Adoption of electronic banking services in Vietnam Luận văn thạc sĩ

LIST OF TABLES Table 1-1: Electronic banking service provided by Vietnam banks --- Page 09 Table 3-1: The questionnaire items for measurements factors --- Page 31 Table 4-1: Descriptive

Prepared by Vo Thi Thuy Li nh

MASTER THESIS

Ho Chi Minh C ity, 2010

Prepared by Vo Thi Thuy Li nh

Department of graduate program Division of Banking, code no 60.31.12

MASTER THESIS Supervisors: Dr Le Thai Thuong Quan

Ho Chi Minh C ity, 2010

Abstract

With the development of IT, e-commerce and international trade, e-payment becomes an indispensable payment trend in a modern society E-payment has been developed and introduced in many developed countries for a long time, but

it is still the phase of developing in Vietnam E-payment in Vietnam has been applied for more than 10 years, marking a significant development in recent years

E-bankin g services development is inevitable and objectivity tendency in the modern economy, in international economic integration Benefits of electron ic banking services is very large for customers, banks and the economy, thanks for convenient, fast, accurate and secure Therefore, the primary purpose of this study is to examine the factors affecting to the adoption of e-banking using in Vietnam

The study based on the Technology Acceptance Model (TAM) and adding personal characteristics of the adopters, those factors to have huge impact on the e-banking adoption in Vietnam The study uses quantitative approach to survey over 500 Vietnamese customers in Ho Chi Minh This study exploits and analysis the factors affecting to e-banking services adoption in Vietnam, a developing country case We expect to provide banks with more information about the adoption of e-banking services in Vietnam

This thesis was written during year 2010 at Economics Un iversity in fulfillment

of the Master program in banking Many people have h elped me with the completion of this study and made this work possible

First of all, I would like to express my sincere gratitude to my supervisor, Dr Le Thai Thuong Quan for his valuable supervision and intelligent guidance during the whole process of the thesis writing Second, I would like to express

my sincere gratitude to Dr Dao Trung Kien, my senior master, for his strong support, encouragement and h is helpful comments on my thesis

I would also like to show my sincere appreciation to managers of customer services division in Viet Nam Eximbank – District 10 branch for their kind support and cooperation

Finally, I would like to express my thanks to the branch staffs of Eximbank – District 10 branch who helped me a lot in distributing and collecting the questionnaires of th is research

I wish to take this opportunity to express my deepest thanks to my dear parents for the love and never-ending support they have extended me in every step of my life

December 2010

Commitment

I declare that the thesis entitled “Adoption of electronic banking services in Viet Nam” contains no results and data that has been submitted previously under any form by anybody This thesis is my own work I take full responsibility to the board of examiners for my commitment

December 10th, 2010

Author’s signature

GLOSSARY OF E-BANKING T ER MS -Page 04

Cha pt er One: Introduction and Res earch proble m -Page 07

1.1 Introduction - Page 07 1.2 The Research Problem - Page 08 1.3 Outline of the Thesis - Page 10

Cha pt er Two: The oretical Review - Page 12

2.1 Electronic Banking - Page 12

2.1.1 The History of Electronic Banking - Page 12 2.1.2 Benefits of Electronic Banking - Page 13 2.1.3 Kinds of Electronic Banking - Page 16 2.2 Diffusion of Innovations Theory - Page 18 2.3 Technology Acceptance Model (TAM) - Page 21

2.3.1 Perceived Usefulness - Page 22 2.3.2 Perceived Ease of Use - Page 23 2.3.3 Perceived Risk - Page 25 2.3.4 Perceived Cost - Page 25 2.3.5 Information on e-banking - Page 26 2.3.6 Personal Trial - Page 2 6

2.3.7 Personal characteristics of the adopters - Page 26

Cha pt er Three: Res earch des ign and methodology - Page 27

3.1 Research Model - Page 27 3.2 Hypotheses development - Page 29

3.2.1 Hypotheses related to personal characteristics - Page 29 3.2.2 Relationships Hypotheses - Page 29 3.3 Methodo logy - Page 30 3.4 Sampling and Questionnaire - Page 31 3.5 Data Analysis Procedures - Page 33

3.5.1 Descriptive statistics analysis - Page 34 3.5.2 Purification and Reliability of the M Variables Page 34

Cha pt er Fo ur: Dat a a nalysis a nd r esults - Page 36

4.1 Descriptive Analysis - Page 36

4.1.1 Characteristics of Respondents - Page 36 4.1.2 Measurement Results for Relevant Research V Page 38 4.2 Factor Analysis and Reliability Test - Page 40

4.2.1 Perceived usefulness - Page 40 4.2.2 Perceived Ease of use - Page 41 4.2.3 Perceived risk - Page 42 4.2.4 Perceived cost - Page 42 4.2.5 Information on E-banking - Page 43 4.2.6 Personal Trial - Page 44 4.3 Independent Sample t-tests - Page 45

4.3.1 Gender Respondents - Page 45 4.3.2 One-way ANOVA - Page 46 4.3.2.1 Age Respondents - Page 46 4.3.2.2 Education Respondents - Page 48 4.3.2.3 Position Respondents - Page 50 4.3.2.4 Income Respondents - Page 52 4.4 Structure Equation Model - Page 53 4.5 Results of research - Page 59

