The diffusion of Internet banking among Singapore

consumers

Philip Gerrard
Nanyang Business School, Nanyang Technological University, Singapore
J. Barton Cunningham
School of Public Administration, University of Victoria, Victoria, Canada

Keywords research, which has investigated the

Internet, Banking, User studies, Introduction diffusion of self-service technologies in
Singapore
The scholarly work of Rogers (1962) has banking, has been conducted in developed
Abstract encouraged research studies in the area of countries. Far less is known about the same
Internet banking is a form of self- the diffusion of innovations. Some 3,810 subject matter in those countries which have
service technology, costing
diffusion studies had been identified by not been afforded developed status. While
millions of dollars, which leading
Rogers (1995) when preparing the fourth Singapore is such a country, it and its
retail banks have made available
in the recent past. An edition of his text. These and more recent people possess many features of developed
understanding of why users are studies have helped to extend our countries (e.g. a significant proportion of its
more accepting of Internet
understanding of the diffusion process. population is ``wired up'' and the people are
banking services should help bank techno-savvy).
managers implement this self- A small but growing number of these
service technology. This study studies have investigated the diffusion of Senior bank management have an
identifies eight characteristics financial services. Nearly all of these studies interest in studies which have investigated
which influenced the rate of
have investigated one or more of the various the adoption of Internet banking as the
adoption. Two of these results can shed light on how to better
characteristics, namely self-service technologies which banks
market their Internet banking service and,
accessibility and confidentiality, introduced over the last quarter of the
thus, accelerate the rate of adoption. If the
are new to the literature. The twenty-first century, one exception being
results show that adopters of service can more quickly reach a critical
Yusof (1999), whose thesis investigated the
Internet banking perceive the mass of customers (see Rogers, 1995, p. 106),
service to be more convenient, adoption of Islamic banking. The self-service
then the respective bank's investment in
less complex, more compatible to technology studies to date have focused on
Internet banking could be recouped more
them and more suited to those certain aspects of the adoption process
who are PC proficient. Adopters quickly.
relating to ATMs (e.g. Rugimbana and
were also found to be more The relative success of Internet banking to
financially innovative. The Iverson, 1994), telephone banking (e.g.
date can be gauged by identifying the number
perceptions that adopters had Al-Ashban and Burney, 2001) and Internet
of current and anticipated registered users.
about social desirability, banking (e.g. Black et al., 2001).
confidentiality, accessibility and Barto (1999), for example, reported that just
The small proportion of studies relating to over ten million consumers in the USA used
economic benefits were viewed no
differently when adopters were the diffusion of financial products is on-line PC banking and that the number was
compared with non-adopters. somewhat surprising, given that the world's expected to grow to 35 million by the end of
leading banks continue to develop new 2003. Gandy (1999) reported that some 7 per
financial services or modify existing ones. cent of UK customers used PC based Internet
With an increasing number of banks offering banking and this was expected to rise to 28
Internet banking, this recently introduced per cent by 2004, these figures being similar
service was an ideal choice upon which to to those of Sweden, Norway and Germany
conduct a diffusion study. Studies which (Bons, 1999). In Singapore, where the present
investigate the adoption of Internet banking study was conducted, about 15 per cent of
are of interest to both academics and senior adult consumers were reported to be using
bank management. Internet banking towards the end of 2000
Academics are keen, amongst other things, (Tee, 2000; Loo, 2001). Singapore's Central
to model the adoption process by identifying Bank has projected that about 20 per cent of
all relevant characteristics and by all retail and corporate accounts would be
determining where and to what extent operated through the Internet by the end of
International Journal of Bank
adopters view these characteristics in a 2002 (Loo, 2001). Internet banking in
Marketing different way to non-adopters. Most of the Singapore, just like we see in various
21/1 [2003] 16-28
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[ 16 ]
Philip Gerrard and developed countries, has become an up-to-date information, the MAS's Web site,
J. Barton Cunningham established service for which growth is quoted above, is the best information
The diffusion of Internet
banking among Singapore expected. The likely short-term growth in source.
consumers Singapore will not be slowed down through While the number of foreign banks is about
International Journal of Bank low levels of home-owned PCs or a lack of four times greater than the number of local
Marketing Internet connectivity. Even at the end of the
21/1 [2003] 16-28 banks, the local banks dominate the
year 2000, 60 per cent of households in consumer market. Part of the reason for this
Singapore owned at least one computer and has been restrictions imposed by the MAS in
50 per cent of all households had access to the
the early 1970s. These restrictions prevented
Internet (Infocomm Development Authority,
foreign banks from expanding their branch
2001).
networks and, at a later date, disallowing
The purpose of this paper is to gain an
understanding of the diffusion of Internet foreign banks from having off-site ATMs.
banking in an Asian setting where the Moreover, some foreign banks, as a matter of
population is predominantly Chinese, policy, place little emphasis on the local
generally well-educated, competent at using consumer market. Instead, they focus on
PCs and familiar with using the Internet. The providing financial services linked to
characteristics of innovations, as found in international trade between their home
past adoption research, are initially country and Singapore.
