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Consumer acceptance of internet banking: the inuence of internet trust

Sonja Grabner-Krauter
Department of Marketing and International Management, University of Klagenfurt, Klagenfurt, Austria, and

Acceptance of internet banking


Rita Faullant
Department of Innovation Management and Entrepreneurship, University of Klagenfurt, Klagenfurt, Austria
Purpose This study seeks to investigate the role of internet trust as a specic form of technology trust in the context of internet banking. Furthermore, the integration of propensity to trust within the hierarchical structure of personality and its applicability to technological systems are investigated. Design/methodology/approach The approach takes the form of an empirical study with 381 bank customers in Austria (adopters and non-adopters) and the use of a basic model of the adoption of internet banking with structural equation modelling (SEM). Findings The results conrm the inuence of internet trust on risk perception and consumer attitudes towards internet banking. Propensity to trust is a determinant not only for interpersonal relationships but also for trust in technological systems. Research limitations/implications This is not a representative study. Future research is encouraged to systematically investigate further facets of the personality structure in trust and adoption research, as well as to test interaction effects of psychological determinants (from the study) and external stimuli (web site characteristics). Practical implications Making the internet banking interface for the customer more attractive and easier to navigate is not enough to increase the adoption rate of internet banking. Trust-creating activities to increase internet trust and to diminish perceived risk must be continuously pursued. Propensity to trust is an important determinant in the fruitfulness of these actions. Originality/value The paper presents the conceptualization of internet trust as a specic form of technology trust, and its pivotal role in the adoption process of internet banking, together with the extension of the propensity to trust concept to technological systems. Keywords Virtual banking, Trust, Risk assessment, Personality Paper type Research paper

1. Introduction In recent years, developments in information technology and the subsequent evolution of internet banking have fundamentally changed the ways in which banks implement their business and consumers conduct their everyday banking activities (Eriksson et al., 2008; Sayar and Wolfe, 2007). internet banking allows customers to conduct a wide range of banking transactions electronically via the banks web site anytime and anywhere, faster, and with lower fees compared to using traditional, real-world bank branches. However, despite the continuing increase in the number of internet users and despite all the apparent advantages of internet banking for customers, in many countries the growth rate of internet users who adopt internet banking has not

International Journal of Bank Marketing Vol. 26 No. 7, 2008 pp. 483-504 q Emerald Group Publishing Limited 0265-2323 DOI 10.1108/02652320810913855

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risen as strongly as expected (White and Nteli, 2004). Across Europe, internet banking adoption rates are markedly different. For example, in Norway and Finland 70-80 per cent of internet users adopt online banking, in Austria and Germany about 40 per cent, whereas in Greece and Romania less than 10 per cent of the internet users make use of online banking or brokerage (Meyer, 2006). On the other hand, in Brazil the internet banking growth rate over the past years has exceeded that of the internet itself (Hernandez and Mazzon, 2007). These differences raise questions about the determinants of consumers acceptance of internet banking. Using numerous different theoretical approaches and models several researchers have investigated the factors that impact the decisions of costumers to adopt internet banking (for recent reviews see, e.g. (Hernandez and Mazzon, 2007; Sayar and Wolfe, 2007). Compared to face-to-face transactions, internet banking transactions have some unique characteristics, such as the extensive use of technologies, the distant and impersonal nature of the online environment, and the implicit uncertainty of using an open technological infrastructure for nancial transactions (Gan et al., 2006; Yousafzai et al., 2003). These particular features of internet banking render a unique environment, in which trust is of crucial importance. Recent literature on internet banking indeed shows that the lacking of trust has to be considered to be one of the main reasons why consumers are still reluctant to conduct their nancial transactions online (Flavian et al., 2006; Luarn and Lin, 2005; Mukherjee and Nath, 2003; Rotchanakitumnuai and Speece, 2003). Consumer trust is an important factor in practically all business-to-consumer interactions and a crucial aspect of electronic commerce. Most empirical studies on consumer online trust focus on interpersonal trust, where the object of trust is the internet vendor (e.g. (Gefen, 2000; Gefen et al., 2003; Koufaris and Hampton-Sosa, 2004; Lee and Turban, 2001; Pavlou, 2003; Suh and Han, 2003), whereas the inuence of technology or system trust on online consumer behaviour is largely neglected (Grabner-Krauter and Kaluscha, 2003). This paper adds both to technology adoption research and to trust research in marketing by examining the role that different types of online trust play in the adoption of internet banking. We focus on the concept of internet trust, analyzing if it is a distinct type of trust that inuences the consumers perceived risk of internet banking and the consumers attitude toward internet banking. Assuming that the lack of internet trust is an important reason for consumers not using the internet for conducting their nancial transactions, we collected data from both adopters and non-adopters of internet banking. Moreover, the implications of ones individual disposition or propensity to trust on online consumer behaviour have not yet been examined in depth (McKnight et al., 2004). On a more general level, in a recent paper the lack of research on the role of dispositional factors in internet use was pointed out (McElroy et al., 2007). Disposition to trust is an individual difference variable that refers to the propensity or general tendency to be willing to depend on or become vulnerable to other persons. Previous research has shown that dispositional trust is of special importance in the initial stages of building new relationships (Chau et al., 2006; McKnight et al., 1998). In several studies the consumers general disposition to trust was found to have an impact on the consumers initial trust in an online vendor (Gefen, 2000; McKnight et al., 2002; Teo and Liu, 2007). However, little research has addressed the question if an individuals propensity to trust other people also has a major inuence on his/her trust in technical systems (Kaluscha, 2004; McKnight et al., 2002; McKnight and Chervany, 2002). Hence,

