@prefix vivo: . @prefix edm: . @prefix ns0: . @prefix dcterms: . @prefix dc: . @prefix skos: . vivo:departmentOrSchool "Business, Sauder School of"@en, "Management Information Systems, Division of"@en ; edm:dataProvider "DSpace"@en ; ns0:degreeCampus "UBCV"@en ; dcterms:creator "Chan, Stan"@en ; dcterms:issued "2009-06-17T20:09:32Z"@en, "1999"@en ; vivo:relatedDegree "Master of Science - MSc"@en ; ns0:degreeGrantor "University of British Columbia"@en ; dcterms:description """This paper tests a model of Internet banking adoption, giving insight into issues that banks consider when adopting the Internet as a delivery channel. It also reveals how a bank's perception of these issues is related to the intent to adopt. The study has two parts. The qualitative study involved literature review and interviews with bank executives, leading to the identification of several potential decision factors and the formation of a tentative adoption model. The quantitative research validated the proposed model by conducting a comprehensive survey targeted at senior bank executives in North America. The result has shown that the adoption decision was mainly determined by various issues such as strategic motivation, the perceived value of Internet banking, customer demand, environmental influences, and operational context. However, only a few of them are able to discriminate the level of adoption intent among banks. Keywords: Adoption of IT, Internet Banking, Decision Model, Empirical Study, Literature Review, Theory of Planned Behavior, Factor Analysis, Discriminant Analysis."""@en ; edm:aggregatedCHO "https://circle.library.ubc.ca/rest/handle/2429/9406?expand=metadata"@en ; dcterms:extent "4091787 bytes"@en ; dc:format "application/pdf"@en ; skos:note "THE ADOPTION OF INTERNET B A N K I N G : A M O D E L OF DECISION FACTORS by STAN C H A N Diploma of Business Administration, Hong Kong Shue Yan College, 1988 M B A , The University of Central Oklahoma, 1990 A THESIS SUBMITTED IN PARTIAL F U L F I L M E N T OF THE REQUIREMENTS FOR THE D E G R E E OF M A S T E R OF SCIENCE in THE FACULTY OF GRADUATE STUDIES THE F A C U L T Y OF C O M M E R C E A N D BUSINESS ADMINISTRATION DIVISION OF M A N A G E M E N T INFORMATION SYSTEMS We accept this thesi^as conforming to the required stjandard THE UNIVERSITY OF BRITISH C O L U M B I A August 1999 ©Stan Chan, 1999 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Faculty of Commerce and Business Administration Division of Management Information Systems The University of British Columbia Vancouver, Canada Abstract This paper tests a model of Internet banking adoption, giving insight into issues that banks consider when adopting the Internet as a delivery channel. It also reveals how a bank's perception of these issues is related to the intent to adopt. The study has two parts. The qualitative study involved literature review and interviews with bank executives, leading to the identification of several potential decision factors and the formation o f a tentative adoption model. The quantitative research validated the proposed model by conducting a comprehensive survey targeted at senior bank executives in North America. The result has shown that the adoption decision was mainly determined by various issues such as strategic motivation, the perceived value o f Internet banking, customer demand, environmental influences, and operational context. However, only a few of them are able to discriminate the level o f adoption intent among banks. Keywords: Adoption of IT, Internet Banking, Decision Model , Empirical Study, Literature Review, Theory of Planned Behavior, Factor Analysis, Discriminant Analysis. u Table of Contents Abs t rac t i i L i s t o f Tab les v L i s t o f F igures v i L i s t o f A p p e n d i c e s v i i A c k n o w l e d g m e n t s v i i i Sec t ion 1 Int roduct ion: Strategic U s e o f IT i n B a n k i n g 1 Sec t ion 2 Strategic Imp l i ca t ions o f the Internet to B a n k i n g 1 Sec t ion 3 Resea r ch Perspect ives 4 Sec t ion 4 Research M e t h o d o l o g y 5 Sec t ion 5 P rev ious Research on T e c h n o l o g i c a l A d o p t i o n 6 Sec t ion 6 Fac tor Ident i f i ca t ion : A Qua l i t a t i ve S tudy 9 6.1 Strategic M o t i v a t i o n 9 6.2 V a l u a t i o n o f Internet B a n k i n g 10 6.3 Cus tomer D e m a n d 11 6.4 Env i r onmen ta l Inf luences 11 6.5 Opera t iona l Con tex t 13 Sec t ion 7 Const ruc t V a l i d i t y : Q-Sort A n a l y s i s 14 Sec t ion 8 