Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
Understand Your Market, Not the System: A Case Study on
Internet Banking in Malaysia
Arasu Raman and Tay Chiat Chien
Strategic information system management should act as a way of
communication method to differentiate a bank’s offerings against its
competitors. Relationship between banks as marketers, consumers
and businesses and electronic banking were strongly challenged by
internet technology. This study aimed to offer clearer information of the
aspects influencing intention to use web for banking of a selected
international commercial bank in Malaysia. In this study, a
comprehensive survey for data gathering was used to collect and 204
valid responses were obtained from the chosen bank customers.
Multiple regressed results proven that there are differences between
the banks understanding on its customers and the customers have
significant reasons to demand a real electronic banking system. There
is a necessity for commercial banks to ensure their customers
acquiescent to internet banking.
Field of Research: Internet Banking, Electronic Commerce, Information Systems
1. Introduction
According to Bank Negara (2011) there are twenty-eight banks providing internet banking
out of which twelve-banks providing mobile banking services to their customers, including
local and overseas banks. Internet banking in Malaysia started in mid-2000 due to the trend
of electronic revolution. The banking segment faced various challenges such as transaction
security and resistance to change in internet banking due to various psychological and
behavioural issues. Thus, internet banking is not dominance in Malaysia. Ramayah (2003)
in a study has proven that awareness level of electronic commerce and internet banking is
high in Malaysia however there are only 23% of this are actual internet banking users.
SM bank has more than 1,500 offices across 70 countries. SM bank is one of a prime
international commercial bank that listed on a few of the world‟s top stock exchanges. The
bank offers personal, commercial, and Islamic banking services. The SM bank‟s other global
hubs are in India and China. SMOPE is the SM bank‟s Technology Operations Hub which
was established in Malaysia in 2001. It is first Global Shared Services Centre by an
international commercial bank in Malaysia. In Malaysia, SMOPE has approximately 3,600
employees currently. (SMOPE, 2011).
Arasu Raman, INTI International University, Malaysia. E-mail: arasu.raman@newinti.edu.my
Tay Chiat Chien, INTI International University, Malaysia.
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
As shown in Figure 1.0 and according to the CEO of SMOPE, only 7% of SM bank
customers in Malaysia use internet banking facilities and its‟ rather low as compared to
Singapore (37%), China (80%) and India (95%) in 2010. The penetration of internet usage
in Malaysia increased from 47.8% in 2007 to 65.7% in 2009 [MCMC, 2009] where else in
the study, Arasu and Viswanathan (2010], indicates the usage of internet banking in
Malaysia is decreased from 11% in 2007 to 8% in 2009. Although the penetration of
internet usage is growing continuously, the usage of internet banking is decreasing.
Figure 1.0: Percentage of SM bank customers using internet banking
100%
80%
60%
40%
20%
0%
95%
80%
37%
7%
India
China
Singapore
Malaysia
Furthermore, Nielsen (2009) discover the barriers of using internet banking in Malaysia, not
needed (59%), not internet / IT savvy (24%), satisfied with current channel (17%), security
issues (16%), no internet access (11%) and likes to interact with bank staff (6%). The
usage rate in Malaysia is decreasing year by year. Most Malaysians feel that they do not
need online banking facilities as they do not fully utilising all services provided by banks.
2. Review of Literature
Rogers, (2003) well defined diffusion as communicating innovation in a set process within a
social system. The process has certain distinguishing human characteristics being
identified as Innovators, Early Adopters, Early Majority, Late Majority and Laggards. Cheap
innovations may take-off rapidly while expensive innovations which its value increases over
time with widespread adoption (network effects) have sooner late stage growth (Furneaux,
2006). Innovation adoption rates can be impacted by some other phenomena. Adaptation
of technology to individual banking needs can change the nature of the innovative systems
over time. Additionally, a new innovation can affect adoption rate of an existing innovation
and path necessity may lock potentially substandard technologies in place. According to
Fishbein and Ajzen (2010), Theory of Planned Behaviour (TPB) extends Theory of
Reasoned Action to reason for conditions where individuals do not have complete control
over their behaviour. TPB theorises that a person‟s behaviour is driven by intentions which
stems a person's attitude toward behaviour, the subjective norms surrounding the action of
the behaviour, and the individual's perception of the ease with which the behaviour can be
performed (Furneaux, 2006).
