Exploring factors that influence customers‟ use of e banking in vietnam

The purpose of this study is to investigate the factors that influence Vietnamese consumer individuals‟ intention use and reuse e-banking services.. Specifically, this study is intereste

Exploring Factors That Influence Customers‟ Use of

College of Informatics Shu-Te University

In Partial Fulfillment of the Requirements

For the Degree of Master of Science

In Information Management

Department of Information Management, Shu-Te University

Exploring Factors That Influence Customers‟ Use of E-Banking

in Vietnam

Student：Le Anh Thuan

Advisor：To Chang Co-advisor：Dr Nguyen Thi My Loc

ABSTRACT With the development of Internet technology continues, the number of people who

use Internet has increased rapidly in the world E-banking grows faster than other

e-commerce sectors and it has emerged as an evolution of application technology on

banking industry

The purpose of this study is to investigate the factors that influence Vietnamese

consumer individuals‟ intention use and reuse e-banking services Specifically, this

study is interested in exploring what are the most success factors between system

quality, information quality and service quality in e-banking The study utilized the

elements of Information System (IS) Success Model (DeLone & McLean, 1992, 2003)

and Expectancy Disconfirmation Theory (EDT, 1980) as theoretical framework to

accomplish this research Intention to use e-banking service depends on the fact that

service quality We use convenience sampling questionnaire to execute the samples and

Regression Analysis apply to confirm the relationships of hypothesis This study

randomly surveyed 270 Vietnamese participants who have experience in consuming

cosmetic products in Vietnam market and received a total of 242 valid questionnaires

The research indicated the components (Information quality, System quality and

Service quality) may lead to acceptable ability of intention to reuse e-banking services

of Vietnamese In details, the strongest influence on intention of consuming cosmetic is

Service Quality The results of this study are hoped to be the efficient constructive

sources for the all Vietnamese banks to understand the critical factors that influence

Vietnamese consumer‟s e-banking intention and contribute the competitive promotion

campaigns in Vietnam

Keywords: E-banking, Intention to Reuse, Information System (IS) Success Model

ACKNOWLEDGMENTS

I am delighted to have chance to express my gratitude and thankfulness to those

who supported and encourage me to complete this research study

First of all, my sincerely thanks and appreciate to my advisor Professor To Chang

from Department of Information Management, Institute of Informatics of Shu-Te

University and Professor Nguyen Thi My Loc from University education Viet Nam,

provided guidance and encourage throughout my study and during my research process

This research study can be completed with supported and guided of him I would like to

express my deeply thanks to Dr Chen Pi-Yun for providing valuable guidance and

suggestion Without their assistants, this study would not be completed I would also

like to express my thankfulness to class MIS 3 for their supporting and encouragement

during two years study

Finally, I would like to expresses my heartfelt gratitude to my family who provide

me mentally support with encouragement and useful advises

Table of Contents

ABSTRACT i

ACKNOWLEDGMENTS iii

Table of Contents iv

List of Tables vi

List of Figures vii

Chapter 1 Introduction 1

1.1 Research Background 1

1.2 Research Purpose 5

1.3 Research Questions 6

1.4 Significance of the Study 6

1.5 Research Procedure 7

Chapter 2 Literature Review 9

2.1 E-banking and Benefits 9

2.2 E-banking in Vietnam 11

2.3 Information System (IS) Success Models 13

2.3.1 The DeLone and McLean (1992) Model 13

2.3.2 DeLone and McLean: The 10 year Update (2003) 15

2.4 Expectancy disconfirmation theory (EDT) 18

Chapter 3 Methodology 21

3.1 Research Framework 21

3.2 Hypotheses Development 22

3.2.1 The relationship between Information Quality and Use 22

3.2.2 The relationship between Information Quality and User satisfaction 23

3.2.3 The relationship between System Quality and Use 24

3.2.4 The relationship between System Quality and User Satisfaction 24

3.5.1 Descriptive and Demographic Analysis 30

3.5.2 Bivariate Correlation 30

3.5.3 Regression Analysis 31

Chapter 4 Data analysis and Results 32

4.1 Demographic Characteristics 32

4.2 Descriptive Statistic 33

4.3 Correlation Coefficient and Reliability Testing 34

4.3.1 Reliability Analysis of variables 35

4.3.2 Correlation Analysis 36

4.4 Regression Analysis 37

4.4.1 Regression of Use (U) on INQ (Information Quality), SYQ (System Quality) and SEQ (Service Quality) 38

4.4.2 Regression of User Satisfaction (US) on INQ (Information Quality), SYQ (System Quality) and SEQ (Service Quality) 40

