Information & Management 39 (2002) 283–295Internet-based e-banking and consumer attitudes: an empirical study Ziqi Liaoa, Michael Tow Cheungb,* a b School of Business, Hong Kong Baptist University, Kowloon, Hong Kong, PR China School of Economics and Finance, University of Hong Kong, Hong Kong, PR China Received 2 April 2000; received in revised form 28 November 2000; accepted 5 February 2001 Abstract Consumer attitudes toward the usefulness of and willingness to use Internet e-retail banking were identified and measured. Our survey was undertaken in Singapore, because its geography and well-developed infrastructure implied similar and small physical- and tele-communication costs, thereby highlighting the differences between traditional and Internet-based retail banking upon the latter’s introduction. The data showed that expectations of accuracy, security, network speed, userfriendliness, user involvement and convenience were the most important quality attributes underlying perceived usefulness. Regression discovered that willingness to use depended significantly on the first five factors, allowing the interdependencies or marginal rates of substitution between them to be estimated. Our results draw attention to demand-side changes in explaining the recent slowdown in Internet e-retail banking, and may also be useful for development planning and marketing. # 2002 Elsevier Science B.V. All rights reserved. Keywords: Internet e-retail banking; Consumer expectations; Perceived usefulness; Willingness to use; Product-service quality 1. Introduction Commercial banking is undergoing rapid change, as the international economy expands and advances towards institutional and market completeness. A major force behind these developments is technology, which is breaching geographical, industrial and regulatory barriers, creating new products, services and market opportunities, and developing more information- and systems-oriented business and management processes. In Singapore, commercial banks have been quick to realize the importance of this factor to * Corresponding author. Tel.: þ852-2859-1053; fax: þ852-2548-1152. E-mail addresses:
[email protected] (Z. Liao),
[email protected] (M.T. Cheung). competitive advantage. Since the 1980s, they have continuously innovated through technology-enhanced products and services, such as multi-function automatic teller machines (ATMs), electronic share application, tele-banking, TV-banking, electronic transfers, electronic cash cards, and Internet-based e-banking. Virtual retail banking over the Internet was introduced into Singapore in 1997–1998 by the Development Bank of Singapore, the Post Office Savings Bank, the Overseas Chinese Banking Corporation, and the United Overseas Bank. This paper reports the findings of a project to study the market acceptance of Internet-based e-retail banking. We employed survey data and regression analysis to measure consumer attitudes toward this financial innovation, and explore its viability and prospects on the demand side. Since Internet e-retail banking was (and still is) 0378-7206/02/$ – see front matter # 2002 Elsevier Science B.V. All rights reserved. PII: S 0 3 7 8 - 7 2 0 6 ( 0 1 ) 0 0 0 9 7 - 0 284 Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 in the introductory stage in Singapore, its products and services would tend to be relatively standardized. We can, therefore, defer consideration of the ‘lemon’ problem associated with quality under asymmetric information [2], until a later time when more product and service differentiation emerges. In line with this observation, our survey was concerned to elicit information regarding consumer perceptions toward retail banking as a whole. Following the standard approach [14], we then framed the questionnaire in terms of the closest substitute to Internet-based e-retail banking, viz. traditional branch-based retail banking. Though electronic products and services (such as ATMs and cash cards) offered by the latter would not qualify as distinct substitutes at this level of aggregation, their effects can be taken into account indirectly. The research was conducted in Singapore, because its geography and well-developed infrastructure meant that shoe-leather (physical communication) and telecommunication costs would be similar and small, thereby allowing the differences qua banking between Internet-based and traditional retail banking to be thrown into sharper relief. By empirically measuring consumer attitudes at the time when Internet e-retail banking was introduced, we may help to explain the slowing growth recently reported in the sector [17] in terms of demand-side changes relative to an initial position. As a result of the study’s specific time focus, therefore, the tendency of Internet-related data to ‘age’ does not represent a problem. Following the approach of [43], suggestions are offered to support the development of demandviable Internet e-banking systems. In particular, we present empirical estimates to predict the marginal effects of the factors underlying perceived usefulness and willingness to use, and the substitutability between them. Combined with a previous work [36], it is hoped that this paper can contribute to research into the complementary relationships between e-banking, business-to-business (B2B), and business-to-consumer (B2C) e-commerce over the Internet. 