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Internet
Adoption of internet banking banking
services in Gujarat services in
Gujarat
An extension of TAM with perceived security
and social influence 147
Kiran J. Patel Received 2 August 2016
V.M. Patel College of Management Studies, Ganpat University, Revised 20 November 2016
2 February 2017
Mehsana, India, and Accepted 13 February 2017
Hiren J. Patel
Department of Business Administration, V.M. Patel Institute of Management,
Mehsana, India

Abstract
Purpose – The purpose of this paper is to validate the technology acceptance model (TAM) and its extended
form to understand the factors influencing internet banking adoption in Gujarat.
Design/methodology/approach – Extended TAM incorporates perceived security and social influence,
important variables in internet banking literature. Using a questionnaire survey, data relating to the variables
are collected from 284 individuals who are/were using internet banking services and subjected to
confirmatory factor analysis (CFA) to establish validity and structural equation modeling (SEM) to identify
important factors influencing internet banking adoption.
Findings – The empirical results of SEM showed that the extended TAM has higher predictability than the
TAM in internet banking settings. The results highlighted that the intention to use internet banking is
positively influenced mainly by perceived security, followed by other significant factors, namely, perceived
usefulness, perceived ease of use and social influence.
Practical implications – The findings of this paper enable internet banking service providers to develop/
modify new/existing internet banking services in order to achieve higher adoption rates of internet banking.
Originality/value – Additional incorporated variables in a new model considerably contribute to improving
the understanding of internet banking adoption in Gujarat.
Keywords SEM, TAM, Social influence, CFA, Internet banking, Perceived security
Paper type Research paper

1. Introduction
The financial services sector, more specifically the banking sector, is undergoing
rapid technological changes compared to the banks’ previous approach to operate.
The advancement in information and communication technology (ICT) has brought
noteworthy transformation in the delivery of financial services and retail banking services
in particular, not only in developed countries but also in developing economies such as
India. This transformation in ICT has directed the banks to deliver their services as per
the changing needs and preferences of its customers. Using internet banking to serve its
customers has become a strategic tool for banks to gain competitive advantage in the
industry (Agarwal et al., 2009; Mann and Sahni, 2012).
Internet banking, an alternate delivery channel, is advantageous both to the banks
(i.e. lower transactional costs, efficiency, retaining profitable customer base and extending
market area) and its customers (i.e. convenience, availability, accessibility, time and cost
savings) (Xue et al., 2011; Shanbaug, 2013) and accordingly it has evolved as one of the most
International Journal of Bank
cost-effective e-commerce applications (Lee, 2009). Internet banking has attained a Marketing
widespread acceptance not only in developed countries but also has gained a foothold in Vol. 36 No. 1, 2018
pp. 147-169
developing countries like India. Nowadays, a majority of Indian banks are choosing internet © Emerald Publishing Limited
0265-2323
banking as a delivery channel and a strategic tool for their business development DOI 10.1108/IJBM-08-2016-0104
IJBM (Safeena et al., 2014). Despite the fact that internet banking is useful to the customers, the
36,1 adoption rate of such technology is somewhat low and short of expectations in India,
including Gujarat (Yadav et al., 2015).
According to the McKinsey report (Banktech India, 2011), usage of internet banking in
India has grown from 1 percent in 2006 to 7 percent in 2011. Moreover, another McKinsey
survey in December 2012 states that India has around 120 million internet users, which is
148 the third largest amount in the world (Gnanasambandam et al., 2012). The report further
highlighted that in the world, India is expected to have the second leading user base and the
largest in terms of incremental growth, with 330-370 million internet users in 2015.
According to Internet World Stats (Miniwatts Marketing Group, 2012), there are about
2.4 billion internet users around the world and 137 million internet users in India. As per the
report of Internet and Mobile Association of India and IMRB International (Internet and
Mobile Association of India, 2013), India had 190 million internet users in June 2013 and by
October 2013, the number of such users reached 205 million and was estimated to reach
213 million by December 2013. Though India is adopting internet at a quicker rate than that
of other developed and developing countries, nearly 83 percent of the Indian population is
not yet connected to the internet (Miniwatts Marketing Group, 2012). Thus, it is clear that
India is an emerging market for internet banking services.
Despite the rapid growth of internet in India, the expected rate of internet banking
adoption among internet users has not been rising proportionally. Although 50 percent
of Indian internet users were anticipated to be using internet banking by 2012, the
actual number of internet banking users was well behind the projected estimates. As per
RBI report, only 1 percent of internet users were active internet banking users in 1998,
which grew to 16.7 percent in 2000 (Reserve Bank of India, 2014), demonstrating that
internet banking has experienced sustainable growth since its inception in India.
However, internet banking penetration in India has remained very low compared to other
Asian countries such as China, with 300 million personal online banking users, as of June
2012 ( Jude, 2012); Hong Kong, which has 1.5 million internet banking users; Indonesia,
with 749,000 internet banking users, as of January 2011 (ComScore, 2011); and Malaysia,
which has around 2.7 million users.
Considering the huge investments made by Indian banks in offering internet banking
services, the success of such e-channels ultimately depends on its customers’ adoption and
continued usage. To enhance internet banking adoption, banks in India including Gujarat,
therefore, need to have a clear understanding of their internet banking users in terms of
their behavioral intentions in using such technology, which will permit banks to offer
solutions and appropriate strategic plans to attract customers. In this regard, this study will
attempt to identify the key factors influencing customers’ behavioral intentions to use
internet banking services in the context of Gujarat. Moreover, it also strives to compare the
technology acceptance model (TAM) and the extended TAM (inclusion of direct influence of
perceived security and social influence on adoption intention) and their effectiveness in
predicting customers’ behavioral intentions to adopt such services.
The remainder of the paper is organized as follows. Section 2 presents a review of
literature comprising theoretical background, TAM, development of conceptual research
model and hypotheses framing for explaining the adoption of internet banking services in
the context of Gujarat. Section 3 outlines research methodology, in which instrument
development, data collection and scale reliability are clarified. Section 4 provides a
description of the results of reliability and validity tests, through confirmatory factor
analysis (CFA) and hypotheses testing results through structured equation modeling (SEM),
followed by the discussion of research findings in Section 5. The implications of this study
are described under Section 6. Finally, Section 7 concludes with limitations and scope for
future research.
2. Review of literature Internet
2.1 Theoretical background banking
Previously, research studies related to technology adoption were conducted to understand services in
various factors influencing technology adoption behavior of an individual. The key feature
of these research studies is that they explained and predicted the phenomena of technology Gujarat
adoption using theoretical models. As there is a lack of these kinds of research studies in the
information technology (IT) area, all these theories came from the area of social psychology. 149
During later years, these theories were revised to analyze the factors influencing technology
adoption behavior. Basic theories/models and their extensions in the domain of technology
adoption, as classified by Hanafizadeh et al. (2014), have taken on many forms over the
years: Theory of Reasoned Action (TRA) (Fishbein and Ajzen, 1975); Innovation Diffusion
Theory (Rogers, 1983); Theory of Planned Behavior (Ajzen, 1985); TAM (Davis, 1989);
Decomposed Theory of Planned Behavior (Taylor and Todd, 1995); Extended Technology
Adoption Model (TAM2) (Venkatesh and Davis, 2000); Unified Theory of Acceptance and
Use of Technology (UTAUT) (Venkatesh et al., 2003).
All the above theories or models provide new insights into the adoption and use of
technology both at individual and at organizational levels. Among these, the TAM is an
extensively used theory to understand individuals’ beliefs toward the adoption and use of
technology. The TAM can also be used more specifically as a model of adoption and use of
self-service banking channels, namely, automated teller machine (ATM), internet banking,
mobile banking and telephone banking (Abbad, 2013; Celik, 2008; Chiou and Shen, 2012;
Lee, 2009; Martins et al., 2014; Yang and Zhou, 2011). Due to the extensive theoretical and
empirical support that the TAM has received over the years, this study has applied the
TAM proposed by Davis (1989) and incorporated additional variables in order to
understand and examine the factors influencing internet banking adoption in Gujarat.

