empirical analysis on internet banking adoption in manila
-
Upload
anthny-garc -
Category
Economy & Finance
-
view
1.562 -
download
1
description
Transcript of empirical analysis on internet banking adoption in manila
An Empirical Analysis of Internet Banking Adoption in Manila
A Thesis
Presented to
The Management of Financial Institutions Department
College of Business
De La Salle University
By
Garcia, Anthony
Jung, Sangbin
Kim, Taejin
August 2011
1
CHAPTER 1. INTRODUCTION
1.1Background of the Problem..................................................................................3
1.2 Problem Statement...................................................................................................................12
1.3 Objectives................................................................................................................................13
1.4 Hypotheses...............................................................................................................................14
1.5 Significance of the Study..................................................................................16
1.6 Scope and Limitations.............................................................................................................17
CHAPTER 2. REVIEW OF RELATED LITERATURE
2.1
Previous Studies 19
CHAPTER 3. FRAMEWORK
3.1 A Priori Expectations23
3.2 Conceptual Framework7
CHAPTER 4. METHOLODGY
4.1 Research Design8
4.2 Sampling Design8
4.3 Data Description and Collection Method9
4.4 Data Analysis Methods
CHAPTER 5. RESULTS AND DISCUSSION3
CHAPTER 6. CONCLUSION51
CHAPTER 7. RECOMMENDATION53
BIBLIOGRAPHY57
2
APPENDIX..…..…………………………………………………………………….……….62
CHAPTER 1
I N T R O D U C T I O N
1.1 Background of the Study
E-banking is called Internet banking, online banking or PC banking. E-banking may
include ATMs, wire transfers, telephone banking, electronic funds transfers and debit cards
(Mobarek, 2007).
The evolution of the e-banking industry started as early as the 1970s when banks began
to look at e-banking as a way of substituting some of their traditional bank functions. The first
automated teller machine (ATM) was invented by IBM and later introduced in December 1972 at
Lloyds bank in the UK (Schneier, 2004). Subsequently, in the 80s, Citibank offered PC-banking
services amidst popularization of the personal computer (Shapiro, 1999). Nevertheless, PC
banking is difficult to use and expensive to maintain. It only succeeded in the business field .
Internet banking was introduced in the mid-90s due to the popularization of the Internet and it
changed the way of banking. Internet banking was made possible by the creation of Web
browsers. With the web browser, consumers do not have to purchase additional software, store
any data on their computer or be constrained by the software updates. All transactions take place
3
on the server of a bank through the Internet. Clients access the bank's Internet banking website,
and just log in their account then they can use their Internet banking service (Kolsaker & Payne,
2002; Dong-Her et al, 2004). Moreover, Wells Fargo is the first bank to introduce and establish
the virtual bank (DeYoung et al., 2007). Now in the 21st century, almost all banks in EU and US
provide Internet banking services (DeYoung et al., 2007; Hernando & Nieto., 2007).
A few existing empirical studies have already proven that Internet banking provides
many benefits for both banks and their clients. Table 1, containing previous researches done on
the performance of Internet banks, indicates that online services have positive impact on the
bank’s financial performance.
4
Table 1: International Studies on Internet banking and Performance (Malhotra and Singh, 2009)
Study Country and
sample size
analyzed
Sample
Period
Results
1 Furst et al.
(2000a,
2000b,
2002a, and
2002b)
U.S., 2,517
National Banks
Q3, 1999 Internet banks outperformed non-
Internet banks in terms of
profitability. Offering Internet
banking did not have a statistically
significant impact on profitability.
2 Hasan et al.
(2002)
Italy, 105 banks 1993-2000 With respect to almost all
performance variables, the Internet
group outperformed the non-
Internet group. Highly significant
relationship between offering of
Internet banking and bank
profitability.
3 Hernando
and Nieto
(2005)
Spain, 72
commercial banks
1994-2002 Performance of multi-channel
banks was better in terms of ROE,
higher commission income and
lower general expenses. The
adoption of the Internet as a
delivery channel had a positive
impact on banks’ profitability
measured both in terms of ROA and
ROE and no statistically significant
impact on risk.
4 DeYoung et
al.(2007)
U.S., 424 Internet
banks and 5175
non-Internet banks
1999-2001 Click and mortar banks became
more profitable (ROA and ROE)
relative to their brick and mortar
rivals between 1999 and 2001.
Internet adoption improved bank
profitability, particularly through
5
increased revenues from deposit
service charges.
In traditional banking, a greater amount of capital investment is required to maintain the
distribution system. Therefore, the operating cost of traditional banks is relatively high compared
to Internet banking, because Internet banking uses the Internet as the medium which is deemed
the cheapest distribution channel (Polasik et al., 2008). In addition, traditional banks allot capital
for labor and infrastructure costs. On the other hand, Internet banking acquires savings which
allows them to offer higher interest rates and lower lending rates and service charges so recently
the trend for traditional banks is to encourage their customers to do their banking online.
Polatoglu and Ekin (2001) reported that the average cost of transaction with regard to Turkish
Internet banking is $0.10, compared to the $2.1 for a teller. Also, web-based banking services
give banks the opportunity to gather customer data and behavior so that a cross-selling can be
easily implemented.
Most consumers look at Internet banking as convenient and efficient because they do not
have to go to the bank, fall in line and wait to be called. Moreover, they are not constrained by
region or time because they can do banking transaction as long as they have a PC that is
accessible to the Internet (Lassar, 2005). Furthermore, other factors like sense of complete
control over one’s account, speed of transactions, higher interest rate and lower lending rate are
also important to consumers (Black et al., 2001).
6
Though Internet banking proved to be beneficial, there are still obstacles to the adoption
of Internet banking. Primarily, the lack of computers and Internet access appear to be the most
critical problem (Black et al., 2002). In the case of the Philippines, only few areas are allowed
for high-speed and wireless Internet connections since these are concentrated only in certain
areas within major cities (Lallana et al., 2009). BBC News reported in an article that based on the
ranges in world broadband prices, Sweden's megabit-per-month entry-level connection was
USD10.79 (P500) in the past decade while the Philippines just crossed the megabit barrier during
this time (BBC News, 16 July 2007). Furthermore, people also have security issues on doing
transactions via the Internet. Most of the people’s concerns include cases of hacking, credit card
fraud, and scam, which have been found to affect the decision to adopt Internet banking (Sathye,
1999; White and Nteli, 2004; Gerrard et al., 2006)
There are other factors that predict the adoption status of Internet banking which include
socio-demographic characteristics. Based on previously conducted studies, income level and
other demographic variables have been shown to be significant predictors (Karjaluoto et al.,
2002; Im et al., 2003; Flavián et al., 2006). Low educational attainment or unavailability of
information limits people’s knowledge about Internet banking (Nielsen, 2002; Im et al., 2003;
Pikkarainen et al., 2004; Lassar et al., 2005; Lee et al., 2005; Gerrard et al., 2006).
The Philippine Context
7
The state does not only supervise banks, but with the advent of central banking, it also
controls the banks’ operation. In the Philippines, the Bangko Sentral ng Pilipinas (BSP)
supervises the nation’s banking system. During the Asian financial crisis of 1997, the banking
industry was relatively undamaged, and asset quality has been improving since 2001. In July
2005, non-performing loans reduced into the single digits (9.3 percent), half the peak level (18.8
percent) recorded in October 2001.
As of February 2009, there are 21,494 BSP supervised/regulated banks, consisting of:
4,284 universal and commercial banks, 1,318 thrift banks and 2,141 rural and cooperative banks.
Three banks are owned or controlled by the government: Al-Amanah Islamic Investment Bank of
the Philippines, Development Bank of the Philippines, and Land Bank of the Philippines.
Foreign banks compete with local banks and are active in asset management, investment
banking, foreign-exchange and derivatives trading. Though foreign banks have a small market
share and branch networks are not that extensive, customers are still attracted by their good
reputation and expertise.