2. Consumer response to technology-based innovations Research in consumer response to product-service innovations has focused in the first place on classi- fication based on usage [15,28,30,52] and demographics [18,24]. Interpreting usage in terms of post-purchase behavior, Barczak et al. [4] investigated the introduction of financial products and services such as ATMs, tele-banking, and debit cards. Another line of research sought to discover directly why consumers adopt or reject innovations [32,37,38,47]. Among the factors identified, we may note innate novelty, variety-seeking behavior, efficacy, and inertia-habit [16,21,44]. Traditional analysis of product-service quality deriving from disconfirmation or consumption-based perceptions [9,19] are difficult to apply to situations in which individuals have yet to experience a technologybased innovation, or in which the product or service is too new to engender sustained user experience. The only evaluations of usefulness that individuals can meaningfully supply would then derive from expectations. Two observations follow with regard to survey measurement in such cases. The more individuals are aware of the pace and diversity of change over the technology life cycle, the less weight price and cost would carry in expectations and perceptions of usefulness. On the other hand, price and cost imply a constraint on actual purchases, which must be indirectly taken into account in survey questions dedicated to expectations and potentialities. Delivery speed, ease of use, user enjoyment, control, and reliability have been found to contribute to usefulness in many technology-based self-implemented systems [11]. Though these considerations may not be the most relevant or most important in the case of innovative e-banking products and services supplied over the Internet, they represent a useful starting point for the discussion. Of further interest is cognitive analysis, under which a compensatory process is employed to evaluate the quality attributes of technology-based products and services [10,26]. Since such evaluations are more likely to emerge in the form of expectations in new or unfamiliar situations [7,42], cognitive analysis is particularly appropriate for our purposes. We, therefore, adopt the thesis that expectations based on cognitive analysis are fundamental to the perceived usefulness of technology-based innovations, and apply it to the introduction of Internet-based e-retail banking in Singapore. Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 285 Our interviews discovered that the banks introducing Internet e-retail banking into Singapore viewed it primarily as a means to increase market share. According to Woodruff [53], the most significant effects of a product-service innovation on competitive advantage derive from outward orientation on the demand side. The implementing firm’s first task is then to identify and measure what targeted consumers perceive to be important. Other steps follow, to determine the relationships between these attributes, assess how well value is being delivered along each dimension, evaluate performance, and to estimate consumer preferences in the future. With applications like market acceptance in mind, we deemed it appropriate to focus on the first and second of these stages. If research is able to discover and measure what individuals perceive to be of value and their interrelationships, this can assist banks to adjust supply to fit demand under the subsequent steps in Woodruff’s procedure. e-banks (SPEED2). The purpose was to assess how faster processing over the Internet and the e-bank’s speed of response would affect expectations of perceived usefulness. 