another aim of our study is to shed light on the potential inuence of dispositional trust on trust and risk perception in the context of internet banking. The paper proceeds as follows: The subsequent review of current literature on online trust and perceived risk provides the theoretical foundation for the hypotheses regarding the impact of dispositional trust on internet trust and the inuence of internet trust on perceived risk and attitude towards internet banking. Then, methodology, results, and hypotheses testing are presented. The nal section discusses the studys ndings, contribution, and theoretical and managerial implications. 2. Online trust Trust in general, is an important factor in many social interactions, involving uncertainty and dependency. From a functional point of view trust can be seen as a mechanism that reduces the complexity of human conduct in situations of uncertainty (Luhmann, 1989). Trust is central to any economic transaction, whether conducted in a retail outlet in the real ofine world or over the internet, by means of a web site. However, trust is even more important in an online situation (Gefen et al., 2003; Gefen and Straub, 2004; Harridge-March, 2006; Pavlou and Fygenson, 2006; Riegelsberger et al., 2005; Walczuch and Lundgren, 2004). One important reason for the importance of trust in e-commerce is the fact that in a virtual environment the degree of uncertainty of economic transactions is higher than in traditional settings. internet-based commercial transactions can bring about several risks that either are caused by the implicit uncertainty of using open technological infrastructures for the exchange of information (system-dependent uncertainty) or can be explained by the conduct of actors who are involved in the online transaction (transaction-specic uncertainty) (Grabner-Krauter, 2002). The importance of initiating, building, and maintaining trust between buyers and sellers as key facilitators of successful e-commerce is increasingly being recognized in academic as well as in practitioner communities. Meanwhile a number of studies have investigated the role of trust in the specic context of business-to-consumer electronic commerce, having their roots in different scholarly disciplines and focusing on different aspects of this multi-dimensional construct (see the overview in (Chang et al., 2005; Grabner-Krauter and Kaluscha, 2003). The concept of trust has been dened by researchers in many different ways, which often reect the paradigms of the particular academic discipline of the researcher. Some denitions overlap, but more often each denition offers an explanation of a different aspect of trust. Thus there are literally dozens of denitions of trust, which many researchers nd contradictory and confusing (Gulati and Sytch, 2008). These problems particularly apply to the e-commerce domain research (McKnight and Chervany, 2002). In the organizational trust literature trust is mostly dened as a belief or expectation about the other (trusted) party, or as a behavioural intention or willingness to depend or rely on another party, coupled with a sense of vulnerability or risk if the trust is violated (e.g. (Mayer et al., 1995; Rousseau et al., 1998). Accordingly, online trust is most often dened as a belief or expectation about the web site, the web vendor and/or (less frequently) the internet as the trusted party or object of trust or as a behavioural intention or willingness to depend or rely on the trusted party (McKnight and Chervany, 1996; McKnight et al., 2002; McKnight and Chervany, 2002). In the context of internet banking, the trustor is typically a consumer who has to decide whether to