2.2 Research gap in the adoption of internet banking services in Gujarat

In developed countries, internet banking adoption has been researched well over the last
three decades. Earlier research has provided rich insights to understand the important
factors influencing internet banking adoption. The majority of these studies have used the
TAM as the base model and studied the influence of various factors on attitudes and
behavioral intentions to adopt technology (Abbad, 2013; Celik, 2008; Cheng et al., 2006;
Chong et al., 2010; Eriksson et al., 2005; Guriting and Oly Ndubisi, 2006; Lee, 2009;
Pikkarainen et al., 2004; Roy et al., 2012; Suh and Han, 2003; Wang et al., 2003).
Although the adoption of internet banking services has been studied by many
researchers in India (Bashir and Madhavaiah, 2015; Behara and Suryanarayana, 2013;
Dash et al., 2011; Fathima and Muthumani, 2015; Jain and Malhotra, 2012; Prakash and
Malik, 2008; Roy et al., 2012; Safeena et al., 2013; Sharma and Srikrishna, 2014; Sudhahar and
Karthikeyan, 2010), there are absolutely no studies in the context of Gujarat that have
sought to understand the factors influencing users’ adoption of internet banking within
the original framework of the TAM (Table I). Consequently, the availability of information
on such factors is zero. Thus, the present study is an effort to fill this gap by addressing
this shortcoming.
Against this background, this study is an initial attempt to identify the factors
influencing customers’ behavioral intentions to use internet banking services in the context
of Gujarat. It strives to measure intention rather than actual behavior because internet
banking is still at the early stage in Gujarat and its usage is relatively low (less than
10 percent of total bank customers) (Yadav et al., 2015). Hence, the choice of behavioral
intention seems more suitable in the context of Gujarat. The findings of this study will help
the banking industry in designing strategic plans to promote their products and services
over internet in the future (Chau and Lai, 2003; Wang et al., 2003).
IJBM Theoretical Sample and its Analytical Significant predictors (DV: intention
36,1 Authors base size tool to use IB)

Summary of literature on internet banking adoption in India

Prakash and Malik na 150 users and 150 EFA Internet accessibility, reluctance to
(2008) non-users of IB change, cost of Computers, reliability,
security concerns, convenience and EOU
150 Sudhahar and TAM 655 IB users SEM PU, PEOU, ATT, PS, awareness,
Karthikeyan (2010) self-efficacy, TR
Dash et al. (2011) TAM 295 IB users SEM PU, PEOU, ATT, SI
Jain and Malhotra na 1,160 banking EFA Prior computer experience, prior
(2012) customers technology experience, personal banking
experience, reference group influence
Roy et al. (2012) TAM 619 IB users CFA, SEM PU, PEOU, PR, SI, PBC, WD, TR
Behara and na 25 IB users Correlation RA, utilitarian outcomes, availability of
Suryanarayana internet, cost, ease of use, security, TR,
(2013) self-confidence
Safeena et al. TAM, TPB 549 online Regression PU, PBC, PEOU, SN, ATT
(2013) banking users
Sharma and TAM 344 bank CFA, SEM SI, PU, PEOU, IB awareness, quality of
Srikrishna (2014) customers internet connection, SE, ATT
Bashir and TAM 155 students Correlation, TR, SE, SI, PR, PU, PEOU
Madhavaiah (2015) regression
Fathima and TAM 319 IB users Regression PU, PEOU, perceived credibility, TR, FC,
Muthumani (2015) PC, SN, image, SE
Summary of literature on internet banking adoption in Gujarat
Table I. Bhatt (2011) TPB 150 bank Correlation ATT, SN, PBC
Review of previous customers
researches related to Modi et al. (2013) na 82 users and 113 EFA Convenience, TR, information about IB,
internet banking non-users of IB customer awareness, security
adoption applying Parmar et al. (2013) na 200 IB users χ2 analysis Security, user-friendly, convenient to use
different technology Prajapati et al. na 100 online EFA Security, TR, familiarities, awareness,
acceptance models (2013) banking users privacy, innovativeness

