Factors affecting customers intention to use sredit card

ABBREVIATIONS ATM: Automated teller machine ATT: Attitude towards using credit card AVE: Average variance extracted EDC: Electronic data capture EFA: Exploratory factor analysis FAQ: Fre

DEDICATION

To my loving family and friends who support me a lot in my life, study, and work

ACKNOWLEDGEMENTS

Composing this master thesis is a long journey with many unexpected ups and downs; thanks to my great family, good friends, colleagues, and resourceful supervisor, I have accomplished this goal I am blessed beyond all measures, and I just want to say thank you

I wish to extend special thanks to my supervisor, Dr Tran Phuong Thao, for all your time, advice, comments, and encouragement I could not have even imagined how I would have completed this thesis without your support Also, I would like to thank Dr Nguyen Dinh Tho, Dr Nguyen Thi Mai Trang, and Dr Dinh Thai Hoang, who all provide me initial foundation of research design as well as data analysis To the ISB research committee, I am thankful for your time, comments, and kind words that helped me through this process

To my friends at Master of Business program

ABSTRACT

Vietnam

CHAPTER 2 - LITERATURE REVIEW, HYPOTHESES

2.2 Customer

3.1 Research process 21

CHAPTER 4

APPENDICES

Appendix A: Questionnaire (English - Vietnamese version) Appendix B: KMO and Bartlett

Page

Figure 2.1: The Theory of Reasoned Action 9

Figure 2.2: The Theory of Planned Behavior 10

Figure 2.3: Conceptual Model 19

Figure 3.1: Research process 22

LIST OF TABLES

Page

Table 3.1: Scale Items 24 Table 4.1: Profile of respondents 30 Table 4.2: Total Cronbach

ABBREVIATIONS

ATM: Automated teller machine ATT: Attitude towards using credit card AVE: Average variance extracted EDC: Electronic data capture EFA: Exploratory factor analysis FAQ: Frequently asked questions INF: Information about credit card INT: Customer

CHAPTER 1 - INTRODUCTION

1.1 Background of study

Payment represents both cash and non-cash financial transactions In cash payment, cash moves directly from the buyers

Credit card was first issued in USA by the Western Union in 1914, then it has been the most popular and advanced means of payment and settlement (Bai & Chen, 2013; Kaynak, Kucukemiroglu, & Ozmen, 1995) Credit card payment is the preferred payment method to purchase goods and services abroad due to factors such as convenience, security, and costs, accounting for 74% of all non-cash payments transactions worldwide (Capgemini, 2014) It

is referred as the mean of payment that involves the concept of buying first and paying later (Amin, 2012a) It allows for purchases against a pre-approved line of credit; the account holder has the choice of whether to pay off the entire balance without interest or opt for monthly installments with the balance serving as revolving credit with interest (Euromonitor International, 2010; Foscht et al., 2010) Furthermore, it is also easier to obtain credit card than applying for personal loan, which requires the applicant to comply with more formalities like providing guarantors or collaterals (Ahmed, Ismail, Sadiq Sohail, Tabsh, & Alias, 2010) In other words, credit card is a credit certificate issued by banks and non-bank financial institutions to users so as to be used both as a convenient payment medium in place of cash and cheques and as a means of obtaining short-term revolving credit (Abdul- Muhmin & Umar, 2007; Bai & Chen, 2013)

In the literature, scholars are interested in doing research on credit card, especially its pattern usage and customer

attitude towards behavior (Amin, 2012a), subjective norm (Amin, 2012a; Celik, 2011), perceived usefulness, perceived ease of use (Celik, 2011); perceived risk (

ensuring the safety, convenience and efficiency of payment systems and non-cash payment instruments; striving to reduce the ratio of cash to total payment instruments to around 15%

by 2020 (Le & Lim, 2008)

Credit card has been introduced in Vietnam since 1996, but credit card usage still deals with limitations In many economically developed countries, credit card ownership is so widespread among customers that penetration rates are approaching 100 percent (Abdul-Muhmin & Umar, 2007); however, there are only 2.43 million credit cards issued in Vietnam (State Bank of Vietnam, 2014b) while the population of Vietnam is expected to reach 90 million at the end of the year 2013 (Tuoitrenews, 2012) This means one credit card per 37 persons, whereas the corresponding figure for Europe is one for 10 persons, and for the USA is one credit card for every 4 persons (Kaynak & Harcar, 2001) Additionally, the number of credit cards is too small in comparison to the total of 46,762,997 personal bank accounts (State Bank of Vietnam, 2014c) Therefore, Vietnam has a huge potential for credit cards expansion

