An Empirical Analysis of Internet Banking Adoption in Manila

A Thesis

Presented to

The Management of Financial Institutions Department

College of Business

De La Salle University

By

Garcia, Anthony

Jung, Sangbin

Kim, Taejin

August 2011

1

CHAPTER 1. INTRODUCTION

1.1Background of the Problem..................................................................................3

1.2 Problem Statement...................................................................................................................12

1.3 Objectives................................................................................................................................13

1.4 Hypotheses...............................................................................................................................14

1.5 Significance of the Study..................................................................................16

1.6 Scope and Limitations.............................................................................................................17

CHAPTER 2. REVIEW OF RELATED LITERATURE

2.1

Previous Studies 19

CHAPTER 3. FRAMEWORK

3.1 A Priori Expectations23

3.2 Conceptual Framework7

CHAPTER 4. METHOLODGY

4.1 Research Design8

4.2 Sampling Design8

4.3 Data Description and Collection Method9

4.4 Data Analysis Methods

CHAPTER 5. RESULTS AND DISCUSSION3

CHAPTER 6. CONCLUSION51

CHAPTER 7. RECOMMENDATION53

BIBLIOGRAPHY57

2

APPENDIX..…..…………………………………………………………………….……….62

CHAPTER 1

I N T R O D U C T I O N

1.1 Background of the Study

E-banking is called Internet banking, online banking or PC banking. E-banking may

include ATMs, wire transfers, telephone banking, electronic funds transfers and debit cards

(Mobarek, 2007).

The evolution of the e-banking industry started as early as the 1970s when banks began

to look at e-banking as a way of substituting some of their traditional bank functions. The first

automated teller machine (ATM) was invented by IBM and later introduced in December 1972 at

Lloyds bank in the UK (Schneier, 2004). Subsequently, in the 80s, Citibank offered PC-banking

services amidst popularization of the personal computer (Shapiro, 1999). Nevertheless, PC

banking is difficult to use and expensive to maintain. It only succeeded in the business field .

Internet banking was introduced in the mid-90s due to the popularization of the Internet and it

changed the way of banking. Internet banking was made possible by the creation of Web

browsers. With the web browser, consumers do not have to purchase additional software, store

any data on their computer or be constrained by the software updates. All transactions take place

3

on the server of a bank through the Internet. Clients access the bank's Internet banking website,

and just log in their account then they can use their Internet banking service (Kolsaker & Payne,

2002; Dong-Her et al, 2004). Moreover, Wells Fargo is the first bank to introduce and establish

the virtual bank (DeYoung et al., 2007). Now in the 21st century, almost all banks in EU and US

provide Internet banking services (DeYoung et al., 2007; Hernando & Nieto., 2007).

A few existing empirical studies have already proven that Internet banking provides

many benefits for both banks and their clients. Table 1, containing previous researches done on

the performance of Internet banks, indicates that online services have positive impact on the

bank’s financial performance.

4

Table 1: International Studies on Internet banking and Performance (Malhotra and Singh, 2009)

Study Country and

sample size

analyzed

Sample

Period

Results

1 Furst et al.

(2000a,

2000b,

2002a, and

2002b)

U.S., 2,517

National Banks

Q3, 1999 Internet banks outperformed non-

Internet banks in terms of

profitability. Offering Internet

banking did not have a statistically

significant impact on profitability.

2 Hasan et al.

(2002)

Italy, 105 banks 1993-2000 With respect to almost all

performance variables, the Internet

group outperformed the non-

Internet group. Highly significant

relationship between offering of

Internet banking and bank

profitability.

3 Hernando

and Nieto

(2005)

Spain, 72

commercial banks

1994-2002 Performance of multi-channel

banks was better in terms of ROE,

higher commission income and

lower general expenses. The

adoption of the Internet as a

delivery channel had a positive

impact on banks’ profitability

measured both in terms of ROA and

ROE and no statistically significant

impact on risk.

4 DeYoung et

al.(2007)

U.S., 424 Internet

banks and 5175

non-Internet banks

1999-2001 Click and mortar banks became

more profitable (ROA and ROE)

relative to their brick and mortar

rivals between 1999 and 2001.

Internet adoption improved bank

profitability, particularly through

5

increased revenues from deposit

service charges.

In traditional banking, a greater amount of capital investment is required to maintain the

distribution system. Therefore, the operating cost of traditional banks is relatively high compared

to Internet banking, because Internet banking uses the Internet as the medium which is deemed

the cheapest distribution channel (Polasik et al., 2008). In addition, traditional banks allot capital

for labor and infrastructure costs. On the other hand, Internet banking acquires savings which

allows them to offer higher interest rates and lower lending rates and service charges so recently

the trend for traditional banks is to encourage their customers to do their banking online.

Polatoglu and Ekin (2001) reported that the average cost of transaction with regard to Turkish

Internet banking is $0.10, compared to the $2.1 for a teller. Also, web-based banking services

give banks the opportunity to gather customer data and behavior so that a cross-selling can be

easily implemented.

Most consumers look at Internet banking as convenient and efficient because they do not

have to go to the bank, fall in line and wait to be called. Moreover, they are not constrained by

region or time because they can do banking transaction as long as they have a PC that is

accessible to the Internet (Lassar, 2005). Furthermore, other factors like sense of complete

control over one’s account, speed of transactions, higher interest rate and lower lending rate are

also important to consumers (Black et al., 2001).

6

Though Internet banking proved to be beneficial, there are still obstacles to the adoption

of Internet banking. Primarily, the lack of computers and Internet access appear to be the most

critical problem (Black et al., 2002). In the case of the Philippines, only few areas are allowed

for high-speed and wireless Internet connections since these are concentrated only in certain

areas within major cities (Lallana et al., 2009). BBC News reported in an article that based on the

ranges in world broadband prices, Sweden's megabit-per-month entry-level connection was

USD10.79 (P500) in the past decade while the Philippines just crossed the megabit barrier during

this time (BBC News, 16 July 2007). Furthermore, people also have security issues on doing

transactions via the Internet. Most of the people’s concerns include cases of hacking, credit card

fraud, and scam, which have been found to affect the decision to adopt Internet banking (Sathye,

1999; White and Nteli, 2004; Gerrard et al., 2006)

There are other factors that predict the adoption status of Internet banking which include

socio-demographic characteristics. Based on previously conducted studies, income level and

other demographic variables have been shown to be significant predictors (Karjaluoto et al.,

2002; Im et al., 2003; Flavián et al., 2006). Low educational attainment or unavailability of

information limits people’s knowledge about Internet banking (Nielsen, 2002; Im et al., 2003;

Pikkarainen et al., 2004; Lassar et al., 2005; Lee et al., 2005; Gerrard et al., 2006).

The Philippine Context

7

The state does not only supervise banks, but with the advent of central banking, it also

controls the banks’ operation. In the Philippines, the Bangko Sentral ng Pilipinas (BSP)

supervises the nation’s banking system. During the Asian financial crisis of 1997, the banking

industry was relatively undamaged, and asset quality has been improving since 2001. In July

2005, non-performing loans reduced into the single digits (9.3 percent), half the peak level (18.8

percent) recorded in October 2001.

As of February 2009, there are 21,494 BSP supervised/regulated banks, consisting of:

4,284 universal and commercial banks, 1,318 thrift banks and 2,141 rural and cooperative banks.

Three banks are owned or controlled by the government: Al-Amanah Islamic Investment Bank of

the Philippines, Development Bank of the Philippines, and Land Bank of the Philippines.

Foreign banks compete with local banks and are active in asset management, investment

banking, foreign-exchange and derivatives trading. Though foreign banks have a small market

share and branch networks are not that extensive, customers are still attracted by their good

reputation and expertise.