3.2. User-friendliness Ease of use is generally regarded as an important quality attribute in computer-technological services [3,12]. In choosing between delivery options in such cases, it has been shown that a significant factor is the effort involved [33]. Extending these observations to Internet e-retail banking, we present: Proposition 2. Expected user-friendliness is a significant quality attribute in the perceived usefulness of Internet-based e-retail banking. To measure this quality attribute in our survey, a Likert seven-point semantic differential scale was introduced with five items: (a) clear and easy-tofollow instructions (FRIEND1); (b) simple operating procedures (FRIEND2); (c) light hard- and soft-ware requirements (FRIEND3); (d) ready availability of help facilities (FRIEND4); and (e) efficiently-designed websites (FRIEND5). The importance of expected perceived ease of use and technical demands on users can then be assessed. 3.3. Accuracy Research has shown that operational precision is a significant quality consideration in products and services involving computer technology [13]. Since Internet-based e-banking involves transfers of money and accounting via electronic black boxes, individuals would be especially concerned about precision in the sense of expected accuracy in arithmetic and implementation. We, therefore, present: Proposition 3. Expected transactions accuracy is a significant quality attribute in the perceived usefulness of Internet-based e-retail banking. Since the description ‘‘accurate’’ readily sums up the desiderata in this situation, a Likert seven-point semantic differential scale with a single item (ACCU) 3. Perceived usefulness and its attributes 3.1. Transactions speed In advanced societies, consumers tend to be highly sensitive to the speed of service delivery [6,46,50]. Situations have been identified in which individuals would rather opt for self-service if this reduced delivery time [40], while according to [35] time-saving was an essential consideration for users of conventional electronic retail banking facilities like ATMs. Extending these observations to Internet e-retail banking with due emphasis on the role of expectations, perceptions, and their cognitive-analytical basis, we present: Proposition 1. Expected transactions speed is a significant quality attribute in the perceived usefulness of Internet-based e-retail banking. We introduced a Likert seven-point semantic differential scale with two items, in terms of which survey respondents were asked to evaluate: (a) the expected perceived speed of retail banking through the Internet as compared to conventional branches (SPEED1), and (b) the expected perceived speed of response from 286 Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 was deemed sufficient to evaluate perceived usefulness in terms of expectations regarding error-free transactions and recording. 3.4. Security According to [41,51], reliability is fundamental to product or service quality. For transactions conducted through an open network which may involve sizeable money values, security—especially with regard to proper authorization and confidentiality—would tend to be that aspect of reliability which matters the most [45]. Applying this reasoning to e-banking over the Internet, we present: Proposition 4. Expected security is a significant quality attribute in the perceived usefulness of Internet-based e-retail banking. We introduced a Likert seven-point semantic differential scale with four items to measure expected perceived security in terms of: (a) authorization (SECURE1); (b) confidentiality (SECURE2); (c) transaction limits (SECURE3); and (d) security awareness of e-banks (SECURE4). Given the possibility of hacking, data tampering, and information leakage over a public network, the above items were introduced to reveal how important survey respondents perceive esecurity measures to be. 3.5. User experience It has been suggested that users of technologybased products and services value the entertainment aspect and novelty in use, and prefer self-service systems which allow them to indulge [23]. This is especially the case with regard to computer software and computer games [22]. Extending these observations to Internet-based e-retail banking, we present: Proposition 5. Expected user experience is a significant quality attribute in the perceived usefulness of Internet-based e-retail banking. We employed a Likert seven-point semantic differential scale with two items to measure this attribute. Respondents were queried on how important it was (a) to enjoy Internet e-banking (EXPER1), and (b) for it to be low-stress (EXPER2). 