082 0.080 0.048 0.068 -0.172 -0.066 0.008 0.032 -0.915 -0.928 0.098 -0.015 -0.042 0.152 0.007 0.074 0.104 0.091 -0.074 0.082 -0.021 2.010 0.067 1.590 5.301 68.855 0.593 0.881 0.505 0.497 0.076 -0.065 0.011 0.038 -0.109 -0.048 0.149 0.041 0.111 -0.188 0.117 -0.044 0.017 -0.082 -0.049 0.214 -0.010 -0.117 0.181 0.172 0.050 -0.079 0.068 -0.022 0.057 0.046 1.892 0.063 1.454 4.846 73.701 0.168 -0.074 -0.089 0.224 -0.029 0.213 0.151 0.126 0.117 0.088 -0.166 0.056 -0.001 -0.766 -0.812 -0.005 0.061 -0.149 -0.084 0.003 0.009 0.003 -0.028 0.160 0.104 0.071 0.101 -0.020 0.092 -0.061 1.574 0.052 1.212 4.040 77.740

The next test required is Spearmans rank correlation, testing for heteroskedasticity, which is the occurrence of unequal variances. Spearmans R = 0.033, t = 0.331, and p > 0.05. For heteroskedasticity to exist, the correlation coefficient should be significant (i.e: p < 0.05). This indicates that there is no heteroskedasticity.

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Factors Affecting the Adoption of Internet Banking in South Africa : a Comparative Study

It is also necessary to test for multicollinearity i the data, which refers to high n correlations among the independent variables. Tan & Teo (2000) use the variance inflation factor (VIF) computed for each independent variable to test for this. If the VIF of a variable exceeds 10, that variable is highly collinear and will pose a problem to regression analysis. Table A2 shows the variables and their VIF values. All the values are well below 10, indicating no problem of multicollinearity.

It is interesting to note that the variables with the highest VIF values are Relative advantage and compatability with values. This is to be expected as these are the two variables which loaded onto one factor.

Table A2. VIF Values Variable Relative advantage Compatability with values Internet experience and skill Banking Needs Complexity Trialability Risk Subjective norms Self-efficacy Government support VIF Value 4.393 4.224 1.289 1.169 1.217 1.101 1.205 1.064 1.746 1.098

ER Project 2001 Hoppe, Mugera, Newman

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