In the early 1980s, the Bank of the Philippine Islands (BPI)，Citibank , Philippine

National Bank, and other large banks pioneered e-banking creating a change in the world of

banking in the country. Interbank networks in the country like Megalink, Bancnet, and BPI

Expressnet were among the earliest and biggest starters of ATM (Automated Teller Machine)

8

technology. BPI launched its BPI Express Online in January 2000. Aside from this, other forms

were introduced such as phone and mobile banking. The most common online financial services

include deposits, fund transfers, applications for new accounts, Stop Payment on issued checks,

housing and auto loans, credit cards, and remittances (Leuterio and Estepa, 2009)

By the end of June 2004, 57 banks (41 domestic banks and 16 foreign banks) provided

Internet banking services, 36 of which were universal and commercial banks and 21 were thrift

banks and in February 2009, this number grew to 92. Because of these, customers were able to

access banking services from different parts of the country all day and enjoyed conveniences and

lower transaction costs. However, there exist some obstacles in the wide use and implementation

of e-banking. The Philippines has been reported as one of the lowest GDP per capita among the

Southeast Asia (IMF, 2011) (Figure 1). Most users in the country who access Internet banking

Figure 1 : GDP per capita in Southeast Asia 2010 (in billions $)

Indonesia Thailand Malaysia Singapore Philippines Vietnam0

100

200

300

400

500

600

700

800707

319238 223 189

104

Source: IMF (2011)

9

come from urban areas. The innovation has not been widespread since only those who have

Internet connections are able to enjoy it. Pure e-banking has not yet fully replaced the traditional

way of banking in the Philippines. Internet-only banks do exist as the BSP has already licensed

one pioneer Internet-only bank in the Philippines. However, today's Internet banking is more like

bricks-and-clicks, the incorporation of e-banking into the more traditional banking structure

(Jimenez and Roman, 2005).

Security is also a major concern although the technology to protect transactions is

already pretty good and keeps getting better. For BSP, this is a major reason for regulating e-

banking activity both from the perspective of prudential regulation as well as consumer

protection (BSP, 2009). The percentage of households with a computer and Internet access still

falls below the Asia average, PC penetration is estimated at 1.9 for every 100 persons and 71%

of the Filipinos are accessing Internet through PC cafes (Yahoo-Nielsen, 2010). And according to

a survey by Nguyen (2011) (refer to Table 2), the number of visitors to online banking websites

rose by double-digit figures over the 12 month period from January 2010 in all five countries,

including a 72 percent rise in Indonesia. However, in this list, the Philippines still had the lowest

number of Internet banking users (Nguyen, 2011).

10

Table 2: Internet banking users in Southeast Asia

Online banking category visitation by market

January 2010 vs January 2011

Total Unique Visitors

2010 January 2011 January % Change

Malaysia 2,360,000 2,746,000 16%

Vietnam 701,000 949,000 35%

Singapore 779,000 889,000 14%

Indonesia 435,000 749,000 72%

Philippines 377,000 525,000 39%

Source: Nguyen (2011)

The benefits of e-banking in the Philippines can be maximized through the benefit of

Overseas Filipino Workers (OFWs). OFWs send large amounts of remittances to their relatives in

the Philippines. Internet banking could make the remittance process a lot more convenient and

faster. In addition, the remittance fees become minimized. Therefore, Internet banking must be

made available to OFWs and banks must take advantage of their needs and provide these

services abroad.

1.2 Problem Statement

11

This study is to evaluate the phenomenon of Internet banking adoption on the

perspective of Filipino Internet users. Specifically, the following questions would like to be

answered:

a. Does individually perceived security able to increase the probability of using Internet banking

services?

b. Does Internet experience affect usage of web-based banking?

c. Does exposure to Internet banking advertisement increase the likelihood of Internet banking

adoption?

d. Does the use of other banking products, such as mobile banking and debit and credit cards

increase the likelihood of opening an online account?

e. Does the type of Internet connection used increase the probability of using Internet banking?

f. Do demographic characteristics such as age, gender, income, educational attainment and work-

related attributes determine the adoption status of Internet banking?

1.3 Objectives

This paper seeks to identify empirically the factors underlying the decision to adopt In-

12

ternet banking in the Philippines and the barriers to adopting Internet banking will be particularly

noted and explained. Consequently, the results that will be obtained in this study can be of assis-

tance to banks that operate in the Philippines. The improvement of banks and the strong empha-

sis on Internet banking are considered necessary in the adoption of Internet banking in the Philip-

pines. This study could provide banks with important insights on the target market segment, se-

curity issues and strategies that will help foster the acceptance of Internet banking.

Also, this study aims to investigate the perception and behavior of Filipino consumers on

Internet banking. The knowledge of Filipino consumers on Internet banking will be evaluated to

determine their likelihood to adopt Internet banking in the future.

Finally, this study will also analyze the impact of Internet banking on the banking

industry and economy in the Philippines. The future of Internet banking in the country is

important as Internet banking could pave the way for the economic progress.

1.4 Hypotheses

The factors which are hypothesized to influence the individual’s decision to adopt

Internet banking are divided into six main categories: (a) Perceived security, (b) Internet

13

experience, (c) Marketing exposure, (d) Use of other banking products, (e) Type of Internet

connection used, (f) Demographic characteristics.

a. Perceived security

Ho: The individually perceived security of Internet transactions has no effect on probability of

using Internet banking services.

H1: The higher the individually perceived security of Internet transactions, the higher the

probability of using Internet banking services.

b. Internet experience

Ho: Familiarity with the Internet medium, application of Internet at work and prior experience

with online transactions have no effect on the usage of Internet banking.

H1: Familiarity with the Internet medium, application of Internet at work and prior experience

with online transactions have a positive effect on the usage of Internet banking.

c. Marketing exposure

Ho: Exposure to Internet banking advertisements has no effect on likelihood of Internet banking

adoption.

H1: Exposure to Internet banking advertisements increases the likelihood of Internet banking

14

adoption.

d. Use of other banking products

Ho: Use of other banking products, such as mobile banking, as well as debit, credit card has no

effect on odds that a respondent opens an online account.

H1: Use of other banking products, such as mobile phone banking, as well as debit, credit card

raises the odds that a respondent opens an online account.

e. Type of Internet connection used

Ho: The type of Internet connection has no effect on probability of using Internet banking.

H1: The type of Internet connection increases the probability of using Internet banking.

f. Demographic characteristics

Ho: Demographic characteristics, such as age, gender, income, educational attainment and work-

related have no effect in determining the adoption status of Internet banking.

H1: Demographic characteristics, such as age, gender, income, educational attainment and work-

related attributes jointly determine the adoption status of Internet banking.

15

1.5 Significance of the Study

As e-banking is considered an important innovation in the field of banking and finance,

this study has major implications in the Philippine setting. First, as the adoption of Internet

banking in the country is not that prominent compared to other countries, this study can help

banks in thinking of ways to promote Internet banking. The information this study would provide

regarding market segmentation, perceived security and banking products can improve the

management of Internet banking. As a result, this may increase the adoption status of Internet

banking in the country. The analysis of bank's financial statements related to the adoption of

Internet banking will suggest on how banks can operate at lower costs. Second, with the

knowledge of the problems encountered by users, banks can improve their Internet banking

services. Finally, it contributes to the e-commerce industry of the Philippines by enhancing

performance and having greater economic efficiency and more rapid exchanges among financial

markets.

In addition, as the development of Internet technology is getting faster and many people

all over the world are already experiencing Internet banking, this study provides Filipinos with

ways on how to maximize the benefits of Internet banking.

1.6 Scope and Limitations

This study focuses on studying the Internet banking adoption status in the Philippines.

16

The sample population was obtained in the City of Manila since it has a vast geographic area and

consists of a wide variety of people as it is the capital of the country. In order to determine the

situation of Internet banking adoption, the research analyzed the effect of variables such as

perceived security, Internet experience, marketing exposure, use of banking products, type of

Internet connection used, and demographic characteristics. The respondents answered

questionnaires and were interviewed to determine the significance of each variable.

However, there are always inevitable limitations in every research. This research also

faced the same issues which include improper time management, high cost of research, the

difficulty in obtaining information required and the unpredictable nature of data collection. It is

difficult and expensive to collect information especially when the respondents are reluctant to

disclose the information. The cooperation of respondents is very important, since they provide

the data needed in research. It is noted that some respondents showed lack of enthusiasm and

skepticism during the data collection process since it deals with personal financial information.

There were also problems when designing the questionnaire; nevertheless, the

researchers were able to come up with a questionnaire that combines both open-ended and close-

ended questions to obtain accurate responses from respondents. The open-ended questions were

used to boost the close-ended questions by supporting and substantiating them.