Moreover, cash payment is still

over 150 banks and credit institutions fairly competing in Vietnam these days (State Bank of Vietnam, 2014a) Customers no longer just bank with one institution but are increasingly using a number of banks at the same time and have thus become

The data collection is based on administered questionnaire towards individual customer of commercial banks The questionnaire is designed to capture custormer

Chapter 3 renders a discussion on research designing, sampling, and measurements of constructs in research model

Chapter 4 conveys results of analyzing the collected data, concentrating on testing hypotheses proposed in Chapter 2

Chapter 5 provides roundup and discussion on the findings of research as well as research limitations and propositions for future work

CHAPTER 2 - LITERATURE REVIEW, HYPOTHESES

AND CONCEPTUAL MODEL

This chapter discusses a thorough review of foundational theories and prior studies on customer

Figure 2.1: The Theory of Reasoned Action

(Source: Fishbein & Ajzen, 1975)

TRA model has been applied in different contexts According to Amin (2012b), various academic works have employed the TRA model into their studies because of three reasons Firstly, the theory is well suited for the purpose of examining and predicting a particular behavior Secondly, it has been praised for its flexibility to be applied into different contexts of research like online stock trading, knowledge sharing, banking, and the marketing area Thirdly, the TRA can be used to measure behavioral intention and actual of

a particular situations, systems or even products

2.1.2 Theory of Planned Behavior (TPB)

The TRA is questioned because it assumes that all human behaviors are volitional and rational (Chang, 1998) It means that an individual has full control over his/her behavior though not all behaviors are fully volitional or fully controlled by consumers due to various factors Therefore, TPB extends from TRA by incorporating an additional construct, namely perceived behavior control, to account for situations in which an individual lacks substantial control over the targeted behavior (Ajzen, 1991) According to TPB, an individual

2.2 Customer

A study carried out in Turkey by Kaynak and Harcar (2001) to examine consumer

Typically, Amin (2012b) analyses the probability of Islamic credit card usage intention among Islamic bank customers and finds that financial recommendation, knowledge on credit card, age, marital status, religion and education level significantly affect the customer

(2011) claims attitude as a significant determinant of Islamic personal financing usage among Malaysian bank customers; especially, Amin (2012b) finds that attitude has strong influence over the behavioral intention to use Islamic credit card Meiden (as cited in Chan, 1997) insists that the greatest determinant of whether a cardholder is inactive or active is attitude A research by Kaynak and Harcar (2001) verifies the strong relationship between the ownership and positive attitude towards credit card

Vietnam is a developing country where credit card has been introduced for about two decades but not so popularly used The customer

and

common payment instrument in the world and it has been launched in Vietnam with good growth over years, it is expected that social influence positively impacts on Vietnamese bank customer

As such, perceived credibility is expected to positively impact on Vietnamese bank customer

customer as it is one of the most frequently quoted reasons for having a card (Ahmed et al., 2010; Chan, 1997)

Although credit cards have been in Vietnam since 1996, there have been only 15 issuers and the scope of launching is still quite narrow, mainly in big cities like Hanoi, Ho Chi Minh, and some tourist spots (VCCInews, 2014) In a survey done by Nielson Finance IPG (2011), only 42% of Vietnamese customers aware of credit card; a number of customers have not enough basic information about credit card as well as promotion ads about it This turns to be a barrier against credit card growth Therefore, the following hypothesis is developed:

Hypothesis 5: Information about credit card has a positive effect on customer

H2(-) H1(+)

H3(+) H4(+) H5(+)

H6(+)

Figure 2.3: Conceptual Model

Hypothesis 1: Attitude towards using credit card has a positive effect on customer

perceived credibility, information about credit card, and materialism were added to form the conceptual model with six hypotheses

CHAPTER 3

After analyzing the data collected, the research results were interpreted to give out research conclusion and implications

