Factors influencing the adoption of electronic banking in vietnam

The first version modifies Technology Acceptance Model with Decomposed Theory of Planned Behavior and Perceived Risk in which eight constructs including Actual Usage, Behavioral Intentio

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Factors Influencing the Adoption

of Electronic Banking in Vietnam

PHAN THUY KIEUInternational University - Vietnam National University Ho Chi Minh City -

phanthuykieu2006@gmail.com

NGUYEN DINH KHOIInternational University - Vietnam National University Ho Chi Minh City

PHAM THI BICH UYENInternational University - Vietnam National University Ho Chi Minh City

NGO DANG HOAN THIENInternational University - Vietnam National University Ho Chi Minh City

Abstract

The paper mainly adopts the extension of the theory of reasoned action from prior studies The first version modifies Technology Acceptance Model with Decomposed Theory of Planned Behavior and Perceived Risk in which eight constructs including Actual Usage, Behavioral Intention, Attitude toward using, Perceived Behavioral Control, Subjective Norm, Perceived Usefulness, Perceived Ease of Use, and Perceived Risk are used to examine which constructs directly influence the adoption of electronic banking by individuals in Vietnam After analyzing 405 valid questionnaires with SPSS and AMOS software version 20, the study, developed based on two common models of behavioral studies, shows that seven out of eight hypotheses are significant to the direct relationship between intention and attitude In addition, Perceived Risk is considered a barrier factor of using e-banking The paper also suggests the groundwork for further studies in Vietnam.

Keywords: electronic banking; traditional banking; tra; tam; tpb; perceived risk; Vietnam

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1 Introduction

One of the most important phenomena of this age is revolutionizing oftraditional banking through the developing of electronic communicationand access of huge individuals to the Internet The rapid technologicalprogress and development in the global financial market (Ozuru, 2010;Jonhson, 2005) has led to a new chapter on today’s trend in the bankingindustry Telecommunication and technological innovations allow banksapproach their customers and provide them with not only generalinformation but also the chance to experience interactive retail bankingtransactions With the convenience and efficiency, e-banking has become

an important channel to sell products and services, where customers donot need to queue up and even suffer their constrained manner contacted

to make the bank due to offering “anytime, anywhere” banking facilities(Lassar et al., 2005) Serving customer without the need of frontline staffswhile banks benefits from staff reduction, lesser branch sizes and paper-related works (Tan and Teo, 2000) are the great main motivation to usethe online banking (Bruno, 2003)

Today, personal service and convenience are still the critical factors inthe banking relationship, but they are defined differently Consumers stillwant to bank with a financial institution, but they do not necessarily want

to go to the bank They are utilizing computers and technology They arenow comfortable with personal computers and other electronic devices.They expect fast, efficient, and accurate service and the only way to costeffectively provide the instant, quality service that customers demand Forall these reasons, the banks delivery systems are completely changing Abetter understanding of factors that influence e-banking adoption in highlydeveloping market like Vietnam may help to further increase the adoptionrates in countries with improving infrastructures and economies (Davis,1989; Mathieson, 1991)

The rest of this paper is organized as follows Section 2 describesrelevant literature in the area of consumer behavior in the acceptance ofe-banking, including of e-commerce and information technology;theoretical models of information technology usage Section 3 discusseshypothesis development and the theoretical foundation of our researchmodel In section 4, it draws the research methodology Section 5 is theresults of data analysis, and Section 6 contains managerial implicationsand discussion The final section is the conclusions and directions forfuture research

achieved lots of substantial progresses E-commerce is playing a veryimportant role in the economic development Large numbers of buyers andsellers

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interact with each other through digital transactions These interactionspromote the evolution and shape complex structures of e-commercemarket

2.1.2 Electronic banking (E-banking)

Electronic Banking is simply the use of electronic means to transferfunds directly from one account to another, rather than by check or cash(Daniel, 1999) The rapid advanced in technology in banking industryforced players to re-formulate the information technology strategies thatthey employ to remain competitive Consequently, e-banking becomesmore popular that most commercial banks must pursue However, thetransaction in the branch is still the most common method used for banktransactions in Vietnam in relation the Vietnamese habits and culture torestrain the use of banking services

Moreover, e-banking services in Vietnam started late as compared tomany developed countries The use of e-banking has brought manybenefits among which include: no barrier limitations; convenient; lowercost; modern practices and fast services As a result, customers prefer theuse of e-banking because it saves time; it makes possible for the use ofinnovative product or service at a low transaction fee Besides, manycommercial banks have to upgrade the information technology with highersecurity quality to keep their current customers and attract newcustomers