4.4.3 Regression of IRU (Intention to Reuse) on US (User Satisfaction) 41

4.5 Summarize of Results 42

Chapter 5 Conclusion and Recommendations 44

5.1 Research Conclusions 44

5.2 Managerial Recommendations 46

5.3 Limitation 46

REFERENCES 48

APPENDIX: QUESTIONAIRE IN ENGLISH 53

List of Tables

Table 1 Questionnaire Design 27

Table 2 Characteristics of Respondents 33

Table 3 Descriptive Statistic 34

Table 4 Evaluation of Composite Reliability (CR) 35

Table 5 Construct Reliability 36

Table 6 Bivariate Correlations Among Variables 37

Table 7 Multiple - Regression Analysis Results (INQ, SYQ and SEQ on U) 38

Table 8 Multiple - Regression Analysis Results (INQ, SYQ, SEQ and U on US) 40

Table 9 Multiple - Regression Analysis Results (IRU on US) 41

Table 10 Summarized Results of the Testing Hypotheses 43

List of Figures

Figure 1 Research Structure 8

Figure 2 The IS Success Model (DeLone & McLean, 1992) 14

Figure 3 The Updated IS Success Model (DeLone & McLean, 2003) 16

Figure 4 Expectancy Disconfirmation Theory (Oliver, 1980) 19

Figure 5 Research Framework 22

Chapter 1 Introduction

The introduction of this study details in five parts It starts with research background

to introduce the actual situation of Vietnam e-banking industry The next part reveals

research purposes and research questions which help to set direction for the study The

fourth part is some significance in academic perspective and business perspective in this

research Finally, it is research flow chart of this research

1.1 Research Background

Vietnam's emergence as one of the most promising economies in Asia, Vietnam is

rapidly developing country with GDP growth estimated at 5.83% for the first quarter of

2010 that shows strong signs of recovery for 2010 after a disappointing 2009 The

Asian Development Bank (2009) projects Vietnam‟s GDP to grow above 7.5% during 3 years lately

General Director of WTO Pascal Lamy said that “After three years of joining the World Trade Organization (WTO), Vietnam has maintained to be “a story of success” while having huge opportunities for further development” Integration into WTO has

also helped Viet Nam to develop domestic markets, lure big inflows of foreign

investment, perfect human resources and build institution in an attempt to deeply

With the development of Internet technology continues, the number of people who

use Internet has increased rapidly in the world Attracting products coupled with the

intensity of online competition and a mouse click to select a new provider, investigating

website success is of crucial prominence for e-businesses to develop a website that

decreases customer churn rate (Singh, 2002) Another authors, Reicheld and Schefter

remark that acquiring online customers is so expensive that startup companies may

remain unprofitable for at least two or three years, meanwhile by retaining just 5 percent

more customers, online companies can boost their profits by 25% to 95%

E-banking grows faster than other e-commerce sectors and it has emerged as an

evolution of application technology on banking industry By e-banking, we mean that

customers are able to conduct their banking business via personal computers without

having to visit a bank branch (Federal Trade Commission, 2006) E-banking can be

defined as the deployment of banking services and products over electronic and

communication networks directly to customers (Singh & Malhotra, 2004) E-banking

technology represents a variety of different services include Automated Teller Machines

(ATMs), direct dial-up connections, private and public networks, the Internet,

televisions, mobile devices and telephones Among these technologies, the increasing

penetration of personal computers, relatively easier access to the Internet and

particularly the wider diffusion of mobile phones has drawn the attention of most banks

to e-banking

E-banking has opened up new windows of challenges and opportunities for all of

Vietnamese banks and Vietnamese customers According to Vietnam Government

published record (www.bankingvn.com.vn) that at the end of 2007, Vietnam‟s banking

system has 80 credit institutions, including 6 state-owned banks, 36 joint stock banks, 4

joint venture banks, 34 branch offices of foreign banks, 1 policy bank, 1 central credit

fund, 13 non-banking credit institutions, and nearly 1,000 grassroots people‟s credit

funds Vietcombank, Incombank, ACB, Eximbank, ANZ and Citibank are supplying

home - banking services In addition, customers could get phone-banking service from

