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Journal of Internet Banking and Commerce
An open access Internet journal (http://www.arraydev.com/commerce/jibc/)
Journal of Internet Banking and Commerce, December 2007, vol. 12, no.3
(http://www.arraydev.com/commerce/jibc/)
Internet Banking Adoption Among Young Intellectuals
Hanudin Amin
Lecturer and Head of Islamic Finance Program, Universiti Malaysia Sabah-Labuan
International Campus
Postal Address: Labuan School of International Business and Finance, Universiti
Malaysia Sabah-Labuan International Campus, Jalan Sungai Pagar, 87008 Labuan
Federal Territory, Malaysia
www.ums.edu.my
Email: hanudin_zu@yahoo.com
Hanudin has written several articles in Journal of Internet Banking and Commerce
(JIBC). Indeed, this has pursued him to explore more area in Internet Banking and
Commerce, to be published in JIBC. His areas of interest are Islamic banking products
and e-banking.
Abstract
The aim of this paper is to study technology acceptance of internet banking among
undergraduate students in Malaysia. Thus, the theoretical framework of the paper is
based on modified version of Technology Acceptance Model (TAM). This paper
develops a technology acceptance model for internet banking, a conceptual framework
to explain the factors influencing undergraduate students' acceptance of internet banking.
The model employs perceived usefulness (PU), perceived ease of use (PEOU),
perceived credibility (PC) and computer self-efficacy (CSE). The first two are two initial
constructs for TAM model. The rest are new constructs to be included in the model in
order to have an extension of TAM model that better reflects the students’ view. The
results suggest that PU, PEOU and PC had a significant relationship with behavioral
intention. Further, these measures are good determinant for undergraduate acceptance
for internet banking. Results also suggest that PU and PEOU had a significant
relationship with CSE. On the contrary, CSE did not associate with PC. Also, PEOU had
JIBC December 2007, Vol. 12, No. 3 - 2 -
a significant relationship with PU and PC that indicate these scales are related to PEOU
in explaining undergraduate preference. The paper is useful in providing the
understanding of the TAM among undergraduate from Malaysians’ perspective.
Keywords: Banking; Technology acceptance model; Students; Malaysia
© Hanudin Amin, 2008
INTRODUCTION
It is an accepted fact that Internet banking is become a central field of study by many
researchers in Malaysia. Specifically, the recent study conducted in Internet banking is
done by Guriting and Ndubisi (2006) who studied Borneo online banking. Among the
other Malaysian internet banking researches are Ndubisi and Sinti (2006), Ndubisi et al.
(2004), Suganthi and Balachandran (2001) and Shanmugam and Guru (2002), to
mention a few. These studies uniquely offer a specific understanding on Internet banking
acceptance among Malaysians. However, it is limited for them to explore the
undergraduate’ behavioral intention over internet banking acceptance. Previous studies
were silent to address specifically undergraduate as their main target of research (i.e.
Karem, 2003; Ndubisi et al., 2004; and Sathye, 1999). Thus, the current study is
designed in order to study undergraduate acceptance of Internet banking.
Although internet banking provides flexibility in performing financial transaction, fast and
easy, however Malaysians are still reluctant to adopt the system because of several
reasons. First, the security and privacy are two elements in the perceived credibility.
Without a proper knowledge of the system, individuals are not interested to test the
system. Indeed, Tan and Teo (2000) found risk to be a very significant factor and
Ndubisi et al. (2004) also agreed the importance of adequacy of security in order to raise
the confidence of public to utilize the system. Second, internet banking is mixed-blessing.
It consists of the software and hardware costs such as needing internet-connection,
personal computer or laptop and maintenance in order to ensure its can be implemented.