In the early 1980s, the Bank of the Philippine Islands (BPI),Citibank , Philippine
National Bank, and other large banks pioneered e-banking creating a change in the world of
banking in the country. Interbank networks in the country like Megalink, Bancnet, and BPI
Expressnet were among the earliest and biggest starters of ATM (Automated Teller Machine)
8
technology. BPI launched its BPI Express Online in January 2000. Aside from this, other forms
were introduced such as phone and mobile banking. The most common online financial services
include deposits, fund transfers, applications for new accounts, Stop Payment on issued checks,
housing and auto loans, credit cards, and remittances (Leuterio and Estepa, 2009)
By the end of June 2004, 57 banks (41 domestic banks and 16 foreign banks) provided
Internet banking services, 36 of which were universal and commercial banks and 21 were thrift
banks and in February 2009, this number grew to 92. Because of these, customers were able to
access banking services from different parts of the country all day and enjoyed conveniences and
lower transaction costs. However, there exist some obstacles in the wide use and implementation
of e-banking. The Philippines has been reported as one of the lowest GDP per capita among the
Southeast Asia (IMF, 2011) (Figure 1). Most users in the country who access Internet banking
Figure 1 : GDP per capita in Southeast Asia 2010 (in billions $)
Indonesia Thailand Malaysia Singapore Philippines Vietnam0
100
200
300
400
500
600
700
800707
319238 223 189
104
Source: IMF (2011)
9
come from urban areas. The innovation has not been widespread since only those who have
Internet connections are able to enjoy it. Pure e-banking has not yet fully replaced the traditional
way of banking in the Philippines. Internet-only banks do exist as the BSP has already licensed
one pioneer Internet-only bank in the Philippines. However, today's Internet banking is more like
bricks-and-clicks, the incorporation of e-banking into the more traditional banking structure
(Jimenez and Roman, 2005).
Security is also a major concern although the technology to protect transactions is
already pretty good and keeps getting better. For BSP, this is a major reason for regulating e-
banking activity both from the perspective of prudential regulation as well as consumer
protection (BSP, 2009). The percentage of households with a computer and Internet access still
falls below the Asia average, PC penetration is estimated at 1.9 for every 100 persons and 71%
of the Filipinos are accessing Internet through PC cafes (Yahoo-Nielsen, 2010). And according to
a survey by Nguyen (2011) (refer to Table 2), the number of visitors to online banking websites
rose by double-digit figures over the 12 month period from January 2010 in all five countries,
including a 72 percent rise in Indonesia. However, in this list, the Philippines still had the lowest
number of Internet banking users (Nguyen, 2011).
10
Table 2: Internet banking users in Southeast Asia
Online banking category visitation by market
January 2010 vs January 2011
Total Unique Visitors
2010 January 2011 January % Change
Malaysia 2,360,000 2,746,000 16%
Vietnam 701,000 949,000 35%
Singapore 779,000 889,000 14%
Indonesia 435,000 749,000 72%
Philippines 377,000 525,000 39%
Source: Nguyen (2011)
The benefits of e-banking in the Philippines can be maximized through the benefit of
Overseas Filipino Workers (OFWs). OFWs send large amounts of remittances to their relatives in
the Philippines. Internet banking could make the remittance process a lot more convenient and
faster. In addition, the remittance fees become minimized. Therefore, Internet banking must be
made available to OFWs and banks must take advantage of their needs and provide these
services abroad.
1.2 Problem Statement
11
This study is to evaluate the phenomenon of Internet banking adoption on the
perspective of Filipino Internet users. Specifically, the following questions would like to be
answered:
a. Does individually perceived security able to increase the probability of using Internet banking
services?
b. Does Internet experience affect usage of web-based banking?
c. Does exposure to Internet banking advertisement increase the likelihood of Internet banking
adoption?
d. Does the use of other banking products, such as mobile banking and debit and credit cards
increase the likelihood of opening an online account?
e. Does the type of Internet connection used increase the probability of using Internet banking?
f. Do demographic characteristics such as age, gender, income, educational attainment and work-
related attributes determine the adoption status of Internet banking?
1.3 Objectives
This paper seeks to identify empirically the factors underlying the decision to adopt In-
12
ternet banking in the Philippines and the barriers to adopting Internet banking will be particularly
noted and explained. Consequently, the results that will be obtained in this study can be of assis-
tance to banks that operate in the Philippines. The improvement of banks and the strong empha-
sis on Internet banking are considered necessary in the adoption of Internet banking in the Philip-
pines. This study could provide banks with important insights on the target market segment, se-
curity issues and strategies that will help foster the acceptance of Internet banking.
Also, this study aims to investigate the perception and behavior of Filipino consumers on
Internet banking. The knowledge of Filipino consumers on Internet banking will be evaluated to
determine their likelihood to adopt Internet banking in the future.
Finally, this study will also analyze the impact of Internet banking on the banking
industry and economy in the Philippines. The future of Internet banking in the country is
important as Internet banking could pave the way for the economic progress.
1.4 Hypotheses
The factors which are hypothesized to influence the individual’s decision to adopt
Internet banking are divided into six main categories: (a) Perceived security, (b) Internet
13
experience, (c) Marketing exposure, (d) Use of other banking products, (e) Type of Internet
connection used, (f) Demographic characteristics.
a. Perceived security
Ho: The individually perceived security of Internet transactions has no effect on probability of
using Internet banking services.
H1: The higher the individually perceived security of Internet transactions, the higher the
probability of using Internet banking services.
b. Internet experience
Ho: Familiarity with the Internet medium, application of Internet at work and prior experience
with online transactions have no effect on the usage of Internet banking.
H1: Familiarity with the Internet medium, application of Internet at work and prior experience
with online transactions have a positive effect on the usage of Internet banking.
c. Marketing exposure
Ho: Exposure to Internet banking advertisements has no effect on likelihood of Internet banking
adoption.
H1: Exposure to Internet banking advertisements increases the likelihood of Internet banking
14
adoption.
d. Use of other banking products
Ho: Use of other banking products, such as mobile banking, as well as debit, credit card has no
effect on odds that a respondent opens an online account.
H1: Use of other banking products, such as mobile phone banking, as well as debit, credit card
raises the odds that a respondent opens an online account.
e. Type of Internet connection used
Ho: The type of Internet connection has no effect on probability of using Internet banking.
H1: The type of Internet connection increases the probability of using Internet banking.
f. Demographic characteristics
Ho: Demographic characteristics, such as age, gender, income, educational attainment and work-
related have no effect in determining the adoption status of Internet banking.
H1: Demographic characteristics, such as age, gender, income, educational attainment and work-
related attributes jointly determine the adoption status of Internet banking.
15
1.5 Significance of the Study
As e-banking is considered an important innovation in the field of banking and finance,
this study has major implications in the Philippine setting. First, as the adoption of Internet
banking in the country is not that prominent compared to other countries, this study can help
banks in thinking of ways to promote Internet banking. The information this study would provide
regarding market segmentation, perceived security and banking products can improve the
management of Internet banking. As a result, this may increase the adoption status of Internet
banking in the country. The analysis of bank's financial statements related to the adoption of
Internet banking will suggest on how banks can operate at lower costs. Second, with the
knowledge of the problems encountered by users, banks can improve their Internet banking
services. Finally, it contributes to the e-commerce industry of the Philippines by enhancing
performance and having greater economic efficiency and more rapid exchanges among financial
markets.
In addition, as the development of Internet technology is getting faster and many people
all over the world are already experiencing Internet banking, this study provides Filipinos with
ways on how to maximize the benefits of Internet banking.
1.6 Scope and Limitations
This study focuses on studying the Internet banking adoption status in the Philippines.
16
The sample population was obtained in the City of Manila since it has a vast geographic area and
consists of a wide variety of people as it is the capital of the country. In order to determine the
situation of Internet banking adoption, the research analyzed the effect of variables such as
perceived security, Internet experience, marketing exposure, use of banking products, type of
Internet connection used, and demographic characteristics. The respondents answered
questionnaires and were interviewed to determine the significance of each variable.
However, there are always inevitable limitations in every research. This research also
faced the same issues which include improper time management, high cost of research, the
difficulty in obtaining information required and the unpredictable nature of data collection. It is
difficult and expensive to collect information especially when the respondents are reluctant to
disclose the information. The cooperation of respondents is very important, since they provide
the data needed in research. It is noted that some respondents showed lack of enthusiasm and
skepticism during the data collection process since it deals with personal financial information.