3.6. User involvement User involvement is generally understood to mean the control the individual can exercise over a process. It has been proposed that control is a significant quality attribute in service delivery, especially when self-implemented [5,20], and that individuals choose such systems to be (or to feel) in control [8,34]. Interpreting this quality attribute in terms of expectations and perceptions with regard to e-banking over the Internet, we present: Proposition 6. Expected user involvement is a significant quality attribute in the perceived usefulness of Internet-based e-retail banking. To measure this attribute in the survey, we introduced a Likert seven-point semantic differential scale with two items to measure how important it is for users: (a) to be able to terminate transactions any time before confirmation (INVOL1), and (b) to perform operations at preferred speeds (INVOL2). These items describe a situation where the individual would be able to exercise a high degree of perceived control when e-banking on the Internet. 3.7. Convenience Since individuals can e-bank over the Internet at any time in any properly equipped location, the quality attribute of time and location convenience is likely to be significant in differentiating it from traditional retail banking. Allowing for the importance of expectations and perceptions, we present: Proposition 7. Expected (time and location) convenience is a significant quality attribute in the perceived usefulness of Internet-based e-retail banking. We introduced a Likert seven-point semantic differential scale with three items to measure the importance of expectations to enjoy banking access (a) round-theclock (CONV1); (b) round-the-globe (CONV2); and (c) to be offered a readily accessible and wide range of financial facilities over the Internet (CONV3). Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 287 4. Measuring perceived usefulness Propositions 1–7 were tested in terms of survey data obtained according to standard procedure [1]. A questionnaire invited individuals to evaluate (a) the various quality attributes of Internet-based e-retail banking; (b) the usefulness of this financial innovation on the basis of these attributes; and to state (c) whether in consequence they intend to (incrementally) use this product-service. To more effectively follow Woodruff’s procedure, we targeted regular web-users as representative of the core customers for Internet e-retail banking in Singapore. In the introductory stage, it was more likely that this group would contain individuals with sufficient knowledge and experience of e-transactions in various forms to meaningfully evaluate the different expected quality attributes. We obtained 323 meaningful responses in our survey, of which 36% accessed e-banking one to five times a month, 42% for 6–10 times a month, and the remainder 11–20 times a month. Respondents were not significantly different in age (20–35 years), Table 1 Multi-dimensional quality attributes Convenience CONV1 CONV2 CONV3 User experience EXPER1 EXPER2 User friendliness FRIEND1 FRIEND2 FRIEND3 FRIEND4 FRIEND5 User involvement INVOL1 INVOL2 System security SECURE1 SECURE2 SECURE3 SECURE4 Transactions speed SPEED1 SPEED2 education (university first degree), and income, so that given Singapore’s cultural homogeneity, similarity of tastes may be assumed. Individuals were asked to evaluate the dimensions of the (expected perceived) quality attributes in terms of a Likert seven-point semantic differential scale with the following equivalencies: 1: ‘‘not important at all’’, 2: ‘‘not very important’’, 3: ‘‘neutral’’, 4: ‘‘slightly important’’, 5: ‘‘important’’, 6: ‘‘very important’’, 7: ‘‘extremely important’’. Since consumer attitudes toward innovations tend to be rich in meaning and many-dimensional [29], multiple items were employed to describe and measure the quality attributes in all cases but one (Table 1). Cronbach’s alpha-reliability analysis was applied to test internal consistency with respect to the multidimensional attributes. As the data showed, items associated with any particular attribute were reliably related to each other (Table 2). We then computed Pearson correlation coefficients to measure convergent validity. As can be seen from Table 3, coefficients between items describing the same attribute are Access at anytime Access from anywhere Wide variety of services readily accessible Enjoyable Not stressful Clear easy-to-follow instructions Simple operational procedures Light hard- and soft-ware requirements Comprehensive Help menus Efficiently designed websites Able to control transactions before confirmation Able to perform transactions at preferred speeds Authorized access only Customer information kept confidential Restrictions on high-value transactions Strong commitment to security measures Faster than branch banking Quick response from e-bank 288 Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 Table 2 Reliability analysis of multi-dimensional attributes Variables Convenience User experience User friendliness User involvement System security Transactions speed a-Value 0.74 0.76 0.90 0.61 0.77 0.62 6. The items INVOL1 and INVOL2 introduced to test Proposition 6 received close to ‘‘important’’ scores. This