Cha pt er F ive: C o nclusio ns and I m plicatio ns - Page 62

5.1 Conclusions - Page 62 5.2 Contribution and Managerial Imp lications - Page 63 5.3 Limitations of the study - Page 66 5.4 Recommendations for further research - Page 66

REFERENC ES -Page 68

APPENDIX I -Page 69

APPENDIX II -Page 75

LIST OF TABLES

Table 1-1: Electronic banking service provided by Vietnam banks - Page 09 Table 3-1: The questionnaire items for measurements factors - Page 31 Table 4-1: Descriptive Analysis of personal characteristics - Page 37 Table 4-2: Measurement Results for Relevant Research Variables - Page 39 Table 4-3: Factor Analysis and Reliability for Perceived usefulness Page 41 Table 4-4: Factor Analysis and Reliability for Perceived Ease of use Page 41 Table 4-5: Factor Analysis and Reliability for Perceived risk - Page 42 Table 4-6: Factor Analysis and Reliability for Perceived cost - Page 43 Table 4-7: Factor Analysis and Reliability for Information - Page 44 Table 4-8: Factor Analysis and Reliability for Personal Trial - Page 45 Table 4-9: T-Test results of Gender Respondents. - Page 46 Table 4-10: ANOVA test results of Age Respondents - Page 47 Table 4-11: ANOVA test results of Education Respondents - Page 49 Table 4-12: ANOVA test results of Position Respondents - Page 51 Table 4-13: ANOVA test results of Income Respondents - Page 52 Table 4-14: Standardized Regression Weights (Default model) - Page 55 Table 4-15: Fit Measures for Model - Page 58 Table 4-16: Standardized Regression Weights (Causality model) - Page 58 Table 4-17: Results of the testing Hypotheses - Page 60 Table II.1: Correlation Matrix for Perceived usefulness - Page 75 Table II.2: Correlation Matrix for Perceived Ease of use - Page 75 Table II.3: Correlation Matrix for Perceived risk - Page 75 Table II.4: Correlation Matrix for Perceived cost - Page 76

Table II.5: Correlation Matrix for Information - Page 76 Table II.6: Correlation Matrix for Personal Trial - Page 76 Table II.7: Regression Weights (Default model) - Page 77 Table II.8: Model Fit Summary (Default model) - Page 78 Table II.9: Regression Weights (Causality model) - Page 80 Table II.10: Model Fit Summary (Causality model) - Page 81

LIST OF FI GURES

Figure 1.1: Outline of the research - Page 11 Figure 2-1: Adoption Process - Page 20 Figure 2-2: Technology acceptance model (TAM) - Page 22 Figure 2-3: Chronological Progress of TAM Research - Page 24 Figure 3-1: The research framework of th is study - Page 28 Figure 3-2: Data Analysis Procedures - Page 33 Figure 4-1: Measurement model - Page 54 Figure 4-2: Structural Equation model - Page 57 Figure II.1: Structural Equation model (Causality model) - Page 82

GL OSSARY OF E-B ANKI NG TE RMS

E-banking Electronic banking is an umbrella term for the process by which a

customer may perform banking transactions electronically without visiting bank

Automated teller machine An electronic terminal provided by financial institutions and other firms that permits consumers to withdraw cash from their bank accounts, make deposits, check balances, and transfer funds

Computer banking Banking services that consumers can access, by using an

Internet connection to a bank’s computer center, in order to perform banking tasks, receive and pay bills, and so forth Many other financial services can be accessed via the Internet (for example, paying credit card bills on a credit card issuer’s web site), but those services may not be classified as computer banking

Debit card A card used at an ATM or a point-of-sale (POS) terminal that enab les a

consumer to have funds directly debited from his or her bank account (usually a checking account) Some financial service providers (such as check cashers and currency exchanges) may market a so-called debit card that is not tied to a deposit account but instead functions as a stored-value card

Direct deposit A form of payment by which an organization (such as an employer

or a government agency) pays funds (such as pay or benefits) via an electronic transfer The funds are transferred directly into a consumer’s bank account

Direct payment (also electronic bill payment) A form of payment that allows a

consumer to pay bills through electronic fund transfers Funds are electronically transferred from the consumer’s account to the creditor’s account A direct payment differs from a preauthorized debit in that the consumer must initiate each d irect payment transaction

Electronic bill presentment and payment (EBPP) A form of bill payment by which

bills are presented to a customer online, via either e-mail or a notice in an e-banking

account After presentment, the customer may pay the bill online when convenient The payment is electronically deducted from the customer’s account

Payro ll card A type of stored-value card issued by an employer instead of a

paycheck that enables an employee to access his or her pay at ATMs or sale terminals The employer adds the value of the employee’s pay to the card electronically

point-of-Smart card A type of stored-value card in which one or more chips or

microprocessors are embedded, making the card capable of storing data, performing calculations, or performing special-purpose processing (to validate personal identification numbers, authorize purchases, verify account balances, and store personal records) The memory in some smart cards is updated when the card is used The chip or microprocessor physically stores records, such as the value of funds remaining on the card These cards can be used in ‘‘closed’’ systems (for example, a transit system) or ‘‘open’’ systems (for example, MasterCard or Visa networks)

