Ebanking in Australia

Adoption of Internet banking by Australianconsumers: an empirical investigation

Milind SathyeLecturer, University of Southern Queensland, Toowoomba, Queensland, Australia

Introduction

The Australian financial system is under-

going a period of substantial change, the

impact of which is transforming the way

financial services are delivered. The changes,

among others, include a significant increase

in the number of alternative channels avail-

able for the delivery of services. The most

recent delivery channel introduced for fi-

nancial services is Internet or online bank-

ing. Internet banking involves consumers

using the Internet to access their bank and

account, to undertake banking transactions.

At the basic level, Internet banking can mean

the setting up of a Web page by a bank to give

information about its product and services.

At an advance level, it involves provision of

facilities such as accessing accounts, funds

transfer, and buying financial products or

services online. This is called `` transactional''

online banking and is the subject-matter of

this study. The objective of this paper is to

quantify the factors affecting the adoption of

Internet banking by Australian consumers.

Such a research will help banks to formulate

appropriate strategies to ensure rapid

migration of customers to online banking

and thus bring down their operating costs.

The rest of the paper has been organised as

follows: the next section gives an account of

the Internet banking scenario in Australia,

followed by a review of relevant literature,

research method and procedure, findings of

the study, discussion of results and limita-

tions of the study, implications for manage-

ment and areas for further research and

conclusion.

Internet banking

Transactional Internet banking is growing

rapidly. It has been estimated that 60 per cent

of retail banking transactions will be online

in ten years' time (Barwise, 1997). A study by

Booz et al. (1997) on Internet banking shows

that `` up to 20 per cent of retail and 30 per cent

of corporate customers will use some form of

Internet banking capability within the next

five years''. This study further states that

Internet and other virtual banking channels

have significantly lower cost structure than

traditional delivery channels. `` Internet

banks can operate at an expense ratio of 15-20

per cent compared to 50-60 per cent for the

average bank'' (Booz, 1997). Thus, by

encouraging customers to use the Internet

for banking transactions, the banks would

save considerable operating costs. Competi-

tive pressures would also require banks to

offer Internet banking. New players such as

software and telephone companies will be

interested in entering the online banking

market (Hagel and Eisenmann, 1994; Hagel

and Lansing, 1994). One would, therefore,

expect that Australian banks would not only

be quick to provide Internet banking service

but would also encourage customers to

migrate to this form of delivery of banking

services.

The real picture is, however, different.

Only one of the four major banks in Australia

was providing an Internet banking facility by

the end of 1997 and the other three banks are

now slowly appearing on the Internet to

provide retail and corporate banking ser-

vices. As regards the use by bank customers

of Internet banking, it has been estimated

that only about 1 per cent of the retail

transactions are done over the Internet

(Ernst & Young, 1996). `` Advance bank, a

smaller bank which was quick to adapt new

technology and started to provide net bank-

ing one and a half years ago, has only 5,000

active users'' (Wood, 1996). Many explana-

tions have been offered for the slow growth of

Internet banking in Australia. Some contend

that security concerns among banks and

customers are keeping both away from

Internet banking, while others cite lack of

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[ 324 ]

International Journal of BankMarketing17/7 [1999] 324334

# MCB University Press[ISSN 0265-2323]

KeywordsBanking, Internet,

Consumer behaviour, Australia

AbstractQuantifies the factors affecting

the adoption of Internet banking

by Australian consumers. The

sample for this survey was drawn

from individual residents and

business firms in Australia. Shows

that security concerns and lack of

awareness about Internet banking

and its benefits stand out as being

the obstacles to the adoption of

Internet banking in Australia.

Suggests some of the ways to

address these impediments.

Further suggests that delivery of

financial services over the Internet

should be a part of overall

customer service and distribution

strategy. These measures could

help in rapid migration of

customers to Internet banking,

resulting in considerable savings

in operating costs for banks.

knowledge about availability of such a ser-

vice, the Internet banking site being not user-

friendly and lack of access to computers/

Internet as the reasons (O'Connell, 1996).