There were also problems when designing the questionnaire; nevertheless, the
researchers were able to come up with a questionnaire that combines both open-ended and close-
ended questions to obtain accurate responses from respondents. The open-ended questions were
used to boost the close-ended questions by supporting and substantiating them.
Another major limitation of this research was the inadequacy of knowledge that most
17
respondents had about Internet banking, mobile banking and Internet security. It was observed
that the people are not thoroughly aware of Internet banking and Internet security. This can lead
to irrelevant results since the respondent does not have enough knowledge on the subject matter.
Finally, not all assumptions made were right and this leads to different conclusion and
recommendations compared to previous studies.
CHAPTER 2
R E V I E W O F R E L A T E D L I T E R A T U R E
2.1 Previous Studies
Due to the fact that our research is highly based on experimental methods, it is better
that the characteristics of different countries which use Internet banking be defined first. Using
notable texts, it was found that developed countries tended to provide Internet and electronic
banking.
18
Internet banking first flourished in big and successful banks located in urban settings.
Profitability and efficiency were the main reasons for choosing to adopt Internet banking as
shown by statistical evidences in the study of Furst et al. (2002) since there was a strong
correlation between the high profitability of banks and their time usage of Internet banking.
In a study clearly depicting the Internet banking usage in Europe, it was stated that banks
in the EU showed commonality because of their business method of both the Internet banking
system and the orthodox banking system. It was mainly stated that banks in Europe tried to
exploit not only the Internet banking system, but also equally the orthodox banking system,
because it was believed that being experienced on both fields put certain banks ahead than
others. For example, banks that started using Internet banking systems also moved on to other
techniques such as telephone banking, financial advisors, and such. Since most successful banks
in Europe use this method, it is very rare to see banks that only use the orthodox way of banking
(Claeys and Arnaboldi, 2007).
Due to the efficiency of the Internet banking system, Internet banking does not only help
the successful, but also the people who are rising to success. To back this statement, Jimenez and
Roman (2005) stated that electronic banking services, which are considered more efficient and
cheaper, should be made available to microfinance clients as well. The increased convenience
and lowered costs brought about by e-banking should also benefit the poor and low-income
19
clients. Jimenez and Roman (2005) also stated that rivalry of Internet banking between banks
may also help the poor and the low-income clients because this conflict will force the Internet
banking system to improve and become more efficient for the public.
Furthermore, the research of Fuentes et al. (2006) stated that decisions such as using
Internet banking in banks were usually decided by the financial status and size of the banks that
are going to use the system. He further explained that the bank membership to a holding
company speeds up the Internet banking adoption but this was not the case so the adoption
decision was taken at the bank level.
Advantages of using Internet banking
Numerous studies showed that there were several advantages to Internet banking. One
advantage was that Internet banking created cheaper means of banking for both the customers
and banking companies. The other advantage was that the banking companies would not need to
have a lot of workers to sort out the money of their customers, since the online banking system
allowed the money to be circulated online. It is also very convenient for the customers since they
can do banking in places that have Internet installed (Howcroft, Hamilton and Hewer, 2002).
The Bank and E-business Benefits of the Internet
The research done by Gow (1997) indicated the benefits of the
Internet banking system. These include improving banking revenues,
20
customer service, and cost savings. This is described more in detail in an
article called “Next Generation-Retailed Banking” (Compaq, 2001):
The money saved from the reduced amount of transactional costs.
Online banking requires no ink, paper, and any tangible material;
therefore, in the end, it will save money for whichever company
uses this system of banking
The chance to attract new customers. The online banking system
will attract customers who are usually not used to going to the
bank physically; therefore, they will used the Internet banking
system of the bank whichever has the most efficient system.
Improved ways to keep customers loyal to the bank. Since the
banking will be online, the Customer Relationship Management
(CRM) will be able to store information and statistics about their
customers better since it will be saved up on the banking database.
There is a lot of research about Internet banking adoption. However,
there is a lack of study focusing on the Philippine setting. This paper
attempts to apply a similar study to the local front using the aforementioned
papers as guides, and reserves the option to modify several elements of the
21
research paper.
CHAPTER 3
F R A M E W O R K
3.1 A Priori Expectations
Table 3 : Expectations of Variables on Internet Banking Adoption
a. Perceived security +b. Internet experience +c. Marketing exposure +
22
d. Use of other banking products +e. Type of Internet connection used +/-f. Demographics characteristics +/-
a. Perceived Security
Some customers deny using Internet banking as they perceive it as being easily sensitive
to fraud. The survey by White and Nteli (2004) found that UK consumers ranked the security of
bank’s web site as the most important attribute of Internet banking quality. Therefore, this study
uses perceived security as a significant predictor. This perception can damage consumers’
confidence of the online system as a whole. According to a study conducted by Sathye (1999),
73% of the respondents avoided the adoption of online banking because they are concerned
about the safety and security of transactions over the Internet. Moreover, Sathye (1999) found
that consumer will not be ready to change from current familiar ways of banking to Internet
banking unless their specific need is satisfied.
b. Internet Experience
Since online banking is delivered through the medium of the Internet, customers have to
be familiar with the web browser (Lee et al., 2005). Also, the Technology Acceptance Model of
Davis (1989) identifies perceived ease of use as a key factor in determining Internet banking
adoption. Internet banking has been viewed by customers who are likely to be computer-literate
and familiar with the Internet (The Straits Times, 14 September 1997). Therefore, it is expected
23
that the more the individual uses the Internet and the more he or she perceives the Internet as
compatible with his or her lifestyle, the more likely that the individual will adopt Internet
banking.
c. Marketing Exposure
Some people are not aware of the great existence of Internet banking and the services it
offer. They cannot enjoy the innovative products and services unless it is exposed to them.
Sathye (1999) identified lack of awareness as one of the main barrier in Australia. Also,
marketing effort in Turkey had a positive influence on E-banking acceptance (Polatoglu and
Ekin, 2001).
d. Use of other banking products
There are only few customers who are using different kinds of banking products in the
Philippines. However, a previous study indicated that banking products are initially embraced by
consumers who are financially innovative (Gerrard and Cunningham, 2003). Also, customers
who heavily utilized the existing electronic services such as ATMs or telephone banking showed
a greater tendency to Internet banking adoption. Consequently, it is hypothesized that users of
certain technologies are more likely to adopt online banking. In terms of compatibility with the
24
needs of the potential adopters, Internet banking can be seen as an expeditious tool that allows
customers to better manage their multiple accounts. As there are more financial products and
services, it is expected that individuals who may have many financial accounts and who
subscribe to many banking services will be more inclined to adopt Internet banking.
e. Type of Internet connection used
The speed of Internet connection used in the Philippines is slow compared to other
countries. The download speed and rate of Internet connection in the Philippines are 679 kbps
and 85 kbps respectively. In Asia and around the world, the Philippines ranked at #30 and #136
respectively in terms of speed of Internet connection. Some suffer from the slow connection
problem and price of Internet installation (Internet Speed Test, 2011). However, in the studies
used in Poland, the download speed rate for Internet connection is 512 kbps. The higher marginal
cost and slow speed of dial-up connection did not appear to hinder consumers from conducting
their banking activities online (Polasik, 2008).
f. Demographic Characteristics
Demographics serve as personal characteristics. This includes age, income, gender,
educational attainment and so on. For instance, people with high educational attainment may
have an aptitude for skills in computer and information technology. It is crucial that relationship
25
between education and Internet banking is propounded. Age and gender also have been found to
be important determinants in the online banking acceptance studies (Karjaluoto et al, 2002).
Women are less likely to conduct Internet
banking in Poland. Even geographic location
and income level widely influenced the Internet
banking adoption.
3.2 Conceptual Framework
Figure 2 Research Model
26
Independent Variable
Use of other banking products
Bank cards
Mobile banking
Marketing Exposure
Internet Experience
Internet use frequency
Year of Internet use
Internet use at work
Experience with online Purchase
Experience with e-finance
Perceived Security
Demographic Characteristic
Gender
Year of schooling
Age
Employment status
→
Figure 2 above is shown to illustrate the relationship between the independent and
dependent variables of Internet banking systems. Independent variables such as Internet
experience, marketing exposure, security, demographic features, and the type of Internet
connection used correlate with the dependent variable which is the adoption of the Internet
banking system.