ATM cards ATM cards, which consumers can use to access their bank accounts at

an electronic terminal, were introduced in the late 1960s to help consumers make cash withdrawals from their deposit accounts

ABBREVIATI ONS

ANOVA is the abbreviation of One way analysis of variance

AVR is the abbreviation of Automatic voice response

E-banking is the abbreviation of Electronic banking

EBPP is the abbreviation of Electronic bill presentment and payment

ID is the abbreviation of Identifier

INF is the abbreviation of Information

Intranet is the abbreviation of Internal network

IT is the abbreviation of Information Technology

PC is the abbreviation of Perceived cost

PDA is the abbreviation of Personal digital assistant

PEU is the abbreviation of Perceived ease of use

PIIT is the abbreviation of Personal innovativeness in IT

PIN is the abbreviation of Personal identification number

POS is the abbreviation of Point of sale

PR is the abbreviation of Perceived risk

PTR is the abbreviation of Personal trial

PU is the abbreviation of Perceived usefulness

S.D is the abbreviation of Standard deviation

SEM is the abbreviation of Structural Equation model

SMS is the abbreviation of Sending messages

TAM is the abbreviation of Technology acceptance model

TRA is the abbreviation of Theory of reason action

WTO is the abbreviation of World Trade Organization

Supervisors: Dr Le Thai Thuong Quan

Master thesis entitled “Adoption of electronic banking services in VietNam”

The thesis has achieved some results such as clarifying the concept of e-banking services, present the advantage and disadvantage of e-banking This researchers also presents the necessity to develop e-banking and focuses on the adoption of electronic banking services by customers in Vietnam The research problem for th is research can be formulated as: What are the main factors, which influence the adoption of electronic banking services? From that point, this study provides some proposals aimed at developing e-banking in Vietnam

The research model is built based on TAM model and Diffusion of Innovations Theory Those factors are divided into two kinds Factors under the control of bank: perceived usefulness, perceived ease of use, perceived risk, perceived cost, information on e-banking and factors not under the control of banks are personal characteristics (gender, age, education level, position and income)

Methods of data analysis used in this study include T-test, one way ANOVA and especially Structural Equation Model which made the analysis results was accurate and meaningful both theoretically and practically From theoretical perspective, th is study has proved that the important role of TAM in predicting the acceptance of new technology Practically, this study find that in order to encourage people adopt e-banking system in Vietnam, banks should concern more on the system characteristics, increase awareness of customer about the system by providing more involved information and make them easily manipulate and manage the system and make it more convenient

If do so, e-banking is the key to success for commercial banks in particular and the international business activities of Vietnam in general

CH A PT E R ONE: I NTR O DU C TI ON AND RESE ARCH P ROB LE M

1.1 Introduction

Over the last few decades information technology has affected the banking industry highly and has provided a way for the banks to differentiate their products and services For more than 200 years, banks were using branch-based operations but the advent of multiple technologies and applications diversified the ways delivered services to customers For instance, automated teller machines (ATM) displaced cashier tellers, telephones represented by call centers replaced the bank branch, the Internet replaced mail, credit cards and electronic cash replaced bank transactions The reason was the numerous key advantages that banks could gain

by providing electronic banking services By this way, they had lower transaction costs, 24 hour trading, more extended business territory and also increased efficiency in daily banking processes Today banks are faced with a competitive environment In order to succeed in such marketplace, they must offer a wide array

of products with the latest technology At present, many banks and financial institutions are actively developing new electronic banking products for their customers throughout the world

In Vietnam, most transactions are dominated by cash, since the bulk of personal consumption is done through the medium of cash Cash remains as the main method

of payment, especially among individuals and it is making up more than 90 percent retail payment According to statistics of State Bank of Vietnam in 2008, of total population of 84 million, less than 15 percent are estimated to have used bank services regularly and less than 30 percent have savings with banks, and most account users are high-income earners in urban areas or in large companies

However, under the liberalization, globalization and the process of Vietnam integration into WTO are opening many opportunities and threats for economic sector in general and in particular the banking sector To participate in the stage of

world, Vietnam has to change payment transaction habits to adapt the general trend

of the world Recent integration into WTO are opening many opportunities and threats for general Vietnam economic and banking industry To participate in the stage of world, new models of business have been appeared such as e-commerce, e-business Thus, IT has to be equipped in banking system to enhance their quality of service

Besides, since almost banks offer same service, the application of new technology

in bank becomes the determinant factor deciding the success of bank in compete customer’s belief Hence, many kinds of modern banking applications are now applied in Vietnamese banks The State Bank of Vietnam has made efforts to reduce the volume of cash payment transactions by issuing non-cash project and expect to finish this project on 2020 Besides, banks alliances are formed and develop quickly, e-payment forms are more and more diversified Thereby, it is time to enhance customer awareness and disseminate the e-payment system in society Despite of the preference to cash over e-payment, the attitude of the public to wards e-payment has been encouraged over the past few years with the increase of bank card users and the expansion of ATM and Point-of-sale (POS) networks According annual report of the State Bank of Vietnam as e-payment makes progress, the importance of cash is on the decline over the past three years However, the public

is still concerned about the security, information on e-banking forms, hesitate changing from traditional and simple method to automatic and electronic ones,

wh ich are matters this study purpose to research

1.2 The Research Problem

It will save significant costs if Vietnam banks develop e-banking services instead of opening more branches and transaction offices In terms of economy, the bank will raise the efficiency use of capital In terms of social, E-banking contributes to economic and commercial activities, services and tourism development This is a

benefit that traditional services hard to reach

E-banking service is the most perfect banking service that gains the highest utility, but requires security of payment because the risk of this activity is not trivial However, commercial banks in Vietnam have only developed this service in certain degree and offer the same services

