International Journal of Bank Marketing

The impact of personalization and compatibility with past experience on e-banking usage
May Wang Stella Cho Trey Denton
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May Wang Stella Cho Trey Denton , (2017)," The impact of personalization and compatibility with past experience on e-
banking usage ", International Journal of Bank Marketing, Vol. 35 Iss 1 pp. -
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 The Impact of Personalization and Compatibility with Past Experience on

E-banking Usage

Abstract

Purpose - The aim of this study is to examine the impact of service personalization on customer
reactions to e-banking services. Based on research on Information and Communication
Technology (ICT), service innovation and the Unified Theory of Acceptance and Use of
Technology (UTAUT), this study further examines one contingent factor, namely compatibility
with previous e-banking experience. This study focuses on the interaction between
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personalization and technology compatibility in influencing customers’ e-banking service usage.

Design/methodology/approach - Quota sampling was applied and different types of customers

were approached in 30 branches of a commercial bank. Data was drawn from a sample of 181
banking customers in a metropolitan region in southern China.

Findings - The results indicated that personalization leads to increased performance expectancy
and decreased effort expectancy, which in turn lead to increasing intention to continue to use e-
banking services. In addition, compatibility with previous e-banking experience and
personalization produces an interaction effect on both performance expectancy and effort
expectancy.

Originality/value - This study provides evidence demonstrating that personalization increases

customer perceptions of performance expectancy and decreases effort expectancy, and that the
effect is most profound for customers with a limited level of perceived compatibility with past
experience with e-banking. The findings extend the Unified Theory of Acceptance and Use of
Technology (UTAUT) and build on research in information and communication technology (ICT)
service innovation, by providing new insights on the effects of e-banking service personalization
and customer experience in the e-banking context.

Keywords: E-banking, Personalization, Compatibility

Paper type: Research Paper

 1. Introduction
As access to the internet grows, more and more customers around the world are using online
banking services. Information-oriented industries such as banking and securities trading services
are experiencing high growth in the e-commerce arena. Since China Merchant Bank started the
first online banking service for Chinese customers in 1997, almost all Chinese financial
institutions have moved to offer e-banking services, many with some degree of personalization.
However, electronic banking is still in its initial stage of implementation in China (AC Nielsen
Consult, 2002; Laforet and Li 2005; Ma and Zhao 2012). Main barriers to e-banking usage in
China were the perception of risks, Chinese traditional cash-carry banking culture, and
understanding of the benefits of e-banking (Laforet and Li 2005). There are also many other
alternative personal financial management tools which prevent users from using e-banking, e.g.
PayPal, AliPay, WeChat Wallet, etc. Given the obstacles mentioned above for e-banking in
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China, limited research has been carried out to increase usage of e-banking for existing
customers and many of the e-banking studies still remain focused on the diffusion and adoption
of e-banking in China (Laforet and Li 2005).

Moreover, modern marketers know that the best way to engage with customers is through
personalized services as customer banking preferences keep changing. There is considerable
variation in the area of personalization, depending on the capabilities of the financial institution
and the expectations of customers. Despite its importance, little research has been dedicated to its
impact on decisions process in the e-banking context (Laforet and Li 2005; Xu et al 2014). In
addition, internet users have highly divergent levels of technological sophistication, experience,
and training. As such, users vary in how they perceive personalized banking services as being
compatible with previous experiences. Some users have accounts in different banks and have
experience in using different e-banking platforms. In contrast, other users may have only limited
or no experience with e-banking services. Thus, bank customers may have diverging
expectations regarding these services. This forces financial institutions to attempt to understand
how best to meet the needs of their experienced and their inexperienced customers. This study is
an attempt to examine the impact of offering personalized e-banking delivery of service on
expectations and intentions, and to also include compatibility with previous e-banking
experiences as a moderating factor.

