Adopition of EB in vietnam

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UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIET NAM
International School of Business


Vo Ngoc Anh Thy


ADOPTION OF E-BANKING IN VIETNAM


MASTER OF BUSINESS (Honours)




Ho Chi Minh City – Year 2014
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UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIET NAM
International School of Business


Vo Ngoc Anh Thy


ADOPTION OF E-BANKING IN VIETNAM


MASTER OF BUSINESS (Honours)

Supervisor: Dr. Ngo Viet Liem




Ho Chi Minh City – Year 2014
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Abstract
E-banking is one of the most powerful tools for making banking transactions. This
study examines the relationship between attributes of E-banking website (e.g. perceived
security, perceived privacy, perceived usefulness and perceived ease of use) and Trust in
E-banking. This study also examines the extent to which trust in E-banking influence
perceived value and company image. Data is collected via a survey of customers of Joint
Stock Commercial Bank For Foreign Trade of Vietnam (Vietcombank) Bien Hoa Branch
and Nhon Trach Branch, which are located in Dong Nai Province, Southeast Vietnam.
The findings of this study show that among the four attributes of E-banking, perceived
privacy, perceived usefulness and perceived ease of use had a certain impact on trust in E-
banking while perceived security did not have such impact. This study also found the
positive relationship not only between trust in E-banking and perceived value but also
between perceived value and company image.
Keywords: trust, E-banking, online banking, Internet banking




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TABLE OF CONTENTS
 CHAPTER 1: INTRODUCTION

1.1. Background of the research
1.2. Research problem
1.3. Research questions
1.4. Scope of the research
1.5. Structure of the research
 CHAPTER 2: LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.1. Attributes of E-banking Website
2.2. Trust in E-banking
2.3. Perceived Value
2.4. Company Image
 CHAPTER 3: RESEARCH METHODOLOGY
3.1. Research design
3.2. Measurement instruments and questionnaires construction
3.3. Sampling and data collection
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3.4. Data analysis method

 CHAPTER 4: ANALYSIS AND RESULT
4.1. Descriptive analysis
4.2. Measurement validation
4.3. Hypothesis testing
 CHAPTER 5: DISCUSSION, IMPLICATION AND LIMITATION


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LIST OF FIGURES
Figure 1: Proposed research model
Figure 2: Conceptual framework and data process

Figure 3: Model with t-value in hypothesis testing
Figure 4: Model with β and R square in hypothesis testing

LIST OF TABLES
Table 1: Trust in previous researches
Table 2: Measurements scale of Attributes of E-banking
Table 3: Measurements scale of Trust in E-banking
Table 4: Measurements scale of Perceived value
Table 5: Measurements scale of Company image
Table 6: Type of customers
Table 7: Typical services customers using
Table 8: Period of time customers started to use the service
Table 9: Frequency that customers using E-banking and communicating with bank officers
Table 10: Percentage of customers based on age and gender
Table 11: Demographic characteristic of the sample
Table 12: Cronbach’s alpha for each construct
Table 13: Composite reliability for each construct
Table 14: Average variance extracted values for all constructs
Table 15: Outer loadings of manifest variables
Table 16: Construct-Level Measurement Statistics and Correlation Matrix
Table 17: Path coefficients of the constructs


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CHAPTER 1
Introduction
1.1. Background of the research
Internet banking is the most recent delivery channel introduced to the financial
service industry (Saythe, 1999). Kenneth et al (2010, p. 27) state that “online banking,

also commonly known as internet banking or e-banking, has experienced phenomenal
growth in recent years”. Along with the trend of using technology in commerce, during
the past two decades, there has been a shift from using traditional banking services to
using online banking services, so that, customers have more time and more convenience
in meeting their needs to use banking services. According to Pew Research Center (2013),
61 percent of all Internet users have used online banking, compared to 58 percent and 18
percent in 2011 (Huffingtonpost, 2014). In another research from eMarketer, almost 73
million adult consumers within the United States engaged in online banking in 2006, and
forecasts annual growth rates of between 6.5% and 9.5% through 2010 (eMarketer, 2007).
However, many studies indicate that distrust in online banking is not reducing and
remains of concern to customers (Johnson, 2007).
Customers use online banking because of perceived usefulness and perceived ease
of use. These include not being waiting in line at the branch, not being messy and fed up
with paper statements taking up space, and accessing to their account 24/7. Despite the
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increasing number of customers using online banking, many of them have the fears of not
being warranted about their security and privacy (Huffingtonpost 2014). Kersner (2005)
states that 68% of banking customers who are not interested in E-banking cite privacy
concerns as their main reason. The above factors might influence the customers’ trust in
E-banking.
Consumers concern about the positive benefits of E-banking adoption. These
benefits include the cost reductions by shifting services online, the extra value that
consumers receive from online customization, and the improved image that banks
obtained from good values they provide for their customers (Johnson, 2007).
Citibank.com reports that their E-banking customers consume a large number of the
bank’s products and are the bank get more than 40% profitable than their offline
transactions (Schneider, 2004).
1.2. Research problem
Not only in developed economies but also in developing ones such as Vietnam,