Table 1-1: Electronic banking service provided by Vietnam banks

Banking, Phone Banking, Internet Banking

Banking, POS, SMS Banking, Phone Banking

Banking, Phone Banking

Home Banking, Internet Banking, Phone Banking

Customers use these services to reach out only counselin g, reference and search information mainly E-banking has not exploited the strengths and the absolute advantage agains bank is provided new products and services, diversity and convenience, high utility, quickly and accurately

This study presents the necessity to develop e-banking and focuses on the adoption

of electronic banking services by customers in Vietnam The research problem for this research can be formulated as:

What are the main factors, which influence the adoption of electronic banking services?

From that point, this study provides some proposals aimed at developing e-banking

in Vietnam

1.3 Outline of the Thes is

This thesis consists of five chapters In the first chapter, an introduction to the research is given and the research problem is stated The next chapter the theoretical review framework relevant to the purpose of this study will be presented In the third chapter, research design and cover the methodology used in this research will

be discussed In the chapter four, the data which have been collected through the survey is analyzed statistically and the results are presented In the last chapter, contribution of this study is brought up under conclusions as well as implications for commercial banks in Vietnam and future researches

Chapter 1 presented an overview of e-banking services and presented the research problem that will be study in the next chapters

Chapter one Introduction and Research Problem

Chapter two Theoretical review

Chapter Three Research design and methodology

Chapter Four Analysis and results

Chapter Five Conclusion and implications

Figure 1.1: Outline of the research

CH A PT E R TWO: T HEORE TI CAL REVIEW

The previous chapter provided the background and problem area for this research I n this chapter, the theoretical framework relevant to the purpose of this study will be pr esented

2.1 Electronic Banking

Electronic banking is the automated delivery of new and traditional bankin g products and services directly to customers through electronic, interactive communication channels Electronic banking includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the Internet It should be noted that electronic banking is a bigger platform than just banking via the Internet Electronic banking can also be defined as a variety of platforms such as Internet banking (or online banking), telephone banking, TV-based banking, mobile phone banking, and PC banking (or offline banking) whereby customers access these services using

an intelligent electronic device, like a personal computer, personal digital assistant (PDA), automated teller machine (ATM), point of sale (POS), kiosk, or Touch Tone telephone, compu ter banking, direct deposit, direct payment, payro ll card, electronic bill presentment and payment, …

2.1.1 The History of Electronic Banking

Electronic innovation in banking can be traced back to the 1970s when the computerization of financial institutions gained momentum However, a visible presence of this was evident to the customers since 1981, with the introduction of the automatic teller machine (ATM) Innovative banking has grown since then, aided by technological developments in the telecommunications and Information

Technology industry The early decade of the 1990s saw the emergence of automated voice response (AVR) technology By using the AVR technology, banks could offer telephone banking facilities for financial services With further advancements in technology , banks were able to offer services through personal computers owned and operated by customers at their convenience, through the use of Intranet proprietary software The users of these services were, however, mainly corporate customers rather than retail ones The Security First Network Bank was the first Internet banking in the world that was built in 1995, USA After that some famous banks introduced their Internet banking one after another, such as Citibank and Bank of America

2.1.2 Benefits of Electronic Banking

Electronic banking services have provided numerous benefits for both banks and customers

On the side of bank,

 The first benefit for the banks offering electronic banking services is better branding and better responsiveness to the market Those banks would be perceived as leaders in technology implementation Therefore, they would enjoy a better brand image

 E-Banking is a solution for commercial banks to improve service quality and operational efficiency, thereby improving their competitiveness More important is E-Banking helps banks to implement the strategy "globalization" without opening more branches in the country and abroad E-Banking is also a promotional too l, promoting trade name of commercial banks in a effective way

 E-banking services fees are assessed as very low compared to traditional transactions, especially transactions over the Internet, thereby contributing to increased income for the bank According to a survey by Booz, Allen and Hamilton,

an estimated cost providing the routine business of a full service branch in USA is

$1.07 per transaction, as compared to 54 cents for telephone banking, 27 cents for ATM (Automatic Teller Machine) banking and 1.5 cents for Internet banking

 It is the utility gained from the application of technology, from software, from network service providers, e-banking service has attracted customers to use and maintain relationship with banks, become loyal customers of the bank With modern banking model, the development capab ilities, providin g services to many customer types, many areas of E-banking is highly

 The special features of e-banking services are able to provide full service Whereby, banks can link with other insurance companies, securities firms, other financial companies to offer utility products to meet the basic needs of a client or a customer groups for services related to banking, insurance, investments, securities

On the side of customer,

 E-Banking is a trading channel which allowing customers to contact the bank quickly and conveniently to do some banking services at any time (24 hours a day,