VCB, ACB, Techcombank, HSBC, ANZ and Citibank; and mobile-banking service

from Incombank, ACB and Techcombank Other banks are content with their websites

where they advertise themselves and supply some information about their services The

Bank for Agriculture and Rural Development is carrying out a pilot scheme to supply

e-banking services (Ngan Tran & Hai Ngo, 2007) Most of the other local banks and all

the foreign banks operating in Vietnam have been offering e-banking services They

allow customers to withdraw money from private accounts and international credit cards,

check their account balance, make statement enquiry and transfer funds Besides

maintaining good business relationship with its long lasting customers such as state run

corporations, large enterprises and import-export corporations, Vietnamese banks has

also focused on small, medium companies and individual customers For example,

ANZ‟s e-banking offers customers secure and immediate e-banking services which

acceptance device by June, 2010 over the country However, because of different

investment scale so that system of each bank is totally different Smartlink Union has

1,700 ATMs and 3 million cards but Vietcombank ATM has taken up all the 1,100

machines and 2,5 million cards Another 20 banks split 600 machines and 500,000 cards

VNBC Alliance has 752 ATMs and nearly 2 million cards in total of 926 ATMs and

nearly 2.2 million cards of the alliance Banknetvn Union has about 3,000 ATMs which

most belong to Agribank

Vietcombank (VCB) is the oldest commercial bank for external affairs in Vietnam,

the bank has always been known as the most prestigious bank in trade finance,

international payments, foreign exchange, guarantee and other banking and financial

services, including credit cards: Visa, Master Card VCB introduced Internet-banking

service to customers in December 2001 This service was the beginning stage which

satisfies customers' inquiry for information about bank balances, exchange rates,

interest rates and other related information In 2002, VCB launched electronic-banking

and ATM network dubbed Connect 24 These two services allowed customers transfer

money electronically; they can access information such as their balance, exchange rates,

interest rates, consultative information useful for their investment activities, invoice

payment (electricity bill, water bill, telephone bill, internet bill ) etc

However as a matter of fact, this growth has posed increasingly competitive

challenges to the Vietnamese banking system In order to improve and develop,

e-banking system must find direction to get more benefits from more potential customers

At this time, in the context of changing economic globalization particularly with

developing economy like Vietnam, e-banking service is playing a strongly important

role and Vietnam has ready to make e-banking more necessary and popular especially in

services industry because of retaining and satisfying Vietnamese customers

1.2 Research Purpose

The purpose of this study is to investigate the factors that influence Vietnamese

consumer individuals‟ intention use and reuse e-banking services Specifically, this

study is interested in exploring what are the most success factors between system

quality, information quality and service quality in e-banking The study utilized the

elements of Information System (IS) Success Model (DeLone & McLean, 1992, 2003)

and Expectancy Disconfirmation Theory (EDT, 1980) as theoretical framework to

accomplish this research Intention to use e-banking service depends on the fact that

customer can be satisfy with elements such as system quality, information quality and

service quality The following are research objectives:

1 Applying the Information System (IS) Success Model and Expectancy

Disconfirmation Theory on explaining customers‟ intentions

2 Finding the key factors impacts on Vietnamese in using or re-using e-banking

3 Develop a model to be applied in e-banking service in Vietnam

4 Concluding about the ability of the model applied in Vietnam banking system

1.3 Research Questions

Based on the above descriptions, this study intended to examine factors that affect

Vietnamese consumer intention of using and re-using e-banking This study aims to

answer these following questions:

1 What are the key factors that influence Vietnamese consumer intention on using

and re-using e-banking?

2 What is the intention model that can be applied to e-bank system to provide

better service in Vietnam?