online services has been the newly-targeting industry through decades. Much as the
customers’ demand, E-commerce has not satisfied them yet, because of distrust, E-
banking is one of the problems. In this context, it is worthy of note that understanding the
effects of E-banking attributes on trust in E-banking can help to carry out which factor
influences trust in E-banking the most, and which one pushes the least. Moreover, keep
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on examining the relationship between trust in E-banking, perceived value and company
image can assist the banking leaders in the way they operate their business, therefore
strengthen their business system and provide their customers with the best services,
especially in E-banking.
1.3. Research questions
The purpose of this study is to develop and empirically validate a theoretical
framework that investigates the interrelationships between attributes of E-banking
website, trust in E-banking, perceived value, and company image. Specifically, this study
attempts to answer the following research questions.
1. To what extent, do attributes of e-banking website (e.g. security, privacy,
usefulness, and ease of use) influence trust in e-banking?
2. To what extent does trust in e-banking enhance perceived value?
3. To what extent does perceived value affect company image?


1.4. Scope of the research
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This study uses the data conducted from a survey in Vietcombank Bien Hoa and
Vietcombank Nhon Trach, which are located in Dong Nai Province, Southeast of
Vietnam. The questionnaires are designed to the customers of these banks (especially
those who already used Vietcombank E-banking), estimated that 200 customers would
conduct this survey. The study applied by multimethod approach to data collection, via e-

mail, phone and directly right after their transaction.
1.5. Structure of the research
The remaining of the thesis is organized as followed.
Chapter 1 presents the background, research problem, research questions, and
research objectives of the study. It also briefly discusses the scope and the method of data
collection.
Chapter 2 reviews the literature upon which a theoretical framework is developed in
Chapter 2. Drawing on prior research related to the adoption of E-banking, this chapter
crafts the research model and hypotheses.
In Chapter 3, a research plan is designed with measurement instruments. It also
presents the development of the questionnaire, pilot survey and final survey. This chapter
discusses about data collection and data analysis methods to test the research hypotheses.
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Chapter 4 reports findings from the analsyis of collected data, followed by Chapter 5
with discussion on theoretical contributions and implications. Finally, this study makes
suggestions for further research on the topic area. References and appendixes are included
in the end of thesis.











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CHAPTER 2
Literature Review and Theoretical Framework
This chapter provides a theoretical background about attributes of E-banking, trust in E-
banking, perceived value and company image. Drawing on prior research related to the
adoption of E-banking, this chapter crafts the research model and hypotheses.
2.1. Attributes of E-banking Website
Past studies has classified online banking attributes into four factors, including
perceived security, perceived privacy, perceived usefulness and perceived ease of use.
Kenneth et al. (2010) propose that these four attributes of online banking influence the
customer’s intention to use E-banking. Service quality research has overwhelmingly
focused on customer expectations (Esssam et al., 2006). These attributes help consumers
to build trust in the online environment, especially online banking.
One of the most significant obstacles to the process of adopting E-banking is
security (Saythe 1999). Even though customers are aware of E-banking security risks,
they still have a weak understanding of E-banking security. Security relates to the fact
that the web site guarantees the safety of their customers’ information, both financial and
personal. According to Carlost et al (2006), security also refers to aspects such as
integrity, authentification, encryption, and non- recognition, defined as follow: integrity
refers to the impossibility of the transmitted or stored data being modified by third parties
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without permission; confidentiality involves the data being seen by authorized
individuals; authentication enables a certain operation to be carried out only after
identification, or if there are guarantees of the identity of the party one is dealing with;
non-recognition refers to procedures that prevent an individual or organization from
denying that they had carried out a certain operation. Lacking of security blocks the
growth in the number of online banking users (Carlos et al. 2006). If E-banking security is
improved, users will conduct their financial transactions at home, office, or in public
places, via the Internet. E-banking absolutely will not be used unless it is considered as