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
Figure 1.2: Theory of planned behavior model
Perceived Usefulness (PU) referred as underlying factors in determining consumers‟ trust
toward usage of Internet banking (Su-Wen, 2011). Also, PU outlines a one‟s belief in using
a particular system that enhances his or her job performance (Nor, 2010).This study found
PU has a direct and positive effect on the intention to use Internet banking. PU has a
significant effect on attitude toward using the virtual stores. Hence, previous researchers
have proven PU is essential variable that influences usage of internet banking. Hosein
(2010) and Ramayah (2003) stated prior experience and previous technical skills in using
the internet or computer may influence or affect intention to use internet banking. Internet
as a delivery channel is compatible as a medium since it fits the profile of contemporary
banking customer, who is computer-literate and familiar with the issues pertaining to
Internet (Tan & Teo, 2000). Furthermore, previous researchers have proven that actual
internet experience can influence the banking users towards usage of internet banking.
3. Methodology
This study will provide better understanding of lesser usage of internet banking
(phenomenon) and strategies to increase involvement among the existing customers will be
recommended to SM bank. There are two assumptions in this study i.e. the elected
population represented the overall population of SM bank customers and all respondents
have provided their feedback in an honest manner. This study intended to explore the most
influencing factor for less usage of internet for banking. Secondly, attempts to offer ways for
SMOPE to increase usage among existing customers toward internet banking. This
research also helps to understand the internet banking in Malaysia to certain extent.
Typically, the research has concentrated on two main areas:
 What is the relationship between PU on internet banking and usage of internet
banking?
 What is the most influencing factor for lesser usage of internet banking?
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
This exploratory research is conducted as the researchers do not know how and why this
phenomenon occurs. A quantitative research is designed to analyse the study linking SM
bank customers who know what internet banking is. Convenience sampling method is
approached due to the targeted respondents are fits in the profile and available within the
location. This research was conducted at SM bank as permission sought from senior
managers of the bank prior to data collection at their bank premises which located at
Puchong and Seremban cities. Altogether 204 responses collected out of 220
questionnaires which were distributed and the respondents were analysed using regression
analysis. Following Arasu and Viswanathan, (2011) a close ended questionnaire with a 5
point Likert scale is used as the base to measure the feedback, with „1‟- strongly disagree
to „5‟- strongly agree. The value of factor loading is to show the correlation of the variables.
According to Hair, Black and Babin, (2010) the value of factor loadings more than 0.40 is
considered as being significant if the sample size is in the range of 200-249. Hypotheses
proposed for the study are: (H1) PU has a relationship with usage of internet banking. (H2)
Actual internet experience has a critical influence on internet banking usage. Data gathered
in the study were tested corresponding with outlined hypotheses.
4. Results and Discussion
Cronbach‟s alpha scores for internet banking usage; Hence, the cronbach‟s alpha value for
all variables is 0.952(>0.7), which shows that the value has high internal consistency. A
total of 12 questions are reliable and admissible. Thus, these three variables are used for
the next step to check the reliability of each factor independently.
Table 1: Reliability Analysis for Factors Portraying Internet Banking Usage
Factors
Cronbach Alpha
Nu. of items
Perceived Usefulness
0.860
5
Internet Experience
0.796
2
Intention to Use Internet Banking
0.883
5
As shown in Table 1, coefficient is high in all scales, ranging from 0.7 to 0.9. These alpha
scores exceed the 0.70 recommended acceptable reliability limit, signifying each multi-item
variable are inter-related.
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
Table 2: Demographics of the study
Demographics
Gender
Classification
Frequency
%
Female
88
43.1
Male
116
56.9
Highest
Primary School
24
11.8
Education
High School
26
12.7
Foundation/Diploma
28
13.7
Bachelor Degree
70
34.3
Master Degree
46
22.5
Doctorate / PHD
8
3.9
Other
2
1
Malay
12
5.9
Chinese
170
83.3
Indian
16
7.8
Other
6
2.9
Married
80
39.2
Single
120
58.8
Other
4
2.0
Internet
Daily
164
80.4
Usage
Few times a week
22
10.8
Per Day
Once a week
4
2
Once a month
4
2
Rarely
6
2.9
Never
4
2
Race
Marital
As summarized in Table 2, male customers are more than female customers, mostly are
degree holder and above. Besides, the majority customers are Chinese and uses online
daily.