Theore t i ca l Founda t ions 16 Sec t ion 9 Survey 18 Sec t ion 10 Survey Samp le 19 Sec t ion 11 Desc r ip t i ve Stat ist ics 2 0 11.1 Percept ion o f In i t ia l P red ic tors 20 11.2 L e v e l o f Intent to A d o p t Internet B a n k i n g 20 11.3 N o r m a t i v e Responses 21 Sec t i on 12 M o d e l V a l i d a t i o n : A Quant i ta t i ve A n a l y s i s 23 12.1 Fac tor A n a l y s i s on In i t ia l P red ic tors 23 12.1.1 Objec t i ves 23 12.1.2 Procedures 23 12.1.3 Resu l ts : 24 12.2 D i s c r i m i n a n t A n a l y s i s 25 12.2.1 Objec t i ves 25 12.2.2 Procedures 26 12.2.3 Resu l ts 28 Sec t ion 13 S u m m a r y 32 Sec t ion 14 C o n c l u s i o n s 34 Sec t ion 15 Research Cont r ibu t ions 37 Sec t ion 16 L im i t a t i ons 38 T a b l e 1: C o m p a r i s o n o f F i n d i n g s w i t h P rev ious Resea r ch 39 Tab l e 2: C l a s s i f i c a t i on o f B a n k i n g Func t ions i n the Internet 40 Tab l e 3: F requency D i s t r i bu t i on o f E va lua t i on Score on In i t ia l P red icators 41 Tab le 4: F r equency D i s t r i bu t i on o f L e v e l o f Intent to A d o p t Internet B a n k i n g Func t ions ... 42 Tab l e 5: F r equency D i s t r i bu t i on o f Responses to N o r m a t i v e Ques t ions 43 Tab l e 6: Percentage o f Va r i ance E x p l a i n e d b y P r o v i s i o n a l Factors 44 Tab l e 7: Fac tor L o a d i n g M a t r i x 45 Tab l e 8: F requency D i s t r i bu t i on o f M e a n Score i n Intent L e v e l 46 Tab l e 9: M e a n Scores in the D e f i n e d G r o u p s 48 F igu re 1: A Hypo thes i zed M o d e l o f D e c i s i o n Factors o f Internet B a n k i n g 49 F i gu re 2: The Theo ry o f P l anned B e h a v i o r ( T P B ) 50 F i gu re 3: The A d o p t i o n o f Internet B a n k i n g : A M o d e l o f D e c i s i o n Factors 51 A p p e n d i x 1: Strategic Advan tages o f Internet B a n k i n g 52 A p p e n d i x 2: In i t ia l Measu remen t Items 53 A p p e n d i x 3: Items P lacement M a t r i x o f Q-Sort A n a l y s i s 56 A p p e n d i x 4: A n a l y s i s o f the I tems P lacement M a t r i x 57 A p p e n d i x 5: Survey F o r m 58 A p p e n d i x 6: Procedures o f E va l ua t i ng S ign i f i cance o f D i s c r i m i n a n t Func t i ons 66 References 67 IV List of Tables Table 1: Comparison of Findings with Previous Research 39 Table 2: Classification of Banking Functions in the Internet 40 Table 3: Frequency Distribution of Evaluation Score on Initial Predicators 41 Table 4: Frequency Distribution of Level of Intent to Adopt Internet Banking Functions .... 42 Table 5: Frequency Distribution of Responses to Normative Questions 43 Table 6: Percentage of Variance Explained by Provisional Factors 44 Table 7: Factor Loading Matrix 45 Table 8: Frequency Distribution of Mean Score in Intent Level 46 Table 9: Mean Scores in the Defined Groups 48 v List of Figures Figure 1: A Hypothesized Model of Decision Factors of Internet Banking 49 Figure 2: The Theory of Planned Behavior (TPB) 50 Figure 3: The Adoption of Internet Banking: A Model of Decision Factors 51 v i List of Appendices Appendix 1: Strategic Advantages of Internet Banking 52 Appendix 2: Initial Measurement Items 53 Appendix 3: Items Placement Matrix of Q-Sort Analysis 56 Appendix 4: Analysis of the Items Placement Matrix 57 Appendix 5: Survey Form 58 Appendix 6: Procedures of Evaluating Significance of Discriminant Functions 66 Acknowledgments T h e author w o u l d l i k e to extend spec ia l thanks to J o h n T i l l q u i s t for his considerable assistance this study. T h e author w o u l d also l i k e to thank R i c h a r d A W a f e r , Sean P O ' S u l l i v a n , B o b M c G l a s h o n and M e i n i Icker t for their he lp i n the in te rv iews , I zak Benbasa t for h is va luab l e adv ice o n the research m e t h o d o l o g y , and those graduate students at the U n i v e r s i t y o f B r i t i s h C o l u m b i a for par t ic ipa t ing i n the Q-sor t A n a l y s i s . T h i s research was supported b y a C a n a d i a n research grant f r o m the S o c i a l Sc ience and H u m a n i t i e s Resea r ch C o u n c i l . viii Section 1 Introduction: Strategic Use of IT in Banking In business, the use of Information Technology (IT) is always widely adopted to support business strategies. The banking industry provides a very good example. It has always been the leader in innovative applications of IT and is very aggressive in aligning IT to support business strategies, particularly in