Review of Internet Banking in Thailand

The rapid growth of the internet has had a significant impact on the business world including the banking industry. The internet offers an alternative channel to distribute products and services to customers. One emerging channel is internet banking or online banking. It allows customers to conduct several kinds of electronic financial transactions such as transferring funds between accounts, checking monthly statements, paying bills, applying for loans, etc. via a telecommunication network by using a personal computer (Parsons and Oja, 2009). Internet banking service benefits both banks and their customers. For the bank, it helps to reduce operational costs by replacing the physical bank branch and also improving the quality of the customer service (Furst et al., 2000). The bank will require less time and fewer staffs to deliver products and services to customers because the internet allows the bank to deal with hundreds of customers at the same time (Seitz and Stickel, 2001). Moreover, the web site can be used not only to provide useful information, but also to sell various range of products. In Thailand, according to Tangkitvanich (1999), the cost of fund transfer via traditional counter service is around £0.6 per transaction, while internet costs only £0.05 to £0.1. From the customers’ perspective, personal internet banking offers time and cost saving since the services are available 24 hours a day and 7 days a week. Thus, they can execute transactions anywhere and do not have to travel and wait for services like they do in physical branches or at the automated teller machines (ATMs) (Seitz and Stickel, 2001). In addition, the information is up to date and most internet banking web sites are compatible with sophisticated programs, for example, rate alerts, account aggregation, and Quicken. These will help customers to make more effective funds management decisions (Tan and Teo, 2000). Lastly, many customers are attracted by a greater control over service delivery process since financial transactions can be executed without having front-line personnel (Karjaluoto et al., 2002; Polasik and Wisniewski, 2009).

Although internet banking is widespread in many parts of the world especially in developed countries such as Finland, Sweden, and the United States (Karjaluoto et al., 2002; Nilsson, 2007; Berger, 2003), adoption of internet banking in developing countries including Thailand appears to be quite rare (Abdul et al., 2007; Ongkasuwan and Tantichattanon, 2002). This could be the result of some drawbacks embodied within this option. The most noticeable, and may be the hardest requirement for the banks in using internet banking is that it requires the restructure of the organization, which would cost not only money, but also time and effort, in order to achieve it (Dimaggio et al., 2001). What is more, an adoption of the internet banking also needs to be monitored carefully with respect to the government policy and the legislation (Weiser, 2003). Finally, it is still uncertain that internet banking would bring about the positive effects in the operation of the banks, especially in the small banks, and it could even affect their operation adversely (Berger, 2003). From the viewpoint of the customers, there are several potential disadvantages that may arise from internet banking usage (Remenyi, 2007). Firstly, internet banking can be difficult to understand for first timers. It takes time to learn how the system works through tutorials and navigation tools. In addition, most banks periodically upgrade their online programs by adding new features and products. This means that customers are required to re-familiarize themselves with new programs many times. Lack of security and privacy are found to be major obstacle of growth in the number of internet banking users (Howcroft et al., 2002; Flavian et al., 2006; Rotchanakitumnuai and Speece, 2003). There are fraud and proxy web sites that offer imaginary services or items. These web sites can hack and misuse important information such as credit-card numbers, username, and password. Therefore, large losses of money may have been incurred without knowing until the owner receives his or her bank statement (Sukkar and Hasan, 2005). What is more, some customers prefer to do transactions with employee of the bank who provides personalized services (Rotchanakitumnuai and Speece, 2003). Especially, when problems or queries occur, it is easier to find certain solution via face-to-face contact compared to online customer support from the bank web site. Moreover, internet channel is perceived to be unreliable (Kuisma et al., 2007). As stated by Remenyi (2007), internet banking customers are always uncertain whether their transactions processed successfully and they will only be confident after the transaction appeared on the bank statement. Lastly, a lack of specific laws and regulations support from the government is another reason of a low internet banking adoption (Chong et al., 2010). Customers need to assure about an organization that will be responsible if financial losses occurred in internet transactions (Thomas et al., 1998).