7 days a week) and at anywhere Th is is particularly significant for customers who have little time to go directly to the banks, small and medium customers, individual customers who have the vo lume of transactions and the amount of each transaction

is not large These are benefits that banks offer the traditional style can hardly be achieved with speed and accuracy than electron ic banking

 E-Banking will help improve the efficiency of capital use Through the services of electron ic banking, the payment order, collection of customers is done quickly, giving facilities for circulating capital fastly, implementing transactions well Thus it speeds up the circulation of commodities, currencies, raising the efficiency of capital use

Besides the benefits, e-banking also have a lots of disadvantages

On the side of bank, to build a system of E-Banking requires a large initial investment to choose a modern technology, the correct orientation, not include the

cost of backup systems, costs maintenance, system development, technological innovation Simultaneously requires a team of engineers and qualified technical staff to manage, operate a system But some commercial banks are available The investment is effective or not depended on the communications infrastructure of the country, or otherwise depends on the efforts of the whole country and not only do the commercial banks

On the side of customer, customers can not receive information through e-banking

as a full staff in charge of the bank Customers will lose the opportunity to exchange information with bank staff, capture new situation, "hot" at the bank's transaction

Both of bank and customer side,

 Capital and technology is not an easily problem, but they can be overcome More problem is that safety and security of E-Banking system Risks of services is not small, the customer may lose access password account or was "Hacker" stolen

by high technology So that, money in the account of customers lost without knowing in myself or in commercial banks Also on the commercial banks in Vietnam, mainly due to technology "imports", they can not seize the high technology, to detect and correct the flaws of the software purchased from foreign countries can not be done fully It takes time and money to offer the professor

 Virus, computer worms, spyware is the danger of standing to attack the system through fraud, theft of customer data Computer criminals use to attack website is probably happening Risk management policies for e-banking activities

of commercial banks are in the first step, there is no storage data, lack of risk management tools (Tr n Hoàng Ngân & Ngô Minh H i, 2006)

2.1.3 Kinds of Electronic Banking

Base on the level development of the country and the state of the banking system, the degree of e-banking use is differs When mention to e-banking services, many Vietnamese customers immediately think about ATM, credit or debit cards But e-banking services not only ATM, credit card, debit card, but also internet banking, mobile banking, phone banking and so on However, card services was setting up and developing since the beginning development of e-banking services and has dominated the e-banking market

 Internet banking: this services help customers transfer money through online

accounts as well as control the operation of this account To participate, customers access the bank's website and make financial transactions, query necessary information Information is abundant, from the transaction details of customers to other information about the bank Customers can also visit other sites to purchase and make payments to the bank However, when the Internet is connected, the bank must have security systems strong enough to deal with risks on a global scale

 Home banking: with the bank at home, customers can deal with transactions

through online banking but the internal network (Intranet) by a bank to build its own Transactions are conducted at home, office, company through computer systems connected to the computer systems of banks Through home banking service, customers can perform transactions on the remittance, list the transactions, exchange rates, interest rates, debt notice, newspapers are To use the home banking service, customers should have computer (at home or headquarters) connected to the computer systems of banks through modem - dial telephone line Customers must register the phone number and address to connect Home banking system of banks

 Phone banking: This product supply bank information over the phone fully

automated The information should be assigned first, including information on exchange rates, interest rates, stock prices, personal information such as customer account balances, transactions listed in the last account, the latest notice The

system also automatically send fax when customers ask for other information above

 Mobile banking: a form of online payment via mobile phone networks This

method was invented to solve the needs of payment transactions with small value (micro payment) or the automated service, no service For using th is service, customers must register to become an official member of which is important information such as phone numbers, personal account number used in payment After that, customers are received of a code identifier (ID) through this network With identifier codes, customers are given a personal number (PIN) to confirm customer payment transactions when providers of payment services requested After completing the necessary procedures, the customers will be an official member and eligible for payment through mobile

 Call center: As data is centrally managed, customers have account at any

branch can call a fixed number of centers to provide all information Differences from Phone banking just provide the type of information is programmed, call center can provide information or answer questions of customers flex ible Disadvantage of call center is having staff available 24/24

 Card payment: A bank card is a plastic card that provides an alternative

payment method to cash when making purchases Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank account

or from the remaining balance on the card In some cases, the cards are designed exclusively for use on the Internet, and so there is no physical card For consumers, the difference between a "debit card" and a "credit card" is that the debit card deducts the balance from a deposit account, like a checking account, whereas the credit card allows the consumer to spend money on credit to the issuing bank In other words, a debit card uses the money you have and a credit card uses the money you don't have "Debit cards" which are linked directly to a checking account are sometimes dual-purpose, so that they can be used as a credit card, and can be charged by merchants using the traditional credit networks

2.2 Diffusion of Innovations Theory

The original diffusion research was done as early as 1903 by the French sociologist Gabriel Tarde. Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system Diffusion is a special type of communication concerned with the spread of messages that are perceived as new ideas

An innovation, simply put, is “an idea perceived as new by the individual.”

