Determinants of User’s Intention to Adopt Digital Banking Services in Malaysia
Nik Nuraisyah Nik Azmi1*, Nur Hazrini Mohd Zahari1, Zainon Md Yunus1, Wan Nur Izni Wan Ahmad Kamar-BODIAN2
1 Faculty of Business and Finance, Universiti Tunku Abdul Rahman, Perak
2 Institut de Langues, Groupe Ecole Superieur de Commerce de Dakar, Dakar, Senegal
*Corresponding Author: [email protected] Accepted: 15 November 2021 | Published: 1 December 2021
DOI:https://doi.org/10.55057/ijaref.2021.3.4.3
_________________________________________________________________________________________
Abstract: In recent years, technology development and implementation has received a lot of attention. In Malaysia, the transformation of financial system to use digital banking infrastructure could drives nation to a high-income economy. Yet, the establishment of first digital banking enables innovative application of banking technology in order to address the market gaps in the underserved and unserved segment in Malaysia. Therefore, this study aims to examine the factors that influence the intention of Malaysian users to use digital banking services. This study also will introduce technology acceptance model (TAM) and diffusion of innovation theory (DOI) model as tools to investigate the factors that have a significant impact on the intention to use digital banking services among Malaysian users.
Keywords: digital banking, intention, diffusion innovation theory, technology acceptance model
___________________________________________________________________________
1. Introduction
Digital banking is a relatively new application that utilized digitized technology in order to provide all the services provided by traditional banks. The importance roles of the technology development towards the banking industry have been recently acknowledged, especially in emerging countries including Malaysia. The quick drive and adoption of technology has played a great role in leading to banks in re-adjusting towards digital finance (Gomber, Koch &
Siering, 2017).
According to Baabdullah et al. (2019) digital banking refers as a financial institution’s e- commerce application that allows consumers to make financial transactions remotely via a mobile device. In the digital era, traditional banking services are no longer adequate to meet the ever-changing needs of user’s behaviour. According to McKinsey’s report mentioned that the bank’s net profit has the potential between the range of 43 percent to 48 percent in 2014 as a result from the influence of digital technology. As a result, several banks have made digital banking as a strategic goal and competitive advantage for them.
Malaysia has seen a significant acceleration in digital adoption due to the pandemic COVID- 19 which has accelerated its adoption of FinTech, hence Malaysian consumers are embracing digital banking. According to Visa Consumer Payment Attitudes (2021) found that 65% of Malaysian are keen on digital banking services and believe that digital banking services are
more efficient, convenient, accessible and secure (The Edge, July 14, 2021). The survey also found that 74% of Malaysian are aware of digital banking services.
Furthermore, according to Hadid et al. (2020), in order to meet the demands of their respective clients, Malaysian banks have been integrating digital banking through various ways such as mobile banking, internet banking, online banking and automated banking. However, the ever- changing business climate and customer’s demand are the primary issues because they are constantly fluctuating.
Intention to adopt and accept the new innovation is based on individual’s response to the environment and social culture. In fact, consumers have the ability to accept or reject new products which is one form of consumer behaviour. Although each consumer plays significant role in embracing new technology, yet most of the majority of consumers are able to accept and use it.
Nevertheless, due to limited research on digital banking services in Malaysia which completely new, hence the information on factors that influenced users’ intention to adopt digital banking services are limited and yet to explore. Conclusively, this study aims to acknowledge the factors which influence the intention of Malaysian users to adopt the usage of digital banking services. The study uses TAM and DOI as a base-line theory to investigate factors that may influence digital banking services adoption and use.
2. Literature Review
Technology Acceptance Model (TAM)
In TAM theory, Davis (1989) mentioned that there are two elements that are crucial in describing the user’s intention and behaviour towards the usage of new technology, namely perceived usefulness and perceived ease of use. According to TAM theory, perceived usefulness and perceived ease of use will determine an individual’s behavioural intention to utilized a system. TAM theory was created with the goal of describing computer-related behaviour. Also, according Davis (1989) TAM has the ability to describe and predicting individual behaviour across a greater range of end-user computing technologies and user groups while remaining both frugal and theoretically justified.