2. Literature Review
E-banking has transformed traditional practices in banking and has attracted attention in the
academic literature in many countries (Aderonke and Charles 2010; Khare 2010; Adapa 2011;
Ahmad and Al-Zu'bi 2011; Pi, Liao et al. 2012; Sindwani and Goel 2012; Akhlaq and Ahmed
2013). Growth in this area of interest runs parallel with the spread of e-banking around the
world. Akhlap and Ahmed (2013) researched the effect of motivation on trust in e-banking
services and found that performance expectancy and effort expectancy have a significant impact
on trust and acceptance of e-banking. Social and cultural factors were considered in the growth
of mobile payment services in e-banking (Arvidsson 2014; Dahlstrom and Nygaard et al. 2014;
Söderberg and Sallis 2014; Vyas and Raitani 2014). Since e-banking is still in its initial stage of
 implementation in China, limited research has been conducted to investigate the usage of e-
banking for existing customers. Most of the e-banking research still remains in the diffusion and
adoption of e-banking in China (Laforet and Li 2005).

As customer familiarity with e-banking increases, so does expectation of an increased level of

personalization. Thus banks can use personalization as a way to differentiate their services from
the competition. In the past, personalization has been examined from a variety of perspectives.
Khaldoon and Kandampully (2008) examined degree of personalization from a qualitative
perspective. Others have attempted to list potential items that can be personalized (Mathew and
Stone 2003; Pi et al. 2012). In the research of information and communication technology (ICT)
service innovation and its complementary strategies on customer loyalty toward ICT service
providers, personalization is one of the key strategies. It allows customers to tailor products and
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services according to their preferences (Gilmore and Pine 1997; Xu et al. 2014). It also allows
service providers to recommend services or products that fit customers' preferences (e.g. Tam
and Ho 2005; Xu et al. 2014). Though some research differentiates customization and
personalization in the initiating party, they both serve the purpose of adapting services to meet
customers' requirements (Ho and Bodoff 2014). In this research we incorporate these two
mechanisms as the components of a single construct of personalization. Personalization has been
found to influence various aspects of customer psychology, including information processing and
decision making (e.g., Tam and Ho 2006).

The operationalization of personalization is highly variable, yet we will attempt to summarize

some of the attempts. Loonam and O’Loughlin (2008) included the attributes of customized e-
banking services, one-to-one financial offers, individual emails regarding latest financial offers.
Lee and Lin (2005) defined personalization as customer perception of the degree to which an
online retailer provides differentiated services to satisfy specific individual needs, e.g. targeting
email or Short Message Service (SMS), recommendations based on customers’ preferences, and
free personal homepage. Swaid and Wigand (2009) included attributes of personalized website
pages, personalized contents and customized products. Khaldoon and Kandampully (2008)
included personalized recommendations, suggested packages, individual e-mail of deals, and
group reservations. Mathew and Stone (2003) included personalized electronic services (e.g.
acknowledging the name of the individual accessing the TAM or line Web page) and provision
of brochures or information to new users to educate them in how to use services.

To further investigate the impact of personalized services and to bridge the gap of finding out
whether personalized services increase the intention to use e-banking, this study attempts to
examine the impact of offering personalized e-banking delivery of service on expectations and
intention. It also provides compatibility with previous e-banking experiences as a contingent
factor since users differ in their level of experience with this type of service. The Unified Theory
of Acceptance and Use of Technology (UTAUT) Model served as the overarching theoretical
background of this study. This model, introduced by Venkatesh et al. (2003), focuses on
behavioral intentions of technology users based on previous studies on technology acceptance
 model or TAM (Agarwal and Prasad 1998;1999; Davis 1989). TAM is one of the most
influential extensions of Ajzen and Fishbein’s theory of reasoned action (TRA) in the literature.
TAM replaces many of TRA’s attitude measures with the two technology acceptance
measures— ease of use, and usefulness. TRA and TAM, both of which have strong behavioral
elements, assume that when someone forms an intention to act, they will be free to act without
limitation. UTAUT model prominently features explaining impacts of both performance
expectancy and effort expectancy. Performance expectancy measures the degree to which
customers believe using e-banking will enhance performance of banking-related tasks. Effort
expectancy measures the degree of expected difficulty related with the use of e-banking services.
Making e-banking service easy to use or reducing the effort expectancy will improve customer
performance of banking-related tasks or performance expectancy. This will ultimately increase
customers’ intention to continue to use e-banking. Karahanna et al. (2006) extended the UTAUT
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model by introducing the notion of compatibility as a moderating variable in the model.

