Factors influencing credit card use of customers in ho chi minh city an empirical analysis

Finding the predominant factors bank policy, convenience and compatibility which effect to credit card use can provide credit card providers with valuable insights then they improve thei

Secondly, I would like to thank my dear colleagues, friends and classmates for their valuable encouragement during the many months that I was working on this thesis Special thanks for people who spent their precious time with me in the in-depth

interview phase and who did join both pilot and main surveys

Last but not least, I would like to express my heartfelt thanks to my family for their support, their encouragement, and their faith during the time I completed my thesis

ABSTRACT

Credit cards are being used popular nowadays as a hot trendy in society There are many credit card providers in the fierce competition to increase number of people use their products and services The purpose of this thesis is to examine key factors influencing customer’s credit card use in Ho Chi Minh City

To empirically apply the conceptual model and test the hypotheses, data are collected through a questionnaire involving 118 bank customers who already knew about credit cards Data are analyzed using exploratory factor analysis and multiple regression

analysis

Convenience perceived has been defined as the strongest predictor of credit card use in

Ho Chi Minh City with β = 0.539, followed by compatibility perceived with β = 0.307; and policies were provided by bank with β = 0.124 However, the findings did not state the negative relationship that exists between risk barriers and credit card use of

customers in Ho Chi Minh City with ß = -0.037 and p = 0.5380

Finding the predominant factors (bank policy, convenience and compatibility) which effect to credit card use can provide credit card providers with valuable insights then they improve their policy as well as emphasize convenience and compatibility attributes

to instill confidence among consumers and motivate them to use credit cards

There is very limited previous research on Vietnamese credit card use Through a faceted framework, this study extends the literature on influence of bank policy,

multi-convenience, and compatibility and risk barriers in the context of credit card use among Vietnamese customers

Keywords - Credit Card Use, Bank Policy, Convenience, Compatibility, Risk Barriers

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION 1

1.1Research background 1

1.2Research motivation 4

1.3Research objective 5

1.4Research methodology and research scope 6

1.5Research contribution 7

1.6Research structure 7

CHAPTER 2: LITERATURE REVIEW 9

2.2 Bank’s policies 13

2.3 Convenience 14

2.5 Risk barriers 17

2.6 The conceptual model and hypotheses of the research 20

CHAPTER 3: RESEARCH METHODOLOGY 22

3.1 Research process 22

3.1.1 Step 1: Item generation step 22

3.1.2 Step 2: Pilot study 23

3.1.3 Step 3: Main study 23

3.2 Questionnaire design 25

3.3.1 Sample 27

3.3.2 Sampling method 28

3.4 Data analysis method 28

CHAPTER 4: DATA ANALYSIS 30

4.1 Respondents’ demographics 30

4.2 Reliability Analysis 32

4.3 Exploratory Factor Analysis (EFA) 34

4.3.1 EFA for variables 34

4.3.2 EFA for Dependent variables 37

4.4 Multiple Regression Analysis 38

CHAPTER 5: CONCLUSION, IMPLICATIONS, AND LIMITATIONS 47

5.1 Conclusion 47

5.2 Managerial Implications 47

5.3 Limitations and future research 49

REFERENCES 51

APPENDICES 59

APPENDIX A: Questionnaire (English Version) 59

APPENDIX B: Questionnaire (Vietnamese Version) 63

APPENDIX C: Histogram, Normal Regression & Scatter plot of Dependent 67

LIST OF TABLES

Table 2.1 Summary of main research findings on credit card use……… 12

Table 3.1 Summarize the reference sources of measurement scale used for each factors ……… 26

Table 3.2 Source of data collection……… 28

Table 4.1 Respondents' characteristic……… 31

Table 4.2 Reliability Statistics……… 33

Table 4.3: KMO and Bartlett's Test……… 34

Table 4.4: Rotated Component Matrix for Independent Variable……… 35

Table 4.5: Total Variance Explained of Dependent Variables……… 36

Table 4.6: Table KMO and Bartlett's Test……… 37

Table 4.7: Rotated Component Matrix for Dependent Variable……… 37

Table 4.8: Total Variance Explained of Independent Variables……… 38

Table 4.9: Casewise Diagnostics……… 39

Table 4.10: Correlations……… 40

Table 4.11: Model Summary……… 41

Table 4.12: ANOVA……… 42

Table 4.13: Coefficients……… 42

Table 4.14 Summary of hypotheses testing result……… 45

LIST OF FINGURES

Figure 2.1: A theoretical model……… 21 Figure 3.1: Research Process……… 25

CHAPTER 1: INTRODUCTION

This chapter introduces the research background, researches’ motivations,

objectives, methodology and scope; and its contribution

payment by credit cards for variety commodities from low to high value such as

electric/water bills, shopping, eating, household commodity, car, house, etc Besides, with economic growth, the number of people in the middle income increases together with the increasing of people gaining bank account Furthermore, credit card services and its delivery change a lot with the growing of technology which is considered as the most important factor (Suoranta, Mattila & Munnukka, 2005) Consequently, there are more people and businesses are joining in credit card use as advance financial electronic transactions, then the credit card as a payment method is increasing As a result, there are many tough competitions between credit cards providers in getting higher credit card market share

