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  Proceedings of the 2007 Computer Science and IT Education Conference   Analyzing the Factors that Influence the Adoption of Internet Banking in Mauritius Kesseven Padachi, Sawkuk Rojid, and Boopen Seetanah School of Public Policy & Management, University of Technology, Mauritius, Pointes-Aux-Sables, Mauritius kpadachi@utm.intnet.mu ;  sawkutrojid@yahoo.com ;  b.seetanah@utm.intnet.mu   Abstract This paper analyses the factors that influence the adoption of internet banking for the case of the emerging African economy of Mauritius. Results based on the analysis of data relating to 200 respondents indicate that the mostly used services are inter account transfer, payment to other  personal account, transfer to credit card account, recharge mobile phones among others. Compar-ing demographic variables of the internet banking users to the non-internet banking users, the analysis also reveals that there is no significant difference between the two groups of users with respect to age group and the education level of the respondents. This is however not the case for the mean monthly income. Using factor analysis to identify the factors affecting the adoption of internet banking in Mauritius, it was found that the most significant factor is ease of use and that other important elements featured reluctance to change, trust and relationship in banker, cost of computers, internet accessibility, convenience of use, and security concerns. Further analysis us-ing cross tabulations suggest important statistical relationship between awareness, access to Internet facility, length of banking relationship, people working in the Internet banking/finance sector, education level in the category ‘post graduate’ and also income group with the usage of internet banking. Keywords: Internet-banking; Internet; Mauritius, banking, telecommunication. Introduction A feature of the banking industry across the globe has been that it is increasingly becoming turbu-lent and competitive, characterized by an increasing trend towards internationalization, mergers, takeovers and consolidation of the banking industry. Moreover a number of non-banking compa-nies are entering the banking industry by offering financial products and services (e.g., Toyota’s credit card, GM’s auto financing, Merrill Lynch investments). This has given a myriad of options to customers in choosing banking services. As a response and aided by technological develop-ments, banks have attempted to build customer satisfaction through providing  better products and services and at the same time to reduce operating costs. Thus the banking industry has been con-stantly innovating and with the advent of technological developments, particu-larly in the area of telecommunications and information technology, one of the latest innovation that took birth, and quite inevitably, has been the internet   Material published as part of this publication, either on-line or in print, is copyrighted by the Informing Science Institute. Permission to make digital or paper copy of part or all of these works for personal or classroom use is granted without fee  provided that the copies are not made or distributed for profit or commercial advantage AND that copies 1) bear this notice in full and 2) give the full citation on the first page. It is per-missible to abstract these works so long as credit is given. To copy in all other cases or to republish or to post on a server or to redistribute to lists requires specific permission and payment of a fee. Contact Publisher@InformingScience.org to request redistribution permission.  Factors that Influence the Adoption of Internet Banking in Mauritius 560  banking. This phenomenon has attracted a number of empirical studies (Bielski, 2000; Booz, Al-len & Hamilton, 1997; DeSourdy, 2001) that analyzed the development of electronic banking and its operations. A general consensus exist that e-banking enables banks to provide an inexpensive and direct way of doing banking business, exchanging information and to sell or buy products and services. A number of studies have been carried out relating to issues in the wider context of e-banking (Balachandher, Santha, Norhazlin, & Prasad, 2000; Suganthi, Balachandher, & Balachandran, 2001), particularly in relation to the rationales and benefits of internet banking, customer loyalty and service quality. However, comprehensive research investigating the relative importance of factors influencing the adoption of internet banking and other customer preferences, particularly for the case of an African country namely Mauritius, has never been carried out to our knowl-edge. This study thus aims to fill the gap in the literature by focusing on the factors that influence the adoption of internet banking for the case of the emerging African economy of Mauritius. Mauri-tius provides a good case study as the country is actually one of the best performers of the conti-nent and has a relatively well-developed financial system. Today the financial services, particu-larly banking, sector play a critical role in the economy both in the provision of employment and also in foreign currency inflow to the economy. Moreover the country also possesses a relatively good quality infrastructure, particularly with respect to communication and has among the highest education attainment level as well. Indeed it is estimated that around 15% of major bank custom-ers have an internet banking account and make use of it. Specifically this paper aims at i) identifying the most widely used internet banking services in the first place and ii) investigating if elements such as accessibility and cost of computers and inter-net, customers reluctance, awareness of the service, security of internet banking transactions, convenience and ease of use influence the usage of e-banking. The results will have important implications and is believed to be very helpful for the Mauritian banking sector and also for the government since both will be aware of the relatively important elements that should be