Perceived Usefulness
Perceived usefulness has been defined as a user’s subjective probability that using a different system or technology will increase his or her job performance (Davis, 1989). Therefore, perceived usefulness is one of a system which the user believes the existence of a positive user- performance relationship (Davis, 1989).
Prior to the study by Gao and Bai (2014) found that consumers who felt the usefulness of the system would influence the intention of consumer behaviour towards the systems. According to Guriting and Ndubisi (2006), found that perceived usefulness online was a strong factor among bank customers in Malaysia.
Therefore, perceived usefulness provides reliable prediction for predicting use of self-predicted decision models (Mufarih, Jayadi & Sugandi, 2020). There results confirm that there is a high correlation between perceived usefulness and one’s intention to use the system.
Perceived Ease of Use
Perceived ease of use refers as how clear and understandable interaction with the system is, ease of getting the system to do what is required, mental effort required to interact with the system, and ease of use of the system (Davis, 1989).
According to Guriting and Ndubisi (2006) reported that perceived ease of use had a positive relationship with behavioural intention to use Internet banking in Malaysia. Moreover, several studies provide consistent findings which indicate a positive causality between perceived ease of use and usage intention (Guriting & Ndubisi, 2006; Luarn & Lin, 2005). It is parallel to a study by Gao and Bai (2014), found that consumer who feel the benefits and conveniences of the system will affect the intention of consumer behaviour towards the systems.
Besides, perceived ease of use provides one’s perception on using technology can be easily understood and applied. Therefore, perceived ease of use is a level of confidence in the ease of using an application in carrying out these activities (Mufarih et al., 2020).
Diffusion of Innovation Theory (DOI)
DOI theory describes the characteristics of innovation are the nature of the diffusion of innovation, where the characteristics of innovation are one that determines the successful use of technology namely compatibility, complexity and relative advantage.
DOI can be referred to as an innovation to an idea, practice or object that is perceived as new by an individual or groups (Rogers, 2003). Even though DOI can be used to explain the dispersal of any new idea, practice or object, DOI theory is also commonly used to explain technology diffusion (Lu, Quan & Cao, 2009). Moreover, DOI theory frequently used in the literature on internet banking adoption (Md Nor et al., 2007; Zolait & Sulaiman, 2008) along with TAM theory due to innovative nature of internet banking.
In the context of technology acceptance, DOI theory are cognitive steps that individuals go through to gain awareness of the innovation and eventually begin to use the innovation (Daka
& Phiri, 2019).
Compatibility
According to Chen et al. (2004), compatibility defines as a degree to which a service is perceived as consistent with users’ existing values, beliefs, habits, presents and previous experiences. Besides, Rogers (2003) said that compatibility is a vital feature of innovation as conformance with user’s lifestyle can propel a rapid rate of adoption. If the innovation is compatible with the needs of individual, thus the uncertainty will decrease and the rate of adoption of innovation will increase (Hoerup, 2001). It is also suggested that if the users believed that the innovation is not compatible with the values and the norms of their past practice, it is highly likely that the innovation will be adopted not as fast as the compatible ones (Roger, 1995).
Past researchers have shown that compatibility has a significant antecedent in determining consumers’ attitude towards internet banking adoption in Malaysia (Ndubisi & Sinti, 2006). In a parallel to that, compatibility has been found influential in the adoption of virtual store (Chen et al., 2004), m-payment (Chen, 2008) and mobile banking (Koening-Lewis et al., 2010; Lin, 2011).
Therefore, compatibility is a level of innovation which is perceived as consistent with the values of past experiences and needs of potential adopters (Andlivari Huisman, 2006).
Complexity
Rogers (1995), mentioned that the ease of use of any innovation makes it worth for people to adopt the innovation. Complexity refers as an innovation that can be considered relatively difficult to understand and use (Cheung et al., 2000). It is suggested that the simpler the innovation to be understood by the users, the faster the innovation will be adopted. Innovation which are complex to understand and to be used will require the adopters to develop new skills to adopt it. Since users’ knowledge of technology and innovation would vary, it is believed that some innovation will be easier for some people to understand and for some others, it would require additional and certain level of knowledge. Yet, complexity has been found to be negatively influences the adoption of internet usage and it is the opposite of ease of use.