Further, `` there is little evidence of consumer

demand for Internet banking services''

(Davidson, 1998). `` . . . the critical question is

whether customers will accept the electronic

form of receiving information and perform-

ing transactions'' (Oliver, 1997). A study by

Ernst & Young (1998) finds that financial

institutions are not sure about customer

acceptance of e-commerce. Mols et al. (1999)

state that `` the diffusion of electronic banking

is more determined by customer acceptance

than by seller offerings''. Though customer

acceptance is a key driver determining the

rate of change in the financial sector, em-

pirical studies on what is holding customers

from acceptance of Internet banking have

been few. A study by Booz, Allen & Hamilton

(1997) assessed the strategic impact of Inter-

net banking on financial services industry

and in particular the set-up and operating

cost of Internet banking. Thorton Consulting

(1996) conducted a survey in the USA which

focused on banks and concluded that 67 per

cent of the banks felt that `` security concerns''

is the major apprehension about Internet

banking. The behavioural consequences of

PC banking in Denmark were studied by

Mols (1998) and it was found that PC bank

customers are more satisfied than non-PC

bank customers. Daniel (1999) studied elec-

tronic banking in UK and Ireland and gives

excellent insights into the bank's adoption of

electronic banking. Customers' perception

about adoption of Internet banking was not

the focus of these studies. In particular, no

published study, regarding perceptions of

bank customers in Australia about Internet

banking, could be found by the author. The

present study is intended to fill this impor-

tant gap.

Literature review and developmentof hypotheses

Adoption is the acceptance and continued use

of a product, service or idea. According to

Rogers and Shoemaker (1971), consumers go

through `` a process of knowledge, persuasion,

decision and confirmation'' before they are

ready to adopt a product or service. The

adoption or rejection of an innovation begins

when `` the consumer becomes aware of the

product'' (Rogers and Shoemaker, 1971). In

the context of bank marketing planning,

Guiltinan and Donnelly (1983) identify

`` information about the benefits of using a

product/service'' as an essential service/

product promotion strategy. The Wallis

Report (1997) states that `` consumers will seek

out those financial products and suppliers

which offer the best value for money and they

are educated about it''. Hence, for adoption of

Internet banking, it is necessary that the

banks offering this service make the consu-

mers aware about the availability of such a

product and explain how it adds value

relative to other products of its own or that of

the competitors. The added value in electro-

nic banking, according to Trethowan and

Silicone (quoted in Daniel, 1999), was conve-

nience, sales orientation and lower costs.

Howard and Moore (1982) emphasise that for

adoption `` consumers must become aware of

the new brand''. An important characteristic

for any adoption of innovative service or

product is creating awareness among the

consumers about the service/product. `` Don't

assume good products sell themselves''

(Cooper, 1997). Hence, if Australian consu-

mers are not adopting Internet banking, it

may be because they are not aware about

such a service being available and the added

value that it offers. These findings and

observations lead us to the hypothesis:

H1: Australian consumers are not adopting

Internet banking service because they

are unaware of the service and the

benefits it offers.

The second factor that leads to adoption of

innovative service/product by customers is

the `` ease of use''. In his study, Cooper (1997)

finds `` ease of adoption'' as one of the three

important characteristics from the customer's

perspective for adoption of innovative service.

The Wallis Report (1997) identifies that tech-

nological innovation `` must be easy to use'' to

ensure customer take-up or acceptance. `` The

degree to which an innovation is difficult to

understand or use'' was one of the reasons for

failure of home banking in the USA (Dover,

1988). Rogers' (1962) analysis of diffusion

emphasises the importance of individual

perceptions and understanding of a new

technology in shaping its acceptance. Scar-

brough and Corbett (1992) find `` understand-

ings of consumers'' to be an important

element in the diffusion of innovative tech-

nology. Daniel (1999) identifies `` ease of use'' as

one of the factors for customer acceptance in

her study of electronic banking in the UK and

Ireland. If customers in Australia are not

adopting Internet banking, it could be because

the Internet sites are not easy to operate.