Figure 3.1: Research process

3.2 Measurement

3.2.1 Measurement scale

The questionnaire was divided into two sections One section consisted of demographic information (gender, marital status, age, education level, working field, and income) while the other consisted of the measurement of variables There were seven constructs to be examined in latter section, namely: attitude towards using credit card,

Identify the problem

Review the literature

- Variables defined

- Hypotheses & Conceptual model

Research design developed

(Type, purpose, timeframe, scope, environment)

- Data collection design

perceived financial cost, social influence, perceived credibility, information about credit card, materialism, and customer

Table 3.1: Scale Items

Attitude towards

using credit card

(ATT)

ATT1 It is a good idea to have something

now and pay for it later

Pattarin & Cosma (2012), Amin & Ramayah (2010), Al- Smadi (2012)

ATT2 Having credit card is a good idea

ATT3 I have positive perception on credit

card

ATT4 Credit card is beneficial

ATT5 Using Credit card is wise

ATT6 I like the idea of having credit card

ATT7 I do not like borrowing money

Perceived financial

cost (PFC)

PFC1 The total fee of using credit card is

higher than using other methods of payment

Luarn & Lin (2005), Sripalawat et al (2011)

PFC2 The credit card issuers charge me lot

of money in case of late making monthly payment

PFC3 Credit card monthly installment is

cost burden to me

Social influence

(SI)

SI1 People who are important to me

think that I should use credit cards

Yu (2012), Thakur & Srivastava (2014), Al- Smadi (2012)

SI2 People who are familiar with me

think that I should use credit cards

SI3 People who influence my behavior

think that I should use credit cards

SI4 Most people surrounding with me

use credit cards

SI5 People whose opinion I value think I

should use credit cards

Perceived

credibility (PC)

PC1 I believe my information is kept

confidential when using credit cards

Yu (2012), Amin (2007,

2008)

PC2 I believe my transactions are secured

when using credit cards

PC3 I believe my privacy would not be

divulged when using credit cards

PC4 I believe the banking environment is

safe

Measures Code Research Items Source

Information about

Credit card (INF)

INF1 I have generally received enough

information about credit cards

Amin (2007, 2008); Nasri (2011)

INF2 I received enough information about

the promotion of credit cards

INF3 I obtained information on credit

cards via the bank and its management

Materialism

(MAT)

MAT1 I admire people who own expensive

homes, cars, and clothes

Richins (2004)

MAT2 The things I own say a lot about how

well I

As commented from respondents, one item measuring

A total of 500 questionnaires were distributed and 387 responses were received, showing a response rate of about 77 percent Such a high response rate was mainly due to the fact that the questionnaires were collected when the respondents completed the forms However, only 314 questionnaires were usable (63 percent of total questionnaires distributed and 81 percent of total returned ones) due to unqualified respondents and incomplete forms This provides a good sample size for factor analysis as recommended by Comrey and Lee (1992)

3.4 Data analysis

Once data collection was completed, raw data was compiled, sorted, and coded to have the required quality, accuracy and completeness Edited data was input and analyzed by SPSSv22.0 Variables

3.4.2 Exploratory factor analysis (EFA)

In order to evaluate the validity and the correlation among variables to determine extracted factors that qualified for further data analysis, EFA was applied using Principal Component Analysis alongside with Varimax and Kaiser Normalization rotation method According to Pallant (2011), some requirements of EFA should be satisfied:

- The minimum of sample size should be at least 100 and rate of observations per items of models should be five cases for each of the items, it means the minimum required sample size should be at least 165 cases (33 items x 5) The actual sample size was 315, higher than 165 so it met the requirement

- Kaiser-Meyor-Olkin (KMO) test must be equal or above 0.60 (Tabachnick & Fidell, 2007)

- Barllett

3.5 Chapter summary

Chapter 3 gives details of the research design, sampling, data collection procedure, measurement of variables, and the data analysis techniques that were applied Survey method with convenient sampling method was used Questionnaire was designed with statements derived from previous studies A pilot test was taken prior to actual survey; both were done in Ho Chi Minh City Targeted respondent of the final questionnaire was person with bank account but not a credit card holder SPSSv22.0 was used to support data analysis techniques including reliability measure, factor analysis, and multiple regression