identified and appraised and feedback from It was not until the second half of 1997 that
interviews, which sought to identify other the first local banks, namely DBS and UOB,
characteristics, are identified. Few studies to began to offer an Internet service. OCBC
date have sought to develop characteristics commenced its Internet operations in 1998
which are specific to measuring the adoption and OUB in 1999 (see the respective banks'
of Internet banking. This study aims to annual reports). The bigger foreign full
address this relative vacuum and, in so
licence banks, such as HSBC, Citibank and
doing, adds to the more traditional
Standard Chartered Bank also provide
characteristics, as identified by Rogers (1962)
financial services through the Internet.
and Ostlund (1974). The perceptions
As a consequence of local banks acquiring
consumers have about the characteristics of
an increasingly larger percentage of
innovations are useful in establishing if
adopters and non-adopters view these consumer accounts since the early 1970s,
differently and if those who have adopted these relationships have proved especially
Internet banking are more innovative than useful in enabling the local banks to promote
non-adopters. To enable readers to view the their Internet banking service to their
findings of this study in the context of existing customer base. The marketing
Singapore's retail bank market, a brief consultant, NetValue (Singapore) has
overview of this market is provided recently provided figures to show the extent
immediately below. to which local banks dominate Singapore's
Internet bank market (NetValue, 2002). DBS
was reported to have had 106,210 different
Retail banks in Singapore and their customers connect to its Web site at least
Internet banking activities once during February 2001. In the same
Retail banks are classified into either local period, the connections to UOB numbered
or foreign full licence banks by the 40,990, OUB numbered 22,920 and OCBC
monetary authority of Singapore (MAS), numbered 18,020. The leading foreign bank
Singapore's central bank (see was Citibank with 21,170 connections,
www.mas.gov.sg). The full licence banks are followed by Standard Chartered Bank with
authorised to offer the broadest range of 15,130 connections. In further support of the
financial services, including service dominance of DBS and the other local full
delivery through the Internet. At the time
licence banks, ACNielsen has published
data for this study was being collected, there
pertinent figures derived from an on-line
were six local full licence banks and 22
survey it conducted from September to
foreign full licence banks. Textbooks
describe the various types of banking November 2001 (A C Nielsen, 2002). The
institution in Singapore and the range of consulting group found that DBS controls 70
services they provide. The banking system, per cent of the Internet bank market, with
just as in the West, is quite fluid as a result Citibank, OCBC, OUB and UOB controlling
of various developments, including merger 25 per cent. The remaining 5 per cent of the
and acquisition activity and deregulation. market was held by all the other Internet
For readers who are keen to have the most banks.
[ 17 ]
Philip Gerrard and better than the `idea' it supersedes''. Rogers
J. Barton Cunningham The characteristics of innovations (1995) found that adopters invariably
The diffusion of Internet perceived relative advantage in terms of the
banking among Singapore The following section identifies the main
consumers characteristics of innovations as established economic benefits which accrue and
International Journal of Bank in prior adoption studies. After describing improvements that are afforded to their
Marketing each characteristic, references are made to social status. Convenience has also been
21/1 [2003] 16-28
pertinent research which has investigated found to be a measure of relative advantage
the adoption of all types of self-service in some innovation studies.
technology available from banks. Adoption research, which has been
The limited number of adoption studies, conducted on self-service technologies used
which have been conducted on self-service in banking, has identified economic benefits
technologies (namely ATMs, telephone (Loudon and Della Bitta, 1993; Black et al.,
banking and Internet banking) made 2001; Polatoglu and Ekin, 2001) and
available by banks, is summarised as follows. convenience (Loudon and Della Bitta, 1993;
Marr and Prendergast (1993), Rugimbana and Black et al., 2001; Polatoglu and Ekin, 2001;
Iversen (1994) and Rugimbana (1995) Suganthi et al., 2001). Polatoglu and Ekin
investigated the adoption of ATMs, while (2001) consider performance as being a
Al-Ashban and Burney (2001); and Locket and measure of relative advantage, while Black
Littler (1997) studied the adoption of et al. (2001) identify the elimination of the
telephone banking. Some researchers need to rely on others. In other words,
investigated two types of self-service Internet bank users, at all times, remain in
technology in a single study. Barczak et al. full control of what they are doing through
(1997), for example, studied the adoption of the commands they enter via their PC's
ATMs and telephone banking, while Hewer keyboard.
and Howcroft (1999) researched the adoption
of telephone and Internet banking. Compatibility
A total of six studies were identified which Compatibility is defined as ``the degree to
investigated various issues relating to the which an innovation is perceived as being
adoption of Internet banking. Daniel (1998) and consistent with the existing values, past
Frambach et al. (1998), for example, viewed the experiences and the needs of potential
adoption process in the eyes of the supplier adopters''.
