METHODS IN BUSINESS RESEARCH

Effect of trust on customer acceptance of Internet

banking

Submitted To:

Sir. Usman Ali Warraich

Submitted By:

Muhammad Atta Ur Rehman (14311)

Shahzad
Zain 16876

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Contents
1. Introduction: ......................................................................................................................................... 3
2. Problem Statement ............................................................................................................................... 3
3. Scope of the Study: ............................................................................................................................... 4
4. Theoretical Framework: ........................................................................................................................ 4
5. Hypothesis............................................................................................................................................. 5
6. Research Method: ................................................................................................................................. 6
6.1. Subject: ............................................................................................................................................. 6
6.2. Measurement: .................................................................................................................................. 6
7. Result .................................................................................................................................................... 7
7.1. Reliability and validity of measurement items ................................................................................. 8
7.2. Assessment of overall model fit ........................................................................................................ 8
8. Conclusion: ............................................................................................................................................ 8
9. Reference: ............................................................................................................................................. 9

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1. Introduction:

In the past decades, much research has paid attention to the perceived usefulness and perceived
ease of use as the determinants of the individual’s under acceptance of IS. These constructs are
the salient beliefs underpinning the Technology Acceptance Model (TAM) [8]. The TAM is one
of the most widely used models for explaining the factors that have an impact on user acceptance
of IS.

Many studies have demonstrated the validity of the TAM across a wide range of IS. However,
the factors contributing to the acceptance of new IS are likely to vary with the technology,
untargeted users, and context [31]. Internet banking is very different from traditional IS. That is,
Internet banking uses emerging technologies, such as the Internet and WWW, and enables
customers (users of Internet banking) to perform financial activities in virtual space. Research on
customer acceptance of Internet banking may, therefore, enhance the under acceptance standing
of a customer’s beliefs to make him/ her use Internet banking, and show how these beliefs affect
Internet banking customer behavior.

In spite of the recent proliferation of Electronic Commerce (EC), customers have a tendency to
be reluctant to provide sensitive personal information to Web sites. Customers are generally
comfort-able providing Web sites with general information such as preferences. They are,
however, very untargeted comfortable when asked to provide more sensitive information such as
credit card numbers. These feelings are due not only to the defects of the Internet and EC
security, but also to the customers ‘distrust of them. Many technologies for the Internet and EC
security such as data encryption and digital signatures became more advanced in the 1990s. They
Have reduced the possibility of Internet security breaches. Nevertheless, highly publicized cases
involving major security lapses have served to height-en the public concern over the Internet and
EC security. The customers’ concerns reduce his / her trust in EC, and thus are the major
obstacles to the growth of EC.

2. Problem Statement

1. Is Technology Acceptance Model (TAM) applied Internet banking:

The TAM was developed to explain the effect of the user’s perception of system characteristics.
The TRA model is a general model, which suggests that an individual’s social behavior is
motivated by his / her attitude towards the behavior. According to the TRA model, an
individual’s attitude towards a behavior is a function of his / her beliefs about the consequences
of performing the behavior and the evaluation of those consequences.

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The TAM adopts the TRA model’s causal relationships to explain an individual’s IS acceptance
behavior. The TAM shows that two particular beliefs, perceived usefulness and perceived ease of
Use, are most relevant to IS acceptance behaviors.

2. Trust in the Internet banking environment:

There are so many different definitions of trust across research areas. Based on the literature of
various areas, McKnight and Chervany [30] classified the definition of trust into four types:
disposition to trust, in-stitution-based trust, trusting belief, and trusting intention. Disposition to
trust is the extent to which one displays a consistent tendency to be willing to depend on others
in general across a broad spectrum of situations and persons.

3. Scope of the Study:

So the main objectives of this paper are as follows:

 To explore the influence on customer acceptance of Internet banking.

 To examine additional belief, trust, to the original TAM in order to reflect the
characteristics of the Internet banking environment.

