Adoption of Internet banking by Australian

consumers: an empirical investigation

Milind Sathye
Lecturer, University of Southern Queensland, Toowoomba, Queensland, Australia

Keywords of retail banking transactions will be online

Banking, Internet, Introduction in ten years' time (Barwise, 1997). A study by
Consumer behaviour, Australia
The Australian financial system is under- Booz et al. (1997) on Internet banking shows
Abstract going a period of substantial change, the that ``up to 20 per cent of retail and 30 per cent
Quantifies the factors affecting impact of which is transforming the way of corporate customers will use some form of
the adoption of Internet banking financial services are delivered. The changes, Internet banking capability within the next
by Australian consumers. The
sample for this survey was drawn
among others, include a significant increase five years''. This study further states that
from individual residents and in the number of alternative channels avail- Internet and other virtual banking channels
business firms in Australia. Shows able for the delivery of services. The most have significantly lower cost structure than
that security concerns and lack of recent delivery channel introduced for fi- traditional delivery channels. ``Internet
awareness about Internet banking
nancial services is Internet or online bank- banks can operate at an expense ratio of 15-20
and its benefits stand out as being
the obstacles to the adoption of ing. Internet banking involves consumers per cent compared to 50-60 per cent for the
Internet banking in Australia. using the Internet to access their bank and average bank'' (Booz, 1997). Thus, by
Suggests some of the ways to account, to undertake banking transactions. encouraging customers to use the Internet
address these impediments.
At the basic level, Internet banking can mean for banking transactions, the banks would
Further suggests that delivery of
financial services over the Internet the setting up of a Web page by a bank to give save considerable operating costs. Competi-
should be a part of overall information about its product and services. tive pressures would also require banks to
customer service and distribution At an advance level, it involves provision of offer Internet banking. New players such as
strategy. These measures could facilities such as accessing accounts, funds software and telephone companies will be
help in rapid migration of
customers to Internet banking,
transfer, and buying financial products or interested in entering the online banking
resulting in considerable savings services online. This is called ``transactional'' market (Hagel and Eisenmann, 1994; Hagel
in operating costs for banks. online banking and is the subject-matter of and Lansing, 1994). One would, therefore,
this study. The objective of this paper is to expect that Australian banks would not only
quantify the factors affecting the adoption of be quick to provide Internet banking service
Internet banking by Australian consumers. but would also encourage customers to
Such a research will help banks to formulate migrate to this form of delivery of banking
appropriate strategies to ensure rapid services.
migration of customers to online banking The real picture is, however, different.
and thus bring down their operating costs. Only one of the four major banks in Australia
The rest of the paper has been organised as was providing an Internet banking facility by
follows: the next section gives an account of the end of 1997 and the other three banks are
the Internet banking scenario in Australia, now slowly appearing on the Internet to
followed by a review of relevant literature, provide retail and corporate banking ser-
research method and procedure, findings of vices. As regards the use by bank customers
the study, discussion of results and limita- of Internet banking, it has been estimated
tions of the study, implications for manage- that only about 1 per cent of the retail
ment and areas for further research and transactions are done over the Internet
conclusion. (Ernst & Young, 1996). ``Advance bank, a
smaller bank which was quick to adapt new
technology and started to provide net bank-
Internet banking ing one and a half years ago, has only 5,000
Transactional Internet banking is growing active users'' (Wood, 1996). Many explana-
International Journal of Bank rapidly. It has been estimated that 60 per cent tions have been offered for the slow growth of
Marketing Internet banking in Australia. Some contend
17/7 [1999] 324±334 that security concerns among banks and
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Internet banking, while others cite lack of
[ 324 ]
Milind Sathye knowledge about availability of such a ser- product promotion strategy. The Wallis
Adoption of Internet banking vice, the Internet banking site being not user- Report (1997) states that ``consumers will seek
by Australian consumers: an
empirical investigation friendly and lack of access to computers/ out those financial products and suppliers
Internet as the reasons (O'Connell, 1996). which offer the best value for money and they
International Journal of Bank
Marketing Further, ``there is little evidence of consumer are educated about it''. Hence, for adoption of
17/7 [1999] 324±334 demand for Internet banking services'' Internet banking, it is necessary that the
(Davidson, 1998). ``. . . the critical question is banks offering this service make the consu-
whether customers will accept the electronic mers aware about the availability of such a
form of receiving information and perform- product and explain how it adds value
ing transactions'' (Oliver, 1997). A study by relative to other products of its own or that of
Ernst & Young (1998) finds that financial the competitors. The added value in electro-
institutions are not sure about customer nic banking, according to Trethowan and
acceptance of e-commerce. Mols et al. (1999) Silicone (quoted in Daniel, 1999), was conve-
state that ``the diffusion of electronic banking nience, sales orientation and lower costs.