Compatibility is the degree to which the use of the new technology is compatible with previous
experience with the existing and related technology. This extended model provides the basis for
this examination of the impact of personalization on e-banking usage intentions.

3. Conceptual framework and hypotheses development

Insert Figure 1 about here

Figure 1 presents our research model and the hypotheses regarding the synergistic impacts of
personalization on performance expectancy and effort expectancy that in turn influence users'
intention to use e-banking services. Based on research findings in ICT service innovation and its
management strategies, personalization is hypothesized to have direct effects on performance
expectancy and effort expectancy. Based on Unified Theory of Acceptance and Use of
Technology (UTAUT) model, effort expectancy or ease of use is hypothesized to have direct
effect on performance expectancy, which in turn influences users' behavioural intention.
Personalization has been found to influence various aspects of information processing and
decision making (e.g., Tam and Ho 2006; Xu, et. al. 2014). It was found that personalization
increases performance expectancy in various contexts (Ahmad and Al-Zu’bi 2011; Mathew and
Stone 2003). In the e-banking context, service providers offer a variety of financial products and
services based on customer preferences. Some e-banking service providers also provide online
agents and e-banking service users can interact with the online agents to get personalized
recommendations. Therefore, personalization can improve users' effectiveness and productivity
in using various e-banking services. Hence, we propose
H1: Personalization will impact performance expectancy for e-banking service users.
Using e-banking services, users can receive personalized email or SMS which will direct them to
relevant financial services based on their needs. Online agents can help the customer or user
finish their e-banking task efficiently, thus reducing the expected difficulty related with the use
of e-banking services. Consumers can also configure their own homepage to add new credit
 cards or services to their home page so that they can easily check their accounts and perform
other banking-related tasks with less effort. Therefore, we propose
H2: Personalization will impact effort expectancy for e-banking services.
Studies based on the UTAUT model propose that ease of use or a lower level of effort
expectancy will increase e-banking task productivity or performance expectancy. Performance
expectancy will result in existing customer’s continuing intention to use the current e-banking
(Venkatesh et al. 2003; Fishbein and Ajzen, 1975; Davis 1989). Similarly, we follow the
previous research and propose
H3: Effort expectancy will impact performance expectancy for e-banking services.
When customers can finish e-banking tasks productively and save both time and effort, they may
tend to continue to use the current e-banking services. Therefore, we propose
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H4: Performance expectancy will impact users’ intentions to continue using e-banking.
Rogers (1962) introduced and defined the term compatibility in Innovation Diffusion Theory as
the degree to which an innovation is perceived as being consistent with existing values, current
working practices/needs, and past experiences of potential adopters. Karahnna et al. (2006)
argued that compatibility assessed the extent of congruence between a new technology and
various aspects of the situation in which the technology will be utilized. Personalization brings a
different experience for users with different levels of perceived compatibility. For users who
perceive the current e-banking service with a higher level of compatibility with their past
experience, they may follow their previous routine and finish bank-related tasks effectively.
They may feel comfortable with e-banking services even with a lower level of personalization.
For users who perceive the current e-banking service with a lower level of compatibility with
their past experience and are new to e-banking services, they may need more personalized
recommendations and more guidance during the interaction with an online agent. They may feel
more comfortable while using e-banking services with a higher level of personalization. For
example, an online agent can guide customers to attain their goals effectively in the e-banking
context. Therefore, the model predicts that compatibility with prior experience is one of the
important aspects moderating the impact of personalization on performance expectancy.
Hence, we propose:
H5a: Compatibility and Personalization will have an interaction effect on performance
expectancy for e-banking services.
Similarly, for users who perceive the current e-banking service with a higher level of
compatibility with their past experience, they can follow their previous routine and finish bank-
related tasks with less effort. For users who perceive the current e-banking service with a lower
level of compatibility with their past experience and are new to e-banking services, they may
need more personalized recommendations and more guidance during the interaction. They may
feel more comfortable while using e-banking services with a higher level of personalization. For
example, ease of access to preferred financial products or less effort in doing online trading for
various financial products. Online agents can also help customers save their time and efforts in
difficult tasks. Therefore, the model predicts that compatibility with prior experience is one of
the important aspects moderating the impact of personalization on effort expectancy.
 H5b: Compatibility and Personalization will have an interaction effect on effort
expectancy for e-banking services.

