FACTORS AFFECTING THE ADOPTION OF TECHNOLOGICAL
INNOVATION OF E-BANKING IN KENYA
BY
JOSEPH MWANGI
UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA
SUMMER 2015
FACTORS AFFECTING THE ADOPTION OF TECHNOLOGICAL
INNOVATION OF E-BANKING IN KENYA
BY
JOSEPH MWANGI
A Project Report Submitted to the Chandaria School of Business in
Partial Fulfillment of the Requirement for the Degree of Masters of
Science in Business Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA
SUMMER 2015
ii
DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to any
other college, institution or university other than the United States International
University in Nairobi for academic credit
Signed: ___________________________________ Date: ___________________
Joseph Mwangi (ID: 621907)
This project has been presented for examination with my approval as the appointed
supervisor.
Signed: ___________________________________ Date: ___________________
Dr Peter Kiriri
Signed: ___________________________________ Date: ___________________
Dean, Chandaria School of Business
iii
COPYRIGHT
© Joseph Mwangi, 2015
All rights reserved. This report may not be reproduced in part or in whole without the
prior written consent from the author.
iv
ABSTRACT
The general objective of the study was to determine the factors affecting the adoption of
technological innovation of e-banking in Kenya. The study specifically sought: to
determine the effect of perceived usefulness of e-banking on the adoption of e-banking
facility; to determine the effect of perceived ease of use of e-banking facility on adoption
of e-banking; and, to determine the effect of perceived risks on adoption of e-banking.
The design used for the study was descriptive research design. The target population
comprised of 998 businesses in Nairobi listed in the online database of The Official
Yellow Pages Kenya. The sample comprised 100 such businesses selected through
stratified sampling technique. Questionnaires were used to collect data which were then
analyzed using Spearman’s Rank Correlation Coefficient technique. SPSS was used to aid
in data analysis and the findings were presented in figures and tables.
In terms of the effect of perceived usefulness of e-banking on the adoption of e-banking
facility; the results showed that the relationship between e-banking adoption and
perceived usefulness as measured by time-saving, cost savings and convenience were
statically significant.
Regarding the effect of perceived ease of use of e-banking facility on adoption of e-
banking, the results indicated that there was a statistically significant correlation between
e-banking and ease of task accomplishment, ease of log-in and ease of adaptation to e-
banking products.
Findings on the effect of perceived risks on adoption of e-banking showed a statistically
significant inverse relationship between e-banking adoption and aspects of e-banking
risks such as incorrect payment processing, risk of lack of compensation in case of loss,
inconveniences due to payment errors, fear of giving personal information online, fear of
hackers and fear of disclosing individual’s PIN.
The study concluded that perceived time savings and perceived cost-savings directly
influenced adoption of e-banking. Aspects of perceived ease of use that affected adoption
of e-banking were ease of task accomplishment and ease of log-in. Perceived risk was the
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most important factor affecting adoption of e-banking as many aspects of perceived risks
were associated with the low adoption of most aspects of e-banking services.
The study recommended that banks should leverage on the numerous benefits that come
with the technological innovation of e-banking platform. Banks should demystify e-
banking services by increasing e-banking literacy through training and making public e-
banking literature. Banks should work to increase confidence of potential e-banking
adopters by positioning e-banking platform as a secure and safe means of satisfying their
banking needs. Future studies should focus on specific e-banking services such as internet
banking, PC banking and credit-card technology in order to establish the reasons for their
relatively low adoption rate and how they could collectively add value to the bank’s
portfolio of services.
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ACKNOWLEDGEMENT
I wish to acknowledge the assistance that my lecturer Dr Peter Kiriri gave me and the
encouragement that my fellow students accorded me during the entire period that I was
writing this project.
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DEDICATION
I dedicate this work to my dear wife Margaret, daughter, Joan and son, Alex for their
perseverance that they showed when I took long hours away from them and for the
encouragement that they gave me as I completed the work. Similarly, I also dedicate the
project to my late Mother, Joanina Njeri.
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TABLE OF CONTENT
DECLARATION................................................................................................................ ii
COPYRIGHT ....................................................................................................................iii
ABSTRACT ....................................................................................................................... iv
ACKNOWLEDGEMENT ................................................................................................ vi
DEDICATION.................................................................................................................. vii
TABLE OF CONTENTS ...............................................................................................viii
LIST OF ABBREVIATIONS ........................................................................................... x
LIST OF TABLES ............................................................................................................ xi
LIST OF FIGURES ......................................................................................................... xii
CHAPTER ONE ................................................................................................................ 1
1.0 INTRODUCTION................................................................................................... 1
1.1 Background of the Problem ...................................................................................... 1
1.2 Statement of the Problem .......................................................................................... 5
1.3 General Objective ..................................................................................................... 6
1.4 Specific Objectives ................................................................................................... 6
1.5 Importance of the Study ............................................................................................ 6
1.6 Scope of the Study .................................................................................................... 7
1.7 Definitions of Terms ................................................................................................. 8
1.8 Chapter Summary ..................................................................................................... 9
CHAPTER TWO ............................................................................................................. 10
2.0 LITERATURE REVIEW .................................................................................... 10
2.1 Introduction ............................................................................................................. 10
2.2 The Effect of Perceived Usefulness of E-banking on adoption of E-banking ........ 10
2.3 The Effect of Perceived Ease of Use of E-banking on Adoption of E-banking ..... 16
2.4 The Effect of Perceived Risks on Adoption of E-banking ..................................... 21
2.5 Chapter Summary ................................................................................................... 27
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CHAPTER THREE ......................................................................................................... 28
3.0 RESEARCH METHODOLOGY ........................................................................ 28
3.1 Introduction ............................................................................................................. 28
3.2 Research Design...................................................................................................... 28
3.3 Population and Sampling Design ............................................................................ 28
3.4 Data Collection Methods ........................................................................................ 29
3.5 Research Procedures ............................................................................................... 30
3.6 Data Analysis Methods ........................................................................................... 30
3.7 Chapter Summary ................................................................................................... 31
CHAPTER FOUR ............................................................................................................ 32
4.0 RESULTS AND FINDINGS ................................................................................ 32
4.1 Introduction ............................................................................................................. 32
4.2 General Information ................................................................................................ 32
4.3 The Effect of Perceived Usefulness on the adoption of E-banking ........................ 37
4.4 The Effect of Perceived Ease of Use on the adoption of E-banking ...................... 44
4.5 The Effect of Perceived Risks on the adoption of E-banking ................................. 48
4.6 Chapter Summary ................................................................................................... 53
CHAPTER FIVE ............................................................................................................. 54
5.0 DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS ................. 54
5.1 Introduction ............................................................................................................. 54
5.2 Summary ................................................................................................................. 54
5.3 Discussions ............................................................................................................. 55
5.4 Conclusion .............................................................................................................. 60
5.5 Recommendations ................................................................................................... 61
REFERENCES ................................................................................................................. 63
APPENDICES .................................................................................................................. 69
APPENDIX 1: LETTER OF INTRODUCTION .............................................................. 69
APPENDIX 2: RESEARCH INSTRUMENT ................................................................... 70
APPENDIX 3: POPULATION & SAMPLE OF FIRMS IN ONLINE DIRECTORY..... 74
x
LIST OF ABBREVIATIONS
ATM - Automatic Teller Machine
B2B - Business to Business
CBD - Central Business District
CBK - Central Bank of Kenya
CCK - Communication Commission of Kenya
CCTV - Closed Circuit Television
EFT - Electronic Funds Transfer
IB - Internet Banking
ICT - Information and Communication Technology
KBA - Kenya Bankers Association
POS - Point of Sale
SPSS - Statistical Package for the Social Sciences
TAM - Technology Acceptance Model
WWW - World Wide Web
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LIST OF TABLES
Table 4.1: Response Rate ................................................................................................... 32
Table 4.2: Distribution of Respondents by Gender ........................................................... 33
Table 4.3: Distribution of Respondents by Age Group ..................................................... 33
Table 4.4: Distribution of Respondents by Level of Education ......................................... 34
Table 4.5: Frequency of E-Banking Use............................................................................ 35
Table 4.6: Respondents’ Satisfaction Rating of E-Banking Services offered by Bank ..... 37
Table 4.7: Correlation between Perceived Usefulness and E-Banking Adoption ............. 38
Table 4.8: Effect of E-Banking on Time Saving ............................................................... 39
Table 4.9: Effect of E-Banking on Transaction Cost ......................................................... 39
Table 4.10: Effect of E-Banking on Convenience ............................................................. 40
Table 4.10: Effect of E-Banking on Convenience ............................................................. 40
Table 4.11: Effect of E-Banking on Service Reliability .................................................... 41
Table 4.12: Effect of E-Banking on Personal Contact with Teller .................................... 41
Table 4.13: Effect of E-Banking on Access to Bank Products .......................................... 42
Table 4.14: Effect of E-Banking on Customer Preference of Online Payment ................. 42
Table 4.15: Effect of E-Banking on New Software Acquisition ....................................... 43
Table 4.16: Effect of E-Banking on New Phone Acquisition ............................................ 43
Table 4.17: Effect of E-Banking on Modification of Existing Software ........................... 44
Table 4.18: Correlation between Perceived Ease of Use and E-Banking Adoption .......... 45
Table 4.19: Effect of Ease of Registration on E-Banking ................................................. 46
Table 4.20: Effect of Ease of Log in on E-Banking .......................................................... 46
Table 4.21: Effect of Ease of Use of Additional E-Banking Products .............................. 47
Table 4.22: Effect of E-Banking on Training .................................................................... 47
Table 4.23: Effect of E-Banking on Training .................................................................... 48
Table 4.24: Correlation between Perceived Risk and E-banking Adoption ...................... 49
Table 4.25: Effect of Internet Speed on E-Banking ........................................................... 50
Table 4.26: Effect of Processing Accuracy on E-Banking ................................................ 50
Table 4.27: Effect of Perceived Risks of Errors during Money Transfer .......................... 51
Table 4.28: Effect of Perceived Chances of Compensation when Error Occurs ............... 51
Table 4.29: Effect of Perceived Safety of E-banking on Adoption ................................... 52
Table 4.30: Effect of Perceived Risk of Hacking on Adoption of e-Banking ................... 52
Table 4.31: Effect of Perceived Fear of Thieves on Adoption of e-Banking .................... 53
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LIST OF FIGURES
Figure 2.1: Technology Acceptance Model ...................................................................... 17
Figure 2.2: Theoretical Framework for the Determinants of Perceived Ease of Use ....... 18
Figure 2.3 Theoretical Models of the Determinants of Perceived Ease of Use ................. 19
Figure 4.1: E-banking Services offered by Bank ............................................................... 34
Figure 4.2: E-Banking Services Utilized by the Respondent ............................................ 35
Figure 4.3: Purpose of E-Banking Use .............................................................................. 36
Figure 4.4: Purpose of E-Banking Use .............................................................................. 37
1
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Problem
Technological innovation is defined as the use of new knowledge or process to offer a
new product or service that customers want (Wheelan and David, 2004). Technological
innovation dates back to when human beings invented tools and techniques to assist or
facilitate them in execution of routine activities. The background knowledge enabled
them to create new tools to assist them to perform duties, for example implements for
tilling farmland, pots to assist in cooking, cars for travel to places that were far apart or
dhows and air planes to help them probe the universe in more details than their natural
senses could allow (Schumpter, 2007). Though rudimentary in the initial stages,
innovation has been improved overtime to enable creation of more sophisticated tools to
perform the same routine activities, albeit with more precision and efficiency (Pavitt,
2005). Technology has been viewed as a major force for economic growth and as a way
of everyday life as it changes a society’s mindset on trade (Graham and Woo, 2009).
The innovation of coins (money) as a means of exchange of value during a trade
transaction came in to facilitate and settle value-measurement-related disputes amongst
traders. The whole process of buying and selling of products and services was henceforth
measured in monetary value (Schumpter, 2007). Trade between two people or two firms,
who are geographically apart, has necessitated the invention of avenues for
communication, mode of transferring the goods, creation of ways of settlement of debts,
offering after sales service, establishment of legal contractual deeds of performance and
generally maintaining amicable business relationship (Palmer and Kaplan, 2007). This
process has led to the development of an integrated concept known as electronic
commerce (e-commerce) which encompasses entire use of internet and other computer
systems to facilitate exchange of goods and services between producers and consumers
who could be closer or geographically far apart from one another (Palmer and Kaplan,
2007).
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E-commerce involves the use of online process to develop, market, sell, deliver, service
and pay for products and services. E-commerce has tremendously evolved overtime from
when a computer system’s use was for record keeping and automation, to business to
business (B2B) trade processing. B2B is a branch of e-commerce that involves trade
between two or more business firms. A large percentage of e-commerce today is
conducted entirely in electronic form (Palmer and Kaplan, 2007). Electronic commerce is
now held to bring new commercial revolution by offering a cost effective way of
exchange of information when buying or selling products and services. This revolution
has resulted in banks setting a provision of a payment system that is compatible with the
demands of the electronic market place (Senft, Gallegos and Davis, 2012).
Innovations in Information and Communication Technology (ICT) has enabled the
seamless processing of banking transactions and has been credited with helping to fuel
strong growth in many economies (Lee, 2009). In the banking industry, electronic
banking (e-banking) has emerged as a distinct branch of e-commerce specializing on
transaction specifically related to the day to day business of banks. Banking is traced back
to 1694 with the establishment of Bank of England. It was established by money lenders
whose aim was to lend and charge an interest (Bank of England, 2014).