1.4 Significance of the Study

In academic perspective, this research tries to find out key factors affecting

consumers‟ intention in using and re-using e-banking services in Vietnam The

Information System (IS) Success Model (DeLone & McLean, 1992, 2003) and

Expectancy Disconfirmation Theory (EDT, 1980) is to be introduced as anecessary tool

for analysis Moreover, this research adapted to investigate the framework with these

factors whether or not can be appliedto find out customer‟s intention better in Vietnam

banking system

In business perspective, this research will assist managers to understand the

important of those factors affect on e-banking intention by recording the factors of

consumers use and re-use and what are the results caused by them From this point of

view, this study examines the successful capabilities of e-banking in this time and sees

future opportunity for Vietnam e-banking In fact, understanding customer‟s intention in

using e-banking is extremely necessary for succeed or failure of a bank to improve

banking services in order toprovide better services for Vietnamese customer

1.5 Research Procedure

Figure 1.1 indicates the progress and structure of this study There are five parts of

this study including Introduction, Literature Review, Methodology, Analysis and Result,

and then, Conclusion and Recommendation

Figure 1 Research Structure

Chapter 2 Literature Review

Chapter 1 provided the research background and research problems area for this

study In this chapter, the theoretical framework relate to the aim of this study will be

discussed more clearly

2.1 E-banking and Benefits

Information and communications technologies (ICTs) are the tool that assisted the

process of business transactions and serving the growing demands of customers for

most organizations, especially the activities of banking system E-banking can be

defined as the deployment of banking services and products over electronic and

communication networks directly to customers (Singh & Malhotra, 2004) These

electronic and communication networks include as Internet Banking (or online banking),

telephone banking, mobile banking and PC banking (or offline banking) whereby

customers access banking services using an intelligent electronic device, such as a

personal computer (PC), personal digital assistant (PDA), ATM, point of sale (POS),

kiosk, or Touch Tone telephone Instead of these technologies, the increasing of

personal computers and easier access to Internet and particularly the wider popular of

transact business, or obtain information on financial products and services through a

public or private network, including the Internet Electronic banking technology

represents a variety of different services, ranging from the common automatic teller

machine (ATM) services and direct deposit to automatic bill payments (ABP),

electronic transfer of funds (EFT), and computer banking (PC banking)

Electronic banking services have provided many benefits for both of banks and

customers One of major contributions of Internet-based service is the reduction in

transaction costs and buyers and sellers can contact each other directly through website

The potential future of electronic banking at the beginning was described that increase

customer base, reduce transaction costs, improve the quality and timeliness of response,

enhance opportunities for advertising and branding, facilitate self-service and service

customization, and improve customer communication and relationship (Garau, 2002)

Banking system has the same purpose with many companies is made bigger profits for

their organizations Therefore, if banks use e-banking as one of their services, bank

transactions will happen through website and e-banking service will help the banks save

costs, expand customer network, improve customer service and make long-term profit

for their banks E-banking provides their customers change to use banking activities

(Claessens, 2002) and transactions speed is faster than traditional bank (Liao and

Cheung, 2002)

For customer, when they use e-banking as their main transaction with bank, they also

have different benefits such as: saving time, save costs and using services conveniently

In the study about online banking drivers of Aladwani (2001), he found that providing

faster, easier and more reliable services to customers were among the top drivers of

e-banking development The main benefits from e-e-banking for private customers are as

follows (BankAway, 2001):

1 Reduced costs This is in terms of the cost of availing and using the

various banking products and services

2 Convenience All the banking transactions can be performed from the

comfort of the home or office or from the place a customer wants to

3 Speed The response of the medium is very fast; therefore customers can

actually wait till the last minute before concluding a fund transfer

4 Funds management Customers can download their history of different

accounts and do a “what-if” analysis on their own PC before affecting any transaction on the web

Customers prefers e-banking for conveniences, speed, round the clock services and

access to the account from any parts of the world (Cheng, 2006) E-banking offers

benefits to banks as well Banks can benefit from lower transaction costs as e-banking

requires less paper work, less staffs and physical branches (Cheng, 2006) E banking

leads higher level of customers‟ satisfaction and retention (Poatoglu & Ekin, 2001)

2.2 E-banking in Vietnam

users, ranked 20th among the top 20 countries have highest Internet users in the world