4. Methodology
A survey was conducted to investigate the impacts of personalization on the e-banking usage
decision process and the interactions between personalization and compatibility with past e-
banking experience. Adapted from the work of Venkatesh and Davis (2000), this study employs
a questionnaire containing 11 statements regarding various aspects of e-banking. A 5-point
Likert scale is used to capture the level of agreement with each statement. The survey includes 2
items about compatibility, 4 measuring performance expectancy, 3 measuring effort expectancy
using reverse questions asking about ease of use, and 2 for behavioral intention concerning the
use of e-banking services. Five additional items pertaining to personalization are adapted from
the work of Lee and Lin (2005), Mathew and Stone (2003), and Swaid and Wigand (2009)
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resulting in an instrument with 16 items. Measurements for Compatibility are adopted from
Karahanna et al. (1999) and Chin and Gopal (1995). Performance Expectancy and other
variables use measurements validated by Venkatesh, et al. (2003). Scale items used in this study
are presented in Appendix 1. The original items were in English and were translated into Chinese.
Back-translation was employed to ensure an accurate translation.
Three hundred questionnaires were distributed to 30 branches of a single bank located in a large
metropolitan area in southern China. Quota sampling was applied based on the percentage of
different type of banking customers, e.g. VIP, premium customers, etc. The use of a single bank
is in accordance with the recommendation proposed by Karahanna et al. (1999) and Brown
(1981). The use of a single institution controls for the effect of organizational differences in
such things as internet infrastructure and service offerings. The complexity of personalization is
also controlled by using a specific e-banking platform. Two hundred and seventy-three (273)
questionnaires were received. Some customers did not finish all the questions because of their
limited time. Complete and valid questionnaires from 181 respondents were collected. Invalid
questionnaires were excluded due to missing data. The response rate is 60.33%. To test non-
response bias, a common technique comparing the first and fourth quartiles of responses for
differences in demographics and key constructs was adopted (Armstrong and Overton 1977). No
significant differences were found in Gender (p=0.75), Loyalty (p=0.22), Performance
Expectancy (p=0.61), Effort Expectancy (p=0.38), Personalization (p=0.25), and Compatibility
(p=0.54).

5. Results
Table 1 presents the mean value of each of the personalization dimensions. The reliability of the
personalization construct is 0.79. The mean value across the 5 items is 3.66 (on a five-point
Likert scale). All of the means were above the midpoint of the scale, indicating that
personalization was recognized in the e-banking services utilized by the customers.

Insert Table 1 about here

 Table 2 and Table 3 illustrate results for the measurement model. The measurement model was
examined by assessing the reliability and validity of the constructs. The reliability was assessed
by checking the composite reliability (CR) and average variance extracted (AVE). As shown in
Table 3, the CR values for all the constructs were greater than .7 (Nunnally and Bernstein 1994)
and the AVE values for all the constructs were greater than .5, suggesting that all the constructs
exhibited reliability. Validity includes convergent validity and discriminant validity. The
convergent validity was assessed by checking the item loadings on the corresponding constructs.
As shown in Table 2, all item loadings were greater than .60, suggesting good convergent
validity for all the constructs. The discriminant validity was examined by checking the cross
loadings. As shown in Table 2, all cross loadings were below 0.60, indicating that all the
constructs exhibited discriminant validity. The discriminant validity can also be assessed by
checking if the square root of the AVE was greater than the correlations associated with the
construct (Barclay et al. 1995). As shown in Table 3, the square roots of AVE for all the
constructs were greater than the correlations, reconfirming the discriminant validity of the
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constructs.