Another major limitation of this research was the inadequacy of knowledge that most

17

respondents had about Internet banking, mobile banking and Internet security. It was observed

that the people are not thoroughly aware of Internet banking and Internet security. This can lead

to irrelevant results since the respondent does not have enough knowledge on the subject matter.

Finally, not all assumptions made were right and this leads to different conclusion and

recommendations compared to previous studies.

CHAPTER 2

R E V I E W O F R E L A T E D L I T E R A T U R E

2.1 Previous Studies

Due to the fact that our research is highly based on experimental methods, it is better

that the characteristics of different countries which use Internet banking be defined first. Using

notable texts, it was found that developed countries tended to provide Internet and electronic

banking.

18

Internet banking first flourished in big and successful banks located in urban settings.

Profitability and efficiency were the main reasons for choosing to adopt Internet banking as

shown by statistical evidences in the study of Furst et al. (2002) since there was a strong

correlation between the high profitability of banks and their time usage of Internet banking.

In a study clearly depicting the Internet banking usage in Europe, it was stated that banks

in the EU showed commonality because of their business method of both the Internet banking

system and the orthodox banking system. It was mainly stated that banks in Europe tried to

exploit not only the Internet banking system, but also equally the orthodox banking system,

because it was believed that being experienced on both fields put certain banks ahead than

others. For example, banks that started using Internet banking systems also moved on to other

techniques such as telephone banking, financial advisors, and such. Since most successful banks

in Europe use this method, it is very rare to see banks that only use the orthodox way of banking

(Claeys and Arnaboldi, 2007).

Due to the efficiency of the Internet banking system, Internet banking does not only help

the successful, but also the people who are rising to success. To back this statement, Jimenez and

Roman (2005) stated that electronic banking services, which are considered more efficient and

cheaper, should be made available to microfinance clients as well. The increased convenience

and lowered costs brought about by e-banking should also benefit the poor and low-income

19

clients. Jimenez and Roman (2005) also stated that rivalry of Internet banking between banks

may also help the poor and the low-income clients because this conflict will force the Internet

banking system to improve and become more efficient for the public.

Furthermore, the research of Fuentes et al. (2006) stated that decisions such as using

Internet banking in banks were usually decided by the financial status and size of the banks that

are going to use the system. He further explained that the bank membership to a holding

company speeds up the Internet banking adoption but this was not the case so the adoption

decision was taken at the bank level.

Advantages of using Internet banking

Numerous studies showed that there were several advantages to Internet banking. One

advantage was that Internet banking created cheaper means of banking for both the customers

and banking companies. The other advantage was that the banking companies would not need to

have a lot of workers to sort out the money of their customers, since the online banking system

allowed the money to be circulated online. It is also very convenient for the customers since they

can do banking in places that have Internet installed (Howcroft, Hamilton and Hewer, 2002).

The Bank and E-business Benefits of the Internet

The research done by Gow (1997) indicated the benefits of the

Internet banking system. These include improving banking revenues,

20

customer service, and cost savings. This is described more in detail in an

article called “Next Generation-Retailed Banking” (Compaq, 2001):

The money saved from the reduced amount of transactional costs.

Online banking requires no ink, paper, and any tangible material;

therefore, in the end, it will save money for whichever company

uses this system of banking

The chance to attract new customers. The online banking system

will attract customers who are usually not used to going to the

bank physically; therefore, they will used the Internet banking

system of the bank whichever has the most efficient system.

Improved ways to keep customers loyal to the bank. Since the

banking will be online, the Customer Relationship Management

(CRM) will be able to store information and statistics about their

customers better since it will be saved up on the banking database.

There is a lot of research about Internet banking adoption. However,

there is a lack of study focusing on the Philippine setting. This paper

attempts to apply a similar study to the local front using the aforementioned

papers as guides, and reserves the option to modify several elements of the

21

research paper.

CHAPTER 3

F R A M E W O R K

3.1 A Priori Expectations

Table 3 : Expectations of Variables on Internet Banking Adoption

a. Perceived security +b. Internet experience +c. Marketing exposure +

22

d. Use of other banking products +e. Type of Internet connection used +/-f. Demographics characteristics +/-

a. Perceived Security

Some customers deny using Internet banking as they perceive it as being easily sensitive

to fraud. The survey by White and Nteli (2004) found that UK consumers ranked the security of

bank’s web site as the most important attribute of Internet banking quality. Therefore, this study

uses perceived security as a significant predictor. This perception can damage consumers’

confidence of the online system as a whole. According to a study conducted by Sathye (1999),

73% of the respondents avoided the adoption of online banking because they are concerned

about the safety and security of transactions over the Internet. Moreover, Sathye (1999) found

that consumer will not be ready to change from current familiar ways of banking to Internet

banking unless their specific need is satisfied.

b. Internet Experience

Since online banking is delivered through the medium of the Internet, customers have to

be familiar with the web browser (Lee et al., 2005). Also, the Technology Acceptance Model of

Davis (1989) identifies perceived ease of use as a key factor in determining Internet banking

adoption. Internet banking has been viewed by customers who are likely to be computer-literate

and familiar with the Internet (The Straits Times, 14 September 1997). Therefore, it is expected

23

that the more the individual uses the Internet and the more he or she perceives the Internet as

compatible with his or her lifestyle, the more likely that the individual will adopt Internet

banking.

c. Marketing Exposure

Some people are not aware of the great existence of Internet banking and the services it

offer. They cannot enjoy the innovative products and services unless it is exposed to them.

Sathye (1999) identified lack of awareness as one of the main barrier in Australia. Also,

marketing effort in Turkey had a positive influence on E-banking acceptance (Polatoglu and

Ekin, 2001).

d. Use of other banking products

There are only few customers who are using different kinds of banking products in the

Philippines. However, a previous study indicated that banking products are initially embraced by

consumers who are financially innovative (Gerrard and Cunningham, 2003). Also, customers

who heavily utilized the existing electronic services such as ATMs or telephone banking showed

a greater tendency to Internet banking adoption. Consequently, it is hypothesized that users of

certain technologies are more likely to adopt online banking. In terms of compatibility with the

24

needs of the potential adopters, Internet banking can be seen as an expeditious tool that allows

customers to better manage their multiple accounts. As there are more financial products and

services, it is expected that individuals who may have many financial accounts and who

subscribe to many banking services will be more inclined to adopt Internet banking.

e. Type of Internet connection used

The speed of Internet connection used in the Philippines is slow compared to other

countries. The download speed and rate of Internet connection in the Philippines are 679 kbps

and 85 kbps respectively. In Asia and around the world, the Philippines ranked at #30 and #136

respectively in terms of speed of Internet connection. Some suffer from the slow connection

problem and price of Internet installation (Internet Speed Test, 2011). However, in the studies

used in Poland, the download speed rate for Internet connection is 512 kbps. The higher marginal

cost and slow speed of dial-up connection did not appear to hinder consumers from conducting

their banking activities online (Polasik, 2008).

f. Demographic Characteristics

Demographics serve as personal characteristics. This includes age, income, gender,

educational attainment and so on. For instance, people with high educational attainment may

have an aptitude for skills in computer and information technology. It is crucial that relationship

25

between education and Internet banking is propounded. Age and gender also have been found to

be important determinants in the online banking acceptance studies (Karjaluoto et al, 2002).

Women are less likely to conduct Internet

banking in Poland. Even geographic location

and income level widely influenced the Internet

banking adoption.

3.2 Conceptual Framework

Figure 2 Research Model

26

Independent Variable

Use of other banking products

Bank cards

Mobile banking

Marketing Exposure

Internet Experience

Internet use frequency

Year of Internet use

Internet use at work

Experience with online Purchase

Experience with e-finance

Perceived Security

Demographic Characteristic

Gender

Year of schooling

Age

Employment status

→

Figure 2 above is shown to illustrate the relationship between the independent and

dependent variables of Internet banking systems. Independent variables such as Internet

experience, marketing exposure, security, demographic features, and the type of Internet

connection used correlate with the dependent variable which is the adoption of the Internet

banking system.