taken into account to foster this service and thus reaping out its benefits. The structure of the paper is as follows: in the next section, we review the relevant literature in the area. Background information on Mauritian banking sector is then presented. The following section describes the research methodology, which is then followed by the data analysis and re-sults from the survey. The paper concludes with a summary, outlining the implications of the findings and the limitations of this study. Literature Review Pikkarainen, Pikkarainen, Karjaluoto, and Pahnila, (2004, p. 224) defines internet banking as an ‘internet portal, through which customers can use different kinds of banking services ranging from bill payment to making investments’. With the exception of cash withdrawals, internet  banking gives customers access to almost any type of banking transaction at the click of a mouse (De Young, 2001). Indeed the use of the internet as a new alternative channel for the distribution of financial services has become a competitive necessity instead of just a way to achieve competi-tive advantage with the advent of globalization and fiercer competition (Flavián, Torres, & Gui-nalíu, 2004; Gan, Clemes, Limsombunchai, & Weng, 2006). All banks using the internet as an additional channel or a bank using only the internet as delivery channel are now on equal footing to offer their banking services on the internet and to compete for customers around the world. As Karjaluoto, Mattila, and Pento (2002, p.261) put it ‘this could be the reason why the internet is widely seen as the most important delivery channel in the era’   Padachi, Rojid, & Seetanah 561 Internet Banking is beneficial for both the provider and the customer. The rationales of banks’ usage of the internet banking technology from the bank’s perspective are mainly related to cost savings (Robinson, 2000; Sathye, 1999). Banks use online banking as it is one of the cheapest delivery channels for banking products (Pikkarainen et al., 2004). Such service also saves the time and money of the bank with an added benefit of minimizing the likelihood of committing errors by bank tellers (Jayawardhena & Foley, 2000). Internet banking offer services regardless of geography and time and banks thus provide its services to the customers for them to use at their convenience. As Karjaluoto et al. (2002, p. 261) argued ‘banking is no longer bound to time and  geography. Customers over the world have relatively easy access to their accounts, 24 hours per day, and seven days a week’  . The author further argued that, with internet banking services, the customers who felt that branch banking took too much time and effort are now able to make transactions at the click of their fingers. Competition is yet another important rationale as with increasing competitive pressures from ex-isting firms and new entrants in the market, internet banking strategy has been an interesting way to retain existing customers and attract new ones. The use of internet banking as an alternative channel has also been allowing banks to target different demographic segments more effectively. Robinson (2000) believes that the supply of internet banking services enables banks to establish and extend their relationship with the customers. There are other numerous advantages to banks offered by online banking such as mass customization to suit the likes of each user, innovation of new products and services, more effective marketing and communication at lower costs (Tuchilla, 2000), development of non-core products such as insurance and stock brokerage as an expansion strategy, improved market image and better and quicker response to market evolution (Jayaward-hena & Foley, 2000). Benefits for the end users are numerous as well and includes convenience of the service (time saved and globally accessible service), lower cost of transaction and more frequent monitoring of accounts among others. The benefits of internet banking are known and unanimous, though there are some reserves mainly in terms of security of the system. However, this study is not aimed at analysing the ra-tionales or benefits of internet banking but, as spelled out previously, rather to investigate the  possible factors that determine the adoption of internet banking for the case of Mauritius. Below we discuss the theoretical underpinnings and provide some empirical evidences on these possible factors. It should be noted that empirical evidences has been indeed scant in the literature until now. Factors Determining the Demand for Internet Banking One factor that determines the level of demand for e-banking services is that of the number of  people having access to Internet. Moreover the cost and speed of internet connections have also  been argued to be important elements (see Li & Worthington, 2004; Sohail & Shanmugham, 2003). Li and Worthington also argued that customer confidence on e-banking transactions is yet another factor. This depends on how the banks would deal with any erroneous transactional and security concerns that may occur during online banking. It is good to point out that Stewart (1999) claimed that the failure of the Internet in retail banking is largely attributable due to the lack of trust consumers have in the electronic channels. Provision of infrastructural facilities is another factor that could lead to quicker diffusion of inno-vation. Study from Jayawardhena and Foley (2000) reveals that there is a significant correlation  between the website downloaded speed and web-users satisfaction. Moreover other features such as content and design, interactivity, navigation and security are relevant according to the author. Broderick and Vachirapornpuk (2002) found through observations and narrative analysis of inter-net banking customers, that problems such as slowness, poor navigational possibilities, poor in-  Factors that Influence the Adoption of Internet Banking in Mauritius 562 teractivity and critical incidents such as lack of help and empathy by internet banking service  providers, triggered considerable