proposition, therefore, received reasonable support from the data. 7. Items CONV1–CONV3 received ‘‘important’’ scores. Proposition 7 is, therefore, supported by the data. In sum, our empirical analysis showed that at the time of its introduction into Singapore, consumer expectations regarding accuracy, security, network speed, user-friendliness, and convenience represented the most important quality attributes in the perceived usefulness of Internet e-retail banking. It is not surprising that, in a fast-paced international financial center, expected perceived network speed should turn out to be significant. Of our respondents, 89% considered it important for Internet e-retail banking to be faster than branch retail banking, and 92% felt that short response times from e-banks were important. With regard to expected perceived user-friendliness, clear, easy-to-follow instructions were considered to be important or very important by 76% of respondents, and 82% felt that it was important for the procedures to be easy to learn. Learning was considered to be easier if a comprehensive Help menu is available, and respondents welcomed user-friendly interfaces (such as icons) which simplify operations and allow mouseaccess. Expected ease of use is, therefore, likely to be a significant determinant of consumer acceptance, both at the present stage and later on, when more sophisticated financial products and services and one-to-one accounts marketing over the Internet are introduced. However, as a rule users must match the system configurations of Internet e-banks. As personal computers with minimum speed and other features are required, customers may be faced with pecuniary as well as technical demands. With respect to expected perceived convenience, 24 h access was singled out by 91% of respondents to be important. Since Singapore’s commercial bank branches close in the early afternoon and on weekends, individuals would find it especially attractive to be able to execute financial transactions in the comfort of home, at any time. Of lesser importance was worldwide access, possibly because not many respondents were frequent travelers. Not surprisingly, the more readily accessible and wider the range of facilities, the significant in all cases. Since convergence was found to be high for user-friendliness and moderate for the other attributes, no items were deleted. Given that SECURE1 and SECURE2 referred to semantically overlapping (in the sense of fuzzy sets) aspects of transactions security, the high correlation between them did not suggest multicollinearity (a similar remark applies to FRIEND1 and FRIEND2). The other coefficients were not high enough to evoke concern about multicollinearity. Finally, a t-test was introduced to compare differences in response between males and females in the sample. The result suggested that, as far as the perceptions towards Internet-based e-retail banking were concerned, no significant difference exists between the sexes in Singapore (at the 5% level). Computing Likert scores for the quality attributes and their dimensions in each case, we tested Propositions 1–7 in terms of the survey data (Table 4). 1. The items SPEED1 and SPEED2 introduced to test Proposition 1 received ‘‘important’’ scores. This proposition is, therefore, supported by the data. 2. The items FRIEND1–FRIEND5 introduced to test Proposition 2 were found to be ‘‘important’’. This proposition is, therefore, supported by the data. 3. Item ACCU was found to be ‘‘very important’’. Proposition 3 is, therefore, supported by the data. 4. The items SECURE1–SECURE4 introduced to test Proposition 4 received ‘‘very important’’ and (in one instance) ‘‘important’’ scores. This proposition is, therefore, supported by the data. 5. The items EXPER1 and EXPER2 introduced to test Proposition 5 received Likert scores indicating ‘‘marginal importance’’. This proposition is, therefore, not supported by the data. Table 3 Sub-item correlation coefficientsa CONV1 CONV1 CONV2 CONV3 EXPER1 EXPER2 FRIEND1 FRIEND2 FRIEND3 FRIEND4 FRIEND5 INVOL1 INVOL2 SECURE1 SECURE2 SECURE3 SECURE4 SPEED1 SPEED2 a CONV2 0.78 1.00 CONV3 0.41 0.26 1.00 EXPER1 EXPER2 FRIEND1 FRIEND2 FRIEND3 FRIEND4 FRIEND5 INVOL1 INVOL2 SECURE1 SECURE2 SECURE3 SECURE4 SPEED1 SPEED2 1.00 1.00 0.62 1.000 1.00 0.78 1.00 0.58 0.61 1.00 0.58 0.64 0.70 1.00 0.59 0.56 0.64 0.78 1.00 1.00 0.44 1.00 1.000 0.76 1.00 0.30 0.28 1.00 0.56 0.57 0.27 1.00 1.00 0.45 1.00 Only correlations significant at the 0.01 level (two-tailed) are displayed in the above symmetric matrix. 