2.2 Internet banking in Thailand

Because of Asian financial crisis in 1997, many Thai banks experienced significant net losses from non-performing loans and bad debts. They were forced to shift their strategies in order to increase efficiency and reduce operational costs (Ongkasuwan and Tantichattanon, 2002; Poungkin, 2004). This situation results in the aggressive competition in the banking market. Importantly, the Bank of Thailand (BOT), as the central bank, is responsible for regulation setting in the banking sector. Being aware of the crucial role of electronic transactions in the future economic development of the country, since 2000 the BOT has permitted commercial banks in Thailand to provide the similar kinds of transactions via the internet like the transactions that are offered in the physical branch (Jaruwachirathanakul and Fink, 2005). As a result, several commercial banks in Thailand began to use internet banking as a new service channel. The banks expect that internet banking will generate higher long-term profits, reduce costs, and provide better service quality to customers in the same way it is anticipated by banks in other countries (Gerrard and Cunningham, 2003). Internet banking was first implemented in 1999 by the Siam Commercial Bank Plc (Jaruwachirathanakul and Fink, 2005). And, other three leading Thai banks which consist of Thai Farmers Bank (TFB), Bank of Asia (BOA), and Krung Thai Bank (KTB), have decided to launch internet banking services in the beginning of 2000 (Ongkasuwan and Tantichattanon, 2002).

The number of internet users is one of the most important factors that influences customers’ internet banking adoption (Samphanwattanachai, 2007). According to the World Bank (2010), the number of internet users in Thailand was around 2.3 million in 2000. In 2008, there was a dramatic increase to 16.1 million. In other words, the growth rate across the period 2000 and 2008 was approximately at 600 per cent. With this rapid growth rate, there is a huge market potential for banks in Thailand to explore and gain competitiveness by introducing internet banking services. Although the level of internet accessibility is increasing, internet banking adoption rate among customer is quite low. And, the development of internet banking in Thailand is still in its early stages. In 2007, there are 34 commercial banks operating in Thailand but only 16 banks provide internet banking services (Hamid et al., 2007). As claimed by Wungwanitchakorn (2002), many banks have launched web sites merely to provide information about financial products and services. For most banks that have been implementing and developing internet banking, the systems are not complete and the services primarily provided to customer are standard services, such as checking account balances, requesting bank statements, transferring funds, bill payments and asking frequency asked transactions (Rotchanakitumnuai and Speece, 2004). On the other hand, additional and integrated services, for instance, international fund transfers, transferring funds to the third party accounts, and stopping checks are only available in the few leading banks (Prompattanapakdee, 2009).

Adoption of internet banking in Asian countries is different from the West in some aspects. Firstly, several studies revealed that Asian cultures give precedence to relationship in business (Rotchanakitumnuai and Speece, 2003; Poungklin, 2004; Siam Commercial Bank, 2006). Similarly, personal relationships, collectivism, and socialization are crucial in Thai culture. Prompattanapakdee (2009) found that many Thai customers value friendly personalized services of the bank officers. This is supported by Sammapan (1996) and Chatchawanwan et al. (2009) who cited that individual customers prefer informal and personal relationship-based communication. They believe that their needs are better understood compared with self-service technologies and the personal relationships will be loss if they use internet-based financial services. In addition, customers in Thailand are strongly influenced by their colleagues and friends. Furthermore, security, privacy, and lack of government support are also significant factors that discourage the successful implementation of internet banking in Thailand (Rotchanakitumnuai and Speece, 2004). From customers’ viewpoint, the infrastructure of web security systems is insufficient (Leelapongprasut, 2005) so they are reluctant to use the web for financial transactions. Even though, Thai banks have invested in many security measures, for example, firewall, intrusion detection software, automatic sign-off, 128 bit encryption, and VeriSign Secure system (Prompattanapakdee, 2009). What is more, privacy is important as customers concern that their personal information might be accessed or misused by unauthorized personnel over the internet (Rotchanakitumnuai and Speece, 2004). Legal support is another major issues associated with internet banking acceptance. Since Thailand has announced the first electronic commerce law in 2002, customers strongly believe that the government is unable to protect bank customers in cases of financial loss through internet banking. And, internet fraud cases might not be resolved effectively (Rotchanakitumnuai and Speece, 2003; Rotchanakitumnuai and Speece, 2004; Hamid et al., 2007; Chatchawanwan et al., 2009). Currently, Thailand has been improving policies on ICT to assist the people by increasing their use of computers and the internet. For example, there are 1st National ICT Master Plan (2002-2008) and 2nd National ICT Master Plan (2009-2013) which aim to provide equal accessibility on high speed network with affordable prices (Phantachat and Anan, 2009).