switching and negative word-of –mouth . The type of relationship customers wishes to maintain, and this differ, with banks is another as- pect to consider. Indeed there are evidences in communications that suggest that the choice of communication channel will affect on the development of relationships. Hiltz, Johnson, & Turoff (1986), for instance, 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 (Daft & Lengel, 1986). Clark and Mills (1993) con-cluded that ‘while some individuals may desire to establish relationships that are more personal and friendship-like, there may be others who value efficiency of services and prefer more imper- sonal association’  . Thus, as the authors argued, this implies that customers desiring social and  psychological benefits by establishing personal relationships with banks will prefer face to face interactions, at the detriment of e-banking. Tomiuk and Pinsoneault (2001) concurred with the above view and stated that the lesser degree of ‘richness’ and ‘sound presence’ of e-banking envi-ronment will affect banks’ ability to create a trusting relationship between their customers and employees. On the other hand, for those customers whose relationship is primarily based in effi-ciency of services, e banking will be an attractive alternative. There are also several other theories relating to consumer behavior what may explain the rate of adoption and degree of acceptance of the use of the likes of internet banking. Rogers and Shoe-maker (1971) argued that consumer go through several stages in knowledge conviction and deci-sion confirmation before they finally adopt a product of service. Guiltinand and Donnelly (1983) emphasized on the importance of awareness before adoption of any innovative products. Interest-ingly as Doll, Raghunathan, Lim and Gupta (1995) also claimed that product information content on the web design and layout are also important factors that affect customer satisfaction. Sohail and Shanmugham (2003) further argued ‘that proper navigational attributes and search facilities, leading to higher level of interactivity will have an impact on the customer perception on user  friendliness of the e-banking site’.  Mattila and Mattila (2005) also claimed that security has been widely recognized as one of the main barriers to the adoption of internet innovation following empirical work on Finnish banking customers’ survey responses including both internet users and non-user. Based on the above discussion we conclude that consumers’ preference to adopt internet-banking is dependent upon the availability of Internet service and interestingly on a number of several other social and psychological factors as well. Mauritian Banking Sector and Internet Banking The Internet Banking Sector Mauritius has realized rapid economic growth due to its diversification policies from agriculture to information technology and financial services. Today the financial services, the particularly  banking sector plays a critical role in the economy both in the provision of employment and also in foreign currency inflow to the economy. The country has a relatively well-developed domestic financial system and a growing offshore sector. There are 11 domestic commercial banks and 12 offshore banks in the country. Among the domestic banks, the two largest foreign banks are the Hong Kong Shangai Bank (HSBC) and Barclays International. These two banks control around 25 % of the market. As regards the local banks, they are dominated by the Mauritius Commercial Bank Ltd and the State Bank of Mauritius Ltd. They have more than two-thirds of the market. These two banks are also listed on the Stock Exchange.   Padachi, Rojid, & Seetanah 563 The domestic banking sector, which constitutes over two-thirds of the domestic financial system, has grown at an average 13 percent p.a. over the past five years. In 2005, the net foreign assets of the banking system went up by 7.3 per cent compared with a rise of 7.9 per cent in 2004. Domes-tic credit grew by 14.9 per cent in 2005, down from 19.1 per cent in 2004. Net credit to Govern-ment expanded by 8.0 per cent lower than the growth of 45.9 per cent registered in the preceding year. Credit extended by banks to the private sector, inclusive of non-financial public corpora-tions, increased by 18,0 per cent in 2005, up from 11,2 per cent in 2004. The Bank of Mauritius, (the central bank), carries out the supervision and regulation of banking business as well as non- bank financial institutions authorized to accept deposits. Communication and Internet    Communication infrastructure and provision in Mauritius is one of the best of the Continent. Ac-cess to the Internet on the island is accessible to residential and business users and the number of Internet users has grown rapidly over the years. Currently, the number of dial up Internet sub-scribers is around 60,000 (40% business and 60% residential) and the estimated number of users is around 146,000. Table 1 provides some basic information and key facts on the status of com-munication and internet on the island. It shows that in general, there has been a constant progres-sion in the communication and internet access since 1998. Table 1: Key Facts: Communication and Internet 1998 2000 2002 2004 2005 Population 1.14 1.15 1.18 1.2 1.2 Main Telephone lines per 1000 inhabitants 200 237 327 353 357 Telephone faults per 100 lines per year. 56 48 41.77 Internet host per 10000 inhabi-tants. 20 22 27.62 Personal Computers per 1000 inhabitants. 90 100 140 176 Av Mon. cost for unlimited Internet pack. U$20 U$ 18 U$ 15 Internet Host Sites. 577 3275 4000 Internet Subscribers (including ADSL) 12000 30000 50600 63500 65300 Internet Users per 1000 inhabi-tants. 49 73 100 146 Source: ITU (International Telecommunication Union), NW (Network Wizards) Internet Host Surveys and  partially adapted from Mike Jensen's Overview of Africa Internet Status [http://www3.sn.apc.org/africa/afstat.htm]. Updated World bank: ICT at a glance and Mauritius Telecom Annual Report 2005
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