safe and secured (Saythe 1999). As such, high level of perceived security is expected to
enhance trust in E-banking.
As the amount of products and services offered via E-banking grows rapidly,
consumers often rely on the fact that their bank is more concerned about privacy issues
and protect them (Tero et al., 2004). Privacy refers to the protection of personal
information. It is the consumer’s perception of the ability of the bank to protect personal
information from unauthorized use or disclosure. It is also an important dimension that
may affect users' attitude towards E-banking. In order to secure information privacy, all
bank web sites have applied encryption technology to their E-banking, supplemented by a
combination of different unique identifiers, for instance, a password, mother's name, a
memorable date, or a few minutes of automatically logging users off the account.
Customers want to protect their personal information from hackers; on the other hand,
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they want to use a completely reliable service. If consumers find something risky for their
ongoing transactions, they would not use the services anymore much as many past
successful issues they have done. Thus, perceived privacy could strongly affect their trust
in using E-banking.
It is supposed that increased usability reduces the likelihood of error and creates a
comfortable environment which would positively influence customer attitude towards the
website (Kenneth et al., 2010). Prior research has found that there is a positive
relationship between perceived usefulness and E-banking. Davis et al. (1989) defined
perceived usefulness as the degree to which a person believes that using a particular
system would enhance his or her job performance. E-banking provides sufficient
convenience that enables customers to access internet bank at all times and places, they
could use E-banking more often and fast. Customers will have a tendency to make E-
banking transactions more frequently if they noticed that using E-banking could help
them saving time doing banking services, receiving sufficient information and thus,
increasing their productivity. As a result, perceived usefulness could boost E-banking
transaction frequency.

Ease of use is measured by the degree to which consumers perceive the website is
easy to read, understand, and operate (Kim and Niehm, 2009). The understandability and
format of information, the way information is presented to consumers, are found to be
essential factors of information quality. Therefore, consumers, who regconize that content
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(text, display, label, item…) on the website is easy to read and understand, and the format
of the website is easy to follow, may desire to make transaction more often. It is why the
author consider perceive ease of use as a key factor that enhance trust in E-banking.
Hence, this study keeps on research the following hypothesis:
- H
1
: Perceived security has positive impacts on trust in E-banking.
- H
2
: Perceived privacy has positive impacts on trust in E-banking.
- H
3
:

Perceived usefulness has positive impacts on trust in E-banking.
- H
4
: Perceived ease of use has positive impacts on trust in E-banking.

2.2. Trust in E-banking
The nature of online service delivery gives rise to a lack of trust in e-banking among
customers. In e-commerce, including e-banking, in order to build trust in customer, the
customer must be made or proved that their transaction is safe, and their information
absolutely would not be given to other people. There is no direct physical contact between

buyer and seller in online environment (Kenneth et al., 2010). The consumers and the
suppliers are separated, they cannot observe each other, which is a very important thing to
judge trustworthiness. Johnson (2007) says that users’ intention to adopt E-banking arises
from its conveniences, such as 24-hour access, no geographic limitations, speed of
service, and transaction automation. It means that the four attributes of E-banking website
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create the perception that E-banking is trustworthy. Thus, they are expected to enhance
trust in E-banking.
Some research have started to analyze the influence of trust for online marketing
such as E-banking, because the lack of trust among online consumers is considered as the
main explanation for the low rate of making E-banking transaction (Carlos et al. 2006).
Frankly, trust is considered to be one of the main reasons why consumers are still hesitate
to conduct their financial transactions online as high levels of perceived risk are
associated with some products, such as financial services (Carlos et al. 2006). At other
side, when online transaction is done, meanwhile, e-banking provide services
immediately, not like other e-commerce purchases, it means customers have more trust in
doing e-banking transaction and as a consequence, they will use it more often.
Prior research in this area has made significant progress toward understanding how
trust web sites and online vendors is developed. Johnson (2007) summarizes some of the
important conceptual models proposed by researchers across the marketing and
information systems literature in Figure 1. Previously examined antecedents of trust in
electronic channels generally comprise four categories of factors. This research stream
regards trust in electronic channels as a function of characteristics of both the web site
and the customer.
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- The first group centers on branding, including the effects of incumbent brand
reputation or transferable brand equity and brand strength of the firm.
- The second one includes privacy and security issues, such as institution-based

assurances, independent expert advisors, trust seals, legal and regulatory
mechanisms, privacy policy, and situational normality.
- The third examines the role of consumer personal dispositions or propensity to trust.
- Last, the fourth one looks at the role of a Web site’s performance aspects, such as
navigation, order fulfillment, and Web site quality.
STUDY
ANTECEDENTS OF TRUST IN
ELECTRONIC CHANNEL
FOCAL TRUST CONSTRUCT
CONSEQUENCES
Hoffman, Novak, &
Peralta (1999)
Lack of control over Web
merchants access to
personal information
Trust in Web vendors