An innovation is an idea, practice, or object that is perceived as new by an individual or other unit of adoption The characteristics of an innovation, as perceived by the members of a social system, determine its rate of adoption

Relative advantage is the degree to which an innovation is perceived as better than

the idea it supersedes The degree of relative advantage may be measured in economic terms, but social prestige, convenience, and satisfaction are also important factors It does not matter so much if an innovation has a great deal of objective advantage What does matter is whether an individual perceives the innovation as advantageous The greater the perceived relative advantage of an innovation, the more rap id its rate of adoption will be

Compatibility is the degree to which an innovation is perceived as being consistent

with the existing values, past experiences, and needs of potential adopters An idea that is incompatible with the values and norms of a social system will not be adopted as rapidly as an innovation that is compatible The adoption of an incompatible innovation often requires the prior adoption of a new value system,

wh ich is a relatively slow process

Complex ity is the degree to which an innovation is perceived as difficult to understand and use Some innovations are readily understood by most members of a social system; others are more complicated and will be adopted more slowly New

ideas that are simpler to understand are adopted more rapidly than innovations that require the adopter to develop new skills and understandings

Trial ability is the degree to which an innovation may be experimented with on a limited basis New ideas that can be tried on the installment plan will generally be adopted more quickly than innovations that are not divisible An innovation that is trial able represents less uncertainty to the individual who is considering it for adoption, who can learn by doing

Observability is the degree to which the results of an innovation are visible to others The easier it is for individuals to see the results of an innovation, the more likely they are to adopt it Such visibility stimulates peer discussion of a new idea,

as friends and neighbors of an adopter often request innovation-evaluation information about it

Diffusion of an innovation occurs through a five–step process This process is a type of decision-making It occurs through a series of communication channels over

a period of time among the members of a similar social system

The customers are invariably the best source of ideas Innovations have commercial value only if they meet the needs of customers better than current products Innovative customers-those individuals who are at the forefront in buying new products or applying new ideas- are the most valuable sources Such customers see problems and opportunities well ahead of typical buyers But before customers can adopt an innovation, they must learn about it This learning is called the “adoption process” (Rogers, 1995) and consists of five stages as follow:

 Awaren ess First the individual is exposed to the innovation but lacks complete information about it

 Interest Next the individual becomes interested in the new idea and seeks additional information about it

 Evaluation Individual mentally applies the innovation to his present and anticipated future situation, and then decides whether or not to try it

 Trial The individual makes full use of the innovation

 Adoption The individual decides to continue the full use of the innovation

Figure 2-1: Adoption Pr ocess Source: Rogers (1995)

The literature on the adoption of innovation and specifically adoption of electronic banking services can be found in a broad range of academic research These studies suggest that customers’ adoption of electronic banking technologies may be related to a number of factors, some associated with the characteristics of the product or service and others associated with the characteristics of the customers

2.3 Technology Acceptance Model (TAM)

TAM is one of the most influential extensions of Ajzen and Fishbein’s theory of reasoned action (TRA) in the literature It was developed by Fred Davis and Richard Bagozzi (Davis 1989, Bagozzi & Warshaw 1992) TAM replaces many of TRA’s attitude measures with the two technology acceptance measures— ease of use, and usefulness TRA and TAM, both of which have strong behavioural elements, assume that when someone forms an intention to act, that they will be free

to act without limitation

The Technology Acceptance Model (TAM) is an information systems theory stating how users come to accept and use a technology The model suggests that when users are presented with a new technology, a number of factors influence their decision about how and when they will use it

The technology acceptance model (TAM) is a mature model that has been validated

in different context This model has been widely applied to predict the acceptance

of information technology and the validity has been demonstrated across a wide variety of information technology First, this established model of computer usage often used to test computer applications as computer adoption, word processors (Davis et al., 1989), and then expanding to internet, e-mail, WWW, GSS, intranet, e-commerce, m-commerce e-learning, under different situations (e.g time and culture) with d ifferent control factors (e.g., gender, organizational type and size) The development of TAM model is parallel with the development of IT world And

in any case, this model proves that it is the most influential and commonly employed theory for explain ing and predicting the determinants of individual behavior toward a system, manifest through system utilization

2.3.1 Perceived Usefulness

In fact, a new product or service that does not help people perform their jobs, their life or it is too abstract with the fact will be easily eliminated There are many aspects to evaluate the usefulness of a system Venkatesh et al (2003) affirmed that

“Perceived usefulness is a factor which has a strong determinant of usage intentions” Perceived usefulness is also known as performance expectancy when people think that based on advantages of innovation, IT can help them enhance productivity and aid work performance (Davis et al., 1989; Davis, 2007) In the broad context of e-payment, perceived usefulness means that the system can be available and helpful for customer at any time and any place Thus, perceived usefulness can be considered as the comprehensive ability of customers in integrating e-payment into their daily activities

In a different aspect, it can be captured as the attention of potential adopter views about the innovation when offering alternatives choices with the same performing abilities It means that, an innovative system is believed to be high usefulness when

Perceived ease of use

Perceived usefulness

Attitude toward

Behavioral intention

System use

Figure 2-2: Technology acceptance model (TAM)

Source: Davis et al (1989)

External

Variables

it adapts the need of people and connects closely the use, productivity, performance, effectiveness and satisfaction

Although there are many concepts of perceived usefulness but the classical definition of Davis et al (1989) seems to be most applied “perceived usefulness is the degree to which a person believes that use a system would improve his or her performance”