Insert Table 2 about here

Insert Table 3 about here
Insert Table 4 about here

Structural Equation Modelling was used in the analysis. Partial Least Squares was employed
because of the small sample size. Table 4 reports the hypotheses test results. The results show
that personalization has a significant impact on both performance expectancy and effort
expectancy. In other words, increasing personalization increases the perception of the utility of
the e-banking services and decreases the level of effort that the customer expects to expend using
the services. The results indicate that ease of use improves perception of evaluation of the utility
of the services. In turn, increasing perception of utility increases the intention to continue to use
e-banking services.
There is a significant interaction between personalization and compatibility with past experience.
Figure 2 illustrates the interaction effect between personalization and compatibility, dividing
graphically the respondents into two groups based on their perceptions of high and low
compatibility with previous e-banking experiences. Personalization has a more significant impact
on both performance expectancy and effort expectancy, especially when compatibility with past
experience is lower than the impact when compatibility with past experience is high.
Personalization is especially helpful for users who do not perceive the design to have high
compatibility with their past experience. In other words, the responses from e-banking
customers who are either inexperienced with e-banking in general or familiar with a distinctly
different e-banking platform, indicate that personalization leads them to find more utility in their
e-banking experience and to report enhanced perceived ease of use or less difficulty.

Insert Figure 2 about here

 6. Discussion and Implications

This study reveals that customers are capable of recognizing the existence of personalized
banking services delivered via the internet, e.g. customized financial offers, personalized design
of the user web interface, and salutations. This personalization is found to significantly affect
both performance expectancy and effort expectancy in positive ways. Personalization increases
perceptions of utility and ease of use, making the delivery of e-banking services more efficient
and effective. In turn, ease of use leads to increases in perceived utility and increases in
perceived utility leads to increases in intent to use e-banking services. This relationship is
enhanced when compatibility with past e-banking experiences is low. This study conclusively
demonstrates that personalization is especially good for all customers but particularly for those
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inexperienced with the system and that banks may want to make a special effort to personalize
services for those customers new to e-banking. It is worthwhile to invest into a personalized
service to facilitate the usage of e-banking for inexperienced users. The theoretical contribution
of this study is to demonstrate how the contingent factor of compatibility moderates the impact
of personalization, thus extending the UTAUT model in the area of e-banking service adoption.
Implications are twofold: 1) personalization influences evaluations of both utility and ease of
use, and 2) the effect is magnified when compatibility with prior e-banking experience is
factored into the model. This is an important extension and future research should examine
whether the same relationship holds in other industries using new technologies to deliver
services. The UTAUT model, after extension by including the moderating impact of
compatibility, works well in demonstrating the impact of various factors on the adoption of a
new technological delivery system for a service.

This study has two significant implications for managerial practices. First, the study sheds light
on the segmentation of e-banking customers. Modern marketers know that the best way to
engage with customers is through personal messaging strategies and should make great efforts to
identify customers before trying to reach them. In the e-banking realm, customer banking
preferences keep changing. With a clear understanding of the different customer banker
segments, financial institutions can identify which channels appeal to them. For example, some
users are more likely than average to use e-banking. Second, this study helps e-banking service
providers design different personalized e-banking service for different customers. More and
more businesses are developing web delivery of services, all with varying degrees of
personalization. This study demonstrates the practical value of that personalization, particularly
among those new to a delivery platform.

7. Limitations and Future Research

As a limitation of our study, we did not address various dimension of service personalization.
Personalization of financial products, market information, e-banking system features, etc. was all
included in one construct based on previous literature. Another limitation of the study stems
from not investigating other possible outcome variables, such as affective loyalty, relationship
 quality, and long-term usage behaviors. In addition, further demographics may be included as
well, for example, financial literacy. Since data was collected in China, these results may not be
generalized to e-banking contexts in other part of the world or different IT artifact. Sample size
should be increased in future research as well. The data was collected from the 30 branches of
one commercial bank. There are quite a few respondents who did not fill in all information in the
questionnaire.

In conclusion, this study sheds light on the impact of services personalization in e-banking
context by extending the research of information and communication technology (ICT) service
innovation and the Unified Theory of Acceptance and Use of Technology (UTAUT) model.
Synergistic effects of personalization and technology compatibility were found. Different levels
of personalization are highly recommended for e-banking services users, whose level of
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perceived compatibility with past experiences may vary.

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Research. 25(4):710-729
 Appendix 1: Scale Items Used in the Study

Measurement items for Personalization (PER) is adopted from Lee and Lin (2005):
PER1: The e-banking service provides services that I use very often.