Hence, the following hypothesis is proposed:


Internet banking service because they do

not find that it is easy to use.

[ 325 ]

Milind SathyeAdoption of Internet bankingby Australian consumers: anempirical investigation


The third important factor that consumers

consider before adopting an innovation is the

level of risk involved. In the context of

Internet banking, it refers to the security and

reliability of transactions over the Internet.

Cooper (1997) identifies `` the level of risk'' as

an important characteristic from a consu-

mer's perspective in the adoption of innova-

tion. A report on Internet banking in

Australia finds that `` security concerns

among banks and customers'', are keeping

both away from Internet banking (ABF, 1997).

O'Connell (1996) finds `` security concerns'' as

an important reason for slow growth of

Internet banking in Australia. The Wallis

Report (1997) states that if `` security is

improved'' households will conduct their

financial transactions over the Internet.

Rothwell and Gardiner (1984), while devel-

oping the framework of user needs in tech-

nological innovations, identify `` safety in

use'' as one of the factors that influences

potential users. Daniel (1999) also identifies

`` security'' as a factor influencing customer

acceptance. Obviously, Internet banking will

not be adopted unless it is considered safe

and secure by the customers. These findings

and observations lead to the following hy-

pothesis:


Internet banking service because they

are concerned about safety and security

of transactions over the Internet.

Another factor that influences the consumer

adoption of innovation is the price/cost

factor. In the context of Internet banking, two

types of costs are involved. First, the normal

costs associated with Internet activities and

second, the bank cost and charges. Rothwell

and Gardiner (1984) observe that `` there are

two fundamental sets of factors defining user

needs, namely price factors and non-price

factors''. Guadagni and Little (1983), Gupta

(1988), Mazursky et al., (1987) identify `` price''

as a major factor in brand switching. Howard

(1977) gives importance to `` price factor'' in

adoption and diffusion of innovation. Cooper

(1997) states that innovative products often

have superior `` price/performance charac-

teristics''. Rayport and Sviokla (1994) also

emphasise the `` pricing'' aspect for electronic

distribution of goods and services. The Wallis

Report (1997) states that for `` consumers to

use new technologies, the technologies must

be reasonably priced relative to alterna-

tives''. Thus, if Internet banking is not being

adopted it could be because it is not reason-

ably priced. Hence, the following hypothesis

is proposed:


Internet banking service because it is not

reasonably priced.

The fifth factor that affects adoption is that

the existing mode of service or product

delivery fulfils the customers' needs ade-

quately. In the context of Internet banking,

telephone banking and brick and mortar

branches are the existing modes of transact-

ing banking business. Adoption of new

technologies often comes across a certain

amount of resistance to change from present

ways of operating. Commenting about tech-

nology adoption, Quinn and Mueller (1982)

state `` human beings what they are, there

tend to be resistance to change''. Daniel (1999)

finds `` a high level of customer inertia in

changing their established banking arrange-

ments''. For customers to change present

ways of operating and take up new technol-

ogy, it must `` fulfil a specific need'' (Wallis

Report, 1997). Unless such a need is fulfilled,

consumers may not be prepared to change

from present ways of operating. Hence, the

following hypothesis is proposed:



not want to change from currently famil-

iar ways of transacting.

Finally, availability of access to computers/

Internet is a prerequisite for adoption of

Internet banking. The more widespread the

access to computers/Internet, the greater the

possibility of use of Internet banking.

O'Connell (1996) identifies lack of access to

computers/Internet as one of the possible

reasons for slow adoption of Internet bank-

ing. Daniel (1999) found lack of customer

access to suitable PCs as the reason for low

usage of electronic banking in the UK and

Ireland. The Wallis Report (1997) states `` as

the Internet becomes more widely accessible

. . . households will conduct their financial

transactions over the Internet''. Hence, if

Internet banking is not being adopted in

Australia, it may be because of lack of access

to computers/Internet.



not have access to computers/Internet.