Urban, Sultan, &
Qualls (2000)
Virtual-advisor technology,
provide unbiased
information, include
competitive products, keep
your promise, ensure
consumer privacy,
transferring recognized
brand equity
Three stage process: trust
in the Internet and specific
Web site, trust in

information displayed, and
trust in delivery and
fulfillment
Customer loyalty
McKnight & Chervany
(2002)
Disposition to trust,
institution-based trust
Trusting beliefs (specific
others)
Trusting intentions,
trusting behaviors

McKnight, Choudhury,
& Kacmar (2002)
Deputation, site quality,
structural assurances of the
Web, perceived risk
Trusting intentions:
willingness to depend on
Web vendor trusting beliefs
in Web vendor
Intention to: follow
vendor advice,
share personal
information,
purchase
Balasubramanian,
Konana, & Menon
(2003)

Operational competence,
environmental security
Trustworthiness of online
broker
Satisfaction
Pavlou (2003)
Reputation, past
satisfaction, frequency
Trust in Web retailer
Intentions to
transact,
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reduces perceived
risk,
usefulness, ease of
use
Suh & Han (2003)
Perceived control,
authentication, non-
repudiation, privacy
protection, data integrity
Trust in e-commerce
Attitude towards
using, behavioral
intention to use,
actual use
Bart, Shankar, Sultan,
& Urban (2005)
Privacy, security, brand

strength, advice, absence of
errors, community features,
order fulfillment
Trust in a Web site
Behavioral intent
Yousafzai, Pallister, &
Foxall (2005)
Institution-based trust:
security policies, privacy
policies, legal & regulatory
compliance, trust third
party verification,
guarantees situational,
normality; testimonials
Web site design & quality,
brand identification
Trust in e-banking: ability
belief, integrity belief, and
benevolent, belief
Trusting intentions
Schlosser,White, &
Lloyd (2006)
Web site investment,
privacy, and security
Ability, integrity, and
benevolence
Online purchase
intentions
Wang, Beatty, & Foxx
(2004)

Privacy, disclosures,
security disclosures, return
policy, seal of approval
Cue-based trust (trust
based on cues from initial
Web site encounter)
Book-marking,
willingness to
provide personal
information
Source: (Johnson, 2007)
Table 1: Trust in previous researches (Johnson, 2007)

2.3. Perceived value
According to Parasuraman and Grewal (2002), perceived value includes both “get”
component (i.e., the benefits buyers acquire from seller's offering, such as products or
services) and “give” component (i.e., the costs the buyers pay for acquiring the offering,
including monetary and non-monetary costs). Among them, persons, who recognize that
what they receive exceeds what they give, tend to be more satisfied (Zeithaml 1988).
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Parasuraman and Grewal (2000) proposed four types of perceived value, (a)
acquisition value implies the benefits of getting by acquiring a product or service, (b)
transaction value refers to the pleasure from a good deal, (c) in-use value means utility
experienced from the actual use of the product, and (d) redemption value involves other
benefits at the moment of the transaction (for products) or termination (for services).
Online banking is able to have great impact on all of these value components. Information
or services provided by the web sites may directly or indirect impact value components
(Grewal et al. 2003). As so, it is reasonable to assume that trust in E-banking influences
perceived value.

- H
5
: Trust in E-banking is positively related to Perceived Value.

2.4. Company Image
Long et al. (2013) state that company image refers to the extent to which customers
accumulate and develop the reputational knowledge of an organization or a company
image is of most importance and is, to a great extent, dependent on how its customers are
treated during interactions with the employees (Balmer and Stotvig, 1997; Nguyen and
LeBlanc, 1998). Reputational knowledge can be represented by a firm in offering
products/services with very high quality (Olavarrieta and Friedmann, 1999). Image is
believed to function well to overcome complexities generated by distinct attributes of
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service and when small problems occur from functional and technical aspects of quality
(Long et al. 2013).
The more satisfaction online banking services bring to customers, the more
perceived values customers obtain. When building value in customers, banks should be
concerned with meeting the customers’ specific needs. Bank’s ability to understand its
customers’ needs and provide qualitative service in accordance with those needs can
consequently boost its credibility and enhance its company image (Fatima, 2011). For the
the present time, commercial banks that wish to build a better image consequently need to
find out how to improve their customers’ perceived value. Hence, the last hypothesis
would argue as:
- H
6
: Perceived value positively influence company image.