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adopt internet banking or stay with more traditional ways to undertake her/his nancial transactions. Especially within the research disciplines of relationship marketing and organizational theory several scholars have offered trust denitions that highlight trust related attributes of the trusted party. Researchers have dened trust as a multi-dimensional construct and included specic characteristics of the trusted party in their trust denitions such as ability, integrity, benevolence, predictability, credibility or dependability (e.g. (Mayer et al., 1995; Palmer and Bejou, 1994; Selnes, 1998). These characteristics or attributes of the trusted party are often referred to interchangeably as elements, antecedents, underlying dimensions or determinants of online trust (Wang and Emurian, 2005). Fundamentally, these attributes of the trustee reect different components of trustworthiness, a concept that again is dened differently by a number of researchers (e.g. Riegelsberger et al., 2005). In line with a multi-dimensional idea of trust more commonly found in the marketing and organization theory literature (e.g. Morgan and Hunt, 1994) we propose to include specic characteristics of the trusted party in the denition of online trust. Basically, two broad dimensions of online trust can be distinguished. The hard dimension of online trust has a functionality-based nature, involving the ability, competence, and predictability of the trusted object. The trustors judgement of the hard dimension primarily is based on cognition. This dimension is relevant for all objects of trust in the context of e-commerce: the e-commerce web site, the merchant that the web site represents, and the underlying technology. The soft dimension of trust comprises characteristics or attributes such as honesty, integrity, benevolence and credibility that refer to the intrinsic, value-based motivation of the trustee to act in the interest of the trustor. The trustors perception of the soft dimension mainly is affect-based. The operationalization of this trust dimension respectively of its sub-dimensions makes sense only in interpersonal trust relationships, or more specically, when the trusted party is another individual person. The analysis of online trust in the context of internet banking should not focus exclusively on interpersonal relationships but has to consider impersonal forms of trust as well. The technology itself serving as a transmission medium for conducting nancial transactions and including security services and technical solutions embedded in e-commerce technologies has to be considered as an object of trust (Corritore et al., 2003; Pennington et al., 2003/2004; Ratnasingam, 2005; Rotchanakitumnuai and Speece, 2003; Shankar et al., 2002). Ratnasingham (1999) proposes the term technology trust and suggests that dimensions of security services such as condentiality mechanisms, authentication mechanisms, and access control mechanisms contribute to the enhancement of technology trust from a capability process that serves to support the privacy, accuracy, authenticity of authorized parties, and accountability of e-commerce transactions. (Mukherjee and Nath, 2003) view the customers orientation towards e-commerce technology and the extent to which they trust the electronic system as a proxy for their trust in internet banking. When investigating the inuence of technology trust on online consumer behaviour it makes sense to dene this construct as a belief, for example about the reliability and security of the e-commerce infrastructure, combined with a willingness to rely on the internet as a medium for economic transactions. Trust in technical systems mainly is based on the perceived functionality (e.g. reliability, capability, correctness and availability) of a system (Lee and Turban, 2001; Thatcher et al., 2007). Therefore, we

argue that only the hard dimension of trust is relevant for the conceptualization and operationalization of internet trust. We conceptualize internet trust as trusting beliefs in the reliability and predictability of the internet and the willingness of the consumer to depend on the internet with regard to economic transactions. The dependent variable in our research model is attitude towards internet banking. The concept of attitude can be considered a key factor in most consumer behaviour models. Attitude has long been shown to inuence behavioural intentions and actual behaviour (Ajzen, 1991). Based on Venkateshs denition of attitude toward using technology (Venkatesh et al., 2003), attitude toward internet banking is dened as an individuals overall affective reaction to using the internet for his/her banking activities. The prevailing view of consumer trust in the e-commerce literature contends that trust has a direct positive effect on attitudes and behaviour (Jarvenpaa et al., 2004; Pavlou, 2002; Suh and Han, 2003; Teo and Liu, 2007). The consumers trusting beliefs about the trusted party or trusted object affect their attitude toward the trusting behaviour. The relationship between trust and attitude draws on the notion of perceived consequences (Pavlou and Fygenson, 2006). internet trust enables favourable expectations that the internet is reliable and predictable and that no harmful consequences will occur if the online consumer uses the internet as a transaction medium for his/her nancial transactions. Therefore, we propose that: H1. Internet trust positively inuences the consumers attitude toward internet banking. 3. Perceived risk of internet banking The concept of consumer-perceived risk has been widely dealt with in the marketing literature and has been shown to inuence consumer behaviour to varying degrees and in varying contexts (Cunningham et al., 2005; Mitchell, 1998). Consumer behaviour researchers most often dene perceived risk in terms of the consumers perceptions of the uncertainty and potential adverse consequences of buying a product or service (Littler and Melanthiou, 2006). Many studies have shown that consumers perceive different facets or components of risk and that their predictive value for total risk and risk-reducing behaviour depends very much on the product class (Gemunden, 1985). Distinct facets of risk (e.g. social, nancial, security, and performance risk) may be perceived independently of one another as they can arise from different kinds of sources. The inuence of risk perception on consumer attitudes and behaviour may be different in situations that are dominated by different types of risks, e.g. either by high social risk or high nancial risk (Mandrik and Bao, 2005). Previous research suggests to include perceived risk as an important factor inuencing online consumer behaviour (Cunningham et al., 2005; Pavlou, 2003; Salam et al., 2003; Schlosser et al., 2006). To process economic transactions on the internet presents numerous risks for consumers, over and above the transaction process itself being perceived as risky (Einwiller and Will, 2001). In the online environment criminal acts can be performed with extremely high speed, and without any physical contact (Cheung and Lee, 2006). If an unauthorized individual is able to get access to the online banking portfolio of a user, a considerable amount of nancial information may be jeopardised and there might be considerable nancial losses. Hence, the most important categories of perceived risk associated with internet banking are likely to be nancial risk and security risk related to the potential loss because of deciencies in