C H A P T E R 4
M E T H O D O L O G Y
4.1 Research Design
Explanatory research was used in this study. The primary goal of this study was to
understand the relationship between the independent and dependent variables. This method was
used to show that one variable caused or determined the value of the other variable. Furthermore,
27
Dependent Variable
Internet banking adoption
quantitative approach was used to obtain the results of the study, appearing as numbers and
statistics.
4.2 Sampling Design
A preliminary survey was conducted and from that, 266 samples were collected. Based
on this number, nearly 40% of the respondents are Internet banking users, therefore, p= .4 was
used in the formula below evaluating the needed number of respondents for the actual survey.
n= z2 pqe2 =
(1.962 ) (.4 )(.6).052 =368
where:
n= sample size
z= confidence level
p= proportion of the population (in this case, proportion of Internet banking users)
q=1-p
e=confidence interval
The computed number was 368 but the questionnaires administered were more than this figure to
account for the uncertainty and error. Thus, the sample used in this study was 600 Manila
Internet users, completing interactive questionnaires. The total population of Manila city is 1.6
million (NSO, 2007). There was no accurate data available for population in Manila since the
2010 census was still in progress. Data gathering was done through the distribution of
questionnaires. The effect of the variables mentioned in this study on the adoption status of
Internet banking services was observed using the logit model.
28
4.3 Data Description and Collection Method
Questionnaires (attachment 1) were distributed in SM City Manila (92), University Mall
along Taft Avenue (75), Robinsons Place in Malate (120), Binondo Church (53), Quiapo Church
(43), Starbucks in Intramuros (86), Gotesco Tower near Malacanang (41), Robinson Residence
(52) and Adriatico Tower along Adriatico Street (38). Table 4 defines the explanatory variables
used in the study.
Table 4: Explanatory Variables Used in the Study
Variables Definition Previous Study
Perceived Security(Security) Security of Internet transactions perceived by the respondent; variable measured on a five-point scale ranging from 1 (very unsafe) to 5 (very safe)
Davis, F.D. (1989), “Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology”, MIS Quarterly, Vol. 13 No. 3, pp. 319-40.
Internet Experience(Internet Experience)
Number of years the respondent has been using the Internet
Pikkarainen, T., Pikkarainen, K., Karjaluoto, H. and Pahn, S. (2004), Consumer Acceptance of Online Banking: an Extension of the Technology Acceptance Model, Internet Research, Vol. 14 No. 3, pp. 224–235.
Internet at work(Internet_at_work) Internet use at work; 1 if the respondent uses
Pikkarainen, T., Pikkarainen, K., Karjaluoto, H. and Pahn, S. (2004),
29
Internet at work; 0 otherwise
Consumer Acceptance of Online Banking: an Extension of the Technology Acceptance Model, Internet Research, Vol. 14 No. 3, pp. 224–235.
Internet Transactions(Internet_transactions)
Experience with online transactions; 1 if the respondent conducted at least one Internet purchase or sale in the past; 0 otherwise
Al-maghrabi, T. & Dennis, C. (2010) “Driving online shopping: Spending and behavioral differences among women in Saudi Arabia,” International Journal of Business Science and Applied Management, vol. 5, no. 1, pp. 30-47.
Internet Financial
Transaction
s(Financial_transaction)
Experience with online financial transactions other than Internet banking (i.e. Internet purchase or sale of stocks, bonds, mutual fund shares, insurance policies or online borrowing); 1 if the respondent conducted at least one Internet financial transaction in the past; 0 otherwise
Black, N.J., Lockett, A., Winklhofer, H. and Ennew, C. (2001), “The Adoption of Internet Financial Services: a Qualitative Study”, International Journal of Retail & Distribution Management, Vol. 29 No. 8, pp. 390-8.
Marketing Exposure(Ads) Exposure to Internet banking advertisements; 1 if the respondent came across at least one advertisement; 0 otherwise
Polasik, M. & Wisniewski, T.P. (2008) Internet banking Adoption in Poland. Retrieved on January 25, 2010 from http: //ssrn.com/abstract=1116760.
Mobile Banking(Mobile_banking) Experience with mobile phone banking; 1 if the respondent conducted at least one financial transaction over the mobile phone in the past; 0 otherwise
Laforet, S. and Li, X. (2005), “Consumers’ Attitudes towards Online and Mobile Banking in China,” International Journal of Bank Marketing, Vol. 23 No. 5, pp. 362-380.
Bank Card(bank_card) Credit card ownership; 1 if the respondent holds a credit card; 0 otherwise
Amin, H. (2007). “An Analysis of Mobile Credit Card Usage Intentions,” Information Management & Computer Security, Vol. 15 No. 4, pp. 260-269.
Broadband(Broadband) Type of Internet connection; 1 if the respondent accesses the
Polasik, M. & Wisniewski, T.P. (2008). Internet banking Adoption in Poland. Retrieved on January 25,
30
Internet via broadband Internet connection; 0 otherwise
2010 from http: //ssrn.com/abstract=1116760.
Years of Schooling(Education) Number of years spent in education; variable derived from the highest educational attainment
Polasik, M. & Wisniewski, T.P. (2008). Internet banking Adoption in Poland. Retrieved on January 25, 2010 from http: //ssrn.com/abstract=1116760.
Age between 18 and 65(Age)
Age level; 1 if the respondent is between 18 and 65 years of age; 0 otherwise
Maiyaki, A.A. and Mokhtar, S. S. (2010). Effects of electronic banking facilities, Employment sector and age- group on customers’ choice of banks in Nigeria, Journal of Internet banking and Commerce. Vol. 15, No. 1, pp. 1-8.
Gender(Gender) 1 if the respondent is a male; 0 otherwise
Elder, V., Gardner, E., and Ruth, S. (1987), “Gender and Age in Technostress: Effects on White-Collar Productivity”, Government Finance Review, Vol. 3 No.6, pp.17-21.
High income(Income) Income level; 1 if the respondent’s monthly income is above P35,000; 0 otherwise
Polasik, M. & Wisniewski, T.P. (2008) Internet banking Adoption in Poland. Retrieved on January 25, 2010 from http: //ssrn.com/abstract=1116760.
Employed(Employ) Employment status; 1 if the respondent is in paid employment; 0 otherwise
Maiyaki, A.A. and Mokhtar, S. S. (2010). Effects of electronic banking facilities, Employment sector and age-group on customers’ choice of banks in Nigeria, Journal of Internet banking and Commerce. Vol. 15, No. 1, pp. 1-8.
White Collar(White_Collar) Occupation; 1 if the respondent is a white-collar worker; 0 otherwise
Elder, V., Gardner, E., and Ruth, S. (1987), “Gender and Age in Technostress: Effects on White-Collar Productivity”, Government Finance Review, Vol. 3 No.6, pp.17-21.
4.4 Data Analysis Methods
Li = {Pi /( 1-Pi)} = β1 + β2Frequencyi + β3Internet_Experiencei + β4Internet_at_worki +
β5Broadbandi + β6Internet_Transactioni + β7Securityi +β8Bank_Accounti + β9Bank_Cardi +
β10Mobile_Bankingi + β11Financial_Transactioni + β12Adsi+β13Genderi+β14
Agei+β15Employi+β16Inci+β17Whti+β18Educationi
31
Logit model: Variables are defined in table 4
Since Internet banking adoption status is a binary variable, we used logistic regression to
analyze the data (Greene, 2003). The parameters, z-statistics, p-values and Huber-White robust
standard errors are estimated using quasi-maximum likelihood method. We used Eviews 7 to
analyze the data, and the results are reported in table 5.
CHAPTER 5
R E S U L T S A N D D I S C U S S I O N
Based on the questionnaires, data were obtained to characterize the respondents. Of the
600 respondents, those aged 18 to 65 years old consisted of 28% and the rest are those below 18
or beyond 65 years old (Figure 3). Males and females comprise 55% and 45% of the total sample
population (Figure 4). Figure 5 shows the educational background of the respondents, most of
which have finished their undergraduate course in college.