Third, internet banking is seen as an alternative, is still limited to apply to the Malaysians
at large due to computer literacy. Therefore, in order to promote the use of Internet
banking, some situations need to be met. First, it is important to create “confidence”
among individuals about the system by providing a sufficient information and “useful” for
their critical thought before use the system range from “know-how” to security. Second is
that perhaps in the future, banks provide e-banking centers to promote the use of the
system and provide sufficient assistant in case of the customers got stuck. Third, banks
must support the use of the system by providing in-group training in order to make them
aware and believe about the usefulness of the system. As we know Internet banking was
permitted in June 2001 by Bank Negara Malaysia (BNM) to local banks and in January
2002 to foreign banks. A continuous observation is carried by BNM in order to protect
customer away from any losses caused by Internet banking.
The objective of the paper is to explain the factors influencing undergraduate students'
acceptance of internet banking in Malaysia. Thus, the theoretical framework of the paper
JIBC December 2007, Vol. 12, No. 3 - 3 -
is based on modified version of Technology Acceptance Model (TAM). TAM is chosen
because of two main reasons (Guriting and Ndubisi, 2006). First, because TAM helps to
better understand the relationship between the five important constructs of the study,
namely PU, PEOU, PC, CSE and BI. Second, TAM more than any other model is
acclaimed for its parsimony and predictive power which make it easy to apply in different
situation (Ndubisi and Jantan, 2003; Venkatesh and Morris, 2000). Most fundamentally,
perceived ease of use and perceived usefulness are addressed as the most important
constructs in predicting information system acceptance (Cheong and Park, 2005 and
Guriting and Ndubisi, 2006). In addition to that, the researcher proposed perceived
credibility and computer self-efficacy in order to enhance our understanding of
undergraduate acceptance of Internet banking beyond the general constructs of TAM
(i.e. perceived ease of use and perceived usefulness).
The paper is organized as follows. Section one deals with literature review and
hypotheses that relevant to the present study. Third section attempts to discuss the
model of the study. Section fourth attempts to justify the methodology of study. Fifth are
to analyze the data findings. Finally, the author attempts to highlight a number of
conclusions, implications of the study, limitations and potential future study relevant to
the present study topic.
LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
The previous studies have illustrated the importance of TAM. TAM has received better
empirical support in information technology research by many research studies
regardless the country concerned (i.e. Guriting and Nelson, 2006; Wang et al., 2003;
Ramayah and Ling, 2002; and Venkatesh and Morris, 2000). A further modification of
TAM is necessary since TAM was created for a general explanation of the determinants
of computer acceptance rather than for the specific topic of behavioral intentions of
Internet banking adoption as planned to further discussed in the present study. In this
part, the author highlights the original constructs of TAM namely PU and PEOU, followed
by PC and computer self-efficacy. The following further discussed about the studies
touch on the mentioned constructs:
Perceived usefulness
According to Davis (1989) perceived usefulness is defined here as the degree to which a
person believes that using a particular system would enhance his or her job performance.
In many instances, there is also extensive research in the Information System (IS)
community that provides evidence of the significant effect of perceived usefulness on
usage intention (i.e. Guriting and Nelson, 2006; Venkatesh and Morris, 2000; and
Venkatesh and Davis, 1996 to name a few).
The proposed relationship between perceived usefulness and behavioral intention is
based on the theoretical argument by Wang et al. (2003), and Guriting and Nelson
(2006). Wang et al. (2003) found that perceived usefulness has a positive effect on
behavioral intention to use the Internet banking. In simple words, perceived usefulness
has a significant relation on behavioral intention. Guriting and Nelson (2006) found that
perceived usefulness and perceived ease of use significantly determine behavioral
intention. These studies offer an insight for the author to further investigate the following
JIBC December 2007, Vol. 12, No. 3 - 4 -
hypothesis:
H1: Perceived usefulness will have a positive effect on behavioral intention to
use the Internet banking systems.