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the operating system or misappropriation of funds through illegal external access (Awamleh and Fernandes, 2006; Littler and Melanthiou, 2006; Rotchanakitumnuai and Speece, 2003; Sarel and Marmorstein, 2003). Numerous researchers have recognized the importance of risk to understand trust (Yousafzai et al., 2003), but at the same time have emphasized that the relationship between risk and trust is complex. Across disciplines there is agreement that trust only exists in an uncertain and risky environment. The need for trust only arises in a risky situation (Mayer et al., 1995), p. 711). Trust would not be needed if actions could be undertaken with complete certainty and no risk. The trustor must lack information regarding the behaviour or characteristics of the trusted party or object of trust (i.e. uncertainty and there must be something that the trustor could lose if the trust is violated (i.e. risk). However, the relationship between risk and trust is reciprocal: risk creates an opportunity for trust, which reduces the perceived risk and leads to risk taking (Rousseau et al. 1998). Drawing on the work of (Luhmann, 1989) trust can be seen as a mechanism to reduce the complexity of human conduct in situations where people have to cope with uncertainty. In this perspective trust bears important functions for the consumer it reduces information complexity and lowers the perceived risk of a transaction. Hence, internet trust can be seen as a mechanism that reduces the uncertainty of using open technological infrastructures for the exchange of information, i.e. system-dependent uncertainty. With regard to internet banking or online shopping system-dependent or exogenous uncertainty primarily relates to potential technological sources of errors and security gaps or to put it economically to technology-dependent risks that can not be avoided by an agreement or a contract with another actor who is involved in the transaction (Grabner-Krauter, 2002). In the context of online shopping, several studies have conrmed the expected risk reducing impact of trust (Chang et al. 2005; Gefen et al. 2003; Jarvenpaa et al. 2000; Pavlou, 2003). Hence, we conclude that internet trust is a mechanism that reduces the perceived system-dependent risks of economic transactions on the internet. We propose that: H2. Internet trust is negatively related to perceived risk of internet banking. Without solving the existing problems of conceptualization and measurement of perceived risk (Mitchell, 1998) the impact of risk factors on attitudes, intentions or actual usage of online-shopping has been investigated in a number of studies (see the overview in (Chang et al. 2005). Several researchers refer to Ajzens theory of planned behaviour (TPB) (Ajzen, 1991) or to the theory of reasoned action (TRA) (Ajzen and Fishbein, 1980) as a theoretical framework (e.g. (Jarvenpaa et al. 2000; Pavlou, 2003; Teo and Liu, 2007; Teo and Liu, 2002). Similar to trust, perceived risk can also be regarded as a situational belief about the likelihood of gains and losses (Mayer et al. 1995; Teo and Liu, 2007). In several studies a signicant negative impact of risk perception on the attitude towards online shopping or likelihood to purchase online was found (Jarvenpaa et al. 2000; Kuhlmeier and Knight, 2005; Laforet and Li, 2005; Teo and Liu, 2007; Van der Heijden et al. 2003). Drawing on these ndings we posit that: H3. Perceived risk of internet banking is negatively related to the consumers attitude toward internet banking.

4. Situational and dispositional antecedents of internet trust 4.1 Familiarity with the internet In consumer research familiarity traditionally has been dened as the number of product-related experiences that have been accumulated by the consumer (Alba and Hutchinson, 1987). Familiarity thus reects the direct and indirect knowledge about a certain product or object available to the individual. Several researchers emphasize that consumers level of experience or familiarity with the internet should be considered as a key situational variable in determining both beliefs about this medium and online consumer behaviour (for an overview see (Martinez-Lopez et al., 2005). Both trusting beliefs and the willingness to depend are context-dependent. Therefore understanding the given context involved (i.e. familiarity) is often an important antecedent of trust (Gefen, 2000). Familiarity allows customers to accumulate trust-relevant knowledge about the trusted object and provides a framework for future expectations (Doney and Cannon, 1997; Komiak and Benbasat, 2004). According to (Gefen, 2000) familiarity can help to reduce uncertainty in online transactions and relationships. Prior experience with and knowledge about the internet should alleviate some of the complexity people encounter on commercial web sites and thus increase internet trust. Hence, we propose that: H4. Familiarity with the internet will increase internet trust. 4.2 Propensity to trust in the hierarchical structure of personality Propensity to trust or dispositional trust is the extent to which a person displays a tendency to be willing or depend on others across a broad spectrum of situations and persons (McKnight et al. 2002). This type of trust has its roots in personality psychology (e.g. (Rotter, 1967) and can be seen as a stable intra-individual characteristic which inuences interpersonal interaction with others. (Mayer et al. 1995, p. 715) dene the propensity to trust as a stable within-party factor which can be thought of as the general willingness to trust others. Perceiving it as a generalized and enduring predisposition, propensity to trust is not focused on specic situations or specic others. Despite its wide use in literature and also in empirical studies the concept of dispositional trust has mostly been conceptualized as a stand-alone trait without relation to the theoretical understanding of the personality structure which has emerged in recent years in psychology. (Brown et al. 2004) strongly claimed for relating this concept to established personality theories, and proposed the interpersonal circumplex model as an integrative framework. (Mooradian et al. 2006) among the rst empirically related propensity to trust to the hierarchical structure of the Five Factor Model, and investigated the relationship between trait and state trust in the context of knowledge sharing. We share the perspective that the concept of dispositional trust needs to be related to recent ndings in personality research, and therefore give an overview of the hierarchical structure of the Five Factor Model and the position of propensity to trust in this framework. The concept of personality and its relationship to consumer behaviour have long been of vital interest to consumer researchers (Sojka and Giese, 2001). For decades the structure of personality has been hotly debated without being able to grant consistent results. As in the early 60s ve fundamental traits had been identied (Tupes and Christal, 1992), growing consensus was emerging that these were the fundamental