290 Table 4 Likert scores Variable ACCU CONV1 CONV2 CONV3 EXPER1 EXPER2 FRIEND1 FRIEND2 FRIEND3 FRIEND4 FRIEND5 INVOL1 INVOL2 SECURE1 SECURE2 SECURE3 SECURE4 SPEED1 SPEED2 Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 Mean 6.67 6.00 5.87 5.75 4.34 4.61 5.97 6.01 5.60 5.58 5.81 5.82 5.20 6.71 6.59 5.27 6.65 5.60 5.87 S.D. 0.65 1.16 1.38 1.36 1.33 1.45 1.15 1.27 1.47 1.52 1.38 1.36 1.45 0.73 0.88 1.40 0.77 0.93 0.99 more individuals would consider using Internet eretail banking. As Internet e-retail banking is not conducted faceto-face over the counter but over a public network, it is easy to see that expected perceived accuracy and expected perceived security would be of primary concern, particularly why authorization and confidentiality were deemed to be very important by 97% of respondents. It was likely that individuals valued fast real-time processing and confirmation of Internet e-retail banking transactions because of a greater sense of security. On the other hand, only 72% of respondents considered transactions limits to be important. This may be due to the fact that Singaporean consumers routinely deal in small amounts. The above findings suggest that e-banks would find it useful to advertise the presence of cutting-edge facilities like encryption and digital signatures to enhance accuracy and security. At the time of our survey, support and assistance in e-security were available from the Singapore Certification Authority’s NETRUST and the SingCERT Computer Emergency Response Team [25]. Our findings suggest that a commercially viable Internet e-retail banking system should satisfy at least four accuracy and security requirements. With the aid of smart cards with digital certificates, banks must first be able to properly identify e-account holders and grant access only upon the entry of valid codes. Second, confidentiality of transactions and information must be preserved, for example with the aid of encryption. Third, the integrity of transactions and information must be maintained, so again facilities such as firewalls and encryption are essential. Lastly, non-repudiation is required. So that no party in an Internet e-banking transaction can deny involvement, technology such as digital signatures must be introduced. A parallel requirement would be consumer education in e-security, for example with regard to PIN (personal identification number) confidentiality and the necessity to immediately log-out after use. The finding that expected perceived user experience was of slight importance may be due to the fact that under Asian culture, money is a serious matter. On the other hand, expected perceived user involvement was found to be fairly important. In particular, endowing more perceived control seemed to increase the user’s sense of self-security: individuals felt it possible to proceed at their own pace without being prompted by the computer at every turn. Though Internet e-retail banking was only being introduced into Singapore, given the city–state’s technological culture it is easy to understand why individuals felt attracted. A total of 83% of respondents who expected Internet e-retail banking to be useful also indicated an intention to use it more. Individuals who did not express such intentions generally cited reasons such as security and the untested nature of the product-service. These findings are in line with previous experience with technology-based self-service innovations like ATMs, and point to the need for banks to devote more resources to identifying, measuring, and cultivating consumer preferences towards Internet e-retail banking along the paths of greatest acceptance. 5. Regression analysis of willingness to use As a matter of language, under survey-based market research methodology [31] perceptions of usefulness are generally presented in a one-by-one format, Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 291 notwithstanding the fact that cross effects often exist in the minds of respondents. The relationship between perceived usefulness and willingness to use [27,39] provides a means by which interdependencies between the quality attributes identified and tested in the previous sections can be made explicit. Exploiting the survey data (with 314 meaningful responses available for the question on hand), we computed the following (linear) regression equation to estimate the joint effects of these expected perceptions on the willingness to use Internet-based e-retail banking: w ¼ À0:48 þ 0:21SECURE þ 0:50ACCU þ 0:19SPEED þ 0:11FRIEND À 0:03EXPER þ 0:08INVOL þ 0:04CONV (1) The dependent variable w represents willingness to use, while the explanatory variables SECURE, ACCU, SPEED, FRIEND, EXPER, INVOL, and CONV represent overall measures of expected perceptions regarding transactions security, transactions accuracy, network speed, user-friendliness, user experience, user involvement, and convenience. To limit the length of the discussion, the