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Abstract
This paper examines the current trends in the e-commerce revolution that has set in
motion in the Malaysian banking sector and reports on an empirical research that was
carried out in Malaysia to study the customersÕ preference for electronic banking and
the factors, which they considered influenced the adoption of electronic banking. Re-
sults based on the analysis of data relating to 300 respondents indicate that while there is
no significant differences between the age and educational qualifications of the electronic
and conventional banking users, some differences exists on other demographic variables.
Analysis further reveals that accessibility of Internet, a wareness of e-banking, and
customersÕ reluctance to change are the factors that significantly affected the usage of
e-banking in Malaysia. The paper discusses on the implications of these. Limitations of
the study are highlighted and further research directions are suggested.
2002 Elsevier Science Inc. All rights reserved.
*
Corresponding author.
E-mail address: sadiqsohail@hotmail.com (M. Sadiq Sohail).
1
Formerly at Monash University Malaysia.
0020-0255/02/$ - see front matter 2002 Elsevier Science Inc. All rights reserved.
PII: S 0 0 2 0 - 0 2 5 5 ( 0 2 ) 0 0 3 7 8 - X
208 M. Sadiq Sohail, B. Shanmugham / Information Sciences 150 (2003) 207–217
1. Introduction
In the next section, we review the relevant literature in the area. Background
information on Malaysian banking sector is then presented. The following
section describes the research methodology, which is then followed by the re-
sults from the survey. The paper concludes with a summary, outlining the
implications of the findings and the limitations of this study.
2. Literature review
One factor that determines the level of demand for e-banking services is that
of the number of people having access to Internet. However, this is rather
difficult to estimate due to the dispersed nature of usage. Although recent es-
timates of Internet subscribers was put around 1.3 million which is approxi-
mately 7% of Malaysian population [7]. The actual number of users could vary
widely as there are likely to be multiple users, for each of the registered sub-
scribers.
Several other consumer behaviors related issues would affect the consumer
preference and loyalty towards adoption of e-banking. Social psychology and
marketing research indicate the customers differ in the type of relationship they
wish to maintain with service providers such as banks. Clark and Mills [8]
concluded that while some individuals may desire to establish relationships
that are more personal and friendship-like (communally oriented customers),
there may be others who value efficiency of services and prefer more imper-
sonal association (exchange oriented customers). This implies that customers
who desire social and psychological benefits by establishing personal rela-
tionships with banks will prefer face to face interactions. E-banking environ-
ment will thus have a detrimental effect on such consumers. On the other hand,
for those customers whose relationship is primarily rooted in efficiency of
services, e banking environment will be a perfect alternative.
Another research suggests that customers differ in the type of relationships
they intend to maintain will their service providers. Reynolds and Beating [9]
suggest that relationships have both functional and social benefits, while an-
other study concluded that customers vary on the value they place on these
benefits [10].
Empirical evidence in communications suggest that the choice of commu-
nication channel will affect on the development of relationships. Hiltz et al. [11]
found that computer mediated communication is less personal and socio-
emotional than face to face exchanges. Another research on the Information
Richness theory points out face to face communication is a better medium to
transmit complex messages which is essential to establish a personal contacts
[12].
Tomiuk and Pinsoneault [13] propose that the lesser degree of ÔrichnessÕ and
Ôsound presenceÕ of e-banking environment, the significant affect it will have on
the banks ability to create a trusting relationship between their customers and
210 M. Sadiq Sohail, B. Shanmugham / Information Sciences 150 (2003) 207–217
Like most Muslim countries, Malaysia too has a dual banking system, that
is, a conventional, and an Islamic banking system. There are two Islamic banks
in Malaysia-Bank Islam Malaysia and Bank Muamalat. Bank Islam Malaysia
was established on 1 July 1983 and Bank Muamalat on 1 October 1999. Bank
Muamalat being at an infancy stage, has yet to get into the e-banking arena.
Bank Islam Malaysia, however, is actively moving towards this digital divide,
wherein it promises to offer its customers e-banking facilities by the end of
2001. This is seen as an effort to enhance and broaden its range of services and
also to compete with other conventional banks.
Table 1
Summary of e-banking services offered by Malaysian domestic banks
Bank Service Transactions
Southern PC banking Real-time fund transfers, credit-card payments,
Bank access account balances and auto alerts.
Hong Leong Bank@Home Fund transfers, balance enquiries, statement download,
Bank bill payments, cheque-book request, cheque-status enquiry,
stop cheque and credit-card payments.
e-banking Account summary, funds transfer, credit card service,
bill payments, service request.
HSBC Bank Hexagon A desktop-banking system via the HSBC groupÕs
proprietary worldwide communications network. Services
include transfer of funds within own accounts and
third-party accounts.