the delivery of services and products. Many technical innovations have been developed and adopted in an effort to provide competitive advantages and channel efficiency. For example, \"Back Office Automation\" was enabled by Electronic Data Processing (EDP) in the 1960s, \"Front Office Automation\" and \"Customer Interface Automation\" by the EFT, A T M and POS networks in the 1970s, and geographic expansion by home banking, such as telephone and PC banking, in the 1980s. In recent years, the potential of the Internet has been widely recognized. Driven by Web technologies, the Internet has now become a major infrastructure providing an economical, quality, fast and, more importantly, a virtual medium for business transactions. It is also an impetus of today's ubiquitous electronic commerce, and its applications can be strategically aligned to business operations. For example, the Internet is now being used as a sales channel, a marketplace for buyers and sellers, an infrastructure of distribution network, an on-line catalogue, a customer support and a means of forming virtual corporations '(Kosiur, 1997). Its strategic implications, especially to banks, are very significant. Section 2 Strategic Implications of the Internet to Banking Competitive Implications. The Internet has changed the competitive landscape of the banking industry. In a way, it poses a threat to large banks for two reasons. First, since the Internet is size insensitive, small banks can have the opportunity to close the technology gap between them and large banks and offer on-line banking without having to make enormous investments in IT infrastructures such as the design of software applications, support of proprietary back-end systems and dial-in lines and modems for customers access. The burden of technical development has been shifted to such companies as Web browser developers and communication companies. Technically, all that is needed is the use of standard TCP/IP networking and a connection to the Internet (US Web Services, 1998). 1 Second , s ince the Internet is a lso geographic insens i t i ve , it can neutra l ize the compet i t i ve advantage o f hav ing the extensive b ranch ne twork that large banks have. Th i s extends the compet i t i on b e y o n d geographic boundar ies to become reg iona l or na t iona l . B y outsourc ing the Internet b a n k i n g operat ions to serv ice bureaus, such as F i se r v , E D S and In tegr ion 2 , sma l l banks can ma in ta in a f u l l t ransact ional webs i te to customers on a nat iona l bas is and project the same techno logy image that large banks have , at a l o w cost 3 ( M a r e n z i , 1998) . G i v e n this un l im i t ed geograph ic reach, the compet i t i ve d i f fe rent ia t ion between geograph ica l d i f ferences w i l l be g radua l l y e roded, subject o n l y to regulatory constraints ( B o o z , A l l e n & H a m i l t o n , 1997). Strategic Benefits. T o banks , the adopt ion o f the Internet as a de l i ve ry channe l is a strategic use o f I T to p rov ide channel e f f i c i ency . In this aspect, the Internet can p rom i se s ign i f i cant potent ia l benef i ts , i n c l u d i n g immedia te use o f a w i d e l y adopted set o f t echno logy standards, r ap id increases i n funct iona l i t y as standards evo l ve , integrated marke t ing and b a n k i n g content, and access to a large number o f customers and prospects at the lowest cos t 4 ( O o i et a l . , 1996, i v ) . Strategy Development. The impac t o f the Internet on banks i n f o rmu la t i ng strategy can be r e cogn i zed from several examples . F i rs t , banks are r ep lac ing ex i s t ing PC-based serv ices w i t h Internet b a n k i n g , l i ke the Toron to D o m i n i o n B a n k ' s conve rs ion i n 1999. It is a strategic m o v e enab led b y the evo lu t ion o f IT, i.e., the Internet and W e b technolog ies . Internet b a n k i n g has advantages over P C bank ing because the concept o f Internet b a n k i n g is ent i re ly based on open t echno logy standards, such as TCP/ I P and W e b browsers , i n w h i c h the unde r l y i ng t e l e commun i ca t i on ne twork is an open p l a t f o r m shared b y the pub l i c . T h i s a l l ows banks to escape the constraints o f expens ive propr ietary systems, such as those operated b y C h e c k F r e e and V i s a Interact ive, and spec ia l l y deve loped software and dial-up interface, such as Q u i c k e n and M o n e y ( Eng l and , 1998). The beauty o f Internet b a n k i n g is the use o f the cl ient-server p l a t f o r m to support the interact iv i ty between banks and customers , i n w h i c h customers r u n appl ica t ions that res ide at the b a n k ' s W e b server. B a n k s can therefore f u l l y cus tomize and dif ferent iate e lectronic interfaces, and have true b rand ident i ty that P C b a n k i n g cannot o f fe r ( O o i et a l . , 1996, i i i ; F i v e Pace , 1995; W e b T e c h , 1998). Kosiur in his book provides six innovative case studies of Web-based electronic commerce. 