micro-dimensions of each multiple attribute in Table 1 were aggregated assuming equal weights, deferring the determination of relative importance to later research. Since our survey did not explicitly introduce cost and price considerations, the effects of transactions cost are parameterized in terms of the regression constant. Moreover, to ensure similarity and constancy of tastes, income differences do not enter into the equation. From Table 5, it is seen that SECURE, ACCU, SPEED, FRIEND, INVOL (and the underlying perceptions and expectations) represented the significant Table 5 Regression results Unstandardized coefficients bk Constant SECURE ACCU SPEED FRIEND EXPER INVOL CONV À0.48 0.21 0.50 0.19 0.11 À0.03 0.08 0.04 S.E. 0.32 0.04 0.04 0.04 0.03 0.03 0.03 0.03 determinants of willingness to use. In addition, we computed R2 ¼ 0:62 and F ¼ 71:53 (d:f: ¼ 7; 306; P-value < 0:01). The statistical analysis, therefore, suggested that Eq. (1) satisfactorily explained the willingness to use Internet-based e-retail banking, at the time it was introduced into Singapore. Since banking is essentially a supporting input to market transactions, when interpreting this result it is important to note that an important factor—that of Internet-based e-commerce [48]—had been left out of the survey, because it was also being introduced into Singapore at the same time. It is seen that the R2 of 0.62 accommodates the hypothesis that, if we add variables representing B2B and B2C Internet e-commerce, the regression’s explanatory power would increase. We can estimate the effect of a change in any attribute by its coefficient bk, the marginal rate of substitution or MRS [49] between any pair of attributes by the ratio bk/bj (Table 6), and interpret a shift in any specific aspect of consumer preferences in terms of a parametric change in the corresponding regression coefficient. In particular, the following observations may be noted. 1. The regression result for b1 indicates that expected perceived transactions security is a significant determinant of willingness to use. If consumers feel transactions risk to decrease, they would be more ready to post credit and financial information over the Internet. This result is consistent with Proposition 4 above. 2. According to the regression result for b2, expected perceived accuracy significantly affects willingness to use. An increase in this attribute reduces the likelihood and cost of transferring ‘wrong’ t-Values À1.52 4.85 11.36 5.42 3.37 À1.22 2.95 1.23 Significance (P-values) 0.31 0.000 0.000 0.000 0.001 0.23 0.003 0.22 292 Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 Table 6 Estimated MRS between quality attributes Variables ACCU:SECURE (b1/b2) SPEED:SECURE (b1/b3) SPEED:ACCU (b2/b3) FRIEND:SECURE (b1/b4) FRIEND:ACCU (b2/b4) FRIEND:SPEED (b3/b4) INVOL:SECURE (b1/b6) INVOL:ACCU (b2/b6) INVOL:SPEED (b3/b6) INVOL:FRIEND (b4/b6) Estimated MRS 0.42 1.11 2.63 1.91 4.55 1.73 2.63 6.25 2.38 1.38 credit and other data and information over the Internet, which would then increase willingness. This finding is consistent with Proposition 3. The MRS between expected perceived accuracy and expected perceived security is estimated to equal 0.42 (Table 6). In terms of substitutability, this inter-relationship indicates that a unit decrease in expected perceived security is equivalent to an approximately 1.5 increase in expected perceived accuracy, willingness to use being held constant. Since expected perceived accuracy substitutes 1 to 2 for expected perceived security, banks are presented with useful information to assist in predicting the market effects of supply-side shifts in these directions (similar observations apply with respect to other MRS estimates). 3. The regression result for b3 indicates that expected perceptions of (higher) transactions speed is a significant determinant of willingness to use. This is consistent with Proposition 1. The MRS between expected perceived network speed and expected perceived security is estimated to be 1.11. A unit decrease in perceived security is, therefore, equivalent in effect on willingness as approximately the same (absolute) increase in expected network speed. This suggests a perception on the part of consumers that the faster an e-retail banking transaction can be executed over the Internet, proportionally the less time there would be for its security to compromised. Similarly, an estimated MRS between expected perceived network speed and expected perceived accuracy of 2.63 implies that a unit decrease in expected perceived accuracy must be compen- sated by a nearly three-fold increase in expected perceived network speed, if willingness to use is to remain unchanged. The primary importance of expected perceived transactions accuracy in Internet e-banking is clearly indicated. 