32
3%
10%
55%
27%
6%
Figure 5: Educational Background of Respondents
ElementaryHighschool/VocationalCollege(undergraduate)GraduatePost-graduate
33
72%
28%
Figure 3: Age Distribution of Respondents
between 18 to 65below 18 or beyond 65 years old
Furthermore, the respondents are a mix of unemployed and employed people (Figure 6). Of those
employed, 61% reported having white collar jobs (Figure 7). For those employed, 76% have
income less than P35,000 (Figure 8).
47%
54%
Figure 6: Employment of Respondents
yesno
39%
61%
Figure 7: Respondents with White Collar Jobs
yesno
34
24%
76%
Figure 8: The Income Distribution of Respondents
more than P35,000less than P35,000
With regard to the Internet experience, Figure 9 shows that among the respondents, 70% of them
use the Internet daily or almost daily. This number reflects that most people use the Internet since
none of the respondents answered not using the Internet. Of the respondents, 55% have been
using the Internet for 7 years or longer, 22% have used internet for 5 to 7
years, 12% have used internet for 3 to 5 years, 7% have used internet for 1
to 3 years, 3% have used Internet for 6 to 12 months and 1% have used
Internet for less than 6 months (Figure 10).
35
10%
7%
13%
70%
Figure 9: The Frequency of Internet Use of Respondents
Less than once a monthseveral times a month 2-3 times a week daily or almost daily
1% 3%
7%
12%
22%
55%
Figure 10: The Internet Experience of Respondents
less than 6 months 6 to 12 months1 to 3 years 3 to 5 years5 to 7 years7 years or longer
The respondents were also asked about the type of Internet connection that they commonly used
and 58% reported using among various wired connections such as broadband, DSL, and cable
(Figure 11).
36
42%
58%
Figure 11: The Type of Internet Connection
wirelesswired
Most of the respondents access the Internet at their respective work as 59% reported doing so
(Figure 12).
41%
59%
Figure 12: Internet Use at Work
yesno
Accessing the Internet may be due to several reasons but determining their buying or selling
experience through the Internet is vital to understanding the prevalence of Internet banking in
37
Manila. Figure 13 presents the fraction of people who have bought or sold in the Internet in the
form of online shopping. Other respondents also reported doing online purchase or sale of stocks,
bonds or other securities, investment funds and insurance, raising a loan, and many others.
Among the respondents, 78% have experienced performing any of the financial transactions
mentioned above (Figure 14).
51%49%
Figure 13: Experience of Internet Transactions
YesNo
38
23%
78%
Figure 14: The Experience of Financial Transactions
yesno
In terms of banking products, the respondents were also asked if they have bank accounts and
72% affirmed having bank accounts (Figure 15). Also, of these respondents, 73% use bank cards
in the form of ATM, debit, and credit cards (Figure 16).
72%
28%
Figure 15: Bank Accounts of Respondents
YesNo
39
27%
73%
Figure 16: The Use of Bank Cards
yesno
Mobile banking, another banking product, has been also studied. Of the respondents, 73% have
reported using mobile banking and any of its services (Figure 17).
27%
73%
Figure 17: The Use of Mobile Banking
yesno
There are a lot of factors that affect the adoption of Internet banking. People have concerns on its
security and some are influenced mostly by the marketing campaign of banks. According to the
respondents, they have been acquainted with advertisements on Internet banking in different
40
forms of media as 72% reported having seen, read, or heard about it (Figure 18).
72%
28%
Figure 18: Marketing Exposure on Internet Banking
YesNo
In terms of the perceived security on Internet banking, the respondents were mostly uncertain on
the security of Internet banking. Only 9% of the sample population reported being definitely sure
that Internet banking is indeed safe (Figure 19).
41
6%
17%
31%
38%
9%
Figure 19: Perceived Security on Internet Banking
Definitely notProbably notIt is difficult to sayProbably yesDefinitely yes
It is stated that the independent variable on this study is the Internet banking adoption status in
the Philippines; thus, it is necessary to determine who among the residents have already been
performing Internet banking transactions. The use of Internet banking services includes mobile
banking, money transfer, online remittance, and the others (Figure 20).
37%
64%
Figure 20: The Use of Internet Banking Services
yesno
42
Table 5 : Descriptive Statistics on the Variables
all=600 adopters=219 non-adopters=381
Variable Mean Std. Dev. Mean Std. Dev. Mean Std. Dev.
Frequency 3.425 1.00634 3.42922 1.01288 3.42257 1.00389
Internet_Experi 5.135 1.19268 5.37443 1.10731 4.99738 1.21936
Internet_at_Wor 0.408333 0.491936 0.630137 0.483873 0.28084 0.45
Broadband 0.581667 0.493697 0.630137 0.483873 0.553806 0.49775
Internet_Transa 0.513333 0.500239 0.730594 0.444668 0.388451 0.488039
Security 3.28333 1.02215 3.59817 0.959356 3.10236 1.01438
Bank_Account 0.723333 0.447723 0.926941 0.26083 0.606299 0.489212
Bank_Card 0.731667 0.443462 0.917808 0.275286 0.624672 0.484844
Mobile_Bank-
ing
0.271667 0.44519 0.47032 0.500262 0.15748 0.364732
Financial_Trans 0.226667 0.419024 0.447489 0.498374 0.0997375 0.300044
Ads 0.791667 0.406455 0.894977 0.307285 0.732283 0.443351
Gender 0.548333 0.498074 0.616438 0.487367 0.509186 0.500573
Age 0.831667 0.374474 0.890411 0.313092 0.7979 0.402094
Employ 0.465 0.49919 0.634703 0.482616 0.367454 0.482746
Income 0.238333 0.42642 0.39726 0.490452 0.146982 0.354553
White_Collar 0.391667 0.48853 0.589041 0.493135 0.278215 0.448709
Education 3.23667 0.815535 3.43836 0.913502 3.12073 0.729899
Table 5 shows the summary statistics of the variables used in the study categorized by the
adoption status. Based on this, out of the 600 sample population, 219 (37%) are Internet banking
users. It is reported that most of the Internet banking adopters have used the Internet for an
average of 5.4 years, most of them use Internet at work with broadband connections, they look at
Internet banking to be safe and 93% and 91% of them have bank accounts and bank cards
respectively. The adopters also have high percentage of online financial transaction experience
43
compared to non-adopters who almost have no online financial transaction experience at all.
Furthermore, adopters are more likely to be exposed to Internet banking advertisements and a
large portion of them is comprised of white collar workers with high income. Moreover, most of
the adopters are males who are 18 years of age and above.
Table 6 : Binary Logit Model
Dependent Variable: EBANKING
Method: ML - Binary Logit (Quadratic hill climbing)
Sample: 1 600
Included observations: 600
Convergence achieved after 5 iterations
Covariance matrix computed using second derivatives
Variable Coefficient Std. Error z-Statistic Prob.
β1 -4.961913 0.915816 -5.418026 0.0000
44
β2FREQUENCY -0.188289 0.119030 -1.581868 0.1137
β3INTERNET_EXPERIENCE 0.085419 0.106650 0.800924 0.4232
β4INTERNET_AT_WORK 1.061337 0.268577 3.951708 0.0001
β5BROADBAND 0.151027 0.231358 0.652783 0.5139
β6INTERNET_TRANSACTION 0.617921 0.236108 2.617118 0.0089
β7SECURITY 0.273235 0.119733 2.282039 0.0225
β8BANK_ACCOUNT 1.551837 0.384599 4.034950 0.0001
β9BANK_CARD 0.342740 0.390851 0.876908 0.3805
β10MOBILE_BANKING 0.744541 0.246366 3.022089 0.0025
β11FINANCIAL_TRANSACTION 1.786262 0.282812 6.316066 0.0000
β12ADS 0.708288 0.322231 2.198072 0.0279
β13GENDER 0.389471 0.229246 1.698921 0.0893
β14AGE -0.080686 0.347160 -0.232416 0.8162
β15EMPLOY -0.378572 0.320434 -1.181436 0.2374
β16INCOME 0.420854 0.301450 1.396097 0.1627
β17WHITE_COLLAR 0.516424 0.307231 1.680900 0.0928
β18EDUCATION -0.085011 0.168289 -0.505151 0.6135
McFadden R-squared 0.346076 Mean dependent var 0.365000
S.D. dependent var 0.481832 S.E. of regression 0.377676
Akaike info criterion 0.918263 Sum squared resid 83.01601
Schwarz criterion 1.050171 Log likelihood -257.4789
Hannan-Quinn criter. 0.969612 Deviance 514.9578
Restr. Deviance 787.4890 Restr. log likelihood -393.7445
LR statistic 272.5313 Avg. log likelihood -0.429131
Prob(LR statistic) 0.000000
Obs with Dep=0 381 Total obs 600
Obs with Dep=1 219
Likelihood ratio test: Chi-square(17) = 272.531
It can be noted that the data are said to be well represented in the theoretical model based on the
likelihood ratio test, Chi-square value of 272.531 with df=17. In addition, the log likelihood of
the model is higher than the restricted log likelihood, which strongly proves that regression has a
45
highly predictive power.