2 Integrion is a consortium found by some of the largest banks and financial institutions in North America. Its goal is to act as an outsourcer for the electronic banking needs of its members (Marenzi, 1998). 3 For example, initial set up cost is from US20K to $30K, plus $1.5Kper month for first 12,000 transactions, which is much lower than the cost in creating in house Internet banking. 2 Second, the Internet allows Internet-based or so-called virtual banks to appear as new competitors because it breaks the entry barrier created by the high set-up cost of branch network5. Internet-based competitors of this type have created a well-branded image and compete directly with traditional banks for time-pressed customers who demand any-time and anywhere banking services. Some traditional banks have responded by either creating a new business6 or acquiring a business7 of this type. Meanwhile, it was also suggested that the strategic issue for banks might no longer be how to integrate Internet banking into the portfolio of existing delivery channels, but to consider how and where to build a new barrier before this old barrier completely collapses (Li, 1997). But setting an entry barrier could also be considered as protectionism. \"Keeping them (new competitors) out even though they got a better idea is a bad idea, ... what you (banks) need to do is find the way to win, as opposed to find the way to make the other lose\" (McGlashon & Ickert, 1998). Third, the Internet is a force leading to strategic partnerships between banks and other organizations. With the use of the Internet, rich information can simultaneously reach a large number of prospects, thus breaking the traditional trade-off between richness and reach of information. This allows bank customers to navigate a full range of banking options and provides direct access to such financial service providers as credit card companies and mortgage lenders, without having to go through banks. The hierarchy of channels once controlled by banks has been broken (Evans & Wurster, 1997). To a great extent, the Internet is an enabler of disintermediation to the financial industry (McGlashon & Ickert, 1998). In order to maintain their role as a leading financial intermediary and to support a full menu of services that cannot be offered alone, banks are forming strategic partnerships with such companies as insurance and brokerage firms (Ogilve, 1996). Market Potential. Many studies have indicated that there is great potential in Internet banking. It was projected that 16 million US households, representing 16% of all US households, would use Internet banking by the year 20008 (Booz, Allen & Hamilton, 1996). In 1998, Online Banking Report estimated that there were about 4.5 million US households using Internet banking at least 4 Some other commonly recognized strategic advantages are summarized in Appendix 1. 5 Setting up an Internet-only bank costs only between US$1 to US$2 million, which is significantly lower than the costs involved in developing a branch network (Booz, Allen & Hamilton, 1997). 6 For example, Mbanx was created by the Bank of Montreal and Citizens Bank by Vancouver City Savings Credit Union. 7 For example, First Security Network Bank was acquired by the Royal Bank. 3 once a month. That number was expected to increase to 33.5 million by the year 2005 and would represent nearly 31% of all households (US Web Services, 1998). The Tower Group (1996), a consulting firm specializing in financial industry, expected that by the year 2000, 85% of US households with an account at a commercial bank would have that account at a bank offering Internet-based services. Therefore, household demand for Internet banking will be at a level that banks cannot afford to ignore. Worthy of note is the fact that most customers are willing to see more varieties of banking functions available through the Internet. In GVU's