Overview of previous studies of internet banking

Internet banking has gained a special attention in academic studies for the past decade. In the search to investigate the determinants of acceptance and use of new information technologies, various studies have been conducted in nations by using different theoretical approaches and models. Three significant models that are widely used to provide an explanation of internet banking users’ behavior are Technology Acceptance Model (TAM), Theory of Planned Behavior (TPB), and Decomposed Theory of Planned Behavior (DTPB). The main features of each theoretical model will be discussed below.

Technology Acceptance Model (TAM)

The Technology Acceptance Model (TAM) was proposed by Davis in 1986. The objective of TAM is to identify the factors or determinants influencing individuals’ acceptance of technology-based product and service (Davis et al., 1989). The framework proposed that two particular beliefs, perceived usefulness and perceived ease of use, can be used to predict the attitude towards using new technology, which in turn affects the behavioural intention to use the system directly. And, finally, behavioural intention to use leads to actual system use (Venkatesh et al., 2003) as presented in figure1. According to Davis et al. (1989), perceived usefulness is defined as “the degree to which a person believes that using a particular system would enhance his or her job performance”, while perceived ease of use refers to “a person believes that using a particular system would be free of physical and mental effort.”

• Perceived Usefulness
• External Variables
• Attitude Toward Using
• Behavioral Intention to Use
• Actual System Use
• Perceived Ease of Use

Figure1: The Technology Acceptance Model (TAM)

Source: Davis et al. (1989)

Attitude toward using means the individual user’s positive or negative feelings about using the system. And, behavioural intention to use reflects the strength of an individual’s intention to use particular system. The advantages of TAM are its predictive power and the small amount of constructs to forecast intention (Agarwal and Prasad, 1999). In addition, it is general and capable of explaining user behaviour across a wide range of technologies in different situations such as time and culture (Davis et al., 1989; Lee et al., 2003). For example, Adam et al. (1992) examined TAM by using five different technologies: voice mail, electronic mail, word processors, spreadsheets, and graphics. The study demonstrated that TAM maintained its consistency and validity in explaining users’ information system acceptance behavior. And, both perceived usefulness and perceived ease of use were two important determinants of system use. Similarly, Szajna (1996) claimed that TAM is a valuable tool for predicting intentions to use an electronic mail system. Hu et al. (1999) also applied TAM to study physicians’ decisions to accept telemedicine technology in public hospitals in Hong Kong. Perceived usefulness appeared to be a significant determinant of attitude and intention but perceived ease of use was not. In addition, TAM has been used to examine users’ acceptance of online shopping which is an activity that is similar to online banking in many aspects. For instance, Pavlou (2003) used TAM as a based model to predict consumer acceptance of online transaction. Trust and perceived risk were integrated in the proposed model. Likewise, Ha and Stoel (2009) studied consumer acceptance of online shopping by integrating online shopping quality, enjoyment, and trust into TAM. The finding revealed that online shopping quality influences enjoyment, trust, and perceived usefulness which in turn determines customers’ attitudes toward online shopping, while perceived ease of use does not affect attitude toward online shopping. Moreover, they claimed that TAM provides a useful foundation for research examining consumer acceptance of online shopping. Therefore, TAM could be suitable theoretical model for studying the usage of internet banking. In recent years, numerous banking studies have used TAM to explain individuals’ acceptance of internet banking.