Credit card market grow significantly since the first credit cards were introduced

in the 1950s in USA (Durkin, 2000); with increasing number of customers hold credit cards (Devlin, Worthington & Gerrard, 2007) Credit cards are different with other payment modes as they are used as long term credit without any collateral at the time using money (Stavins, 1996, cited by Chakravorti, 2003) Many years ago, bank’s policy permitted only rich people could apply for credit cards Step by step, banks lower

qualifications for customers applying for new credit cards The fast growth of economy

in Asian countries has opened more opportunities for customers in those countries applying credit cards During the year 2007, credit card use in the Asia Pacific region stood at $1.3 trillion which was 30 percent of global credit card transactions with Japan lead the region in total transactions made through credit cards ($209 billion), follows by South Korea ($203 billion), Australia ($140 billion), Taiwan ($24 billion), then China, New Zealand and India (KPMG, 2009) Due to the huge growth of credit cards use among customers in the emerging markets, studying the customer’s credit card use in those markets is particularly important Many researchers believe that the rapid

increasing of new middle income customers and advantage technology in emerging markets are two of the determinants that make these markets become attractive to credit card providers around the world

There has been a rapid increase in credit card issuing in Vietnam recently

Between 2009 and 2011, the number of credit card issuing increases by 198 percent and 1.62 million credit cards are issued at the end of 2012 or 2.4 cards per 100 adults

(Lafferty, 2013) According to The State Bank (cited in Ocean Bank Annual Report, 2014), until end of October of 2013, Vietnam has 52 payment card providers, with estimated 64 million payment cards; among its credit cards is 3.6% Compare with the number 1% which Nielsen Research indicated in 2011 about the number of credit card users in Vietnam (as cited in Military Bank news, 2011), this is a great development of credit card use in Vietnam In addition, the credit cards were used widely after the Decision of government 291/QD-TTg in 2006 about the plan on non-cash payments for the period from 2006 to 2010 with an extension until 2020 and Regulations

20/200/NHNN about the issuing, using and supplying services to support card payment These decisions play very important roles in promoting non-cash transactions in

Vietnam, by developing infrastructure for non-cash payments and providing incentives

for financial institutions to apply more advanced technologies in non-cash payment systems Study by Spire Research and Consulting shows that Vietnam has been

beginning to develop into a cashless society and the Vietnam banking and credit card industry has been developing rapidly over the past 10 years (Spire, 2009) In terms of the overall card payments channel, the share of cash transactions decreased from 3.4%

in 2009 to 2.7% in 2013, while the share of card transactions increase from 1.5% in

2009 to 3.1% in 2013 (Business Journal, 2014) Dang (2013) states Vietnam credit card market is expected to have some major changes in the next ten years Most of well-known banks worldwide such as Citibank, ANZ, HSBC as well as local banks as such Vietcombank, Vietinbank, Maritimebank have already implemented many introduction and promotional programs to increase the awareness of credit cards to customers in Vietnam

The challenge of the credit card market in Vietnam is most of the population is still unbanked and cash still dominates as a main payment method for every day

transactions Besides, although Vietnam’s urban population growth has averaged around 3.5 percent in recent years; Vietnam still has one of the lowest urbanized rates in

emerging areas of Asia with the large proportion of the population that lives in the countryside where most of employees are in textiles, agriculture and fisheries fields (Lafferty, 2013) In 2012, some 20 percent of the population has bank accounts but only half of these actively use consumer banking services and many consumers, even though they owned credit or debit cards, still prefer to use cash to make payments for every day transactions in Vietnam (Lafferty, 2013)

However there are some significant advantages that make Vietnam become a hot destination for the credit card market Firstly, Vietnam is one of the fastest growing economies among the developing countries in Asia and Vietnam's GDP per capita

subsequently rose during the review period from US$1,097.1 in 2009 to US$1,728.4 in

2013 (Business Journal, 2014) This is reflected the developments of socio-economic status These developments allow the general Vietnamese to have a better quality of life Lawrence (2003) claims “Credit cards can be a convenient means of payment, a useful tool for learning financial responsibility, a resource in case of emergencies, a means to establishing a good credit history and a way to gain greater access to credit in the

future.” (p 5) With its convenience and usefulness, credit cards of course are being a trendy in the country has socio-economic developments as Vietnam Secondly,