2.3 TAM
The TAM has been confirmed as a powerful and parsimonious model to predict individual
adoption of information systems (ISs) (Davis, 1989; Davis et al., 1989). Initially, the TAM was
developed to test the adoption of word processor technology among IBM employees
(Davis et al., 1989). However, in current years, the TAM has received strong empirical
support for its explanatory power in the context of e-commerce, mobile commerce, personal
computers, telemedicine technology and World Wide Web (Mathieson, 1991; Igbaria et al.,
1995; Tan and Teo, 2000; Chen et al., 2002; Vijayasarathy, 2004; Wu and Wang, 2005;
Wu et al., 2007; Chen, 2008). Furthermore, the TAM has been an extensively applied
research model to explain and predict the adoption and use of ATM, internet banking,
mobile banking and telephone banking (Celik, 2008; Lee, 2009; Zhou, 2011; Yousafzai and
Yani-de-Soriano, 2012; Martins et al., 2014).
The TAM, an adaptation of TRA, was specifically tailored to explain IT adoption.
The main proposition of TAM is that a user’s adoption of new technology is directly
determined by his/her behavioral intention to use that technology. In addition, Davis argues
that behavioral intention is a function of attitude and two particular beliefs: perceived
usefulness (PU) and perceived ease of use (PEOU).
Recent studies that have used the TAM as a theoretical framework have advocated the
exclusion of attitude from the model, as it does not mediate the impact of PU and PEOU on
behavioral intention as originally predicted (Venkatesh, 1999; Koufaris, 2002). Originally, Internet
Davis (1989) found a weak relationship between PU and attitude, but a strong relationship banking
between PU and behavioral intention and consequently, attitude construct was dropped services in
from final conceptualization of the TAM (Venkatesh et al., 2003). In a meta-analysis of
previous studies conducted by Legris et al. (2003), only three out of 22 studies have Gujarat
comprised attitude construct. Based on these reasons, attitude has not been considered in
this study. Consequently, the final structure of TAM assumes PU and PEOU as the 151
determinants of users’ behavioral intentions.

2.4 Research model and hypotheses

Due to the extensive empirical support and theoretical soundness that the TAM has
received over the years, this study has applied the TAM (Davis, 1989) as the base model.
As postulated, the TAM assumes two predictors of intentions: PU and PEOU. Figure 1
depicts the proposed research model employed in this study. The strength of hypothesized
relationships and robustness of the proposed research model are tested in predicting
customers’ intention to use internet banking services in the context of Gujarat. Each of these
predictors of the TAM (i.e. PU and PEOU) is discussed in the following sections.
2.4.1 PU. Within the framework of the TAM, PU is a significant factor influencing
adoption of ISs (Davis, 1989; Davis et al., 1989). PU is defined by Davis as “the degree to
which a person believes that using a particular system would enhance his or her job
performance” (Davis, 1989). In the context of internet banking, the users will adopt the
system if they believe the system will bring benefits such as reducing time spent on going to
bank and improving efficiency (Rao et al., 2003). Several researchers have empirically
supported that PU exerts a significant and positive impact on intention to use ISs as
proposed in the TAM (Davis, 1989; Venkatesh and Davis, 2000; Venkatesh, 2000).
A significant number of past studies on internet banking adoptions have consistently
provided empirical evidence for significant positive effect of PU on users’ intentions
(Cheng et al., 2006; Celik, 2008; Lee, 2009; Chau and Ngai, 2010; Chiou and Shen, 2012).
Likewise, Pikkarainen et al. (2004), in Finland, found that PU is one of the most significant
antecedents of customers’ intention to use internet banking. PU is able to encourage the
adoption of online banking among Thai consumers ( Jaruwachirathanakul and Fink, 2005).
Moreover, Celik (2008) conducted a web-based survey to analyze internet banking adoption
among Turkish users and his finding was in line with earlier studies, i.e., PU played a
significant role for determining Turkish users’ intentions to adopt internet banking services.

Perceived
Usefulness (PU) TAM
+ H1

Behavioral Intention
+ H2 to Use Internet
Perceived Ease
of Use (PEOU) Banking (BI)

Perceived + H3
Security (PS)

Figure 1.
Social + H4 Proposed
Influence (SI) research model
IJBM Therefore, it is presumed that customers are more likely to adopt internet banking if they
36,1 perceive it to be more useful over and above regular banking methods (i.e. branch banking).
Thus, in accordance with the TAM, it is hypothesized that:
H1. PU has a significant positive impact on customers’ behavioral intentions to use
internet banking services.

152 2.4.2 PEOU. PEOU, one of the main beliefs in the framework of the TAM, is conceptualized
as the degree to which a person believes that using a particular system would be effortless to
use (Davis, 1989). PEOU has also been confirmed as a significant determinant in the adoption
of lot information technologies, for example, World Wide Web (Lederer et al., 2000), online
banking (Wang et al., 2003), intranet (Chang, 2004) and wireless internet (Shih and Fang, 2004).
This relationship is further established by many researchers in their empirical research
studies in the context of ISs (Davis et al., 1989; Jackson et al., 1997; Agarwal and Prasad, 1999;
Venkatesh and Davis, 1996, 2000; Venkatesh and Morris, 2000; Venkatesh, 2000).
In the context of internet banking adoption, impact of PEOU is widely recognized and
sizable amount of past studies tested this relationship empirically and revealed that PEOU
plays an important role in determining internet banking adoption (Lai and Li, 2005;
Yiu et al., 2007; Celik, 2008; Lee, 2009; Ramayah et al., 2009; Alsajjan and Dennis, 2010; Chau
and Ngai, 2010; Giovanis et al., 2012). Similar finding was observed by Gounaris and
Koritos (2008), and concluded that PEOU was able to improve the prediction of customers’
adoption of internet banking. However, Pikkarainen et al. (2004) and Eriksson et al. (2005), in
their studies, highlighted that PEOU do not influence the adoption of internet banking.
Thus, customers are more likely to adopt internet banking services if they perceived it to
be user-friendly, easy to operate and does not involve too much hassle to operate. That is,
the easier to use the technology, the more useful it is perceived to be and the more likely to
be adopted by users. Therefore, it is postulated that:
H2. PEOU has a significant positive impact on customers’ behavioral intentions to use
internet banking services.