(i.e. the banks). Polatoglu and Ekin (2001) Compatibility is a measure of the values or
measured the relative satisfaction of those beliefs of consumers, the ideas they have
who had adopted Internet banking. Black et al. adopted in the past, and the ability of an
(2001), using discussion groups, identified the innovation to meet their needs. Black et al.
characteristics appropriate for measuring the (2001) conclude that past experiences and the
adoption of Internet banking. Sathye (1999) in values of consumers in the UK appear to have
Australia and Suganthi et al. (2001) in a significant impact on their willingness to
Malaysia established, in their respective adopt Internet banking. Those who indicated
locations, where and to what extent adopters they were comfortable with the Internet were
and non-adopters viewed the characteristics of more positive about Internet banking. In
Internet bank adoption differently. Turkey, due to low levels of e-mail usage and
a preference for using over-the-counter
The characteristics of innovations: delivery at bank branches, respondents
a review of the literature viewed Internet banking as being far less
Rogers (1995) identified five ``main'' compatible (Polatoglu and Ekin, 2001).
characteristics of innovations: relative
advantage, compatibility, complexity, Complexity
observability and trialability. Adopters have Complexity is ``the degree to which an
invariably been found to have different innovation is perceived as difficult to
perceptions about these characteristics in understand and use''. Complexity has been
comparison with non-adopters. These five measured in relation to perceptions about the
characteristics should not be considered as purpose of the respective innovation, its
creating an exhaustive list, but ones which intended use and the ease with which it can
have commonly been found in a wide range of be used.
studies (Rogers, 1995, p. 16). Let us, with this Polatoglu and Ekin (2001) imply that a well-
point in mind, appraise the five main educated people, who are familiar with the
characteristics of innovations. Internet and e-mail, should not find Internet
banking to be complex. Black et al. (2001)
Relative advantage found that complexity in conducting
Relative advantage is defined as ``the degree financial transactions over the Internet was
to which an innovation is perceived as being inversely related to a consumer's experience
[ 18 ]
Philip Gerrard and with computers. Hewer and Howcroft (1999), (2001), while not specifically using the word
J. Barton Cunningham in a similar vein, say: ``e-banking requires a ``risk'', suggest that errors and the security
The diffusion of Internet certain minimum level of technical
banking among Singapore afforded might be considered as measures of
consumers experience and competence, irrespective of risk. Polatoglu and Ekin (2001) consider risk
International Journal of Bank whether this relates to the use of a computer in terms of financial, physical and social
Marketing or the Internet''. Suganthi et al. (2001) label characteristics. The term trust, to which
21/1 [2003] 16-28
one of their dimensions ``ease of use'', which Hewer and Howcroft (1997) refer, may also be
Rogers (1995) considered to be a measure of considered as a measure of risk. Suganthi
complexity. et al. (2001) view risk in the context of
security concerns and risk in the context of
Trialability trust in one's bank.
Trialability is ``the degree to which an
innovation may be experimented with on a Sundry characteristics relating to the
limited basis''. Customers are unable to try adoption of self-service technologies in
out Internet services beforehand in the same banking
way they can test out a hi-fi system or a car Suganthi et al. (2001) identify reluctance and
before purchasing. Some banks in the west costs as adoption characteristics. Black et al.
have responded to this need by developing (2001) identify societal issues, such as job
Web sites which allow potential users to try losses, lack of opportunities to socialise and
out Internet banking (see Hewer and the development of a lazy society. They also
Howcroft (1999), Black et al. (2001) who refer to a ``sense of fatalism'' as some
describe the UK position). The ability to members of their discussion groups felt that
conduct a trial may confirm how easy it is to hi-tech/self-service channels were being
use Internet banking or, for those who are forced upon bank customers: first, there were
apprehensive about the service, it may give ATMs, then phone banking and now Internet
them the necessary confidence. banking.
In summary, relative advantage,
Observability compatibility, complexity and risk, as
Observability is described as ``the degree to established in prior research, appear to be
which the results of an innovation are visible appropriate characteristics for measuring
to others''. The characteristic of observability the diffusion of Internet banking in
has been defined by Black et al. (2001) as the Singapore. No doubt other characteristics
extent to which an innovation is visible to remain to be identified. It would be
other members in a social system. Using this preferable for such characteristics to be
definition, they conclude that ``observability global in their appropriateness rather than
does not appear to be a contributor to the Singapore or Asia specific.
adoption of Internet banking''. We reach the The section immediately below provides an
same conclusion but do this based on Rogers' overview of relevant comments made by local
definition which includes the word ``results''. consumers in the various interviews we
We conclude that it is not possible for others conducted.
to view the results of customers who use
Internet banking unless, as adopters, they
are prepared to show the results of their Methodology
financial dealings to third parties. This is
most unlikely to happen. Exploratory interviews: a search for further
adoption characteristics
Risk There is already a growing knowledge
Ostlund (1974), in a non-banking context, concerning the diffusion of Internet banking
appears to have been the first to identify that in the West, as evidenced by the locations of
perceptions about risk was a characteristic the abovementioned studies. As this study is
which influences the rate of adoption. Risk is the first to be conducted in a culture which is
defined in terms of ``the uncertainty about dominated by Chinese people, it is important
what the innovation gives''. Researchers in to establish if there are other measures of
non-banking contexts during the 1980s, such diffusion which are important and which
as Labay and Kinnear (1981) and Holak (1988), may be unique to the people that are being
identified risk as an innovation studied. To do this, eight consumers, who had
characteristic. adopted the Internet banking service and
In regard to self-service technologies in eight who had not, were interviewed. We
banking, risk has been identified as a used the process to assist us in establishing
relevant characteristic in the phone banking measures which local consumers perceive as
study of Lockett and Littler (1997). In the impacting on a decision to adopt or not adopt
context of Internet banking, Black et al. Internet banking. The technique assists in
[ 19 ]
Philip Gerrard and identifying characteristics which are easy as possible for myself. Internet banking
J. Barton Cunningham additional to those that have been identified helps achieve this''.
The diffusion of Internet
in research published to date.