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dimensions of personality (Costa and McCrae, 1992; Goldberg, 1990). Five broad factors of higher order constitute the pattern of traits across individuals: (1) neuroticism; (2) extraversion; (3) agreeableness; (4) openness; and (5) conscientiousness. Numerous scholars from many traditions were able to replicate the ndings, thereby sustaining the theory of ve basic dimensions of personality. The Big Five taxonomy received considerable evidence over the last decades across different theoretical frameworks, measures, occupations, cultures, and sources of ratings (DeRaad and Kokkonen, 2000; Liao and Chuang, 2004). In cosequence the concept of the Big ve has been employed in and linked to essential areas of applied psychology and social science, e.g. emotions and well-being (Larsen and Ketelaar, 1991; Watson and Clark, 1984), life satisfaction (Costa and McCrae, 1992), clinical research, counselling centres and job selection (Semit and Ryan, 1993), to marketing and consumer behaviour (Mooradian and Olver, 1997), motives and values (Roccas et al. 2002). However, the Five Factor Model has not been without its critique. In many studies personality traits failed to predict concrete behaviour. Among others, the person-situation debate challenges the view that consistencies in individuals behaviour are pervasive or broad enough to be meaningfully described in terms of personality traits (Funder, 2001). Also in the online trust literature scholars investigating the impact of the Big Five on trust in electronic retail settings did not nd any supporting evidence that personality-related factors inuence the dependent trust variable (Walzuch and Lundgren, 2004). In most studies, in order to assess personality, the relative parsimonious NEO-Five Factor Inventory (NEO-FFI) (Costa and McCrae, 1992), is used, which might constitute one reason for the lacking signicance of the personality-behaviour-relationship, as this raster is too coarse meshed. By splitting up the ve dimensions into 30 narrower facets, additional information is thought to be gathered about individuals over and above what could be obtained from the ve common factors (McCrae and Costa, 1992). Costa and McCrae (1995, p. 23) dene the broad ve factors as collections of specic cognitive, affective, and behavioural tendencies that might be grouped in many different ways, and facets designate the lower level traits which correspond to these groupings. The lower-level facets might therefore be more closely related to overt and observable behaviours (Paunonen et al. 2003). In the Big Five personality framework propensity to trust (which is simply labeled trust) is a facet of the Agreeableness dimension. It can be dened as the tendency to attribute benevolent intent to others, assuming that most people are fair, honest and have good intentions. Contrarily, distrust delineates suspicion that others are dishonest or dangerous (Costa et al. 1991). Low scorers on the trust dimension are further described as being cynical, pessimistic, and sceptical. We propose the trust facet of the Five Factor Model to adequately reect the stand-alone perceptions of the propensity to trust concept, while relating this important construct to recent developments in personality research.

Previous research examining propensity to trust has mainly focused on its impact on interpersonal situations. (Payne and Clark, 2003) for example investigated dispositional and situational determinants of trust in two types of managers. In online settings the internet vendor or the web site are often investigated as trusted objects or parties. (Lee and Turban, 2001) have seen dispositional trust mainly as moderator for consumer trust in internet shopping, and (McKnight et al. 2004) integrate dispositions to trust as determinants for the trusting intention towards a web site. We propose that the concept of propensity to trust is not exclusively applicable for interpersonal situations but is extendable towards technical systems. First evidence in this regard can be found in (Siegrist et al. 2005) who found that general trust (as disposition) might inuence perceptions of new technologies. In their study they investigated the impact of propensity to trust on various technological and non-technological hazards and found a weak signicant correlation. Although the internet has not been among the investigated technologies we posit that propensity to trust inuences both internet trust and the perceived risk of internet banking. H5a. People with high/low scores on the trust-scale display higher/lower levels of internet trust. H5b. People with high/low scores on the trust-scale display lower/higher levels of perceived internet banking risk. 5. Study 5.1. Sample To test the proposed relationships, data from customers from different Austrian banks who also are internet users (both adopters and non-adopters of internet banking) were collected. Subjects for the study were randomly selected people that have been approached in different places (airport, park, shopping streets) in bigger and smaller cities more or less all over Austria. Data collection took place in August 2007. The interviewers randomly selected airport passengers and passers-by, asked them to participate in the study (if they used the internet and had a bank account) and to complete the standardized, self-administered questionnaire. In most cases respondents did not need any help to answer the questions. As an incentive, interviewees received a soft drink. 381 usable questionnaires were collected. Table I displays the characteristics of the sample. 5.2. Measures A standardized questionnaire with closed-response questions using seven-point-rating scales was developed. All measurement items were drawn from the literature, and they were adapted using standard psychometric scale development procedures. internet trust was measured with four items, two items measuring the perceived reliability and predictability of the internet, and two items measuring the willingness to depend on the internet. (1) Internet trust: . With adequate safety measures on a web site I do not hesitate to enter my credit card information (willingness to depend on the internet). . I trust the internet (willingness to depend on the internet).