2.5 Derivation of the extended TAM

Though the model specified by Davis (1989) had received much empirical support, based on
review of previous literature, it has been found that the TAM alone has not been able to
provide consistently superior explanations or behavioral predictions (Chen et al., 2007).
To overcome from this limitation, a growing body of research has focused on the extension
of the TAM by incorporating additional variables to improve its specificity and explanatory
power (Davis et al., 1989; Chin and Gopal, 1995; Karahanna and Limayem, 2000; Venkatesh
et al., 2003; Celik, 2008; Lee, 2009; Chong et al., 2010; Chiou and Shen, 2012). Considering this,
two additional variables, namely, perceived security and social influence, are incorporated
into the framework of the TAM to better understand customers’ intention to use internet
banking more comprehensively in the context of Gujarat.
2.5.1 Perceived security. Perceived security, as defined by Salisbury et al. (2001), is the
extent to which one believes that the web is secure to transmit sensitive information.
In simple, perceived security refers to the people’s perceptions toward the internet banking
system which concludes their financial transactions securely and maintains the
confidentiality of their personal information that will affect their voluntary adoption of
internet banking. The importance of security and privacy to the adoption of internet
banking has been observed in many banking studies (Sathye, 1999; Polatoglu and Ekin,
2001; Black et al., 2002; Howcroft et al., 2002; Pikkarainen et al., 2004). In specific, Roboff and
Charles (1998) noted that although customers’ confidence in their bank was strong, yet their
confidence in the technology was weak.
 Security and privacy were also found to be the significant factors in the adoption of Internet
online banking in Australia and the UK (Sathye, 1999; White and Nteli, 2004). Wang et al. banking
(2003) found that perceived credibility, i.e. security and privacy, had a significant positive services in
impact on behavioral intention to use online banking. The study also strongly advocates
that perceived credibility has the higher ability to predict and explain users’ intention to Gujarat
adopt or use online banking. In addition, using the TAM to investigate consumer adoption
of online banking in Finland, Pikkarainen et al. (2004) reported that the security impacted 153
online banking adoption. Likewise, Qureshi et al. (2008) found security and privacy to have
positive effect on the customer acceptance of online banking in Pakistan.
Consequently, the needs for secure transactions are crucial to the success of not
only internet banking but also of any e-commerce-related website (Liu and Arnett, 1999).
Thus, the following hypothesis is proposed to be tested:
H3. Perceived security has a significant positive impact on customers’ behavioral
intentions to use internet banking services.
2.5.2 Social influence. Social influence is defined as “a person’s perception that most people
such as friends, family, colleagues, peers and social group, who are important to him/her
think he/she should or should not use internet banking services.” According to Venkatesh
(2000), “Social influence is defined as the degree to which an individual perceives that
important others believe he or she should use the new system.” Indeed, the reason that why
people use internet banking is that they are encouraged by people surrounding them to
adopt and utilize internet banking. The importance of social influence on technology
adoption behavior has been extensively acknowledged (Kesharwani and Tripathy, 2012).
In TRA, Fishbein and Ajzen (1975) first used the term “subjective norm” to describe the
term “social influence.” As per TRA, social influence has a direct impact on behavioral
intention (Fishbein and Ajzen, 1975; Ajzen and Fishbein, 1980). This argument was further
confirmed by the findings of Venkatesh and Davis (2000). The researchers, in recent years,
have incorporated social influence into the framework of TAM.
A significant number of studies have empirically shown that social influence acts as positive
influencing factor in the adoption of new technology (Venkatesh et al., 2003; Sudeep, 2007).
Karahanna and Straub (1999) found that social influence has strong impact on individual’s
technology usage. Likewise, Martins et al. (2014), through the UTAUT model, confirmed that
social influence is a strong predictor of behavioral intention to adopt internet banking. Similarly,
Abbasi et al. (2011) established the positive impact of social influence on customers’ intentions to
use internet banking services. Whereas Mathieson (1991), Lewis et al. (2003), Shih and Fang
(2004) and Malhotra and Galletta (1999) did not find any significant impact of social influence on
behavioral intention. Therefore, to clarify the impact of social influence on behavioral intention,
it is hypothesized that:
H4. Social influence has a significant positive impact on customers’ behavioral intentions
to use internet banking services.

3. Research methodology
3.1 Instrument development
A structured questionnaire, consisting of two sections, was designed to collect primary data
from internet banking users residing in Gujarat. First section of the questionnaire was
proposed to collect data relating to the samples’ demographics, namely, gender, age,
educational qualification, monthly income, employment status and internet banking usage.
Second section of the questionnaire sought to measure various constructs related to internet
banking adoption to establish relationship among them.
IJBM The research instrument, of second section of survey questionnaire, was developed
36,1 based on the detailed review of existing literature on technology adoption models and their
extensions in the context of adoption of different technologies in general and internet
banking technology in particular. A list of 20 items under five constructs were incorporated
in the conceptual research model, namely, PU, PEOU, perceived security, social influence
and behavioral intention to use internet banking.
154 This study used measurement scales that have been validated in earlier studies.
A six-items scale was operationalized to measure PU of internet banking system based on
Cheng et al. (2006), Manzano et al. (2009), Nor et al. (2010) and Giovanis et al. (2012).
The construct PEOU, having three items, was adapted from Cheng et al. (2006). A four
items of perceived security scale was adapted from the studies of Wang et al. (2003),
Joseph et al. (1999) and Pikkarainen et al. (2004). The validated three item scale was, used
to measure social influence, taken from the study of Wu and Chen (2005). Finally, to
measure behavioral intentions of internet banking users, all the four items were tailored
from Suh and Han (2002), Shih and Fang (2004), Al-Sukkar (2005) Walker and Johnson
(2006). Refer Table AI for detailing of each statement. All these items were measured on a
five-point Likert scale anchored from “1” (strongly disagree) to “5” (strongly agree).
Face validity of the questionnaire was checked with the help of two bank experts and
some changes were then incorporated based on their suggestions.
Prior to the main survey, pilot study was conducted to validate the items of the instrument
on a sample of 20 respondents who have more than two years of internet banking usage
experience. They were asked to comment on the length, format and wording of the scales of the
instrument. The results of this pilot study lead to minor changes in the wording of some items
to suit them in the context of Gujarat, thus, confirming content validity of the instrument.