2.1.3 User acceptance or adoption of information technology

Saga and Zmud (1994) declared that consumers’ acceptance oradoption of information technology is defined as ‘‘the act of receivinginformation technology use willingly” The findings from user acceptanceresearch suggest that when users are presented with a modern softwarepackage, a number of factors influence their decision about how and whenthey use it In the past two decades, several theories have emerged thatoffer deeper insights into acceptance of information technology Amongthese theories, the technology acceptance model (TAM) has received moreattention Several theories reveal the factors that may affect consumers’willingness to use an online financial service They consist of (1) Theory ofReasoned Action (Fishbein and Ajzen, 1975); (2) Decomposed Theory ofPlanned Behavior (Taylor et al 1995); (3) The first modified version ofTechnology Acceptance Model;

2.1.4 New opportunities for banking sectors in Vietnam

The commercial banks in Vietnam need to expand more modern productsrather than deliver information and prior basics services However, to improveand diversify e-banking services requires huge investment in informationtechnology This is a barrier to introduce new value added services such asselling insurance, investment products, or market stock quotes Telephonebanking can bring financial services to the home or office, especially if theyare affordable screen phones By noticing how much interest the customerexpresses, the banks can apply Interactive videos to the customer to maintainpersonal contact while still lowering the expense of delivery service With an

interactive video, commercial banks can reduce labor force in their branch.Complex life insurance products,

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open brokerage accounts, customized services can be widely availablewhere needed The interactive videos will be cost effective expertise Theinternet allows banks to offer products to customers outside the normalcustomer base of a branch Banks are aware of the customer’s need forthese services and plan to make them available before other sources do.2.1.5 Drawbacks

First of all, commercial banks are facing with some potential dangersand issues to be taken into account Because of increasingly allowedcustomers to bank outside of traditional bank facilities like AutomatedTeller Machines (ATM) or electronic home banking systems Nevertheless,customers only contact with their banks through (rather unsophisticated)electronic interfaces This also leads to the major difficulties in integratingthe legacy systems of a typical bank and selling additional products tocustomers (cross-selling) For example, the insurance companies took theopportunity of that to grab business from banks, selling savings products

to customers through their extensive distribution network Similarly, thedecrease in human interaction with customers could also lead to a lesssophisticated understanding of their needs, as they are not always able toexpress comments, criticisms or requests for new products whileinteracting with machines

2.2 Theoretical models of information technology usage

The first-line research has employed intention-based models, which useBehavioral Intension to predict usage and in turn, focus on the

identification of the determinants of intention, including: (1) The theory of

reasoned action (TRA) is a behavioral intention model, developed by

Fishbein and Ajzen (1980) to predict human behavior in general; including

the performance of any voluntary act, unless intent changes betweenassessment and performance of that behavior and whether a behavior willoccur (Ajzen and Fishbein, 1980; Fishbein and Ajzen, 1975) Moreover,Sheppard et al (1988) point out that the TRA was effective in predictingdifferent behaviors (e.g., study a few hours, go to a weekend job, or write

a letter) In TRA, attitude (ATT) towards a behavior and subjective norm(SN), are identified as determinants of behavior

Figure 1 The theory of reasoned action

(2) The First modified version technology acceptance model (TAM1) TAM is an adaptation of TRA to explain specifically computer-usage behavior (Davis,

1989) In the TAM, Davis proposed Perceived Usefulness (PU) and PerceivedEase of Use (PEOU) as two theoretical constructs affecting ATT towards a

technology, which affects the users’ behavior intention (BI) to the technology.

PU is a

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strong predictor of behavioral intentions in different environments whileTAM describes PEOU has an indirect effect through PU and ATT on the BI.TAM has become a widely used model for predicting the acceptance anduse of information systems, and has recently been applied to predictinternet adoption Unfortunately, the orignal TAM does not take intoaccount prior experience, age, gender and other personal characteristics.That is why the researchers adapt the first modified version TAM (TAM1)

Figure 2 The First modified version of technology acceptance

modelHowever, TAM1 has still not tested with actual measures of usagebehavior fully There are studies claimed that TAM’s fundamentalconstructs are unable to explain fully the variances in intention Moreover,one key benefit of using TAM1 to understand system usage behavior isthat it allows other factors to be incorporated easily into its basicframework, if desired, to explain better the effects of external variables onsystem usage (Hong, 2001), as well as factors influencing the extent ofuse of the internet in financial services (McKechnie, 2006) As a result ofthis, it is necessary to integrate TPB and TAM for the conceptual modelmeasured the willingness, attitudes and intentions towards using e-banking (Pavlou, 2003; Jaruwachirathanakul, 2005; Verhagen, 2006; Kim,2006) Furthermore, this integration will be combined with otherbehavioral constructs to verify how technology factors affect to adopt e-banking in Vietnam