Vietnam’s young population with a median age of 25 with forecast to grow continually

at an annual rate of around 1 percent and is expected to increase to 94.5 million by 2016 offers a good opportunity for continued economic growth at least in the short and

medium terms (Lafferty, 2013) Thirdly, the gradual changing in payment habit in Vietnam is an excellent condition for credit card market Especially, under Vietnam’s trade commitments to the WTO, since January 2011, foreign bank branches in Vietnam have been treated equally to domestic commercial banks in the areas of credit limits and credit guarantees and allowed to establish wholly owned subsidiary banks and set up branches in Vietnam As a result, several overseas banks have entered the market with strong competition to local bank in providing services with the latest technologies and marketing strategies As a result, people can own credit cards more easily than ever before and credit card use is more and more popular particularly in big cities such as Ho Chi Minh or Ha Noi Cities

1.2 Research motivation

As the discussion in research background, Vietnam possesses many advantages

to be an ideal destination of international credit card providers in near future According

to Dang (2013), Vietnam is a potential market for credit card providers despite of the limit of credit card use of credit cards due to many Vietnamese have not get acquainted with credit card and their lack of understanding of credit cards, as well as a limited card

acceptance network With an average profit per card at $6 in 2011, Vietnam is one of the world’s least profitable markets for credit cards (Lafferty, 2013) however its young population, fast-growing middle classes and huge economic growth potential, combined with improved network infrastructure, point towards a bright future for the Vietnamese cards market Anyhow, to be successful in Vietnamese market, such advantages are only necessary but not sufficient conditions Besides, not only international but also local credit card issuers are in aggressive competition to apply marketing strategies and

advertising to increase their market share Furthermore, understanding what customers’ need expect to the card service providers plays the very important role for the survival and successful of them Therefore, it requires credit cards providers to do deliberately and deeply studies to find out what factors stimulate using credit cards of customers In other words, the key factors affected with customers’ credit cards use need to be

examined With this way, credit card providers can increase their comprehension and knowledge of consumer behavior towards credit cards which are critical for planning a long term strategy to win the Vietnam’s payment card market This is one of the

motivations for author to develop this research

In addition, to the best knowledge of author, there have been very limited

researches on credit cards in Vietnam The numerous studies related to credit cards have been conducted in many countries however there was a few of such researches in

emerging market economies, which includes Vietnam In addition, due to legal,

structural, cultural, geographical, and socio-economic differences between countries, the credit card use may to be impacted by variety of factors This is the second motivation for author to conduct this study to explore which predominant factors effect to credit card use in the context of Vietnam, especially for Ho Chi Minh City

1.3 Research objective

The overall objective of this study is to examine key factors effecting to

customer’s credit card usa in Ho Chi Minh City In specifically, it answers for these following research questions:

RQ1: Is there a positive relation between bank policy and credit card use of customers in Ho Chi Minh City?

RQ2: Is there a positive relation between convenience and credit card use of customers in Ho Chi Minh City?

RQ3: Is there a positive relation between compatibility and credit card use of customers in Ho Chi Minh City?

RQ4: Is there a positive relation between risk barriers and credit card use of customers in Ho Chi Minh City?

1.4 Research methodology and research scope

This study uses questionnaire to collect data The survey questionnaire is

originally developed in English and then translated into Vietnamese with the help of some English experts The in-depth interview is conducted to modify the measurement scale After the qualitative phase, a quantitative pilot study is conducted in which

individual face to face interviews and online survey are undertaken to test interviewees’ understanding on the contents of questions in this questionnaires as well as to make sure the properly running of online survey The final questionnaire is launched in the

following main survey The questionnaire is sent to respondents by using Google Survey tool and paper The next step is analyzing the collected data The data of this research is processed using SPSS software with three main stages First, Cronbach’s Alpha is used

to test the reliability of the measurement scale Then, the validity of the measurement scale is checked by Exploratory Factor Analysis (EFA) Finally, simple regression and

multiple regressions are used as the main method for investigating the relationships among factors in the research model

This thesis focuses on the customers’ credit cards use in Ho Chi Minh City The author selects this city for research as it is biggest city with most of citizen are young and dynamic whose high income and technology skill The study is designed to gain a better understanding of the factors influencing use of credit cards Respondents of this study are people who live in Ho Chi Minh City and know about credit cards

From research perspective, there is very limited previous research on Vietnamese credit card use Through a multi-faceted framework, the study extends the literature on influence of bank policy, convenience, and compatibility and risk barriers in the context

of credit card use among Vietnamese customers to contribute not only the literature in terms of the factors affecting credit card use in Vietnam, but also serves to motivate similar studies to be conducted across the emerging market economies to determine whether the issues reported here are similar or different

1.6 Research structure

This study is organized into five chapters

It starts with the introduction chapter which presents an outline of this research This chapter includes background of the research, motivation for doing research, and research objectives Besides, research methodology and scope as well as research contribution are also mentioned in the first chapter

Chapter two reviews the theories in the literature of the overview of credit card and its use and four concepts which the author believe affect to credit card use of customers in Ho Chi Minh City, including bank’s policy, convenience, compatibility, and risk barrier Besides, hypotheses research model are also proposed in this chapter

Chapter three introduces research methodology used to empirically test the research model

Chapter four presents the results of data analysis

The final chapter discusses summarily the study’s core findings, suggests some recommendations for business strategy of credit card issuers based on findings and finally points out some limitations of the research