banking among Singapore Comments made by non-adopters
consumers The goal of the interviews was to design
All non-adopters expressed great concern
International Journal of Bank survey questions based on the values and
about third-party intrusions: ``I am scared
Marketing beliefs of the people in relation to the matter
21/1 [2003] 16-28 that somebody may clear my bank balance
being investigated (Cunningham, 2001). In
out because the bank's computer is not 100
the interviews, the following questions were per cent secure''; ``If somebody takes money
asked: what do you think slows down the rate out of my account without my permission, I
at which Internet banking is being adopted? reckon the bank would never reimburse me''
What do you think would encourage more and ``Somebody could hack into the bank's
consumers to adopt Internet banking? What system and take my balance. Where does that
advantages do you perceive that Internet leave me?''
banking possesses? (for adopters) What Of the non-adopters, six appreciated that
influenced your decision to use Internet banking services could be accessed at a time
banking? (for non-adopters) What influences and a place convenient to customers but then
your decision not to use Internet banking? added riders: ``ATMs are so conveniently
(for both) How strong are the influences you located here, the extra convenience of
mentioned? Internet banking is too marginal''; ``ATMs
Comments made by adopters now offer a broad range of services'' and ``I
All the adopters who were interviewed were pass many ATMs on my way to work or
very positive about the convenience which coming home; so, ATMs offer me more than
Internet banking afforded. Various aspects of sufficient convenience''.
convenience were mentioned, as seen by the A total of five expressed concern about
following comments: ``I can do most of my access related matters: ``I know ATMs break
down from time to time; I presume the same
banking business either from home or work'';
will happen with Internet banks''; ``What's
``I do not have to spend time going to a branch
the position if I want to source a service and
or an ATM''; ``When I have used my branch in
the Internet bank is down?'' and ``Computers
the past, I have had to queue up; now I do not
need servicing and upgrading. When will this
even think about queuing'' and ``Even if the
work be done?''
bank is `closed', I can still do my banking
Of the non-adopters, four perceived that
business''.
Internet banking was an inexpensive way of
Of the eight adopters, six mentioned that,
conducting banking transactions. They were
as they possessed the necessary skills to use
aware of this advantage because either
Internet banking, they did not consider the
family or friends told them or from
service to be too complex: ``I have been using
comments made by the banks: ``I know banks
a PC since I was at junior college''; ``I spend say that Internet banking is less expensive.
many hours searching the Web each week''; But, I don't pay fees anyway; so where is the
``With ATMs, you follow prompts; with cost saving?"
Internet banking you follow prompts; it's not Of the interviewees, four felt that their
that difficult'' and ``I learnt computer computer skills were not sufficient to set up
programming at university''. and operate an Internet banking
A total of two commented that they had relationship. This was reflected by the older,
saved on banking fees: ``Previously I paid less well-educated interviewees: ``Technology
fees, now I do not any more'' and ``It's less scares me''; ``We have never had a PC at home
costly to stop a cheque now in comparison and so I do not think I have sufficient skills to
with the traditional method''. use an Internet bank'' and ``My kids are OK
While two mentioned reservations about with computers, but not me'', three expressed
whether or not their banks had a 100 per cent concern about confidentiality matters:
secure system, this negative perception was ``Cookies may be installed and the
far outweighed by the convenience and other information may be used to my
positive features of the service: ``If I were that disadvantage'' and ``Somehow, outsiders may
concerned about a bank's system being find details of my financial affairs''.
insecure, I would not be an Internet bank Past literature and the comments made
customer. I am a customer, so what does that during the interview sessions described
tell you?'' above, enabled us to create 36 measures
Two commented upon aspects of relevant to the adoption of Internet banking.
compatibility: ``When I'm in the banking hall,
people can listen to me talking to the staff; The survey and its development.
when I am at home using my PC, no one is The statements used in the survey form to
able to listen in'' and ``I like to make life as measure the adoption characteristics of
[ 20 ]
Philip Gerrard and Internet banking and innovativeness were Moreover, complexity, as labelled by Rogers
J. Barton Cunningham designed partly based on responses to the (1962) split into ``pure'' complexity and PC
The diffusion of Internet interview questions that were posed (e.g. proficiency.
banking among Singapore
consumers software problems may prevent customer There is also a need to comment about
International Journal of Bank access) and partly from literature available what has previously been labelled as risk
Marketing at the time the survey form was being (Ostlund, 1974). In this study, risk
21/1 [2003] 16-28 decomposed into confidentiality and
developed (e.g. improves my social status).
After appraising the innovation accessibility. These measures of risk appear
characteristics identified by Rogers (1962) to be characteristics not identified in prior
and Ostlund (1974) and the comments made research which has investigated the adoption
in the various interviews, trialability and of Internet banking. Confidentiality arises
observability, for reasons mentioned above, because consumers feel that, by being an
were found not to be relevant characteristics Internet bank customer, somehow, details of
in this study. Both of these characteristics, as their financial affairs and financial make up
a consequence, were excluded at this stage. may not remain private. In regard to
A total of 36 statements were used to accessibility, it is true to say that Suganthi
measure the characteristics relating to the et al. (2001) labelled one of their
adoption of Internet banking and five characteristics with the same name ± but
statements were used to measure they viewed accessibility in terms of Internet
innovativeness (two of which were ``I am access and Internet connection speed. This
among the first to try new banking services'' study viewed accessibility in relation to the
and ``I prefer using new banking services to ability of a customer to access his/her
traditional ones''). Internet bank at all times and the ability of
For this study, respondents were third parties to gain access to a customer's
considered to be adopters if they had applied Internet bank account. The characteristic of
to become an Internet banking customer and accessibility, as defined above, is considered
their bank had accepted the application. To to be new to the literature.