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Characteristic Gender Age Male Female Less than 20 years 20-29 years 30-39 years 40-49 years 50-59 years 60-69 years More than 70 years Primary High school Vocational school or apprenticeship University Other Adopters Non-adopters

% 48.6 51.4 10.5 23.1 20.5 23.4 13.6 5.5 3.4 4.7 36.7 29.7 26.5 2.4 59.1 40.9



Table I. Characteristics of the sample

Internet banking





When performing a transaction on the internet I know exactly what will happen (trusting beliefs predictability). . Internet transactions (e.g. online shopping or online hotel reservations) always function as expected (trusting beliefs reliability). Perceived risk of internet banking: . I am afraid that other people might get access to information about my internet banking transactions. . I believe it can rather easily happen that money is stolen if using internet banking. . I am afraid that the condentiality of my nancial transactions might get lost when using internet banking. . I think that privacy is not guaranteed when using internet banking. Attitude toward internet banking: . In my opinion it is desirable to use internet banking. . I think it is good for me to use internet banking. . Overall, my attitude toward internet banking is favourable. Familiarity with internet: . How long have you used the internet? . How often do you use the internet? (Propensity to) trust: . My rst reaction is to trust people. . I tend to assume the best about people. . I have a good deal of faith in human nature.

The items were adapted from (McKnight et al. 2002; McKnight and Chervany, 2002) and the brand trust scale developed by (Chaudhuri and Holbrook, 2001). Perceived risk of internet banking was adapted from (Awamleh and Fernandes, 2006) and (Meuter et al. 2005). Attitude toward online banking was based on scales developed by (Lai and Li, 2005), (Wu and Chen, 2005) and (Chau and Lai, 2003). The measure for propensity to trust was taken from Costa and McCraes (1992) NEO-Personality-Inventory-Revised (NEO-PI-R). The scale for the trust facet was adopted from the translated and validated German version of (Ostendorf and Angleitner, 2004). 5.3 Results 5.3.1 Reliability and validity. Structural equation modeling was used to analyze the data (AMOS 6.0). Conrmatory factor analysis (CFA) was conducted to test the measurement model and establish convergent and discriminant validity of the constructs. The initial measurement model had a mediocre model t, and ve items from the personality facet scale were eliminated in order to improve the t of the measurement model. As a result of the renements and purication, the initial measurement instrument of 21 items was reduced down to 16 items for the nal, rened measurement model. To evaluate the t of the proposed structural model, several goodness-of-t indicators were used. The chi-square value is 194,38 (df 112, p 0.000; x2/d.f. 1,736). Chi-square as a test statistic, however, is only recommended with moderate sample sizes (Hu and Bentler, 1999), e.g. 100 to 200, as with larger sample sizes as in this case, trivial differences become signicant. Hence, other global t indices are used to test model t. The nal measurement model reached or succeeded all recommended thresholds, with a goodness-of-t index (GFI) of 0.945, an adjusted goodness-of-t index (AGFI) of 0.925; the root mean square error of approximation (RMSEA) is 0.044, the Tucker-Lewis index (TLI) is 0.979 and the comparative t index (CFI) is 0.983. Thus, it can be concluded that the model ts the data reasonably well. In order to evaluate the local t of the structural components, reliability and validity of the measures were tested calculating the composite reliability (CR) of the constructs, the average variance extracted (AVE) and the Fornell-Larcker-Ratio (Fornell and Larcker, 1981) to test discriminant validity. The results are reported in Table II, showing good psychometric properties of the measures. For the endogenous constructs internet trust, perceived risk of internet banking and attitude toward internet banking, and the exogenous construct familiarity all indices clearly exceed their respective common acceptance levels recommended by previous researchers (indicator loading . 0.4, t-value signicant, composite reliability . 0.6, average variance extracted . 0.5, Fornell-Larcker-Ratio , 1). One indicator loading of the exogenous construct propensity to trust is lower than the recommended threshold. 5.3.2 Hypothesis testing results. Figure 1 displays the results of the basic model with the main effects, the explained variance of endogenous latent constructs and the strength of structural relationships. R 2 values of the endogenous constructs are 0.37 (internet trust), 0.36 (perceived risk of internet banking), and 0.58 (attitude toward internet banking). Hence, the personality facet propensity to trust and familiarity with the internet inuence internet trust, explaining 37 per cent of its variance. Both propensity to trust and internet trust inuence perceived risk of internet banking, explaining 36 per cent of its variance.