study (1997), the majority of surveyed consumers felt that having a variety of features and services (including bill payment) available on the Internet was important9, while in Ooi, Wei and Goh's survey (1996, i), both bill payment and transfer of funds were viewed as important categories of Internet banking services that should be provided. Section 3 Research Perspectives Research Motivation. From the above elaboration, it is reasonable to expect a high adoption rate of full functionality in banks' websites. However, research findings have shown that Internet banking functions adopted by banks varied significantly, and that only a minority of banks had offered advanced level functions such as bill payment and funds transfer (Diniz, 1998; Booz, Allen & Hamilton, 1997). In Diniz's study, only about 15% of bank sites studied provided services in bill payment and funds transfer10. Obviously, customer demand does not solely determine the adoption rate and there exist some important issues about providing Internet-based services and products. For banks, integrating the Internet into the existing business portfolio might require a completely different set of considerations that might not be encountered in the adoption of earlier technologies. However, many journals have tried to explain the adoption of Internet banking from the customers' perspective and attributed the slow growth to customer resistance because they are still not comfortable with the security of the Internet banking and prefer face-to-face interactions with branch tellers. As a result, many studies on Internet banking have been focused on the understanding of the relationship between customer behavior and adoption rate. For example, how the consumer usage of electronic channels was influenced by their needs and opportunity of using electronic channel (Ramaswami et al., 1998), what the user profile of Internet banking was 8 The analysis was based on the key factors affecting consumer demand, such as Internet usage, computer ownership and consumer acceptance. 9 Including both respondent groups that had and had not an Internet bank account. 4 and what factors were a f fec t ing their adopt ion dec i s i on ( G V U Center , 1997) , and what determinants ex is ted to affect cus tomers ' usage in tent ion o f Internet b a n k i n g serv ices ( O o i et a l . , 1996, i ) . B y compa r i son , studies i n the perspect ives o f banks o n l y have rece i ved l i t t le attent ion. Research Questions. Therefore , this study tries to e x p l a i n adopt ion o f Internet b a n k i n g f r o m the perspect ives o f banks . It intends to invest igate the p r i n c ip l e issues that banks cons ider w h e n p r o v i d i n g products and services through the Internet, and then to create and va l idate a m o d e l o f techno log i ca l adopt ion that reveals h o w these issues affect b a n k s ' intent to adopt. T h e p roposed m o d e l answers two research quest ions. 1. What are the factors that banks take into account when considering or implementing Internet banking? 2. How are these factors related to banks' level of intent to adopt Internet banking? Section 4 Research Methodology Qualitative Research. T h i s research was d i v i d e d into t w o phases. T h e f i rst phase started w i t h a qual i tat ive research b y r e v i e w i n g the l iterature o f re levant indust ry pub l i ca t ions and scho la r l y research w h i c h have ident i f i ed m a n y potent ia l factors l ead ing to the adopt ion o f the Internet as a de l i ve ry channe l , a lbeit i n p i ecemea l f o r m . These have been augmented b y semi-structured in terv iews w i t h bank execut ives o f several ma jo r f i nanc i a l inst i tut ions i n the V a n c o u v e r area. In the in te rv iews , respondents had been a l l o w e d to choose the issues they wanted to d iscuss before the prepared quest ions were asked. Factors from bo th sources were c o m b i n e d to generate 56 in i t i a l survey i tems and a tentative adopt ion m o d e l . Q-Sort Analysis. A Q-sort analys is on the in i t i a l su rvey i tems was conducted to test the construct v a l i d i t y o f the m o d e l , w h i c h was , spec i f i ca l l y , to m a k e sure that corre lated quest ions were grouped w i t h i n par t i cu lar categories and amb iguous quest ions e l im ina ted or rev i sed . A f t e r th is , the rev i sed survey i tems were incorporated into an 8-page survey , i n w h i c h quest ions measu r ing the respondents ' intent to add par t icu lar b a n k i n g funct ions to their f i r m s ' websi tes were a lso i n c luded . Quantitative Research. The second phase was a quant i tat ive research approach des igned to ana lyze the survey result against the proposed adopt ion m o d e l . The survey was des i red i n this study because factors ident i f i ed i n the qual i tat ive study d i d not have suf f i c ient emp i r i c a l The survey data was collected in October/November 1997. 