is more determined by customer acceptance Howard and Moore (1982) emphasise that for
than by seller offerings''. Though customer adoption ``consumers must become aware of
acceptance is a key driver determining the the new brand''. An important characteristic
rate of change in the financial sector, em- for any adoption of innovative service or
pirical studies on what is holding customers product is creating awareness among the
from acceptance of Internet banking have consumers about the service/product. ``Don't
been few. A study by Booz, Allen & Hamilton assume good products sell themselves''
(1997) assessed the strategic impact of Inter- (Cooper, 1997). Hence, if Australian consu-
net banking on financial services industry mers are not adopting Internet banking, it
and in particular the set-up and operating
may be because they are not aware about
cost of Internet banking. Thorton Consulting
such a service being available and the added
(1996) conducted a survey in the USA which
value that it offers. These findings and
focused on banks and concluded that 67 per
observations lead us to the hypothesis:
cent of the banks felt that ``security concerns''
H1: Australian consumers are not adopting
is the major apprehension about Internet
Internet banking service because they
banking. The behavioural consequences of
are unaware of the service and the
PC banking in Denmark were studied by
benefits it offers.
Mols (1998) and it was found that PC bank
customers are more satisfied than non-PC The second factor that leads to adoption of
bank customers. Daniel (1999) studied elec- innovative service/product by customers is
tronic banking in UK and Ireland and gives the ``ease of use''. In his study, Cooper (1997)
excellent insights into the bank's adoption of finds ``ease of adoption'' as one of the three
electronic banking. Customers' perception important characteristics from the customer's
about adoption of Internet banking was not perspective for adoption of innovative service.
the focus of these studies. In particular, no The Wallis Report (1997) identifies that tech-
published study, regarding perceptions of nological innovation ``must be easy to use'' to
bank customers in Australia about Internet ensure customer take-up or acceptance. ``The
banking, could be found by the author. The degree to which an innovation is difficult to
present study is intended to fill this impor- understand or use'' was one of the reasons for
tant gap. failure of home banking in the USA (Dover,
1988). Rogers' (1962) analysis of diffusion
emphasises the importance of individual
Literature review and development perceptions and understanding of a new
of hypotheses technology in shaping its acceptance. Scar-
Adoption is the acceptance and continued use brough and Corbett (1992) find ``understand-
of a product, service or idea. According to ings of consumers'' to be an important
Rogers and Shoemaker (1971), consumers go element in the diffusion of innovative tech-
through ``a process of knowledge, persuasion, nology. Daniel (1999) identifies ``ease of use'' as
decision and confirmation'' before they are one of the factors for customer acceptance in
ready to adopt a product or service. The her study of electronic banking in the UK and
adoption or rejection of an innovation begins Ireland. If customers in Australia are not
when ``the consumer becomes aware of the adopting Internet banking, it could be because
product'' (Rogers and Shoemaker, 1971). In the Internet sites are not easy to operate.
the context of bank marketing planning, Hence, the following hypothesis is proposed:
Guiltinan and Donnelly (1983) identify H2: Australian consumers are not adopting
``information about the benefits of using a Internet banking service because they do
product/service'' as an essential service/ not find that it is easy to use.
[ 325 ]
Milind Sathye The third important factor that consumers H4: Australian consumers are not adopting
Adoption of Internet banking consider before adopting an innovation is the Internet banking service because it is not
by Australian consumers: an
empirical investigation level of risk involved. In the context of reasonably priced.