The concept of banking was introduced in Kenya in 1896 with the establishment of
National Bank of India. Other banks such as Standard Chartered Bank in 1911, Kenya
Commercial Bank in 1958, Co-operative Bank of Kenya in 1965, among others, have
since been established in Kenya (Ombati, Magutu, Nyamwange and Nyaoga, 2010). The
banking industry in Kenya is governed by the Companies Act, the Banking Act, the
Central Bank of Kenya (CBK) Act and various prudential guidelines issued by the
Central Bank of Kenya (Central Bank of Kenya, 2012). The banking industry is
essentially a service industry, which provides various types of banking and allied services
to its clients. The banking sector has set guidelines for self-regulation through the banks
umbrella body, Kenya Bankers Association (KBA), which serves as a forum for
addressing the issues affecting its members and similarly to lobby for their interests.
3
Bankers are interested in their customers’ behavior in adopting internet banking.
According to Ndubisi and Sinti (2006), “individuals have already established personal
banking norms, lifestyle, finance management systems, and account monitoring
mechanisms prior to the advent of internet banking”. In this regard therefore, the
customers’ acceptance or rejection of the e-banking rely on whether the technology
affords them greater value (Ndubisi and Sinti, 2006). The concept of internet banking
evolved due to the emergence of global World Wide Web (WWW) facility. Creative
programmers developed a software to enhance ideas of online banking transactions and
the concept of online shopping was born. However, adoption of these services depended
on customers’ perceived benefits and compatibility with existing technology and
organizational norms in making the adoption decision (Beatty, Shim and Jones, 2001).
The Kenyan financial services industry operate in a challenging environment that has
made banks to develop various innovative service delivery channels aimed at attracting
and retaining customers, improving their perceptions and encouraging loyalty (Ombati et
al., 2010). The recent developments in the ICT platform have forced the banks to invest in
innovative e-banking to provide customers with value-adding experiences and a reliably
efficient interactive flow of information (Ombati et al., 2010).
E-banking refers to the process of performing banking transactions through electronic
means without necessarily visiting a physical bank (Al-Hajri, 2008). It is also defined as
the use of electronic means to deliver banking services, mainly through internet. E-
banking is a branch of e-business in the banking industry that involves use of ICT in
offering banking services, where the latter are delivered by way of a computer-controlled
environment. E-banking enables the user to perform banking transactions through the
internet facility (Lee, 2009). Furthermore, new off-the-shelf electronic services for
example online retail banking, Automated Teller machines (ATM’s), Electronic Funds
Transfers (EFT), e-bills, e-payments, amongst others have made it possible for banks to
take advantage of new technologies, albeit with heavy capital outlay (Senft et al., 2012).
E-banking enables the industry to facilitate efficient recording, tracking and monitoring of
customer deposits, payment schedules, loan portfolio amongst other benefits.
4
According to a study done in Hong Kong, internet banking was observed to offer an
opportunity to foster banking services thereby enhancing their competitiveness (Lam and
Burton, 2005). The researchers further observed that e-banking platform reduces costs,
enhances a bank’s cooperate image whilst meeting the demands of its customers through
setting up more distribution channnels.
Online banking services are offered on a technology-intensive platform called the
Technology Acceptance Model (TAM) (Chuttur, 2009). According to Davis (2003),
TAM specifies the causal relationships between system design features, perceived
usefulness, perceived ease of use, attitude towards using and actual usage behavoir”.
TAM provides an informative mechanism that enables design choices that influences user
acceptance and is helpful in evaluating the user acceptance of information technology.
The adoption of e-banking in Kenya, therefore, follows the above model. Consumers are
perceived to be positive on technology-based services as they believe that they are fast
and more efficient compared to services offered by a bank teller in a physical bank
(Ammi, 2013). Both reliability and user friendliness are essential in evaluating the
technology-based services. The attributes of innovation that affect the rate of adoption are
the relative advantage, compatibility, complexity, divisibility and communicability
(Rogers, 2003). Other characteristics that were later added to the above attributes were
perceived risk and financial and social costs (Zeithaml, 2000).
As at the end of December 2011, Kenya had 43 registered commercial banks and 1
mortgage finance company with all of them offering varied levels of technology-enabled
online services (CBK, 2012). According to a World Bank report in 2010, there were 6.67
ATMs per 100,000 people (Financial Sector Deepening Kenya, 2012). Empirical studies
have been done to help to understand both the adoption and effects of online banking in
various countries. Al-Hajri (2008) looked at various factors that determine the
adoptability of a certain technology in the banking industry in Oman, a developing
country, whilst comparing it with Australia. According to Al-Hajri, (2008), factors such
as organizational performance customer-bank relationship management and ease of use of
the e-banking facility are some of the indicators that tend to influence the adoption of the
technology. Similar studies have been done in other countries including Taiwan (Lee,
2009), Oman (Al-Hajri, 2008), Hong Kong (Yiu, Grant and Edgar, 2007), Pakistan
5
(Omar, Sultan, Zama, Bibi, Wajid and Khan, 2011). A similar study by Barako and
Gatere (2008) was done in Kenya to attempt to understand the level of ICT in Kenyan
banks vis-a-vis outsourcing. It was revealed that internet availability, awareness, attitude
towards change, access to internet and associated costs, trust in one’s bank, security
concern and ease and convenience were major factors affecting the adoption of internet
technology (Barako and Gatere, 2008).
Since the banking sector and more specifically the field of e-banking is an attractive and
rich research area (Ndubisi and Sinti, 2006; Sachan and Ali., 2006, Shan and Hua, 2006),
previous research projects have concentrated mainly on the impacts of adoption of
information technology or internet with limited empirical study to capture the nature and
essence of the technological adoption of e-banking in Kenya’s domestic market. This
study, therefore, shall focus on the environment of customers in the Kenyan domestic
market to determine the customers’ adoption of technological innovation of e-banking.
1.2 Statement of the Problem
Banks continue to invest heavily in the (ICT), a sector that is growing rapidly, posing
them with a challenge of constantly reviewing, enhancing or introducing new
technologies into the discerning market (Chuttur, 2009). Customers use several criteria in
adopting the e-banking services. Many banks tend to focus on customers’ expectations on
quality service whilst avoiding to address the important aspect of their usage and
accessibility. Specific areas that may influence the adoption of e-banking might include
knowledge and understanding of the new e-banking facility, required investment in a
compatible system, associated risks in using the e-banking, lack of documentary evidence
and loss of personal touch (Ombati et al., 2010). Studies on adoption of e-banking have
been done in other countries including Taiwan (Lee, 2009), Oman (Al-Hajri, 2008), Hong
Kong (Yiu et al., 2007) and Pakistan (Omar et al., 2011).
Njuguna, Ritho, Olweny and Wanderi (2012) undertook a study on internet banking
adoption in Kenya using the case of Nairobi County. Their results showed that internet
banking in Kenya was very low as only 24.82% of respondents in the study used internet
banking services. Despite this low uptake of internet banking services, few studies have
6
been done in Kenya to investigate the challenges that the Kenyan customers face in
adopting the e-banking facility, accessing the e-banking services, the accompanying
benefits, if any, and changes in service delivery and quality that the e-banking services
offer (Chuttur, 2009). Until the launch of the new technology is done, the banks’
management has neither the prior knowledge of the acceptability nor the customers’
response to anticipated change by its investment in ICT (King and He, 2006). A study
done by Gikandi and Bloor (2009) concentrated on the banks’ perspective to the adoption
and effectiveness of e-banking in Kenya and recommended that further research be done
on the customers’ perspective regarding e-banking. This is the reason that prompted this
study to determine the factors that affect the adoption of technological innovation in e-
banking in the study area.
1.3 General Objective
The general objective of the study was to determine the factors affecting the adoption of
technological innovation of e-banking in Kenya.
1.4 Specific Objectives
1.4.1 To determine the effect of perceived usefulness of e-banking on the adoption of e-
banking facility
1.4.2 To determine the effect of perceived ease of use of e-banking facility on adoption
of e-banking.
1.4.3 To determine the effect of perceived risks on adoption of e-banking.
1.5 Importance of the Study
1.5.1 Bank Customers
The research determines the perceived benefits to customers and the relative advantages
while using e-banking as opposed to the traditional visit to the brick and mortar
institution. The various e-banking services and their benefits and challenges have been
highlighted. This would allow the customers to make an informed decision while
choosing a preferred service delivery channel.
7
1.5.2 Management of Banking Institutions
The study attempts to bring out specific needs of customers. It was envisaged that it
would enhance the managers’ understanding thereby enable them to have an outside-in
approach in future e-banking investments, in development of both the software and
hardware, including developing tailor made products that aim to build long term customer
relationships and loyalty.
1.5.3 Software and Hardware Developers in the ICT field
The study would enable software manufacturers to understand the customers’ perceived
challenges, limitations and benefits derived from the use of the software. This would
enable the developers to modify and innovate on their products to address both the banks
and their customers’ needs accordingly.
1.5.4 Central Bank of Kenya
As the regulatory body, the Central Bank of Kenya (CBK) has been mandated with the
supervisory role of the commercial banks in Kenya. The study would therefore assist it to
make relevant policies that aim to promote and enhance the perceived benefits of
investments in e-banking to both banks and their customers.
1.5.5 Academicians and scholars
Besides generating a deeper understanding on the study area, the study gives
recommendations which would inform scholars on the gaps for further research. It forms
a rich pool for mining data and information that might be relevant to scholars and
academicians.
1.6 Scope of the Study
The study was conducted within Nairobi County and involved customers who held bank
accounts maintained by banks which have invested in technological innovation to
enhance access of e-banking services. It was conducted between May and August 2012.
8
The study was limited to a representative sample of customers who use the e-banking
facility, and therefore, its conclusions and recommendations are only indicative of the
technology adoption of the whole customer base in Kenya.
1.7 Definitions of Terms
1.7.1 E-Banking
E-banking is an umbrella term denoting the process that enable a customer to access or
perform various banking services and transactions, respectively, via an internet platform.
The services include account balance inquiry, online bill payments, withdrawing funds
from an ATM, money transfer, among many others (Barako and Gatere, 2008).
1.7.2 Perceived benefit of using e-banking
This is the probability that e-banking shall improve the delivery of banking services
compared to the existing method. According to TAM, perceived usefulness is a degree of
confidence that a potential user places on a new system to enhance job execution (Davis,
2003). Alternatively, this can be said to be the consumer’s perception that applying the
new technology shall improve task performance (Chuttur, 2009).
1.7.3 Perceived ease of use of e-banking
This is the perception that the new technology is easy to understand and operate (Rogers,
2003). Customers do not expect difficulties while applying the new technology since they
have a perception that e-banking shall provide better attributes as it is an improvement of
the existing system.
1.7.4 Compatibility
This denotes the suitability of the new system to be integrated into an existing one
without necessarily incurring capital investments or hefty additional training to staff. It
can also refer to the adoptability of the new technology being determined or influenced by
past experiences, attitudes and values of the potential consumers (Rogers, 2003).
9
1.7.5 Technology
Technology is the use of new methods, tools, process or techniques to solve a specific
problem or perform a specific task (Wheelan and David, 2004).
1.7.6 Innovation
Innovation can be defined as the application of engineering or scientific knowledge, new
methods or new processes to facilitate both effective and efficient production of goods
and services (Yiu et al. 2007). It can also be defined as the use of new knowledge or
process to offer a new product or service that customers want. Innovation in e-banking
therefore, is the introduction of new banking services that can be accessed through the
internet (Ndubisi and Sinti, 2006).
1.7.7 Technology Acceptance Model (TAM)
The TAM is an information system that models the way users adopt and use new
technology (Davis, 2003). It advances that some factors influence users’ decision
particularly on how and when to use a new software package. TAM provides an
explanation of the determinants of computer acceptance (Rogers, 2003).
1.8 Chapter Summary
The chapter provides a background of the study which is on factors that determine the
adoption of the technological innovation of e-banking in Kenya, and has also developed
the problem statement. The general objective and specific objectives have been outlined
together with the scope of the study which was limited to a representative sample of
banking customers within Nairobi County. Lastly, the chapter has provided definition of
key terms that were used in the study for ease of understanding. The next chapter reviews
literature pertinent to the study while chapter three details the blue print for the collection
and analysis of data.
10
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
The chapter looks at what other researchers have done in the field of e-banking,
specifically laying emphasis on the perceived benefits of e-banking to a customer,
perceived ease of use, compatibility of e-banking facility with customers’ existing
systems and the perceived risks that may hinder usage or adoption of e-banking. It
borrows heavily from past similar studies that have been done in various countries in the
recent past. The chapter ends with a summary of the discussions and a brief introduction
of the next chapter.
2.2 The Effect of Perceived Usefulness of E-banking on adoption of E-banking
A benefit can be defined as a positive change that derives some utility (Lee, 2009).
Benefits are quantifiable and measurable improvements with a tangible value that can be
expressed in terms of monetary or other resource. E-banking widens the scope of
business. In order for customers to enjoy e-banking facilities, it is imperative that the
banks should have an efficient ICT infrastructure and internet facility in place (Oye,
Shakil, and Iahad, 2011). In a study that was done in Thailand in the year 2008 the
internet users were 13.4 Million which represented a growth rate of 483% during the
period 2000-2008 (Prompattanapakdee, 2009). This showed that there was a huge
opportunity to enhance the adoption of IB services in Thailand. Since the uptake of the IB
services by the Thailand population was encouraging, these statistics silently demanded
that the banks grab the opportunity and invest in innovative products associated with IB.
Perceived value is noted as a motivator for engaging e-banking to facilitate transactions
that would be offered albeit at a slower rate at a brick and mortar establishment (Forsythe,
Liu, Shannon and Gardner, 2006). In the study by Prompattanapakdee (2009), it was
found that the Bank of Thailand, being the regulator in the banking industry, encouraged
the investment in ICT infrastructure by providing financial platforms, frameworks and
incentives that would serve the needs of all players in an attempt to harness the
11
advantages provided by the adoption of IB. In this respect, most commercial banks
invested heavily and launched corporate websites to attract the use of internet as a new
distribution channel for their services.