PER2: The e-banking service meets my specific needs.

PER3: One-to-one financial offers were provided.

PER4: customized e-banking services are provided.

PER5: Individualized Emails regarding latest financial offers were provided.

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Measurements for Compatibility (COM) are adopted from Karahanna et al. (1999); Chin and
Gopal (1995).

-COM1: Using e-banking in this bank is consistent with my experience in using other website.

-COM2: Using e-banking in this bank is consistent with my experience in using other e-banking
website.

Performance Expectancy (PU) and other variables use measurements validated by Venkatesh, et al.
(2003).

-PU1 Using e-banking would enhance my effectiveness in using banking services.

-PU2 Using e-banking would improve my performance in using banking services.

-PU3 Using e-banking would increase my productivity in using banking services.

-PU4 I found e-banking useful.

Effort Expectancy

-PEOU1 I found e-banking easy to use.

-PEOU2 E-banking is easy to access.

-PEOU3 Learning to use e-banking is easy for me.

Behavioral Intention to use (BI) (Xu, et al. 2014)

-BI1 I intend to use e-banking frequently.

-BI2 I intend to use e-banking services more than tradition channels, e.g. counters.
 Table 1. Descriptive statistics of items in personalization construct.
Personalization Mean Std
PER1: The E-banking service provides financial services that I use very often. 4.29 .825
PER2: The E-banking service meets my specific needs. 3.55 .957
PER3: One-to-one financial offers were provided. 3.54 .936
PER4: customized E-banking services are provided. 3.80 .968
PER5: Individualized Emails regarding latest financial offers were provided. 3.69 1.02
Total 3.66 .831

Table 2. Loading and cross-loadings of measurements.

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BI EFFORT PERFORM COMPAT PERSONALIZATION

BI1 .889 .568 .475 .557 .566
BI2 .843 .362 .417 .576 .460
EFFORT-EXP1 .430 .888 .482 .497 .408
EFFORT-EXP2 .577 .893 .527 .561 .517
EFFORT-EXP3 .374 .790 .377 .383 .308
PERFORM-EXP1 .468 .491 .815 .465 .536
PERFORM-EXP2 .392 .386 .875 .488 .546
PERFORM-EXP3 .397 .384 .856 .470 .518
PERFORM-EXP4 .409 .499 .677 .516 .440
COMPATAB1 .459 .434 .413 .753 .434
COMPATAB2 .583 .413 .482 .744 .549
PERSONALIZATION1 .389 .384 .470 .370 .744
PERSONALIZATION2 .463 .352 .481 .416 .774
PERSONALIZATION3 .506 .348 .462 .516 .738
PERSONALIZATION4 .456 .402 .511 .479 .787
PERSONALIZATION5 .380 .493 .463 .445 .807

Table 3. Internal consistency and discriminant validity of measurements.

Alpha BI EFFORT PERFORM COMPAT PORT
BI .768 .866
EFFORT-EXP .822 .546 .858
PERFORM-EXP .820 .516 .545 .809
COMPATIBILITY .769 .614 .568 .600 .769
PERSONALIZATION .790 .596 .489 .633 .586 .761
The elements on the diagonal are the square roots of AVE
 Table 4. Summary of Hypotheses Testing
Hypotheses Path Estimates Hypotheses Testing
H1: Personalization -> Performance Expectancy .130** Supported
H2: Personalization -> Effort Expectancy .453** Supported
H3: Effort Expectancy -> Performance Expectancy .752** Supported
H4: Performance Expectancy -> Intention .645** Supported
H5a: Compatibility*Personalization->Performance .253** Supported
H5b: Compatibility*Personalization->Effort .294** Supported
**: significant at 0.01; *: significant at 0.05
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 Performance
H1
Personalization
Expectancy H4
Behavioral
H5a
H2 H3 Intention
Compatibility Effort
H5b

Expectancy
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Figure 1. Research Model

Performance Expectancy Effort Expectancy (Effortlessness)

High Compatibility
High Compatibility

Low Compatibility N
Low Compatibility

Personalization: Personalization:

Low High Low High

Figure 2. Interaction Effect between Personalization and Compatibility with Past Experience