3.2 Data collection

This study is intended to analyze users’ behavioral intentions for internet banking services
by examining key determinants of internet banking adoption in Gujarat by using four
different constructs. Therefore, target population for this study was an active internet
banking users aged 18 years or above, who have at least one bank account and were
sampled randomly. To have the representative sample of internet banking users for data
collection, descriptive research design with cross-sectional survey was adopted. Survey was
conducted during December 2015-January 2016. The finalized research questionnaire was
then circulated among 325 respondents, yielding 284 completed questionnaires resulting in
a response rate of 87.38 percent. Respondents of pilot study were not considered for further
data analysis.
The summary of respondents’ demographics is presented in Table II. The sample
constituted around 70 percent males and 30 percent females. The ratio of male to female
respondents is 2.33:1. With respect to age, 60.56 percent of them are in the age group of
26-35 years, 27.46 percent are in 18-25 years of age group and 9.15 are in the 36-45 years of
age group. This pattern represents that the young adult (18-35 years) customers constitute
the majority (88.02 percent) of Gujarat internet banking users’ sample. Moreover, most of
them are highly educated, with a monthly income higher than Rs. 30,000 per person,
employee and using internet banking less than one year.

3.3 Scale reliability

The assessment of strength of the scale has been made through reliability analysis. To do
so, Cronbach’s α – an indicator of internal consistency was determined (Cronbach, 1951)
using SPSS version 20.0. As depicted in Table IV, Cronbach’s αs for all the constructs were
found greater than the threshold value of 0.700 (Cronbach, 1951; Kline, 2005), thus
confirming that the scale showed good internal reliability.
Demographic variable Category Frequency Percentagea
Internet
banking
Gender Male 198 69.72 services in
Female 86 30.28
Age (years) 18-25 78 27.46 Gujarat
26-35 172 60.56
36-45 26 9.15
46-55 6 2.11 155
W 55 2 0.70
Educational qualification Up to high school/diploma 13 4.58
Bachelor degree 59 20.77
Master degree 168 59.15
Doctorate degree 44 15.49
Monthly income (in Rs.) o 10,000 14 4.93
10,000-30,000 55 19.37
30,001-50,000 102 35.92
50,001-1,00,000 97 34.15
W 1,00,000 16 5.63
Employment status Student 16 5.63
Businessman 85 29.93
Employee 138 48.59
Self-employed 32 11.27
Other 13 4.58
Internet banking usage (years) o1 148 52.11
1-3 82 28.87
3-5 41 14.44
W5 13 4.58 Table II.
Note: aPercentage is computed based on total usable sample of 284 Sample demographics

4. Data analysis and results

For analyzing the data collected, two stage procedures, recommended by Anderson and
Gerbing (1988), was followed. In first stage, quality and adequacy of measurement model
was examined through CFA to ensure reliability, convergent and discriminant validity.
Then, using SEM, structural model was assessed to investigate the strength and direction of
relationships among theoretical constructs. For this, maximum likelihood estimation
method was applied in each stage (Byrne, 2001).

4.1 Testing of measurement model

CFA, using AMOS version 20.0, is conducted to test the validity of measurement model.
The measurement model met the criteria of Bollen (1998), wherein each latent variable has
at least two indicators and each observed variable is determined by one latent variable.
The results of measurement model, presented in Table III, indicate an excellent model
fit to the data on the basis of number of fit statistics ( χ2 ¼ 301.921; df ¼ 160;
χ2 Significance ¼ 0.000; χ2/df ¼ 1.887; GFI ¼ 0.909; IFI ¼ 0.940; TLI ¼ 0.928; CFI ¼ 0.939;
RMSEA ¼ 0.056) (Byrne, 2010; Hair et al., 2010).
Moreover, construct validity was checked through establishing convergent and
discriminant validity (Hair et al., 1998). To establish convergent validity, three criteria were
followed: all standardized factor loadings (λ) were significant and above 0.500 (Bagozzi et al.,
1991), composite reliabilities were above 0.700 (Hair et al., 1998), and all average variance
extracted (AVE) values were above 0.500 (Ruvio et al., 2008; Fornell and Larcker, 1981).
This statistics confirmed strong convergent validity (Table IV ) (Figure 2).
To establish discriminant validity, criteria suggested by Fornell and Larcker (1981) were
considered where the diagonal value should be greater than non-diagonal value for adequate
IJBM Fit indices Recommended value Obtained value
36,1
χ2 – 301.921
Degree of freedom – 160
χ2 significance P ⩽ 0.05 0.000
χ2/df 1 oχ2/dfo3 1.887
Goodness of fit index (GFI) ⩾0.900 0.909
156 Incremental fit index (IFI ) ⩾0.900 0.940
Tucker Lewis index (TLI) ⩾0.900 0.928
Table III. Comparative fit index (CFI) ⩾0.900 0.939
Fit indices of Root mean square error of approximation (RMSEA) ⩽0.080 0.056
measurement model Note: n ¼ 284

Construct Item λ CR AVE α

Perceived usefulness PU1 0.726 0.865 0.518 0.864

PU2 0.765
PU3 0.795
PU4 0.688
PU5 0.659
PU6 0.676
Perceived ease of use PEOU1 0.662 0.759 0.514 0.750
PEOU2 0.800
PEOU3 0.681
Perceived security PS1 0.707 0.807 0.512 0.802
PS2 0.763
PS3 0.734
PS4 0.654
Social influence SI1 0.656 0.755 0.509 0.754
SI2 0.815
SI3 0.658
Behavioral intention BI1 0.770 0.837 0.561 0.836
BI2 0.767
BI3 0.719
Table IV. BI4 0.740
Reliability and Notes: λ: Standardized Factor Loadings; CR, composite reliability; AVE, average variance extracted;
validity measures α, Cronbach’s α

discriminant validity. Discriminant validity assesses the extent to which a concept and its
indicators differ from another concept and its indicators (Bagozzi et al., 1991). Table V
presents the correlation matrix of constructs, where non-diagonal elements are correlation
among constructs while diagonal elements are square-root of AVE by that construct.
As presented in Table V, the square-root of AVE exceeds correlations, demonstrating
discriminant validity. Thus, it showed that all five factors were different from each other.
The results, thus, evidenced that research instrument had satisfactory construct validity.

