Analysis of the Key Success Factors of the Adoption of Digital Banking

Table of Contents

CHAPTER 1 - INTRODUCTION
1.1 BACKGROUND OF THE STUDY
1.2 DEFINITION OF DIGITAL BANKING
1.3 THE EVOLUTION OF BANKING SECTOR IN MAURITIUS
1.4 PROBLEM DEFINITION
1.5 RATIONAL OF STUDY
1.6 AIMS, OBJECTIVES, RESEARCH QUESTIONS AND HYPOTHESIS
1.6.1 RESEARCH OBJECTIVES
1.6.2 RESEARCH QUESTIONS
1.6.3 RESEARCH HYPOTHESES
1.7 STRUCTURE OF DISSERTATION

CHAPTER 2 - LITERATURE REVIEW
2.1 THE DIGITAL BANKING ECOSYSTEM
2.2 DIGITAL BANKING IN MAURITIUS
2.3 DIGITAL BANKING FROM THE CUSTOMER PERSPECTIVE
2.4 KEY SUCCESS FACTORS
2.5 ADOPTION MODEL
2.5.1 TECHNOLOGY ADOPTION MODEL (TAM)
2.5.2 EXTENSION OF TAM TOWARDS E-TAM
2.5.3 DIFFUSION OF INNOVATIONS THEORY (DIT)
2.5.3.1 CONVENIENCE, ACCESSIBILITY AND QUICK ONLINE SERVICE DELIVERY
2.5.3.2 E-SECURITY, PRIVACY AND TRUST
2.5.3.3 CONTENT, DESIGN AND SIMPLICITY OF THE BANKING WEB SITE
2.5.3.4 ANXIETY AND RELIABILITY
2.5.3.5 FEES AND CHARGES
2.5.3.6 DEMOGRAPHIC CHARACTERISTICS
2.5.3.7 BEHAVIORAL INTENTION
2.5.3.8 ACTUAL USAGE
2.6 CHAPTER SUMMARY

CHAPTER 3 - METHODOLOGY
3.1 INTRODUCTION
3.2 RESEARCH METHODS
3.2.1 EXPLANATORY RESEARCH
3.2.2 DESCRIPTIVE RESEARCH
3.3 DATA COLLECTION INSTRUMENTS
3.3.1 SECONDARY DATA COLLECTION
3.3.2 PRIMARY DATA COLLECTION
3.4 THE POPULATION AND SAMPLE SIZE
3.4.1 SAMPLE SIZE
3.5 PILOT TESTING
3.6 LIMITATIONS AND DIFFICULTIES
3.7 RESPONSE RATE
3.8 DATA PREPARATION AND CODING
3.9 ANALYSIS OF DATA

CHAPTER 4 - PRESENTATION AND ANALYSIS OF FINDINGS
4.1 PRESENTATION OF FINDINGS
4.1.1 SECTION 1- BANKING INFORMATION
4.1.2 SECTION 2- BANKING SERVICES
4.1.3 SECTION 3- PERCEPTIONS OF DIGITAL BANKING
4.1.3.1 THE RELATIVE ADVANTAGES OF DIGITAL BANKING
4.1.3.2 THE COMPLEXITY OF INTERNET BANKING
4.1.3.3 THE COMPATIBILITY OF DIGITAL BANKING
4.1.3.4 THE PERCEIVED COST OF DIGITAL BANKING
4.1.3.5 THE PERCEIVED RISK OF DIGITAL BANKING
4.1.3.6 INFLUENCES ON DIGITAL BANKING
4.1.4 SECTION 4- DEMOGRAPHIC FACTORS

CHAPTER 5 - CONCLUSION AND RECOMMENDATION
5.1 CONCLUSION
5.1.1 INFLUENCE OF DEMOGRAPHIC FACTORS OF CONSUMERS’ ADOPTION OF DIGITAL BANKING
5.1.2.1. AGE
5.1.2.2. INCOME
5.1.2.3. EDUCATION LEVEL.
5.1.2 INFLUENCE OF PSYCHOLOGICAL FACTORS ON CONSUMER’S ADOPTION OF DIGITAL BANKING
5.1.2.4. RELATIVE ADVANTAGE..
5.1.2.5. COMPATIBILITY
5.1.2.6. COMPLEXITY.
5.1.2.7. PERCEIVED COST
5.1.2.8. PERCEIVED RISK.
5.2 RECOMMENDATION
5.2.1. AWARENESS OF DIGITAL BANKING SERVICES
5.2.2. SECURITY AWARENESS
5.2.3. SECURITY IN PLACE
5.3 LIMITATIONS
5.4 RECOMMENDATIONS FOR FUTURE RESEARCH

REFERENCES

WEBSITES

APPENDIX

Abstract

Data Innovation is gradually changing the banking industry around the world. Digital banking offers banks new opportunities and challenges. This paper gives a comprehension of how demographic characteristics, social components and consumer perception and attitudes towards digital banking influence its adoption. Digital banking has been developed in order to enable consumers to gain a greater share in the banking market. In Mauritius, there is little awareness about the emergence of digital banking despite the fact that this service is presently representing an important share in the banking market. This is because digital banking is a new industry here, and therefore, consumer acceptance and use of digital banking is still limited. To date very little research has been conducted into factors which influence consumer adoption of digital banking in Mauritius, and so therefore there is a need for a study such as this.

A research framework in light of the diffusion of innovation theory was utilized to identify elements that would impact the adoption of digital banking. This report has evaluated current literature and conclusions about this innovation banking technology. It has likewise reviewed the elements, including consumer demographic characteristic, consumer perceptions towards digital banking and social impacts that influence consumer adoption of this mode of banking.

This study additionally clarifies the strategy utilized as a part of conducting a survey of 25 questions with 185 respondents to acquire primary data for this study. Analysis of these outcomes was made with charts and figures to determine to what extent the factors studied, influence consumer adoption of digital banking. The hypotheses of this research were tested with chi-square tests.

Acknowledgement

This study has been a challenging, but interesting experience for me. It has been a real learning experience more than just an academic experience.

Motivation, encouragement, guidance, corrections, advices and overall support are the key element that I have acquired from my supervisor and lecturers to write and complete this dissertation within deadlines. It is a matter of utmost pleasure for me to extend my gratitude and give due credit to my supervisor Mr. Vasenden Dorasami whose support has always been there in need of time and who provided me with all these key elements to complete this work. I would like to thank for the rime spent reviewing my work. I would like to thanks all the participation who filled in the questionnaires distributed to them. These have really helped me gather some primary data.

Acknowledgement would be incomplete without extending my gratitude to my parents who have helped me in the data collection process. I am also very grateful Mr. Kishan Doorgah, who has been a constant source of support and encouragement during the challenges of graduate school and life. I am truly thankful to him for his moral support.

List of Tables

Table 1: List of Banks in Mauritius (Source: Bank of Mauritius, Mauritius Bankers Association)

Table 2: Electronic Banking Services provided by Mauritian Banks

Table 3: Respondents’ age and their reason for visiting the bank

Table 4: Sources of digital banking knowledge

Table 5: Online Banking allows people to manage their finances better

Table 6: Online Banking saves time

Table 7: Online Banking allows good communicate with the bank

Table 8: Mobile banking is more accessible and less time consuming

Table 9: Mobile banking is more convenient than other banking options

Table 10: Using mobile banking enables me to perform banking transaction quickly

Table 11: Online Banking is easy to use

Table 12: Complexity of Online Banking

Table 13: Online Banking suits people's lifestyle

Table 14: I use mobile banking because I am used to do everything with my cell phone

Table 15: I use mobile banking because it has a built-in help facility for assistance

Table 16: Expensive telecommunication cost

Table 17: Online Banking is cost-effective

Table 18: Mobile banking is costly to use

Table 19: Prefer to go to the bank for security reasons

Table 20: Online banking is safe and secure

Table 21: Banks might not have the ability in mobile banking to protect my privacy

Table 22: I am not afraid of disclosing credit card or account details on the internet

Table 23: Reliability is the factor influencing the use of mobile banking

Table 24: I intend to use these forms of digital banking in the future

Table 25: I would use mobile banking if I could get more information about it

Table 26: Descriptive of the five dimension of SERVQUAL

Table 28: KMO and Bartlett's Test

Table 29: Communalities

Table 30: Total Variance Explained

Table 31: Rotated Component Matrixa

Table 44: KSF for the success of digital banking in Mauritius

List of Figures

Figure 1: Technology Acceptance Model (TAM) by Dravis (1989)

Figure 2: E-TAM (Venkatesh, et al 2003)

Figure 3: Adopters of Innovation Curve adapted by Rogers (1995)

Figure 4: Main reasons for visiting bank

Figure 5: Number of times respondents visit banks in a year

Figure 6: Banking years

Figure 7: Digital Banking awareness

Figure 8: Usage of Digital banking

Figure 9: Usage of banking services

Figure 10: Frequency of use of digital banking

Figure 11: Preferred means of carrying out banking transactions

Figure 12: Digital Banking Services Satisfaction

Figure 13: Factors encouraging the use of Digital Banking

Figure 14: Specific factors which encourage people to use more of digital banking services

Figure 15: Factors making people reluctant to use Digital Banking

Figure 16: Specific reasons why not use Digital Banking

Figure 17: Perceptions of respondents about Digital Banking

Figure 18: Education of non-users who intend to use digital banking services

Figure 19: Age of non-users who intend to use digital banking services

Figure 20: Age of non-users who do not intend to use digital banking services

Figure 21: Gender

Figure 22: Gender (Digital Banking Users)

Figure 23: Gender (Digital Banking Non Users)

Figure 24: Age of Respondents

Figure 25: Age (Digital Banking Users)

Figure 26: Age (Digital Banking Non-Users)

Figure 27: Monthly income of respondents

Figure 28: Income (Digital Banking Users)

Figure 29: Income (Digital Banking Non-Users)

Figure 30: Education level

Figure 31: Education Level (Digital Banking users)

Figure 32: Education Level (Digital Banking Non-Users)..

Chapter 1 - Introduction

Chapter 1 represents the background of the study, the evolution of banking sector in Mauritius. It also introduced the reader to the aims, objectives, problem definition and the research questions that leads to the purpose of this study. Subsequently, it gives an idea of the structure of the thesis.

1.1 BACKGROUND OF THE STUDY

Banking services have undergone many changes in the past years. These changes have been catalyzed by vital variables such as technology advancements, global business, competitiveness and clients’ requests. These factors have had an exceptional effect on society, culture, employment, communication and even the global economy. As a result, banking services have fast developed to adopt new delivery means which adapt to the changing commercial landscape (Shi & Lee, 2008). The adoption and usage of the technological advancement is becoming a crucial component in today’s advancement of the banking sector.

Now self-service, internet medium and mobile channels are giving customers further choice in how to manage their business finances. Due to the increased use of personal computers, tablets and smart phones to access the internet and the World Wide Web, the internet has provided an easy channel for accepting orders and become a medium for delivering products and services to the entire customers. This kind of banking is commonly known as Digital Banking. This innovation has been increasing radically in recent times and banks are working hard to integrate their systems across platforms to give customers the best digital services which will reduce complexity and give businesses a full oversight of their finances.

1.2 DEFINITION OF DIGITAL BANKING

According to Moeckel (2013), digital banking is a new concept in the zone of electronic banking. It aims to improve standard online and mobile banking services by integrating digital technologies, for instance strategic analytics devices, online networking connections, inventive installment solutions, mobile technology and concentrate on user experience. It is about connecting individuals to their money more rapidly; precisely and efficiently than ever before (Locke, 2015). Digital technologies are undoubtedly powerful and are revolutionizing every area of our lives. They have transformed banking services while leading to benefits such as: cost savings, higher efficiency, reduced error rates, expanded customer base, delivery of services in a creative way, increased marketing and communication possibilities, mass customization and development of non-core businesses (Ndlovu & Sigola, 2013). As stated by Olanrewaju (2013), banks that do not adjust to the needs and wants of today s digital customer put their very survival at risk.

In spite of all the benefits attached to digital banking, there are still many people who are reluctant to use the services. This study is about the adoption of digital banking in Mauritius and it sets forward several elements that seem to be involved in the acceptance by users.

1.3 THE EVOLUTION OF BANKING SECTOR IN MAURITIUS

In Mauritius, it was the Mauritius Commercial Bank, which first started its activities in 1838. According to the Global Finance Mauritius, the banking sector currently comprises of 22 banks, among which 7 are native banks, 10 are foreign owned subsidiaries, 1 is a joint venture and the remaining 4 are branches owned by foreign banks. A list of these corporations is shown at table 1.1. According to the banking act, the Bank of Mauritius is responsible for providing all banks with license in order to conduct their activities nationally as well as internationally.

Abbildung in dieser Leseprobe nicht enthalten

Table 1: List of Banks in Mauritius (Source: Bank of Mauritius, Mauritius Bankers Association)

The banking sector is regulated by the Bank of Mauritius, which was established in September 1967 under the Banking Act 1966. The main purpose of the act is to conserve a safe banking system in the country and to preserve the interests of people banking in Mauritius. The central bank set guidelines such as Internet Banking and Mobile payments. This is done to promote a sound financial system in Mauritius and regulate those electronic banking services. The Central Bank of Mauritius granted the first license to the local banks to introduce internet banking on the 2nd April 2001.

The emergence of electronic banking in Mauritius was around late 87s when the ‘first Automatic Teller Machine (ATM)’ was introduced by the Mauritius Commercial Bank (MCB). ATMs have largely lowered down geographic barriers and helped banks to serve their clients in a better way. Gradually with deployment of a nationwide Internet connectivity, online networks and safe protocols, other banks have followed this pace (Baraghani, 2008). This has contributed towards an increase in the number of products that bank provide, most of which are “system dependent”. Banks in Mauritius started their development and expansion of the use of electronic payment methods such as ‘ATM, electronic cards and Point of sales (POS)’. Recently, internet and mobile banking facilities have been introduced. The services offered by some of the major Mauritius Banks have been listed in table 1.2. More specialized services such as ‘fund administration, wealth management, custodial services, trade finance, international portfolio management, private client activities and treasury, and e-commerce’ facilities are likewise offered by banks (Mauritius Bankers Association Limited, 2013).

Abbildung in dieser Leseprobe nicht enthalten

Table 2: Electronic Banking Services provided by Mauritian Banks

According to the World Economic Forum (2015), Mauritius which ranks high in the Technology Adoption Index, is now keeping pace with American and European countries in the Technology area. Mauritians are more and more connected to the internet and are extensively using new technologies such as smart phones, tablets, electronic commerce for online shopping. Banking sectors are taking advantages of the increasing use of technology in Mauritius to provide new services to customers as well as to enhance their operations, improve controls and securing their data.

Banks in Mauritius are investing more and more resources on technology so as to provide new secure electronic banking services in addition to the existing ones. With the progress in communications and Information Technology, there has been an emergence from traditional banking to online banking. In addition, banks participate with one another to provide new and innovative services to guarantee a competitive edge (Shi & Lee, 2008). This is done in order to meet all customer expectations. They are giving customers further choice in how they manage their business finances. Consumers nowadays want stay closely connected to their money and due to this demand, new approach to digital banking services is emerging.

1.4 PROBLEM DEFINITION

The evolution of banking services is going at a very rapid pace due to the emergence of new technologies available. In Mauritius as well as in other countries, it is however perceived that the most extensive method in order to conduct banking transaction is through the traditional branch based retail banking.

Banks are giving much importance to digital banking service nowadays. This service enables customers to access bank services from anywhere in the world using their mobile devices.

Even with new developments brought forward to better create easier banking systems, these systems still remain unnoticed by customers and are less used even if they are accessible (Fock & Koh, 2006). It is important to understand user’s acceptance of the digital banking and a need to determine the factors that affect their interest to use the services (Baraghani, 2008). This problem is vital since the answer may provide an indication that will help the banking sector to work out their marketing strategies in the promotion of new models of more digitalized banking systems further. It is therefore important to analyze the digital ecosystem and to further understand the key success factors and any weaknesses identified.

1.5 RATIONAL OF STUDY

This study will provide a brief explanation of the ‘nature of the research; its objectives; why it is needed; how it will be carried out; and, the likely outcomes’. The first specific significance is to observe the level of understanding of digital banking among Mauritians. How is it useful to them? Secondly it is to find out the extent to what digital banking helps users as well as banks? The third concern is to figure out the intention of Mauritians to use digital banking in the future to manage their performance.

1.6 AIMS, OBJECTIVES, RESEARCH QUESTIONS AND HYPOTHESIS

1.6.1 RESEARCH OBJECTIVES

This study focuses on the adoption of digital banking by Mauritian customers. The specific aims of this study are:

- To identify the elements which influence the acceptance of digital banking in Mauritius?
- To measure the relationship between the various factors such as; ‘consumer demographic factors, social influences, features of the mobile banking’ and the adoption of digital banking.
- To identify the challenges and opportunities presented by digital banking.
- To analyze consumer perception, adoption and expectations towards digital banking services.
- To understand the role of banks in promoting digital banking services.

1.6.2 RESEARCH QUESTIONS

- What are main factors, which influence the adoption of digital banking by Mauritian customers?
- What are the challenges and opportunities presented by the usage of digital banking?
- What is the role of social influence in acceptance of digital banking?
- What are the most preferred digital banking services?
- Are banks doing enough to promote digital banking services?

1.6.3 RESEARCH HYPOTHESES

Research hypotheses considered in this study are:

a) Ho: There will not be positive significant relationship between convenience, accessibility and quick service delivery and intention to adopt Digital Banking.

H1: There will be a positive significant relationship between convenience, accessibility and quick service delivery and intention to adopt Digital Banking.

b) Ho: There will not be positive significant relationship between security, privacy, and trust and intention to adopt Digital Banking.

H1: There will be a positive significant relationship between security, privacy, and trust and intention to adopt Digital Banking.

c) Ho: There will not be positive significant relationship between content, design, and simplicity and intention to adopt Digital Banking.

H1: There will be a positive significant relationship between content, design, and simplicity and intention to adopt Digital Banking.

d) Ho: There will not be a positive significant relationship anxiety and reliability and intention to adopt Digital Banking.

H1: There will be a positive significant relationship between anxiety and reliability and intention to adopt Digital Banking.

e) Ho: There will not be a positive significant relationship between fees and charges and intention to adopt Digital Banking.

H1: There will be a positive significant relationship between fees and charges and intention to adopt Digital Banking.

f) Ho: There will not be a positive significant relationship between intention to adoption of Digital Banking and the actual usage.

H1: There will be a positive significant relationship between intention to adoption of Digital Banking and the actual usage.

g) Ho: There will not be a positive significant relationship between demographic factors trust and intention to adopt Digital Banking.

H1: There will be a positive significant relationship between demographic factors trust and intention to adopt Digital Banking.

1.7 STRUCTURE OF DISSERTATION

- Chapter I: Introduces the research work and the objectives of the study. The evolution of the banking industry in Mauritius is discussed. Approaches to understand and identify the issues in the adoption of digital banking are introduced. The research problem, research questions and hypotheses are outlined.
- Chapter II: Consist of literature review. It gives an overview of the digital banking ecosystem. It gives a comprehensive definition of Digital Banking and the Key Success Factors (KSF) elements influencing its adoption. The different adoption models are described and KSF influencing adoption in the past are discussed.
- Chapter III: Deals with the research methodology and the findings. The data collection instruments and procedures are described. The way the testing and analysis will be done later on in the study is presented in this chapter.
- Chapter IV: Presents the analysis of data gathered from questionnaires. SPSS software is used to do the statistical analysis. The findings of the research study will be explained in details.
- Chapter V: It gives the recommendation and conclusion based on the data gathered during the survey and secondary the research. It depicts an accurate picture of the industry, its current status and the banks’ customers.

Chapter 2 - Literature Review

Chapter two is structured along several themes. Firstly, this chapter explains the digital banking ecosystem leading to the evolution of digital banking in Mauritius. Then, the chapter explains digital banking from the customer ’ s perspective. It also gives a brief explanations of Key success factors which affect the adoption of new innovation. The technology adoption models are introduced in this paper.

2.1 THE DIGITAL BANKING ECOSYSTEM

Over the last 40 years, substantial development was seen in the financial sector due to technological advances which involve the creation of a new product or service through the use of an existing technology (Birkinshaw and Mol, 2006). In the words of Cantisani, this process is defined as; “the sequence of activities undertaken to generate new techniques with the help of the sciences and their method”, (Cantisani, 2006). New technologies allow new ideas, and procedures to emerge or can be updated for a substitute use (Rogers, 1995). The rapid adoption of advanced internet technologies has resulted in the establishment of a flexible and proven corporate architecture that is increasingly being referred to as a “digital ecosystem”.

According to Consoli (2003), until the early 1980s and 1990s many regulatory restrictions were laid down on banks which prohibited them to implement new technology. However, this changed slowly when there was removal of certain regulations in the industry in the 1990s. According to (Muzividzi, Mbizi & Mukwazhe, 2013), there was then a growing importance of Information Communication Technology (ICT), which led to more competition and pressure for faster change. In order to develop and acquire a large part of the banking market, some banks have invested in infrastructure to broaden their geographical and market coverage while others have considered a more radical approach to supply their banking services via the internet.

The banking industry, which plays a crucial role in our commercial and personal lives, has always progressed with the times to adopt new challenges and consumer attitudes (Locke, 2015). To help in this evolution, it must be noted that technology has definitely played an increasing essential role. According to (Locke, 2015); many inventions in the banking industry have changed the ways banking transactions are carried out. For instance, the ATM and credit cards were introduced in the 1960s, internet banking services in the 1990s and now mobile banking and payments. Locke further provides his views by stating that; “a major driver in banking industry change is the consumer demand to be better connected to their money ” (Locke, 2015). “This demand is now supporting a new breed of digital banking services that is coming to the fore” (Locke, 2015). Scornavacca & Barnes (2008) explained that digital banking is still at its early stage because the efforts put by the banking industry to change to digital channels have been stumbling. Consumers lost their trust in the banking system after the global financial crisis. They have a preference to smaller banks and credit unions to manage their personal finances (Jalal, Marzooq & Nabi, 2011). However, digital technology now provides banks with the occasion to get back their relevance with customers.

In order to maintain long term relationships, banking corporations have embraced the theory of customer satisfaction (Leveraging Digital Banking Channels for Sustained Success, 2015). As stated by McMahon, ‘for banks to survive in the digital era, the retail banks need to gain consumer loyalty through product features and services excellence’ (McMahon, 1996). This is the reason why; traditional retail banks have implemented the digital services customers want. In order to keep with the digital age, traditional banks need to learn and above all adopt the strengths of the successful digital ecosystems. (Banks of the Future Will Embrace the Digital Revolution to Thrive, 2014).

Worldwide, banks have explored means to transform into a more digital business model to be able to offer these services to their customers. Banks were among the early adopters of this new technology and without any doubt they are best positioned to lead the industry forward.

Consumers constantly ask for an ‘end-to-end’ experience and greater reliability when using their mobile, their iPad, their PC, or even their Smart TV to access their bank accounts (Locke, 2015). According to the research conducted by Locke (2013), today’s consumers, conditioned by Amazon and Facebook expect personalization in their digital experiences, and want financial institutions to deliver the same.

2.2 DIGITAL BANKING IN MAURITIUS

The time when bank users used to go to a branch to complete their transaction or query about services is nearly over. The development of digital banking and now mobile banking have brought enormous transformation to the entire financial industry. ‘Digital banking means more than just going paperless’. Nowadays banks offer a new and better-quality customer experience and offering faster and more effective services. Digital banking has been around for years. Many experts call it the cure for the damaged banking industry which we came across after recent financial crisis (A.T Kearney, 2013). Digital banking is a radical transformation that brings a variety of new features, including anytime and anywhere banking, sharp response ties and omnipresent advisors (A.T Kearney, 2013).

In order to be ensure good profits and succeed in the new digital economy, Mauritian banks needed to implement a customer oriented business model, expansion of the online delivery of products and services channels (Cognizant, 2014). Banks needed to reinvent their key businesses of lending, retail banking and payments (Cognizant, 2014). Thus, Digital banking services have been adopted.

Digital banking is becoming important for Mauritians and they are depending heavily on it for their daily activities. In fact, these customers already benefit from the digital technologies in other industries. Many transactions are being processed through this system; for example; flight bookings, extensive shopping for clothing and other goods via digital networks (Olanrewaju & Willmott, 2013).

According to Robinson (2000), it is much cost effective to use an electronic transaction to carry out an activity through digital means compared to other ways. Digital banking is replacing ‘branch investments with low cost digital channels that enable banks to build economies of scale with a much lower capital investment’ (Cognizant, 2014). Revenue is generated quicker so that banks can attract more capital (Cognizant, 2014).

However, the regulatory compliance should be reviewed to allow easier access for its adoption.

2.3 DIGITAL BANKING FROM THE CUSTOMER PERSPECTIVE

Previous literature suggests some imperative elements which clients consider when deciding to use digital banking. They are:

2.3.1 PERCEIVED RELATIVE ADVANTAGE

Consumers are aware of the advantages that arise from the usage of digital banking. They are convenient, easy to use, contain copious information, reliable, time and cost effective, all of which are very important, contributing to the success of digital banking (Poon, 2008). Those users are more prone to identify relative advantages of the services (e.g., usefulness, ease of use, accessibility, amount of information, etc.), whereas the nonusers are more likely to perceive relative disadvantage of the services (e.g., security and privacy issues) (Cai et al., 2008).

2.3.2 PERCEIVED RELATIVE COMPATIBILITY

Compatibility refers to the extent individuals perceive that new products or services have no conflict with their needs, beliefs, values and experiences (Rogers, 2003). Compatibility is considered as one of the main determinants for the innovation spread process with the high compatibility perceived by the individual leading to the speedy adoption of any new technologies. Several researchers have shown that perceived compatibility has a significant direct influence on individuals’ intention to adopt Digital Banking services (Hernandez & Mazzon, 2007).

2.3.3 PERCEIVED SECURITY AND PRIVACY

Most of the banking studies show security and privacy as their major concern. Moreover specifically, the security and privacy issues are the major barriers in the adoption of online banking services. The banks as well as the customers are really concerned about the security issues because of lack of those laws which govern the online banking/internet banking (Maitlo et al. 2014).

2.3.4 ACCESSIBILITY

This factor refers to how fast and convenient the digital banking services are. For instance, the availability and loading of a bank’s website for performing transactions at any time. This factor is consistent with previous literature regarding accessibility in online banking (Zeithaml et al., 2009). For customers, accessibility is an important factor they tend to look at before adopting a new banking service.

2.3.5 TRUST

Trust is defined as “perceptions about others' attributes and a related willingness to become vulnerable to others” (Rogers, 2003) .In this sense, consumers might not use digital banking services because they lack trust in Internet businesses. Indeed, numerous empirical studies have found that trust constitutes a major critical factor influencing the success of Digital Banking because uncertainties often surround banking transactions over the internet (Zhang & Tang, 2006).

2.4 KEY SUCCESS FACTORS

Key Success Factors (KSF) is considered to be the elements which are essential to ensure prospective competitive success in the banking industry. The factors are; potentialities, competitive abilities, product attributes and market acquisitions. KSF was defined by Thompson and Strickland (1992) as a “skill or talent, a competitive ability, or the condition a company’s achievement is accomplished; it can be associated to resources such as, manufacturing, distribution, marketing and technology.

KSF are devised after the analysis of the different types of means used and the way in which they can be successfully applied in an industry. Therefore, after a study of the existing industry resources, KSF should be developed (Richard Lynch, 2005). The key success factor takes different dimension and patterns subject to the industry. KSF may vary from one industry to another due to the ‘competitive conditions and changes in the driving forces’. According to Analoui and Karami (2003), they state that the KSF comprises of the particular skills, capabilities and qualities usually associated to the product, service or technology. These allow a firm or an industry to create competitive advantages. Below is a brief discussion on the several key success factors of banking industry.

- Technology

Modern technology plays a major role in the banking industry. It is very helpful in the cost reduction of transactions and it also helps towards the improvement of the quality of products. For instance, banks installed ATMs and issued debit and credit cards, when it was found that their transaction costs can be decreased by doing so. This is very convenient for the customers, who now receive 24/7 service. It is also beneficial towards saving overhead cost.

- Cost Efficiency

Due to ongoing high competition in an industry, it is found that survival in the industry becomes difficult. Thus, low cost has proven to be very important. Now, virtual banks are charging less due to low overhead cost. In return, they are earning plus points due to the low transaction.

- Convenience

Clients are very attracted to convenience. Banks with broader network and facilities give customers the chance and option to carry out transactions easily and more conveniently. Digital banking is more handy and accessible than the traditional banks.

- Innovation

Innovation is among the influential factors which help towards building success in the banking industry. Since competition is fierce and banks provide identical products and services therefore, variation in innovation is of utmost importance for them to sustain their survival.

It must be noted that together with innovation, the above factors will certainly help create an easy adoption of digital banking services.

2.5 ADOPTION MODEL

2.5.1 TECHNOLOGY ADOPTION MODEL (TAM)

TAM is an expansion of the ‘Theory of Reasoned Action (TRA)’. In 1975, Fishbein and Ajzen suggested TRA 1975. The reason behind was to understand behavior and forecast outcomes. By this concept, it is assumed that a person considers the implication of his/ her action before making a decision on whether to act in a certain way or not.

Technology adoption model (TAM) is known to be one of the most vital literatures regarding customer acceptance of the latest technology applications. It was set up by Davis (1989) and can be used to forecast the adoption of digital banking. TAM is the ideal tool which demostrates the acceptance by users and the use of technology. The prime determinants of user’s acceptance are the ‘two beliefs- perceived efficacy and perceived ease of use (Figure 2.1). Perceived efficacy is defined as “the degree to which a person believes that using a particular system would enhance his or her job performance” (Davis, 1989). While perceived ease of use has the definition as “the degree to which a person believes that using a particular system would be free from effort” Davis (1989).

illustration not visible in this excerpt

Figure 1: Technology Acceptance Model (TAM) by Dravis (1989)

As showed by TAM, user′s approach and belief is seen to be a significant feature which impacts the use of modern technology. A person who has a positive approach to technology will highly accept and consider using technology, compared to someone who has a negative attictude on technology (Bekhet & Al-Allak, 2011). Many factual studies for instance (Davis, et al., 1989; Venkatesh, et al., 2003) have provided support for this model. Thus, the technology acceptance model is predominantly considered to be the most influential theory in IT and Information Systems (Benbasat & Bark, 2007).

2.5.2 EXTENSION OF TAM TOWARDS E-TAM

There was however criticisms about TAM for not having the ability to wholly set forth the explicit influences of “technological and usage-context” elements which may deviate user acceptance (Quan, et al., 2010; Davis, et al., 1989). Moreover, Venkatesh, et al., (2003) came with the proposal of extended TAM. By this, some known models were put together and combined to the unified concept of acceptance and use of technology. This was done to highlight how information systems are accepted, and to illustrate the changes which can impact the purpose to use them (Venkatesh, et al., 2003).

illustration not visible in this excerpt

Figure 2: E-TAM (Venkatesh, et al 2003)

2.5.3 DIFFUSION OF INNOVATIONS THEORY (DIT)

This theory was formed by Rogers (1995) to provide clarification on the occurence of diffusion of innovations in the social system. As indictated by Rogers (1995), there are 5 phases of adoption process. They are, “knowledge, persuasion, decision, implementation and confirmation”. In addition, Rogers (1995) stated that there are; “the quality of an innovation, peer to peer communication and understanding of the need of different user segments”. These insights might be useful and valuable to diffuse and adopt the innovation. Utilizers of such innovation were grouped into five categories: “innovators (3.4%), early adopters (12.5%), early majorities (34%), late majorities (34%) and laggards (16%) ”. Figure 2.3 shows the curve representing the adoption of innovation. DIT has extensively been used to flag up the concerns about the adoption of the various innovations by individuals. (Moore & Benbasat, 1991; Tan & Teo, 2000). According to Rogers (1995), people tend to adopt the innovation due to their compatibility of their actual way of working and their behaviour.

When the model was further developed and was used in the research, all models were considered when the ‘dependent and independent variables’ were defined.

illustration not visible in this excerpt

Figure 3: Adopters of Innovation Curve adapted by Rogers (1995)

Based on previous studies, a number of variables thought to be impacting the process of adoption of products and services will be discussed and later embodied in a suggested model. These variables are as follows:

2.5.3.1 Convenience, Accessibility and Quick Online Service Delivery

In the first place, the principle behind the digital banking services is to create more convenience and rapidity for bank account holders to carry out their transactions and to use internet banking services anytime and access places using digital means (Qirem, 2013). According to Poon “digital banking provides higher degree of convenience that enables customers to access internet banking at all times and places ” (Poon, 2008). With this facility, digital banking also permits customers to access to their financial data and carry out their financial transactions (Rotchanakitumnuai and Speece, 2003). Besides, the introduction of digital devices is seen to be very advantageous (Gerrard & Cunningham, 2003). In the end both bankers and users are delighted with a service which is convenient, rapid and easily reachable.

2.5.3.2 E-Security, Privacy and Trust

Since there are many risks which are related to online banking transactions, clients who hold a bank account feel concerned about that. The supposed lack of financial and non-financial security is definitely a factor leading to their concerns (Jun et al., 2004). Financial security is the conveyance of financial information online ‘(e.g. an account number, account statement, transfers, etc.)’. On the other side non-financial security is generally to show the personal information ‘(e.g. e-mail, telephone number, etc.)’. According to (Mirza, et al., 2009), security is defined as the “protection of data against accidental or international disclosure to unauthorized persons, or unauthorized modifications or destruction ”. Additionally, bank account holders are usually concerned about the secrecy of their personal information. They have the fear that their information might be disclosed to irrelevant groups via the internet (Miyazaki & Fernandez, 2001). Users are also worried about the trustworthy level of the privacy policies of digital banking (Gerrard & Cunningham, 2003). Some research shows that privacy and security are related to trust. According to (Lynch & Lundguist, 1996) trust is important in the synchronization of issues such as security, privacy, confidence and fulfillment.

2.5.3.3 Content, Design and Simplicity of the Banking Web Site

As per Laukkanen, et al. (2008) consumers tend to restrict the usage of digital banking, especially when they are not well acquainted with internet. It is recognized that this is due to technical issues such as content and complexity, design and also the means of using the site. Moreover, it is found that sophisticated web site with bulky content push customers to restrict their use of the web site thus not benefiting from the service (Pikkarainen, et al., 2006). Lau (2007) declares that in order to gain the interest of the customers on website and to make it more captivating it must be devised in a way where maximum benefits is being exposed.

2.5.3.4 Anxiety and Reliability

Findings by Laukkanen, et al. (2008) demonstrates that psychological states such as anxiety, past beliefs, traditions and image are the stronger factors than others which may lower down the use of digital banking services. The term anxiety is usually used to define undesirable emotional state which is ‘characterized by fear and tension’ (Abu Shanab et al., 2010). On the other hand, reliability refers to the degree to which someone thinks he/she can trust and depend on the digital banking services and is also satisfied with it (Lee & Lin, 2005). So, it is clear that both factors have an impact on the intent of the users towards usage of digital banking services.

2.5.3.5 Fees and Charges

Empirical findings show that the acceptance of the new technologies among customers will be boosted up if the cost is less than the advantages gained from the technologies. In other words, there should be more advantages gained by the use of the technologies than the charges (Davis, 1989). With digital banking, customers benefit from better prices with improved ‘transparency and comparability’ (A.T Kearney, 2013). In 2013 A.T Kerney team conducted a survey. According to the report, a traditional bank’s running cost is “50% - 60 % of its revenue while the running costs of digital banking are valued at 15% - 20% of its revenue ” (A.T Kearney, 2013). However, (Poon, 2008; Laukkanen, et al. 2008) claim that although many users of the digital banking acknowledge that the fees of this service is reasonable and accept it, on the other hand there are non-users who view it less advantageous.

This is due to the fact that big expenses should be made on smart phones, tablets and on internet. They believe that the costs together might surpass the benefits

2.5.3.6 Demographic Characteristics

With regards to demographic characteristics, it is suggested that characteristics such as gender, age, income and education have an influence on the motive to use digital banking services. Wilson (2000) proclaims that clients with low income would be less willing to possess a digital device since they will not be ready to spend on a monthly subscription of the internet. Earlier study by Al-Qisi established that men were more likely to opt for online banking services (Al-Qisi, 2009). Lastly, it is seen that the level of education is also an element which may impact the intention to use online banking systems (Matilla et al., 2003; Laforet & Lee, 2005 &Wan et al., 2005).

2.5.3.7 Behavioral Intention

According to Fishbein and Ajzen, behavioral intention to accept digital banking services assesses a user’s comparative strength of intention to perform a behavior (Fishbein, Ajzen, 1975). It indicates a person’s drive to perform exact behavior. Behavior intention is considered as the precedent of actual behavior.

2.5.3.8 Actual Usage

Davis (1985) suggested that system use is a reply that can be explained by user’s motivation which is alternately impacted directed by external variables including the actual system features and abilities. It is claimed that the ‘actual use of a system’ is a behavior. To measure the ‘actual use of behavioral usage, the amount of time, frequency of use, actual number of usage and diversity of usage’ are employed.

2.6 CHAPTER SUMMARY

The aim of this work is to carry out an analysis of the key success factors which affect the adoption of digital banking in Mauritius. The proposed model puts forward that “effort expectancy, convenience, accessibility quick service delivery, security, privacy, trust, content, design and simplicity of the banking website as well as anxiety, lack of reliability, fees and charges and service quality” have a direct influence on the behavioral intention to adopt digital facilities. In addition, this research determines a straight impact which behavioral intention has on the actual usage of the digital banking service.

Chapter 3 - Methodology

This chapter discusses the research methodology of the dissertation. It starts with the research methods and the data collection instruments used. It also outlines the research strategy and sampling methods. Finally, it presents the pilot testing, limitations and difficulties encountered during this research.

3.1 INTRODUCTION

This research aims at analyzing the key success factors influencing the adoption of digital banking in Mauritius. The research approach used in order to answer to the research questions will presented in this section. A set of explanatory method and descriptive method has been utilized. Exploratory research will help the researcher to determine issues, formulates hypothesizes and receive a vision into the focus of digital banking while the descriptive research design will help the researcher to acquire first-hand information from the persons responding so that logical, sound conclusions and recommendations are formulated for the study in the digital banking sphere.

3.2 RESEARCH METHODS

3.2.1 EXPLANATORY RESEARCH

Explanatory research is sometimes referred to as analytical study focuses on “why” questions. The prime goal of explanatory research is to find any causal links between the influences or variables that relate to the research problem. The research is also well organized in nature. Explanatory studies look for explanations of the essence of certain relationships.

3.2.2 DESCRIPTIVE RESEARCH

Descriptive research aims to portray an exact explanation of observations of a development. The key purpose of descriptive research is to set out a precise and valid representation of the elements or variables that are significant to the research question. This type of research is better organized than exploratory research.

[...]