Commercial banks in Vietnam have launched some safe, efficient and modern products

and services such as: ATM services, real time payment services, credit management,

and fund transfer creating more efficiency in banking activities, consolidating the trust

in the banking sector by the public

The development trend of the banking system is narrow the traditional distribution

and expanding the modern distribution channels to replace the traditional channels

However, in each country, depending on specific conditions at each different time

periods, the development of distributed systems is different Vietnam electronic banks

exist by the combining model between commercial traditional banking system and

electronic traditional services to (Ngan & Hai, 2006), only some parts of credit bank

such as home banking, mobile banking or some services like construction services

and development site for the bank that separately developed (Friendship, 2005)

Compared with some previous years, payment via electronic system and

communication channels in Vietnam is growing very fast The country also had a

biggest banking project, named Vietnam Payment System and Banking System

Modernization Project, which was approved in 2003 by World Bank The deployment

of Decision 291/2006/QD-TTg approved the scheme on non-cash payment in Vietnam

in the 2006-2010 period and orientations to 2020, especially the Instruction

20/2007/CT-TTg and Instruction 05/2007/CT-NHNN on 11 Oct 2007 mandating that

salaries paid to State employees be deposited directly into employee‟s bank accounts The Government has set a target of 15 million electronic payment cards, install

electronic payment systems in 70% commercial center, supermarkets, restaurants, hotels

and shops in 2010 and that number is 30 million cards and 95% in 2020 Cash payment

will not exceed 18% and 80% of business transactions through the bank in 2010 (Thoa,

2007)

Local bank-card companies are promoting the connection of their automatic teller

machines (ATM) and point of sale (POS) systems nationwide to create convenience for

customers and contribute to the development of non-cash payment tools in Viet Nam

Recently, one of the most efficient banking cooperation is that connection between

Smartlink Corporation and Vietnam National Financial Switching Joint-Stock Company

(Banknetvn) to „link‟ all ATMs from eight banks to one hub In near future, all ATM systems will be connected; using e-banking services bring customers considerable

benefits, easy to use and facilitation in space and time

2.3 Information System (IS) Success Models

2.3.1 The DeLone and McLean (1992) Model

Assessing the success of Information Systems (ISs) has been identified as one

of the most critical issues in IS field One of the most commonly cited models for

IS success is the one developed by Delone & McLean (1992) They reviewed

and user satisfaction, both being antecedents of individual impact, and this

individual impact should affect the organizational impact These constructs are

represented in Figure 2.1 below:

Figure 2 The IS Success Model (DeLone & McLean, 1992)

In the proposed model, system quality refers to technical level measures and

information processing system itself such as convenience of access, reliability of

the computer system, realization of user expectations, online response time, ease

of use, ease of learning, response time, and system accuracy Information quality

targets the meaning level of the IS output or the quality of the information that the

system produces in the form of reports and it includes accuracy, timeliness,

precision, relevance, meaningfulness, accessibility, reliability, completeness and

adaptability Use reported by the users or the actual use as reported by the system

in terms of frequency of use User satisfaction measures of how the information

affects the user and responses to the use of the output of IS It related to the degree

of user‟s satisfaction Individual impact refers to the effect of information on the behavior of the recipient Executive efficiency, higher-quality decisions,

communication and operational control are some measurable variables Finally,

organizational impact contains measures about how the system and the

information provided influence the organization Profitability, productivity and

financial improvement are some of the measured items

2.3.2 DeLone and McLean: The 10 year Update (2003)

After the publication of the IS Success Model and following the authors‟ request for validation and extension of the model, DeLone and McLean proposed

minor refinements to their model and proposed an updated IS Success Model In

this updated model, they added a third quality dimension “Service Quality” and

combined “individual impact”, “organizational impact” into “Net Benefits” In additional, they added “Intention to Use” as an alternative measure for attitude

In terms of individual relationships between dimensions of the IS Success

Model, DeLone and McLean report that 7 different studies find a positive

relationship between system use and individual impact (Goodhue & Thompson,

1995; Guimaraes & Igbaria, 1997; Igbaria & Tan, 1997; Teng & Calhoun, 1996;

Torkzadeh & Doll, 1999; Weill & Vitale, 1999; Yuthas & Young, 1998) The

quality and individual impacts is studied in 4 articles reviewed by DeLone and

McLean (Etezadi-Amoli & Farhoomand, 1996; Seddon & Kiew, 1994; Teo &

Wong, 1998; Wixom & Watson, 2001)