Perceived ease of use
According to Davis (1989) perceived ease of use refers to the degree to which a person
believes that using a particular system would be free of effort. Extensive research over
the past decade provides evidence of the significant effect of perceived ease of use on
usage intention, either directly or indirectly through its effect on perceived usefulness
(Venkatesh, 2000; Venkatesh and Morris, 2000; Agarwal and Prasad, 1999; Davis et al.,
1989). By extending these study results, the author proposes the following hypotheses
for Internet banking adoption among young Malaysians in Labuan:
H2: Perceived ease of use will have a positive effect on perceived usefulness
of the Internet banking systems;
H3: Perceived ease of use will have a positive effect on perceived credibility
of the Internet banking systems; and
H4: Perceived ease of use will have a positive effect on behavioral intention to
use the Internet banking systems.
Perceived credibility
According to Wang et al. (2003) perceived credibility consists of two important elements
namely privacy and security. Further, security refers to the protection of information or
systems from unsanctioned intrusions or outflows. Fear of the lack of security is one of
the factors that has been identified in most studies as affecting the growth and
development of e-commerce (Wang et al., 2003) including for Internet banking adoption.
According to Wang et al. (2003), found that perceived credibility had a significant
positive effect on behavioral intention. Moreover, Ramayah and Ling (2002) found that
Internet banking users are very concerned about security and majority of them are using
Internet banking for accounts enquiry only due to the credibility concern. These study
results are supported by Sathye (1999) who found that Australian consumers are not
adopting Internet banking because they are concerned about safety and security of
transactions over the Internet. Indeed, Suganthi et al. (2001), Daniel (1999), O’ Connel
(1996) discovered that security concern in an important affecting acceptance and
adoption of new technology or innovation. Based on these studies results, the author
pleases to propose the following hypothesis in order to further observe the relationship
between perceived credibility and behavioral intention but, from the Malaysians’ point of
view:
H5: Perceived credibility will have a positive effect on behavioral intention to
use the Internet banking systems.
Computer self-efficacy
JIBC December 2007, Vol. 12, No. 3 - 5 -
According to Compeau and Higgins (1995) computer self-efficacy is defined as the
judgment of one’s ability to use computer. Previous studies have shown that there is
empirical evidence on the effect of computer self-efficacy on perceived usefulness and
perceived ease of use that has been documented (i.e. Agarwal et al., 2000; Venkatesh,
2000; Venkatesh and Davis, 1996; Igbaria and Livari, 1995).
The proposed relationship between computer self-efficacy and perceived ease of use is
based on the theoretical argument by Davis (1989), Wang et al. (2003) and Guriting and
Nelson (2006). There also exists empirical evidence of a causal link between computer
self-efficacy and perceived ease of use (i.e. Venkatesh and Davis, 1996; Igbaria and
Livari, 1995; Venkatesh, 2000; Agarwal et al., 2000).
The proposed relationship between computer self-efficacy and perceived credibility is
based on the theoretical argument by Guriting and Ndubisi (2006) and Wang et al.
(2003). Guriting and Ndubisi (2006) in their study found that computer self-efficacy is
significantly associated with perceived usefulness and perceived ease of use. Further,
Wang et al. (2003) implying that computer self-efficacy will have a negative effect on
perceived credibility of the Internet banking.
Indeed, Wang et al. (2003) in their study found all three hypotheses concerning the
effects of computer self-efficacy on perceived usefulness, perceived ease of use, and
perceived credibility were supported. Furthermore, computer self-efficacy had a positive
effect on both perceived usefulness and perceived ease of use, and had a negative
effect on perceived credibility. These studies are provided a framework for constructing
the following hypotheses in order to establish a new insight about Internet banking
adoption among young Malaysians specifically in Labuan.
H6: Computer self-efficacy will have a positive effect on perceived usefulness
of the Internet banking systems;
H7: Computer self-efficacy will have a positive effect on perceived ease of
use of the Internet banking systems; and
H8: Computer self-efficacy will have a negative effect on perceived credibility
of the Internet banking systems.