Also, the major factor in adoption of mobile banking is complexity. Based on previous research on the mobile technology suggested that users’ intention to adopt mobile banking is inhibited by the complexity of the innovation (Au & Kauffman, 2008; Mallat, 2007; Ondrus & Pigneur, 2006). However, past researcher revealed that complexity of an innovation is critical to its adoption (Sakala & Phiri, 2019).
Relative Advantage
According to Moore and Benbasat (1991), defines relative advantage as a degree to which an innovation is perceived to provide more benefits that its predecessor. Rogers (2003) mentioned that relative advantage will increase efficiency, economic benefits and enhanced the status. The greater the relative advantage perceived by the adopters, the faster these innovations can be adopted (Roger, 1983). The relative advantage can be in terms of financial or non-financial and can be measured in economic, social prestige, comfort and pleasure terms.
Relative advantage can be considered to be a better idea to replace the things that want to be improved the performance (Nor & Pearson, 2007). Besides, relative advantage has clearly influenced the choice of banking method (Lichtenstein & Williamson, 2006). According to McCloskey (2006) and Rogers (2003) suggested that when user perceives relative advantage of a new technology over an old one, they tend to adopt it.
Trialability
Trialability is defined as a degree to which an innovation may be tested or experimented for some time before a commitment to adopt is made on a limited time basis i.e., allowed to experiment with it, would feel comfortable with it and thus be more likely to adopt it (Roger, 1983;Roger, 2003; Scott et al., 2008; Agarwal & Prasad, 1999). It is believed that if users are able to test the innovation before adopting it, it can help to convince the users more to adopt the innovation. Users will usually believe that the adoption of innovation will be not be successful if they cannot test it before the real adoption.
Previous study by Tan & Tan (2000) found that trialability significantly influenced the intentions to adopt internet-banking services in Singapore. The finding is consistent with Eze et al., (2011) that trialability has a positive influence on internet-banking adoption in Malaysia especially among young adults and Sohail & Al-Jabri (2014) found trialability is the most significant factors affecting Saudi consumers’ decision to adopt mobile banking.
Therefore, trialability is a positive relationship to rate adoption (Roger, 1995 and Li, 2004).
That is because new innovations require investing time, energy and resources – the more
innovations that can be tried, the faster it will be adopted among the users (Roger, 2003; Scott et al., 2008).
Observability
Observability suggest the degree to which the adopters can see the results of adopting the innovation. Under this attribute, it is believed that if users can observe the result of adopting the innovation, it is easier that the innovation was to be adopted and the rate of adoption will be more rapid. By observing the result of innovation, it will trigger the discussion among peers and the potential adopters. This is because, people tend to request the evaluation or opinion from those who are close to them on the result of using the innovation.
The degree of opinion that people can obtain from their peers regarding the result of using the innovation is believed to have the effect their decision on adopting the innovation. Therefore, it is suggested that if the result of using the innovation is available for observation by the potential users, they are more willing to adopt the innovation. Besides, it is also suggested that this attribute will help to eliminate the challenges in adopting the innovation by the potential users (Rogers, 1995).
In digital banking context, observability can be concluded as the exposure gained by the customers about the mobile banking and its benefits after witnessing the effect of mobile banking, the ability to access the banking services any at any time and from any location without any delay or queue. Therefore, through the exposure customers will be able to gain knowledge about the digital banking thus will facilitate the adoption (M. Al-Jabri & Sohail, 2012). Past research conducted by Lau (2002) on the brokers adoption of online trading in Hong Kong has suggested that observability was significantly correlated with the attitude of using the system.
Proposed Conceptual Framework
Figure 1: Conceptual framework of the study
Figure 1 represents the possible factors that influence the adoption of digital banking services in Malaysia. By combining both model of TAM and DOI might determine the factors that influence users’ intention to adopt digital banking services in Malaysia.
Perceived Usefulness Perceived Ease of Use
Compatibility Complexity Relative Advantage
Intention to Adopt Digital Banking Services in Malaysia Trialability
Observability
3. Conclusion
Technology has taken up the world with a storm transforming each and every aspect of life. In fact, technology innovation has had a significant impact on distributing in banking (Nguena, 2019). It is an inevitable trend and banks need to adapt to survive in the increasingly competitive market. With current customers especially the millennials demand financial system that are more intelligent which could reduce costs and convenience therefore, digital banking services could help the users to access more services with flexibility. Therefore, it is very important to determine factors that will influence user’s intention to adopt digital banking services in Malaysia especially it could be useful to the policymakers and bankers to encourage more adoption rate of digital banking services.