C H A P T E R 4

M E T H O D O L O G Y

4.1 Research Design

Explanatory research was used in this study. The primary goal of this study was to

understand the relationship between the independent and dependent variables. This method was

used to show that one variable caused or determined the value of the other variable. Furthermore,

27

Dependent Variable

Internet banking adoption

quantitative approach was used to obtain the results of the study, appearing as numbers and

statistics.

4.2 Sampling Design

A preliminary survey was conducted and from that, 266 samples were collected. Based

on this number, nearly 40% of the respondents are Internet banking users, therefore, p= .4 was

used in the formula below evaluating the needed number of respondents for the actual survey.

n= z2 pqe2 =

(1.962 ) (.4 )(.6).052 =368

where:

n= sample size

z= confidence level

p= proportion of the population (in this case, proportion of Internet banking users)

q=1-p

e=confidence interval

The computed number was 368 but the questionnaires administered were more than this figure to

account for the uncertainty and error. Thus, the sample used in this study was 600 Manila

Internet users, completing interactive questionnaires. The total population of Manila city is 1.6

million (NSO, 2007). There was no accurate data available for population in Manila since the

2010 census was still in progress. Data gathering was done through the distribution of

questionnaires. The effect of the variables mentioned in this study on the adoption status of

Internet banking services was observed using the logit model.

28

4.3 Data Description and Collection Method

Questionnaires (attachment 1) were distributed in SM City Manila (92), University Mall

along Taft Avenue (75), Robinsons Place in Malate (120), Binondo Church (53), Quiapo Church

(43), Starbucks in Intramuros (86), Gotesco Tower near Malacanang (41), Robinson Residence

(52) and Adriatico Tower along Adriatico Street (38). Table 4 defines the explanatory variables

used in the study.

Table 4: Explanatory Variables Used in the Study

Variables Definition Previous Study

Perceived Security(Security) Security of Internet transactions perceived by the respondent; variable measured on a five-point scale ranging from 1 (very unsafe) to 5 (very safe)

Davis, F.D. (1989), “Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology”, MIS Quarterly, Vol. 13 No. 3, pp. 319-40.

Internet Experience(Internet Experience)

Number of years the respondent has been using the Internet

Pikkarainen, T., Pikkarainen, K., Karjaluoto, H. and Pahn, S. (2004), Consumer Acceptance of Online Banking: an Extension of the Technology Acceptance Model, Internet Research, Vol. 14 No. 3, pp. 224–235.

Internet at work(Internet_at_work) Internet use at work; 1 if the respondent uses

Pikkarainen, T., Pikkarainen, K., Karjaluoto, H. and Pahn, S. (2004),

29

Internet at work; 0 otherwise

Consumer Acceptance of Online Banking: an Extension of the Technology Acceptance Model, Internet Research, Vol. 14 No. 3, pp. 224–235.

Internet Transactions(Internet_transactions)

Experience with online transactions; 1 if the respondent conducted at least one Internet purchase or sale in the past; 0 otherwise

Al-maghrabi, T. & Dennis, C. (2010) “Driving online shopping: Spending and behavioral differences among women in Saudi Arabia,” International Journal of Business Science and Applied Management, vol. 5, no. 1, pp. 30-47.

Internet Financial

Transaction

s(Financial_transaction)

Experience with online financial transactions other than Internet banking (i.e. Internet purchase or sale of stocks, bonds, mutual fund shares, insurance policies or online borrowing); 1 if the respondent conducted at least one Internet financial transaction in the past; 0 otherwise

Black, N.J., Lockett, A., Winklhofer, H. and Ennew, C. (2001), “The Adoption of Internet Financial Services: a Qualitative Study”, International Journal of Retail & Distribution Management, Vol. 29 No. 8, pp. 390-8.

Marketing Exposure(Ads) Exposure to Internet banking advertisements; 1 if the respondent came across at least one advertisement; 0 otherwise

Polasik, M. & Wisniewski, T.P. (2008) Internet banking Adoption in Poland. Retrieved on January 25, 2010 from http: //ssrn.com/abstract=1116760.

Mobile Banking(Mobile_banking) Experience with mobile phone banking; 1 if the respondent conducted at least one financial transaction over the mobile phone in the past; 0 otherwise

Laforet, S. and Li, X. (2005), “Consumers’ Attitudes towards Online and Mobile Banking in China,” International Journal of Bank Marketing, Vol. 23 No. 5, pp. 362-380.

Bank Card(bank_card) Credit card ownership; 1 if the respondent holds a credit card; 0 otherwise

Amin, H. (2007). “An Analysis of Mobile Credit Card Usage Intentions,” Information Management & Computer Security, Vol. 15 No. 4, pp. 260-269.

Broadband(Broadband) Type of Internet connection; 1 if the respondent accesses the

Polasik, M. & Wisniewski, T.P. (2008). Internet banking Adoption in Poland. Retrieved on January 25,

30

Internet via broadband Internet connection; 0 otherwise

2010 from http: //ssrn.com/abstract=1116760.

Years of Schooling(Education) Number of years spent in education; variable derived from the highest educational attainment

Polasik, M. & Wisniewski, T.P. (2008). Internet banking Adoption in Poland. Retrieved on January 25, 2010 from http: //ssrn.com/abstract=1116760.

Age between 18 and 65(Age)

Age level; 1 if the respondent is between 18 and 65 years of age; 0 otherwise

Maiyaki, A.A. and Mokhtar, S. S. (2010). Effects of electronic banking facilities, Employment sector and age- group on customers’ choice of banks in Nigeria, Journal of Internet banking and Commerce. Vol. 15, No. 1, pp. 1-8.

Gender(Gender) 1 if the respondent is a male; 0 otherwise

Elder, V., Gardner, E., and Ruth, S. (1987), “Gender and Age in Technostress: Effects on White-Collar Productivity”, Government Finance Review, Vol. 3 No.6, pp.17-21.

High income(Income) Income level; 1 if the respondent’s monthly income is above P35,000; 0 otherwise

Polasik, M. & Wisniewski, T.P. (2008) Internet banking Adoption in Poland. Retrieved on January 25, 2010 from http: //ssrn.com/abstract=1116760.

Employed(Employ) Employment status; 1 if the respondent is in paid employment; 0 otherwise

Maiyaki, A.A. and Mokhtar, S. S. (2010). Effects of electronic banking facilities, Employment sector and age-group on customers’ choice of banks in Nigeria, Journal of Internet banking and Commerce. Vol. 15, No. 1, pp. 1-8.

White Collar(White_Collar) Occupation; 1 if the respondent is a white-collar worker; 0 otherwise

Elder, V., Gardner, E., and Ruth, S. (1987), “Gender and Age in Technostress: Effects on White-Collar Productivity”, Government Finance Review, Vol. 3 No.6, pp.17-21.

4.4 Data Analysis Methods

Li = {Pi /( 1-Pi)} = β1 + β2Frequencyi + β3Internet_Experiencei + β4Internet_at_worki +

β5Broadbandi + β6Internet_Transactioni + β7Securityi +β8Bank_Accounti + β9Bank_Cardi +

β10Mobile_Bankingi + β11Financial_Transactioni + β12Adsi+β13Genderi+β14

Agei+β15Employi+β16Inci+β17Whti+β18Educationi

31

Logit model: Variables are defined in table 4

Since Internet banking adoption status is a binary variable, we used logistic regression to

analyze the data (Greene, 2003). The parameters, z-statistics, p-values and Huber-White robust

standard errors are estimated using quasi-maximum likelihood method. We used Eviews 7 to

analyze the data, and the results are reported in table 5.

CHAPTER 5

R E S U L T S A N D D I S C U S S I O N

Based on the questionnaires, data were obtained to characterize the respondents. Of the

600 respondents, those aged 18 to 65 years old consisted of 28% and the rest are those below 18

or beyond 65 years old (Figure 3). Males and females comprise 55% and 45% of the total sample

population (Figure 4). Figure 5 shows the educational background of the respondents, most of

which have finished their undergraduate course in college.

32

3%

10%

55%

27%

6%

Figure 5: Educational Background of Respondents

ElementaryHighschool/VocationalCollege(undergraduate)GraduatePost-graduate

33

72%

28%

Figure 3: Age Distribution of Respondents

between 18 to 65below 18 or beyond 65 years old

Furthermore, the respondents are a mix of unemployed and employed people (Figure 6). Of those

employed, 61% reported having white collar jobs (Figure 7). For those employed, 76% have

income less than P35,000 (Figure 8).