International Journal of Bank Internet banking, it refers to the security and
The fifth factor that affects adoption is that
Marketing reliability of transactions over the Internet. the existing mode of service or product
17/7 [1999] 324±334 Cooper (1997) identifies ``the level of risk'' as delivery fulfils the customers' needs ade-
an important characteristic from a consu- quately. In the context of Internet banking,
mer's perspective in the adoption of innova- telephone banking and brick and mortar
tion. A report on Internet banking in branches are the existing modes of transact-
Australia finds that ``security concerns ing banking business. Adoption of new
among banks and customers'', are keeping technologies often comes across a certain
both away from Internet banking (ABF, 1997). amount of resistance to change from present
O'Connell (1996) finds ``security concerns'' as ways of operating. Commenting about tech-
an important reason for slow growth of nology adoption, Quinn and Mueller (1982)
Internet banking in Australia. The Wallis state ``human beings what they are, there
Report (1997) states that if ``security is tend to be resistance to change''. Daniel (1999)
improved'' households will conduct their finds ``a high level of customer inertia in
financial transactions over the Internet. changing their established banking arrange-
Rothwell and Gardiner (1984), while devel- ments''. For customers to change present
oping the framework of user needs in tech- ways of operating and take up new technol-
nological innovations, identify ``safety in ogy, it must ``fulfil a specific need'' (Wallis
use'' as one of the factors that influences Report, 1997). Unless such a need is fulfilled,
potential users. Daniel (1999) also identifies consumers may not be prepared to change
``security'' as a factor influencing customer from present ways of operating. Hence, the
acceptance. Obviously, Internet banking will following hypothesis is proposed:
H5: Australian consumers are not adopting
not be adopted unless it is considered safe
Internet banking service because they do
and secure by the customers. These findings
not want to change from currently famil-
and observations lead to the following hy-
iar ways of transacting.
pothesis:
H3: Australian consumers are not adopting Finally, availability of access to computers/
Internet banking service because they Internet is a prerequisite for adoption of
are concerned about safety and security Internet banking. The more widespread the
of transactions over the Internet. access to computers/Internet, the greater the
possibility of use of Internet banking.
Another factor that influences the consumer
O'Connell (1996) identifies lack of access to
adoption of innovation is the price/cost computers/Internet as one of the possible
factor. In the context of Internet banking, two reasons for slow adoption of Internet bank-
types of costs are involved. First, the normal ing. Daniel (1999) found lack of customer
costs associated with Internet activities and access to suitable PCs as the reason for low
second, the bank cost and charges. Rothwell usage of electronic banking in the UK and
and Gardiner (1984) observe that ``there are Ireland. The Wallis Report (1997) states ``as
two fundamental sets of factors defining user the Internet becomes more widely accessible
needs, namely price factors and non-price . . . households will conduct their financial
factors''. Guadagni and Little (1983), Gupta transactions over the Internet''. Hence, if
(1988), Mazursky et al., (1987) identify ``price'' Internet banking is not being adopted in
as a major factor in brand switching. Howard Australia, it may be because of lack of access
(1977) gives importance to ``price factor'' in to computers/Internet.
adoption and diffusion of innovation. Cooper H6: Australian consumers are not adopting
(1997) states that innovative products often Internet banking service because they do
have superior ``price/performance charac- not have access to computers/Internet.
teristics''. Rayport and Sviokla (1994) also These six hypotheses and their relation to
emphasise the ``pricing'' aspect for electronic adoption of Internet banking can be seen in
distribution of goods and services. The Wallis Figure 1. There could also be other factors
Report (1997) states that for ``consumers to influencing the non-adoption of Internet
use new technologies, the technologies must banking by customers, e.g. the desire for
be reasonably priced relative to alterna- personal interaction with bank staff, tech-
tives''. Thus, if Internet banking is not being nology phobia, widespread network of
adopted it could be because it is not reason- existing branches, computer illiteracy among
ably priced. Hence, the following hypothesis customers (Mols et al., 1999). This study
is proposed: focuses on the above six factors, because the
[ 326 ]
Milind Sathye Wallis Report (1997) states that new technol- Survey instrument
Adoption of Internet banking ogy adoption by the majority of the custo- Non-availability of computers/Internet has
by Australian consumers: an mers depends, mainly, on these factors.
