CHAPTER (2)

THEORETICAL BACKGROUND
This chapter intends to describe the theory which was used as a framework for this study.
It includes Digital Wallet, Customer’s perception towards Digital Wallet and Technological
Acceptance Model.

2.1 Digital Wallet

Financial transaction application that runs on any connected device is called a digital
wallet (or electronic wallet). Digital wallets are financial applications that allow you to store
funds, make transactions, and track payment histories on devices like phones and tablets. Our
payment information and passwords will be securely stored in the cloud. When we are shopping,
we can use only device without carrying our cards and cash around. It is so convenient to store
our credit card, debit card or bank account information and easily to use our device to pay for
purchases ( MAHINDRA COMVIVA , 2016 ).

Digital wallets are password protected, providing on added layer of security. Biometric
authentication is often used to further secure digital wallets. There is no requirement to maintain a
minimum balance in a digital wallet. User can add as much as little money as they need to their
digital wallet. Digital wallets are available for use at no cost. Digital wallets can be accessed from
anywhere and to any time, providing convenience for users. They require only a smart phone, an
internet. They can be used at the point of sale by scanning a QR code or by adding a mobile
number ( Akhila , 2018 ).

According to the Corporate Finance Institute ( CFI ), there are three types of digital
wallets;

Open wallet: An open wallet is used directly by a bank or through a third party. Open
wallets allow customers to use the funds in the mobile wallet for making payments for
transactions or withdrawing the funds deposited to the account in cash.
Semi-closed: Semi-closed mobile wallets allow users to use the funds in the wallet to
make payments for transactions with multiple merchants, as long as there is an existing contract
between the merchant and the mobile wallet company. Users can also withdraw the funds into
a bank account. However, semi-closed wallets do not allow users to withdraw funds in cash.

Closed wallet: Closed wallets are linked to specific merchants, and users can only use the
funds to make payments for transactions initiated with the specific merchant. Users cannot use the

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money to make payments for transactions with other merchants and third-party service providers
or withdraw the funds in cash.

While many factors are driving the growth of digital wallets, the Covid-19 pandemic
helped skyrocket their use due to a surge in online shopping and contactless transactions.
(Source: Brianna Blaney (worked as financial writer))

2.2 Customer’s perception towards Digital Wallet

Customer perception is highly influenced by the personal experience that a customer has
while buying and using a particular product. The customers build a good perception of the brand
if the quality, customer service, price, logo, color, discounts, etc. could make an excellent
impression on their mind. Before the pandemic, e-payments, including those by digital wallets,
already took up a significant part of e-commerce transactions.

The government measures to prevent physical contact during the Covid-19 health crisis
forced consumers to use digital sales channels which as a result, boosted digital wallet payments.
A new structure model has to be established and examined involving customers’ attitude and
perception toward their usefulness, ease of use, social influence, facilitating conditions, lifestyle
compatibility and trust.

User can perform everyday financial operations such as paying for goods and services,
transferring funds between accounts and storing money electronically. It also different rewards
and discounts, similar to those of classic payment systems with bank cards. They are more
convenient option when making transactions in physical as well as online stores and they do not
require entering card data when paying the household bills (Brahmbhatt , M .2018 ).

2.3 Technology Acceptance Model

The Technology Acceptance Model (Davis, 1989), or TAM, posits that there are two
factors that determine whether a computer system will be accepted by its potential users: (1)
perceived usefulness, and (2) perceived ease of use. The key feature of this model is its emphasis
on the perceptions of the potential user. That is, while the creator of a given technology product
may believe the product is useful and user-friendly, it will not be accepted by its potential users
unless the users share those beliefs.

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 .Figure (2.1) Framework of the Technological Acceptance Model (TAM)

Perceived
Usefulness
2
External Attitudes Towards Intention to
Variables Using a Technology Use a Technology

Perceived Ease
of Use

Source : Technology Acceptance Model by Davis , 1989

Perceived Usefulness refers to “the extent to which a person believes that using a
particular technology will enhance her/his job performance”. In TAM framework, PU is
hypothesized to be the direct predictor of behavioral intention to use (BI) of the technology
of interest. Perceived Ease of Use as “the degree to which a person believes that using a
technology will be free from effort”. If a system is relatively easy to use, individuals will be more
willing to learn about its features and finally intend to continue using it. Studies indicate that
PEOU is positively associated with continuance intention in the context of Web-based learning
(Hamid, 2016).

TAM 2 is an Extension of the original Technology Acceptance Model by Venkatesh and

Davis in 2000 which also includes external social factors that influence the behavioral intention to
use new technology (Venkatesh and Davis, 2000 ). In 2008, Venkatesh and Bala further extended
the model TAM 3.

The advantages of TAM are easy to comprehend and get has demonstrated a high level of
predictiveness in many contexts. ( Fred Davis in 1986)

2.4 Conceptual Framework of the Study

A theoretical model was based on Technology Acceptance Model (TAM) to achieve the
objective of the study and to describe the behavior of customer acceptance of digital wallet. TAM
to use a new information system on the recognition of the two factors which are perceived
usefulness (PU) and perceived ease of use (PEOU). Perceived usefulness is defined as the degree
to which an individual believes that using a particular technology would be beneficial. It provides

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the users to work faster, and more efficient. Perceived ease of use is defined as the degree to
which an individual believes that using a particular technology would be free from effort. It can
provide service which is easy to understand, easy to learn and easy to administer. As an
individual’s perceived ease of use of using a given technology increases, intention to use the
technology also increases.

Figure (2.2) Conceptual Framework

Quality
Usefulness (PU)
- Quality
- Features
Features - Safety
Perception towards
Ease of Use (PEOU) adaption for users
Trust
- Simplicity
- Convenience
Convenient
- Trust

Source : Technology Acceptance Model by Davis , 1989

Usefulness (PU) is measured by quality, features and safety on KBZ Pay products. Ease
of Use (PEOU) is measured by simplicity, convenience and trust on KBZ Pay products.

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