47%

54%

Figure 6: Employment of Respondents

yesno

39%

61%

Figure 7: Respondents with White Collar Jobs

yesno

34

24%

76%

Figure 8: The Income Distribution of Respondents

more than P35,000less than P35,000

With regard to the Internet experience, Figure 9 shows that among the respondents, 70% of them

use the Internet daily or almost daily. This number reflects that most people use the Internet since

none of the respondents answered not using the Internet. Of the respondents, 55% have been

using the Internet for 7 years or longer, 22% have used internet for 5 to 7

years, 12% have used internet for 3 to 5 years, 7% have used internet for 1

to 3 years, 3% have used Internet for 6 to 12 months and 1% have used

Internet for less than 6 months (Figure 10).

35

10%

7%

13%

70%

Figure 9: The Frequency of Internet Use of Respondents

Less than once a monthseveral times a month 2-3 times a week daily or almost daily

1% 3%

7%

12%

22%

55%

Figure 10: The Internet Experience of Respondents

less than 6 months 6 to 12 months1 to 3 years 3 to 5 years5 to 7 years7 years or longer

The respondents were also asked about the type of Internet connection that they commonly used

and 58% reported using among various wired connections such as broadband, DSL, and cable

(Figure 11).

36

42%

58%

Figure 11: The Type of Internet Connection

wirelesswired

Most of the respondents access the Internet at their respective work as 59% reported doing so

(Figure 12).

41%

59%

Figure 12: Internet Use at Work

yesno

Accessing the Internet may be due to several reasons but determining their buying or selling

experience through the Internet is vital to understanding the prevalence of Internet banking in

37

Manila. Figure 13 presents the fraction of people who have bought or sold in the Internet in the

form of online shopping. Other respondents also reported doing online purchase or sale of stocks,

bonds or other securities, investment funds and insurance, raising a loan, and many others.

Among the respondents, 78% have experienced performing any of the financial transactions

mentioned above (Figure 14).

51%49%

Figure 13: Experience of Internet Transactions

YesNo

38

23%

78%

Figure 14: The Experience of Financial Transactions

yesno

In terms of banking products, the respondents were also asked if they have bank accounts and

72% affirmed having bank accounts (Figure 15). Also, of these respondents, 73% use bank cards

in the form of ATM, debit, and credit cards (Figure 16).

72%

28%

Figure 15: Bank Accounts of Respondents

YesNo

39

27%

73%

Figure 16: The Use of Bank Cards

yesno

Mobile banking, another banking product, has been also studied. Of the respondents, 73% have

reported using mobile banking and any of its services (Figure 17).

27%

73%

Figure 17: The Use of Mobile Banking

yesno

There are a lot of factors that affect the adoption of Internet banking. People have concerns on its

security and some are influenced mostly by the marketing campaign of banks. According to the

respondents, they have been acquainted with advertisements on Internet banking in different

40

forms of media as 72% reported having seen, read, or heard about it (Figure 18).

72%

28%

Figure 18: Marketing Exposure on Internet Banking

YesNo

In terms of the perceived security on Internet banking, the respondents were mostly uncertain on

the security of Internet banking. Only 9% of the sample population reported being definitely sure

that Internet banking is indeed safe (Figure 19).

41

6%

17%

31%

38%

9%

Figure 19: Perceived Security on Internet Banking

Definitely notProbably notIt is difficult to sayProbably yesDefinitely yes

It is stated that the independent variable on this study is the Internet banking adoption status in

the Philippines; thus, it is necessary to determine who among the residents have already been

performing Internet banking transactions. The use of Internet banking services includes mobile

banking, money transfer, online remittance, and the others (Figure 20).

37%

64%

Figure 20: The Use of Internet Banking Services

yesno

42

Table 5 : Descriptive Statistics on the Variables

all=600 adopters=219 non-adopters=381

Variable Mean Std. Dev. Mean Std. Dev. Mean Std. Dev.

Frequency 3.425 1.00634 3.42922 1.01288 3.42257 1.00389

Internet_Experi 5.135 1.19268 5.37443 1.10731 4.99738 1.21936

Internet_at_Wor 0.408333 0.491936 0.630137 0.483873 0.28084 0.45

Broadband 0.581667 0.493697 0.630137 0.483873 0.553806 0.49775

Internet_Transa 0.513333 0.500239 0.730594 0.444668 0.388451 0.488039

Security 3.28333 1.02215 3.59817 0.959356 3.10236 1.01438

Bank_Account 0.723333 0.447723 0.926941 0.26083 0.606299 0.489212

Bank_Card 0.731667 0.443462 0.917808 0.275286 0.624672 0.484844

Mobile_Bank-

ing

0.271667 0.44519 0.47032 0.500262 0.15748 0.364732

Financial_Trans 0.226667 0.419024 0.447489 0.498374 0.0997375 0.300044

Ads 0.791667 0.406455 0.894977 0.307285 0.732283 0.443351

Gender 0.548333 0.498074 0.616438 0.487367 0.509186 0.500573

Age 0.831667 0.374474 0.890411 0.313092 0.7979 0.402094

Employ 0.465 0.49919 0.634703 0.482616 0.367454 0.482746

Income 0.238333 0.42642 0.39726 0.490452 0.146982 0.354553

White_Collar 0.391667 0.48853 0.589041 0.493135 0.278215 0.448709

Education 3.23667 0.815535 3.43836 0.913502 3.12073 0.729899

Table 5 shows the summary statistics of the variables used in the study categorized by the

adoption status. Based on this, out of the 600 sample population, 219 (37%) are Internet banking

users. It is reported that most of the Internet banking adopters have used the Internet for an

average of 5.4 years, most of them use Internet at work with broadband connections, they look at

Internet banking to be safe and 93% and 91% of them have bank accounts and bank cards

respectively. The adopters also have high percentage of online financial transaction experience

43

compared to non-adopters who almost have no online financial transaction experience at all.

Furthermore, adopters are more likely to be exposed to Internet banking advertisements and a

large portion of them is comprised of white collar workers with high income. Moreover, most of

the adopters are males who are 18 years of age and above.

Table 6 : Binary Logit Model

Dependent Variable: EBANKING

Method: ML - Binary Logit (Quadratic hill climbing)

Sample: 1 600

Included observations: 600

Convergence achieved after 5 iterations

Covariance matrix computed using second derivatives

Variable Coefficient Std. Error z-Statistic Prob.  

β1 -4.961913 0.915816 -5.418026 0.0000

44

β2FREQUENCY -0.188289 0.119030 -1.581868 0.1137

β3INTERNET_EXPERIENCE 0.085419 0.106650 0.800924 0.4232

β4INTERNET_AT_WORK 1.061337 0.268577 3.951708 0.0001

β5BROADBAND 0.151027 0.231358 0.652783 0.5139

β6INTERNET_TRANSACTION 0.617921 0.236108 2.617118 0.0089

β7SECURITY 0.273235 0.119733 2.282039 0.0225

β8BANK_ACCOUNT 1.551837 0.384599 4.034950 0.0001

β9BANK_CARD 0.342740 0.390851 0.876908 0.3805

β10MOBILE_BANKING 0.744541 0.246366 3.022089 0.0025

β11FINANCIAL_TRANSACTION 1.786262 0.282812 6.316066 0.0000

β12ADS 0.708288 0.322231 2.198072 0.0279

β13GENDER 0.389471 0.229246 1.698921 0.0893

β14AGE -0.080686 0.347160 -0.232416 0.8162

β15EMPLOY -0.378572 0.320434 -1.181436 0.2374

β16INCOME 0.420854 0.301450 1.396097 0.1627

β17WHITE_COLLAR 0.516424 0.307231 1.680900 0.0928

β18EDUCATION -0.085011 0.168289 -0.505151 0.6135

McFadden R-squared 0.346076    Mean dependent var 0.365000

S.D. dependent var 0.481832    S.E. of regression 0.377676

Akaike info criterion 0.918263    Sum squared resid 83.01601

Schwarz criterion 1.050171    Log likelihood -257.4789

Hannan-Quinn criter. 0.969612    Deviance 514.9578

Restr. Deviance 787.4890    Restr. log likelihood -393.7445

LR statistic 272.5313    Avg. log likelihood -0.429131

Prob(LR statistic) 0.000000

Obs with Dep=0 381     Total obs 600

Obs with Dep=1 219

Likelihood ratio test: Chi-square(17) = 272.531

It can be noted that the data are said to be well represented in the theoretical model based on the

likelihood ratio test, Chi-square value of 272.531 with df=17. In addition, the log likelihood of

the model is higher than the restricted log likelihood, which strongly proves that regression has a

45

highly predictive power.