CHAPTER 2: LITERATURE REVIEW

Chapter 1 provides an outline of this thesis and identified its four research

questions This chapter reviews the academic literature related to these research

questions and develops hypotheses to test in answering them The literature overview about credit card use is introduced in Section 2.1 The theoretical issues and literature pertaining to RQ1, RQ2, RQ3 and RQ4 are discussed consequently in Section 2.2, Section 2.3, Section 2.4 and Section 2.5 Finally, research model is proposed with its constructs and relationship hypothesized among these constructs is also discussed in Section 2.6

2.1 Overview on credit card use

As a credit card is still a new product in Vietnam, it is necessary to start with a study whether or not the bank customers know about credit cards and if so, how their behavior to credit card use Credit card use in this study comprises use a credit card regularly, use a credit card for only specific purchase, like to use a credit card and not prefer to make payment by cash and thinking of applying for a new credit card (Khare et al., 2011)

This section will discussed about credit card’s working mechanism and

researches on credit card use in over the world

The development of high technology hasten the increasing of credit cards

(Suoranta, Mattila, and Munnukka, 2005), with the creation of technical services which allows operating of service at a global level, based on telecommunications and

information technologies Phau and Woo (2008) state that the advancement of

technology has made credit card is considered as a convenient mode of transaction Credit card symbolizes global reach (people can buy things they want online and have

them shipped to their countries), comfortable lifestyle, and a sense of achievement (Khare et al., 2011)

Following is the illustration of credit cards’ working mechanism

Source: International Journal of Service Science, Management, Engineering, and Technology (Varaprasad, Chandran, Sridharan & Unnithan, 2013)

From the mechanism, easily to see that customer, merchant, network and bank are all equally responsible for a smooth credit card transaction In Vietnam, Visa and MasterCard are the main players in credit cards who provide the network (Lafferty, 2013)

Several researches are conducted to study many constructs related to credit card use Consumer perception and attitude towards credit card use in Pakistan (Ahmed, Amunullah, & Hamid, 2009), consumers’ credit card use behavior in Malaysia (Ahmed,

Ismail, Sohail, Tabsh & Alias, 2010), the use and holding patterns of consumers in America (Delner & Katzenstein, 1994); some scholars present their findings from

Middle East focusing on correlates of credit card acceptance (Kaynak, Kucukemiroglu

& Ozmen, 1995); some researchers suggest to credit card companies for educating students about credit card use (Austin & Phillips, 2001); the use of credit cards and consumers’ attitudes (Durkin, 2000), some studious researchers developed a model using fashion orientation, credit card use, and compulsive buying (Park & Burns, 2005) Customers of different cultures have different views on the use of credit cards (Khare et al., 2011) Chan (1997) studies the demographic and attitudinal differences between active and inactive cardholders in Hong Kong The Wickramasinghe and Gurugamage (2009) try to understand the use patterns of credit cards in Sri Lanka and they find credit cards are used major because customers can purchase products on credit cards regularly;

it symbolizes status, and it is used for short-term funding Chinese households are more likely to use the credit facility for the purchase of consumer goods (Farrell, Gersch & Stephenson, 2006) Use patterns effect to Singapore credit cardholders (Gan et al 2008) Factors affecting credit card use in India (Khare et al., 2011) Lee and Kwon (2002) study about consumers’ use of credit cards: Store credit card use as an alternative

payment and financing medium Worthington et al (2007) in their study find credit cards are used for travel and entertainment in China Besides, several studies are

examined use patterns, age, gender and income influences on credit card ownership, and relationship of attitudes towards money with use of credit cards

Table 2.1: Summary of main research findings on credit card use

Reseacher Country Findings

Akin et al (2010) Turkey Benefits are offered by banks through credit cards which are

considered as a “bundle” of services Gan et al (2006) Singapore Low interest rate and absence of annual fees

Teoh et al (2013) Malaysia Benefits given by the bank and payment policies have

significant influence on credit card holder’s spending behavior/Banks increase the number of credit card holders dramatically by policies

Chakravorti

(2003)

America Many banks offer different incentives in order to attract

customers to apply for credit cards Khare et al, 2013 India Credit cards are considered as convenience in financial

transactions

Meidan and

Davos (1994)

Greece Convenience is the most important one of five factor effect

credit card use Maysami and

Williams (2002)

Singapore Convenience is the major attribute for using credit card Ahmed et al

(2010)

Malaysia Convenience and security are elements which credit cards

offer are most important for women Life style has an influence in spending attitude when using credit card Worthington et

Fashion orientation as a main predictor to credit card use

Nga et al (2011) Malaysia Materialism and compulsive buying behavior and their

influence on credit card use Lin (2011) Tainwan Compatible with consumers lifestyle and preferences

(2005)

Tainwan Customers worry about their privacy Laukkanen et al

(2007)

Finland Customers worry about confidentiality, personal information

and losing money Khalid et al

(2013)