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Item Internet trust ITRUST2 ITRUST3 ITRUST4 ITRUST5 Perceived risk RISK_IB3 RISK_IB4 RISK_IB5 RISK_IB6

Indicator loading 0.683 0.639 0.673 0.585

t-value factor loading 16.633* 16.020* 16.489*

Composite reliability 0.88

Average variance extracted 0.65

Fornell-LarckerRatio 0.86


internet banking 0.654 20.357* 0.679 19.783* 0.848 24.562* 0.784




Attitude toward internet banking ATT1 0.836 ATT2 0.890 32.611* ATT3 0.879 32.109* Familiarity with internet Dauer_I 0.757 FREQ_I 0.836 Trust propensity Agree1_6 0.602 Agree1_7 0.879 Agree1_8 0.267 Note: * p , 0.001 15.546* 9.916* 9.120*







Table II. Psychometric properties of the scales in the main effect model




Figure 1. Relationships in the main effect model

internet trust has a strong positive effect and perceived risk of internet banking has a medium negative effect on the attitude toward internet banking, and together these variables explain 58 per cent of the variance of attitude. The results of the main effect model provided support for H1 to H5b. Familiarity with the internet has a strong positive effect impact on internet trust ( 0.59; p 0.000). internet trust has a strong and positive impact on attitude toward internet banking ( 0.66, p 0.000) and a strong and negative impact on perceived risk of internet banking ( 2 0.57, p 0.004). Perceived risk of internet banking has a negative impact on attitude toward internet banking ( 2 0.16, p 0.002). In support of H5a and H5b, propensity to trust has a signicant positive impact on internet trust ( 0.16, p 0.002) and a signicant negative impact on perceived risk, ( 2 0.11, p 0.025). 6. Discussion As yet, most studies on consumer online trust have focused on trust-related characteristics of the internet rm or the web site interface. In order to derive effective implications for enhancing consumer trust in e-commerce a number of empirical studies have attempted to identify the elements that are pertinent to the formation of online trust. Because the willingness to buy online or adopt internet banking depend both on the consumers trust in a specic party (web site or online merchant) and in the internet as underlying transaction medium, not only characteristics of the merchant but also characteristics of the web site and the underlying technology infrastructure are factors that affect online trust. The results of this study provide strong support for the proposed inuence of internet trust on risk perception and consumer attitudes toward internet banking. We conceptualized internet trust as trusting beliefs in the reliability and predictability of the internet and the willingness of the consumer to depend on the internet with regard to economic transactions and thus did not include any characteristics of the bank or the banks web site in our denition. In the original survey, the variable bank trust also was included, as we expected it to inuence the adoption of internet banking as well. The results of a discriminant analysis between the two groups of adopters and non-adopters of internet banking did not show any signicant differences for bank trust (Wilks Lambda 0.988, p 0.731). However, for internet trust as independent variable, the analysis of discriminance found a statistical signicant difference between adopters and non-adopters (Wilks Lambda 0.673; p 0.000). In a rival structural model (the results are not reported in this paper) trust in the bank was included as another antecedent of the attitude toward internet banking. Bank trust did not show any impact on the attitude toward internet banking and there only was a small intercorrelation between bank trust and internet trust. Thus it can be concluded that trust toward the bank or the internet vendor in a broader sense and trust toward the internet must not be confounded or treated as different dimensions of the same construct online trust, but have to be regarded as two distinct constructs that inuence online consumer behaviour in different ways. Another contribution of this study to the trust literature is the conrmation of the hypothesized impact of propensity to trust on internet trust as a specic form of technology trust. The question if the psychological concept of dispositional trust or propensity to trust is extendable towards technical systems is controversially discussed in the literature (Kaluscha, 2004; McKnight et al., 2002; McKnight and