These six hypotheses and their relation to

adoption of Internet banking can be seen in

Figure 1. There could also be other factors

influencing the non-adoption of Internet

banking by customers, e.g. the desire for

personal interaction with bank staff, tech-

nology phobia, widespread network of

existing branches, computer illiteracy among

customers (Mols et al., 1999). This study

focuses on the above six factors, because the

[ 326 ]



Wallis Report (1997) states that new technol-

ogy adoption by the majority of the custo-

mers depends, mainly, on these factors.

Further, these factors were also endorsed by

a focus group consisting of two students, two

housewives and five academics.

Research method and procedure

Population and sampleInternet banking service is presently being

offered to two sets of clients, i.e. personal

clients and business clients; hence the popu-

lation for this survey consisted of individual

residents and business firms in Australia.

For residents, the sample unit was indivi-

duals and for business, it was a single firm.

The total sample size was fixed at 500

(individual and business respondents being

250 each), in view of time and cost consid-

erations. `` For populations of 10,000 and more,

most experienced researchers would prob-

ably consider a sample size between 200 and

1,000 respondents'' (Alreck and Settle, 1985).

Considering the low response rates found in

surveys, 1,000 questionnaires (twice the

sample size) were sent out. The study was

limited to capital cities where use of Internet

was likely to be concentrated and also

because about 65 per cent of Australia's 17

million people live in cities. The question-

naires were allocated among the cities, in

proportion to the population of the cities. The

first subject was chosen using random num-

bers and thereafter an interval of 12,000

(population of cities 12 million divided by

1,000), was used. White and yellow pages

(telephone book) were used as the frame of

reference for personal and business custo-

mers, respectively.

Survey instrumentNon-availability of computers/Internet has

been identified as a possible reason why

consumers may not be adopting Internet

banking. An e-mail survey would not have

been able to capture this section of the

population; hence a mail survey. The total

design method (TDM) was applied in the

conduct of the survey. To enhance reliability

and validity, great care was taken while

designing the questionnaire. A 17-item ques-

tionnaire was used to measure the six key

constructs identified. Every question on the

questionnaire focused directly on a specific

issue and it was ensured that questions have

brevity and clarity. While designing the

survey instrument, it was ensured that

instrumentation bias is avoided. Multiple

choice questions, of both single and multiple

response, were used. The questionnaire was

then pre-tested among 25 individual and 25

business respondents. The pre-testing

brought to light some of the problems in

questionnaire completion. These problem

areas were then sorted out. The revised

questionnaire was again pre-tested among a

set of 20 individual and 15 business respon-

dents and it was found that it worked well.

Of the 17 questions, six related to demo-

graphic characteristics and the remaining 11

addressed the various constructs of the

study. Questions 1 to 4 were about access to

computers and the Internet and the place of

access. A three-item scale, i.e. regular access

(almost every day), occasional access (i.e.

once or twice a week), or no access was used.

The place of access also had a three-item

scale, i.e. home, office or other. Question 5,

was concerned with respondents' bank based

on a choice between the five major banks in

Australia and a category referring to others.

`` Awareness'' was measured at question 6,

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

Figure 1A model for adoption of Internet banking

[ 327 ]



measure the responses. Those who were not

using Internet banking were asked at ques-

tion 10, whether they would be prepared to

use it, if their bank provided it. Here, a three-

item scale of yes, no and unsure, was used.

Again, those who were prepared to use were

asked, what do they expect from the bank and

here again, a six-item scale (the six hypoth-

eses) was used to elicit responses. Those who

were not prepared to use were asked to give

responses on a six-item scale, i.e. on the six

hypotheses. The rest of the questions were

about demographics. These scales have some

limitations and these have been indicated in

a subsequent paragraph outlining limitations

of the study.

Hypotheses testedThrough the questionnaire the following

hypotheses were tested:

Bank consumers are not adopting Internet

banking due to:

H1: lack of knowledge (awareness) of such a

service and its benefits.

H2: service available being not easy to use or

perceive it difficult to use.