Pakistan Informational barrier, security risk strict legal requirement and

low domestic acceptance effect to credit use and adoption significantly

In summary, many researches are conducted for other countries however researches about credit card use in Vietnam are very limited as well as very few studies about the influencing of specific items such as bank’s policy, convenience, and

compatibility and risk barriers directly in credit card use in the emerging markets To the best of author’s knowledge, only the study of Teoh, Chong and Yong (2013) is about bank’s policies influencing in credit card spending behavior among Malaysians, Khare

et al., (2011) is about convenience affected in credit card use regularly Besides, no study about the influencing of compatibility and risk barriers directly in credit card use; just has studies of Chemingui and Lallouna (2013), Rammile and Nel (2012) for general financial mobile services Thus, in order to fulfill such gap this study aims to test the influences of bank’s policies, convenience, compatibility and risk barriers which the author believes are the most predominant factors affect the credit card use in the context

of Vietnam

2.2 Bank’s policies

In this study, bank’s policies refer to the benefits which banks provide to credit card holder or customers who want to apply for new credit cards They comprise free gifts, earning points to exchange for gifts and cash rebate when spend using credit card (Teoh et al., 2013)

There are many experts claim that policy is very important factor for banks to attract not only new customers but also the loyalty of current customers Dowling and Uncles (1997) find that competition is a major reason of launch of many customer

loyalty schemes Many banks offer different incentives in order to attract customers to apply for credit cards (Chakravorti, 2003) Many banks are striving to improve their products because of the fierce competition of the credit card market (Subramaniam & Marimuthu, 2010) Liu (2009) states that credit card marketers should communicate

well and effectively about reward points programs, redemption procedure, and benefits

of redemption of reward points should to increase awareness of customers or potential customers Widening the benefits provided, loosening the qualifications for applying for credit cards, and a more flexible payment policy as well as applying unique polices make the banks increase the number of credit card holders dramatically (Teoh et al, 2011) Credit cards and other banking service are perceived by customers as a bundle (Akin et al., 2011) The incentives include no annual fees at the first year, cash rebate, point rewards, airline miles, shopping discounts, and facilitating payment in

installments Providing gift when applying credit card motivates customers to get new card and this is the last trend which bank is offering (Liu, 2009) In addition, some of the benefits could be the coverage in case of losing the credit card, accidents while on trips, and the card holders becoming unemployed or ill

Contrast to above statements, Zinman (2009) argue if the incentives which

customers are receiving make them uses credit cards as a main payment mode In

addition, to test if bank policy will effect to credit card use in context of Vietnam, the following hypothesis is developed:

Hypothesis 1: There is a positive impact of bank policy on credit card use

2.3 Convenience

In this study, convenience of using credit cards is included the advantage

compared to cash, more convenient than cash, not take too much cash such, the

necessary of credit cards when travelling oversea, credit card payment is safer than cash payment (Khare et al., 2011)

Many researches are conducted to examine of convenience as well as

inconvenience attributes to deferent status of credit card use such use regularly (Khare et

al, 2013), Safakli (2007) in his study found ““convenience” and “easiness and safety”

are the vital factors to be taken into account in order to pursue appropriate marketing strategies so as to satisfy needs and wants of existing and potential customers” The most important factor of five factors which affect to credit card use on Greek credit card market is convenience which is accounted for 37 percent of use (Meidan & Davos, 1994) Ahmed, Amanullah and Hamid (2009) in their study expose that the convenience and security element that credit cards offer is most important for women Besides, credit cards are used for travel and entertainment in China (2007) Credit card use is related to convenience, acceptance of credit card at local stores, and status symbol (Khare, 2011) The popularity of credit cards has risen because of the convenience of not having to carry cash and credit cards are considered as an open-ended, easily available credit source (Lee and Kwon, 2002) Kaynak, Kucukemiroglu and Ozmen (1995) in their study on credit card use in Turkey, find that the most important reason for using credit cards are availability of emergency funds, convenience during travel, and availability of cash for shopping Durkin (2000) asserts that “In modern commerce, credit cards serve

as a payment device in lieu of cash or checks for millions of routine purchases as well as for many transactions that would otherwise be inconvenient or perhaps impossible” (p.623) Holding and using of credit cards make consumers feel comfortable, especially when they spend on travel and entertainment (Ahmed, 2010)

Above findings show the convenience of credit card use however Lafferty report (2013) shows the key barrier for the growth of card payment in Vietnam is the low cards acceptance as 60 percent of payments at POS are international transactions and domestic transactions are made in the big cities as most of POSs are equipped in shopping malls and high ranking retailers In addition, many scholars expose some factors such as cash habit and low acceptance make credit cards become inconvenient in some emerging countries Laforet and Li (2005) in their study find that traditional cash‐carry banking culture is one of important barrier in adoption online banking of Chinese customers In

addition, the low acceptability of credit card is considered as a non-monetary cost

should be considered (Khalid et al., 2013) Chan (1997) find in Hong Kong that credit cards of inactive users are not widely accepted because of their unlimited use rate