be an adopter in this study, a respondent did Internal consistency texts were conducted
not have to have a minimum usage pattern. using Cronbach alpha tests (Cronbach, 1946),
with the alpha values ranging from 0.84 to
Sample 0.69. The six statements used to measure
A team of surveyors obtained responses from innovativeness were subject to a Cronbach
adults employed in the downtown area. The alpha test for which a figure of 0.79 resulted.
total number of useable responses was 240, These alphas are considered to be reasonable
111 of these were from adopters and 129 as or better (Sekaran, 1992) and the groupings
non-adopters. Adopters had the following were retained for further analysis. Having
characteristics: 79 were aged 29 and less; 72 established the characteristics relevant to
did not have a degree; 75 earned less than the adoption of Internet banking, hypotheses
SGD 3,000 per month, 101 were Chinese and can be created. These are presented
56 were male. Equivalent figures for the non- immediately below.
adopters were: 62 were aged 29 or less; 104 did
not have a degree; 103 earned less that SGD Development of hypotheses
3,000 per month; 95 were Chinese and 66 were Past research suggests that there is generally
male. a positive relationship between adoption and
the various characteristics of innovations,
Development of the adoption except those characteristics relating to
characteristics complexity and riskiness issues, where the
Factor analysis with varimax rotation was expected relationship is negative. Also, past
used to establish the dimensions appropriate research suggests that there is generally a
to modelling the adoption of Internet positive relationship between adopters and
banking. A total of five measures, which had innovativeness. In line with these findings,
loadings of less than 0.5, were excluded. the following hypothesised directions in the
Dimensions with eigenvalues of 1 or above style used by Ostlund (1974), were
were retained and, as seen in Table I, eight formulated:
factors emerged. These factors were labelled H1. Adopters and non-adopters differ on
social desirability, compatibility, the basis of their perceptions of
convenience, complexity, confidentiality, Internet banking. As compared to non-
accessibility, economic benefits and PC adopters, adopters rate Internet
proficiency. A feature of this analysis is that banking as being more convenient
relative advantage, a label given by Rogers (H1a), more accessible (H1b), less risky
(1962), split into social desirability, ± in relation to breaches of
convenience and economic benefits. confidentiality (H1c), more compatible
[ 21 ]
Philip Gerrard and (H1d), requiring a higher level of PC responses of adopters and non-adopters and
J. Barton Cunningham proficiency (H1e), more economically their relative innovativeness.
The diffusion of Internet
banking among Singapore beneficial (H1f ), more socially
consumers desirable (H1g) and less complex Convenience
International Journal of Bank Internet banking was perceived by both
(H1h).
Marketing adopters and non-adopters to offer a high
21/1 [2003] 16-28 H2. Adopters, as compared to non-
level of convenience, but users perceived
adopters, will be more financially
Internet banking to be significantly more
innovative.
convenient. Hence, H1a was accepted.
Respondents seemed more positive about
convenience because they perceived that
Results
Internet banking could be used at any time,
Table II illustrates the eight characteristics subject to a PC being available and their
that were identified and compares the bank's Internet site being accessible. Current

Table I
Dimensions which influence the adoption of e-banking and the attributes which represent them
F1 F2 F3 F4 F5 F6 F7 F8
Social desirability
Some of my friends use it 0.89
Some of my family use it 0.89
Some of my colleagues use it 0.85
Improves my social status 0.60
Compatibility
I like innovations 0.80
I am familiar with modern technology 0.79
I like sourcing services in a hassle-free way 0.77
I like privacy 0.64
Convenience
Provides convenience since it is available 24 hours 0.81
Enables transactions to be conducted at home 0.81
Saves time as compared to conventional banking 0.78
Complexity
Account opening procedures are complex 0.82
E-banking transactions involve complex procedures 0.78
Prompts are difficult to understand 0.78
Confidentiality
Third parties may be able to establish customers'
financial details 0.75
Third parties may track bank usage patterns 0.71
Customers' financial affairs may be passed on to other companies 0.67
in the bank group
Accessibility
PINs obtained by fraud may allow access to e-banks 0.80
Hackers may be able to gain access to e-bank accounts 0.78
Software problems may prevent customer access 0.63
Economic benefits
E-banks charge lower transaction fees 0.81
E-banks charge lower rates of commission 0.77
E-banks pay higher interest 0.75
PC proficiency
Upgrading browser software discourages e-bank usage 0.82
Inadequate PC skills discourage e-bank usage 0.81
Eigenvalues 4.61 3.07 2.88 2.21 1.52 1.34 1.14 1.04
% variance 17.10 11.37 10.66 8.18 5.65 4.98 4.22 3.83
Cumulative variance 17.10 28.47 39.13 47.31 52.96 57.94 62.16 65.99
Cronbach Alphas 0.84 0.78 0.76 0.79 0.69 0.69 0.71 0.70

[ 22 ]
Philip Gerrard and Table II
J. Barton Cunningham The dimensions which influence the adoption of e-banking: a comparison of adopters and non-
The diffusion of Internet
banking among Singapore adopters
consumers
All Adopters Non-adopters
International Journal of Bank
Marketing n = 240 n = 111 n = 129
21/1 [2003] 16-28 Mean sd Mean sd Mean sd t
Adoption
Convenience 1.75 0.52 1.68 0.51 1.81 0.51 ±1.83*
Accessibility 1.82 0.55 1.78 0.51 1.85 0.58 ±0.90
Confidentiality 2.29 0.60 2.35 0.62 2.24 0.58 1.41
Compatibility 2.46 0.65 2.13 0.53 2.74 0.61 ±8.22**
PC competence 2.48 0.88 2.65 0.88 2.34 0.86 2.81**
Economic benefits 2.64 0.56 2.67 0.60 2.63 0.53 0.57
Social desirability 2.86 0.82 2.96 0.77 2.78 0.86 1.61
Complexity 3.31 0.75 3.65 0.74 3.01 0.61 7.46**
Innovativeness
Innovativeness 2.86 0.82 2.62 0.55 3.07 0.59 ±6.03***
Notes:
**significant at p < 0.01; *significant at p < 0.1

Internet bank adopters must already have would seem, have not done enough to
access to a PC. As some 50 per cent of ``educate'' their customers in emphasising
Singapore households have an Internet the extent to which Internet bank accounts
connection (Infocomm Development are protected.