According to Gikandi and Bloor (2009), between 2005 – 2009, there was a huge shift on
the importance that was attached to the drivers of e-banking in Kenya. In the survey
conducted in Kenya in the year 2005, 70% of the retail banks considered ebanking as an
essential channel for their business. New products and services would hence be based on
an ebanking platform (Gikandi and Bloor, 2009). In their follow up survey carried out in
year 2009, Gikandi and Boor, observed that banks rated e-banking at 100% to drive their
banking business. E-banking has brought in a new era where the banking industry
explores new areas of growth and development that enhances business operations.
Ombati et al. (2010) established that the use of online banking in Pakistani for instance,
though slow, has opened doors for other players, including dealers in computer hardware
and software developers, to apply their entrepreneurial skills and expertise while
competing in quality service delivery . The study revealed that although there were many
bottlenecks in the uptake of ebanking, the difussion had taken place ultimately, where
issues like safety, lack of trust and security of ATMs being overidden by the many
benefits that started to creep in, including reduction in operational cost, savings on time,
reliability and convenience.
2.2.1 Reduction in Operational Costs
The use of e-banking reduces the costs of accessing banking services to the customers
(Baten and Kamil, 2010). The use of the various e-banking products including electronic
Funds transfer (EFT), Automated Teller Machines (ATM), e-bills and e-payments which
enable both the bank and customers to save on the transaction costs that would be
encountered if the traditional banking channel was used (Oye et al., 2011). Savings on
paperwork, printing of documents, queuing time, consultations time with tellers, savings
on costs pertaining to visits to physical banks amongst others would be some of the
benefits that e-banking would deliver to both customers and the bank (Baten and Kamil,
2010).
12
Al-Hajri (2008) also adds that with the use of e-banking, the administrative work and
associated costs including expenditures on paper slips, pre-printed standard forms and
other bank stationery is greatly reduced, in effect raising the profit margin. Electronic
banking has a positive financial impact, as traditional account maintenance fees are not
charged highly, electronic bill payment saves mailing costs, customers travel less to their
physical bank than before and are able check their bank account balances and print
statements online.
2.2.2 Saving on Time
According to Forsythe et al. (2006), the most important aspect of adopting e-banking, in
the customers perspective, is the time saved. E-banking enables the bank to provide its
services at the press of a button. The automation of banking services and user-friendly
tools for managing the customers funds give the latter increased comfort in time
management. Since the customer can access e-banking services at his convinient time,
mostly 24 hours a day, then he is able to schedule and utilize his time without
unnecessary travels to a physical bank (Shan and Hua, 2006) . To the bank’s perpective,
the time saved when the customer does not physically engage a teller is utilized through
scheduling the tellers time to other tasks. A customer can use mobile banking to send or
receive money instantly, transfer money to another country at a touch of a button and at
the comfort of his or her sitting room (Baten and Kamil, 2010).
2.2.3 Reliability
The aspect of reliability is essential in creating trust and a considerable level of comfort
with a new system, product or service. In a study by Omar et al. (2011), it was observed
that the banks should improve the services offered at various ATMs to establish their
customer’s confidence and reliability. When customers perceive the service to be reliable
then they develop mental models of reuse and repurchase. This establishes a relationship
with the bank that is of mutual benefit to both the customer and the bank, since the former
derive their intention to adopt e-banking services from the beneficial outcomes that the
bank offers (Safeena et al., 2011).
13
A customer who visits an ATM and finds it working for the umpteenth time is able to
relate favorably with the bank and the two create a long lasting relationship. Since the
system is expensive to install in terms of hardware and infrastructure then it is imperative
that the accompanying software must be user friendly to enable the customers to actually
apply them (Jahangir and Begum, 2008). The absence of internet interruptions in e-
banking service delivery enables the customer to adopt the facility. Customers have
adopted M-Pesa, an innovative mobile banking system operated by Safaricom, due to its
safety features, reduced costs, is fast and reliable as opposed to the predecessor services
that the bank offered (Jack and Suri, 2010).
In the same context, Real Time Gross Settlement (RTGS) has come to be more reliable
than normal EFT in terms of speed and additional safety on the amounts involved (CBK,
2012). For example, though partially a regulatory measure by CBK, the RTGS platform
enables customers to transfer amounts in excess of Kshs 1 million real time within Kenya.
2.2.4 Convenience
The aspect of convenience comes with the quality of having the properties that are
available when the need arises. According to a study done in Singapore by Gerrard and
Cunningham, (2003), there is a positive correlation between convenience and e-banking.
The study observed that the prime benefit of e-banking is cost saving and convenience to
banks and customers, respectively. Kaleem and Ahmad (2008) did an empirical study on
the bankers’ perception of electronic banking in Pakistan and made an important
observation that ebanking saved on time and created convenience. Kaleem and Ahmad
further observed that employees of private banks felt that time saving reduced
inconvenience whereas their compatriots in public banks gave more emphasis to reduced
transaction costs. A facility that offers round the clock services creates conveniences to
customers in terms of accessibility, availability, timeliness and offers the customer an
opportunity to obtain the services at his own time and place (Kaleem and Ahmad, 2008).
An ATM offers 24 hour service allowing customers convenience in meeting their cash
needs at their own pleasure. It is a round the clock service enabling the customer to
14
withdraw cash up to a certain limit either during the day or night (CBK, 2012). ATMs
provide convenience to the customers. Nowadays, ATMs and M-Pesa kiosks are located
at convenient places, such as, at the air ports, railway stations, among others and not
necessarily at the bank's premises. It is to be noted that ATMs are installed off-site (away
from bank premises) as well as on site (installed within bank's premises) (Kaleem and
Ahmad, 2008). ATMs and M-Pesa provide mobility in banking services for withdrawal
hitherto reducing workload of the bank staff by minimizing queues in the bank hall. The
service is seamless since there are no human errors as would be found in a traditional
banking hall (Barako and Gatere, 2008). ATMs and M-Pesa facilities’ convenience is of
special essence to travellers as they do not have to hoard cash during long haul journeys.
It provides safety of travellers’ cash as the latter can withdraw cash at their destinations
across towns, countries or continents and similarly enabling them to obtain cash in the
host country’s currency, while globetrotting (Boon and Yu, 2003).
2.2.5 Compatibility
Compatibility which refers to how well a technology fits with an individual's working and
lifestyle, values and needs, is an essential dimension while assessing the technological
adoption process (Gerrard and Cunningham, 2003). In a report by King and He (2006),
the Innovation Diffusion Theory states that the new technological innovation is most
likely to be adopted if it is compatible with the customer’s requirements, including task
execution, expected performance levels and value system. To create a competitive
advantage, the innovation should have utility in the eyes of the consumer. Individual and
corporate customers base their technology adoption decision on the specific performance
levels and objectives, available technological alternatives in relation to the set goals and
associated costs (Sieber and Valor, 2008); the total cost of acquiring ownership of new
innovation, the technology attributes (features, functionality, hardware configuration and
system characteristics) and lock-in costs may have an influence on the intention to adopt
the new system (Sieber and Valor, 2008). In this respect, the system needs to be
compatible with the bank policies and technological infrastructure.
Since e-banking is viewed as a fast, convenient, secure and reliable delivery channel,
which is similarly compatible with the demands of the customers, then its adoption is
directly related with the compatibility of the customers’ system (Suki, 2010). In a survey
15
conducted in Kenya by Gikandi and Bloor (2009), it was observed that once a service
provider overcame the consumers’ security and privacy concens, then the latter would
easily view the new innovation as compatible with their beliefs.
Other factors that directly contibute to consumers’ perception of compatibility include the
consistency with existing values, past experiences and future needs (Suki, 2010; Davis,
2003; Palmer and Kaplan, 2007). According to Rogers (2003), compatibility is a factor
bearing conscious influence and is pegged to customer’s prefered work style, existing
work practices, prior experiences and value system. The perceived compatibility of a
new technological innovation with existing systems could be viewed from a perspective
of the complexities of systems software or hardware. The functionality of each of these is
essential in making the final decision whether to adopt the innovation or not (Suki,
2010).
Software compatibility involves an examination of the current system vis-a-vis the
innovation. If the software features are not much different, then its adoption may take
place much faster as opposed to when the latter has complexities, which might require
additional training. The programming language, instructions, speed and ease of decoding
are all factors that influence the adoption of new e-banking software (Ombati et al.,
2010). The investment cost of the new software, its flexibility to include some tailor made
features or necessary modifications to suit customer-specific needs are paramount. The
brand switching costs should be minimal to guard against the effects of post purchase
dissonance (Suki, 2010; Sachan and Ali, 2006). The e-banking software should be user
friendly, secure and reliable to enhance its compatibility with customer requirements and
hence its adoptability (Gikandi and Bloor, 2009).
Ombati et al. (2010) explain that the software should also be compatible with a
consumer’s work ethics and practices in terms of flexibility of use and privacy. Consumer
should be able to use the software any time they need to, irrespective of the time of the
day. E-banking software that requires a customer to access certain information during
specific periods of time may hinder the customer to adopt it due to its inflexibility. The
software should be designed with flexibilities such as to allow customers to make changes
during a transaction. If a customer keys in wrong figures while withdrawing cash from an
ATM, the software should enable him or her to go a step back and make corrections. The
16
software should pass the government and regulatory approval. The M-Pesa software,
though leaning towards being stand alone software while compared to the mainstream
banking softwares, is harmonized with the Communications Commision of Kenya (CCK)
regulations. This allows it to gain trust from of customers and therefore enjoy easy
penetration into the market (Jack and Suri, 2010).
The new e-banking systems should be able to utilize the existing hardware. Customers
would find it difficult to adopt a new e-banking system that require (or force) them to
make heavy investments in requisite hardware (Ombati et al., 2010). A new technology
that may require new printers, card readers, an overhaul of the Point of sale (POS) setup,
complete laying of new cables may find resistance at its adoption stage. Both the software
and hardware should be compatible with existing laid infrastructure networks (Jack and
Suri, 2010).
2.3 The Effect of Perceived Ease of Use of E-banking on Adoption of E-banking
Perceived ease of use refers to the extent to which a user is confident that using a system
would not call for additional effort (Klun, Decman and Jukic, 2011). On the other hand,
perceived usefulness entails the understanding that using a particular system shall
facilitate and enhance a task execution (Riyadh, Akter and Islam, 2009). The Innovation
Diffusion Theory which, acording to Rogers (2003), has been cited by many researchers
mentions that the determinants of behavioral intention are relative advantages of that
particular innovation, its compatibility with existing systems, complexity and trialability
(Riyadh et al., 2009). According to TAM, perceived usefulness is a degree of confidence
that a potential user places on a new system to enhance job execution (Davis, 2003).
Alternatively, this can be said to be the consumer’s perception that applying the new
technology shall improve task performance (Chuttur, 2009).
17
Figure 2.1: Technology Acceptance Model
Source: Davis (2003).
Yiu et al. (2007) point out that TAM provides an economical approach when seeking to
examine and make sense of the factors that lead and cause users to accept certain
technologies and not others. TAM attempts to show the motivating factors that influence
a user to accept e-banking and according to Bertrand and Bouchard (2008), the perceived
usefulness and perceived ease of use ranks high.
Chong et al. (2010), in a study done in Vietnam, advanced that perceived usefulness, trust
and government infrastructure were positively associated with the intention to access
ebanking. However the perceived ease of use was not as significant as the rest of the
factors in determining the adoption of e-banking as advanced in TAM (Omar et al.,
2011). In a different study done in Pakistan by Kaleem and Ahmad (2008) to establish the
bankers perspective on the perceived ease of use in relation to determining the adoption
of e-banking, it was observed that customers attitude and orientation towards
convenience, knowledge about computing and internet affected the usage of different
channels offered in the e-banking platform.
Perceived usefulness is anchored on the general beliefs about computers and the
customers actual computer usage (Venkatesh, 2000). In a study done in Hong Kong, Yiu
et al. (2007) observed that external variables including personal characteristics, attitudes,
a person’s cultural orientation and past experiences affected the adoption of e-banking.
As a customer continues to interact with the e-banking facility, then prior negative beliefs
that hindered the use of the system are slowly forgotten as the learning effect takes place
18
and the customer adjusts their mental models to reflect the change (Safeena et al., 2011).
The figure 2.2 below, as adopted from a previous study by Prompattanapakdee (2009),
illustrates the relationship of the above mentioned variables. The perceived usefulnes and
perceived ease of use are viewed as behavioral determinants that influence the customers
intention to use e-banking and affects the overall adoption of e-banking in Hong Kong
(Yiu et al., 2007). The figure suggests that perceived ease of use is anchored on the
general beliefs about computers and computer usage as well as beliefs that are shaped
based on direct experience with the target system. This relationship itself is affected by
the user’s general experience. Internet experience according to Brown, et al. (2004)
showed a greater influence on adoption in Singapore than South Africa. As well, Black et
al. (2001) conclude that past experiences and the values of consumers in the British
context appear to have a significant impact on their intention to adopt Internet Banking. A
stud by Karjaluoto, et al. (2002) demonstrated that four factors: prior computer
experience, prior technology experience, personal banking experience, and reference
group influence, affect attitude towards online banking as well as online banking usage.
Figure 2.2: A Framework for the Antecedents of Perceived Ease of Use
Source: Prompattanapakdee (2009).
19
Figure 2.3 below as adopted by Venkatesh (2000) denotes that the ease of use is
influenced by among others the customers self-efficacy in computers (that is, customer’s
perception that s/he is able to harness and use technology (Bertrand and Bouchard, 2008),
anxiety to use computers especially for the first time, perceived enjoyment while
accessing the computer system and the perception of external control towards computers,
that is, the knowledge and opportunities required to use a computer (Bertrand and
Bouchard, 2008).
Figure 2.3 Theoretical Models of the Determinants of Perceived Ease of Use
Source: Venkatesh (2000).