RESEARCH MODEL
The model of the study is presented below. The model was adapted from the previous
study Guriting and Nelson (2006), Pikkarainen et al. (2004), Wang et al. (2003),
Venkatesh (2000) and Davis (1989). The model is applied to study the sample of
Malaysians that may helpful to explain the Malaysians’ acceptance on Internet banking
in Malaysia banking environment. The model is appeared below:
JIBC December 2007, Vol. 12, No. 3 - 6 -
Figure 1: Research framework for Internet banking acceptance
Perceived ease of use
Perceived credibility
Perceived usefulness
Behavioral intention
Computer
Self-Efficacy
METHODOLOGY
Sample
With respect to the sampling, a convenience sampling was utilized to survey about 250
students at the Labuan School of International Business and Finance. The reasons of
using this sampling type are twofold. First, it offers an easy way to obtain the raw data
for the further analysis. Second, it saves times and costs since the respondents can be
randomly selected. The potential respondents were those who are never using Internet
banking. In short, those students who were used Internet banking was exempted to
participate in the survey. The study is conducted in one of the public universities operate
in Malaysia, namely Universiti Malaysia Sabah – Labuan International Campus (UMS-
LIC). In the university campus, there are two schools open for the public, namely Labuan
School of International Business and Finance (SPKAL) and Labuan School of Informatic
Science (SSIL). The former is related to the business and finance study. The latter is for
those students who are master in information system (IS). The study is conducted during
the first semester of 2006/07 where the study was conducted in the SPKAL, some of the
SSIL students were participated. SSIL students were registered for the minor course of
business and finance courses in order to complete their syllabus. Choosing this campus
is because of two reasons. First, those business and economics student are revealed
with the knowledge of applied business and economics. At the same time, they are
equipped with the knowledge of computer science, where the concept of Internet
banking is not an alien for these students. Second, it was found that there is no study
ever conducted in the campus, it leaves a motivation to the research to perform a study
in order to investigate the students’ adoption for Internet banking in the near future. The
data is directly collected by the author via self-administered method. Needless to say,
the study conducted in the period from 1 March to 1 April 2006. Sample demographics
are displayed in Table 1.
JIBC December 2007, Vol. 12, No. 3 - 7 -
Table 1: Profile of respondents
Demographics Items No. respondents Percent
Gender Male 106 42.4%
Female 144 57.6%
Age 20-29 years 250 100%
Religion Muslim 194 77.6%
Non-Muslim 56 22.4%
School SPKAL 232 92.8%
SSIL 18 7.2%
Race Bumiputra 194 77.6%
Chinese 38 15.2%
Indian 16 6.4%
The profile of respondents is shown in Table 1. The ratio of male respondents to female
respondents is slightly almost equal, given the 42.4% of the male respondents and
57.6% are female respondents. Majority of the respondents are aged 20-29 years old
because they are undergraduate students where the age number is common for those
so-called university’s students. By religion, most of the respondents are Muslim with
77.6% while the rest will be non-Muslim. In terms of school, most of the respondents are
from SPKAL with 92.8% and SSIL with 7.2% because the study sample is largely
devoted to the business and finance students. By race, Bumiputra (i.e. Bajau, Melanau,
Kadazandusun, Murut, Suluk, and Malay, to name a few) is equal to 77.6% followed by
Chinese (15.2%) and Indian (6.4%).
Measures
The data for the study was collected via a questionnaire. The questionnaire was
constructed in two sections. First section attempts to verify the profile of the respondents.
Second section attempts to measure the agreement by respondents over their
acceptance of Internet banking. The measures are five measures are constructed range
from perceived usefulness to computer self-efficacy. These measures are tested in order
to observe their affect toward behavioral intention to use. In the questionnaire, all
concepts are measured based on or using seven-point scales ranging from “strongly
disagree” (1) to “strongly agree” (5).
The questionnaire items were adapted from different sources. Perceived usefulness with
three items were adapted from Wang et al. (2003). Perceived ease of use with four items
was adapted from Nysveen et al. (2005). Perceived credibility with two items were
adapted from Pikkarainen et al. (2004). Behavioral intention with two items was adapted
from Venkatesh (2000). Finally, computer self-efficacy with three items was adapted
from Wang et al. (2003). Prior to the distribution of the questionnaire, the questionnaire
received improvement by pre-tested its by using 4 mature lecturers mastering in banking
and marketing research based in Labuan, Universiti Malaysia Sabah.