However, many researchers suggested that TAM itself may not fully explain users’ acceptance of every kinds of technology, therefore TAM is widely used as a base model and extended model by adding additional variables to the original model depending on the type of technologies that are studied (Chong et al., 2010). Importantly, various extensions to TAM were also conducted in the study of internet banking. For example, Suh and Han (2002) believed that original TAM which consists of two beliefs, usefulness and ease of use, is insufficient to explain internet banking users’ behaviour. So, trust was added in the model and the result showed a significant impact on the adoption of internet banking. Wang et al. (2003) also used TAM as theoretical framework and introduced perceived credibility and computer efficacy. The result demonstrated the significant effect of computer self efficacy on the intention of internet banking users via perceived usefulness, perceived ease of use, and perceived credibility. As suggested by Pikkarainen et al. (2004), extended TAM model indicated that perceived usefulness and information provided through internet banking website were the main variables influencing online banking acceptance in Finland. Similarly, Karjaluoto et al. (2002) adapted TAM model and found that prior experience of computers and technology as well as demographic factors impact internet banking users’ behaviour in Finland. Generally, online banking users were well educated, relatively young, and have high level of income. In addition, Luarn and Lin (2005) had extended TAM by putting perceived credibility, perceived self-efficacy and perceived financial cost into the framework and the finding was that TAM and added factors influence users’ intention to adopt electronic banking. In another study, Eriksson et al. (2005) modified TAM and applied it to internet banking users in Estonia. They stated that perceived usefulness have the strongest effect to users’ acceptance of the technology since perceived ease of use will not result in increased use of internet banking without perceived usefulness. In other words, users might not adopt a well-designed and easy to use internet banking if it is not perceived as useful.

2.2.2 Theory of Planned Behavior (TPB) and Decomposed Theory of Planned Behavior (DTPB)

Theory of Planned Behavior (TPB) is another model considered beneficial in predicting factors that affect the adoption of information technology among users. The TPB is an extension of well-known Theory of Reasoned Action (TRA) by incorporating an additional construct which is perceived behavior control in the model for situation where person does not have complete control over his behavior. According to Ajzen (1991), an individual’s behavior can be explained by his or her intention to perform behavior. And, intention is jointly influence by three factors: attitude, subjective norms, and perceived behavioural control as showed in figure 2. Attitude refers to how favourably or unfavourably an individual views about the performance effect of the particular behavior. The second factor is subjective norms. It means an individual’s perceptions of other people’s opinions, such as family and friends, on whether he should or should not perform the behavior. Thirdly, perceived behavioural control reflects person’s belief of the availability of resources or opportunities necessary for performing a specific behavior (Ajzen and Madden, 1986).

• Attitude Toward Behavior
• Intention to Use
• Usage Behavior
• Subjective Norm
• Perceived Behavioral control

Figure 2: The Theory of Planned Behavior (TPB)

Source: Ajzen (1991)

Another version of TPB is called Decomposed Theory of Planned Behavior (DTPB). The DTPB was introduced by Taylor and Todd (1995) who decompose concepts from two distinct theories: Theory of Planned behavior (TPB) and Innovation Diffusion Theory. As proposed by Taylor and Todd (1995), traditional TPB beliefs are decomposed to provide better explanatory power, clearer, and more understandable of individuals’ behavior compared to TAM and original TPB models. In DTPB, attitudinal beliefs are broken down into three dimensions: perceived usefulness, complexity, and compatibility. For normative beliefs structure, it is divided into two groups: peer and superior influences. Lastly, control beliefs are decomposed into three dimensions: individual self-efficacy, resource facilitating conditions, and technology facilitating conditions. The DTPB model is presented in figure3.

• Perceived usefulness
• Attitude
• Complexity
• Compatibility
• Subjective norm
• Behavioral intention to use
• Normative influence
• Perceived behavioural control
• Self-efficacy
• Facilitating conditions

Figure3: Decomposed Theory of Planned Behavior (DTPB)

Source: Taylor and Todd (1995)

In recent decade, information system researchers have conducted several studies by using TPB and DTPB to investigate factors that influence users’ acceptance of information technology systems. For instance, Liao et al. (1999) examined the adoption intention of virtual banking of Hong Kong users. The TPB and innovation diffusion model were selected. They concluded that TPB was only partially applicable in predicting individuals’ adoption intention in the research setting. Also, Tan and Teo (2002) adapted DTPB framework to identify whether three factors: attitude, subjective norms, and perceived behavioural control would affect the adoption of internet banking in Singapore or not. The findings showed that attitude and perceived behavioural control factors have stronger effect to internet banking users than subjective norms. In addition, Luarn and Lin (2005) studied users’ acceptance of mobile banking in Taiwan by combining TPB and TAM. Perceived credibility, perceived self-efficacy, and perceived financial cost were added to the model. The results revealed perceived credibility found to be significant to users more than traditional TAM variables which are perceived usefulness and perceived ease of use. This means easy to use system alone is insufficient to attract users. The system should have trustworthiness in order to protect the security and privacy of the users.