20
2.3.1 Ease of Registration
The perceived ease of use can be determined by how easily a customer can register
online. If a customer has difficulty in the initial registration, then most probable s/he may
negate to access the e-banking services in the future (Medyawati et al., 2011). This factor
is also afected by the customers self-efficacy since the ability to utilize the offerings on a
bank’s website would be hindered if the customer’s computing knowledge is limited
(Chuttur, 2009). Similarly difference in the time taken to register manually and the
amount of paperwork required vis-à-vis online registration denotes the perceived ease of
use in the future. Some banks may require customers to fill standard forms during account
opening or when processing a payment.
Jahangir and Begum (2008) recommended that banks should make the e-banking system
easy to use by organizing computer training courses to enhance consumers’ efficacy to
enable them to feel at ease at any level. According to a study by Prompattanapakdee,
(2009) that was done in Thailand, the functionality value of e-banking services and the
associated software and program should be user friendly. This would enable the user to
accomplish the banking services more quickly. Customers derive the continued intention
to use e-banking services from past experiences (Chuttur, 2009). The clarity of
instructions and convenience while accessing e-banking services should be emphasized
(El-Kasheir et al., 2009). Subsequent access procedures should be user friendly in terms
of operating software and reduced internet interruptions (Al-Hajri, 2008).
2.3.2 Perceived Ease of Transaction
Upon initial registration, the subsequent log-in procedures should be easy. Complexity in
accessing the bank website, lengthy log in process including internet delays and password
verification limits the ease of usage (Lee, 2009). The ease of performing a financial
transaction offsite creates some trust with the system. The relative advantage that the
customer gains overtime reflects his attitude towards using the internet banking which
consequently affects the intention to apply the system (Medyawati et al., 2011). The
system should use a clear and simple language to enable the user to decode the
instructions with no ambiguity (El-Kasheir et al., 2009). The computer screen system
21
design and characteristics should enhance customers perception on usability. A touch
screen creates some anxiety in use and allows the user to have computer playfulness
leading to perceived enjoyment (Bertrand and Bouchard, 2008).
2.3.3 Perceived Ease of Funds Transfer
In any internet based payment system, it is imperative that privacy of the customer be
upheld. Customers who transact business need to have a seamless payment system that
has uncompromising security features, offers flexibility, fast and reliable. The
interconnectivity with the clearing house should be fast and reliable (Nor and Pearson,
2007). Most financial institutions and other retail outlets (e.g. supermarkets and other
stores) have laid a payment infrastructure that is linked to a central payment processor for
ease of verifying and transfer of money (Barako and Gatere, 2008). In Kenya, major
banks operate corporate branded ATM terminals. However, a consortium of 18 Small and
Medium banks joined resources and innovated on an on-line ATM network called
Kenswitch, which is a shared network for switching transactions amongst member banks
(CBK, 2012).
The M-pesa facility has enabled customers, especially the low-end, to transfer money
from one mobile phone to another with the recipient obtaining cash from branded kiosks.
This channel has eased the transfer of money traditionally made through the Western
Union money transfer, through Telegraphic order, Money order or EFT modes which
would only be availed in a physical bank. Some commercial banks have an arrangement
with Safaricom (a leading mobile services provider in Kenya) to enable linkage between
them and Safaricom, that enables customers to transfer funds from their bank accounts to
an M-Pesa account (Safaricom, 2012). The Central Bank’s introduction of RTGS facility
enabled the transfer of funds from one bank account to another on real time for corporate
and high-end customers. This service is safe and fast and the beneficiary can access the
funds within seconds.
2.4 The Effect of Perceived Risks on Adoption of E-banking
Suki, (2010) define risk as the probability that a hazard can turn into a disaster. Further,
Suki observed that every business venture has inherent risk either, market, industry or
22
business risks. Investors undertake businesses with the expectation that it will generate
more revenues than expenses, thereby creating wealth. The level of uncertainties that the
business venture predisposes the investor to can be termed as the level of risk (Yiu et al.,
2007). Perceived risks should be measured through understanding a person’s behavior
and risk dimensions including financial risk, social risk, performance risk, psychological
risk, physical risk and convenience risk (Suki, 2010). Suki further observed that the risk is
the expectation of losses in a business venture where the outcome falls short of expected
incomes.
In the context of risks associated with e-banking, recent studies show that adoption of e-
banking comes with added risks that necessitate risk management efforts as mitigating
factors (Gikandi and Bloor, 2009). It is imperative to understand any potential risks that
come in with the adoption and usage of IB. A survey conducted by Central bank of Kenya
in 2005 indicated that some financial institutions have ineffective risk management
frameworks that can mitigate for loss due to fraud (CBK, 2005). Perceived risk is a major
hindrance that may affect adoption of e-banking (Al-Hajri, 2008). Since the adoption of
e-banking poses various risks, the specific risks associated with adoption need to be
investigated. The impersonal nature of IB and the environment that the IB platform is
offered, render it to be susceptible to risks. According to a study done by Internet and
Mobile Association of India (IAMAI), out of 6,365 internet users that were sampled only
35% were found to use internet banking channels in India (Safeena et al., 2011). The
study further indicated that 23% of online users prefered internet banking (IB) as a
channel of choice while 53% prefered to use ATM. This indicates that a majority of the
respondents do not use IB due to the risks that they perceive to be inherent in the banking
industry in India.
In a study done by Medyawati, Christiyanti and Yunanto (2011), it was observed that the
banking customers in Bekasi City, Indonesia prefered a high level of security and
confidentiality on e-banking services for them to feel secure while using the e-banking
facility. The researchers observed that if the safety condition was not met then the
customers would not feel at ease with the e-banking and would most likely shift to other
service channels or banks that would offer lesser risks.
23
Researchers of consumer behavior most often define perceived risk in terms of the
consumer's perceptions of the uncertainty and potential adverse consequences of buying a
product or service (Little and Melanthiou, 2006). Perceived risk arises from the
uncertainty that customers face when they cannot foresee the consequences of their
purchase decisions (Manzano, et al. 2009). For example, owing to the open Internet
technology infrastructure and lack of sufficient laws concerning e-commerce activities,
the trust and trust related-concepts (that is, perceived risk, credibility, image and
reputation) have been integrated with the adoption models to explain internet banking
adoption behaviour (Ozdemir and Trott, 2009).
2.4.1 Risks related to Finance
Risk related to finances also called financial risk refers to the amount of chance that a
targeted investment may not deliver projected revenues. Risk refers to the probability of
loss while exposure is the possibility of loss and hence risk exposure comes due to risks
(Jack and Suri, 2010). Risk and exposure predisposes any individual to loss. When an
individual or a firm has a financial exposure then most likely financial losses shall be
witnessed. Forsythe et al. (2006) perceives risk as to loss of money while in business or
while performing financial transactions online. Any transaction that is performed online
has inherent risks and uncertainities. The transfer of money through M-Pesa has got its
own risk especially if a customer inserts a wrong cell phone number prompting the
system to send money to an unintended customer (Jack and Suri, 2010).
Ozdemir and Trott (2009) conducted a research using a multi-method and phased research
approach was adopted to explain the adoption behaviour. The data were collected in the
commercially developed parts of Istanbul, which are often populated by people who
belong to upper socioeconomic strata and have higher education levels. This research
adopted convenience sampling of Internet users who were aged over 18 and hold a bank
account. The study found out that security concerns played the key role. Perceived
security risk was also the most significant barrier for IB adoption compared to other
banking channels. The study recommended that the banks should initially decrease the
level of perceived risk towards using the service. The initial requirement for this would be
educating the customers regarding the security of IB. They should increase the awareness
24
of the availability and operation of the IB security precautions. This is because the non-
awareness of IB security measures constitutes an important impediment for IB adoption.
In addition, it limits the amount of banking transactions that may be conducted by the
early adopters of IB.
2.4.2 Risk of Fraud
This is a form of financial risk that occurs to unsuspecting banking customers. One of the
drawbacks in the use of ATMs is fraudulent card readers, called skimmers, by fraudsters.
They are placed over the authentic reader to transfer Personal Identification Number
(PIN) and codes to another device through discreetly set cameras which harvest
customers’ password and access codes (Kenswitch, 2010). The thieves later use the PIN
to access and clean unsuspecting customers’ accounts. The loss of ATM card poses
another potential incidence for fraud. It is important that a loss of an ATM card should be
reported immediately to the issuing bank so that the card’s access is denied throughout
the ATM system (Kenswitch, 2010).
The security of online banking is a major issue for an increasing number of consumers
(Sarel and Marmorstein, 2005). Previous research in countries with different levels of E-
commerce adoption shows that perceived security risk is an important predictor of
internet banking adoption (Manzano, et al. 2009b). Consumers associate security risk
with the loss of bank account or credit account numbers, passwords, etc., which can result
in the loss of money (Manzano, Navare, Mafe and Blas, 2009a).
According to Jensen (2005), a research firm, which interviewed 1,000 American adults
for a study on online banking safety, found that many consumers were anxious that their
personal data could either be stolen by hackers or sold to third parties by the banks.
Nearly 83% of those who conduct banking online report such concerns, while 73% of
respondents said private data stealing are a problem that holds them back.
In Internet banking, security has been found to be a matter of intense concern, especially
with regard to the acquisition and dissemination of personal and sensitive data.
Perceptions regarding this aspect of service quality are generally operationalized in the
form of transaction security, as represented directly by the safe and
25
accurate transfer of funds and payment-credit information and indirectly by transaction
risk (Liao and Cheung, 2008).
According to Bainbridge (2006), in the beginning, its inventors had predicted that it
would be only a matter of time before online banking completely replaced the
conventional kind. Facts now prove that this was an overoptimistic assessment - many
customers still harbor an inherent distrust in the process. Others have opted not to use
many of the offered facilities because of bitter experience with online frauds, and inability
to use online banking services. Polasik and Wisniewski (2009) observed that, influenced
by the imagination-capturing stories of hackers, customers may fear that an unauthorized
party will gain access to their online account and serious financial implications will
follow. Therefore, in virtual environments it is fundamental to increase consumer trust as
the risk associated with possible losses from online banking transactions is greater than in
traditional environments (Manzano, Navare, Mafe and Blas, 2009). Indeed, according to a
study by Poon (2008) on a survey across e-banking services, privacy and security are the
major sources of dissatisfaction.
2.4.3 Risk of Liquidity
Liquidity risk may be caused by either failure or delays in crediting a customer’s account
with money that has been sent by another customer. The liquidity position of a customer
exposes him to seeking overdraft facilities or incurring penalties due to non-payment of
cheques or uncleared effects. The banks levy heavy penalties if an account has
insufficient funds (CBK, 2012).
2.4.4 Systemic Risk
This risk occurs due to a problem within the payment system. If a customer sends some
money through an EFT but a wrong account is credited with the funds then the problem is
said to be systemic (Kenswitch, 2010). This would also be due to transaction risk as the
customer’s expectations of a safe, secure, reliable and accurate system is met by an
inefficient and error-prone system. Mensah, Bahta and Mhlanga (2005) suggest the
following policy considerations when creating an enabling environment: Encryption and
decryption techniques - provide authentication, authorization, confidentiality and integrity
26
to services, increasing the security of ecommerce transactions. They are necessary, for
instance, for processing credit card information; Digital signatures and electronic
contracts are relevant, for instance in cases of dispute between trading partners in an e-
commerce transaction; Certification authorities secure electronic transactions and act as
trusted third parties to verify information about parties. African certification authorities
must take part in the international framework for supporting ways to link certification
mechanisms and the mutual recognition of different certification authorities and;
Consumer protection - in an electronic market place it is not easy for consumers to
identify and localize suppliers so it is necessary to promote protection mechanism.
Without much information available on mechanisms adopted locally to guarantee
confidentiality, this study proceeded to establish the impact of confidentiality concerns on
online banking adoption.
2.4.5 Physical Risk
Banks incur heavy investments to secure their premises (Kenswitch, 2010). Similarly,
banks undertake stringent physical measures to secure their ATM terminals. Besides the
additional cost of recruiting a guard, ATM points have Closed Circuit Television (CCTV)
cameras and are strongly secured. Robbery is a risk that ever individual try to avoid. The
physical location of most banks is relatively secure to lower the incidences of break-ins.
A potential thief definitely knows that after a customer has visited ATMs spots, he or she
must have a certain amount of cash. The villain is assured to steal some cash. Most thefts
occur in dimly lit or secluded areas far from public limelight. To mitigate this vice, the
banks ensure that the ATMs are positioned in open and guarded places which are easily
accessible to the public. Incidences such as forceful withdrawal of cash after being
kidnapped are not so common, but the bank mitigates these incidences by setting up spy
cameras to record the environment surrounding the ATM (CBK, 2012). The CCTV
recordings can be used to identify the culprits and later, as evidence during prosecution in
a court of law. The set up creates perceived trust, safety and convenience to the
customers.
27
2.4.6 Performance Failures
The network interruptions cause banks to suspend their operations during systems down
time. Since the internet banking is computer based then in case of network failures the
operations are adversely affected (Bauer et al., 2005). Customers whose banks have
frequent network failures may find their customers resisting to adopt an improvement to
the existing system or a completely new system. Some ATMs may not have sufficient
funds when a customer needs to make a withdrawal. Others may lack envelops which are
necessary to make a deposit, thereby preventing customers from making deposits. The
system must be compatible with the customers system to avoid problems of
interconnectivity between the banks and customers system (Beatty et al., 2001). Network
failures or problems of interconnectivity disjoints the customers who, inconveniently,
may have to queue during open bank hours or due to lack of cash, may forego shopping,
medical attention or reschedule travel due to unavailability of cash, especially during non-
banking hours (Ndubisi and Sinti, 2006).