JIBC December 2007, Vol. 12, No. 3 - 8 -
RESULTS AND DISCUSSIONS
Table 2: Reliability results
Determinants Number of Items Reliability for this sample
PU 3 0.70
PEOU 4 0.74
PC 2 0.82
CSE 3 0.77
BI 2 0.80
Further, the research instrument was tested for reliability using Cronbach’s coefficient
alpha estimate. The Cronbach’s alpha values for all dimensions range from 0.70 to 0.82,
exceeding the minimum alpha of 0.6 (Hair et al., 1998), thus the constructs measures
are deemed reliable.
Table 3: Factor loadings
Determinants Factor 1 Factor 2 Factor 3 Factor 4 Factor 5
PU1 0.791
PU2 0.782
PU3 0.725
PEOU1 0.941
PEOU2 0.682
PEOO3 0.950
PEOU4 0.665
PC1 0.863
PC2 0.863
CSE1 0.884
CSE2 0.685
CSE3 0.866
BI1 0.928
BI2 0.928
EigenValues 2.312 1.298 0.764 0.417 0.209
% of Variance 33.37% 18.74% 11.03% 6.03% 3.02%
Moreover, factors analysis is also conducted. The aim of factors analysis is to confirm
the construct validity of the scales could be performed adequately by using principle
component analysis (PCA). In order to reach this, the minimum factor loading of 0.6 on
its hypothesized constructs is proposed (Nunnally, 1978). A number of analyses were
conducted for factors analysis. Factor loading values were obtained using varimax
rotation. According to the above table, most of the factor loading for each instrument
exceeded 0.6, meeting the essentially significant level of convergent validity.
JIBC December 2007, Vol. 12, No. 3 - 9 -
Table 4: Regression results
Regression
1 Regression
2 Regression
3 Regression
4 Regression
5 Regression
6
(Constant) -0.0909
(Behavioral
Intention)
9.081
(CSE) 0.490
(CSE) 7.652
(CSE) 11.067
(PEOU)
PU 0.474
(0.000**.) 0.296
(0.000**) 0.109
(0.043*)
PEOU -0.111
(0.019*) 0.238
(0.001**)
PC 0.515
(0.000**) -0.075
(0.086,
n.s.)
0.433
(0.000**)
F statistic 75.792
(0.000**) 24.495
(0.000**) 11.329
(0.001**) 2.964
(0.086,
n.s.)
4.132
(0.043*)
79.11
(0.000**)
R20.48 0.305 0.22 0.11 0.12 0.511
Notes: * Significant at 5% level and **Significant at 1% level.
The results of the multiple regression analysis indicate that PU, PEOU and PC are
significantly associated with behavioral intention. Further, H1 is confirmed with the study
results which show that perceived usefulness has a positive relationship with behavioral
intention (t=12.01, p-value=0.000). The result is consistent with the previous studies (i.e.
Guriting and Nelson, 2006; Wang et al., 2003; Venkatesh and Morris, 2000; and
Venkatesh and Davis, 1996) who claimed that perceived usefulness has a significant
relationship with behavioral intention to use information system (IS).
H2 is confirmed. It indicates that perceived ease of use has a significant effect on
perceived usefulness (t=2.033, p-value=0.043). Further, H3 is also supported which
means perceived ease of use has a positive effect of perceived credibility (t=16.112, p-
value=0.000).
Moreover, H4 is significant at the 5% level, the result shows a negative relationship
between perceived ease of use and behavioral intention (t= -2.360, p-value=0.05). This
is supporting the hypothesis indirectly. The result is supported by the previous studies
such as Venkatesh (2000) and Venkatesh and Morris (2000).
The results also show that H5 is confirmed. Indeed, the result shows that perceived
credibility has a positive effect on behavioral intention to use the internet banking system
(t=6.591, p-value=0.000). Therefore the result is consistent with previous studies such
as Ramayah and Ling (2002) and Sathye (1999) who claimed that perceived credibility
was a determinant of behavioral intention.