Although both TPB and DTPB are well-accepted model that have been successful in predicting human behavior across numerous information technology because they include constructs that do not appear in TAM such as subjective norm and perceived behavioural control which lead to superior and more precise explanatory power of the antecedents of behavior and may offer more effective guidance to information technology managers and researchers interested in the study of system implementation(Taylor and Todd, 1995), the disadvantages of the model can also be seen. Firstly, dimensions of the beliefs structures of TPB vary in different situations. Thus, TPB is difficult to be generalized across various settings (Wu and Chen, 2005). In other words, TPB is not specific to information system usage and less parsimonious than the TAM (Luarn and Lin, 2005). Moreover, even though DTPB is better than the TAM in explaining behavior intention of individuals, the difference is not large (Chau and Hu, 2001). To demonstrate, Taylor and Todd used their DTPB to examine users’ behavioral intention to use particular information system. The model consists of 17 constructs and able to explain 60 per cent of the variance in behavioral intention. On the other hand, TAM includes only 5 constructs but can explain 52 per cent of the variance. Hence, in order to obtain small increase in predictive power, researcher has to bear a relatively substantial increase in model complexity (Luarn and Lin, 2005).

Research Model and Hypotheses

Based on the literature review, the model for this study will be based on Technology Acceptance Model (TAM) since it provides greater benefits compared to other theories such as TPB and DTPB. Firstly, TAM is the most widely used model that has been chosen to examine the users’ acceptance in the internet banking context. This provides opportunity for researcher to compare the research findings with other findings from various countries. In addition, TAM is much simpler and easier to use as it contains only 5 main variables to explain users’ acceptance across a broad range of technologies (Hubona and Cheney, 1994). Moreover, although TPB and DTPB give fuller explanation than TAM, there is a high trade-off between slightly increase in explanatory power and complexity of the model (Lee et al., 2003). Mathieson (1991) found that TAM consistently explains a considerable amount of variance approximately 40 per cent in usage intention and behavior. Finally, there are a few previous studies of internet banking in Thailand which have adopted the TAM as the theoretical model.

Perceived UsefulnessIn order to increase the explanatory ability of TAM, the original TAM will be extended by including important variables which researcher posits to have an effect on acceptance of internet banking in Thailand. A research model of this study is illustrated in figure 4. Like many studies on internet banking adoption that use TAM as their base model, attitude was removed (Hernandez and Mazzon, 2006; Eriksson et al., 2005; Pikkarainen et al., 2004; and Chong et al., 2010). This renders simpler and more parsimonious framework. But, intention was retained in the model since the adoption of personal internet banking is voluntary. Then, attitude and intention are highly positively correlated (Venkatech et al, 2003).

• Perceived Ease of Use
• Individual Characteristics
• (gender, age, income, education)
• Intention to use internet banking
• Usage of internet banking
• Subjective norms
• Trust
• Government Support

Figure 4: The research model

Perceived usefulness and perceived ease of use

As mentioned in the literature review, perceived usefulness and perceived ease of use are significant factors affecting acceptance of an information system (Davis et al., 1989) and also important determinants in adoption of internet banking (Wang et al., 2003; Eriksson et al., 2005 and Pikkarainen et al., 2004). Davis defined perceived usefulness as the degree to which an individual believes that using a particular system would enhance his or her performance. Therefore, in the internet banking context, individuals will adopt internet banking if they consider that this channel is more beneficial compared to other ways of conducting banking transactions such as physical branch, automatic teller machine and mobile banking. The advantages of internet banking include time and location convenience.

Therefore, researcher hypothesizes similar effect in the following hypothesis.

Hypothesis 1: Perceived usefulness has a positive effect on individual intention to adoption internet banking

Perceived ease of use refers to an individual believes that using a particular system would be free of effort (Davis et al., 1989). In other words, how easy it is to learn to use the system. Many studies revealed positive and significant effect of perceived ease of use on actual usage either directly or indirectly through its impact on perceived usefulness, for example, Wang et al. (2003) and Luarn and Lin (2005). The system that perceived to be easier to learn and use than another is more likely to be adopted by users. Conversely, Pikkarainen et al. (2004) and Eriksson et al. (2005) found that perceived ease of use did not have an effect on users’ acceptance of internet banking. Thus, researcher will examine how perceived ease of use influence Thai customers’ adoption intention.