2.5 Chapter Summary
The discussion of this chapter shows that most researchers agree that the perceived
usefulness of e-banking facility, perceived ease of use, and perceived risk influences the
adoption of e-banking. The chapter has reviewed various studies done in different
countries on the adoption of new technological innovation and specifically, the adoption
of e-banking. The next chapter describes the methods and techniques that the researcher
shall use to gather and analyze the collected data.
28
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
The chapter sets forth a discussion of the research methodology that was used in this
study. The chapter begins by explaining the research design. It proceed on to detail the
population and sampling design, the data collection instruments, data analysis technique
and presentation methods adopted to conduct the study.
3.2 Research Design
The researcher adopted a descriptive research design. According to Cooper and Schindler
(2005), descriptive research design discover and measure cause and effect relationships
amongst variables. A descriptive research design refers to methods and procedures that
describe variables and helps a researcher to gather, organize, tabulate, depict and describe
the data (Bertrand and Bouchard, 2008). The descriptive design assist to show the
variables by providing answers as to who, what, when, where and how questions
(Venkatesh, 2000). A cross sectional survey was adopted to gather primary data from a
sample of the population using a structured questionnaire that was administered to the
respondents (Ombati et al., 2010). The independent variables of the study were: perceived
usefulness, perceived ease of use and perceived risks. The dependent variable was e-
banking adoption.
3.3 Population and Sampling Design
3.3.1 Population
Population refers to an entire group of individuals, events, elements or objects that have
distinctively similar observable characteristics. Population is therefore the entire group of
interest that a researcher wishes to describe, draw conclusions or make inferences
(Cooper and Schindler, 2005). The target population comprised 998 businesses in Nairobi
existing in the online database of The Official Yellow Pages Kenya (2012). The
distribution of the population is classified by index as shown in appendix III.
29
3.3.2 Sampling Design
3.3.2.1 Sampling Frame
Descombe (2007) defines a sampling frame a list of the population subjects from which
the researcher can make selection. According to Cooper and Schindler (2005), this list
should be a complete and accurate representation of the population from where a sample
can be drawn. The sampling frame for this study comprised of bank customers running
businesses in Nairobi’s CBD listed in the Online Yellow Pages Directory.
3.3.2.2 Sampling Technique
Cooper and Schindler (2005) describes a sampling technique as a method of selecting the
elements in a population to estimate some characteristics about the entire population. In
this study, stratified sampling technique, which, according to Denscombe (2003), operates
on the same principles of random sampling but introduces a system whereby the sample is
chosen in proportion to the population size, was used. The population was stratified
according to index classification as shown in appendix III.
3.3.2.3 Sample Size
A sample size must be carefully selected from the sampling frame to avoid bias (Gikandi
and Bloor, 2009). The researcher selects the sample elements that are representative of
the entire population. A sample size of 100 was used. This sample size was deemed
sufficient for drawing inferences about the target population as it represented 10% of the
population size as recommended by Mugenda and Mugenda (2003). The sample size is
shown in appendix III.
3.4 Data Collection Method
A questionnaire method was used to collect data. According to Cooper and Schindler
(2005) a questionnaire is a prepared set of questions that are used by respondents and
interviewers to record data. This method provides an effective understanding and
reliability in the procedures and guidelines to be followed during data collection on the
30
variables of the study (Oye et al., 2011). The questions were both open and closed ended
with the latter designed to enable respondents flexibility to give a more informative
response. The closed questions were measured on a 5 point Likert scale with 5 being
“strongly agree” through 3 being “neutral” to 1 being “Strongly disagree” as explained by
Li and Huang (2009).
The questionnaires structure had four parts, with part A aimed at recording the general
information or demographics about the respondents, part B captured data to determine the
customer’s perceived usefulness of e-banking facility, part C: determined the perceived
ease of usage of e-banking facility, and part D: determined the perceived risks that might
hinder usage of e-banking. A letter of introduction from the United States International
University accompanied each questionnaire to authenticate the study.
3.5 Research Procedures
A pre-test of the questionnaire was done to ascertain its suitability and overall relevance
for data collection purposes as suggested by Li and Huang (2009). The questionnaire was
pretested on 10 respondents. After the pre-test, the questionnaire was amended and a
research assistant trained on how to administer it to the respondents through drop and
pick, face-to-face or e-mails methods. The questionnaire took about fifteen minutes per
respondent which partly formed the basis for commensurately compensating the assistant.
The researcher supervised the research assistant in the field and ensured that relevant and
quality data was collected whilst assuring the respondents of confidentiality of the
information that they provided. To ensure a good response rate, the researcher made
follow ups through personal visits, sent e-mail reminders and made telephone calls to the
respondents (Jahangir and Begum, 2008).
3.6 Data Analysis Methods
The study used a quantitative method of analysis which is applied using descriptive
statistics. The filled questionnaires were coded according to the respective specific
objectives. These were then entered into the Statistical Package for Social Scientists
(SPSS) for data processing and analysis, which enabled the translation of the qualitative
31
data into quantitative data for ease of interpretation as discussed by Oye et al. (2011).
Spearman’s Rank Correlation Coefficient technique was used to draw inferences. This is
simply a technique which measures the relationship of paired ranks assigned to scores on
two variables which represents an index of the strength of association between the
variable ranging from 0 denoting no association to + 1.00 denoting association. An
association is positive if there are no disagreements in ranks between the two variables
while a negative relationship is established if the ranks are in perfect disagreement
(Healey, 2011). The results were presented in appropriate tables and figures.
3.7 Chapter Summary
This chapter was about the methodology that was used to guide the research. The chapter
has detailed the research design, the population, the sampling technique, sampling frame
and sample size. The data collection method, research procedures and data analysis
technique has also been described. The data is analyzed in the next chapter.
32
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter presents the results and findings. The chapter begins by presenting the
descriptive statistics of respondents’ demographic information. The rest of the chapter is
presented by order of the specific objectives. These were: to determine the effect of
perceived usefulness of e-banking on the adoption of e-banking facility; to determine the
effect of perceived ease of use of e-banking facility on adoption of e-banking; and, to
determine the effect of perceived risks on adoption of e-banking. Out of the 100
questionnaires administered, 74 were successfully filled and returned, placing the
response rate at 74%. This is depicted in Table 4.1 below.
Table 4.1: Response Rate
Response rate Distribution
Frequency Percentage
Responded 74 74%
Did not respond 26 26%
Total 100 100
4.2 General Information
The general information sought from the respondents included gender, age, level of
education, E-banking platform offered by respondents’ commercial bank and rating of
satisfaction with E-banking.
4.2.1 Respondents’ Gender
Respondents were asked to indicate their gender. Table 4.2 shows that 52.7% of the
respondents were male whereas female respondents accounted for 47.3% of the sample.
Therefore, respondents were fairly represented in terms of gender.
33
Table 4.2: Respondents’ Gender
Sex Distribution
Frequency Percentage
Male 39 52.7
Female 35 47.3
Total 74 100.0
4.2.2 Respondents’ Age
Respondents were asked to indicate their age. Table 4.3 shows that majority of the
respondents were aged 35 years and below, with 30.7% being in the age group of 26-30
years, followed by 24.3% in the age group of 20-25 years and 23.0% in the age group of
31-35 years. However, some 11.0% of the respondents were aged 36-40 years while
another 11.0% of the respondents were aged 41 years and over.
Table 4.3: Distribution of Respondents by Age Group
Age group Distribution
Frequency Percentage
20-25 Years 18 24.3
26-30 Years 22 30.7
31-35 Years 17 23.0
36-40 Years 8 11.0
41 and over years 8 11.0
Total 74 100.0
4.2.3 Respondents’ Level of Education
The study sought to establish respondents’ highest level of education. Table 4.4 shows
that 62.2% of the respondents were university graduates and 31.2% attained other tertiary
level education. Only 5.4% and 1.4% of the respondents obtained secondary level and
primary level of education, respectively. Therefore, there was a high level of education
among the respondents.
34
Table 4.4: Distribution of Respondents by Level of Education
Level of education Distribution
Frequency Percentage
Primary 1 1.4
Secondary 4 5.4
Tertiary 23 31.1
University 46 62.2
Total 74 100.0
4.2.4 Commercial Bank’s E-Banking Platform
The study sought to establish the e-banking services respondent enjoyed from the e-
banking platform offered by their bank. Figure 4.1 ranks the findings in terms of their
frequency distribution. The figure shows that majority of the respondents (97.3%)
identified ATM services, followed by bank balance (82.4%), debit card (71.6%). Cheque
statement (67.6%), credit card (66.2%) and purchase of products (60.8%). Other banking
services offered by respondents’ commercial banks’ e-banking platform were: SMS
banking (59.5%) and bank transfer (58.1%). The e-banking services identified by the least
number of respondents, in order of frequency were: change of password (40.5%), PC
banking (18.4%), stop payment (24.3%) and order of cheque book (20.3%).
97.3
82.471.6 67.6 66.2 62.2 60.8 59.5 58.1
40.528.4 24.3 20.3
0
20
40
60
80
100
120
AT
M
Ba
nk
ba
lan
ce
De
bit
card
Ch
eq
ue
sta
tem
en
t
Cre
dit
card
Inte
rne
t b
an
kin
g
Pu
rch
ase
pro
du
ct
SM
S b
an
kin
g
Ba
nk
tra
nsf
er
Ch
an
ge
pa
ssw
ord
PC
Ba
nki
ng
Sto
p p
aym
en
t
Ord
er
Ch
eq
ue
Bo
ok
% d
istr
ibu
tion
Figure 4.1: E-banking Services offered by Bank
35
4.2.4 E-Banking Service Utilized by Respondent
The study sought to establish the e-banking services respondent enjoyed from the e-
banking platform offered by their bank. Figure 4.2 ranks the findings from the service
with the highest number of users to that with the lowest. The figure shows that majority
of the respondents used ATM services (94.6%) and tele-banking (93.2%). Debit card was
used by 43.2% of the respondents; SMS banking by 32.4%; internet banking by 20.3%;
credit card by 17.6% and PC banking by 14.9% of the respondents.
94.6 93.2
43.2
32.4
20.3 17.6 14.9
0
10
20
30
40
50
60
70
80
90
100
ATM Tele-banking Debit card SMS banking Internet banking Credit card PC banking
% d
istr
ibut
ion
Figure 4.2: E-Banking Services Utilized by the Respondent
4.2.5 Frequency of E-Banking Use
Respondents were asked to indicate the number of times they used e-banking services.
Table 4.5 shows that 52.7% of the respondents used e-banking services 1-5 times in a
month; 27.0% utilized e-banking 6-10 times in a month; 12.2% used the e-banking
services 11-15 times in a month and 8.1% did so 16 times in a month.
Table 4.5: Frequency of E-Banking Use
Frequency of e-banking
use in a month
Distribution
Frequency Percentage
1-5 times 39 52.7
6-10 times 20 27.0
11-15 times 9 12.2
16 times 6 8.1
Total 74 100.0
36
4.2.6 Purpose for E-Banking Use
The study sought to determine the purpose for which respondents used e-banking
services. Figure 4.3 shows that 82.4% of the respondents used e-banking services to
check account balance; 67.6% also utilized the service to check statement; 60.8% did so
to make product purchases; and 58.1% indicated that they used e-banking for bank
transfer. However, only 40.5% utilized the service for changing password, 24.3% of the
respondents utilized it to stop payment and 20.3% did so to order cheque-books.
82.4
67.660.8 58.1
40.5
24.320.3
0
10
20
30
40
50
60
70
80
90
Check balances Check statement Purchase
products/ pay
bill
Bank transfer Change
password
Stop payment Order cheque
books
% d
istr
ibut
ion
Figure 4.3: Purpose of E-Banking Use
4.2.7 Criteria for Choosing Preferred E-Banking Service
Respondents were asked to state the criteria that they used to choose the e-banking
service they were utilizing. Figure 4.4 shows that ease of use topped the list with 77% of
the respondents; followed by familiarity with the service (67.6%); and promptness in
processing transactions (62.2%). The figure also shows that 41.9% of the respondents
utilized the service because it was available both in the local and overseas branches,
28.4% of the respondents were influenced by the comprehensible instructions and 12.2%
of the respondents said that it was the only service well promoted by the bank.
37
77.067.6
62.2
41.9
28.4
12.2
-
20.0
40.0
60.0
80.0
100.0
Easy to use Familiarity with the
service
Prompt in
processing
transaction
Service is
available both in
local and
overseas
branches
Comprehensible
instructions
It is the only
service well
promoted by the
bank
% d
istr
ibut
ion
Figure 4.4: Purpose of E-Banking Use
4.2.8 Rating of Satisfaction with E-Banking Services
Respondents were asked to rate their level of satisfaction with e-banking services offered
at their banks. Table 4.6 shows that majority of the respondents were generally satisfied,
with 70.3% indicating that they were satisfied while 27.0% were highly satisfied.
However, 2.7% of the respondents were dissatisfied.
Table 4.6: Respondents’ Satisfaction Rating of E-Banking Services offered by Bank
Level of education Distribution
Frequency Percentage
Highly Satisfied 20 27.0
Satisfied 52 70.3
Dissatisfied 2 2.7
Total 74 100.0
4.3 The Effect of Perceived Usefulness on the adoption of E-banking
This section analyses the relationship between perceived usefulness and e-banking
adoption. Table 4.7 shows Spearman’s Rho significant at 0.05 levels. It shows that the
relationship between e-banking adoption and perceived usefulness in terms of time-saving
(r=.412 p<.05); reduced transaction costs (r=.376, p<.05) and convenience (r=.337,
p<.05) were statically significant. However, there was a positive but insignificant
correlation between e-banking adoption and: reduced operational cost (r=.117, p>.05);
reduced stationery cost (r=.114, p>.05); reliability (r=.166, p>.05); wide access to
services (r=.024, p>.05); need for new software (r=.137, p>.05); need for new hardware
(r=.068, p>.05) or need to modify existing software (r=.184, p>.05).