H3: fear of security of doing banking trans-

actions over the Internet.

H4: service available being not reasonably

priced.

H5: resistance to change from current modes

of operation.

H6: non-availability of access to computers/

Internet.

Responses receivedThe questionnaires were sent in September

1998 and 612 questionnaires were received

after follow-up with an overall response

rate of 61 per cent This response rate was

far beyond expectations and much above

the acceptable response rate by social

sciences standards. Of these, 23 question-

naires were discarded as these either were

blank or answered the demographic ques-

tions only. The remaining 589 question-

naires were used for data analysis. The

profile of the respondents has been shown

in Table I.

Findings of the study

Segment profilesThe data were collected from two broad

categories of respondents, i.e. personal and

business respondents. Tables II (a) and (b)

present the demographic characteristics of

these sets of respondents.

Testing of hypothesesThe responses of the personal and business

respondents to the six propositions as above

are shown in Table III. In Table IV, the above

two categories have been sub-divided into

two more categories, namely `` aware'' and

`` unaware''. `` Aware'' represents those

Table IRespondent profile

Surveyclass

Questionnairessent out

Responsesreceived

Responserate %

Personal 500 265 53Business 500 324 65Total 1,000 589 59

Table II(a)Profile of survey sample

Personal respondents

Respondentscharacteristics

Number ofrespondents

who answered %

Age18-25 5 1226-40 101 3841-65 114 33Over 65 45 17Total 265 100

OccupationSelf-employed 45 18Salaried employment 151 61Household 8 3Other 45 18Total 249 100

EducationJunior school 11 4Senior school 90 34Undergraduate 90 34Postgraduate 66 25Other 5 2Total 262 100

IncomeBelow 25,000 (A$) 37 1825,000 to 50,000 91 4450,000 to 75,000 37 1875,000 to 100,000 23 11Above 100,000 18 9Total 206 100

Place of residenceNew South Wales 56 26Victoria 74 34Queensland 26 12South Australia 26 12Western Australia 18 8Aus. Capital Territory 5 2Tasmania 11 5Northern Territory 0 0Total 216 100

[ 328 ]



respondents who are aware about availabil-

ity of Internet banking service, while `` una-

ware'' represents those respondents who

have no knowledge that such a service was

available. In Table V, these two groups were

further classified, as follows:

1 respondents who are aware about avail-

ability of Internet banking service and are

using it (AU);

2 respondents who are aware about avail-

ability of Internet banking service but are

not using it (ANU);

3 respondents who are unaware about

availability of Internet banking but are

prepared to use it, if made available

(UPU); and

4 respondents who are unaware about

availability of Internet banking and are

not prepared to use it, even if made

available (UNPU).

Table III has also been presented in the form

of a bar chart (Figures 2 and 3). The chart

shows that security concerns and lack of

awareness about Internet banking and its

benefits stand out as the reasons for non-

adoption of Internet banking. As a factor for

non-adoption, `` unreasonable price'' ranks

third. It may be interesting to note that a

study by www.consult (1999), in Singapore,

found this to be the prime reason for non-

adoption of online banking. This chart also

shows that non-access to computers/Internet,

resistance to change and difficulty in use are

not the major factors affecting adoption of

Internet banking by Australian consumers.

These results are not surprising given the

fact that 18 per cent of Australian households

have access to the Internet from home

(Alston, 1999).

Australia has the world's third highest use

of EFTPoS per head and a long way ahead of

the USA (Macfarlane, 1997) and, as such,

Australians are considered as technology

savvy. Another point to note is in this study,

the personal users of Internet banking were 22

(8 per cent), while the business users were 39

(12 per cent), with an overall percentage of 10.

The ABS (1999) report states that about 2 per

cent of adults used the Internet to pay bills or

transfer funds. The results in this sample are

on the higher side, probably because our

sample was restricted to capital cities only.

The paragraphs below discuss the findings

with respect to each of the six propositions.

Security concernsTable III shows that 75 per cent of the total

respondents had security concerns. Further,

78 per cent of personal and 73 per cent of

business respondents had security concerns.