4.2 Validation of structural model

Before examining structural model, we computed two models, comparison of which is
presented in Table VI. Structural equation modeling was first performed for independent
TAM and then for extended TAM. The results of TAM were very close to the acceptable fit
to the data ( χ2 ¼ 114.541; df ¼ 62; χ2 Significance ¼ 0.000; χ2/df ¼ 1.847; GFI ¼ 0.944;
IFI ¼ 0.966; TLI ¼ 0.957; CFI ¼ 0.966; RMSEA ¼ 0.055). Accordingly, inference can be made
 e6 PU1
Internet
banking
e5 PU2 0.73 services in
Gujarat
0.77
e4 PU3
0.80 PU
e3 PU4
157
0.69

e2 PU5
0.66

e1 PU6 0.66
0.68

e9 PEOU1
0.66 0.67
e8 PEOU2 PEOU
0.80

e7 PEOU3 0.68
0.40
0.54
e13 PS1

0.71
e12 PS2 0.59
0.76 PS 0.25

e11 PS3 0.73

e10 PS4 0.65 0.52

0.34

e16 SI1
0.66
SI 0.58
e15 SI2
0.81

e14 SI3 0.66 0.39

e20 BI1

0.77
e19 BI2
0.77
BI
e18 BI3
0.72
Figure 2.
e17 BI4 Measurement model
0.74

that customers’ adoption intentions for internet banking were well predicted by applying
TAM framework. However, it has been found that only TAM has not been providing
consistently superior explanations or behavioral predictions (Chen et al., 2007).
This study has, therefore, made an attempt to refine TAM framework by incorporating
relevant variables in order to enhance its explanatory power. Thus, as a next step, TAM was
compared with extended TAM by testing direct impact of two added variables (i.e. PS → BI
IJBM and SI → BI) on behavioral intentions. The extended TAM, exhibited good fit to the data
36,1 ( χ2 ¼ 301.921; df ¼ 160; χ2 significance ¼ 0.000; χ2/df ¼ 1.887; GFI ¼ 0.909; IFI ¼ 0.940;
TLI ¼ 0.928; CFI ¼ 0.939; RMSEA ¼ 0.056), had better explanatory power (R2 ¼ 0.451) than
individual use of TAM (R2 ¼ 0.379) (refer Table VI). Finally, the extended TAM was used for
further statistical analysis.

158 4.3 Hypotheses testing results

Path analysis is conducted to test proposed causal relationship among the various variables.
In Table VII, the results of hypothesis testing, unstandardized regression estimate, standard
error, critical ratio, standardized path coefficient ( β) and significance level observed for each
hypothesized path are shown.
The results revealed that customer behavioral intention to use internet banking is jointly
predicted by PU ( p ¼ 0.046 o 0.05), PEOU ( p ¼ 0.035 o 0.05), perceived security
( p ¼ 0.003o0.01) and social influence ( p ¼ 0.017 o0.05). Based on the standardized path
coefficients ( β), it is observed that the most significant factor influencing intention to use
internet banking is perceived security (β ¼ 0.275), which is followed other significant factors
in order of its influence: PU ( β ¼ 0.211), PEOU ( β ¼ 0.195) and social influence ( β ¼ 0.166)
respectively. Together these four variables explained 45.10 percent of variance in behavioral

Construct PU PEOU PS SI BI

PU 0.720
PEOU 0.658 0.717
PS 0.667 0.535 0.716
Table V. SI 0.397 0.254 0.339 0.713
Discriminant validity BI 0.589 0.523 0.577 0.393 0.749
of constructs Notes: Diagonal elements are square-root of AVE; Non-diagonal elements are correlation between constructs

Fit indices Recommended value TAM Extended TAM

χ2
– 114.541 301.921
Degree of freedom – 62 160
χ2 significance P ⩽ 0.05 0.000 0.000
χ2/df 1 oχ2/dfo 3 1.847 1.887
Goodness of fit index (GFI) ⩾0.900 0.944 0.909
Incremental fit index (IFI) ⩾0.900 0.966 0.940
Table VI. Tucker Lewis index (TLI) ⩾0.900 0.957 0.928
Fit indices and Comparative fit index (CFI) ⩾0.900 0.966 0.939
explanatory power of Root mean square error of approximation (RMSEA) ⩽0.080 0.055 0.056
structural model R2 BI – 0.379 0.451

Hypothesis No. Hypothesized relationship Estimate SE CR β value p-value Result

H1 PU→BI 0.232 0.116 1.993 0.211 0.046* Supported

Table VII. H2 PEOU→BI 0.197 0.093 2.113 0.195 0.035* Supported
Results of path H3 PS→BI 0.354 0.120 2.958 0.275 0.003** Supported
analysis of H4 SI→BI 0.195 0.081 2.396 0.166 0.017* Supported
extended TAM Notes: β ¼ Standardized regression weights or path coefficients. *p o0.05; **p o0.01
intention to use internet banking services (R2 ¼ 0.451, coefficient of determination). As a Internet
result, H1-H4 were found to be supportive. Figure 3 depicts the final structural model banking
(i.e. extended TAM) with significant paths with its standardized path coefficients ( β). services in
5. Discussion
Gujarat
This study attempts to validate TAM) and its extended form to understand the factors
influencing internet banking adoption in the context of Gujarat. The results of this study 159
provide good empirical support for the structural extended TAM depicted in Figure 3 and
for all the causal relationships among the model’s variables. The finding indicates that an
extended TAM has greater predictive power than independent TAM to explain and
understand customers’ intention to adopt or use internet banking services in Gujarat. Thus,
this study confirms the efficacy of an extended TAM as a research model useful for
explaining customers’ internet banking adoption intentions.
The study’s main contribution is that perceived security has a strong impact ( β ¼ 0.275)
and appears to be the primary positive determinants of customers’ intention to use internet
banking services, followed by PU ( β ¼ 0.211), PEOU ( β ¼ 0.195) and social influence
( β ¼ 0.166). It implies that perceived security is the most important predictor of customers’
behavioral intention to use internet banking services, which is consistent with many previous
studies (Sathye, 1999; Polatoglu and Ekin, 2001; Black et al., 2002; Wang et al., 2003;
Pikkarainen et al., 2004; White and Nteli, 2004; Qureshi et al., 2008). The finding shows that
without proper security protection, users will not use internet banking services provided by
the banks. It is rational as banking transactions generally comprise monetary transactions.
Hence, users especially from developing states will be more cautious as they are more used to
conducting their monetary transactions face to face. Therefore, banks in Gujarat should
develop proper security mechanisms to gain the confidence of their internet banking users.
Furthermore, in accordance with TAM, the next most important determinant of
customers’ future intentions regarding internet banking adoption is PU, which plays a
secondary role to perceived security in the proposed model. This finding is also supported
by the results of prior internet banking research by Davis (1989) as well as Pikkarainen et al.
(2004) and Celik (2008), who examined the adoption of internet banking in Finland and
Turkey, respectively. Thus, if users find the internet banking system useful, they will adopt
it. Hence, banks in Gujarat should try to educate their customers about benefits associated
with the use of internet banking as compared to conventional banking. In addition, banks