empirical investigation been identified as a possible reason why
Further, these factors were also endorsed by consumers may not be adopting Internet
International Journal of Bank
Marketing a focus group consisting of two students, two banking. An e-mail survey would not have
17/7 [1999] 324±334 housewives and five academics. been able to capture this section of the
population; hence a mail survey. The total
design method (TDM) was applied in the
Research method and procedure conduct of the survey. To enhance reliability
and validity, great care was taken while
Population and sample
designing the questionnaire. A 17-item ques-
Internet banking service is presently being
tionnaire was used to measure the six key
offered to two sets of clients, i.e. personal
constructs identified. Every question on the
clients and business clients; hence the popu-
questionnaire focused directly on a specific
lation for this survey consisted of individual
issue and it was ensured that questions have
residents and business firms in Australia.
brevity and clarity. While designing the
For residents, the sample unit was indivi-
survey instrument, it was ensured that
duals and for business, it was a single firm.
instrumentation bias is avoided. Multiple
The total sample size was fixed at 500
choice questions, of both single and multiple
(individual and business respondents being
response, were used. The questionnaire was
250 each), in view of time and cost consid-
then pre-tested among 25 individual and 25
erations. ``For populations of 10,000 and more,
business respondents. The pre-testing
most experienced researchers would prob-
brought to light some of the problems in
ably consider a sample size between 200 and
questionnaire completion. These problem
1,000 respondents'' (Alreck and Settle, 1985).
areas were then sorted out. The revised
Considering the low response rates found in
questionnaire was again pre-tested among a
surveys, 1,000 questionnaires (twice the
set of 20 individual and 15 business respon-
sample size) were sent out. The study was
dents and it was found that it worked well.
limited to capital cities where use of Internet
Of the 17 questions, six related to demo-
was likely to be concentrated and also
graphic characteristics and the remaining 11
because about 65 per cent of Australia's 17
addressed the various constructs of the
million people live in cities. The question-
study. Questions 1 to 4 were about access to
naires were allocated among the cities, in
computers and the Internet and the place of
proportion to the population of the cities. The
access. A three-item scale, i.e. regular access
first subject was chosen using random num-
bers and thereafter an interval of 12,000 (almost every day), occasional access (i.e.
(population of cities 12 million divided by once or twice a week), or no access was used.
1,000), was used. White and yellow pages The place of access also had a three-item
(telephone book) were used as the frame of scale, i.e. home, office or other. Question 5,
reference for personal and business custo- was concerned with respondents' bank based
mers, respectively. on a choice between the five major banks in
Australia and a category referring to others.
Figure 1 ``Awareness'' was measured at question 6,
A model for adoption of Internet banking which asked whether any of the banks of the
respondents provide Internet banking ser-
vice. A three-item scale, ``yes'', ``no'' and
``don't know'', was used. If the respondents
were aware about the service, the next
question asked whether they were using it
and this was measured on a two-item scale,
yes or no. Those who were using the service,
were asked at question 8, how did they find
the available service. An eight-item scale was
used to measure the responses to this ques-
tion, i.e. easy to use, difficult to use, cheap
(reasonably priced), expensive, safe and
secure, unsafe and insecure, no way different
from current modes of service, e.g. tele-
phone/branch banking. Those who were not
using the service, were asked at question 9,
why they were not using the service, even
when it was provided by their banks. A six-
item scale (the six hypotheses) was used to
[ 327 ]
Milind Sathye measure the responses. Those who were not
Adoption of Internet banking using Internet banking were asked at ques-
Findings of the study
by Australian consumers: an
empirical investigation tion 10, whether they would be prepared to Segment profiles
International Journal of Bank use it, if their bank provided it. Here, a three- The data were collected from two broad
Marketing item scale of yes, no and unsure, was used. categories of respondents, i.e. personal and
17/7 [1999] 324±334
Again, those who were prepared to use were business respondents. Tables II (a) and (b)
asked, what do they expect from the bank and present the demographic characteristics of
here again, a six-item scale (the six hypoth- these sets of respondents.
eses) was used to elicit responses. Those who
were not prepared to use were asked to give Testing of hypotheses
responses on a six-item scale, i.e. on the six The responses of the personal and business
hypotheses. The rest of the questions were respondents to the six propositions as above
about demographics. These scales have some are shown in Table III. In Table IV, the above
limitations and these have been indicated in two categories have been sub-divided into
a subsequent paragraph outlining limitations two more categories, namely ``aware'' and
of the study. ``unaware''. ``Aware'' represents those

Hypotheses tested Table II(a)

Through the questionnaire the following Profile of survey sample
hypotheses were tested:
Personal respondents
Bank consumers are not adopting Internet
Number of
banking due to: Respondents respondents
H1: lack of knowledge (awareness) of such a characteristics who answered %
service and its benefits.