4. Theoretical Framework:

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5. Hypothesis

 H1: A customer’s perceived usefulness has a positive impact on his /her

trust in Internet banking.

 H1: A customer’s trust has a positive impact on his /her attitude towards
using Internet banking.

 H1: A customer’s trust has a positive impact on his /her intension to use
Internet banking.

 H1: A customer’s perceived ease of use has a positive impact on his /her
perceived usefulness of Internet banking.

 H1: A customer’s perceived usefulness has a positive impact on his /her

attitude towards using Internet banking.

 H1: A customer’s perceived ease of use has a positive impact on his /her
attitude towards using Internet banking.

 H1: A customer’s perceived usefulness has a positive impact on his /her

intension to use Internet banking.

 H1: A customer’s attitude towards using Internet banking has a positive

impact on his /her intention to use it.

 H1: A customer’s intention to use Internet banking has a positive impact

on his /her actual use of it.

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6. Research Method:

Customers are more concerned about EC and Internet security when they process more sensitive
personal information. Internet banking sites are among those that manipulate the most sensitive
personal information, including financial information, therefore chose Internet banking as our
research domain.

6.1. Subject:

The data for this study were made available via a Web survey of Internet banking users. We
created a site for the Web survey. Then, Internet banking users of five major banks in Korea
were requested to participate in the survey. In total, 845 cases were gathered over about 2 weeks,
from September 3 to September 19, 2001. There are no missing data in the sample because
participants could not submit their responses with missing values.

Forty-nine percent of the respondents were male, and 51 percent were female. Almost all
respondents were in their twenties or thirties. The respondents were engaged in various
occupations. About half of the respondents had experience with Internet banking for over 1 year,
while 94 percent of the respondents had experience using the Internet for over 1 year.

6.2. Measurement:

A questionnaire, using a seven-point scale, was employed to collect data for the constructs of the
Research model. Items from previous studies were modified for adaptation to the Internet
Banking context.

The measures of actual use, behavioral intention to use, attitude towards using, perceived
usefulness, and perceived ease of use were adapted from various studies related to the TAM.

In this study, the measures of trust were based on several studies in the marketing area which
examined the relationship between trust and various constructs.

A pilot test of the measures was conducted by graduate students majoring in MIS. Individuals
indicated their agreement or disagreement with the survey items using a seven-point scale.

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7. Result

The SEM approach was used to validate the research model. This approach was chosen because
Its ability to test causal relationships between constructs with multiple measurement items.
The SEM approach also has the capability of testing the measurement characteristics of
constructs.

SEM allows researchers to choose the input matrix from two types of matrices: the variance–
covariance matrix and the correlation matrix. Interpretation of the results is difficult when using
the variance–covariance matrix, while this matrix provides valid comparisons between different
populations or samples. We chose the correlation matrix as the input matrix, because we used
a single sample and the correlation matrix has gained widespread use.

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 7.1. Reliability and validity of measurement items

Internal consistency reliability is a statement about the stability of individual measurement

items across replications from the same source of information [39]. Internal consistency
reliability was assessed by computing Cronbach’s alpha. The values range from 0.774 (for actual
use) to 0.973 (for perceived usefulness).

All constructs in our research model demon-started acceptable reliability because the construct
with the lowest alpha coefficient, actual use, dis-played marginally satisfactory reliability.

7.2. Assessment of overall model fit

After assessing the reliability and validity with CFA, we tested the overall fit of the path model.
The overall model fit evaluates the correspondence of the actual or observed input matrix with
that predicted from the proposed model.

We were assured, therefore, that our research model is an adequate representation of the
entire set of causal relationships.

8. Conclusion:
In this study, we found that trust is one of the most significant beliefs in explaining a customer’s
attitude towards using Internet banking. As suggested by the TAM, customer perception of the
usefulness and ease of use also affect attitude significantly. At the same time, behavioral
intention to use Internet banking is highly related to attitude, perceived usefulness, and trust.
These results imply that customers rely on trust in on-line environments that are processing
sensitive information.

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9. Reference:

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