Perceived TAM
Usefulness (PU) 0.211* R 2 = 0.451

Behavioral Intention
0.195* to Use Internet
Perceived Ease
of Use (PEOU) Banking (BI)

Perceived 0.275**
Security (PS)

Social 0.166*
Figure 3.
Influence (SI)
Structural
extended TAM
Notes: *p < 0.05; **p < 0.01
IJBM should further investigates the key features which existing bank users find useful and
36,1 promote such features to encourage more customers to adopt or use internet banking
services. Another interesting finding of this study is that PEOU has a significant positive
impact on customers’ intention to use internet banking services. This result is found to be
similar to the original TAM (Davis, 1989). Moreover, the importance of PEOU as an
important determinant to the internet banking adoption has been referred to by numerous
160 researchers around the globe (Yiu et al., 2007; Celik, 2008; Gounaris and Koritos, 2008;
Lee, 2009; Chau and Ngai, 2010; Giovanis et al., 2012). However, this result contradicts with
the findings of Pikkarainen et al. (2004) and Eriksson et al. (2005), who suggested that there
is no significant impact of PEOU on intention to use internet banking.
Finally, an interesting outcome of this research is that social influence exerted a significant
positive impact on customers’ intention to use internet banking services. Similar finding is also
obtained by Abbasi et al. (2011) and Martins et al. (2014). However, this result contradicts with
some of the prior researchers (Malhotra and Galletta, 1999; Lewis et al., 2003; Shih and
Fang, 2004). This may be because the respondents in this study are somewhat young
and in between 18 and 35 years age group, therefore, they are susceptible to social influence
(Lu et al., 2003). Moreover, in reality, their decisions to use internet banking are sometimes
influenced by external environment, such as people around them like friends and family.
In this case, it is important for the bank to train its customers to promote the use of internet
banking via word of mouth communication.

6. Implications
This study has both theoretical and practical implications. In terms of theory building, the
model developed in this study represents an improvement for TAM by adding two relevant
constructs, perceived security and social influence. An extended TAM, developed in this
study, can help to better understand and explain the factors contributing to the successful
adoption of internet banking as well as other online experiences such as online shopping or
e-commerce. Perceived security, especially in a developing state like Gujarat, is an important
factor influencing customers’ intention to use internet banking services. This implies
that the incorporation of security as the determinant of customers’ adoption intentions
for internet banking services is quite appropriate. Since e-commerce shares the same
characteristics like internet banking, the findings also suggest the need to incorporate
perceived security in e-commerce adoption models also.
Apart from theoretical contributions, the results of this study will benefit the practitioners,
bank decision makers, internet banking system developers and banking service providers, etc.
For further research in this domain, the results of this study can be used to support the finding
and analysis in the context of internet banking and improving banking services. The findings
of this study shed lights on future plans and solutions to encourage wider implementation and
usage of internet banking services. With the aim to achieve this objective, the emphasis should
be given to perceived security, PU, PEOU and social influence.
The present study confirms that perceived security is one of the major determinants of
customers’ intentions to use internet banking services in Gujarat. This underscores the fact that
the concerns of fraud and identity thefts are foremost in the minds of adopters. Hence, banks in
Gujarat should ensure that the security of the internet banking system is properly developed,
and users should also be made aware that their systems are secured and personal information
is protected. Bank should try to reduce the risk, if any, perceived by its customers by including
risk reduction strategies in their policies, for example, need of authentication at each step while
performing banking transactions via internet. Banks should implement one time password
and transaction password as well as provide accurate and clear records of transactions.
As required, online security is one of the key attractions, decision makers from banks must
ensure that their strategies include ways to confirm that internet banking systems are secured.
 Furthermore, this study also provides useful information to the government as well as Internet
internet banking related organizations in implementing new internet banking rules, banking
regulations and laws (e.g. cyber laws) or revising the existing ones in order to safeguard the services in
interest of internet banking users. Having such clear rules, regulations and laws from the
government ensure that the issues related to the security and privacy of customers’ personal Gujarat
and financial information is taken care of. Up to certain extent, this will help the banks to
improve customers’ confidence regarding the security and privacy of internet banking. 161
Thus, security and privacy should be some of the main priorities of the banks because this is
the key concerns for end user’s in cases of internet transaction.
Besides perceived security, this study reflects an overwhelming importance of PU in
understanding users’ intention to use internet banking services. Therefore, to increase
internet banking adoption in Gujarat, banks should investigate key features which current
bank users find useful and then design their internet banking systems to motivate more
customers toward the adoption of such services. For example, an option on the home page of
internet banking website to recharge any mobile/DTH/other value added services could be
added to increase usefulness of such system. Moreover, banks should organize campaigns
to increase awareness among customers about the advantages associated with the use of
internet banking as compared to traditional brick and mortar banks.
Furthermore, it is advisable that banks can promote internet banking acceptance by
setting up of internet banking terminals at bank branches, shopping malls, airports and
other busy venues so that their users can personally check on the advertised advantages
associated with such systems. Once, they perceive that advantages outweigh
disadvantages, they will more likely to form positive attitudes toward internet banking,
which will positively influence their decision to adopt internet banking systems.
PEOU is another important determinant of customers’ intention to use internet banking in
Gujarat. In this regard, banks should put emphasis on designing an accessible web portal
(i.e. internet banking website) which must be user-friendly and easy to navigate. Moreover,
banks should improve help features or facilities in their services to enable their customers to
complete online transactions more successfully. Additionally, banks should obtain and analyze
their customers’ feedback periodically to upgrade the functionality of their website to cater to
their customers’ needs in a better way. This will lead to an increase in PU of the system and as a
result, potential users will form more favorable adoption intentions, which ultimately encourage
them to spend more time on banking services. Lastly, banks should organize training programs
in their premises to educate their customers about how to use internet banking for financial
activities, which will help in developing positive perception of ease of use among customers.
Present research provides that social influence is also one of the most important factors
when adopting internet banking. More clearly, customers’ intention to adopt internet banking
is influenced by people who are closest to them. They are usually influenced socially by
co-workers, family members, friends, relatives and superiors who always affect their attitude
and/or behavior. From a practitioner standpoint, more effective advertising and promotional
efforts by banks need to take these reference groups into account. The results underscore the
importance of using positive customers’ testimonials from these reference groups to promote
internet banking usage. Furthermore, this implies the importance of providing internet
banking services of the highest quality, because negative word of mouth from these groups
will reduce internet banking acceptance in those who are closest to them. In addition, banks
should focus their advertising on such social networking websites which are regularly visited
by the youngsters, such as Facebook, Twitter, YouTube and WhatsApp. Traditional
marketing campaigns in newspaper, radio and television, advertising and promotion should
also be given importance in colleges, libraries, universities and other popular hangouts.
Considerations to give incentives for customers’ referrals may have significant influence on
customers desire to use internet banking services.
IJBM 7. Limitations and directions for future research
36,1 There is always the issue of generalizability in the research of consumer behavior and this
study is no exception. First, this study was carried out in Gujarat state. Hence, its results
may not be generalized to the customers of other states in India. Customers in other
states might not share the same exposure, experience, availability of IT infrastructure,
comprehensiveness of legal framework and policies protecting them. Since they do not
162 share the same issues faced by the customers of Gujarat state, it is a possibility that the
factors that are important in this study might not be important to them. Based on this,
the future studies should be conducted at other states in India and the results of
those studies should be compared with this study. Such cross-comparison studies would
help to better understand the factors influencing customers’ intentions to adopt internet
banking services.
Second, the final structural model (i.e. extended TAM) of this study explained only
45 percent of variance in intention to use internet banking due to proposed factors.
Therefore, future studies can consider other important factors that might have influence on
the adoption of internet banking more comprehensively. Third, the findings of this study are
obtained using cross-sectional study which reduces the ability of this study to reflect
temporal changes in the research constructs. Hence, longitudinal study on the subject is
crucial in order to clarify the influences of temporal changes. Finally, internet banking in
Gujarat is still in its initial stages and consequently, more research is desired in this domain.
In this regard, the proposed research model is an attempt to explore customer adoption
of internet banking in Gujarat and, thus, can form a valuable basis for future empirical
research studies.