The McFadden R-square is used to measure the goodness-of-fit as to its counterpart, R-
square in OLS. In this study, the value of McFadden R-square is 35% which provides strong
evidence that the regression is able to explain the adoption status in most of the cases.
Furthermore, based on the critical value of 0.05, the model correctly predicts 80% of the
respondents. Another statistical measure also provides further evidence, the Hosmer and
Lemeshow Goodness-of-Fit test (Hosmer and Lemeshow, 1989), which shows a chi-square of
4.7560 with a probability value of 0.7833 (Table 7).
Table 7 : Goodness-of-Fit Evaluation for Binary Specification
Andrews and Hosmer-Lemeshow Tests
Equation: UNTITLED
Date: 08/07/11 Time: 16:16
Grouping based upon predicted risk (randomize ties)
Quantile of Risk Dep=0 Dep=1 Total H-L
Low High Actual Expect Actual Expect Obs Value
1 0.0062 0.0270 58 58.9324 2 1.06757 60 0.82915
2 0.0273 0.0621 58 57.3568 2 2.64316 60 0.16371
3 0.0625 0.1214 55 54.6980 5 5.30195 60 0.01886
4 0.1225 0.1891 52 50.7620 8 9.23799 60 0.19610
46
5 0.1908 0.2675 46 46.4754 14 13.5246 60 0.02158
6 0.2686 0.4100 42 39.9245 18 20.0755 60 0.32246
7 0.4109 0.5352 30 32.0117 30 27.9883 60 0.27101
8 0.5356 0.6980 19 22.5465 41 37.4535 60 0.89370
9 0.6980 0.8636 18 13.9076 42 46.0924 60 1.56755
10 0.8651 0.9767 3 4.38484 57 55.6152 60 0.47185
Total 381 381.000 219 219.000 600 4.75597
H-L Statistic 4.7560 Prob. Chi-Sq(8) 0.7833
Andrews Statistic 5.7340 Prob. Chi-Sq(10) 0.8371
Analyzing the correlation between the dependent and independent variables, perceived security
appeared to be significant, which suggested that people looked at Internet security as an
important factor before they decide to adopt Internet banking. For people to choose performing
banking transactions through the Internet, they need to consider whether the transactions are safe
as these transactions involve money. Also, cases of fraud and theft in the Internet, particularly
hacking of personal information, are rampant so people tend to be cautious in dealing with
transactions in the Internet. Therefore, the null hypothesis was rejected.
Also, one variable related to Internet experience, using the Internet at work, was found
statistically significant, which means people who use Internet at work are more likely to adopt
Internet banking. Therefore, the null hypothesis was rejected regarding the dependent variable,
Internet use at work. Experience in online transactions especially Internet shopping also showed
significant influence on Internet banking adoption. People with prior experience in Internet
47
transactions have increased likelihood in adopting Internet banking. In addition, those who
performed online financial transactions were also found to be more likely to adopt Internet
banking. However, other variables such as frequency of using the Internet and the years of using
the Internet did not show any significance in Internet banking adoption. It was observed that
most age groups, even elementary and high school students have access to the Internet; thus, the
frequency of using the Internet did not affect the adoption of Internet banking.
Furthermore, as the results suggested, the respondents who were exposed to Internet
banking advertisements were more likely to use Internet banking. Marketing exposure is one
strategy for banks to attract clients to adopt Internet banking. Therefore, it was concluded that
the marketing experience has an effect on Internet banking adoption.
The ownership of bank accounts and performing mobile banking were found to have
significant influence on Internet banking adoption. Since people were already exposed to using
other banking products, they were more likely to adopt Internet banking. However, the
possession of credit card, debit card or other bank cards did not show significance to the
adoption of Internet banking. Therefore, it was concluded that the alternative hypotheses on
mobile banking and ownership of bank accounts are supported by the data. In addition, the
quality of the different banking products and services offered must be ensured to attract more
clients to adopt Internet banking.
48
The type of Internet connection did not show significant effect on the adoption of
Internet banking. The difference in speed of Internet connection, availability, and cost among the
types of Internet connection did not prevent consumers in performing Internet banking.
For demographic predictors, no variable was found to significantly influence Internet
banking adoption. Therefore, variables such as gender, age, employment, income, and education
have no effect on the status of Internet banking adoption. The results in this study regarding the
influence of demographic determinants were contrary to those of Polasik (2008) in which gender
and age had significant effects on the Internet banking adoption status. It may be inferred that
whether one is male or female does not prohibit him/her from using Internet banking.
Employment and income as well as educational attainment have no significant impact on Internet
banking. These demographic characteristics appeared insignificant due to the low number of
respondents aged below 18 or above 65 years.
49
CHAPTER 6
C O N C L U S I O N
The primary purpose of this study is to identify the factors behind the Internet banking
adoption based on different journals which studied on Internet banking adoption and the
respondents were comprised of 600 Internet users in the City of Manila. Logit model which was
used in the analysis had been considered the appropriate method for determining the variables
related to Internet banking adoption status. Based on the findings, perceived security, using
Internet at work, performing Internet transactions, having bank accounts, engaging in mobile
banking, having financial transactions, and marketing exposure were significant variables.
50
Perceived security proved to be a major concern in the adoption of Internet banking. The
notion about Internet banking needs to be improved especially in the Philippines by adopting
more advanced technology and strengthening the security of Internet banking transactions.
The use of Internet at work, having bank accounts, engaging in mobile banking and
performing online and financial transactions foster Internet banking adoption since these provide
people the convenience and efficiency in performing banking transactions.
Likewise, the exposure to marketing campaigns influenced Internet banking adoption.
However, this study was not able to observe the effect of demographic characteristics on Internet
banking adoption.
Although this study was able to identify the factors underlying the Internet banking
adoption of Manila Internet users, there are still some barriers that prohibit the development of
Internet banking in the Philippines particularly in the City of Manila. Infrastructure and
availability of Internet are pertinent factors to the further development of Internet banking. The
popularization of Internet banking is closely linked to the economics and education. It would
take several years for the Philippines to fully develop its Internet banking system since it is
ranked as having one of the lowest GDP per capita among Southeast Asia (IMF, 2011).
51
CHAPTER 7
R E C O M M E N D A T I O N S
Internet banking is important for SMEs and e-commerce. It is a good opportunity for
banks to market their Internet banking service in the midst of the emergence of group buying
websites. This research is limited to the analysis on the behavior on Internet banking of Internet
users living in the City of Manila. The research may be extended to surveying a sample
population from the entire Metro Manila. Therefore, it is suggested that further study be done
focusing on the Philippines.
E-commerce in the Philippines can also be enhanced. Through Internet banking, people
could transact their fund or budget anywhere, anytime. People can now invest in financial
products located in other countries and regions more conveniently. Also, people can purchase
52
financial securities in other countries and regions. Meanwhile, SMEs can expand their businesses
through worldwide connections through Internet banking systems.
Furthermore, banks must find ways in improving the management of Internet banking
accounts paying more attention on the issues of security. The result of this study can aid in
attracting more clients by identifying the target market segment and improving the marketing
campaigns of banks. Banks must initiate actions that could increase the longevity of Internet
banking adoption in the Philippines like offering added incentives and services to encourage
more users and improving the technology handling the transactions.
Also, Internet banking adoption will be helpful for both banks and individuals to reduce
their expenses and to manage their time.