Authority, 2001), there is a proportion of non- On the second issue, it is probable that
adopters who have the technology necessary respondents are reminded of problems they
to link to an Internet bank; while other non- occasionally have experienced with ATMs,
adopters may be able to do so using a family the first of the self-service technologies
member's PC or one at work. Hence, it is not generally made available to retail bank
surprising that even non-adopters view customers. Customers, from time to time,
Internet banking as a convenient way of have experienced their bank's ATM system
sourcing bank services. Non-adopters breaking down. They alternatively may find
perceived Internet banking as offering high they cannot use their bank's ATM when its
levels of convenience, reflecting what was software is being serviced/upgraded.
said by some of the non-adopters during the
Perhaps they believe similar problems are
interviews we conducted. Irrespective of
likely to occur with Internet banking.
their very positive comments about
convenience, the mean response of non-
Confidentiality
adopters was significantly less than that of
Adopters and non-adopters indicated that
adopters.
they were concerned about matters
pertaining to confidentiality. The responses
Accessibility
were not different as between adopters and
Respondents were concerned about
non-adopters and, hence, H1c was rejected.
accessibility, irrespective of whether they
Customers were of the opinion that banks
were adopters or non-adopters. The
may be tracking the types of banking service
responses of adopters and non-adopters were
they use and their frequency of usage. Banks
not significantly different and, hence, H1b
was rejected. may pass such information on to other
Accessibility was seen to have two businesses within the banking group and this
components: first, the ability of ``fraudsters/ may result in customers being deluged with
hackers'' to gain access to someone else's what they consider to be ``junk'' mail. There
Internet bank account; second, the inability also appears to be the fear that non-bank
of customers to gain access to their Internet organisations or individuals may also track
bank account when they want to. or may alternatively find a means of tracking
On the first issue, respondents indicated what Internet banking customers are doing
that they were concerned that the banks' and use the acquired information to establish
systems were insecure. There, thus, remains a picture of the customer's ``financial make-
doubts in customers' minds irrespective of up''. Consumers appear to be very concerned
whether they are adopters or not. Banks, it that the above may happen.
[ 23 ]
Philip Gerrard and Compatibility Complex procedures
J. Barton Cunningham Adopters of Internet banking perceived the Consumers, especially adopters, perceived
The diffusion of Internet
banking among Singapore self-service technology to be more compatible that Internet banking did not involve the use
consumers to them and, hence, H1d was accepted. of complex procedures. Adopters, though,
International Journal of Bank Some adopters agreed that Internet perceived the service to be significantly less
Marketing banking suited them because they are more complex. Thus, H1h was accepted.
21/1 [2003] 16-28
familiar with modern technology and enjoy It would appear that those who have
the privacy that Internet banking brings. adopted Internet banking have become very
They see themselves as technology users familiar with the incidental procedures and
perceive that they are far from complex. For
both at work and at home. They probably
those who are non-adopters, they are
have grown accustomed to using ATMs and
somewhat neutral about complexity. As a
see Internet banking as being consistent with
percentage of non-adopters would have PCs
their past experiences of sourcing certain at home and access to the Internet, that
financial services using technology. sector of non-adopters ought not to be too
fearful about the procedures incidental to
PC proficiency using an Internet bank.