The McFadden R-square is used to measure the goodness-of-fit as to its counterpart, R-

square in OLS. In this study, the value of McFadden R-square is 35% which provides strong

evidence that the regression is able to explain the adoption status in most of the cases.

Furthermore, based on the critical value of 0.05, the model correctly predicts 80% of the

respondents. Another statistical measure also provides further evidence, the Hosmer and

Lemeshow Goodness-of-Fit test (Hosmer and Lemeshow, 1989), which shows a chi-square of

4.7560 with a probability value of 0.7833 (Table 7).

Table 7 : Goodness-of-Fit Evaluation for Binary Specification

Andrews and Hosmer-Lemeshow Tests

Equation: UNTITLED

Date: 08/07/11 Time: 16:16

Grouping based upon predicted risk (randomize ties)

    Quantile of Risk Dep=0 Dep=1 Total H-L

Low High Actual Expect Actual Expect Obs Value

1 0.0062 0.0270 58 58.9324 2 1.06757 60 0.82915

2 0.0273 0.0621 58 57.3568 2 2.64316 60 0.16371

3 0.0625 0.1214 55 54.6980 5 5.30195 60 0.01886

4 0.1225 0.1891 52 50.7620 8 9.23799 60 0.19610

46

5 0.1908 0.2675 46 46.4754 14 13.5246 60 0.02158

6 0.2686 0.4100 42 39.9245 18 20.0755 60 0.32246

7 0.4109 0.5352 30 32.0117 30 27.9883 60 0.27101

8 0.5356 0.6980 19 22.5465 41 37.4535 60 0.89370

9 0.6980 0.8636 18 13.9076 42 46.0924 60 1.56755

10 0.8651 0.9767 3 4.38484 57 55.6152 60 0.47185

Total 381 381.000 219 219.000 600 4.75597

H-L Statistic 4.7560 Prob. Chi-Sq(8) 0.7833

Andrews Statistic 5.7340 Prob. Chi-Sq(10) 0.8371

Analyzing the correlation between the dependent and independent variables, perceived security

appeared to be significant, which suggested that people looked at Internet security as an

important factor before they decide to adopt Internet banking. For people to choose performing

banking transactions through the Internet, they need to consider whether the transactions are safe

as these transactions involve money. Also, cases of fraud and theft in the Internet, particularly

hacking of personal information, are rampant so people tend to be cautious in dealing with

transactions in the Internet. Therefore, the null hypothesis was rejected.

Also, one variable related to Internet experience, using the Internet at work, was found

statistically significant, which means people who use Internet at work are more likely to adopt

Internet banking. Therefore, the null hypothesis was rejected regarding the dependent variable,

Internet use at work. Experience in online transactions especially Internet shopping also showed

significant influence on Internet banking adoption. People with prior experience in Internet

47

transactions have increased likelihood in adopting Internet banking. In addition, those who

performed online financial transactions were also found to be more likely to adopt Internet

banking. However, other variables such as frequency of using the Internet and the years of using

the Internet did not show any significance in Internet banking adoption. It was observed that

most age groups, even elementary and high school students have access to the Internet; thus, the

frequency of using the Internet did not affect the adoption of Internet banking.

Furthermore, as the results suggested, the respondents who were exposed to Internet

banking advertisements were more likely to use Internet banking. Marketing exposure is one

strategy for banks to attract clients to adopt Internet banking. Therefore, it was concluded that

the marketing experience has an effect on Internet banking adoption.

The ownership of bank accounts and performing mobile banking were found to have

significant influence on Internet banking adoption. Since people were already exposed to using

other banking products, they were more likely to adopt Internet banking. However, the

possession of credit card, debit card or other bank cards did not show significance to the

adoption of Internet banking. Therefore, it was concluded that the alternative hypotheses on

mobile banking and ownership of bank accounts are supported by the data. In addition, the

quality of the different banking products and services offered must be ensured to attract more

clients to adopt Internet banking.

48

The type of Internet connection did not show significant effect on the adoption of

Internet banking. The difference in speed of Internet connection, availability, and cost among the

types of Internet connection did not prevent consumers in performing Internet banking.

For demographic predictors, no variable was found to significantly influence Internet

banking adoption. Therefore, variables such as gender, age, employment, income, and education

have no effect on the status of Internet banking adoption. The results in this study regarding the

influence of demographic determinants were contrary to those of Polasik (2008) in which gender

and age had significant effects on the Internet banking adoption status. It may be inferred that

whether one is male or female does not prohibit him/her from using Internet banking.

Employment and income as well as educational attainment have no significant impact on Internet

banking. These demographic characteristics appeared insignificant due to the low number of

respondents aged below 18 or above 65 years.

49

CHAPTER 6

C O N C L U S I O N

The primary purpose of this study is to identify the factors behind the Internet banking

adoption based on different journals which studied on Internet banking adoption and the

respondents were comprised of 600 Internet users in the City of Manila. Logit model which was

used in the analysis had been considered the appropriate method for determining the variables

related to Internet banking adoption status. Based on the findings, perceived security, using

Internet at work, performing Internet transactions, having bank accounts, engaging in mobile

banking, having financial transactions, and marketing exposure were significant variables.

50

Perceived security proved to be a major concern in the adoption of Internet banking. The

notion about Internet banking needs to be improved especially in the Philippines by adopting

more advanced technology and strengthening the security of Internet banking transactions.

The use of Internet at work, having bank accounts, engaging in mobile banking and

performing online and financial transactions foster Internet banking adoption since these provide

people the convenience and efficiency in performing banking transactions.

Likewise, the exposure to marketing campaigns influenced Internet banking adoption.

However, this study was not able to observe the effect of demographic characteristics on Internet

banking adoption.

Although this study was able to identify the factors underlying the Internet banking

adoption of Manila Internet users, there are still some barriers that prohibit the development of

Internet banking in the Philippines particularly in the City of Manila. Infrastructure and

availability of Internet are pertinent factors to the further development of Internet banking. The

popularization of Internet banking is closely linked to the economics and education. It would

take several years for the Philippines to fully develop its Internet banking system since it is

ranked as having one of the lowest GDP per capita among Southeast Asia (IMF, 2011).

51

CHAPTER 7

R E C O M M E N D A T I O N S

Internet banking is important for SMEs and e-commerce. It is a good opportunity for

banks to market their Internet banking service in the midst of the emergence of group buying

websites. This research is limited to the analysis on the behavior on Internet banking of Internet

users living in the City of Manila. The research may be extended to surveying a sample

population from the entire Metro Manila. Therefore, it is suggested that further study be done

focusing on the Philippines.

E-commerce in the Philippines can also be enhanced. Through Internet banking, people

could transact their fund or budget anywhere, anytime. People can now invest in financial

products located in other countries and regions more conveniently. Also, people can purchase

52

financial securities in other countries and regions. Meanwhile, SMEs can expand their businesses

through worldwide connections through Internet banking systems.

Furthermore, banks must find ways in improving the management of Internet banking

accounts paying more attention on the issues of security. The result of this study can aid in

attracting more clients by identifying the target market segment and improving the marketing

campaigns of banks. Banks must initiate actions that could increase the longevity of Internet

banking adoption in the Philippines like offering added incentives and services to encourage

more users and improving the technology handling the transactions.

Also, Internet banking adoption will be helpful for both banks and individuals to reduce

their expenses and to manage their time.