With above discussion, following hypothesis is developed

Hypothesis 2: There is a positive impact of convenience on credit card use

2.4 Compatibility

The definition of compatibility in this study follows to Chemingui and Lallouna (2013) It refers to the match of credit card using with customers’ lifestyle, financial transaction style and the way doing jobs

Credit cards mainly target the young and affluent urban Vietnamese, who are attracted by a modern lifestyle Kucukemiroglu (1999) claims the lifestyle relates to interests people have, how they spend their time and resources, and views they hold about themselves and other people Therefore, lifestyle is different from personality Sjoberg & Engelberg (2005) states some certain brands are purchased while some are not purchased relates to lifestyle

To the best knowledge of author, there is very limited number of research about the compatibility credit card to its use However, the major determinant of behavioral intention is compatibility (Rogers, 2003) If users find the more compatible with the innovation, they likely adopt it highly (Scott, Plotnikoff, Karunamuni, Bize & Rodgers, 2008) Chemingui and Lallouna (2013) in their study find that the main factor

accelerating the intention of using this service is its compatibility with customers’ needs Compatibility has a strong direct effect on the intention to use mobile banking (Wessels and Drennan, 2010) In addition, Lin (2011) suggests that the customers more likely adopt mobile banking services when they realize that these are compatible with their

lifestyles and preferences Ilie et al (2005) (cited by Lin, 2011) expose that “greater compatibility between individual needs and technological innovation is preferable because it allows the innovation to be interpreted in a more familiar context” (p 255)

Liang et al (2006) believes using money today but pay in the future when using credit cards has meaningful for people enjoy “Lifestyle appears to play an important role in credit card ownership.” (Khare et al., 2011, p.250) Devlin, Worthington and Gerrard (2007) find that credit cardholders are of two types, first one is convenience users and second type is installment users There is a relationship between social class and use of credit cards with upper social class used credit card as convenience financial mode while lower social class used credit cards as installment (Mathew & Slocum,

1969, cited by Khalid, 2013).Whereas credit card users are divided into two groups are transactor and revolver (Worthington, Stewart& Lu (2007) They also conclude that transactor users find it easier to pay through credit card rather than cash Another

finding by other researchers is low socio-economic classes people use their cards for financing purposes (Gan, Mayrami & Koh, 2008) Bernthal, Crockett and Rose (2005) state credit card represents a lifestyle and suggest that credit cards have the influence in forming a lifestyle for customers In addition, study shows that credit cards convey certain values and lifestyle patterns of the user The use of credit cards allows customers

to achieve desired lifestyle (Bernthal, Crockett & Rose, 2005)

In conclusion, bases on previous studies about effecting of compatibility on mobile financial services and further discussion about the compatibility of credit cards, this study explores whether compatibility has influence to the credit card use in context

of Vietnam

Hypothesis 3: There is a positive impact of compatibility on credit card use

2.5 Risk barriers

In this study, risk barriers is security concerning when using credit card

According to Chemingui and Lallouna (2013), risk barriers comprises the card stolen, unsecure of personal information providing, other people can access to account and credit card system is not secure

Many scholars in their researches define about the security Polatoglu and Ekin (2001) expose that reliability, safety, and privacy are three dimensions of security

comprises Dukin (2000) states “Credit cards have also become the primary source of unsecured open-end revolving credit, and they have largely replaced the installment-purchase plans that were important to the sales volume at many retail stores in earlier decades.” (p 1) Ram and Sheth (1989) (as cited in Rammile & Nel, 2012) define “The risk barrier explains the degree of risk associated with technological innovation” (p 5) Security is defined as protection against credit cards fraud or in the case of card

lost/stolen and bills and balances shall be accurate by Arthur and Dimitris (1994) and they find security is an important criterion when customers are selecting credit cards in this study

Perceived risk in financial services marketing is an important factor from the consumers’ point of view for purchase decisions and is also an issue of significance to service marketers (Goyal, 2008) In addition, most online vendors allow consumers to pay through credit card, which effectively limits the number of consumers immediately Park, Lee and Ahn (2004) define that “perceived risk in the context of online transaction (PRT) as a possible transaction risk that consumers can face when exposed to electronic means of doing commerce” (p.12) Exposing information of credit card to hackers or unknown vendors is still a major security concern (Sindhav & Balazs, 1999) Tan and Teo (2000) expose with the arising of open public network use, security concern is emphasized as being the most important factor inhibiting the adoption and use of

internet banking As credit card is one of the modes of internet banking, this concept indirectly shows the effect of security perceived to credit card use

