A Comparative Study On Factors Influencing Customers’ Using Internet Banking Between the United States and China

By | May 1, 2014

This Assignment Is Published With Permission From The Author For Online Review Only
All Rights Reserved @ ChinaAbout.Net

Contents

 

Contents…………………………………………………………………………………………………………. 1

  1. Introduction……………………………………………………………………………………………… 3
  2. Literature Review……………………………………………………………………………………… 3

2.1      Basic concepts…………………………………………………………………………………. 3

2.2      History of Internet Banking………………………………………………………………. 4

2.3      A General Comparison between China and the United States……………….. 5

2.4      The Technology Acceptance Model (TAM)…………………………………………. 5

2.4.1     Perceived Ease of Use…………………………………………………………….. 6

2.4.2     Perceived Usefulness………………………………………………………………. 6

2.4.3     Intention to use………………………………………………………………………. 6

2.5      Risk Perception………………………………………………………………………………… 6

  1. Research Methods……………………………………………………………………………………… 7
  2. Analyses of Data……………………………………………………………………………………….. 7
  3. Discussion of Findings……………………………………………………………………………….. 7

5.1      Internet banking usage rate……………………………………………………………….. 7

5.2      Internet banking usage and age distribution………………………………………… 9

5.3      Internet banking usage and income level……………………………………………. 11

5.4      Internet banking usage and geographical distribution………………………….. 11

5.5      Internet banking usage and banking methods…………………………………….. 11

  1. Conclusions…………………………………………………………………………………………….. 13

Bibliography………………………………………………………………………………………………….. 14

Appendices…………………………………………………………………………………………………… 18

 

List of Figures

 

Figure 1 Communication methods and access devices in electronic banking…….. 7

List of Charts

 

Chart 1 The top 10 nations by online banking penetration in 2010………………… 11

Chart 2 Internet Banking Penetration in China…………………………………………… 12

Chart 3 The Age Distribution of Internet Banking Users in China………………… 13

Chart 4 The Age Distribution of Online Bill Payment United………………………. 13

Chart 5 The Preferred Banking Method in US in 2010………………………………… 15

Chart 6 The Preferred Banking Method in US from 2007-2010……………………. 15

Chart 7 Preferred E-Payment Methods in China in 2011……………………………… 16

 

List of Tables

 

Table 1 A General Comparison between China and the United States…………….. 8
A Comparative Study On Factors Influencing

Customers’ Using Internet Banking Between the United States and China

 

1.        Introduction

 

Online banking (Internetbank or E-bank), consists of two levels of meaning. One is agency concept which refers to the banking system built up through information networks; the other is business concept which refers to financial services offered by the bank through information networks and these services include traditional banks business as well as emerging business due to the application of information technology (Flower 2012). In daily life and work, we usually understand the online banking by the second concept, namely the concept of online banking services. Internet banking is not just traditional banking that deals with simple online transfer, other services a new variety of businesses are emerging due to the application of information technology.

 

Based on the fact that China and US are the two largest economies as well as user groups of the internet, this study is designed to find out the similarities as well differences regarding various topics in relate to the internet banking usage based on the recent second-hand data published.

 

2.        Literature Review

 

2.1    Basic concepts

 

In term of definition, banking industry cultivates financial relationships with customers of all sizes to supply financial products and services that stimulate economic growth, and act as a catalyst to national and global economics (technofunc.com 2012). While a very significant aspect of the development of traditional banking industry is its requirement of man-power which is a major input of the banking operations (Rao 1993), the development of the internet banking as well as relevant technologies has greatly reduced the reliance to man-power. The term internet banking, also known as online banking, refers to the provision of electronic banking service via the internet, commonly through a personal computer (PC) or other access devices with Internet capabilities.

Figure 1 Communication methods and access devices in electronic banking

Source: Gkoutzinis 2003, p. 8

 

In another definition in the E-Commerce and Development Report 2002, internet banking refers to the deployment over the Internet of the retail and wholesale banking service involving individual and corporate clients, and includes bank transfers, payments and settlements, documentary collections and credits, corporate and household lending, card business and some other (United Nations 2002).

 

2.2    History of Internet Banking

 

The history of the Internet Banking came with the preliminary maturity of the internet based intelligence and technologies. While sometime in 1980s, banking and finance organizations in Europe and United States already started suggestive researches and programming experiments on the concept of ‘home banking’, the first precursor of modern Internet banking launched only on 6 October 1995 with the Presidential Savings Bank allowed customers to open new account over the Internet using a standard web browser. On 18th October, Security First Network Bank, launched by Kentucky-based Cardinal Bancshares organization opened its doors for business. Thus the Security First became the world’s first virtual bank (Gardner 2009).

 

2.3    A General Comparison between China and the United States

ChinaUSA
Population (thousand)1,356,429317,133
Internet penetration (%) as of mid of 201240.1%78.1 %
Penetration of online shopping (against the total population of internet users)42.9% (2012)70.3% (2011)
Average Annual Disposable Personal Income (USD)3,930.411,923.2

Table 1 A General Comparison between China and the United States

Source: tradingeconomics.com, cnnic.net.cn, internetworldstats.com

 

2.4    The Technology Acceptance Model (TAM)

 

The Technology Acceptance Model (TAM) is an information systems theory that models how users come to accept and use a technology. Davis’s original Technology Acceptance Model developed in 1989 has four factors which are:

l  Perceived Ease of Use;

l  Perceived Usefulness;

l  Intention to Use; &

l  Use Behavior. (Khosrow-Pour 2006).

And in the previous researches on technology acceptance model, the perceived usefulness, perceived ease of use and behavioral intention to use are stable and consistent (Lee & Ishii 2009).

 

2.4.1            Perceived Ease of Use

 

Ease of use refers to the users’ belief that the technology in question is difficult to use. In particular, it is the evaluation of the degree to which using the technology is free of effort (Davis 1989). In another word, if the use of the new technology is understood as difficult to use and of overly complexity, it would not probably be use if an alternative does exist.

 

2.4.2            Perceived Usefulness

 

Davis (1989) proposed that the perceived ease of use and the perceived usefulness to the the fundamental determinants, operative in the context of computer use behavior. The perceived usefulness has to do with the degree to which a person believes the new technology would be helpful to him or her to carry out the particular tasks in a productive way (Teo 2011, p. 81).

 

2.4.3            Intention to use

 

The behavioral intention to use (BIU) is an important factor that determines whether users will actually utilize the system (ascilite.org.au 2011).

 

2.5    Risk Perception

 

Risks could be referred as an expected value, a probability distribution and uncertainty and as an event (Aven & Renn 2008). According to Javenpaa and Tractinsky (1999), risk perception is negatively correlated with willingness to buy. In addition, a large number of studies emphasize the importance of risk perception in regard to online shopping. (Choi & Lee 2003; Tan 1999; Misra & Rao 2000). Lee, Kwon and Schumann (2005) found out that non-adopters of internet banking were most influenced by the perceived risks inherent to the transactions as well as by their lack of experience of using the internet.

 

3.        Research Methods

 

Research methods may be understood as all those methods, techniques that are used for construction of research which include: data collection, statistical skills used for establishing relationships between data and the unknown and also methods adopted in evaluating the accuracy of the conclusion made (Kothari 2004, p. 8). The following research methods have been adopted in this research:

 

Relevant literatures;

Data released by the relevant departments of the two countries i.e. US and China;

Similar studies;

 

4.        Analyses of Data

 

Descriptive analysis

Data screening

Correlation research to examine the relationship of two or more variables;

Discussion

 

5.        Discussion of Findings

 

5.1    Internet banking usage rate

Chart 1 The top 10 nations by online banking penetration in 2010

Source: comscoredatamine.com 2010

 

According to a survey done in October 2010, United States had an online banking penetration rate of 45.1% making it the 9th place in the surveyed countries in the world.

 

 

Chart 2 Internet Banking Penetration in China

Source: enfodesk.com 2010

 

Based on the survey of “2010 Q1 China’s online banking market quarterly monitoring” released by Enfodesk in 2010, the number of registered users of the online banking market in China reached 211 million in first quarter of 2010 with a growth rate of 11.7% compared to the previous quarter. In term of the penetration rate, it continued to grow into 18.91% though it was still much smaller than that in the US, 45.1% during the similar period.

 

But this penetration gap seems to be reduced sharply. According to the most updated data release, until the third quarter of 2012 the number of registered online banking users reached 489 million, this data is equivalent to 1.58 times of the total U.S. population. As a matter of fact the cumulative amount of the transactions through online banking last year had exceeded 900 trillion yuan (US $144 trillion) which was equivalent to 17 times of China’s gross domestic product (GDP) in 2012. In term of internet banking, based on this updated number of users as well as the total population above age of 15, i.e. 1,117 million, the penetration rate until the end of third quarter of 2012 will be 43.78%. Thus with the time passes, the faster internet banking penetration rate seems to minimized the penetration rate gap between US and China.

 

5.2    Internet banking usage and age distribution

 

Chart 3 The Age Distribution of Internet Banking Users in China

Source: iresearchchina.com 2010

 

According to the study done by iResearch in 2010 targeting at the internet banking users, the major groups of users in the online banking transactions will be those aged from 18 to 35 (71 percent of the total respondents) indicating that the young population dominated the internet banking user group.

Chart 4 The Age Distribution of Online Bill Payment United

Source: americanbanker.com 2010

 

Looking at the age distribution of online bill payment which is a major activity of online banking business, in the United States in 2010, consumers in the 21-to-34 segment are 28 percent of online bill payers, while those 35-54 represent 48 percent. Those older than 55 represent 24 percent of users.(americanbanker.com 2010)

 

Compared to the major young-age internet banking users in China, usage of internet banking is more accepted among the middle aged and elder people in the US. According to a study done by American Bankers Association (ABA), 57% of bank customers aged 55-years and older prefer online banking as opposed to visiting a branch or ATM (thenextweb.com 2011) indicating that online banking is more commonly more accepted among the elder group of users in the United States.

 

5.3    Internet banking usage and income level

 

5.4    Internet banking usage and geographical distribution

 

5.5    Internet banking usage and banking methods

 

 

Chart 5 The Preferred Banking Method in US in 2010

Source: aba.com 2010

 

Chart 6 The Preferred Banking Method in US from 2007-2010

Source: aba.com 2010

 

An earlier survey held by the American Bankers Association (ABA) demonstrated that in year of 2010, most customers in term of 36 percent of the respondents prefer to use their banking service online compared other than methods. The digit was 25 percent of customers favored online banking in the previous year of 2009 suggesting that the online banking enjoys an enhanced popularity.

Chart 7 Preferred E-Payment Methods in China in 2011

Source: iResearch 2011

 

Similar high level of acceptance of online banking was observed according to a survey done by iResearch in 2011 targeting at the preferred e-payment methods in China among customers. In particular, mobile payment, SMS and third party payment modes were the three most preferred mode of e-payment in China after the internet banking.

 

6.        Conclusions

 

 

 

 

Bibliography

 

aba.com 2010. ABA Survey Shows More Consumers Prefer Online Banking. Accessed on 23rd Mar 2013 [online] available: http://www.aba.com/Press/Pages/093010PreferredBankingMethod.aspx

 

americanbanker.com 2010. More Consumers Embracing Online Banking, Bill Pay. Accessed on 23rd Mar 2013 [online] available: http://www.americanbanker.com/bulletins/-1020520-1.html

 

Aven, T. & Renn, O. 2008. Determining the righ level of investment in societal safety and security – the role of quantitative risk assessment. New Jersey: John Wiley & Sons.

 

ascilite.org.au 2011. Analysis of the technology acceptance model in examining students’ behavioral intention to use an portfolio system. Accessed on 23rd Mar 2013 [online] available: http://www.ascilite.org.au/ajet/ajet27/shroff.pdf

 

Cabinet Office 2002. Realism and social science, London: Sage Publications.

 

Choi, J. & Lee, K. H. 2003. Risk perception and e-shopping: a cross-cultural study. Journal of Fashion Marketing and Management 7(1), 40-64

 

comscoredatamine.com 2010. Top 10 Countries by Online Banking Penetration. Accessed on 23rd Mar 2013 [online] available: http://www.comscoredatamine.com/2010/10/top-10-countries-by-online-banking-penetration/

 

enfodesk.com 2010. Industry data: the number of registered users of the online banking market in China reached 211 million in the first quarter of 2010. Accessed on 23rd Mar 2013 [online] available: http://www.enfodesk.com/SMinisite/index/articledetail-type_id-1-info_id-4521.html

 

Flower, G. 2012. Banking: in Search of Relevance: A New Model for a New Reality. London: Troubador Publishing Ltd

 

Davis, F. D., Bagozzi, R. P., & Warshaw, P.R. 1989. User acceptance of computer technology – a comparison of two theoretical models. Management Science, 35(8), 982

 

Gardner, J. A. 2009. Innovation and the Future Proof Bank. New Jersey: John Wiley & Sons.

 

geert-hofstede.com 2012. National cultural dimensions. Accessed on 23rd Mar 2013 [online] available: http://geert-hofstede.com/national-culture.html

 

Gkoutzinis, A. 2003, Internet Banking and the Law in Europe. Cambridge: Cambridge University Press. p. 8

 

iresearchchina.com 2010. China Online Banking User Research Report. Accessed on 23rd Mar 2013 [online] available: http://www.iresearchchina.com/

 

Jarvenpaa, S. L. & Tractinsky, N. 1999. Consumer Trust in an Internet Store: A Cross Cultural Validation. Journal of Computer-Mediated Communication. 5(2)

 

Kothari, C. R. 2004, Research Methodology: Methods and Techniques. New Delhi: New Age International. p. 8

 

Khosrow-Pour, M. 2006. Emerging Trends and Challenges in Information Technology Management. London: Idea Group Inc.

 

Lee, R. & Ishii, N. 2009. Software Engineering, Artificial Intelligence, Networking and Parallel/Distributed Computing. Berlin: Springer-Verlag.

 

Lee, E. J., Kwon, K. N. & Schumann, D. W. 2005. Segmenting the non-adopter category. Berlin: Springer-Verlag.

 

Misra, B. A. & Rao, R. 2000. On risk, convenience, and internet shopping behavior. Association for computing machinery. Communication of the ACM 43(11), 98-105

 

Paul, J. 2011. International Business. 5th edn, New Delhi: PHI Learning Private Limited.

 

Rao, B. P. 1993. Personnel Management and Industrial Relations in Banking Industry. Delhi: Nav Prabhat Printing Press.

 

Tan, S. J. 1999. Strategies for reducing consumer risk aversion in Internet Shopping. The Journal of Consumer Marketing. 16(2), 163-180.

 

Teo, T. 2011, Technology Acceptance in Education: Research and Issues. The Netherlands: Sense Publishers. p. 81

 

thenextweb.com 2011. The future of online banking. Accessed on 23rd Mar 2013 [online] available: http://thenextweb.com/insider/2012/03/01/the-future-of-online-banking/

 

technofunc.com 2012. What is Banking – Banking Basics. Accessed on 23rd Mar 2013 [online] available: http://www.technofunc.com/index.php/domain-knowledge/category/what-is-banking

 

United Nations 2002. E-Commerce and Development Report 2002. New York: United Nations Publications

 

 

 

 

Appendices