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
Table 3: Factor Analysis of Perceived Usefulness
Kaiser-Meyer-Olkin (KMO) = 0.827
Bartlett‟s Test of Sphericity (sig. = 0.000)
Overall Measure of Sampling Adequacy (MSA) = 0.827
Total Variance = 64.64%
Questions
MS
Communal
Component
on Perceived Usefulness on Internet
A
ities
Matrix
Banking (IB)
(>0.
(>0.5)
(>0.40)
5)
Think IB is user friendly
0.867
0.622
0.878
Think it is easy to remember how to
0.810
0.625
0.837
0.819
0.770
0.790
Think IB is useful
0.785
0.515
0.789
Think it is easy to learn how to use
0.852
0.700
0.717
use IB
Think IB would be easy for
transactions
banking through the Internet
The value of KMO as shown in Table 3 and Table 4 are 0.827(>0.5) and 0.500(>0.5)
respectively, indicates the appropriateness of PU and internet experience fit to use in factor
analysis. Bartlett‟s test shows the value of 0.000 for both factors, which indicate the test is
significant. Therefore, for both, these five questions are correlated with each other. The
correlation matrix indicates ten out of ten correlations with coefficient values more than 0.3.
Table 4: Factor Analysis of Internet Experience
Kaiser-Meyer-Olkin (KMO) = 0.500
Bartlett‟s Test of Sphericity (sig. = 0.000)
Overall Measure of Sampling Adequacy (MSA) = 0.500
Total Variance = 83.04%
Questions
MSA
Communalities
Component
on Actual Internet Experience
(>0.5)
(>0.5)
Matrix
(>0.40)
Consider knowledgeable on search techniques
0.500
0.830
0.911
Know-how to find what via using a search engine
0.500
0.830
0.911
The overall MSA are 0.827(>0.6) and 0.500(>0.6) and all individual MSA are more than 0.5,
while the lowest MSA is 0.785 and for internet experience is 0.500 (this is due to there are
only two questions in this factor). All communalities of questions are more than 0.5. Thus,
the seven questions have met the assumptions and it enables to the next step of the factor
analysis. The total variance of 64.64% and 83.04% respectively in these questions are
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
under one factor each. Furthermore, the component matrix of each question for both factors
is more than 0.3 (the lowest are 0.717 and 0.911 respectively), which indicates all
questions are valid. Therefore, these five and three questions each under the same factor
could be named as PU and actual internet experience.
Table 5: Factor Analysis of Intention for Internet Banking
Kaiser-Meyer-Olkin (KMO) = 0.837
Bartlett‟s Test of Sphericity (sig. = 0.000)
Overall Measure of Sampling Adequacy (MSA) = 0.846
Total Variance = 68.17%
Questions on
MSA
Communalities
Intention to Use Internet for Banking (IB)
(>0.5)
(>0.5)
Component
Matrix
(>0.40)
Overall intention to use IB
0.801
0.671
0.909
Likelihood to use IB in the future
0.783
0.826
0.831
Likelihood to use banking activities through net
0.875
0.691
0.819
Given the chance, thinking to use IB
0.845
0.618
0.786
Expect to use banking activities through Internet in
0.924
0.602
0.776
the future
Referring to Table 5, the overall MSA is 0.837(>0.5), that indicates the appropriateness of
intention to use internet for banking purposes. The overall MSA is 0.846(>0.6) and all
individual MSA are more than 0.5, while the lowest MSA is 0.783. All communalities of
questions are more than 0.5. Thus, the five questions have met the assumptions and it can
proceed to the next step of the factor analysis. Total variance of 68.17% in these questions
is under one factor. This result is acceptable for a social science study since the total
variance is more than 60%. Furthermore, the component matrix of each question is more
than 0.3 (the lowest is 0.776), which indicates all the questions are valid. Therefore, these
questions are under the same factor and can be named as intention to use internet banking.
Based on factor analysis, the construct of all three factors PU, actual internet experience
and intention to use are all accepted.