Figure 1 : Proposed research model

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The proposed research model for this study is described in Figure 2, in which the six
hypothesis are presented as follow: H
1
-H
4
are shown for the influence of attributes of E-
banking (perceived security, perceived privacy, perceived usefulness, perceived ease of
use) on trust in E-banking; then, trust in E-banking enhances perceived value in H
5
; and
last, H
6
examines the effect of perceived value on company image.

CHAPTER 3
Research methodology
The present thesis follows the research process recommended by Urbach et Frederik
(2010) as shown in Figure 3. In Chapter 3, a research plan is designed with measurement
instruments. It also presents the development of the questionnaire, pilot survey and
official survey. This chapter discusses about data collection and data analysis to test the
research hypotheses.
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Figure 2: Conceptual framework and data process (Urbach et al. 2010)

3.1. Research design:
In this study, qualitative research methods were applied to find out the model,
constructs, suitable measurement variables. Then, the questionnaire was built based on
past researches and we run the trial test for checking the efficiency and the meaning of the
translated questions because of the Vietnamese respondents.
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Second, quantitative survey was used for data collection. The purpose is to find the
relationship between attributes of E-banking and trust in E-banking, and test the effect of
trust in E-banking on perceived value and perceived value on company image

3.2. Measurement instruments and questionnaires construction
All measures except company image used a 7-point scale with endpoints of very
strongly disagree (1) and very strongly agree (7).
3.2.1. Attributes of E-banking website comprises 5 dimensions which are measured
by 22 items adapted from Kenneth et al. (2010), Kim and Niehm (2009), Tero
et al. (2004), as follow :
 Security refers to aspects such as integrity, authentification, encryption, and non-
recognition, defined as follow: integrity refers to the impossibility of the
transmitted or stored data being modified by third parties without permission;
confidentiality involves the data being seen by authorized individuals;
authentication enables a certain operation to be carried out only after
identification, or if there are guarantees of the identity of the party one is dealing
with; non-recognition refers to procedures that prevent an individual or
organization from denying that they had carried out a certain operation (Carlost et
al., 2006). It is measured by 5 items.
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 Privacy refers to the protection of personal information or we can define privacy
as the consumer’s perception of the ability of the bank to protect personal

information from unauthorized use or disclosure (Tero et al. 2004). This study
measured privacy by 4 items.
 Davis et al. (1989) defined perceived usefulness as the degree to which a person
believes that using a particular system would enhance his or her job performance.
Perceived usefulness is measured by 6 items.
 Perceived ease of use is measured by the degree to which consumers perceive the
website is easy to read, understand, and operate (Kim and Niehm, 2009).
Perceived ease of use consists of 7 items.
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Table 2: Measurements scale of Attributes of E-banking

Construct
Code
Item
Perceived security
PS1
My bank ascertains my identity before sending any messages to me.
PS2
My bank ascertains my identity before processing any transactions
received from me.
PS3
My bank uses security controls for the confidentiality of transactions.
PS4
My bank implements security measures to protect its online customer’s
information.
PS5
My bank devotes time and effort to prevent unauthorized access to my
information.
Perceived privacy
PP1
I trust in the ability of e-banking to protect my privacy.
PP2
My main bank’s web site never sells my personal information in their
computer databases to other companies.
PP3
My main bank’s web site will not use my personal information for any
purpose unless I authorize it to do so.
PP4
I am convinced that my main bank’s web site respects the privacy of
the transactions.

Perceived usefulness
PU1
The content of my main bank’s web site is useful to me.
PU2
My main bank’s web site is useful in carrying out transactions.
PU3
Using e-banking enhances my effectiveness of utilizing banking
services.
PU4
Using e-banking enables me to utilize banking services more quickly.
PU5
Using e-banking for my banking services increases my productivity.
PU6
I have generally received enough information on E-banking.
PU7
Overall, e-banking is useful for me.
Perceived ease of use
PEU2
The display pages within the website are easy to read
PEU3
The text on the website is easy to read
PEU4
The website labels are easy to understand
PEU5
Learning to operate the website is easy for me
PEU6
It would be easy for me to become skillful at using the website
PEU7
I find the website easy to use.