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Chervany, 2002). Our ndings assert that not only people may be the object of dispositional trust, but trust propensity might be a generalized tendency both across different situations and different objects of trust. In addition, this study has shown that the adoption process of internet banking is not a mere question of web design, or actions dedicated to diminish perceived internet risk, but that it is a complex psychological process in which predispositions in the personality structure of potential internet users play a signicant role. Thus, even if bank managers might devote valuable efforts to design web site interfaces with improved usability and security in order to enhance internet trust and reduce the perceived risk, these steps are likely to have diverging success among internet bank customers, depending on their personal predisposition. In practice however it is quite difcult for bank managers to assess the personality scores on the trust facet of their customer base as a whole. Therefore, in the long run in order to enhance trust in internet banking and to reduce the perceived risk there might be no other means than actions in communicating the reliability and predictability of the internet banking system. This contains detailed information about the use of security features already in the instruction phase for the internet banking user, furthermore regular information up-dates for customers about security improvements, and also high-publicity events such as public lectures, research grants, etc. Negative headlines concerning internet banking, as lately happened in Austria, where phishing-attacks with misuse intentions have caused high uncertainty among internet banking users, have to be counterbalanced by overt efforts to improve security and to re-gain customer trust. 7. Implications, conclusion and limitations Researchers propose a number of different instruments and measures internet retailers can use to inuence trusting beliefs, intentions and behaviours of online consumers (see the overview in Grabner-Krauter and Kaluscha, 2003). Basically, these instruments and measures can be seen as potential signals of trustworthiness as they aim at increasing the perceived trustworthiness of the web site and the online vendor (Bart et al., 2005). Implications for the design of trust-inducing web sites mainly are presented in the growing body of literature in the eld of human computer interaction that focuses on how to implement graphical e-commerce interfaces that are perceived as trustworthy by online consumers (Wang and Emurian, 2005). However, these recommendations might not be sufcient to overcome consumers reluctancy to conduct their nancial and other economic transactions on the internet, as consumers might refrain from visiting web sites designed for e-commerce or internet banking because they do not consider the internet infrastructure as reliable and secure. Fuelled by media reports, there is a growing perception that the internet is insecure and unsafe (Gorman, 2007). To attract more internet banking customers and increase the acceptance of online banking services in Austria, it is denitely not enough to make the internet banking system convenient and easy to interact with. Rather it is of paramount importance, to address the issue of security in order to improve the rate of internet banking adoption (see also (Laforet and Li, 2005; Mukherjee and Nath, 2003). To ensure the security of their online banking systems banks use security features such as rewalls, ltering routers, callback modems, encryption biometrics, smart cards, and digital certication and authentication (Mukherjee and Nath, 2003). However, for the

majority of consumers it is beyond the scope of their technological understanding to fully comprehend the meaning and functionality of these security features. Therefore the attention of bank managers might be fruitfully focused on training and promotion approaches with the aim to inuence their customers perception of online security and to improve their customers knowledge about privacy and security mechanisms and concepts such as encryption methods. In the previous sections we have already mentioned some of the limitations of our study, among others the combined analysis of adopters and non-adopters (even if there were no signicant differences concerning bank trust). One important limitation might be seen in the lacking representativeness of the sample, even if we have a balanced distribution concerning the age groups, the sample is not a true random sample from the whole population wherefore a selection bias can not be fully excluded. And nally, due to space restrictions on the questionnaire we have not included usability, usefulness, other perceived characteristics of online banking and web site-related questions, although there might be interaction effects with the psychological constructs investigated in the present study. This could be a valuable research goal for future studies, as the relative importance of internet trust in the adoption process of internet banking might be related to external stimuli provided by the web site interface. Research focusing on the investigation of the dimensionality of online trust poses another fruitful avenue for trust researchers. Scholars either view trust as being one-dimensional or multi-dimensional, but clear empirical evidence is lacking that would help to favour one of these views. In line with the theoretical reasoning of (Gefen and Straub, 2004) and the ndings of their empirical study we believe that the dimensions that constitute trust are context-specic and that the meaning and consequences of trust can be better analyzed and understood when different trust dimensions are viewed separately. Thus the relevant trusting beliefs or expectations that determine trust-related behaviour depend on the circumstances of the interaction. In the case of internet trust, the relevant trusting beliefs dimensions are predictability and reliability, whereas benevolence and integrity are dimensions of trustworthiness that are relevant only for interpersonal or interorganizational trust concepts. The ndings of our study showed that Austrian consumers tend to have low trust in the internet as a medium to conduct their personal banking activities. As mentioned above, across Europe, internet banking adoption rates are markedly different (Meyer, 2006). Factors inuencing the adoption of internet banking have been investigated in numerous different countries (e.g. (Akinci et al. 2004; Eriksson et al. 2008; Karjaluoto et al. 2002; Kuisma et al. 2007; Laforet and Li, 2005; Mukherjee and Nath, 2003; Rotchanakitumnuai and Speece, 2003; Sukkar and Hasan, 2005; Wan et al. 2005). Consequently, cross-cultural effects on consumers online trust may prove to be another fruitful topic for future research. One of the ways in which culture affects trust is through dispositional trust. But culture can also affect the perception of different trust dimensions and the importance given to each of these dimensions (Schoorman et al. 2007). In any case, we conclude in line with several other researchers that the relationship between (online) trust and culture needs to be further investigated (Gefen, 2000; Lee and Turban, 2001; Schoorman et al. 2007; Shankar et al. 2002; Teo and Liu, 2007).

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About the authors Sonja Grabner-Krauter is Associate Professor of Marketing and International Management at the University of Klagenfurt, Austria. Her research focus is on business ethics, consumer trust, and electronic commerce. She is the corresponding author and can be contacted at: sonja.grabner@ Rita Faullant is senior research fellow at the Department of Innovation Management and Entrepreneurship at the University of Klagenfurt. Her research interests centre on the interfaces between psychology and marketing, leadership and innovation.

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