There also have many previous researches about security positively and

negatively effects on credit cards use Khalid, Butt, Murtaza and Khizar (2013) in their research found the protection against credit cards fraud or in the case of card lost/stolen are two factors which effect to use and adoption of credit cards significantly Liao and Cheung (2002) find that confidentiality is a major concern which increases risk among customers Ahmed et al (2009) in their study about Banking Industry in Pakistan find credit card use and adoption is greatly affected by security factor A survey is conducted

in USA to asking US banks about the barriers for internet banking use and it found security is major concern (Consulting, 1996, cited by Narsi, 2007) (p.147) Narsi (2011) also find perceived risk appears to be an important inhibitor to the adoption of internet banking Customers do not use mobile banking because they are afraid of making

mistakes while conducting mobile banking activities, as well as feelings of insecurity (Laukkanen, Sinkkonen, Kivijarvi & Laukkanen, 2007) In addition, they fear that they may lose money and the private information when using mobile banking (Laukkanen et al., 2007) However, Rammile and Nel (2012) in their study find that no impact of risk barriers to cell phone banking adoption The finding in Chemingui and Lallouna (2013) also shows no influence of risk barriers on mobile financial services

Data of Vietnam State Bank shows only 9 of the 41 card issuing organizations utilize the chip-based security technology in Vietnam (Lafferty, 2013) Besides, high technology is not really developed in nationwide of Vietnam Therefore, with the above findings of scholars, risk barriers is also a concern of many customers Therefore, the following hypothesis is proposed:

Hypothesis 4: There is a negative impact of risk barriers on credit card use

Based on the review of some related literature and hypotheses developed, the following model is proposed (see Figure 2.1)

2.6 The conceptual model and hypotheses of the research

The conceptual framework is presented in Figure 2.1 and consisting of four hypotheses from H1 to H4 They are in independent and quantitative variables, they affect directly on credit card use, a dependent variable

Figure 2.1: A research model

Following are four hypotheses which are proposed for this research:

H1: There is a positive impact of bank policy on credit card use

H2: There is a positive impact of convenience on credit card use

H3: There is a positive impact of compatibility on credit card use

H4: There is a negative impact of risk barriers on credit card use

In summary, this chapter presents theoretical background of each concept in model Based on discussion of literature review, credit card use is affected by four factors, these are: bank’s policy, convenience, compatibility and risk barriers Selecting these factors to build the model because author see the relations between them with some dependent variable which are very close to concept of credit card use are

examined in some previous studies by many scholars The next chapter will discuss about methodology which is used to analyze the data and test hypotheses of the research model

CHAPTER 3: RESEARCH METHODOLOGY

This chapter presents research methodology of this study First, it started with research process sample description, followed by questionnaire design and data

collection method Data analysis method was mentioned in this chapter Beside, this chapter also aimed at explaining the research approach choice and presenting the

purposes of using that method

3.1 Research process

The research process included item generation step, pilot step and main study (Hair, Black, Babin, & Anderson, 2009) which was presented in Figure 3.1

3.1.1 Step 1: Item generation step

From the literature review of chapter 2, the draft questionnaire was developed with the measurement scales (see table 3.2) Then it was followed by conducting interviews using an in-depth interview method The survey questionnaire was originally designed in English and then translated into Vietnamese by the researcher with the support of

English experts Concerning to this qualitative phase, the Vietnamese version of the survey questionnaire was pre-tested using in-depth interviews during two weeks with five experts to collect their ideas about the accuracy, the clarity, and the

understandability of the questionnaire During the interview, the author also wanted to find out if the chosen measurement scale was suitable for conducting the research in Ho Chi Minh City All the comments from the interviewees were gathered with the aim to modify the measurement scale

3.1.2 Step 2: Pilot study

In this step, the purpose was not to collect the data The purpose of the pilot survey was to test preliminarily the viability of the questionnaire and to see if there are any needed modifications or improvements Then, the final questionnaire will be revised based on pilot SPSS check and feedbacks from participants if have

3.1.3 Step 3: Main study

After having the final questionnaire, the survey was conducted in mass Survey was utilized to collect data for testing the research’s hypotheses Participants self-

completed the survey with most of items were measured by five-point Likert scale, anchor points including “strongly disagree” (= 1), “disagree” (= 2), “neutral” (= 3),

“agree” (= 4), and “strongly agree” (=5) The questionnaire was delivered to

respondents by using Google Survey tool and paper Respondents received

questionnaire’s link through emails and they have two weeks to complete the

questionnaires Two week after the initial invitation, the reminder email was sent to encourage respondents to participate as well as thank them if they already complete it

Following was the summary of whole process for this research

Item generation

Questionnaire

In-depth Interviews

Final Draft Questionnaire Revision

Quantitative pilot study

Questionnaire

Quantitative main study

Official Survey

Reliability Analysis

Deleted 1 item (in Use scale)

Exploratory Factor Analysis

Deleted 1 item (in Convenience Scale)

Regression Analysis

Conclusion & Limitation

Figure 3.1: Research Process

The second section explored the determinants affecting to the credit card use All the variables in the model were measured with the scale which were developed by other researchers All concepts’ names were eliminated from the questionnaire to avoid bias response Besides, all questions were presented continuously in one table