Thus, personal respondents have more

security concerns than business respondents.

Table IV shows that the security concerns

were much higher (77 per cent), among those

personal respondents who were aware about

Internet banking, than the business

respondents in this category (47 per cent).

Table II(b)Profile of survey sample

Respondentcharacteristics

Number ofrespondents

whoanswered %

Form of businessProprietary 100 31Partnership 38 12Company 181 56Other 5 2Total 324 100

Nature of businessAgriculture/fishing 4 1Mining 34 10Manufacturing 63 19Construction 41 13Wholesale/retail

trade/transport 53 16Finance/insurance 52 16Small business 69 21Other 8 2Total 324 100

Annual turnoverUnder 100,000 (A$) 32 11100,000 to 500,000 107 36500,001 to less than

2 million 128 432 million and over 32 11Total 299 100

Location of businessNew South Wales 72 22Victoria 63 19Queensland 48 15South Australia 32 10Western Australia 39 12Aus. Capital Territory 29 9Tasmania 32 10Northern Territory 9 3Total 324 100

Table IIIViews of personal and business respondents to the six propositions

Personal Business TotalNo % No % No %

Difficulty in use 132 50 101 31 233 40Security concern 206 78 238 73 443 75Unreasonable price 158 60 167 51 325 55Resistance to change 144 54 46 14 190 32No access to Internet 99 37 15 5 115 19Benefits of IB not clear 194 73 208 64 402 68n 265 100 324 100 589 100

[ 329 ]



Table V shows that 95 per cent of personal

respondents who were aware about Internet

banking but were not using it ascribed

security concern as the reason compared to

64 per cent of business respondents. These

results could be due to lesser exposure of

personal respondents to information

technology compared to business respon-

dents who have or can hire skilled staff. It is

interesting to note from Table IV and V that

irrespective of the category of respondents

`` security'' is identified as the biggest obstacle

to adoption. These results are consistent with

those found in other studies; for example,

security concern among customers was the

top ranking obstacle for non-adoption of

Internet banking in Latin America (Booz,

Allen & Hamilton, 1997). In a subsequent

paragraph, suggestions have been given to

deal with this issue.

Lack of awareness about IB and its benefitsTable III shows that 68 per cent of the total

respondents were not clear about the benefits

or added value that Internet banking can

offer. Of these 73 per cent were personal

respondents and 64 per cent were business

respondents. Table IV shows that 74 per cent

of personal respondents and 70 per cent of

business respondents were unaware about

the availability of Internet banking service.

As can be seen from Table V, where banks

are providing the service, 81 per cent of the

personal customers and 69 per cent of busi-

ness customers were not using it because

they were not clear about the benefits of

Internet banking. Further, 86 per cent of


ness customers would like the benefits to be

explained before they would be prepared to

Table IVViews of personal and business respondents to the six propositionsaccording to awareness of Internet banking

Aware Unaware TotalNo % No % No %

PersonalDifficulty in use 19 28 113 58 132 50Security concern 53 77 153 78 206 78Unreasonable price 16 23 142 73 158 60Resistance to change 34 49 110 56 144 54No access to Internet 18 26 81 42 99 37Benefits of IB not clear 38 55 156 80 194 73n 69 196 265Percent 26 74 100

BusinessDifficulty in use 27 28 74 32 101 31Security concern 45 47 193 85 238 73Unreasonable price 21 22 146 64 167 52Resistance to change 14 15 32 14 46 14No access to Internet 6 6 9 4 15 5Benefits of IB not clear 39 41 169 74 208 64n 96 228 324Percent 30 70 100

Table VViews of personal and business respondents according to awareness and use of Internetbanking (IB)

AwareAu ANU

UnawareUPU UNPU Total

No % No % No % No % No %

PersonalDifficulty in use 0 0 19 40 35 43 78 68 132 50Security concern 8 37 45 95 61 75 92 80 206 78Unreasonable price 0 0 16 33 66 82 76 66 158 60Resistance to change 0 0 34 73 9 11 101 88 144 54No access to Internet 0 0 18 38 9 11 72 63 99 37Benefits of IB not clear 0 0 38 81 70 86 86 75 194 73n 22 47 81 115 265 100