H2: service available being not easy to use or Age
18-25 5 12
perceive it difficult to use.
26-40 101 38
H3: fear of security of doing banking trans-
41-65 114 33
actions over the Internet.
Over 65 45 17
H4: service available being not reasonably
Total 265 100
priced.
Occupation
H5: resistance to change from current modes
Self-employed 45 18
of operation.
Salaried employment 151 61
H6: non-availability of access to computers/
Household 8 3
Internet. Other 45 18
Total 249 100
Responses received
Education
The questionnaires were sent in September
Junior school 11 4
1998 and 612 questionnaires were received
Senior school 90 34
after follow-up with an overall response Undergraduate 90 34
rate of 61 per cent This response rate was Postgraduate 66 25
far beyond expectations and much above Other 5 2
the acceptable response rate by social Total 262 100
sciences standards. Of these, 23 question- Income
naires were discarded as these either were Below 25,000 (A$) 37 18
blank or answered the demographic ques- 25,000 to 50,000 91 44
tions only. The remaining 589 question- 50,000 to 75,000 37 18
naires were used for data analysis. The 75,000 to 100,000 23 11
profile of the respondents has been shown Above 100,000 18 9
Total 206 100
in Table I.
Place of residence
New South Wales 56 26
Table I Victoria 74 34
Respondent profile Queensland 26 12
South Australia 26 12
Survey Questionnaires Responses Response Western Australia 18 8
class sent out received rate % Aus. Capital Territory 5 2
Personal 500 265 53 Tasmania 11 5
Business 500 324 65 Northern Territory 0 0
Total 1,000 589 59 Total 216 100

[ 328 ]
Milind Sathye Table II(b) 1 respondents who are aware about avail-
Adoption of Internet banking Profile of survey sample ability of Internet banking service and are
by Australian consumers: an
empirical investigation using it (AU);
Number of 2 respondents who are aware about avail-
International Journal of Bank respondents
Marketing ability of Internet banking service but are
17/7 [1999] 324±334 Respondent who
not using it (ANU);
characteristics answered %
3 respondents who are unaware about
Form of business availability of Internet banking but are
Proprietary 100 31 prepared to use it, if made available
Partnership 38 12 (UPU); and
Company 181 56 4 respondents who are unaware about
Other 5 2 availability of Internet banking and are
Total 324 100 not prepared to use it, even if made
Nature of business available (UNPU).
Agriculture/fishing 4 1
Table III has also been presented in the form
Mining 34 10
of a bar chart (Figures 2 and 3). The chart
Manufacturing 63 19
shows that security concerns and lack of
Construction 41 13
awareness about Internet banking and its
Wholesale/retail
benefits stand out as the reasons for non-
trade/transport 53 16
adoption of Internet banking. As a factor for
Finance/insurance 52 16
non-adoption, ``unreasonable price'' ranks
Small business 69 21
third. It may be interesting to note that a
Other 8 2
study by www.consult (1999), in Singapore,
Total 324 100
found this to be the prime reason for non-
Annual turnover adoption of online banking. This chart also
Under 100,000 (A$) 32 11 shows that non-access to computers/Internet,
100,000 to 500,000 107 36 resistance to change and difficulty in use are
500,001 to less than not the major factors affecting adoption of
2 million 128 43
Internet banking by Australian consumers.
2 million and over 32 11
These results are not surprising given the
Total 299 100
fact that 18 per cent of Australian households
Location of business have access to the Internet from home
New South Wales 72 22 (Alston, 1999).