Demographics information included income, gender, age and education of the respondents was mentioned in third section Such information was used to classify and compare groups of respondents

Table 3.1 Summarize the reference sources of measurement scale used for each factors

Banks’s policies

I apply for credit card to get free gifts

I spend using credit card to earn points and exchange for gifts

I was attracted by the cash rebate system, thus I always spend using

credit card

Teoh et al., (2013)

Convenience

There are more advantages with credit card payments, than with cash

It is more convenient to use credit card payment, rather than cash

Using a credit card means that I do not have to worry about taking too

much cash with me

It is necessary to have a credit card with me when I travel overseas

It is safer to use credit cards payment compared to cash payment

Khare et al., (2011)

Compatibility

Using credit card would be compatible with my lifestyle

Selecting credit card matches the way I like to manage my financial

I think my money could be stolen easily if I use credit card

I do not feel completely secure when providing personal information

while using credit card

I am worried when using credit card because other people could access

my account

Credit card system is not secure

Chemingui & Lallouna, (2013)

Use

I prefer to use a credit card regularly

I occasionally use a credit card for only specific purchases

I like to use a credit card and not prefer to make payment by cash

I am thinking of applying for a new credit card

Khare et al., (2011)

The sample size needed to be big enough for statistical analysis For EFA

analysis, the minimum sample for appropriate use for statistical analysis is equal to or greater than five times of number of variables, but not less than 100 (Hair et al., 2009)

n >= 100 and n >= 5k (k: number of variables)

The model in this study consist 5 factors with 18 variables so that the necessary sample size should be: 19*5= 95 observations

For standard multiple regression analysis, Nguyen (2011) emphasized that the sample size must satisfy:

n > 50 + 8m ( m: number of independent variables)

There were four independent variables in this research Therefore, the minimum sample requires running multiple regression in this study should be: n > 50 + 8 * 4= 82 observations According to Green (as cited in Nguyen, 2011), this formula was

appropriate for model with m < 7

Summarily, with 15 dependent variables and 4 independent variables, this

research needs 100 observations at least for running EFA and regression

respondents There were total 158 responses collected; the response rate was

However, there only 118 responses were qualified for data analysis process Total

40 responses were deleted with 14 questionnaires indicated that respondents had no idea about credit card and 26 questionnaires were eliminated because they were invalid (respondents just chose one option for all questions or their answers were implausible) Finally, 118 questionnaires were used as valid data for this research This sample size is satisfying the minimum samples size

3.4 Data analysis method

The collected data and statistical tests were processed by SPSS - Statistical

software package - version 16 First, the validity and reliability of the scale instrument were checked by running Cronbach’s Alpha analysis and Exploratory Factor Analysis

(EFA) The items which were not satisfied the conditions of reliability and validity were deleted before running regression Finally, multiple regressions were used to identify the correlation and measure the impact level of each independent variable to credit card use

In summary, this chapter described the choice and adaption of measurement scale construction, sample size, and research method employed to process the collected data

A questionnaire was developed for data collection; it was distributed directly and via email to respondents This study was designed into three phases: first was qualitative phase (in-depth interview), second was quantitative pilot phase and third was

quantitative main survey The in-depth interview was conducted to modify the

measurement scale After the qualitative phase, the questionnaire was adjusted slightly for more easy and accuracy to understand Main survey was conducted after the

questionnaire had revised after pilot survey The next chapter will present data analysis results of main survey

CHAPTER 4: DATA ANALYSIS

Chapter 3 presented research methodology to examine scale validation and analyze the collected data In chapter 4, results of study would be shown and analyzed with sample n=100 First, respondents’ demographics were summarized Secondly, results of scale validation were presented In this section, the data of this research was evaluated through two steps Step 1 used Cronbach’s Alpha and Exploratory Factor Analysis (EFA) to examine reliability and validity of the scale measurement In step 2, researcher employed multiple regressions to test the four hypotheses Finally, results of hypotheses testing were discussed

4.1 Respondents’ demographics

The results of the demographics analysis were summarized in table 4.1

Initial analysis of data indicated that gender was not equally between female and male Female was slight dominant with 55.93% of respondents and male was 44.07% of respondents

Most of the respondents in this study were young people from 26 to 35 years old with 69.49% of total sample The balance was divided by 12.71% respondents for age group between 19 and 25 years old and 16.95% for the age from 36 to 45 years old, just one respondent older than 45 year olds

Education was divided in 3 groups with post-graduated group occupied 52.54%, under-graduated group occupied 33.90% Moreover, the percentage of respondents in college group was just 13.56

Income per month of most of respondents was rather high 35.59% respondents revealed that their income ranged from 6 to 12 million VND 27.97% respondents’ had

income from 12 to 18 million VND There were about 32.20% people earned more than

18 million VND every month, and the last portion with the lowest percentages 4.25% was the respondents with the income under 6 million VND per month

Table 4.1 Respondents' characteristic

Demographic profile Category Frequency Percentage (%)