The origin of research in diffusion of innovation dates back to the work of Gabriel Trade in the early 1900s. Trade is called the father of the concept of diffusion. He identified certain common characteristics in several legal cases and societal trends and called them the “laws of imitation”. Trade observed that diffusion of innovations follows a generalized path.
In the 1920s, anthropological research spent a good deal of time on diffusion research. That research continued up to the early 1950s when Bryce Ryan and his professor, Neal Gross, worked on diffusion through their research on hybrid seed corn. An explosion of diffusion research took place in Latin America and Africa and the leader of that research was Evett Rogers.
Technology diffusion theory helps to explain the process of adoption of an innovation. The societal process and its change across countries at large and population segments in particular is the main center of diffusion theory.
Technological innovation can be in the form of an idea, practice (intangible) or object (tangible). The perceived benefit of technological innovation, its convenience and adopters’ positive attitudes determine the reaction towards any innovation.
Innovators take a leading role in communicating such advantages through specific channels over a period of time to the prospective adopters in a social system.
Since the adoption process starts with a small number of innovators, the rate of growth of cumulative adopters is very slow. This is because the social groups who advocate in favor of technology diffusion constitute a small percentage of the population (approximately 2.5%). As the number of adopters increases, the rate of adoption also increases due to the increasing influence of the adopters on the prospective adopters. This process continues for a considerable time depending on the nature of the technological innovation as well as the cultural, social and economic background of the adopters; however, the rate of adoption increases exponentially. Once a considerable proportion of prospective adopters adopt the innovation, the rate of adoption slowly decreases as there is a very small proportion of prospective adopters left to adopt. This entire phenomenon follows an S-shaped curve. The first part of the curve shows a very slow rate of adoption, then it increases with a faster rate and finally increases with a decreasing rate. Frank Bass [BAS 69] modeled such phenomena mathematically through logistic curves and showed that the probability of adoption of a technological innovation depends on coefficient of innovation, as well as on the coefficient of imitation.
Naturally, the number of adopters at any point in time follows a bell-shaped (normal) curve. Rogers [ROG 62] divided the normal curve into five segments. The relative advantage of the innovation is identified through a risk-return analysis by 2.5% of individuals. The risk adversity of this segment is very low and they are prone to explore new ideas, products or services. They believe that innovation gives them a relative advantage in their daily lives. While this segment of adopters perceives the benefit of technological innovation, their sources of information about such benefit is often different.
The next group of people is averagely risk averse and is positively influenced by the innovators over a period of time. Bass [BAS 69] called them “imitators”. There are four groups of people who are imitators: early adopters, early majority, late majority and laggards.
Both lateral and longitudinal diffusion occurs in the innovation process. Lateral diffusion takes place when technology connects business processes of one area with the other. For example, Net-banking systems, centralized reservations or connecting downstream production with upstream production show horizontal diffusion.
Longitudinal diffusion takes place when technological knowledge is transferred in a vertical direction from an idea to an application through some process. Any diffusion process requires a channel through which technology will transfer from one point to another. Innovators and early adopters work as such a channel, helping technology to diffuse. Another important channel is mass media. Media plays a significant role in increasing the probability of adoption of particular technology.
While the amount of information transmitted through the media is same for all prospective adopters, the degree of personal influence varies, based on the number of people who have already adopted the technology. Hence, the probability of adoption at any point “t” follows a linear model with an intercept of probability of innovation (through mass media) and a gradient of probability of imitation (the influence of people who have already adopted). The ultimate objective is to increase the amount and quality of technology transfer in a unit of time.
Technological innovation in Web-based channels, especially the Internet, has been of interest to researchers for a long time. In general terms, the various pieces of research on technology adoption have explained that the diffusion of the Internet plays an essential role in product growth and the inclination of consumers to use it.
Opinion leaders and followers are two vital players in diffusion process.
Technological difference between opinion leaders and followers can be introduced where information flows from leaders to followers to increase their propensity to
adopt innovative technology. Therefore, there is more potential growth for the follower as compared to the leader. In this way and from the point of view of Internet policies, it would be advisable to make the process of Internet diffusion easier by eliminating obstacles to the effective technological catch-up process among leaders and followers, otherwise the growth of adoption by poor consumers and convergence among other consumers, would stop.
In a divergent and developing country like India, technology adoption in the form of the Internet is critical as well as complicated. This is because India is in a developing stage and both personal computer and Internet penetration is reasonably low. Technology gap theory, while it allows for the important public good aspect of technology, may not be suitable for some of the technology-based services in other developing countries. The main reason behind such delay in adoption is that the adoption process of technology-enabled services in such developing countries depends on some motivators as well as many inhibitors.
Technology is the key concept for success in today’s business world. The banking sector is one of the largest business sectors that use information technology (IT). Although technology is an immense benefit to the banking sector throughout the world in general and in India in particular, the role played by IT in the consumer interface is not important enough to be examined here. Traditionally, technology has provided support and solutions to banks to enable them to take care of their customers’ accounts and back-office requirements. This has subsequently given way to a large-scale implementation of services aimed at the bank’s customers, for example Automated Teller Machines (ATM), centralized database solutions and payment and settlement systems, etc. Another huge area that Indian bankers are targeting is Net banking.
The emphasis of electronic banking is on providing effective front-line systems to render customer contacts user-friendly. This is made easier because the physical presence of the customer is not required. However, the relevant enabling technology and systems should be accessible to customers. Most banks import the new technology for this very purpose. Another advantage of Internet banking is that it increases revenues (eg, through the ease of informing customers about products and the ease of proactive cross-selling). It also represents a competitive advantage through differentiation of banking services and image improvement. Finally, Internet banking allows a modular approach for cost-effective development and is of course an inexpensive option when compared with doing business in bank branches.
All these perceived advantages forced banks to import technology from foreign countries.
The next part of this chapter attempts to find out the factors that influence adoption of electronic banking technology in India. A literature review shows that the acceptance of technology by any country, in order to reduce a technology gap, primarily depends on the attitude toward adoption. In this chapter, the authors have identified the main dimensions that play a major role in the adoption of technology- based banking services in India which is an industrially- and economically- developing country.