5 foundat ion . T h e survey approach is able to p rov ide some stat ist ical s ign i f i cance to the f ind ings . T h e analys is was conduc ted i n three parts. F i rs t , factor ana lys is was used to study h o w measurement i tems c lustered around some unde r l y i ng c o m m o n factors. Second l y , d i s c r im inan t ana lys is was used to examine the re la t ionsh ip between the c o m m o n factors and the l eve l o f intent that bank managers had i n adopt ing par t icu lar Internet b a n k i n g funct ions . F i n a l l y , f i nd ings were eva luated and s u m m a r i z e d , l ead ing to the conc l u s i on o f what the c o m m o n factors were and h o w they d i f ferent iated the l eve l o f intent to adopt Internet b a n k i n g . Section 5 Previous Research on Technological Adoption A l t h o u g h there is a very l im i t ed quant i ty o f research spec i f i c a l l y f ocus ing on Internet b a n k i n g adopt ion f r o m a bank ' s perspect ive , research o n adopt ion o f other technolog ies b y organ iza t ions has been con t inuous l y emerg ing i n the IS l i terature. F o l l o w i n g are examples o f studies f o c u s i n g on adopt ion o f t echno logy that has s imi la r i t ies to Internet b a n k i n g , w h i c h m a y p rov ide some ins ights into the Internet b a n k i n g adopt ion dec i s ion . A l t h o u g h E l e c t ron i c D a t a Exchange ( ED I ) is an In terorganizat iona l Sys tem ( IOS ) be tween t w o organ izat ions , it is s t i l l s im i l a r to Internet b a n k i n g i n a w a y that they both are network-based e lectronic systems, des igned to improve channe l e f f i c i ency and to faci l i tate de l i v e r y o f serv ices and products from an organ iza t ion to its customers . There are m a n y studies i n t e chno log i ca l adopt ion us ing ( ED I ) as a uni t o f ana lys is , but their research focus o f adopt ion determinants va r i ed d i f ferent ly . F o r example , O ' C a l l a g h a n et a l . (1992) had studied the impac t o f relative advantage, compatibility \" and external influences ( f r om t rad ing partners) to the E D I adopt ion i n insurance industry , and f o u n d that on l y the relative advantage was related to the adop t ion behav ior . B u t i n some later research, compa t ib i l i t y and external in f luence c o u l d a lso be in f luent ia l to adopt ion dec i s ion o f E D I . B a s e d on l iterature r e v i e w and case studies, I a covou et a l . (1995) invest igated the adopt ion o f E D I and f o u n d that factors i n f l uenc ing the adopt ion dec i s i on c o u l d be organ iza t iona l and inter -o rgan iza t iona l . Factors i n f l uenc ing the intent to adopt E D I were ident i f i ed as: the pe r ce i ved potent ia l advantages associated w i t h E D I imp lementa t ion (i.e., perceived benefits), the l e ve l o f f i nanc i a l and techno log i ca l resources o f the o rgan iza t ion (i.e., organizational readiness), and the 1 ' R e l a t i v e advantage and c o m p a t i b i l i t y are t w o o f the five f u n d a m e n t a l factors that can i n f l u e n c e the d i f f u s i o n o f i n n o v a t i o n . T h e other three factors are o b s e r v a b i l i t y , c o m p l e x i t y and t r i a l ab i l i t y ( R o g e r s , 1983) . 6 pressure from competitors and trading partners (i.e., external pressure). Later, this proposition was statistically validated by a survey approach (Chwelos et al., 1999). The role of organizational and interorganizational factors were also highlighted in other research. Hart and Saunders (1998) have examined the impact of the interorganizational relationship between the supplier and customer on EDI adoption. The results suggested that customer power and supplier trust could affect the use of EDI differently. In one study, Premkumar and Ramamurthy (1995, i) tested several factors against the decision mode for EDI adoption. It was found that two organizational factors, internal needs (i.e., need and relative advantage) and top management support, and two interorganizational factors, competitive pressure and exercise power of the trading partner, were important factors to differentiate the decision mode among organizations. In a separate study focusing on organizational factors (Premkumar and Ramamurthy, 1995, ii), they found that compatibility, relative advantage, championing, scope of use within the task environment, and being an early adopter determined the diffusion of EDI internally, while technical compatibility, top management support, and being an early adopter were key variables influencing the diffusion externally. Internet banking can be viewed as a customer-oriented strategic system (COSS) n , which is designed to link to customers and improves a bank's competitive edge. Therefore, insight of adoption of Internet banking can be drawn from a case research by Reich and Benbasat (1990). Reich and Benbasat have investigated eleven COSS and identified some factors that enabled an organization to be a first-mover in developing a strategic system. The results showed that factors influencing the speed with which an organization developed a strategic system were related to the characteristics of the industry (i.e., high competitive threat from existing competitors and new entrants, and customer bargaining power), the organization (i.e., proactive stance, CEO support and champion), IS function (i.e., proactive stance, high competence and previous COSS experience) and the system itself (i.e., high priority, high level of resources, full pilot test and avoidance of IS planning). Although Internet banking is more consumer-based13, to a certain extent it is also a customer-based interorganizational system (CIOS) because its purpose is to facilitate the link to the 1 2 As defined, COSS is an information system used to support or shape the competitive strategy of an organization and set up a link to customers. Under such definition, Internet banking can also be categorized as a COSS. 1 3 The scope of this study is limited to retailing banking. 7 cus tomer and to improve customer re la t ionsh ip . A d o p t i o n dec is ions o f C I O S were p roved to be fac i l i ta ted b y factors i n w ide range o f categories (Grover , 1995). T h e y were : support factor {i.e., top management support and championship), IOS factor (i.e., compatibility and complexity), p o l i c y factor {i.e., proactive role of IT and management risk-taking position), o rgan iza t iona l factor {i.e., organizational size, IS infrastructure and strategic planning), and env i ronmenta l factor {i.e., number of adaptable innovations). T e c h n o l o g i c a l adopt ion can also arise from organ iza t iona l in i t ia t ive and env i ronmenta l pressure. B u r k e (1996) used the adopt ion o f A T M b y banks to study the re la t ionsh ip between the strategic or ientat ion and techno log ica l adopt ion dec i s i on and to examine h o w this re la t ionsh ip was associated w i t h the env i ronmenta l constraints the organ iza t ion was f a c ing and the organ iza t iona l capab i l i t i es the organ iza t ion possessed. The results ind ica ted that b a n k s ' strategic orientations were re lated to the t i m i n g and extent o f adopt ion , that i s , banks aggress ive ly pu r su ing expans ion in to n e w markets adopted A T M s ign i f i can t l y ear l ier than banks w i t h conservat ive approach, w h i c h concentrated on ma in ta in ing their current compet i t i ve pos i t i on . T h e results have also s h o w n that the t im ing o f adopt ion w o u l d d i f f e r as a func t ion o f regulatory environment and organizational size. B a n k s operat ing i n a less restr ict ive env i ronment or h a v i n g a larger o rgan iza t iona l s ize w o u l d have an ear l ier adopt ion . A n E E C - s p o n s o r e d research project has iden t i f i ed some major barr iers to the adopt ion o f service-based I T appl ica t ions , w h i c h were in tended to improve customer re la t ionships and the qua l i ty o f serv ices and de l i ve ry (Barras, 1986). Bar r ie rs that m igh t inh ib i t the rate o f adopt ion were be l i e ved to have three categories. T h e y i n c l uded e c o n o m i c a l factors {i.e., cost barrier), soc i a l factors {i.e., fear of depersonalization 1 4 , customer resistance), po l i t i c a l factors (i.e., government regulations), ins t i tu t iona l f a c to r s 1 5 and lega l factors. T h e above d i scuss ion i l lustrates that t echno log i ca l adopt ion is a ve ry b road issue. Factors a f fec t ing the adopt ion dec i s ion m a y vary d i f ferent ly between types o f techno log ies . So , the unders tand ing o f the factors spec i f i c to Internet bank ing adopt ion s t i l l requires a thorough study o f l i terature spec i a l i z ing i n the b a n k i n g indust ry and the Internet techno logy . T h i s w i l l be d i scussed i n the next sect ion. The fear of deskilling of the work and loss of jobs. 1 5 For example, lack of standardization of procedures and consistency of organization structure. 