Hypothesis 2: Perceived ease of use has a positive effect on individual intention to adopt internet banking.

Hypothesis 3: Perceived ease of use has a positive effect on individual perceived usefulness of internet banking.

Individual Characteristics

Individual characteristics have been found to be associated with users’ acceptance of internet banking based on factors such as gender, age, income, and educational level (Karjaluoto et al, 2002; Prompattanapakdee, 2009; Hernandez and Mazzon, 2007; Howcroft et al., 2002; Wan et al., 2005; Mattila et al., 2003). Generally, more males than females tend to use internet banking. This is supported by Polasik and Winniewski (2009) who indicated that women were less likely to conduct their banking transactions online. Studies have also linked age and adoption of internet banking. For example, as suggested by Karjaluoto et al. (2002), younger person is more likely to adopt the new technology. What is more, many older consumers have a more negative attitude to accept new innovation (Trocchia and Janda, 2000). In addition, increase in income and education tends to be positively related to the adoption of internet banking. Mattila et al. (2003) found that over 30 per cent of high income, well-education mid-aged males use internet banking as their primary channel to make payments. Moreover, Hernandez and Mazzon (2007) stated that younger males with high educational level and high income are more likely to adopt internet banking. Hence, based on previous evidence, researcher posit that

Hypothesis 3a: Males are more likely to adopt internet banking than females.

Hypothesis 3b: Younger people are more likely to adopt internet banking than older people.

Hypothesis 3c: The higher the customer income level, the more likely that internet banking will be adopted.

Hypothesis3d: The higher the customer educational level, the more likely that internet banking will be adopt.

Subjective norm

Subjective norm refers to the person’s perception that most people who are important to him think he should or should not perform particular behavior (Ajzen, 1991). For instance, individual can be influenced by his family, friends, and superior. For this study, subjective norm describes the social influence that may persuade a person to use internet banking services. Importantly, Taylor and Todd (1995) highlighted that subjective norm will become more significant in the early stages of innovation implementation because individuals still lack of direct experience that is needed to develop attitudes. And, internet banking is relatively new to users in Thailand. Thus, researcher proposes that

Hypothesis 4: Subjective norm has a positive effect on individual intention to adopt internet banking.

Trust

Trust is one of the most important determinants of internet-based application adoption as well as users’ internet banking acceptance. Prompattanapakdee (2009) concluded that customers in Thailand do not trust personal internet banking due to four reasons which are security, privacy, provider’s reputation, and risks regarding with the reliability of the services. In this study, researcher will focus on two aspects that most customers are concern about: security and privacy. So, trust refers to an individual belief that internet banking is safe and private. Hernandez and Mazzon (2007) also determined the effect of trust on internet banking in Brazil and discovered that both security and privacy influencing customer intention behavior. Similarly, Manzano et al. (2009); Pikkarainen et al. (2004); Howcroft et al. (2002); Wang et al. (2003) found that security and privacy issues have a direct effect on internet banking adoption. Because, users are usually reluctance to admit a system which they do not have complete control over their own behavior and the system which is perceived to be risky (Pikkarainen et al., 2004). Thereby, researcher posits that

Hypothesis 5: Security and privacy has a positive effect on individual intention to adopt internet banking.

Government support

As suggested by Goh (1995), the government plays a crucial role by intervening and encouraging the expansion of emerging innovation in Singapore. Likewise, Tan and Teo (2000) denoted that government support for internet commerce considerably affects users’ intention to adopt internet banking service. In Thailand, government is also important in the development of electronic commerce and major driving mechanism in internet banking adoption (Jaruwachirathanakul and Fink, 2005). However, Thai government policies and laws related to internet banking issues are unclear to most people. Hence, improvements on these areas might be able to encourage more customers to adopt internet banking. The above arguments lead to following hypothesis.

Hypothesis 6: Government support has a positive effect on individual intention to adopt internet banking