Table 8 : Operating Expenses of Several Philippine Banks (Appendix 3)

Bank

Percentage in Operating Costs (%)

Occupancy and other Equipment

Expenses

Compensation and Fringe

Benefit Expense

2008 2009 2010 2008 2009 2010

Allied Bank 11.29 10.7 10 34.89 31.93 32.46

Philippine National Bank 7.92 7.08 7.4 34.21 32.15 27

Bank of the Philippine

Islands

28.96 28.69 29.03 44.22 46.53 43.61

Banco de Oro 5.25 5.13 5.06 36.25 38.59 39.15

Metro Bank 4.92 4.32 5 27.44 34.64 35.10

53

All information shown on Table 8 portrays the incurred expenses of 5 Philippine banks over a

one year period occupancy and compensations. One of the advantages of Internet bank is that

banks can minimize their rent and compensation expenses as the number of physical branches is

decreased since banking users do not need to visit the bank to process banking services such as

transferring fund, billing payments and applying loans as well. Also, banks can provide banking

services with cheaper costs since banks can decrease their operating expenses. However, there

may be arguments after this. First, if banks provide their service with cheaper costs, service

income is going to decrease. Since there is an increase in Internet banking users because of its

convenience, customers want more banking or financial products to increase their fortune or

wealth. Therefore, banks need to provide a wide array of high quality of services to customers.

Second, if banking industries minimize employees due to reduction of physical branches of

banks, it might create a problem of unemployment in the banking industry.

With regard more to the Philippine context, there are billions of remittances from

Overseas Filipino Workers (OFWs) each year through traditional channels, it is now time for

them to transact through Internet banking. OFWs need to pay remittance fees when they send

salary or money from abroad to their loved ones residing here in the Philippines. Banks could

reduce the remittance fee if they provide Internet banking services to OFWs since banks do not

need to put a physical branch to offer remittance services. The amount of remittance of OFWs

54

increases when the number of OFWs increases. The total remittances of OFWs around the world

amount to 7,898,459,000 USD. Most OFWs are working in Asia but the greater portion of the

remittances comes from US, Japan, Hong Kong, Singapore, Saudi Arabia and United Arab

Emirates. When OFWs remit the fund from Japan, Allied Bank charges OFWs a remittance fee of

P55 – P100 in peso accounts, and $1.5 to $22 in dollar accounts. PNB Tokyo branch charges a

fee of JPY 2000 or $21 in credit to account and credit to other local banks, and 1.5% cash

handling fee for USD notes plus 1.0% FX commission for dollar to dollar transactions. In

Singapore, Metro Bank charges remittance fees of SGD 4 to SGD 8 while in Hong Kong, BDO

charges a remittance fee of HDK 20 to HDK 40 (see Appendix 3). If more and more OFWs use

Internet banking to remit their funds, the remittance costs will be reduced and the speed of

receiving remittances will be boosted which would be a great help for their receivers in the

country since Internet is the cheapest distribution channel.

55

B I B L I O G R A P H Y

Al-maghrabi, T. and Dennis, C. (2010). Driving online shopping: Spending and behavioral differences among

women in Saudi Arabia, International Journal of Business Science and Applied Management, 5(1), 30-47.

Amin, H. (2007). An Analysis of Mobile Credit Card Usage Intentions, Information Management &

Computer Security, 15(4), 260-269.

Bangko Sentral ng Pilipinas Official Website (2011). Retrieved from

http://www.bsp.gov.ph/regulations/reg_overview.asp on June 30, 2011.

BBC News. Global broadband prices revealed. Retrieved from http://news.bbc.co.uk/2/hi/tec

hnology/6900697.stm.16 July 2007.

Black, N.J., Lockett, A., Winklhofer, H. and Ennew, C. (2001). The Adoption of Internet Financial Services: a Qual-

itative Study, International Journal of Retail & Distribution Management, 29(8), 390-8.

Black, N.J., Lockett, A., Ennew, Ch. Winklhofer, H. and McKechnie, S. (2002). Modelling

Consumer Choice of Distribution Channels: an Illustration from Financial Services, Interna-

tional Journal of Bank Marketing, 20(4), 161-173.

Claeys, P. and Arnaboldi, F. (2007). Internet banking in Europe: A comparative analysis,

Universitat de Barcelona.

Compaq (2001). Next-generation retail banking, from An analysis of con-

sumer adoption rates in Internet banking. Retrieved from

56

http://www.freepatentsonline.com/article/Europea

n-Journal-Management/237448655.html

Davis, F.D. (1989). Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology, MIS Quarterly, 13(3), 319-40.

DeYoung, R., Lang, W. W. and Nolle, D. L. (2007). How the Internet affects output and per-

formance at community banks, Journal of Banking & Finance, 31,1033-1060.

Dong-Her, S., Hsiu-Sen, C., Chun-Yuan, C., and Lin, B. (2004). Internet security: malicious

e-mails detection and protection, Industrial Management & Data Systems, 104(7), 613-23.

Elder, V., Gardner, E., and Ruth, S. (1987). Gender and Age in Technostress: Effects on White-Collar

Productivity, Government Finance Review, 3(6),17-21.

Flavián, C., Guinaliu, M., and Torres, E. (2006). How Bricks-and-Mortar Attributes Affect

Online Banking Adoption, International Journal of Bank Marketing, 24(6), 406-423.

Fuentes, R., Hernandez-Murillo, R., and Llobet, G. (2006). Strategic Online-banking Adop-

tion, Federal Reserve Bank of Saint Louis.

Furst, K., Lang, W.W., and Nolle, D. E. (2000). Special studies on technology and banking.

Who offers internet banking, Quarterly Journal,19(2), 29-48

Furst, K., Lang, W. W. and Nolle, D. E. (2000a). Who offers Internet Banking?, Quarterly

Journal, Office of the Comptroller of the Currency, 19(2), 27-46.

Furst, K., Lang, W. W. and Nolle, D. E. (2000b). Internet Banking: Developments and

Prospects, Economic and Policy Analysis, Working Paper No. 2000-9, Office of Comptroller

of the Currency.

Furst, K., Lang, W. W. and Nolle, D. E. (2002a). Internet Banking: Developments and

Prospects, Working Paper, Center for Information Policy Research, Harvard University.

Furst, K., Lang, W. W. and Nolle, D. E. (2002b). Internet Banking, Journal of Financial

Services Research, 22(1&2), 93-117.

57

Gerrard, P. and Cunningham, J.B. (2003). The Diffusion of Internet Banking among

Singapore Consumers, International Journal of Bank Marketing, 21(1),16-28.

Gow, K. (1997). Risk vs opportunity, The Premier 100 Supplement to Computerworld, Feb-

ruary,24.

Greene, W. (2003). Econometric Analysis, 5th ed., Upper Saddle River, NJ: Prentice-Hall,

Hassan, M.K and Bashir, A. H. M. (2003). Determinants of Islamic Banking Profitability,

Paper presented at the Economic Research Forum (ERF) 10th Annual Conference,

Marrakesh, Morocco, 16-18 December.

Hernando, I. and Nieto, M. J. (2005). Is the Internet Delivery Channel Changing Banks’ Per-

formance? The Case of Spanish Banks, Banco de Espana, Unpublished Manuscript.

Hernando, I. and Nieto, M.J. (2007). Is the Internet Delivery Channel Changing Banks’ Per-

formance? The Case of Spanish Banks, Journal of Banking and Finance, 31(4), 1083-1099.

Hosmer, D.W. and Lemeshow, S. (1989). Applied Logistic Regression, John Wiley & Sons,

Inc., New York, NY.

Howcroft, B. Hamilton, R. and Hewer, P. (2002). Consumer Attitude and the Usage and

Adoption of Home-Based Banking in the United Kingdom. International Journal of Bank

Marketing, 20(3), 111-121.

Im, S., Bayus, B.L. and Mason, C.H. (2003). An Empirical Study of Innate Consumer Inno-

vativeness, Personal Characteristics, and New-Product Adoption Behavior, Journal of the

Academy of Marketing Science, 31(1), 61-73.

International Monetary Fund (2011). World Economic Outlook Database, April 2011. Re-

trieved from http://www.imf.org/external/pubs/ft/weo/2011/01/weodata/weorept.aspx?sy

=2009&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=65&pr1.y=15&c=566

%2C534%2C578%2C536%2C548%2C582&s=NGDPD&grp=0&a=

Internet Speed Test (2011). Retrieved on March 18, 2011 from

58

http://www.speedtests.net/world/ph

Jimenez, E. C. and Roman, P. B. (2005). Case Study on Philippines Electronic Banking:

Delivering Microfinance Services to the Poor in the Philippines. Philippines: Bangko Sentral

ng Pilipinas, 1-14.