2.3.2 Perceived Ease of Us e

Perceived ease of the use is defined as “the degree to which a person believes that using a particular system would be free of effort” (Davis et al., 1989) Innovative technology systems that are perceived to be easier to use and less complex will have

a higher likelihood of being accepted, and used by potential user (Davis et al., 1989) Because the construct focus on an individual’s perception about the level of efforts needed to use a system, perceived ease of use can be regarded as process expectancy (Davis, 1989) An ease-of-use system should have friendly interfaces such as clear and visible steps, suitable content and graphical layouts, helpful functions, clear commands, and easy understand error messages

According to TAM, determine one’s intention to use technology System acceptance will suffer if users do not perceive a system as useful and easy to use TAM has emerged as a salient and powerful model that can be used to predict potential Information system usage by measuring users’ beliefs after they are exposed to the system even for a short period of time through training, prototype or mock-up models

Davis’ results indicated that while ease of use is clearly significant, usefulness is even more important in determining user acceptance The TAM has been tested widely with different samples in different situations and proved to be a valid and reliable model in explaining information system acceptance and usage

Adams et al (1992) examined TAM in 5 different applications—word processors, graphics, spreadsheets, e-mail, and v-mail—and found that, in general, TAM maintained its consistency and validity in explaining users’ IS acceptance behavior Davis (1993) replicated h is previous study (Davis et al., 1989) using e-mail and a text ed itor with 112 knowledge workers, and found that TAM successfully explained the adoption of both technologies (R2 =0.36) Sambamurthy and Chin (1994) applied TAM to study group attitudes toward GDSS use, and found that the ratio PU/PEOU successfully predicted group attitude to GDSS use Finally, Subramanian (1994) performed the replication of the original TAM with two mailing systems’ acceptance, and found that TAM variables showed results consistent with previous studies

M od el In trodu ction

Straub (1994)

Taylo r and Tod d (1995)

Ad ams (19 92 )

Davis & Venk atesh (19 96 )

Gefen (2 003)

Venkatesh & Davis (20 00 )

Venk atesh (20 03 )

Davis

(1 989 )

Mo del Validation

Mo del Exten sio n

Mo del E labo ration

Figure 2-3: Choronological Progress of TAM Research

Source: Younghwa Lee et al (2004)

According to Vietn a m co ntext, thes e elem ents are a dded to Tech nolog y Acceptance Mo del

2.3.3 Perceived risk

Perceived risk in customer behavior research was introduced as any action of a consumer may lead to unpleasant consequences Other studies have considered perceived risk s the consumer’s expectation of suffering loss in pursuit of desired outcome With this definition, perceived risk is a multi-dimensional construct with overall risk which is divided into financial psychological, performance, physical and social loss, or risk of losing personal control (money, data and times), risk of losing face and system failure (Zhao, Hanmer Lloy, Ward & Goode, 2008)

But no one can refuse the role of risk in the decision to adopt new technology system Especially, risk perception can easily escalate in an e-banking service,

wh ich customer do transaction with no personal face to face contact, no cash in hand However, customers generally want to master their own acts and know or see directly the cause and the consequences of their own and others

Advantages of e-payment can help them reduce stages distance of payment transaction, but customers are still not willing to accept that they do not have full control over their own behaviors and system process By using e-banking services, customers always concern about potential financial risk such as the capacity they will loss of money during the transaction process, and perceived threat to privacy and personal information leak

2.3.4 Perceived cos t

Perceived cost is defined as a transaction fee and time saving that adding negative value to a person when makin g a transaction When using services, customer must pay a charge for suppliers The cost can be issued card fee, internet fee, phone charge, remittance fee, card payment fee and so on

2.3.5 Information on e-banking

The information which customers have about the products has been improved as like as one of the major factor, affecting d irectly to the new product adoption, especially is information on a new applied technology system Finding information

is the process by which customers gather information about good or services before purchase or use it

When applying a new system, customer may be in an early stage in learning and processing, hence, customer look for information invo lved in it Information about new products or services can be the information about bank which supplies e-banking services forms, advantages and disadvantages of e-banking, information about the feature, benefits or operation of the systems, or event information involved in the amount of customers trust in using this system and so on

2.3.6 Personal trial

Perceived trial is indicated as attitude toward, which is referred to the personal positive or negative feeling toward a particular behaviors that are influence by individual beliefs (Sh in & Fang, 2004)

2.3.7 Personal characteris tics of the adopters

The personal characteristics which are used in this study can be stated as demographic characteristics like age, gender, level of education, position and income

Chapter 2 presented the theoretical basis of e-banking services Simultaneously, thesis also presents the theoretical model wi ll be used to build models in chapter 3

CH A PT E R THREE: RESE ARCH DE SI GN AND M E T HOD OL O GY

This chapter involves the designed questionnaire of research model and presents the research model, sampling frame and methods which will be applied to test hypotheses

3.1 Res earch Model

The principal purpose of this study is investigatin g main effects banks to facilitate e-banking adoption in Vietnam The research model is built based on TAM model Those factors are divided into two kinds Factors under the control of bank: perceived usefulness, perceived ease of use, perceived risk, perceived cost, information on e-banking and factors not under the control of banks are personal characteristics