Victoria 63 19 Australia has the world's third highest use
Queensland 48 15 of EFTPoS per head and a long way ahead of
South Australia 32 10 the USA (Macfarlane, 1997) and, as such,
Western Australia 39 12 Australians are considered as technology
Aus. Capital Territory 29 9 savvy. Another point to note is in this study,
Tasmania 32 10 the personal users of Internet banking were 22
Northern Territory 9 3 (8 per cent), while the business users were 39
Total 324 100 (12 per cent), with an overall percentage of 10.
The ABS (1999) report states that about 2 per
respondents who are aware about availabil- cent of adults used the Internet to pay bills or
ity of Internet banking service, while ``una- transfer funds. The results in this sample are
ware'' represents those respondents who on the higher side, probably because our
have no knowledge that such a service was sample was restricted to capital cities only.
available. In Table V, these two groups were The paragraphs below discuss the findings
further classified, as follows: with respect to each of the six propositions.

Table III Security concerns

Views of personal and business respondents to the six propositions Table III shows that 75 per cent of the total
Personal Business Total respondents had security concerns. Further,
No % No % No % 78 per cent of personal and 73 per cent of
business respondents had security concerns.
Difficulty in use 132 50 101 31 233 40 Thus, personal respondents have more
Security concern 206 78 238 73 443 75 security concerns than business respondents.
Unreasonable price 158 60 167 51 325 55 Table IV shows that the security concerns
Resistance to change 144 54 46 14 190 32 were much higher (77 per cent), among those
No access to Internet 99 37 15 5 115 19 personal respondents who were aware about
Benefits of IB not clear 194 73 208 64 402 68
Internet banking, than the business
n 265 100 324 100 589 100
respondents in this category (47 per cent).
[ 329 ]
Milind Sathye Table V shows that 95 per cent of personal technology compared to business respon-
Adoption of Internet banking respondents who were aware about Internet dents who have or can hire skilled staff. It is
by Australian consumers: an
empirical investigation banking but were not using it ascribed interesting to note from Table IV and V that
security concern as the reason compared to irrespective of the category of respondents
International Journal of Bank
Marketing 64 per cent of business respondents. These ``security'' is identified as the biggest obstacle
17/7 [1999] 324±334 results could be due to lesser exposure of to adoption. These results are consistent with
personal respondents to information those found in other studies; for example,
security concern among customers was the
Table IV top ranking obstacle for non-adoption of
Views of personal and business respondents to the six propositions Internet banking in Latin America (Booz,
according to awareness of Internet banking Allen & Hamilton, 1997). In a subsequent
paragraph, suggestions have been given to
Aware Unaware Total deal with this issue.
No % No % No %
Personal Lack of awareness about IB and its benefits
Difficulty in use 19 28 113 58 132 50 Table III shows that 68 per cent of the total
Security concern 53 77 153 78 206 78 respondents were not clear about the benefits
Unreasonable price 16 23 142 73 158 60 or added value that Internet banking can
Resistance to change 34 49 110 56 144 54 offer. Of these 73 per cent were personal
No access to Internet 18 26 81 42 99 37 respondents and 64 per cent were business
Benefits of IB not clear 38 55 156 80 194 73 respondents. Table IV shows that 74 per cent
n 69 196 265 of personal respondents and 70 per cent of
Percent 26 74 100 business respondents were unaware about
Business the availability of Internet banking service.