38
Table 4.7: Correlation between Perceived Usefulness variables and E-Banking Adoption
Spearman's Rho 1
Time-saving Correlation Coefficient .412
Sig. (2-tailed) .042(*)
N 74
Reduced transaction cost Correlation Coefficient .376(*)
Sig. (2-tailed) .048
N 74
Convenience Correlation Coefficient .337(*)
Sig. (2-tailed) .050
N 74
Reduced operational cost Correlation Coefficient .117
Sig. (2-tailed) .887
N 74
Reduced stationery cost Correlation Coefficient .114
Sig. (2-tailed) .338
N 74
Reliability Correlation Coefficient .166
Sig. (2-tailed) .582
N 73
Wide-access to services Correlation Coefficient .024
Sig. (2-tailed) .842
N 74
Need for new software Correlation Coefficient .137
Sig. (2-tailed) .249
N 74
Need for new hardware Correlation Coefficient .068
Sig. (2-tailed) .567
N 74
Need to modify existing software Correlation Coefficient .184
Sig. (2-tailed) .119
N 74
* Correlation is significant at the 0.05 level (2-tailed).
4.3.1 The Effect of E-Banking on Time Saving
The descriptive results of the findings concerning respondents’ perception of the
usefulness of e-banking are shown in table 4.8. The table shows that 64.9% and 32.4% of
the respondents agreed and strongly agreed, respectively, that using e-banking can save
them time in performing bank transactions. However, 2.7% of the respondents were
neutral whereas no respondent disagreed. Therefore, majority of the respondents
perceived –banking as useful in terms of time-savings.
39
Table 4.8: Effect of E-Banking on Time Saving
Responses
Distribution
Frequency Percentage
Strongly agree 48 64.9
Agree 24 32.4
Neutral 2 2.7
Disagree 0 0.0
Strongly disagree 0 0.0
Total 74 100.0
4.3.2 The Effect of E-Banking on Transaction Cost
The views of respondents were sought as to whether e-banking can save on transaction
handling fees in performing banking transactions. Table 4.9 shows that 33.8% and 39.2%
agreed and strongly agreed, respectively. However, 14.9% of the respondents were
neutral; 5.4% of the respondents disagreed and 6.8% of the respondents strongly
disagreed. Therefore, majority of the respondents were of the view that e-banking saves
on transaction handling fees.
Table 4.9: Effect of E-Banking on Transaction Cost
Responses
Distribution
Frequency Percentage
Strongly agree 25 33.8
Agree 29 39.2
Neutral 11 14.9
Disagree 4 5.4
Strongly disagree 5 6.8
Total 74 100.0
4.3.3 The Effect of E-Banking on Convenience
Respondents were also asked their opinion as to whether using ATM was more
convenient than talking to a teller in a physical bank. Table 4.10 shows that majority of
the respondents agreed (59.5% strongly agreed and 35.1% agreed) whereas some 1.4% of
the respondents neutral while 4.1% disagreed.
40
Table 4.10: Effect of E-Banking on Convenience
Responses
Distribution
Frequency Percentage
Strongly agree 44 59.5
Agree 26 35.0
Neutral 1 1.4
Disagree 3 4.1
Strongly disagree 0 0
Total 74 100.0
4.3.4 The Effect of E-Banking on Operational Cost
The study sought to determine from the respondents whether e-banking reduced their
operational costs. The results show that 37.8% and 31.1% of the respondents agreed and
strongly agreed, respectively; 17.6% of the respondents were neutral while 9.5%
disagreed and another 4.1% strongly disagreed. Therefore, majority of the respondents
perceived that e-banking reduced their operational costs.
Table 4.10: Effect of E-Banking on Convenience
Responses
Distribution
Frequency Percentage
Strongly agree 28 37.8
Agree 23 31.0
Neutral 13 17.6
Disagree 7 9.5
Strongly disagree 3 4.1
Total 74 100.0
4.3.5 The Effect of E-Banking on Reliability of Services
The views of the respondents were also sought to determine whether using e-banking
services was more reliable than accessing similar services from a teller in a physical bank.
Table 4.11 shows that 39.7% of the respondents agreed and 15.1% strongly agreed.
However, 31.5% of the respondents were neutral; 5.5% of the respondents disagreed and
8.2% of the respondents strongly disagreed. Therefore, majority of the respondents agreed
that e-banking services were more reliable compared to similar services accessed through
a teller in a bank.
41
Table 4.11: Effect of E-Banking on Service Reliability
Responses
Distribution
Frequency Percentage
Strongly agree 11 15.1
Agree 29 39.7
Neutral 23 31.5
Disagree 4 5.5
Strongly disagree 6 8.2
Total 74 100.0
4.3.6 The Effect of E-Banking on Personal Contact with Teller
The study also sought to determine whether using e-banking made respondents to lose the
much needed personal contact with a teller. Table 4.12 shows that 24.3% of the
respondents agreed and 17.6% strongly agreed; 23% of the respondents were neutral
while 12.2% and 23% of the respondents disagreed and strongly disagreed, respectively.
Therefore, majority of the respondents were of the view that e-banking makes them lose
the much needed personal contact with a teller.
Table 4.12: Effect of E-Banking on Personal Contact with Teller
Responses
Distribution
Frequency Percentage
Strongly agree 18 24.3
Agree 13 17.5
Neutral 17 23.0
Disagree 9 12.2
Strongly disagree 17 23.0
Total 74 100.0
4.3.7 Effect of E-Banking on Access to Product Range
The views of the respondents were sought to establish whether e-banking enabled them to
access a wide range of products offered by the bank. Table 4.13 shows that 40.5% of the
42
respondents agreed and another 21.6% of the respondents strongly agreed; 24.3% of the
respondents were neutral whereas 8.1% of the respondents disagreed and another 5.4%
strongly disagreed. Therefore, majority of the respondents agreed that e-banking enabled
them to access a wide range of products.
Table 4.13: Effect of E-Banking on Access to Bank Products
Responses
Distribution
Frequency Percentage
Strongly agree 16 21.6
Agree 30 40.5
Neutral 18 24.3
Disagree 6 8.2
Strongly disagree 4 5.4
Total 74 100.0
4.3.8 Effect of E-Banking on Customer Preference
Concerning whether they were comfortable receiving and paying e-bills online rather than
manual ones, 41.9% of the respondents agreed and a further 32.4% strongly agreed; 23%
of the respondents were neutral while 2.7% of the respondents disagreed.
Table 4.14: Effect of E-Banking on Customer Preference of Online Payment
Responses
Distribution
Frequency Percentage
Strongly agree 24 32.4
Agree 31 41.9
Neutral 17 23.0
Disagree 2 2.7
Strongly disagree 0 0.0
Total 74 100.0
4.3.9 Effect of E-Banking on New Software Acquisition
The study also sought to establish perceived usefulness of e-banking by asking whether
using e-banking services required respondents to acquire new software. Table 4.15 shows
43
that 30.1% of the respondents disagreed and 27.4% of the respondents strongly disagreed;
19.2% of the respondents were neutral while some 12.3% of the respondents agreed and a
further 11.0% strongly agreed. Therefore, majority of the respondents disagreed that e-
banking services required them to acquire new software.
Table 4.15: Effect of E-Banking on New Software Acquisition
Responses
Distribution
Frequency Percentage
Strongly agree 8 11.0
Agree 9 12.3
Neutral 14 19.2
Disagree 22 30.1
Strongly disagree 20 27.4
Total 74 100.0
4.3.10 Effect of E-Banking on New Phone Acquisition
Similarly, the views of the respondents were sought as to whether using e-banking
services required them to acquire new phone with new software. Table 4.16 shows that
34.2% of the respondents disagreed and 31.5% strongly disagreed; 16.4% of the
respondents were neutral; 11.0% disagreed and 6.8% strongly disagreed. Therefore,
majority of the respondents disagreed that e-banking services required them to acquire
new phone with new software.
Table 4.16: Effect of E-Banking on New Phone Acquisition
Responses
Distribution
Frequency Percentage
Strongly agree 24 31.5
Agree 25 34.2
Neutral 12 16.4
Disagree 8 11.0
Strongly disagree 5 6.8
Total 74 100.0
44
4.3.11 Effect of E-Banking on Modification of Existing Software
Respondents were also asked to indicate whether e-banking services required them to
modify the existing software. Table 4.17 shows that 37.0% of the respondents disagreed
and a 28.8% strongly disagreed. On the other hand, 12.3% of the respondents were
neutral; 13.7% disagreed and 8.2% strongly disagreed. Therefore, majority of the
respondents disagreed.
Table 4.17: Effect of E-Banking on Modification of Existing Software
Responses
Distribution
Frequency Percentage
Strongly agree 21 28.8
Agree 28 37.0
Neutral 9 12.3
Disagree 10 13.7
Strongly disagree 6 8.2
Total 74 100.0
4.4 The Effect of Perceived Ease of Use on the adoption of E-banking
This section presents the analysis of perceived ease of use of e-banking facility on the
adoption of e-banking services. Spearman’s Rank Correlation Coefficient was run to
establish the correlation between variables such as task accomplishment, registration, log-
in and need for training, among others, on the adoption of e-banking. Table 4.18 shows a
significant correlation between e-banking and: ease of task accomplishment (r=.682,
p<.01); ease of log-in (r=.332, p<.05); and ease of adaptation to e-banking products
(r=.329, p<.5). However, the relationship between e-banking adoption and need for a lot
of training (r=-.131, p>.05); ease of e-banking registration (r=.530, p>.05); easy payment
process (r=.011, p>.05) and training before e-banking use (r=.120, p>.05).
45
Table 4.18: Correlation between Perceived Ease of Use variables and E-Banking Adoption
Spearman’s Rho 1
Ease of task accomplishment Pearson Correlation .682(**)
Sig. (2-tailed) .000
N 74
Ease of e-banking registration Pearson Correlation .075
Sig. (2-tailed) .530
N 73
Ease log-in Pearson Correlation .332(*)
Sig. (2-tailed) .046
N 74
Ease of adaptation to e-banking products Pearson Correlation .329(*)
Sig. (2-tailed) .049
N 74
Need for a lot of training Pearson Correlation -.131
Sig. (2-tailed) .264
N 74
Easy payment process Pearson Correlation .011
Sig. (2-tailed) .927
N 73
Training before e-banking use Pearson Correlation .120
Sig. (2-tailed) .313
N 73
** Correlation is significant at the 0.01 level (2-tailed).
* Correlation is significant at the 0.05 level (2-tailed).
4.4.1 The Effect of Ease of Registration on Adoption of E-Banking
Respondents were asked whether they found it easy to register for e-banking services, that
is, if it required minimal additional effort. Table 4.19 shows that 43.8% of the
respondents agreed and 34.2% strongly agreed; 16.5% of the respondents were neutral
while 4.1% and 1.4% of the respondents disagreed and strongly disagreed, respectively.
Therefore, majority of the respondents found it easy to register for e-banking.
46
Table 4.19: Effect of Ease of Registration on E-Banking
Responses
Distribution
Frequency Percentage
Strongly agree 25 34.2
Agree 32 43.8
Neutral 12 16.5
Disagree 3 4.1
Strongly disagree 1 1.4
Total 74 100.0
4.4.2 The Effect of Ease of Log in on Adoption of E-Banking
Table 4.20 shows that 41.9% agreed and 31.1% strongly agreed that they found it easy to
log in and finalize an e-banking transaction; 20.3% of the respondents were neutral, 5.4%
of the respondents disagreed and 1.4% strongly disagreed.
Table 4.20: Effect of Ease of Log in on E-Banking
Responses
Distribution
Frequency Percentage
Strongly agree 23 31.0
Agree 31 41.9
Neutral 15 20.3
Disagree 4 5.4
Strongly disagree 1 1.4
Total 74 100.0
4.4.3 The Effect of Ease of Use of Additional E-banking Products
The research question sought to determine whether respondents were easily able to use
new additional e-banking products and services that the bank introduced. Table 4.21
shows that 41.9% of the respondents agreed and 31.1% strongly agreed; 20.3% of the
respondents were neutral while 5.4% of the respondents disagreed and another 1.4%
47
strongly disagreed. Therefore, majority of the respondents were easily able to use new
additional e-banking products introduced by the bank.
Table 4.21: Effect of Ease of Use of Additional E-Banking Products
Responses
Distribution
Frequency Percentage
Strongly agree 23 31.1
Agree 31 41.9
Neutral 15 20.3
Disagree 4 5.4
Strongly disagree 1 1.4
Total 74 100.0
4.4.4 The Effect of E-Banking on Training
In terms of whether it required a lot of training for respondents to access the e-banking
service, 40.5% of the respondents disagreed and 25.5% strongly disagreed; 13.5% of the
respondents were neutral; another 13.5% of the respondents agreed and 6.8% of the
respondents strongly agreed. Therefore, majority of the respondents disagreed that they
required a lot of training for them to access e-banking services.
Table 4.22: Effect of E-Banking on Training
Responses
Distribution
Frequency Percentage
Strongly agree 19 25.5
Agree 30 40.5
Neutral 10 13.5
Disagree 10 13.5
Strongly disagree 5 6.8
Total 74 100.0
48
4.4.5 The Effect of E-banking on Cheque Payments
The study sought to determine whether respondents found it easy to make e-payments
than making out cheques. Table 4.23 shows that 50.7% of the respondents agreed and
17.8% strongly agreed; 21.9% of the respondents were neutral while 5.5% and 4.1% of
the respondents disagreed and strongly agreed, respectively. Therefore, majority of the
respondents found it easy to make e-payments than making out cheques.