8 Section 6 Factor Identification: A Qualitative Study T h i s study o n l y intends to focus on Internet bank ing-spec i f i c factors because a comprehens i ve m o d e l i n c l u d i n g a \" c o m p l e t e \" range o f var iab les as iden t i f i ed b y prev ious research w o u l d be d i f f i cu l t to manage and test (Grover , 1995). Potent ia l factors l ead ing to Internet b a n k i n g dec i s i on were m a i n l y ident i f i ed f r o m literature spec i a l i z i ng i n the subject and three in-depth in te rv iews w i t h senior execut ives o f major depos i tory inst i tut ions i n C a n a d a 1 6 . T h e re la t ionsh ip o f these factors w i t h the b a n k s ' intent to adopt Internet b a n k i n g was tested b y several hypotheses. H i g h l i g h t s o f the f ind ings , together w i t h the n u l l f o r m o f the hypotheses, are p r o v i d e d as f o l l o w s . 6.1 Strategic Motivation A d o p t i o n o f Internet b a n k i n g is a business strategy mot i va ted b y h o w it can sat isfy the business need, strategic mission and organizational goal. Some examples are f o u n d i n the banks in te rv i ewed . D u e to env i ronmenta l changes 1 7 , the B a n k o f M o n t r e a l ( B M O ) needed to re-define cus tomer re la t ionsh ip and become tota l ly c l ient-centr ic and serv ice-dr iven. W i t h Internet techno logy , the bank c o u l d differentiate the c l ient base and o f fe r appropriate serv ices for i n d i v i d u a l c l ients , so that their \" segment o f o n e \" marke t ing strategy c o u l d be suppor ted 1 8 . M e a n w h i l e , the l aunch o f M b a n x was mos t l y a b rand ing strategy requ i red because B M O had a l o w name recogn i t ion i n N o r t h A m e r i c a . The object ive o f b e c o m i n g a future b a n k i n g b rand , as c lea r l y stated i n an internal document , translated into the goa l o f be ing a dist inct o rgan iza t ion and a l ead ing force for i nnova t ion i n N o r t h A m e r i c a ( M c G l a s h o n & Ickert, 1998; B a r c l a y , 1998; K i n s l e y , 1998; C h i s h o l m , 1998). O n the other hand , cons idera t ion o f Internet b a n k i n g i n H o n g k o n g B a n k G r o u p o f C a n a d a ( H K B a n k ) was mot i va ted b y the need for a l o w cost de l i v e r y channe l . A s commen ted ( O ' S u l l i v a n , 1998), the bank \" cannot compete , at least w i t h a certa in segment i n the customer base, b y o n l y o f f e r ing a h igher cost d i s t r ibut ion channe l \" . F o r V a n C i t y , Internet b a n k i n g c o u l d per fec t l y f i t into their m i s s i o n o f be i ng at the l ead ing edge o f t echno logy based de l i ve ry (Wafer , 1998). The strategic l aunch o f C i t i zens B a n k for V a n C i t y on the other hand was intended to sat isfy the need o f a sma l l g roup o f customers w h o shared the interest i n techno logy or customer serv ices (Barc lay , 1998). Therefore HI: The degree to which Internet banking satisfies the business needs is not related to banks' adoption intent 1 6 Richard A Wafer, V P Information Systems, Vancouver City Savings Credit Union (VanCity); Sean P O'Sullivan, VP Distribution Systems, Hongkong Bank Group of Canada (HK Bank); Bob McGlashon, Senior V P & Meini Ickert, Senior Manager Sales, the Bank of Montreal (BMO). B M O is one of the largest banks, and VanCity and H K Bank respectively are the largest credit union and foreign bank in Canada. 1 7 Democratization of information, globalization, social and demographic shifts, and deregulation of financial industry (Chisholm, 1998). 1 8 It is to make customers feel valued as a market segment of one. 9 ( r< l0 .3 l ) 1 9 . H2: The degree to which Internet banking matches the declared missions is not related to banks' adoption intent (r < 10.31). 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