Multi-purpose Multi-link Basic banking services-account balance enquiry, fund
Bank transfer, bill payments and product info. Also offers
desktop share-trading via JB securities Sdn Bhd.
PhileoAllied PALDIRECT Provides banking, share investing, news and information,
Bank PALWORLD utility-bill payments, insurance, travel, electronic shopping
and communications services.
RHB Bank RHB online Balance enquiry, fund transfer, remittance services,
fixed-deposit placements, credit-card payments, brokering
and bill payments.
4. Research objectives
The study has three aims. The first is to determine the if basic demographic
factors influence the Internet usage for banking in Malaysia. The second is to
examine the factors that affect the adoption of e-banking. The third is to in-
vestigate if there are any differences between the Internet and non-Internet
users relating to the various factors.
5. Research methodology
Table 2
Demographic characteristics and preference for banking
Demographic characteristics E-banking users Conventional banking users Significance
Mean age 28 years 26 years 0.325
Mean monthly income RM3633 RM2224 0.006
Percentage of graduates 86.2% 84.6% 0.892
and undergraduates
Table 3
Factors affecting adoption of electronic banking
Factors Rotated factor Percentage
loading of variance
Accessibility
Internet access 0.809 13.35
Internet connection speed 0.730
Reluctance
Willingness to adopt technology enhancement 0.859 12.96
Level of awareness of current trends 0.782
Attitude towards change 0.617
Costs
Cost of computers 0.873
Cost of Internet connection 0.870 12.86
Trust in one’s bank
Banks reliability in correcting erroneous transactions 0.831 11.08
Trust in the bank to compensate for losses due to security 0.772
Infringements 0.618
Banks response rate to queries
Security concerns
Clear and understandable instructions 0.888 10.42
Security of Internet transaction 0.677
Length of Internet experience 0.608
Convenience
Time saving 0.911 9.90
Convenient way of doing bank transactions 0.795
Ease of use
Ease of performing e-banking transaction 0.739 8.38
Ease of navigation in the banks site 0.608
M. Sadiq Sohail, B. Shanmugham / Information Sciences 150 (2003) 207–217 215
Table 4
Comparative evaluation of electronic and conventional banking users
Factors Mean scores t-value p-value
E-banking Conventional
users banking users
Accessibility 63.00 72.20 )3.50 0.00
Security concerns 61.07 54.84 2.02 0.04
Cost of computers and Internet access 55.11 52.71 1.08 0.28
Reluctance to change 70.34 63.27 1.88 0.06
Trust in bank and security of Internet 58.67 58.68 )0.003 0.99
bank transactions
*, **, and *** denote significance at 1%, 5% and 10% respectively.
of computers and Internet access, trust in oneÕs bank, security concerns, con-
venience and ease of use. It is however, interesting to note that awareness of
e-banking products and services did not seem to affect the adoption of
e-banking services. This may be due to the fact these respondents being In-
ternet users are probably already quite aware of e-banking services. Overall,
the seven factors accounted for about 78% of the total variance.
Finally, each of the research questions were probed and a variance analysis
was undertaken to compare if any variance exists for each of these factors
between the e-banking and conventional banking users. Table 4 provides an
overview of the analysis that includes the two-sample t-test for means and the
p-values.
Analysis of the table revealed that as for accessibility, there is a significant
affect of this factor on the usage of banking services. The analysis further re-
vealed that security concerns of e-banking affects usage of e-banking (p-value
0.04). CustomersÕ reluctance to change is another factor that significantly af-
fected the usage of e-banking (p-value 0.06). It is interesting to note that the
cost of computers and Internet access, and security concerns of e-banking does
not significantly influence the usage of e-banking.
activities at present is not surprising considering the fact that e-banking is only
still in the stage of infancy. The demographic differences between Internet bank
users and the non-users were not very evident in this study, particularly with
reference to age and educational background. This may be due to the fact that
the sample respondents were basically already Internet users and thus they
would have some similar characteristics. However, in view of the security
concerns and the risk involved in e-banking transactions, the more affluent
members of the sample appear to have a greater inclination towards e-banking.
Furthermore, the fact that 20% of the sample respondents had already adopted
e-banking services is encouraging and is indicative of a bright future for
e-banking in Malaysia. However, there are certain limitations in this study.
While this exploratory research has revealed some interesting results, readers
should be cautious on some of its limitations. Firstly, the online survey method
is a limitation to generalise for the whole of the Malaysian context. Secondly,
sample size is another limitation. Therefore, findings of this study are tentative
and needs further verification. Further study with a larger representative of all
regions is suggested for a rigorous analysis.
References
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M. Sadiq Sohail, B. Shanmugham / Information Sciences 150 (2003) 207–217 217