Furthermore, H6 is confirmed. In other words, computer self-efficacy has a positive
JIBC December 2007, Vol. 12, No. 3 - 10 -
effect on perceived usefulness of the Internet banking systems (t=5.049, p-value=0.000).
The result is supported by the previous study ever conducted in Malaysia, which is
referred to Guriting and Ndubisi (2006) who found that computer self-efficacy is
significantly associated with perceived usefulness.
H7 is also confirmed. We can conclude that computer self-efficacy has a positive effect
on perceived ease of use of the Internet banking systems (t=3.366, p-value=0.001) also
consistent with Guriting and Ndubisi (2006) and Wang et al. (2003) studies results.
On the contrary, H8 is not supported by the current result. Computer self efficacy has no
significant relationship with perceived credibility of the Internet banking systems (t=1.722,
p-value=0.086). Hence it is concluded that computer self efficacy is not a determinant of
perceived credibility. In fact, the result is inconsistent with the study result of Wang et al.
(2003).
CONCLUSION
This paper has provided an impression about the determinants that influence university
students’ intention to use Internet banking in the future. By extending TAM, the author
has developed an extension of the TAM model which is incorporating additional
constructs such as computer self efficacy and perceived usefulness. Furthermore, this
study reflects the Internet banking understanding from the undergraduate point of view.
They are selected because of their potency to become an active banking customers in
the future, where all the services offered by banks are tend to be tested by them.
Additionally, the study highlights key findings which are read as follows:
• Perceived usefulness – Internet banking should be treated as important. The
banks investment are not stop at the initial costs of setting the system, further it
complements by having further education to make the system attractive to
customer.
• Perceived ease of use – Internet banking should be treated free from effort.
Further justification is needed to ensure the system beneficial to customers at
large.
• Perceived credibility – it is a ‘heart of the system’. Without a proper security and
privacy, perhaps Internet banking is looked as a menace to the customers
instead of banking channel alternative. Therefore, further enhancement in the
quality of security and privacy should observe over time to reduce losses for
customers.
• Computer self-efficacy – doing internet banking is not easy as doing internet
surfing. Internet banking deals with the customers’ money which is always be a
priority. Thus, indoor training and sufficient guidelines are needed to make sure
the customers are pleased and fulfilled their rights as customers.
Further, the study suffers from two setbacks. First, the sample is devoted to the
undergraduate population situated in the small Island of Labuan. The view of the
undergraduate may differ from those who are staying in the big cities such as Kuala
JIBC December 2007, Vol. 12, No. 3 - 11 -
Lumpur, Shah Alam, and Pulau Pinang. Thus, the results may be limited to the specific
location, and hard to predict its usefulness to other Malaysians in other cities. Second,
the measures perhaps are not sufficient to predict the determinants why undergraduate
use the system. Therefore some of the new measures may be included in the future.
In order to tackle these limitations, therefore the author proposes two-solutions. The first
setback can be minimized by extending the future studies to other universities sample
such as International Islamic University Malaysia (IIUM), Universiti Malaysia (UM),
Universiti Sains Malaysia (USM) and Universiti Kebangsaan Malaysia (UKM). Therefore
by conducting study in these universities, we can compare the results and look the gap
in order to further investigate the undergraduate adoption for Internet banking. Second
setback may be diminished by including other measures such as prior computing
experience, personal innovativeness, normative pressures and training for internet
banking use. Therefore, by using these measures, more interesting finding will be raised
in order to increase the knowledge base of TAM in the Malaysians’ point of view.
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Appendix 1: Results for Research Model
0.296** 0.474**
0.238** 0.109*
-0.111*
0.433** 0.515**
-0.075
PEOU [14.3%]
PC [13.2%]
PU [11.2%]
BI
[48%]
CSE
Notes: * Significant at 5% level and **Significant at 1% level.
Significant path (1% and 5%)
Insignificant path