Table 8 : Operating Expenses of Several Philippine Banks (Appendix 3)
Bank
Percentage in Operating Costs (%)
Occupancy and other Equipment
Expenses
Compensation and Fringe
Benefit Expense
2008 2009 2010 2008 2009 2010
Allied Bank 11.29 10.7 10 34.89 31.93 32.46
Philippine National Bank 7.92 7.08 7.4 34.21 32.15 27
Bank of the Philippine
Islands
28.96 28.69 29.03 44.22 46.53 43.61
Banco de Oro 5.25 5.13 5.06 36.25 38.59 39.15
Metro Bank 4.92 4.32 5 27.44 34.64 35.10
53
All information shown on Table 8 portrays the incurred expenses of 5 Philippine banks over a
one year period occupancy and compensations. One of the advantages of Internet bank is that
banks can minimize their rent and compensation expenses as the number of physical branches is
decreased since banking users do not need to visit the bank to process banking services such as
transferring fund, billing payments and applying loans as well. Also, banks can provide banking
services with cheaper costs since banks can decrease their operating expenses. However, there
may be arguments after this. First, if banks provide their service with cheaper costs, service
income is going to decrease. Since there is an increase in Internet banking users because of its
convenience, customers want more banking or financial products to increase their fortune or
wealth. Therefore, banks need to provide a wide array of high quality of services to customers.
Second, if banking industries minimize employees due to reduction of physical branches of
banks, it might create a problem of unemployment in the banking industry.
With regard more to the Philippine context, there are billions of remittances from
Overseas Filipino Workers (OFWs) each year through traditional channels, it is now time for
them to transact through Internet banking. OFWs need to pay remittance fees when they send
salary or money from abroad to their loved ones residing here in the Philippines. Banks could
reduce the remittance fee if they provide Internet banking services to OFWs since banks do not
need to put a physical branch to offer remittance services. The amount of remittance of OFWs
54
increases when the number of OFWs increases. The total remittances of OFWs around the world
amount to 7,898,459,000 USD. Most OFWs are working in Asia but the greater portion of the
remittances comes from US, Japan, Hong Kong, Singapore, Saudi Arabia and United Arab
Emirates. When OFWs remit the fund from Japan, Allied Bank charges OFWs a remittance fee of
P55 – P100 in peso accounts, and $1.5 to $22 in dollar accounts. PNB Tokyo branch charges a
fee of JPY 2000 or $21 in credit to account and credit to other local banks, and 1.5% cash
handling fee for USD notes plus 1.0% FX commission for dollar to dollar transactions. In
Singapore, Metro Bank charges remittance fees of SGD 4 to SGD 8 while in Hong Kong, BDO
charges a remittance fee of HDK 20 to HDK 40 (see Appendix 3). If more and more OFWs use
Internet banking to remit their funds, the remittance costs will be reduced and the speed of
receiving remittances will be boosted which would be a great help for their receivers in the
country since Internet is the cheapest distribution channel.
55
B I B L I O G R A P H Y
Al-maghrabi, T. and Dennis, C. (2010). Driving online shopping: Spending and behavioral differences among
women in Saudi Arabia, International Journal of Business Science and Applied Management, 5(1), 30-47.
Amin, H. (2007). An Analysis of Mobile Credit Card Usage Intentions, Information Management &
Computer Security, 15(4), 260-269.
Bangko Sentral ng Pilipinas Official Website (2011). Retrieved from
http://www.bsp.gov.ph/regulations/reg_overview.asp on June 30, 2011.
BBC News. Global broadband prices revealed. Retrieved from http://news.bbc.co.uk/2/hi/tec
hnology/6900697.stm.16 July 2007.
Black, N.J., Lockett, A., Winklhofer, H. and Ennew, C. (2001). The Adoption of Internet Financial Services: a Qual-
itative Study, International Journal of Retail & Distribution Management, 29(8), 390-8.
Black, N.J., Lockett, A., Ennew, Ch. Winklhofer, H. and McKechnie, S. (2002). Modelling
Consumer Choice of Distribution Channels: an Illustration from Financial Services, Interna-
tional Journal of Bank Marketing, 20(4), 161-173.
Claeys, P. and Arnaboldi, F. (2007). Internet banking in Europe: A comparative analysis,
Universitat de Barcelona.
Compaq (2001). Next-generation retail banking, from An analysis of con-
sumer adoption rates in Internet banking. Retrieved from
56
http://www.freepatentsonline.com/article/Europea
n-Journal-Management/237448655.html
Davis, F.D. (1989). Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology, MIS Quarterly, 13(3), 319-40.
DeYoung, R., Lang, W. W. and Nolle, D. L. (2007). How the Internet affects output and per-
formance at community banks, Journal of Banking & Finance, 31,1033-1060.
Dong-Her, S., Hsiu-Sen, C., Chun-Yuan, C., and Lin, B. (2004). Internet security: malicious
e-mails detection and protection, Industrial Management & Data Systems, 104(7), 613-23.
Elder, V., Gardner, E., and Ruth, S. (1987). Gender and Age in Technostress: Effects on White-Collar
Productivity, Government Finance Review, 3(6),17-21.
Flavián, C., Guinaliu, M., and Torres, E. (2006). How Bricks-and-Mortar Attributes Affect
Online Banking Adoption, International Journal of Bank Marketing, 24(6), 406-423.
Fuentes, R., Hernandez-Murillo, R., and Llobet, G. (2006). Strategic Online-banking Adop-
tion, Federal Reserve Bank of Saint Louis.
Furst, K., Lang, W.W., and Nolle, D. E. (2000). Special studies on technology and banking.
Who offers internet banking, Quarterly Journal,19(2), 29-48
Furst, K., Lang, W. W. and Nolle, D. E. (2000a). Who offers Internet Banking?, Quarterly
Journal, Office of the Comptroller of the Currency, 19(2), 27-46.
Furst, K., Lang, W. W. and Nolle, D. E. (2000b). Internet Banking: Developments and
Prospects, Economic and Policy Analysis, Working Paper No. 2000-9, Office of Comptroller
of the Currency.
Furst, K., Lang, W. W. and Nolle, D. E. (2002a). Internet Banking: Developments and
Prospects, Working Paper, Center for Information Policy Research, Harvard University.
Furst, K., Lang, W. W. and Nolle, D. E. (2002b). Internet Banking, Journal of Financial
Services Research, 22(1&2), 93-117.
57
Gerrard, P. and Cunningham, J.B. (2003). The Diffusion of Internet Banking among
Singapore Consumers, International Journal of Bank Marketing, 21(1),16-28.
Gow, K. (1997). Risk vs opportunity, The Premier 100 Supplement to Computerworld, Feb-
ruary,24.
Greene, W. (2003). Econometric Analysis, 5th ed., Upper Saddle River, NJ: Prentice-Hall,
Hassan, M.K and Bashir, A. H. M. (2003). Determinants of Islamic Banking Profitability,
Paper presented at the Economic Research Forum (ERF) 10th Annual Conference,
Marrakesh, Morocco, 16-18 December.
Hernando, I. and Nieto, M. J. (2005). Is the Internet Delivery Channel Changing Banks’ Per-
formance? The Case of Spanish Banks, Banco de Espana, Unpublished Manuscript.
Hernando, I. and Nieto, M.J. (2007). Is the Internet Delivery Channel Changing Banks’ Per-
formance? The Case of Spanish Banks, Journal of Banking and Finance, 31(4), 1083-1099.
Hosmer, D.W. and Lemeshow, S. (1989). Applied Logistic Regression, John Wiley & Sons,
Inc., New York, NY.
Howcroft, B. Hamilton, R. and Hewer, P. (2002). Consumer Attitude and the Usage and
Adoption of Home-Based Banking in the United Kingdom. International Journal of Bank
Marketing, 20(3), 111-121.
Im, S., Bayus, B.L. and Mason, C.H. (2003). An Empirical Study of Innate Consumer Inno-
vativeness, Personal Characteristics, and New-Product Adoption Behavior, Journal of the
Academy of Marketing Science, 31(1), 61-73.
International Monetary Fund (2011). World Economic Outlook Database, April 2011. Re-
trieved from http://www.imf.org/external/pubs/ft/weo/2011/01/weodata/weorept.aspx?sy
=2009&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=65&pr1.y=15&c=566
%2C534%2C578%2C536%2C548%2C582&s=NGDPD&grp=0&a=
Internet Speed Test (2011). Retrieved on March 18, 2011 from
58
http://www.speedtests.net/world/ph
Jimenez, E. C. and Roman, P. B. (2005). Case Study on Philippines Electronic Banking:
Delivering Microfinance Services to the Poor in the Philippines. Philippines: Bangko Sentral
ng Pilipinas, 1-14.