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Further reading
Benbasat, I. and Barki, H. (2007), “Quo Vadis TAM?”, Journal of the Association for Information
Systems, Vol. 8 No. 4, pp. 211-218.
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Programming, Taylor and Francis Group, Routledge, New York, NY and London.
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adoption in India: an extension of technology acceptance model”, International Journal of Bank
Marketing, Vol. 30 No. 4, pp. 303-322.
Riffai, M.M.M.A., Grant, K. and Edgar, D. (2012), “Big TAM in Oman: exploring the promise of on-line
banking, its adoption by customers and the challenges of banking in Oman”, International
Journal of Information Management, Vol. 32 No. 3, pp. 239-250.
Rouibah, K., Thurasamy, R. and May, O.S. (2009), “User acceptance of internet banking in Malaysia:
test of three competing models”, International Journal of E-Adoption , Vol. 1 No. 1, pp. 1-19.
Yousafzai, S.Y., Foxall, G.R. and Pallister, J.G. (2010), “Explaining internet banking behavior: theory of
reasoned action, theory of planned behavior or technology acceptance model?”, Journal of
Applied Social Psychology, Vol. 40 No. 5, pp. 1172-1202.
Appendix Internet
banking
Item code Statement Sources of item services in
Gujarat
Perceived usefulness (PU)
PU1 Using internet banking improves the functioning of my Cheng et al. (2006), Manzano
banking activities et al. (2009), Nor et al. (2010),
PU2 Internet banking allows me to manage my banking activities Giovanis et al. (2012)
169
more efficiently
PU3 Internet banking enables me to complete my banking
activities conveniently
PU4 Internet banking enables me to complete my banking activities
more quickly.
PU5 I find internet banking very useful for carrying out my
banking activities
PU6 Overall, I find using internet banking advantageous than
branch banking
Perceived ease of use (PEOU)
PEOU1 I think that learning to use internet banking would be easy Cheng et al. (2006)
PEOU2 I think that interaction with internet banking does not require a
lot of mental effort
PEOU3 I think that it is easy to use internet banking to accomplish my
banking tasks
Perceived security (PS)
PS1 I believe that internet banking is able to conduct banking Joseph et al. (1999), Wang et al.
transactions securely (2003), Pikkarainen et al. (2004)
PS2 I believe that internet banking guarantees that all transactions
have taken place
PS3 I believe that using internet banking is financially secure
PS4 Overall, I am not worried about the security aspects of
internet banking
Social influence (SI)
SI1 People, who are important to me, would think that I should use Wu and Chen (2005)
internet banking
SI2 People, who influence me, would think that I should use internet
banking
SI3 People, whose opinions are valued to me, would prefer that
I should use internet banking
Behavioural intention (BI)
BI1 I intend to increase my use of internet banking services Suh and Han (2002), Shih and
in the future Fang (2004), Al-Sukkar (2005),
BI2 I will add internet banking to my favorite links Walker and Johnson (2006)
BI3 I will encourage my friends and family members to use internet
banking services Table AI.
BI4 I will strongly recommend others to use internet Study constructs with
banking services measurement items

Corresponding author
Kiran J. Patel can be contacted at: kjp01@ganpatuniversity.ac.in

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