Karjaluoto, H., Mattila M. and Pento, T. (2002), Factors Underlying Attitude Formation to-

wards Online Banking in Finland, International Journal of Bank Marketing, 20(7), 261-272.

Kolsaker, A. and Payne, C. (2002). Engendering trust in e-commerce: a study of gender-

based concerns, Marketing Intelligence & Planning, 20 (4), 206 – 214.

Laforet, S. and Li, X. (2005). Consumers’ Attitudes towards Online and Mobile Banking in China,

International Journal of Bank Marketing, 23(5), 362-380.

Lallana, E. C., Pascual, P. and Andam, R. (2002). SMEs and e-Commerce in Three Philip-

pine Cities. Digital Philippines. Retrieved from http://asiafoundation.org/pdf/SMEsurv

ey_ philippines.pdf on June 15, 2011.

Lassar, W.M., Manolis, C. and Lassar, S.S. (2005). The Relationship between Consumer In-

novativeness, Personal Characteristics, and Online Banking Adoption, International Journal

of Bank Marketing, 23(2), 176-199.

Lee, E.K., Kwon, K.N. and Schumann, D.W. (2005). Segmenting the Non-Adopter Category

in the Diffusion of Internet banking, International Journal of Bank Marketing, 23(5), 414-

437.

Leuterio, M.M. and Estepa, C. B. (2009). Banking: Theory and Practice. Phil: Anvil

Publishing, Inc.

Maiyaki, A.A. and Mokhtar, S. S. (2010). Effects of electronic banking facilities,

Employment sector and age- group on customers’ choice of banks in Nigeria, Journal of

Internet banking and Commerce, 15(1), 1-8.

Malhotra, P. and Singh, B. (2009). The Impact of Internet Banking on Bank Performance and

Risk: The Indian Experience, Eurasian Journal of Business and Economics, 2(4), 43-62.

59

Mobarek, A. (2007). E-banking Practices and Customer Satisfaction: A Case Study in

Botswana. Retrieved from http://ssrn.com/abstract=1011112 on June 15, 2011.

National Statistics Office (2007). Population and Annual Growth Rates for Region, Prov-

inces and Highly Urbanized Cities Based on Censuses 1995, 2000 and 2007.

Nielsen, J.F. (2002). Internet Technology and Customer Linking in Nordic Banking, Interna-

tional Journal of Service Industry Management, 13(5), 475-495.

Nguyen, J. (2011). State of the Internet with a Focus on Southeast Asia. Retrieved from

http://www.comscore.com/Press_Events/Presentations_Whitepapers/2010/

State_of_the_Internet_with_a_focus_on_Asia_Pacific on June 15, 2011.

Pikkarainen, T., Pikkarainen, K., Karjaluoto, H. and Pahn, S., (2004). Consumer Acceptance

of Online Banking: an Extension of the Technology Acceptance Model, Internet Research,

14(3), 224–235.

Polasik, M. and Wisniewski, T P. (2008). Empirical Analysis of Internet banking Adoption in

Poland. Retrieved on January 25, 2010 from http://ssrn.com/abstract=1116760.

Polatoglu, V.N. and Ekin, S. (2001). An Empirical Investigation of Turkish Consumers’ Ac-

ceptance of Internet Banking Services, International Journal of Bank Marketing, 19(4), 156-

165.

Shapiro, J. (1999), Innovation in Financial Services Case Study: Home Banking.

Massachusetts Institute of Technology, MIT IPC Working Paper 99-004.

Sathye, M. (1999). Adoption of Internet banking by Australian Consumers: an Empirical

Investigation, International Journal of Bank Marketing,17(7), 324-34.

Schneier, B. (2004). Secrets and Lies: Digital Security in a Networked World. US :John

Wiley & Sons.

The Straits Times. “Cyberbanking Will Open New Windows,” September 14, 1997, 5.

60

White, H. and Nteli, F. (2004). Internet Banking in the UK: Why are there not more

Customers?, Journal of Financial Services Marketing, 9(1), 49-56.

Yahoo-Nielsen Net Index 2010. Retrieved from http://www.slideshare.net/yuga/yahoo

nielsen-net-index-2010 on June 18, 2011.

Appendix 1

Internet banking adoption survey

Gender

Female

Male

Year of Birth

19__ or 20__

Educational Attainment

Elementary

High school/Vocational

College(undergraduate)

Graduate

Post-graduate

Employed?

Yes

No

Monthly income

no income

P500-3000

P3001-7000

P7001-12000

P12001-20000

P20000-35000

P35000-80000

P80,000 and above

Are you a white collar?

(a salaried professional or an educated

worker who performs semi-professional

office, administrative, and sales coordination

tasks, as opposed to a blue-collar worker,

whose job requires manual labor)

Yes

No

How often do you use the Internet?

Never

Less than once a month

several times a month

2-3 times a week

daily or almost daily

How long have you been on the Internet?

61

less than 6 months

6 to 12 months

1 year to 3 years

3 to 5 years

5 to 7 years

7 years or longer

Where do you access the Internet?

(You can select any number of responses)

at home

at work

at school

in the dormitory / hotel

in the Internet cafe

from a public terminal (e.g. library,

office, shopping center)

elsewhere: (please write

where)_____

How do you access the Internet?

wireless(via wifi/wimax/3g/GPRS)

by wired (e.g. broadband,DSL,

cable)

another way: (please specify)____

Have you ever bought or sold on the

Internet?

Yes

No

Do you have a personal bank account?

Yes

No

Which bank card(s) do you have?

(You can select any number of responses)

Debit/ATM card (e.g. Citibank ATM

Card)

a credit card (e.g. MasterCard / Visa)

other cards (please specify)

I have no bank cards

Have you ever performed the following

online financial transaction(s)?

(You can select any number of responses)

purchase or sale of stocks, bonds or

other securities

purchase or sale of investment funds

purchase insurance (or by a request

from the Internet)

Raising a loan (or to request a loan

via the Internet)

Others

Never

Have you ever done financial transactions

via mobile phone?

Yes

No, although I have a cell phone

I do not have a mobile phone

Do you consider making online

transaction to be safe?

Definitely not

Probably not

It is difficult to say

Probably yes

Definitely yes

Where did you see the advertisements of

Internet banking?

(You can select any number of responses)

62

Internet

On TV

in the press

posters / billboards

on the radio

never seen such advertisements

in other places (please write in

which)_____

Have you ever used Internet banking

service?

Yes

No

Appendix 2

Table 9 : Questionnaire Response

Internet_Experience

less than 6 month 8 1%

6 to 12 month 18 3%

1 year to 3 years 43 7%

3 to 5 years 71 12%

5 to 7 years 133 22%

7 years or longer 327 55%

Security

Definitely not 34 6%

Probably not 99 17%

It is difficult to say 187 31%

Probably yes 226 38%

Definitely yes 54 9%

Education

Elemenatary 17 3%

high school/vocational 58 10%

College 327 55%

Graduate 162 27%

post graduate 36 6%

Internet_TransactionYes 308 51%

No 292 49%

Bank_AccountYes 434 72%

No 166 28%

63

Independent Variable Response Figure in Percentage

Frequency

Never 0 0%

Less than once a month

62 10%

several times a month 41 7%

2-3 times a week 75 13%

daily or almost daily 422 70%

Bank_CardYes 439 73%

No 161 27%

Mobile_BankingYes 164 27%

No 436 73%

64

Financial_TransactionsYes 135 23%

No 465 78%

AdsYes 475 79%

No 125 21%

EbankingYes 219 36%

No 381 64%

GenderYes 329 55%

No 271 45%

Age18 to 65 500 83%

Below 18 or Over 65 100 17%

EmployYes 279 47%

No 321 54%

Incomemore than 35000 143 24%

less than 35000 457 76%

White_CollarYes 235 39%

No 365 61%

Internet_at_WorkYes 245 41%

No 355 59%

BroadbandWireless 251 42%

Wired 349 58%