BusinessDifficulty in use 0 0 27 48 58 31 16 40 101 31Security concern 9 23 36 64 158 84 35 87 238 73Unreasonable price 10 25 11 19 120 64 25 63 166 51Resistance to change 0 0 14 24 0 0 32 80 46 14No access to Internet 0 0 6 10 0 0 9 23 15 5Benefits of IB not clear 0 0 39 69 147 78 23 57 209 65n 39 57 188 40 324 100

Notes: The vertical totals will not tally since a respondent could tick more than one responseAU = aware and using Internet banking; ANU = aware but not using Internet bankingUPU = unaware but prepared to use Internet banking; UNPU = unaware and notprepared to use Internet banking

[ 330 ]



adopt it. A total of 75 per cent of personal

customers and 57 per cent of business custo-

mers were not prepared to use Internet

banking, as they were unclear about the

benefits. These results drive home the point

that there was a general lack of awareness

among Australian consumers about Internet

banking and the benefits it offers.

Ease of useIt can be seen from Table III that 40 per cent

of respondents overall ascribed difficulty in

use as the reason for non-adoption of

Internet banking. Table IV shows us that, of

those who were aware of Internet banking,

only 28 per cent both business and personal

respondents ascribed this as the reason for

non-adoption. Further, according to Table V,

40 per cent of personal respondents and 48

per cent of business respondents who were

aware about Internet banking but were not

using it found it difficult to use. It could be

because some banks require downloading of

software before Internet banking can be used.

It appears that the problem of difficulty in

use could be handled by appropriate custo-

mer education.

Pricing/cost aspectsAs already mentioned, `` cost'' was cited as the

top-most reason for non-adoption of Internet

banking in Singapore. In the Australian

context, it was found that 55 per cent of all

respondents consider that unreasonable

price was preventing them from adoption of

Internet banking. Internet banking services

are generally free for personal customers:

still, 60 per cent of the personal respondents

indicated this as the reason for non-adoption.

Obviously, these respondents were unaware

that the service is generally offered free of

charge. Table IV shows that 23 per cent of


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 changeTable 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

(Daniel, 1999), need for personal interaction

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/InternetThis 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

Figure 2Percentage responses to each of the six propositions

Figure 3Views of personal and business respondents to the six propositions

[ 331 ]



business respondents. From Tables III to V, it

can be seen that this was the least cited

reason for non-adoption of Internet banking.

Supplemental analysis and findingsChi-square tests were conducted to deter-

mine the relationship between the respon-

dents who were willing to use Internet

banking and the four characteristics of

personal and business respondents. The

analysis is shown in Table VI.

No correlation was found between the

factors like age, occupation, income and

education and interest in Internet banking.

These findings were surprising, since a

survey by the Australian Bureau of Statistics

about use of the Internet (ABS, 1998) shows

that use was related to income, age and

education. As regards business, no correla-

tion was found between form and nature of

business but a high degree of correlation was

found between turnover, location and inter-

est in Internet banking.

Discussion of results andlimitations of the study

This study shows the major factors that

influence the consumer uptake of Internet

banking in Australia. As identified, security

concerns and lack of awareness about Inter-

net banking and its benefits stand out as the

obstacles to non-adoption of Internet banking

in Australia. Security is a burning issue and

even one instance of adverse media publicity

can damage consumer confidence in the

system. A quick response to such publicity

can help ease customer concerns and restore

their confidence. One of the major banks,

gives such an update to the customers. Some

of the banks have included an undertaking

that they will indemnify the losses incurred

through unauthorised use except under cer-

tain circumstances. Such an undertaking can

help build customer confidence. In addition,

the information on security aspects needs to

be presented in simple and non-technical

form. Issues like lack of awareness about the

service and its benefits, difficulty in use,

resistance to change, are matters of customer

education and thus controllable from a

managerial perspective. Possible solutions

could include giving wider publicity under-

scoring the benefits, demonstration kiosks at

supermarkets or public libraries, where

people can have hands-on experience of

Internet banking, a third party, like, say,

industry association/consumer groups/gov-

ernment, publishing educational literature,

etc. The Commonwealth Government has,

recently, published a fact sheet on Internet

banking for consumers along with a status

report on Internet banking (NOIE, 1999).