Based on the review of literature, a model of the factors influencing adoption of electronic banking services was developed The theoretical framework combined the innovation adoption theory and technology acceptance model (TAM), add ing personal characteristics of the adopters

Figure 3-1: The research framework of this study

In the context of Vietnam, the factors affecting the acceptance of using banking services includ ing personal characteristics (gender, age, education level, position and income), information about products and services, perceived usefulness, perceived ease of use, perceived risk, perceived cost

The research model starts from information on e-banking When customers have full in formation about e-banking products and services, they will feel it useful and easy to use, risk of services is low and cost of services can be acceptable Then the customer can accept using of services When customers can have full information about services, they can also use the service without pay attention to benefits, risks

or costs,

If customers perceive the usefulness and ease of use of the service, customers will find out products at less risk and costs may be acceptable, customers can easily try the product and accepts it

Customers feel less risk and lower costs also can accept service easily

3.2 Hypothes es development

The expected relationship with regard to personal characteristics and new technology can be outlined in the following hypotheses

3.2.1 Hypotheses related to pers onal characteristics:

H1a: Compare to female customers, male customers are more likely to use electronic banking services

H1b: Compare to younger customers, old customers are less likely to use electronic banking services

H1c: Compare to high educated customers, low educated customers are less likely

to use electronic banking services

H1d: Compare to low position customers, high position customers are more likely to use electronic banking services

H1e: Compare to low income customers, high income customers are more likely to use electronic banking services

3.2.2 Relationships Hypothes es:

H2: Information will have a significant positive effect on Perceived risk

H3: Information will have a significant positive effect on Perceived usefulness H4: Information will have a significant positive effect on Personal trial

H5: Information will have a significant positive effect on Perceived ease of use H6: Information will have a significant positive effect on Perceived cost

H7: Perceived usefulness will have a significant positive effect on Personal trial

H8: Perceived usefulness will have a significant positive effect on Perceived risk H9: Perceived usefulness will have a significant positive effect on Perceived cost H10: Perceived ease of use will have a significant positive effect on Perceive usefulness

H11: Perceived ease of use will have a significant positive effect on Perceived risk H12: Perceived ease of use will have a significant positive effect on Perceived cost H13: Perceived ease of use will have a significant positive effect on Personal trial H14: Perceived risk will have a significant positive effect on Personal trial

H15: Perceived cost will have a significant positive effect on Personal trial

The research has focused both on the methods used by banks and on customer perceptions, attitudes and rate of adoption of the new digital services

A questionnaire will be used to collect data for this study in order to analyze the data regarding the factors, which affect adoption of electronic banking services in Vietnam Base on results of data analysis, contribution for the development electronic banking in Vietnam will be proposed

3.4 Sampling and Ques tionnaire

The number of respondents is chosen for this study is 577 Vietnamese customers Data will be collected in many banks, automatic-teller-machine places, companies and university in Ho Chi Minh City This study’s respondents are predicted are managers, students, officers, workers, traders because according the survey of the state of bank 2006, most of card users are students and workers in industrial zones

in Ho Chi Minh and some neighbor provinces and most e-banking products/services are used by students, officers and stock traders

The questionnaire consists of two sections and is translated into Vietnamese to make it easier for respondents The first section gathers demographic information such as gender, age, levels of education, occupation status and net income of the respondents are considered as external variables that influence the formulation of relevant perceptions The second section asks customers about the utility of relative advantages of e-banking and their attitudes about the using of e-banking products The 5 po int Likert scale is used for statements of second section, ranging from “1” for “strongly disagree”, to “5” for “strongly agree”

Data is collected by asking questionnaires directly to respondent and by sending through email

Table 3-1: The questionnaire items for measuring factors

1 Not having to carry and count cash

2 Easy and safe payment

3 I can easily check my finance information anywhere when I use e-banking services

4 Enhanc e effective ness on the payme nt transactions

Construct Items

6 I felt the procedure of services are simple

7 The ways to use the service are simple

8 It is easy to remember how to use e-payment

9 I find it easy to get the payment to conduct banking transaction or commerce transactions

e-Measurements for

Perceived Ease of

Use

10 My interaction with e-banking is clear and understandable

11 When I use credit card I feel it is safer than paying by cash

12 E-banking service is high security

13 I am not worried if one person know my PIN

14 I am not worried about the security of e-banking services

Measurements for

Perceived Risk

15 Matters of security have no influence on using e-payment

16 E-banking service charge is reasonable

17 Using e-banking not have to pay more mobile charge, internet charge,

18 E-banking save more time than direct transaction at the Bank

19 Using e-baking save cash management cost

Measurements for

Perceived Cost

20 E-banking saving cost due to discounting than payment by cash

21 E-banking services are new, but I have much information about it

22 Bank staff usually introduce this service to me

23 Bank staffs are enthusiastic, initiative explaining, consulting services

24 I have received enough information about the benefits of using e-payment

Measurements for

Information

25 Customer complaints are resolved quickly, satisfactorily

26 If you hear about a new technology information, I would look for a ways

to experiment with it

27 You don’t hesitant to try out new information technology

28 You feel the need to use services is essential

29 You don’t hesitant to try out new e-banking services

Measurements for

Personal Trial

30 You like to use e-banking services