Difficulty in use 27 28 74 32 101 31 As can be seen from Table V, where banks
Security concern 45 47 193 85 238 73 are providing the service, 81 per cent of the
Unreasonable price 21 22 146 64 167 52 personal customers and 69 per cent of busi-
Resistance to change 14 15 32 14 46 14 ness customers were not using it because
No access to Internet 6 6 9 4 15 5 they were not clear about the benefits of
Benefits of IB not clear 39 41 169 74 208 64 Internet banking. Further, 86 per cent of
n 96 228 324 personal customers and 78 per cent of busi-
Percent 30 70 100 ness customers would like the benefits to be
explained before they would be prepared to

Table V
Views of personal and business respondents according to awareness and use of Internet
banking (IB)
Aware Unaware
Au ANU UPU UNPU Total
No % No % No % No % No %
Personal
Difficulty in use 0 0 19 40 35 43 78 68 132 50
Security concern 8 37 45 95 61 75 92 80 206 78
Unreasonable price 0 0 16 33 66 82 76 66 158 60
Resistance to change 0 0 34 73 9 11 101 88 144 54
No access to Internet 0 0 18 38 9 11 72 63 99 37
Benefits of IB not clear 0 0 38 81 70 86 86 75 194 73
n 22 47 81 115 265 100
Business
Difficulty in use 0 0 27 48 58 31 16 40 101 31
Security concern 9 23 36 64 158 84 35 87 238 73
Unreasonable price 10 25 11 19 120 64 25 63 166 51
Resistance to change 0 0 14 24 0 0 32 80 46 14
No access to Internet 0 0 6 10 0 0 9 23 15 5
Benefits of IB not clear 0 0 39 69 147 78 23 57 209 65
n 39 57 188 40 324 100
Notes: The vertical totals will not tally since a respondent could tick more than one response
AU = aware and using Internet banking; ANU = aware but not using Internet banking
UPU = unaware but prepared to use Internet banking; UNPU = unaware and not
prepared to use Internet banking

[ 330 ]
Milind Sathye adopt it. A total of 75 per cent of personal aware about Internet banking but were not
Adoption of Internet banking customers and 57 per cent of business custo- using it found it difficult to use. It could be
by Australian consumers: an mers were not prepared to use Internet because some banks require downloading of
empirical investigation
banking, as they were unclear about the software before Internet banking can be used.
International Journal of Bank
Marketing benefits. These results drive home the point It appears that the problem of difficulty in
17/7 [1999] 324±334 that there was a general lack of awareness use could be handled by appropriate custo-
among Australian consumers about Internet mer education.
banking and the benefits it offers.
Pricing/cost aspects
Ease of use As already mentioned, ``cost'' was cited as the
It can be seen from Table III that 40 per cent top-most reason for non-adoption of Internet
of respondents overall ascribed difficulty in banking in Singapore. In the Australian
use as the reason for non-adoption of context, it was found that 55 per cent of all
Internet banking. Table IV shows us that, of respondents consider that unreasonable
those who were aware of Internet banking, price was preventing them from adoption of
only 28 per cent ± both business and personal Internet banking. Internet banking services
respondents ± ascribed this as the reason for are generally free for personal customers:
non-adoption. Further, according to Table V, still, 60 per cent of the personal respondents
40 per cent of personal respondents and 48 indicated this as the reason for non-adoption.
per cent of business respondents who were Obviously, these respondents were unaware
that the service is generally offered free of
Figure 2 charge. Table IV shows that 23 per cent of
Percentage responses to each of the six propositions personal customers and 22 per cent of busi-
ness customers, who were aware about
Internet banking, found the price unreason-
able. Table V throws further light on this and
shows that those who are using the service do
not have any price concerns. In sum, the
results again highlight the importance of
customer education and appropriate publi-
city.

Resistance to change
Table III shows that only 32 per cent of the
customers cite this as the reason for non-
adoption. Understandably, the resistance to
change was found to be much higher (50 per
cent), in the case of personal customers than
in the case of business customers (14
per cent). Table V shows that 73 per cent of
the customers, who were aware but not using
the service, have shown resistance to change.
This could be due to customer inertia
Figure 3 (Daniel, 1999), need for personal interaction
Views of personal and business respondents to the six propositions especially among the senior customers or
technology phobia. As more and more custo-
mers migrate to Internet banking, the resis-
tance of the remaining customers could
disappear. Demonstration kiosks at super-
markets could help in this direction.

No access to computers/Internet
This is the least cited, of all the factors, for
non-adoption of Internet banking. Most cus-
tomers have access to Internet, at home or at
the office or both. Statistics show that 18 per
cent of all households in Australia have
access to Internet from home (NOIE, 1999).