Figure 3 The Updated IS Success Model (DeLone & McLean, 2003)

The 2003 DLMC IS Success Model includes two important modifications

and a clarification: first, the updated model includes the service quality dimension

to the model acknowledging the critique of Pitt (1995), and second, accepting

Seddon„s (1997) suggestion, the authors group both impact measures (individual impact and organizational impact) into a single measure called net benefits

DeLone & McLean (2003) also emphasize that IS success is a multidimensional

and interdependent construct, making it necessary to study the interrelationships

among those dimensions Finally, the authors clarify that use should happen before

experience with the use of the system will increase the satisfaction of the user

Furthermore, an increased user satisfaction will increase the intention to use which

ultimately will increase use (DeLone & McLean 2003)

As DeLone and McLean (2003) proposed that customers and suppliers use

the systems to make buying or selling decisions and execute business transactions,

making the internet a communication and IS phenomenon in the e-commerce

context The six success constructs of the DeLone & McLean IS Success Model

can be applied to the e-commerce environment as follows: System quality in the

E-commerce world measures the desired characteristics of an e-commerce system:

usability, availability, reliability, adaptability, and response time Information

quality refers to the content issue in the E-commerce environment The content

offered should be personalized, complete, relevant, easy to understand, and secure

Service quality should cover the support that the service provider offers to the

customer regardless of what business unit provides it before, during, and after the

E-commerce exchange This dimension is more important in an e-commerce

environment than ever before, because the users are now customers rather than

employees, and therefore, poor support for users will lead to lost customers and

lost sales Intention to use and Usage refers to any type of interaction that

customer experience cycle from information retrieval through purchase, payment,

receipt, and service Finally, net benefits are the most important success measures

that attempt to measure the impact of the system on customers, suppliers,

employees, organizations, markets, industries, economics, and even our societies

With DeLone & McLean IS Success Model, they want to demonstrate how

the model can be successfully transferred from a traditional exchange to an

E-commerce environment The dimensions offered are comprehensive enough and

parsimonious enough to study success in the E-commerce environment with the

existing success item measurements when constructing the research model

2.4 Expectancy disconfirmation theory (EDT)

The EDT model originally proposed by Oliver (1980) that repurchase intentions are

predicted and explained primarily by satisfaction that can predict and explain

consumers‟ satisfaction with products or services Satisfaction is jointly determined by expectations and disconfirmation Oliver and his colleagues (Oliver & Swan 1989a;

Oliver 1993) have advanced the original EDT (Oliver 1980) to include performance,

affect, and equity as the determinants of customer satisfaction and repurchase intention

Figure 4 Expectancy Disconfirmation Theory (Oliver, 1980)

The theory proposes that consumer first form expectations of products or services or

belief probabilities of attribute occurrence They then form post-usage perceptions about

performance and a comparison between initial expectations and performance known as

disconfirmation of expectations (Bhattacherjee & Premkumar, 2004; Spreng & Page,

2003; Oliver, 1980) A positive disconfirmation means performance was better than

expected, and a negative disconfirmation means performance was worse than expected

Therefore, customer satisfaction is shown as a positive function of the different between

perceived performance and expectations According to EDT, the better performance is,

or the more positive the disconfirmation, the greater the satisfaction (Yi, 1990)

One of the earliest authors applied EDT in the IS continuance context that was

Bhattacherjee (2001a) Using a sample of online banking users‟, he found that the most

predicts satisfaction and perceived usefulness, and both influence the consumer‟s

intention to continue using business-to-consumer e-commerce services

Chapter 3 Methodology

The purpose of this chapter was to describe the research model, hypotheses of this

study, explain the sample selection, describe the procedure used in designing the

instrument and collecting the data, provide an explanation about statistical procedures

used to analyze the data and development of measurement – reliability and validity

3.1 Research Framework

With the primary objectives of the study are to investigate Vietnamese consumer

individuals‟ intention use and reuse e-banking services, a conceptual framework is developed This section describes in detail each component or variable in the model and

the correlation between them Based on literature review, the framework encompasses

the following components: