Determinants of customers’ adoption of mobile banking: An empirical study by integrating diffusion of innovation with attitude

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Abstract
Adoption of mobile technology as an alternate distribution channel in delivering the banking services to customer’s shows prospective in the newly developed banking model all over world. Mobile banking is a new radical innovation in the excellence of service delivery to banks. Banks are mining this technology to empower the society containing both banked and un-banked customers as well as bringing profits to mobile network operators and reducing the operational cost for the banks. This research attempted to integrate the customer’s attitude and social environmental factor i.e. mimetic force with Diffusion of Innovation (DOI) model by Roger’s in widening the applicability to mobile banking in India. It explains the customers’ attitude towards mobile banking in terms of innovation attributes i.e. Relative Advantage, Compatibility, Trialbility, Observability and Institution theory i.e. mimetic pressure which leads to the formation of attitude towards adoption of mobile banking. It was found compatibility; trialability and mimetic force are the good predictors for attitude towards adoption of mobile banking in Indian context. The research has enhanced knowledge base on customer adoption of mobile banking and has identified the innovation attributes and mimetic force in explaining the customers’ attitude in better understanding of the commercial likelihood of distribution channel. © Manoranjan Dash, Pradhan Bibhuti Bhusan and Snigdha Samal, 2014.
Journal of Internet Banking and Commerce
An open access Internet journal (http://www.arraydev.com/commerce/jibc/)
Journal of Internet Banking and Commerce, December 2014, vol. 19, no.3
(http://www.arraydev.com/commerce/jibc/)
Determinants of Customers’ Adoption of Mobile Banking:
An Empirical Study by Integrating Diffusion of Innovation with
Attitude
MANORANJAN DASH, M. Tech
Assistant Professor, Faculty of Management Studies, Siksha O Anusandhan
University, Bhubaneswar, India
Postal Address: Ghatikia, Kalinga Nagar, SUM Hospital Road, Bhubaneswar-3, India
Author's Personal/Organizational Website: www.ibcs.ac.in/www.soauniversity.ac.in
Email: manoranjandash@soauniversity.ac.in
Prof. Manoranjan Dash is working as Assistant Professor in Institute of Business and
Computer Studies, Bhubaneswar, India. His areas of interest are E-Commerce, Mobile
and Internet Banking, Cloud Computing and Business Intelligence.
PRADHAN BIBHUTI BHUSAN, Ph.D
Professor, Faculty of Management Studies, Siksha O Anusandhan University,
Bhubaneswar, India
Postal Address: Ghatikia, Kalinga Nagar, SUM Hospital Road, Bhubaneswar-3, India
Author's Personal/Organizational Website: www.ibcs.ac.in/www.soauniversity.ac.in
Email: registrar@soauniversity.ac.in
Prof. Pradhan Bibhuti Bhusan is working as Professor in Institute of Business and
Computer Studies, Bhubaneswar, India. His areas of interest are strategic management
& Accounting, Stock Market Analysis and E-Commerce.
SNIGDHA SAMAL, MBA
Research Scholar, Faculty of Management Studies, Siksha O Anusandhan
University, Bhubaneswar, India.
Postal Address: Ghatikia, Kalinga Nagar, SUM Hospital Road, Bhubaneswar-3,
India.
Author's Personal/Organizational Website: www.soauniversity.ac.in
Snigdha Samal is a Research Scholar in the Faculty of Management studies, Siksha O
Anusandhan University, Bhubaneswar, India. Her current research interests are on
customer adoption and service quality in mobile banking.
JIBC December 2014, Vol. 19, No. 3 - 2 -
Abstract
Adoption of mobile technology as an alternate distribution channel in delivering the
banking services to customer’s shows prospective in the newly developed banking
model all over world. Mobile banking is a new radical innovation in the excellence of
service delivery to banks. Banks are mining this technology to empower the society
containing both banked and un-banked customers as well as bringing profits to mobile
network operators and reducing the operational cost for the banks. This research
attempted to integrate the customer’s attitude and social environmental factor i.e.
mimetic force with Diffusion of Innovation (DOI) model by Roger’s in widening the
applicability to mobile banking in India. It explains the customers’ attitude towards mobile
banking in terms of innovation attributes i.e. Relative Advantage, Compatibility,
Trialbility, Observability and Institution theory i.e. mimetic pressure which leads to the
formation of attitude towards adoption of mobile banking. It was found compatibility;
trialability and mimetic force are the good predictors for attitude towards adoption of
mobile banking in Indian context. The research has enhanced knowledge base on
customer adoption of mobile banking and has identified the innovation attributes and
mimetic force in explaining the customers’ attitude in better understanding of the
commercial likelihood of distribution channel.
Keywords: Mobile banking; Diffusion of Innovation; Roger’s model; Radical
Innovation
© Manoranjan Dash, Pradhan Bibhuti Bhusan and Snigdha Samal, 2014
INTRODUCTION
Technological innovation has rapidly changed every aspect of our lives and the way of
banking business during the last decade. The smart devices are being used in delivering
banking services. The integration of the internet technology and mobile network creates
new opportunities and applications. Delivering the bank-related financial services
through the mobile devices is known as mobile banking.
The services offered by mobile banking include non-financial transaction i.e. Cheque-
Book request, mini statement/ balance enquiry, and financial transactions i.e. bill
payments (utility bills, Credit cards, insurance premium), fund transfer, mobile recharge,
merchant payments etc. Mobile banking provides the customer any time, any where
banking facility with real-time transaction through the mobile device. Mobile network
operators or service provider should ensure the security and threats that the customers
may pose while doing the banking transactions. The voluntary nature of the decision to
adopt it, perceived attributes of an innovation, social system in which the innovation to
diffuse and the communication channels through which an innovation reaches the
adopter are the key determinants of innovation adoption (Rogers, 1995).
Adoption is also depends on the people perceptions of innovation. Innovation adoption
theory proposed by Tornatzky and Fleischer (1990) used typically to foresee mental
approval rather than actual acceptance. Indian banks are eyeing on business
JIBC December 2014, Vol. 19, No. 3 - 3 -
intelligence solutions to understand the behavioral pattern of customers and offer cross
selling solution to customers, to cut operating costs, manage scale and increase their
productivity. Present volatile economic state of affairs is also forcing banks to try various
business models either to increase their base margin or risk management. Adoption of
mobile banking and search for innovation to improve products and services is a
challenge task for Indian banks. Bigger the challenge more is the need for the innovative
attributes. The present research is an attempt to apply diffusion innovation theory
attributes and institutional theory mimetic forces in exploring the customer attitude
towards the use of mobile banking by statistical analysis and structural equation
modeling.
MOBILE BANKING IN INDIA
Payment and Settlement Systems Act, 2007 has moved towards creating electronic
payments and thereby creating a ‘less-cash society’. In keeping view of the vision
document by this act banks are promoting various modes of electronic payments i.e.
credit card payment, mobile banking etc. The act ensures the safe, reliable, accessible
and interoperable payments and settlement systems in India. Keeping in view of the
growth of volume in RTGS as well value processed, retail electronic segment has shown
significant growth of 35.2% in volume and 54.9% in value. Reserve Bank of India (RBI),
issued the first guidelines regarding mobile banking in October 2008. Initially bank-led
model was suitable for India, which stated offering services like balance enquiry, cheque
book request, stop payment , mini transaction statement etc.
Mobile Subscribers in India
589 million
510 million
550 million
22 million
182 million
Fig-1 Statistics of Mobile Subscribers and mobile banking customers in India (Source:
RBI, India (2014))
The larger base of mobile subscribers has not been tapped for financial inclusion.
Mobile banking has been reflecting a growing trend since few years. Since last 3 year
the trend in usage of mobile banking is as per the following figure:
JIBC December 2014, Vol. 19, No. 3 - 4 -
Mobile Banking Trend
5.96
6.85
6.14
12.96
25.56
18.21
22.51
53.3
59.9
0
10
20
30
40
50
60
70
No of Use rs Volume Value
in Million
2010-11
2011-12
2012-13
Fig-2 Mobile Banking Trends over 3 years in India (Source: RBI, India (2014))
As per the guide lines of RBI, banks are offering mobile banking services through
various types of channel i.e. SMS channel, Unstructured Supplementary Service Data
(USSD) channel, mobile banking application available in app stores like Apple, Google ,
Blackberry etc.
The Interbank Mobile Payment Services(IMPS) has enhanced the efficiency of mobile
banking by enabling real time transfer of funds between bank accounts and providing a
centralized interbank settlement service for mobile banking transactions. The IMPS has
also been enhanced to support merchant payments using mobile phones to promote
less cash society. Mounting attractiveness of low charge channels i.e. e-banking, m-
banking has been found wider acceptance by customers, which has given a wave of
digital banking in reducing the bank operating costs. In Jan-2013 mobile banking
transactions was 5.6 million in Jan-2013 in comparison to 2.8 million in Jan-2012 and the
value of transactions is INR 625 cr(USD 105.73 million) in Jan-2013 which three times
of the value of transactions in Jan-2012. .
LITERATURE REVIEW
In social systems how the diffusion of innovation is being undertaken is explained by
Diffusion of innovation (DOI) model designed by Rogers (1983). Human being
perceptions of attributes of an innovation affect the rate of adoption. According to DOI
theory, individuals collect and synthesis information about an innovation and compiling
this information forms their perception about an innovation. Based on theses
perceptions, an individual may decide to accept or reject an innovation (Agarawal &
Prasad, 1997; Moore & Benbasat, 1991). According to Rogers, individuals’ perceptions
of the attributes of an innovation and not the attributes as classified objectively by
JIBC December 2014, Vol. 19, No. 3 - 5 -
experts or change agents, affect the rate of adoption.
Innovation attributes can explain the rate of innovation adoption. Tornatzy and Klein
(1982) in their study have hypothesized, perceived innovation attributes can foresee the
adoption and accomplishment of different innovations. Moore and Benbasat (1991)
extended and refined Rogers model to develop an instrument that can be used across a
variety of information system/technology innovation domains and at the same time
robust enough to tap a variety of perceptions of innovations. They retained relative
advantage, compatibility and trialability as original and renamed complexity as ease of
use to be consistent with Davis’s (1989) TAM. Agarwal & Prasad (1998), in their study
stated Rogers (1983) innovation is more likely to be adopted if it is compatible with
individual’s value and social system. Lehman & Markman (2001) investigated the
psychological processes involved in consumers’ adoption decision and reported that
prior product knowledge had a negative influence on adoption. Polatoglu & Ekin (2001),
in their study in Turkey, found relative advantage as important factors affecting users’
adoption decisions.
Gerrard and Cunningham (2003), defines compatibility as a gauge of the values or
beliefs of individuals, ability of an innovation to meet their needs and the ideas adopted
in the past, and Barnes. S. J & Corbett, B (2003) highlighted that the recent innovations
in telecommunications helped the banks to provide mobile banking services to the
customers and the customer to do banking service through a mobile phone. Clark
(2008) focused in his research, mobile is being used as distribution channel for providing
the banking services but simultaneously it provides challenges to the banks how they will
be providing banking solutions to multi vendor mobile devices. Laukkanen and Kiviniemi
(2010), relative advantage positively weight on the behavioral intention to adopt M-
money in Finland.
Riddhima Gandhi (2010), states that mobile banking is not popular even within the urban
area. Today less than 14 per cent of urban dwellers use mobile banking. He further
states that the awareness level among the people regarding mobile banking is very less
and lack of support in vernacular languages.
Archana Sharma (2011), stated, the huge base of mobile subscribers and wide spread
coverage of mobile network operators have provided an opportunity for banks to utilize
the platform for delivering their banking services to the banked and unbanked
customers. states that the speedy increase in customers and broad exposure of mobile
network have made this channel an important platform for extending banking
services.Jaideep Ghosh (2011) opines that the mobile banking device can be an
important tool to cover the large unbanked population in the country. Benoy CS (2011)
states that, the Indian Banking Industry performed outstanding in the last few years,
even during the times when the rest of the world was struggling with the financial
meltdown.
Today most of the banks in India provide various services such as net banking, ATMs,
SMS banking and Mobile banking. Dikit.S.V, Shringarpur (2012) suggests mobile
network operators should be tied up with banks in order to provide the services at a
cheaper rate to the customers. As per study conducted by Riquelme and Rios (2010),
Lin (2010), Puschel, Mazzon and Hernandez (2010),Cruz, Neto, Gallego and Laukkanen
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