Such documents could help in customer

education. The above documents reproduce

the security systems in use in the banks but

do not provide analysis and recommenda-

tions. The customer is again left to himself to

analyse the security information, which is

provided mostly in technical terms. There

appears to be a role here for the consumer

organisations to guide the customers suita-

bly. Similarly, banks may consider passing

on some of their gain in reduced operating

cost to customers and thus offer a low-cost

service. This may ensure customer loyalty to

the service and switching to other modes of

delivery or banks could be avoided.

It appears that the uptake of Internet

banking will not be uniform. The young,

educated and wealthy groups of customers

need to be targeted first for migration to

Internet banking. It is important to identify

the relevant customer segments and predict

the development of their growth. The pro-

ducts could include account maintenance,

account monitoring, and credit card trans-

actions, mortgage loans, stock market trad-

ing, margin loans and vehicle loans. Farm

loans and other products for the farmers and

others in remote areas and various deposit

schemes could also be the possible targets.

Internet banking will also give rise to issues

that influence banker and customer rela-

tionships. Establishing identity of both par-

ties, authentication of transactions,

resolution of disputes, etc. The Australian

government was quick to identify and initi-

ate suitable steps to remove the legal and

regulatory barriers to e-commerce in general

and Internet banking in particular.

This study has the following limitations.

Given the fact that banks are reluctant to

disclose the names and addresses of their

customers, this study does not specifically

look at those customers who are presently

using Internet banking. It would be very

Table VIInterest in Internet banking

Chi-squarevalue DF p value

PersonalAge 3.96 3 0.26Occupation 5.05 4 0.28Income 8.66 5 0.12Education 5.31 5 0.37

BusinessForm 2.86 4 0.58Nature 1.35 6 0.96Turnover 1.62 4 0.80Location 2.81 6 0.83

[ 332 ]



useful to study these sets of customers

exclusively. Further, being an exploratory

study, multiple choice questions have been

used, instead of Likert-scale, to measure

various constructs. With a Likert-scale mea-

surement, it could be possible to compare the

two groups more rigorously. Further, the

relative importance of these factors could

also be established. It could be possible to

conduct an exclusive e-mail survey, holding

the factor, `` access to computers/Internet'',

constant. This study looks at Internet bank-

ing from a consumer perspective only. A

relevant area for study could be the factors

that affect the provision of Internet banking

by banks, given that only nine out of 52 banks

are offering online transactional banking.

Another area could be the effect of online

banking on credit unions and building

societies. Yet another area of study could be

customer satisfaction with alternative ser-

vice delivery channels.

Conclusion

The objective of this study was to quantify

the factors preventing adoption of Internet

banking in Australia. The literature on

Internet banking in Australia does identify

lack of awareness and security concerns as

the prime reasons for slow adoption thereof

by consumers. However, no empirical evi-

dence was available to support the theory

that these factors are in fact responsible. The

above analysis shows that security concerns

and lack of awareness stand out as the

reasons for non-adoption of innovation of

Internet banking by Australian customers.

Bank managements could build awareness

by emphasising the benefits of Internet

banking vis-a -vis telephone and brick and

mortar (branch) banking and educate custo-

mers about security concerns on the lines

suggested in this paper.

Further, the delivery of financial services

over the Internet should be treated as a part

of overall customer service and distribution

strategy. The relationships developed could

then be used as a gateway for delivery of

product information. These measures could

help in rapid migration of customers to

Internet banking, resulting in considerable

savings in operating costs for banks.

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Ebanking in Australia