References
Agarwal, R., & Prasad, J. (1999). Are individual differences germane to the acceptance of New Information Technologies? Decision Sciences, 30(2), 361–391.
https://doi.org/10.1111/j.1540-5915.1999.tb01614.x
Au, Y. A., & Kauffman, R. J. (2008). The economics of mobile payments: Understanding stakeholder issues for an emerging financial technology application. Electronic Commerce Research and Applications, vol. 7, no. 2:141-164.
Baabdullah, A. M., Alalwan, A. A., Rana, N. P., Kizgin, H., & Patil, P. (2019). Consumer use of mobile banking (M-banking) in Saudi Arabia: Towards an integrated model.
International Journal of Information Management, 44 (July 2018), 38-52.
Chen, L. (2008). A Model of Consumer Acceptance of Mobile Payment. International Journal of Mobile Communication, vol. 6, no. 1: 32-52.
Chen, L., Gillenson, M. & Sherrell, D. (2004), “Consumer acceptance of virtual stores: a theoretical model and critical success factors for virtual stores”, ACM SIGMIS Database,Vol.35 No.2, pp.8-31.
Cheung, W., Chang M. K., & Lai, V. S. (2000). Prediction of Internet and World Wide Web Usage at Work: A test of an extended Triandis Model. Decision Support System, Vol. 30, No. 1: 83-1000.
Daka, G., & Phiri, J. (2019). Factors Driving the Adoption of E-Banking Services Based on the UTAUT Model. International Journal of Business and Management, 14, 43-52.
https://doi.org/10.5539/ijbm.v14n6p43
Davis, F. D., (1989). “Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology”, MISQuarterly,13 (5), pp. 319-339.
Eze, U. C., L. H. Yaw J. K. Manyeki and L. C. Har (2011), “Factors Affecting Internet Banking Adoption among Young Adults: Evidence from Malaysia”, International Conference on Social Science and Humanity, IPEDR , 5.
Gao, L., & Bai, X. (2014). A unified perspective on the factors influencing consumer acceptance of internet of things technology. Asia Pacific Journal of Marketing and Logistics, 26(2), 211-231. https://doi/org/10.1108/APJML-06-2013-0061
Gomber, P., Koch, J. A., & Siering, M. (2017). Digital Finance and FinTech: Current research and future research directions. Journal of Business Economics, 24(5), 537- 580.
Guriting, P., & Ndubisi, N. (2006). Borneo online banking: Evaluating customer perceptions and behavioural intention. Management Research News. 29. 6-15.
10.1108/01409170610645402.
Hadid, K. T., Soon, N. K. & Elmabrok Amreeghah, A. A (2020). The Effect of Digital Banking Services Quality on Customer Satisfaction: A Case Study on the Malaysian Banks. Asian Journal of Applied Science and Technology (AJAST), vol. 4, issue 1, pages 06-29.
Hoerup, S. L. (2001). Diffusion of an innovation: computer technology integration and the role of collaboration (Doctoral dissertation, Virginia Polytechnic Institute and State University, 2001). ProQuest Digital Dissertations. (UMI No. AAT 3031436).
Koenig-Lewis, N., Palmer, A. & Moll, A. (2010),“Predicting young consumers’ take up of mobile banking services”. International Journal of Bank Marketing, Vol.28 No.5, pp.410-432.
Lau, S.M. (2002). Strategies to motivate brokers adopting on-line trading in Hong Kong fi nancial market. Review of Pacifi c Basin Financial Markets and Policies, 5(4), 471-489.
Li, S-C. S. (2004). Exploring the factors influencing the adoption of interactive cable television services in Taiwan. Journal of Broadcasting & Electronic Media, 48(3), 466-483.
Lichtenstein, S., & Williamson, K. (2006). Understanding Consumer Adoption of Internet Banking: An Interpretive Study in the Australia Banking Context. Journal of Electronic Commerce Research, vol. 7, no. 2: 50-66.