Table 4.23: Effect of E-Banking on Training
Responses
Distribution
Frequency Percentage
Strongly agree 13 17.8
Agree 38 50.7
Neutral 16 21.9
Disagree 4 5.5
Strongly disagree 3 4.1
Total 74 100.0
4.5 The Effect of Perceived Risks on the adoption of E-banking
This section presents the findings concerning the effect of perceived risks on the adoption
of e-banking. Table 4.24 shows a statistically significant inverse relationship between e-
banking adoption and: incorrect payment processing (r=-.364, p<.05); risk of lack of
compensation in case of loss (r=-.359, p<.05); inconveniences due to payment errors (r=-
.384, p<.05); fear of giving personal information online (r=.321, p<.05); fear of hacker
(r=-.383, p<.05) and fear of disclosing pin (r=.-473, p<.05). In other words, the lower the
perceived risk, the higher the adoption of e-banking. However, no statistically significant
correlation was found between e-banking adoption and: slow download speeds (r=-.088,
p>.05); risk of losing money due to wrongly keyed in accounts (r=-.042, p>.05); time
required to learn (r=-.182, p>.05) or fear of thieves at ATM (r=-.037, p>.05).
49
Table 4.24: Correlation between Perceived Risk and E-banking Adoption
Spearman’s Rho 1
Slow download speeds Pearson Correlation -.088
Sig. (2-tailed) .456
N 74
Incorrect payment processing Pearson Correlation -.364(*)
Sig. (2-tailed) .043
N 74
Risk of losing money due to wrongly keyed account Pearson Correlation -.042
Sig. (2-tailed) .720
N 74
Risk of lack of compensation in case of loss Pearson Correlation -.359(*)
Sig. (2-tailed) .046
N 74
Requires a lot of time to learn Pearson Correlation -.182
Sig. (2-tailed) .120
N 74
Inconveniences due to payment errors Pearson Correlation -.386(*)
Sig. (2-tailed) .044
N 74
Fear of giving personal information online Pearson Correlation -.321(*)
Sig. (2-tailed) .045
N 74
Fear of hackers Pearson Correlation -.383(*)
Sig. (2-tailed) .049
N 74
Fear of thieves at ATM Pearson Correlation -.037
Sig. (2-tailed) .070
N 74
Fear of disclosing PIN Pearson Correlation -.473(*)
Sig. (2-tailed) .042
N 74
* Correlation is significant at the 0.05 level (2-tailed).
50
4.5.1 The Effect of Internet Speed on E-Banking
The findings on the views of the respondents towards the establishment of perceived risk
factors influencing the adoption of e-banking are shown in table 4.25. Respondents were
asked whether they feared that E-banking servers may not perform well due to slow
download speeds. The table shows that 51.4% of the respondents agreed and 9.5%
strongly agreed; 20.3% of the respondents were neutral while 12.2% and 6.8% of the
respondents disagreed and strongly disagreed, respectively. Therefore, majority of the
respondents feared that e-banking servers may not perform well due to slow download
speeds.
Table 4.25: Effect of Internet Speed on E-Banking
Responses
Distribution
Frequency Percentage
Strongly agree 7 9.5
Agree 38 51.4
Neutral 15 20.3
Disagree 9 12.2
Strongly disagree 5 6.8
Total 74 100.0
4.5.2 Effect of Processing Accuracy on E-Banking
Views of respondents were also sought as to whether they feared that online banking
servers may process e-payments incorrectly. According to table 4.26, 40.5% of the
respondents disagreed and 14.9% strongly disagreed; 20.3% of the respondents were
neutral while 21.6% and 2.7% of the respondents agreed and strongly agreed,
respectively.
Table 4.26: Effect of Processing Accuracy on E-Banking
Responses
Distribution
Frequency Percentage
Strongly agree 7 9.5
Agree 38 51.4
Neutral 15 20.3
Disagree 9 12.2
Strongly disagree 5 6.8
Total 74 100.0
51
4.5.3 Effect of perceived risks of errors during money transfer
In terms of whether respondents were afraid that they might lose money due to wrongly
keyed accounts when transferring money on internet, 43.2% of the respondents agreed
and another 12.2% of the respondents strongly agreed; 18.9% of the respondents were
neutral, whereas 21.6% disagreed and 4.1% of the respondents strongly disagreed.
Therefore, majority of the respondents were always afraid that they might lose money
while transferring money on internet.
Table 4.27: Effect of Perceived Risks of Errors during Money Transfer
Responses
Distribution
Frequency Percentage
Strongly agree 9 12.2
Agree 32 43.2
Neutral 14 18.9
Disagree 16 21.6
Strongly disagree 3 4.1
Total 74 100.0
4.5.4 Effect of Perceived Chances of Compensation when Error Occurs
The research question sought to determine whether respondents were worried that the
bank shall not compensate them when a transaction error occurs, 27.0% and 18.9% of the
respondents agreed and strongly agreed, respectively; 23% of the respondents were
neutral; another 23.0% of the respondents disagreed and 8.1% strongly disagreed.
Therefore, majority of the respondents were worried that the bank would not compensate
them in case of a transaction error.
Table 4.28: Effect of Perceived Chances of Compensation when Error Occurs
Responses
Distribution
Frequency Percentage
Strongly agree 14 18.9
Agree 20 27.0
Neutral 17 23.0
Disagree 17 23.0
Strongly disagree 6 8.1
Total 74 100.0
52
4.5.5 The Effect of Perceived Safety on E-banking
The research question sought to investigate whether respondents would not feel safe
while providing personal private information over internet while accessing e-banking
services. Table 4.29 shows that 23% of the respondents agreed and 17.6% strongly
agreed; 14.9% of the respondents were neutral whereas 31.1% of the respondents
disagreed and a further 13.5% strongly disagreed. On aggregate, majority of the
respondents disagreed that they would not feel safe providing personal information over
internet while accessing e-banking services.
Table 4.29: Effect of Perceived Safety of E-banking on Adoption
Responses
Distribution
Frequency Percentage
Strongly agree 13 17.6
Agree 17 23.0
Neutral 11 14.9
Disagree 23 31.1
Strongly disagree 10 13.5
Total 74 100.0
4.5.6 The Effect of Perceived Risk of Hacking on Adoption of e-banking
Respondents were asked whether they were always worried to use online banking since a
hacker might access their account. Table 4.30 shows that 32.4% and 20.3% of the
respondents agreed and strongly agreed, respectively; 21.6% of the respondents were
neutral while 16.2% of the respondents disagreed and 9.5% strongly disagreed. Therefore,
majority of the respondents were worried to use online banking in fear of hackers.
Table 4.30: Effect of Perceived Risk of Hacking on Adoption of e-Banking
Responses
Distribution
Frequency Percentage
Strongly agree 15 20.3
Agree 24 32.4
Neutral 16 21.6
Disagree 12 16.2
Strongly disagree 7 9.5
Total 74 100.0
53
4.5.7 The Effect of Perceived Fear of Thieves on Adoption of e-Banking
The study sought to determine also whether respondents were always afraid of thieves
while withdrawing money from an ATM. Table 4.31 shows that 35.1% of the respondents
agreed, 14.9% of the respondents strongly agreed; 21.6% of the respondents were neutral
while 21.6% disagreed and 6.8% strongly disagreed.
Table 4.31: Effect of Perceived Fear of Thieves on Adoption of e-Banking
Responses
Distribution
Frequency Percentage
Strongly agree 11 14.9
Agree 26 35.1
Neutral 16 21.6
Disagree 16 21.6
Strongly disagree 5 6.8
Total 74 100.0
4.6 Chapter Summary
The chapter has made a descriptive analysis of the respondents’ demographic profile. It
has then analyzed the findings on the effect of perceived usefulness of e-banking on the
adoption of e-banking facility; the effect of perceived ease of use of e-banking facility on
adoption of e-banking; and, the effect of perceived risks on adoption of e-banking. In the
next chapter, the findings are discussed, conclusions drawn and recommendations made.
54
CHAPTER FIVE
5.0 DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This final chapter commences by summarizing the study. The chapter then discusses the
findings based on the specific objectives of the study. The discussions of the findings
proceed in light of past empirical and theoretical literature. Conclusions are then drawn
from the discussions and recommendations are made for improvement and for further
studies.
5.2 Summary
The general objective of the study was to determine the factors affecting the adoption of
technological innovation of e-banking in Kenya. The specific objectives were: to
determine the effect of perceived usefulness of e-banking on the adoption of e-banking
facility; to determine the effect of perceived ease of use of e-banking facility on adoption
of e-banking; and, to determine the effect of perceived risks on adoption of e-banking.
Descriptive research design was used. The target population comprised of 998 businesses
in Nairobi listed in the online database of The Official Yellow Pages Kenya. The study
adopted stratified sampling design. The sample size was 100 respondents. Data collection
was undertaken through administration of questionnaires. Descriptive technique was used
to analyze data. Relationships between the study variables were established using
Spearman’s Rank Correlation Coefficient technique. SPSS was used to aid in data
analysis and the results presented in figures and tables.
In terms of the effect of perceived usefulness e-banking on the adoption of e-banking
facility; the results showed that the relationship between e-banking adoption and
perceived usefulness as measured by time-saving; reduced transaction costs and
convenience were statically significant. However, there was a positive but insignificant
correlation between e-banking adoption and: reduced operational cost; reduced stationery
cost; reliability; wide access to services; need for new software; need for new hardware
55
or need to modify existing software.
Regarding the effect of perceived ease of use of e-banking facility on adoption of e-
banking, results indicated that there was a statistically significant correlation between e-
banking and: ease of task accomplishment; ease of log-in; and ease of adaptation to e-
banking products. However, the relationship between e-banking adoption and need for a
lot of training; ease of e-banking registration; easy payment process and training before e-
banking use.
Findings on the effect of perceived risks on adoption of e-banking showed a statistically
significant inverse relationship between e-banking adoption and aspects of e-banking
risks such as incorrect payment processing; risk of lack of compensation in case of loss;
inconveniences due to payment errors; fear of giving personal information online; fear of
hacker and fear of disclosing pin. However, there no significant relationship was
established between e-banking adoption and: slow download speeds; risk of losing money
due to wrongly keyed in accounts; time required to learn or fear of thieves at ATM.
5.3 Discussions
5.3.1 The Effect of Perceived Usefulness of E-banking on E-Banking Adoption
The findings showed that majority of the respondents perceived e-banking as useful in
terms of time-savings. For example, majority of the respondents were of the view that
using e-banking takes a shorter time than accessing similar services whilst in a physical
bank. This is consistent with past empirical literature by Forsythe et al. (2006) which
established that the most important aspect of adopting e-banking from the perspective of
the customer is the time saved. It can therefore be inferred, in keeping with the findings of
this study, that increased comfort in time management, thanks to e-banking’s ability to
provide services at the press of a button, explains the statistically significant positive
correlation established between perceived usefulness as measured by time saving and
adoption of e-banking. This reinforces the notion held by Shan and Hua (2006) that since
the customer can access e-banking services at his convinient time, mostly 24 hours a day,
then he is able to schedule and utilize his time without unnecessary travels to a physical
bank. This is also depicted in the number of respondents utilizing e-banking services. As
56
this study has established, nearly all of the respondents adopted some form of e-banking,
with ATM services and tele-banking toping the list. This agrees with the example given
by Baten and Kamil (2010) that a customer can use mobile banking to send or receive
money instantly, transfer money to another country at a touch of a button and at the
confort of her sitting room.
The study also found out that majority of the respondents was of the view that e-banking
saves on transaction handling fees. This is consistent with the argument put forward by
Senft et al. (2012) who associated e-banking adoption with the emergence of e-commerce
which has brought new commercial revolution by offering a cost effective way of
exchange of information when buying or selling products and services. That there was a
direct positive correlation between reduced transaction cost and e-banking adoption
further reinforces this school of thought, observing that the e-banking revolution has
resulted in banks setting a provision of a payment system that is compatible with the
demands of the electronic market place.
The foregoing findings echoe that of a study previously undertaken by Ombati et al.
(2010) which established that the use of online banking in Pakistani for instance, although
characterized by many bottlenecks, issues like safety, lack of trust and security of ATMs
were overidden by the many benefits that started to creep in, including reduction in
operational cost and savings on time and convenience. In this study, it was found that the
relationship between e-banking and convenience was statistically significant, and; as
majority of the respondents agreed that using ATM for instance, was more convenient
than talking to a teller in a physical bank, the convenience that comes with e-banking by
implication offered a compelling business case for the respondents.
The study results indicated that majority of the respondents agreed that e-banking services
were more reliable compared to similar services accessed through a teller in a bank,
although; observably, this majority was marginal. This underscores the view that the
aspect of reliability is essential in creating trust and a considerable level of comfort with a
new system, product or service such as e-banking. The findings are consistent with the
conclusions of a previous study by Omar et al. (2011) which emphasized that banks
should improve the services offering at various ATMs to establish their customer’s
confidence and reliability.
57
5.3.2 The Effect of Perceived Ease of Use on the adoption of E-banking
In terms of perceived ease of use, the study found of that there was a statistically
significant correlation between e-banking and ease of task accomplishment as well as
ease of log-in. For example, majority of the respondents found it easy to register for e-
banking. This suggests that banks have taken heed of e-banking literature (Lee, 2009)
which emphasized that after initial registration, the subsequent log-in procedures should
be easy. The findings by implication agrees with the view that complexity in accessing
the bank website, lengthy log in process including internet delays and password
verification limits the ease of usage. The results highlight the point made by Medyawati
et al. (2011) that if a customer has difficulty in the initial registration, then it was most
probable s/he may negate to access the e-banking services in the future. It also resonates
the study of Al-Hajri, (2008) which found that ease of use of the e-banking facility are
some of the indicators that tend to influence the adoption of the technology.
The study also showed that the relationship between e-banking and ease of adaptation to
e-banking products was statistically significant. In other words, the easy it was to adapt to
e-banking products, the faster was the adoption of e-banking. This is reflected in the
majority of the respondents who indicated that they were easily able to use new additional
e-banking products introduced by the bank. The results agree with Medyawati et al.
(2011) who opined that the ease of performing a financial transaction offsite creates some
trust with the system.