Respondents perceived that a reasonable
level of PC proficiency would be needed for Innovativeness
customers who wished to become Internet Adopters were found to be more financially
bank users. The responses of adopters were innovative than their counterparts and,
different from those of non-adopters and, hence, H2 was accepted.
hence, H1e was accepted. This finding is consistent with many other
By being more confident at downloading adoption studies. It suggests that those
software, either for the first time or when customers who are strongly innovative are
upgrading, adopters appear to be less fearful more likely to adopt a new financial product
of the procedures which are required to set after its launch.
up and maintain an Internet bank
relationship and access the services they
wish to source. Some non-adopters would Implications
have low levels of PC skills and this may The conceptual framework for this study
strongly influence their decision to not apply relied upon three of the five ``main'' diffusion
for an Internet bank account. characteristics derived by Rogers (1962),
namely compatibility, complexity and
Economic benefits relative advantage and the characteristic of
Internet banking was not perceived as risk derived by Ostlund (1974).
offering substantial economic benefits. The Upon comparing the characteristics which
responses of adopters and non-adopters were were created by the factor analysis in the
not different and, hence, H1f was rejected. current study, only one adoption
This finding may have arisen because characteristic was found which remained
many customers pay no fees or nominal unidimensional, this being compatibility.
transaction fees to their bank. By becoming The other two characteristics, which were
an Internet banking customer, they do not sourced from Rogers (1962), namely
feel that they will benefit financially. complexity and relative advantage, split. It
appears that, although Rogers (1962) viewed
Social desirability both complexity and relative advantage as
Both adopters and non-adopters were being conceptually unique, the empirical
somewhat neutral in their perceptions about findings of this study do not support this
whether their social status would be higher if view. Complexity split into ``pure''
complexity and skills associated with the use
they were known to have adopted Internet
of a PC, this being labelled PC proficiency.
banking. Their responses were not different
Relative advantage, split into social
and, hence, H1g was rejected.
desirability, convenience, and economic
It appears that, even if the friends, family
benefits. Risk, as sourced from Ostlund
or colleagues of a non-adopter use Internet (1974), also split, this being into
banking, they see no need to follow suit to confidentiality and accessibility.
improve their own status. Moreover, for the Further evidence that the results of
group who were adopters, they do not see empirical studies are not consistent with the
their social status as being superior to other conceptual frameworks of Rogers (1962) and
members of their family, friends or Ostlund (1974) can be found in the paper of
colleagues who were non-adopters. Suganthi et al. (2001). Their findings bear
[ 24 ]
Philip Gerrard and some similarities to those of the present Second, banks need to reconsider what
J. Barton Cunningham study, in the sense that they found both they have said and done to date in explaining
The diffusion of Internet relative advantage and risk split. The results the level of security which supports the
banking among Singapore
consumers of Suganthi et al. (2001) showed that relative bank's computer system and that third-party
International Journal of Bank advantage split into costs and convenience, intrusions into an Internet account are
Marketing while risk split into security concerns and ``impossible''. Banks need to emphasise that
21/1 [2003] 16-28 trust in one's bank. customers, when creating their PIN/
The empirical findings of the current study password, should use one which is easy for
and the findings of Suganthi et al. (2001) them to remember, and thus make it
suggest that further research needs to be unnecessary for it to be recorded anywhere.
conducted in a variety of settings in order to Customers should rely on their memory and
determine an appropriate range of should that fail them at any time, they can
characteristics which model the adoption of always contact the bank which will cancel
Internet banking. the old PIN/password and the customer can
Bank managers, based on the results of the register a new one.
current study, would see that the The second characteristic which was
respondents appeared to be more positive perceived in a negative way was that of
about Internet banking than neutral/ confidentiality. Respondents were concerned
negative, irrespective of whether they were that either the bank may pass customer
adopters or non-adopters. They recognised profiles over to other companies in the
the convenience this self-service delivery banking group or other sections of the bank
method offered and that it was compatible resulting in the information being used to try
with a hi-tech way of living. They recognised and sell additional products. Customers were
a minimum level of PC skills were needed also concerned that, even if the bank itself
but, as they did not perceive the service to be did not take steps to observe usage patterns, a
complex, they believed that they had the consultant may be appointed by the bank to
skills to access and use it. The respondents establish usage behaviour and the acquired
were somewhat ambivalent about economic information may be similarly passed on.
benefits and social desirability while they Respondents felt that third parties could
had negative perceptions about accessibility build up a picture of a customer's financial
and confidentiality. profile by gaining access to the bank's
How can bank managers use the findings of computer system. Banks, in addition to
the current study to increase the number of having to address possible security breaches,
consumers who register as Internet bank would also have to be open about the ways in
customers? Banks should emphasise the which they track customer usage and
positives in any marketing campaign, while undertake not to pass on to third parties any
at the same time, they need to consider how information, so acquired, without the
they can shift the perceptions of customers customer's express consent.
relating to the characteristics which were In regard to the more neutral adoption
viewed in a negative or neutral way, thereby characteristics, customers perceived that
enabling Internet banking to be viewed more there were no economic benefits to be
favourably. gained from being an Internet bank
Accessibility and confidentially of Internet customer. Is this because there are none or
banking is associated with consumer risk. is it just perceived to be the case? For
Accessibility can be improved by explaining example, many customers may not
to customers what they should do to access presently pay transaction fees to their bank.