Lu, Y., Quan, J., & Cao, X. (2009). The Perceived attributes of wi-fi technology and the diffusion gap among university faculty members: a case study. Communications of the Association for Information Systems, vol. 24, pp. 69-88.
Luarn, P., & Lin, H. H. (2005). Towards an understanding of the behavioural intention to use mobile banking. Computers in Human Behaviour, vol. 21, No. 6: 873-891.
M. Al-Jabri, I., & Sohail, M. S. (2012). Mobile Banking Adoption: Application of Diffusion of Innovation Theory. Journal of Electronic Commerce Research, 13(4), 379–391.
Mallat, N. (2007). Exploring consumer adoption of mobile payments – a qualitative study.
Journal of Strategic Information System, vol. 16, no. 4:413-432.
McCloskey, D. W. (2006). The Importance of Ease of Use, Usefulness and Trust to Online Consumers: An Examination of the Technology Acceptance Model with Older Consumers. Journal of Organizational and End User Computing, vol. 8, No. 3: 47-65.
Md Nor, K., & Michael, P. J. (2007). The Influence of Trust on Internet Banking Acceptance.
Journal of Internet Banking and Commerce. Vol. 12, No. 2.
Moore, G. C., & Benbasat, I. (1991), “Development of an instrument to measure the perceptions of adopting an information technology innovation”, Information Systems Research, Vol. 2 No. 3, pp.192-222.
Mufarih, M., Jayadi, R. & Sugandi, Y. (2020). Factors Influencing Customers to Use Digital Banking Application in Yogyakarta, Indonesia. The Journal of Asian Finance, Economics and Business, 7(10), 897-907. https://doi.org/10.13106/JAFEB.2020.VOL7.NO10.897 Ndubisi, N. O. & Sinti, Q. (2006), “Consumer attitudes, system’s characteristics and internet
banking adoption in Malaysia”, Management Research News, Vol. 29 No. 1/2, pp.16-27.
Nguena, C. L. (2019). On financial innovation in developing countries: The determinants of mobile banking and financial development in Africa. Journal of Innovation Economics
& Management, 2(29), 69-94.
Nor, K. M., & Pearson, J. M. (2008). An exploratory study into the adoption of internet banking in a developing country: Malaysia. Journal of Internet Commerce, 7(1), 29-73.
Ondrus, J., & Pigneur, Y. (2006). Towards a holistic analysis of mobile payments: a multiple perspectives approach. Electronic Commerce Research and Applications, vol. 5, no.
3:246-257.
Roger, E. M. (1983). Diffusions of Innovations, 3rd ed. Free Press, New York, NY.
Rogers, E. M. (1995). Diffusion of innovation (4th ed.). New York: The Free Press.
Rogers, E. (2003). Diffusions of Innovations, Free Press, New York, NY.
Sakala, L., & Phiri, J. (2019). Factors Affecting Adoption and Use of Mobile Banking Services in Zambia Based on TAM Model. Open Journal of Business, 7, 1380-1394.
https://doi.org/10.4236/ojbm.2019.73095
Scott, S. D., Plotnikoff, R. C., Karunamuni, N., Bize, R., & Rodgers, W. (2008). Factors influencing the adoption of an innovation: An examination of the uptake of the Canadian Heart Health Kit (HHK). Implementation Science, 3(1). https://doi.org/10.1186/1748- 5908-3-41
Sohail, M. S., & Al-Jabri, I. M. (2013). Attitudes towards mobile banking: Are there any differences between users and non-users? Behaviour & Information Technology, 33(4), 335–344. https://doi.org/10.1080/0144929x.2013.763861
Tan, M., & Teo, T. (2000). Factors Influencing the Adoption of Internet Banking. Journal Of The Association For Information Systems, 1(1), 1-44. doi: 10.17705/1jais.00005
The Edge Markets. (2021, July 14). https://www.theedgemarkets.com/article/almost-half- malaysians-do-not-visit-bank-branches-choose-bank-online-instead-%E2%80%94-visa- survey.
Zolait, S. A., & Sulaiman, A. (2008). Internet Banking Technology Adoption in Yemen:
Correlates of Rogers’ Five Innovation Attributes. Information Management in Modern Organizations: Trend & Challenges, pp. 1124-1135.