Karjaluoto, H., Mattila M. and Pento, T. (2002), Factors Underlying Attitude Formation to-
wards Online Banking in Finland, International Journal of Bank Marketing, 20(7), 261-272.
Kolsaker, A. and Payne, C. (2002). Engendering trust in e-commerce: a study of gender-
based concerns, Marketing Intelligence & Planning, 20 (4), 206 – 214.
Laforet, S. and Li, X. (2005). Consumers’ Attitudes towards Online and Mobile Banking in China,
International Journal of Bank Marketing, 23(5), 362-380.
Lallana, E. C., Pascual, P. and Andam, R. (2002). SMEs and e-Commerce in Three Philip-
pine Cities. Digital Philippines. Retrieved from http://asiafoundation.org/pdf/SMEsurv
ey_ philippines.pdf on June 15, 2011.
Lassar, W.M., Manolis, C. and Lassar, S.S. (2005). The Relationship between Consumer In-
novativeness, Personal Characteristics, and Online Banking Adoption, International Journal
of Bank Marketing, 23(2), 176-199.
Lee, E.K., Kwon, K.N. and Schumann, D.W. (2005). Segmenting the Non-Adopter Category
in the Diffusion of Internet banking, International Journal of Bank Marketing, 23(5), 414-
437.
Leuterio, M.M. and Estepa, C. B. (2009). Banking: Theory and Practice. Phil: Anvil
Publishing, Inc.
Maiyaki, A.A. and Mokhtar, S. S. (2010). Effects of electronic banking facilities,
Employment sector and age- group on customers’ choice of banks in Nigeria, Journal of
Internet banking and Commerce, 15(1), 1-8.
Malhotra, P. and Singh, B. (2009). The Impact of Internet Banking on Bank Performance and
Risk: The Indian Experience, Eurasian Journal of Business and Economics, 2(4), 43-62.
59
Mobarek, A. (2007). E-banking Practices and Customer Satisfaction: A Case Study in
Botswana. Retrieved from http://ssrn.com/abstract=1011112 on June 15, 2011.
National Statistics Office (2007). Population and Annual Growth Rates for Region, Prov-
inces and Highly Urbanized Cities Based on Censuses 1995, 2000 and 2007.
Nielsen, J.F. (2002). Internet Technology and Customer Linking in Nordic Banking, Interna-
tional Journal of Service Industry Management, 13(5), 475-495.
Nguyen, J. (2011). State of the Internet with a Focus on Southeast Asia. Retrieved from
http://www.comscore.com/Press_Events/Presentations_Whitepapers/2010/
State_of_the_Internet_with_a_focus_on_Asia_Pacific on June 15, 2011.
Pikkarainen, T., Pikkarainen, K., Karjaluoto, H. and Pahn, S., (2004). Consumer Acceptance
of Online Banking: an Extension of the Technology Acceptance Model, Internet Research,
14(3), 224–235.
Polasik, M. and Wisniewski, T P. (2008). Empirical Analysis of Internet banking Adoption in
Poland. Retrieved on January 25, 2010 from http://ssrn.com/abstract=1116760.
Polatoglu, V.N. and Ekin, S. (2001). An Empirical Investigation of Turkish Consumers’ Ac-
ceptance of Internet Banking Services, International Journal of Bank Marketing, 19(4), 156-
165.
Shapiro, J. (1999), Innovation in Financial Services Case Study: Home Banking.
Massachusetts Institute of Technology, MIT IPC Working Paper 99-004.
Sathye, M. (1999). Adoption of Internet banking by Australian Consumers: an Empirical
Investigation, International Journal of Bank Marketing,17(7), 324-34.
Schneier, B. (2004). Secrets and Lies: Digital Security in a Networked World. US :John
Wiley & Sons.
The Straits Times. “Cyberbanking Will Open New Windows,” September 14, 1997, 5.
60
White, H. and Nteli, F. (2004). Internet Banking in the UK: Why are there not more
Customers?, Journal of Financial Services Marketing, 9(1), 49-56.
Yahoo-Nielsen Net Index 2010. Retrieved from http://www.slideshare.net/yuga/yahoo
nielsen-net-index-2010 on June 18, 2011.
Appendix 1
Internet banking adoption survey
Gender
Female
Male
Year of Birth
19__ or 20__
Educational Attainment
Elementary
High school/Vocational
College(undergraduate)
Graduate
Post-graduate
Employed?
Yes
No
Monthly income
no income
P500-3000
P3001-7000
P7001-12000
P12001-20000
P20000-35000
P35000-80000
P80,000 and above
Are you a white collar?
(a salaried professional or an educated
worker who performs semi-professional
office, administrative, and sales coordination
tasks, as opposed to a blue-collar worker,
whose job requires manual labor)
Yes
No
How often do you use the Internet?
Never
Less than once a month
several times a month
2-3 times a week
daily or almost daily
How long have you been on the Internet?
61
less than 6 months
6 to 12 months
1 year to 3 years
3 to 5 years
5 to 7 years
7 years or longer
Where do you access the Internet?
(You can select any number of responses)
at home
at work
at school
in the dormitory / hotel
in the Internet cafe
from a public terminal (e.g. library,
office, shopping center)
elsewhere: (please write
where)_____
How do you access the Internet?
wireless(via wifi/wimax/3g/GPRS)
by wired (e.g. broadband,DSL,
cable)
another way: (please specify)____
Have you ever bought or sold on the
Internet?
Yes
No
Do you have a personal bank account?
Yes
No
Which bank card(s) do you have?
(You can select any number of responses)
Debit/ATM card (e.g. Citibank ATM
Card)
a credit card (e.g. MasterCard / Visa)
other cards (please specify)
I have no bank cards
Have you ever performed the following
online financial transaction(s)?
(You can select any number of responses)
purchase or sale of stocks, bonds or
other securities
purchase or sale of investment funds
purchase insurance (or by a request
from the Internet)
Raising a loan (or to request a loan
via the Internet)
Others
Never
Have you ever done financial transactions
via mobile phone?
Yes
No, although I have a cell phone
I do not have a mobile phone
Do you consider making online
transaction to be safe?
Definitely not
Probably not
It is difficult to say
Probably yes
Definitely yes
Where did you see the advertisements of
Internet banking?
(You can select any number of responses)
62
Internet
On TV
in the press
posters / billboards
on the radio
never seen such advertisements
in other places (please write in
which)_____
Have you ever used Internet banking
service?
Yes
No
Appendix 2
Table 9 : Questionnaire Response
Internet_Experience
less than 6 month 8 1%
6 to 12 month 18 3%
1 year to 3 years 43 7%
3 to 5 years 71 12%
5 to 7 years 133 22%
7 years or longer 327 55%
Security
Definitely not 34 6%
Probably not 99 17%
It is difficult to say 187 31%
Probably yes 226 38%
Definitely yes 54 9%
Education
Elemenatary 17 3%
high school/vocational 58 10%
College 327 55%
Graduate 162 27%
post graduate 36 6%
Internet_TransactionYes 308 51%
No 292 49%
Bank_AccountYes 434 72%
No 166 28%
63
Independent Variable Response Figure in Percentage
Frequency
Never 0 0%
Less than once a month
62 10%
several times a month 41 7%
2-3 times a week 75 13%
daily or almost daily 422 70%
Bank_CardYes 439 73%
No 161 27%
Mobile_BankingYes 164 27%
No 436 73%
64
Financial_TransactionsYes 135 23%
No 465 78%
AdsYes 475 79%
No 125 21%
EbankingYes 219 36%
No 381 64%
GenderYes 329 55%
No 271 45%
Age18 to 65 500 83%
Below 18 or Over 65 100 17%
EmployYes 279 47%
No 321 54%
Incomemore than 35000 143 24%
less than 35000 457 76%
White_CollarYes 235 39%
No 365 61%
Internet_at_WorkYes 245 41%
No 355 59%
BroadbandWireless 251 42%
Wired 349 58%