their bank's services when the bank's Hence, as a matter of fact, they would not
computer system is not on-line. gain any economic benefits; or if they pay
Inaccessibility may arise through a nominal fees at present, they may see no
purposeful event, such as a closure to enable major financial benefits in becoming an
upgrading or maintenance to take place; or Internet bank customer. Alternatively, is it
when the system has had to be shut down due that customers perceive that there are no
to an unexpected event taking place (such as financial benefits? Banks need to establish
a power failure). For closures which are what is behind customer responses to this
purposeful, banks should provide sufficient characteristic before proceeding to use
notice to their Internet banking customers, pricing as an inducement to get customers
thereby enabling customers to work around to register with their Internet bank. Banks,
the closure hours. Customers should also be in an attempt to explain the extent of
advised that the bank could be reached in financial benefits may consider identifying
alternative ways if any service(s) is urgently the profile of an ``average'' customer and
needed and explain the simple procedures show how much a traditional bank
which are necessary. customer, with such a profile, would pay in
[ 25 ]
Philip Gerrard and monthly fees and the fee payable by an
J. Barton Cunningham equivalent customer who uses Internet
Conclusions, limitations and future
The diffusion of Internet
banking. Customers could then see for
studies
banking among Singapore
consumers themselves the extent to which they would Conclusions
International Journal of Bank benefit. It is probably true to say that to Knowledge about the diffusion of Internet
Marketing convince customers on the matter of banking is somewhat in its infancy. In
21/1 [2003] 16-28 concurrence with the comment made by
economic benefits, the savings would have
to be more than marginal. The bank may Black et al. (2001), the diffusion model of
additionally make comparisons of how fees Rogers (1962) is seen as a good starting point
associated with non-regular services differ, in any study which investigates the adoption
of Internet banking. The results of the
as between traditional and Internet
present study and the similar study of
banking. One example could relate to the fee
Suganthi et al. (2001) suggest that the findings
charged for stopping a cheque. The
of empirical research may not be consistent
traditional way of stopping a cheque may be
in a number of ways with the concepts
subject, say, to a fee of $20, while the
proposed by Rogers (1962) and Ostlund (1974).
Internet method may be free or subject to a
In particular, this study and that of Suganthi
(nominal) fee, e.g. $2. et al. (2001) illustrated that three
Internet bank users were found to be
characteristics had split, these being
financially more innovative. Banks are complexity, relative advantage and risk.
advised to identify such customers and then Further research needs to be conducted to
target them prior to a new service being create a more precise model of the adoption
introduced. Having then targeted those who of Internet banking. No doubt Black et al.
have historically been early adopters of other (2001) will provide further insights into the
services, banks can better target the modelling process, once they have published
laggards, by aiming to influence their the follow-up paper to their qualitative study.
perceptions about the characteristics which Of the eight dimensions which were found
inhibit adoption. This comment is not in to be characteristics of the adoption of
conflict with what is said earlier about a Internet banking, accessibility and
bank passing on customer information confidentiality, albeit that they may be
because it solely involves the bank itself. considered as measures of risk, had not been
Overall, respondents were more positive identified in prior research.
than negative about Internet banking. Banks The way that the respondents rated the
can clearly build on the positively viewed various characteristics can be viewed both
characteristics of adoption, but not neglect on a comparative basis and an absolute basis.
those characteristics which are more In comparative terms, compatibility,
neutrally viewed by customers, particularly complexity, PC competence and convenience
those pertaining to accessibility and were viewed differently by adopters and non-
confidentiality. adopters; while social desirability,
The above comments reflect customer confidentiality, accessibility and economic
perceptions and may not accurately describe benefits were not rated differently. In
what banks do in practice. Negative absolute terms, respondents perceived that
perceptions, which are inconsistent with the Internet banking offered a high level of
convenience, but accessibility, as defined in
service offered by banks, are best dealt with
the study, was a major concern. While other
by setting up mechanisms that address the
studies have concluded that Internet banking
misunderstandings. This suggests that the
was complex, this was not found in the
process of communicating what a bank is
current study. It may be concluded that,
doing is as important as what a bank does in
where a population is PC competent and
practice.
frequent Internet users, the procedures
The result about innovativeness suggests
incidental to using an Internet bank are not
that banks should maintain records of those perceived to be complex.
who are amongst the first to use a new The results suggest that, whether
product or service and then specifically consumers are adopters or non-adopters,
target them when other products are to be they both perceive that they are very
introduced. If such a campaign is successful, concerned about accessibility and
the take off point on the typical ``s''-shaped confidentiality as they relate to Internet
adoption curve (see Rogers, 1995, p. 106) banking. This tends to indicate that,
should be accelerated and banks would be whatever the respective banks have done to
able to more quickly recover the costs they date, there remains a need to continue to
have incurred in developing and introducing emphasise that their systems are only
Internet banking. accessible to registered customers who use
[ 26 ]
Philip Gerrard and the correct password and that customer influence the way consumers will source
J. Barton Cunningham information will remain confidential at all specific bank services in the future.
The diffusion of Internet times.
banking among Singapore The results showed that relative advantage
consumers The study adds to the growing knowledge did not remain as a single characteristic but
International Journal of Bank about the adoption of a specific self-service split into separate measures, all of which
Marketing technology used in banking. No doubt, as appeared in the text of Rogers (1995). Relative
21/1 [2003] 16-28 these conclusions are being written, other advantage was found to split into economic
researchers in a range of countries will be benefits, social status and convenience. Risk
concluding similar studies and collectively also split ± risk relating to accessibility and
all the respective findings will create a far risk relating to confidentiality. Further
broader awareness about the adoption of research may confirm, or otherwise, that
Internet banking. these dimensions are distinct as opposed to
being generically labelled as relative
Limitations and future studies advantage or risk.
In building up specific measures concerning
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[ 28 ]