Majority of the respondents in this study chose their preferred e-banking services because
of ease of use and familiarity with the service. This concurs with the speculations of
Ombati et al. (2010) that specific areas that may influence the adoption of e-banking
might include knowledge and understanding of the new e-banking facility. The findings
also reinforces the emphasis by El-Kasheir et al. (2009) that the (e-banking) system
should use a clear and simple language to enable the user to decode the instructions with
no ambiguity. In keeping with this view, Safeena et al. (2011) correctly pointed in
hammony with the findings of this study that as customer continues to interact with the e-
banking facility, then prior negative beliefs that hindered the use of the system are slowly
forgotten as the learning effect takes place and the customer adjusts their mental models
to reflect the change.
58
Further findings showed that majority of the respondents found it easy to make e-
payments than making out cheques. This agrees with the point of view by Gikandi and
Bloor (2009) that recommended that e-banking software should be user friendly to
enhance its compatibility with customer requirements and hence its adoptability. Jahangir
and Begum (2008) also recommended that banks should make the e-banking system easy
to use by organizing computer training courses to enhance consumers’ efficacy to enable
them to feel at ease at any level. However, that the relationship between e-banking
adoption and perceived ease of use in terms of skills compatibility was not statistically
significant; a fact which was implied in other findings which showed that majority of the
respondents disagreed that they required a lot of training for them to access e-banking
services. This could potentially be because majority of the respondents in this study had
higher education and perhaps their technology skill levels were high enough to not
warrant lot of training from the bank.
5.3.3 The Effect of Perceived Risks on the adoption of E-banking
Correlation results showed that there was a statistically significant inverse relationship
between e-banking adoption and incorrect payment processing, risk of lack of
compensation in case of loss or inconvenience due to payment errors. This means that the
less there were experiences of incorrect payment processing via e-banking, the more the
adoption of e-banking services. This is in agreement with the cases with e-banking
services such as the transfer of money through M-Pesa which, according to Jack and Suri
(2010), has got its own risk especially if a customer inserts a wrong cell phone number
prompting the system to send money to an unintended customer.
This study established that majority of the respondents were always afraid that they might
lose money while transferring money on internet. This finding echoes the reports from
past empirical works such as that of Liao and Cheung (2008) who found that security,
especially with regards to internet banking is a matter of intense concern, especially with
regard to the acquisition and dissemination of personal and sensitive data. This risk of
losing money occurs due to a problem within the payment system.
59
The study also established that there was a statistically significant correlation between
perceived risks such as fear of giving personal information, fear of hacker and fear of
disclosing personal information online. This is consistent with the findings of a previous
study by Ozdemir and Trott (2009) which found out that security concerns played the key
role, with perceived security risk being the most significant barrier for internet banking
adoption compared to other banking channels. The question of perceived risk seems to
explain why internet banking particularly registered the lowest usage by respondents in
this study, ranking third after credit card and PC banking.
Unsurprisingly, similar findings have been recorded in other countries such as India
according to (Safeena et al., 2011). It appears therefore that low adoption of e-banking is
synonical particularlly with internet banking as past studies in Kenya such as that of
Njuguna et al. (2012) showed that internet banking in Kenya was very low. This
reinforces the view by Sarel and Marmorstein (2005) that the security of online banking is
a major issue for an increasing number of consumers, making perceived risk an important
predictor of internet banking adoption as consumers associate security risk with the loss
of bank account or credit account numbers and passwords, among others, which can
result in the loss of money. The findings are in line with past study results reported by
Jensen (2005) which found that many consumers were anxious that their personal data
could either be stolen by hackers or sold to third parties by the banks. As the findings of
this study showed, majority of the respondents were worried to use online banking in fear
of hackers. This is perhaps catalyzed by the imagination-capturing stories of hackers thus
customers may fear that an unauthorized party will gain access to their online account and
trigger serious financial implications.
The findings of this study also showed that majority of the respondents feared that e-
banking servers may not perform well due to slow download speeds. This agrees with the
findings of Barako and Gatere (2008) that internet availability and access were among the
major factors affecting the adoption of internet banking technology. The findings echo the
views of Nor and Pearson (2007) that customers who transact business need to have a
seamless payment system that is fast and reliable, and thus, the interconnectivity with the
clearing house should be fast and reliable.
60
5.4 Conclusion
5.4.1 The Effect of Perceived Usefulness on the Adoption of E-banking
Perceived time savings and perceived cost-savings directly influenced adoption of e-
banking. This is because using e-banking takes a shorter time than accessing similar
services whilst in a physical bank. E-banking adopters are attracted to e-banking services
by the facility’s ability to provide services at the press of a button and therefore bank
transactions can be effected without necessarily visiting a physical bank. Perceived cost
savings manifest in the form of reduced transaction cost. In addition, e-banking was
perceived as convenient, making it an attractive alternative to brick-and-mortar banking
options. Moreover, the reliability of e-banking was also a positive influencer in e-banking
adoption decisions.
5.4.2 The Effect of Perceived Ease of Use on the adoption of E-banking
Aspects of perceived ease of use that affected adoption of e-banking were ease of task
accomplishment and ease of log-in. That is, registering for e-banking was not difficult
and subsequent log-in procedures were easy. The ability inherent in e-banking that makes
it easy for adopters to adapt easily had a direct positive effect on e-banking adoption.
Choice of e-banking service was influenced by its ease of use and familiarity with the
service. This includes the ease with which it was easy to make e-payments compared to
making out cheques.
5.4.3 The Effect of Perceived Risks on the adoption of E-banking
Perceived risk was the most important factor affecting adoption of e-banking as many
aspects of perceived risks were associated with the low adoption of most aspects of e-
banking services. Issues such as the potential for incorrect payment processing, risk of
lack of compensation in case of loss or inconvenience due to payment errors negatively
impacted on the rate of e-banking adoption. In addition, there was the fear of losing
money while transferring money on internet, fear of giving personal information, fear of
hacker and fear of disclosing personal information online. Further, the fear that e-banking
servers may not perform well due to slow download speeds served to discourage faster
adoption of e-banking.
61
5.5 Recommendations
5.5.1 Recommendations for Improvement
5.5.1.1 The Effect of Perceived Usefulness on the Adoption of E-banking
Banks should leverage on the numerous benefits that come with the technological
innovation of e-banking platform. In order to accelerate faster adoption of e-banking,
banks should work to position in the minds of adopters the benefits of e-banking such as
time savings, cost savings and convenience. For example, they could use graphic images
of savings that adopters could enjoy in measurable or monetary terms. This should be
based on facts and testimonies drawn from actual research undertaken among users who
have adopted e-banking services already.
5.5.1.2 The Effect of Perceived Ease of Use on the adoption of E-banking
Banks should demystify e-banking services by increasing e-banking literacy through
training and making public e-banking literature. This should target e-banking services that
records low adoption such as internet banking, PC banking and credit card. This is
especially because ease of use and familiarity with service appear to be the determining
criteria potential adopters use to choose the e-banking services to use. Focus should be in
keeping the e-banking process simple and secure.
5.5.1.3 The Effect of Perceived Risks on the adoption of E-banking
Banks should work to increase confidence of potential e-banking adopters in the e-
banking platform as a secure and safe means of satisfying their banking needs. As an
industry, players in the banking sector could collaborate to come up with measures to
counter both perceived and actual risks inherent in e-banking. Focus should be on
investing in e-banking technologies that proactively remain ahead of the game to avert
cases of fraud and identity theft. This includes training adopters on due diligence
procedures that they need to ensure while consuming e-banking services.
62
5.5.2 Recommendation for Further Research
Future studies should focus on specific e-banking services such as internet banking, PC
banking and credit-card in order to establish the reasons for their relatively low adoption
and how they could collectively add value to the bank’s portfolio of services. Future
researchers could also undertake to establish the quantitative gains of e-banking adoption
both to the bankers and the e-banking adopters. This information can then be used to
present the business case for actors in the banking sector to invest in technological
infrastructure that supports the increased utilization of e-banking services. Lastly, since
this research was undertaken in Nairobi only, another study could be undertaken to
establish the dynamics underpinning e-banking adoption in other regions of Kenya for
comparison purposes.
63
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APPENDICES
APPENDIX 1: LETTER OF INTRODUCTION
JOSEPH MWANGI
UNITED STATES INTERNATIONAL UNIVERSITY-AFRICA (USIU-A)
P.O. BOX 14634-00800,
NAIROBI
Ref: Request for participation in a Research Project
Dear Respondent,
I am a post graduate student at the USIU. I am carrying out a research to determine the
factors affecting the adoption of technological innovation of e-banking in Kenya as partial
fulfillment for the requirement for my MBA. The research study uses banking customers
in Nairobi which qualifies you as one of the eligible respondents. The result of this study
will provide the stakeholders - both providers and users, of the e-banking services with
the necessary information that may hinder or enhance the adoption of the technology.
This is an academic exercise and confidentiality is observed. Thus, your name will not
appear anywhere in the report. Please make time to fill the attached questionnaire.
Thank you,
Yours sincerely,
Joseph Mwangi
USIU Student ID 621907
Cell-phone 0722 933 262
70
APPENDIX 2: RESEARCH INSTRUMENT
This study examines the adoption of e-banking platform by examining the customers holding
accounts in commercial banks and who access or use e-banking services in Kenya. The findings
from this study will provide the stakeholders in the banking industry with a deeper understanding
of the e-banking platform to enhance the choice and adoption of this technology.
PART A: GENERAL INFORMATION
1. Your gender: Female Male
2. Your Age:
20-25 years 26-30 years 1-35 years 36-40 years 41 years plus
3. Level of education: Primary Secondary Tertiary University
4. Which e-banking technology do you know that your commercial bank offer
A. ATM B. Internet banking C. Telebanking D. SMS banking E.PC
banking F. Debits card G. Credit cards
5. Which e-banking service(s) do you enjoy from the E banking platform offered by
your commercial bank
A. Check the balances
B. Know the product of the bank
C. Electronic Funds transfer
D. Check statement
E. Purchase product/Pay bills
F. Order cheque book
G. Make or Stop payment
H. Change password and Pin
6. What are the criteria of choosing of your preferred E banking service from a
Commercial bank
A. Familiarity with the service
B. Service is available both in local and overseas branches
C. Comprehensible instructions
D. Easy to use
E. Prompt in processing transaction
F. It is the only service well promoted by the bank
7. How would you rate your satisfaction?
A. Highly satisfied B. Satisfied C. Dissatisfied
71
PART B: PERCEIVED USEFULNESS OF USING E-BANKING
Using a 5-point measurement scale, 5 highest and 1 lowest, please tick the numeric value
corresponding to your personal opinion for each statement.
Strongly
agree
Agree Neutral Disagree Strongly
disagree
8. Using e-banking can saves
me time in performing
banking transactions
9. Using e-banking takes a
shorter time than accessing
similar services whilst in a
physical bank.
10. Using e-banking can save
on transaction handling fees
in performing banking
transaction
11. Using an ATM is more
convenient than talking to a
teller in physical bank
12. Using e-banking reduces
my operational costs
13. Using e-banking saves on
the cost of stationery.
14. Using e-banking services is
more reliable than
accessing similar services
from a teller in a physical
bank
15. Using e-banking makes me
lose the much needed
personal contact with a
teller.
16. E-banking enables me to
access a wide range of
products offered by the
bank
17. I am comfortable receiving
and paying e-bills online
than manual ones.
72
Strongly
agree
Agree Neutral Disagree Strongly
disagree
18. I feel more comfortable
making e-payments than
writing cheques manually
19. Using e-banking services
requires me to acquire new
software
20. Using e-banking services
requires me to acquire new
phone with new software
21. Using e-banking services
requires me to modify the
existing software
PART C: PERCEIVED EASE OF USE OF E-BANKING SERVICES
Using a 5-point measurement scale, 5 highest and 1 lowest, please tick the numeric value
corresponding to your personal opinion for each statement.
Strongly
agree
Agree Neutral disagree Strongly
disagree
22. I find it easy to register for
e-banking services as it
requires minimal additional
effort
23. I find it easy to log in and
finalize an e-banking
transaction
24. I am easily able to use new
additional products and
services that the bank
introduces
25. It requires a lot of training
for me to access the e-
banking services
26. I find it easy to make e-
payments than making out
cheques
27. My bank trains me before it
introduces new e-banking
products
73
PART D: PERCEIVED RISKS OF USE OF E-BANKING
Using a 5-point measurement scale, 5 highest and 1 lowest, please tick the numeric value
corresponding to your personal opinion for each statement.
Strongly
agree
Agree Neutral Disagree Strongly
disagree
28. E-banking servers may
not perform well due to
slow download speeds.
29. Online banking servers
may process e-payments
incorrectly
30. When transferring money
on internet, I am always
afraid that I might lose
money due to wrongly
keyed in amounts
31. When a transaction error
occurs, I am worried that
the bank shall not
compensate me.
32. Using e-banking service
would lead to a lot of
inconvenience since I
would have to fix a lot of
payment errors
33. I am always worried to
use online banking since
a hacker might access my
account
34. I am always afraid of
thieves while
withdrawing money from
an ATM
35. I find it hard to disclose
my PIN while making an
e-payment
36. I always prefer
depositing money in
through a teller than
through an ATM
74
APPENDIX 3: POPULATION AND SAMPLE OF FIRMS IN ONLINE DIRECTORY
INDEX CLASSIFICATION POPULATION SAMPLE SIZE
A 60 6
B 53 5
C 99 10
D 54 5
E 58 6
F 56 6
G 28 3
H 39 4
I 43 4
J 2 0
K 8 1
L 36 4
M 94 9
N 10 1
O 15 2
P 92 9
Q 3 0
R 44 4
S 97 10
T 58 6
U 4 0
V 12 1
W 29 3
X 2 0
Y 1 0
Z 1 0
Total 998 100