Table IV shows that, of the personal respon-
dents who are aware of Internet banking, 26
per cent cited this as the reason for non-
adoption, compared with only 6 per cent of
[ 331 ]
Milind Sathye business respondents. From Tables III to V, it the information on security aspects needs to
Adoption of Internet banking can be seen that this was the least cited be presented in simple and non-technical
by Australian consumers: an form. Issues like lack of awareness about the
empirical investigation reason for non-adoption of Internet banking.
service and its benefits, difficulty in use,
International Journal of Bank Supplemental analysis and findings
Marketing resistance to change, are matters of customer
Chi-square tests were conducted to deter-
17/7 [1999] 324±334 education and thus controllable from a
mine the relationship between the respon-
managerial perspective. Possible solutions
dents who were willing to use Internet
could include giving wider publicity under-
banking and the four characteristics of
scoring the benefits, demonstration kiosks at
personal and business respondents. The
supermarkets or public libraries, where
analysis is shown in Table VI.
people can have hands-on experience of
No correlation was found between the
Internet banking, a third party, like, say,
factors like age, occupation, income and
industry association/consumer groups/gov-
education and interest in Internet banking.
ernment, publishing educational literature,
These findings were surprising, since a etc. The Commonwealth Government has,
survey by the Australian Bureau of Statistics recently, published a fact sheet on Internet
about use of the Internet (ABS, 1998) shows banking for consumers along with a status
that use was related to income, age and report on Internet banking (NOIE, 1999).
education. As regards business, no correla- Such documents could help in customer
tion was found between form and nature of education. The above documents reproduce
business but a high degree of correlation was the security systems in use in the banks but
found between turnover, location and inter- do not provide analysis and recommenda-
est in Internet banking. tions. The customer is again left to himself to
analyse the security information, which is
provided mostly in technical terms. There
Discussion of results and appears to be a role here for the consumer
limitations of the study organisations to guide the customers suita-
This study shows the major factors that bly. Similarly, banks may consider passing
influence the consumer uptake of Internet on some of their gain in reduced operating
banking in Australia. As identified, security cost to customers and thus offer a low-cost
concerns and lack of awareness about Inter- service. This may ensure customer loyalty to
net banking and its benefits stand out as the the service and switching to other modes of
obstacles to non-adoption of Internet banking delivery or banks could be avoided.
in Australia. Security is a burning issue and It appears that the uptake of Internet
even one instance of adverse media publicity banking will not be uniform. The young,
can damage consumer confidence in the educated and wealthy groups of customers
system. A quick response to such publicity need to be targeted first for migration to
can help ease customer concerns and restore Internet banking. It is important to identify
the relevant customer segments and predict
their confidence. One of the major banks,
the development of their growth. The pro-
gives such an update to the customers. Some
ducts could include account maintenance,
of the banks have included an undertaking
account monitoring, and credit card trans-
that they will indemnify the losses incurred
actions, mortgage loans, stock market trad-
through unauthorised use except under cer-
ing, margin loans and vehicle loans. Farm
tain circumstances. Such an undertaking can
loans and other products for the farmers and
help build customer confidence. In addition,
others in remote areas and various deposit
schemes could also be the possible targets.
Table VI
Internet banking will also give rise to issues
Interest in Internet banking
that influence banker and customer rela-
Chi-square tionships. Establishing identity of both par-
value DF p value ties, authentication of transactions,
Personal resolution of disputes, etc. The Australian
Age 3.96 3 0.26 government was quick to identify and initi-
Occupation 5.05 4 0.28 ate suitable steps to remove the legal and
Income 8.66 5 0.12 regulatory barriers to e-commerce in general
Education 5.31 5 0.37 and Internet banking in particular.
This study has the following limitations.
Business
Given the fact that banks are reluctant to
Form 2.86 4 0.58
disclose the names and addresses of their
Nature 1.35 6 0.96
customers, this study does not specifically
Turnover 1.62 4 0.80
look at those customers who are presently
Location 2.81 6 0.83
using Internet banking. It would be very
[ 332 ]
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Adoption of Internet banking exclusively. Further, being an exploratory Australia, Cat. No. 8147, February.
by Australian consumers: an Alreck, P. and Settle, R. (1985), The Survey
empirical investigation study, multiple choice questions have been
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International Journal of Bank
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Cooper, R.G. (1997), ``Examining some myths
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The objective of this study was to quantify
computerised banking'', International Jour-
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Ernst & Young (1996), Technology in Banking
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Survey, Ernst & Young, Sydney.
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