Table 6: Coefficient of Independent Variables and Usage of Internet Banking
Variables:
Unstandardized
Coefficients
Standardized
Coefficients
Sig.
t
Beta
Std. Error
Beta
Y
PU
.022
2.302
.626
.272
.000
3.568
.371
.104
.311
Actual Internet
Experience
.751
-.318
-.020
.064
-.019
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
As shown in Table 6, PU is significant (sig=0.000) in the overall regression. The t value is
3.568 and coefficient of perceived ease of use is 0.371. Thus, the perceived usefulness has
positive relationship with the usage of internet banking at the 1% significance level. The
usage of internet banking will increase by 0.311 for one standardized deviation increase in
the perceived usefulness. Thus, hypothesis 1 is supported. For, actual internet experience
is not significant (sig=0.751) in the overall regression. Thus, the actual internet experience
and the usage of internet banking do not have any relationship. Previous researchers,
Hosein (2010), Ramayah (2003) and Tan and Teo (2000) have proven that the actual
internet experience has a positive relationship with using internet banking. However, this
results show that actual internet experience does not have any direct relationship with
usage of internet banking. Therefore, hypothesis 4 is rejected. Table 6 depicting regressed
results to show the relationship between both variables. Below is the equation for the usage
of internet banking,
Y = 0.626 + 0.371PU
Where,
Y = Usage of Internet Banking;
PU = Perceived Usefulness;
Results show PU is the most influencing factor of internet banking usage. Furthermore, to
measure the strength of the association both independent variables were regressed with
intention to use internet for banking. As shown in Table 7, PU is significant (sig=0.000) in
the overall regression. The t value is 3.908 and coefficient of perceived ease of use is 0.303.
Thus, PU has a positive relationship with intention to use internet banking at the 1%
significance level. The intention to use internet banking will increase by 0.301 for one
standardized deviation increase in the PU.
Table 7: Coefficient of Independent Variables and Intention to Use Internet Banking
Variables:
Unstandardized
Coefficients
Standardized
Coefficients
Sig.
t
Beta
Std. Error
Beta
I
PU
.003
3.029
.615
.203
.000
3.908
.303
.078
.301
Actual Internet
Experience
.007
2.728
.131
.048
.142
Furthermore, actual internet experience is significant (sig=0.007) in the overall regression.
The t value is 2.728 and coefficient of perceived ease of use is 0.131. Thus, actual internet
experience has a positive relationship with the intention to use internet banking at the 1%
significance level. The usage intention will increase by 0.142 for one standardized deviation
increase in the actual internet experience. This results show that actual internet experience
has direct relationship with intention to use internet banking. Thus, there is existence of a
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
strong relationship. Table 7 depicting regressed results to show the relationship between
both variables. Below is the equation for the intention to use internet banking,
I = 0.615 + 0.303PU + 0.131AEI
Where,
I = Intention to Use Internet Banking;
PU = Perceived Usefulness;
AEI = Actual Experience on Internet.
Thus, PU and AEI have a significant and positive influence on intention to use internet for
banking activities.
5. Conclusions
The study has discovered that there is presence of a mediating element in between the
independent variables and usage of internet banking. The PU and AEI have relationship
with the intention to use and usage of internet for banking is depending on the intention.
The lesser usage of internet banking at SM bank is ultimately due to all three factors were
obviously not seen with the bank, especially when the registration is complicated and
inconvenient to users. So, SM bank should automatically register internet banking account
for every new users with the bank. The system of internet banking supposed brought
“usefulness” to the customers. The system should have the option for bulk payment and
reduce the steps involving payment or transfer money. Also, the design of interface should
be simpler and user-friendly in order to make the users easy to use. A graph function
should have provided to users, so that users can view their transactions and expenses
more easily. Internet banking should possess help and search functions. This will assist
users to use the find or get help feature for details on the website easily. Although majority
of the respondents are using internet every day, they are not highly relying on internet for
banking. This is due to they are not familiar with the bank system for internet banking.
Lastly, this research has only focused on SM bank customers, other banks may be used as
reference to improve SM‟s internet banking services. The research findings have
diagnosed ways SM bank may reduce the customer resistant of using internet banking
consequently improving the online banking service.
Acknowledgements
The researchers thank INTI International University for funding the project. Special thanks
are due to Professor Wilson Tay, the Dean of the Faculty of Business, Communications and
Law without whose openness and candor this research would have been impossible. Also,
for confidentiality purpose the name of the Centre and the Bank are made fictitious.
Proceedings of 7th Global Business and Social Science Research Conference
13 - 14 June, 2013, Radisson Blu Hotel, Beijing, China, ISBN: 978-1-922069-26-9
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