(3) That is why the second line of research is added to predict user

intention The theory of planned behavior (TPB) was developed by Ajzen (1988) The theory proposes a model which can measure how human actions are

guided It predicts the occurrence of a particular behavior, provided thatbehavior is intentional The extension of the original TRA led to the formation of

as the introduction of a new construct with three factors: ATT, SN and Perceivedbehavioral control (PBC), which reflects perceptions of internal and externalconstraints on behavior In the TPB, Ajzen (1991) incorporates PBC as adeterminant of behavioral intention toward behavior In the contrary, intention

in turn relies on attitudes, SN and PBC (Ajzen, 2006) However, the researchersalso choose Decomposed TPB (DTPB) of Taylor and Todd (1995), showed theeffective guidance and fuller understanding of technology usage The coreconcept of the DTPB is based on the assumption that individuals make rationaldecisions and their actions are also based on the systematic use of information

and resources available to them Figure 3 illustrates the decomposed theory ofplanned behavior.

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Figure 3 Decomposed theory of planned behavior (Ajzen, 1991)

(4) The theory of perceived risk

Considering the importance of Perceived Risk, proposed by Bauer

(1960), suggested in the context of consumer behavior benefits are oftenaccompanied by risk, this research extends an area of informationsystems by looking into this factor integrated to the research framework ofthe e-banking in Vietnam Risk is the combination of the probability of anevent and its consequence when there is at least the possibility ofnegative consequences (Asnar, 2008) Perceived Risk is the uncertaintythat consumers confront when they are not capable of forecasting theconsequences of purchase decisions In a marketing (Lim, 2003) definesperceived risk as the nature and amount of risk perceived by a consumer

in contemplating a particular purchase action

Perceived risk is a major affecting intention to adopt or continue using agood or a service, including financial risk, performance risk, physical risk,social risk, psychological risk and time risk (Gan, 2006) In the online context,prior studies suggest the inclusion of perceived risk due to its importance ininfluencing online consumer behavior (Pavlou, 2003; Schlosser et al., 2006),especially in the area of e-banking (Gerrard et al., 2003) Existing studieshave produced mixed results on the role of perceived risk in the transactingonline (Yousafzai et al., 2003; Chen and Dhillon, 2003)

2.3 The definition of concepts

1 Perceived

usefulness

refers to the degree to which a person

using a particular system will enhance his

or her job performance

important to him think he should or should not

perform the behavior in question

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Use is generally measured by the

duration, and intensity of e-banking usage.

as the potential of loss in the pursuit of a

outcome from using electronic banking services

3.1 The development of hypotheses

3.1.1 Perceived Usefulness and Perceived ease of use to adopt using banking

e-Perceived Usefulness (PU) has formally been defined as the extent to

which a user subjectively believes that the use of a new technology or a

system will be useful or will improve his/her performance In terms of PU,there is also extensive research in the information systems communitythat provides evidence of its significant effect on usage intention (Lee,2009; Cheng, 2006; Wang, 2003; Chang, 2010) The ultimate reasonpeople employ e-banking that they find the system useful to their bankingtransactions Meanwhile, Perceived Ease of Use (PEOU) is defined as thedegree to which an individual believes that using a technology or a systemwill be effortless (Hamid, 2008; Huang, 2011; Lee, 2009; Shen, 2010) Guand Suh (2009) proposed that the systems need to be both easy to learnand easy to use to make the e-banking systems more useful

With high reliability of PEOU and PU as effective factors, Davis (1989)found that these two factors have strong relationship with actual usage ofinformation technology systems Firstly, PU has stronger correlation withusage of computer technology in comparison with PEOU because usersalways paid more attention to the necessity of using a technology.Secondly, PU also seen as being directly impacted by PEOU as the ease in

a system usage creates a potential impact on users’ perception of theusefulness of a system Based on this logical inference, the study proposedthe first hypothesis:

H1: Perceived ease of use and Perceived usefulness positively influence the use of e-banking

3.1.2 Perceived Usefulness and Attitude towards using e-banking

PU has not only been among the great priority in the use of e-bankingbut also a major factor that affects attitude towards acceptance ofinformation systems Previous authors (Taylor and Todd, 1995;Parthasarathy, 1998; Karahanna, 1999, and Hardgrave, 2003) found thatonly PU (Relative advantage) was a significant determinant of attitudetowards using e-banking Therefore, we proposed the second hypothesis:

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H2: Perceived usefulness positively influences attitude towards using

e-banking

3.1.3 Perceived usefulness and Behavioral Intention to use e-banking

Several works have shown that PU is an important antecedence to

behavioral intention to adopt and use technology (Davis, 1989, Venkatesh,2000) In the e-banking context, it is presumed that the level of usefulnesswhich e-banking offers above regular banking methods could affectintentions towards adoption and usage

Across many empirical tests of TAM, perceived usefulness has asignificant relationship with usage intentions Therefore, the followinghypothesis is tested:

H4: Perceived usefulness positively influences Behavioral Intention to use

e-banking

3.1.4 Attitude towards using and Behavioral Intention to use e-banking

Behavioral intention, as defined as a person’s intention to perform a

certain behavior, can be used to predict corresponding behavior as long as

the behavior is under volitional control, i.e., if the person can perform thebehavior voluntarily (Ajzen, 1980) Consequently, “intention is assumed tocapture the motivational factors that influence a behavior; they areindicators of how hard people are willing to try, or how much of an effortthey are planning to exert, so as to engage in a behavior” (Ajzen, 1991).The intention strength is decided by the subjective probability that aperson will implement the behavior, and this is weighted by setting thesubject along with a subjective probability involving the relationshipbetween the person and the behavior As mentioned before, a person’sintention to perform a certain behavior is influenced by the person’sattitude and the subjective norms toward the behavior Empiricalresearches support the strong relationship between behavioral intentionand behavior (Fishbein, 1975)

TAM emphasized that a positive attitude directly affects an individual’sintention to use the information systems Thus, attitude towards usinginformation system is the fundamental predictor of the users’ behavior -intention to use Moreover, previous authors imply that attitudes directlyimpact the intentions to adopt internet banking (Tan and Teo, 2000;Hernandez, 2007) Consequently, the study proposes that:

H3: Attitude toward using positively influences Behavioral Intention to use

e-banking.

3.1.5 Perceived Behavioral Control and Behavioral Intention

TPB asserts that it is possible to measure Perceived Behavioral Control

-people’s perception of the ease or the difficulty in performing the behavior ofinterest (Ajzen, 1991) PBC is as an exogenous variable that has both a directeffect on actual behavior and an indirect effect on actual behavior throughintentions (Haghighinasab, 2009) Firstly, the indirect effect is based on theassumption that PBC has motivational implications for behavioral intentions.When people believe that they have little control over performing a behavior

due to a lack of requisite resources and opportunities, their intentions toperform the behavior would be low, even if they have favorable attitudes and/

or the

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subjective norms to the performance of the behavior Hence, the structurallink from PBC to Behavioral Intention actually reflects the influence ofcontrol on actual behavior through intentions Secondly, the direct path

from PBC to Actual usage is explained by the manifestation of the actual

control of an individual over the behavior

Ajzen (1985) offers the following rationale for this direct path The firstreason, if intention is held constant, the effort needed to perform thebehavior is likely to increase with PBC In addition, PBC often serves as asubstitute for actual control, and the author hypothesized that PBC shouldhelp to predict actual usage if perceived control is an accurate estimate ofactual control Customers’ self-measurement of skills, opportunities andresources to adopt and use e-banking are the adequate consideration toengage in this particular behavior (Mathieson, 1991) Hence, PBC is amongthe key determinants of Behavioral intention, especially in e-bankingcontext

H6: Perceived Behavioral Control positively influences Behavioral

Intention to use e-banking.

3.1.6 Subjective Norm and Behavioral Intention to use e-banking

The significance of social influences on the individual via theappearance of a subjective norm is also examined in the TPB The role ofSubject norm as a determinant of IT usage is somewhat unclear

Subjective norm (SN) mentions the “person’s perception of the social

pressures that put on him to performing the behavior in question” (Ajzen, 1980) Subjective norms can be weighted directly by asking respondents

to evaluate the importance of surrounding people approval or disapprovalfor their performance in a given behavior (Ajzen, 1988)

Some researchers fail to identify the significant correlation of SN onintention (Davis, 1989; Shim, 2001; Shih and Fang, 2004) whereas othersreveal a significant relationship (Taylor and Todd, 1995; Vijayasarathy,2000) However, these results have been the fact that there were no realconsequences Although ambiguousness still surrounds this construct, thisstudy will include SN in the theoretical framework with the followinghypothesis:

H5: Subjective Norm positively influences Behavioral Intention to use

e-banking.

3.1.7 Perceived Risk and Attitude towards using e-banking

Attitude is populated to be the first antecedent of behavioral intention It is

"an individual’s positive or negative feelings about performing the target behavior” (Fishbein, 1975) Attitude toward behavior is a function of the

product of one’s salient beliefs that performing the behavior will lead tocertain outcomes and an evaluation of the outcomes Therefore, a person whohas strong beliefs that positive consequences will derive from performing thebehavior will have a positive attitude toward the behavior On the contrary, aperson who has strong beliefs that negative outcome will stem from thebehavior will demonstrate a negative attitude The role of perceived risk hasbeen investigated widely in the business arena in understanding customers’

intended and actual purchase behavior Perceived risk has beenconceptualized in the literatures in various means Moreover, risk levelassociated with certain dimensions will be elevated under a different context.Although studies