4. The regression result for b4 indicates that expected perceived user-friendliness is a significant determinant of willingness to use. This is consistent with Proposition 2. The MRS between expected perceived user-friendliness and expected perceived security, expected perceived accuracy, and expected network speed were, respectively, estimated to equal 1.91, 4.55, and 1.73. If willingness to use is to remain constant, a unit reduction in expected transactions accuracy must be compensated by an almost five-fold increase in expected perceived user-friendliness. The compensatory increase required in the case of expected transactions security is nearly two times, while that for expected perceived network speed is more than 1.5 times. 5. The regression result for b 6 indicates that expected perceived user involvement is a significant determinant willingness to use. This is consistent with Proposition 6. The MRS between expected perceived user involvement and expected perceived security, expected perceived accuracy, expected network speed, and expected perceived user-friendliness were, respectively, estimated to equal 2.63, 6.25, 2.38, and 1.38. This suggests that a unit decrease in expected transactions accuracy must be compensated by a six-fold increase in expected perceived user involvement, if willingness to use is to remain unchanged. The compensatory increase in expected perceived user involvement in the case of expected perceived security is more than 2.5 times, while that for expected perceived network speed is nearly 1.5 times. 6. The negative sign of the constant coefficient b0 is consistent with our construction, under which the transactions cost of Internet e-retail banking is parameterized in the regression constant. A rise in transactions cost increases the absolute size of b0, thereby reducing willingness to use. However, since b0 is not statistically significant, it is indicated that this consideration was relatively unimportant with regard to willingness. To e-bank Z. Liao, M.T. Cheung / Information & Management 39 (2002) 283–295 293 on the Internet, the individual must first purchase hardware, software, an Internet subscription, and provide for updating and replacement. Though by strict accounting principles part of this outlay must be included in the cost of any application, this indirect transaction cost (and changes therein) would be modest in an advanced and open economy like Singapore. Moreover, at the introductory stage, the Internet e-retail banking products and services offered would tend to be relatively standardized. Changes in prices or direct transactions cost are, therefore, unlikely to be significant or frequent. Given our purposes (and to avoid an extraneous hypothesis regarding how individuals allocate an initial outlay to different computer applications), these small magnitudes can be seen to additionally justify the exclusion of explicit survey questions on (direct and indirect) transactions cost, and to parameterize its effects in the regression constant. As Internet-based e-retail banking develops in scope and sophistication, however, transactions cost is likely to increase in significance as a determinant of willingness to use. On the other hand, as long as communications cost is low, oneto-one e-banking over the Internet would seem to be a fruitful line to pursue in marketing. 7. The regression result for b5 indicates that expected perceived user experience is not a significant determinant of willingness to use. This is consistent with Proposition 5 above. 8. The regression result for b7 indicates that though the effect of expected perceived convenience is positive, it is not a significant determinant of willingness to use. This seems to be at variance with Proposition 7 above. The apparent contradiction can be explained by first noting that given its expectational and potential nature, the perceived usefulness of Internet e-retail banking is different from willingness to use, which would tend to be constrained by actual considerations like cost (prices), budget or income, and existing consumption patterns. Since we are interpreting the regression result for a single variable, the aggregation level can be reduced accordingly. Individuals may perceive convenience to be important to usefulness in the expectational sense. However, given that Internet e-retail banking was new, in actual fact most of our respondents would be concurrently holding traditional bank accounts. In the absence of full Internet banks offering a wide range of sophisticated functions, these individuals would, therefore, be using at the same time electronic retail banking facilities (ATMs, phone-banking, cash cards) supplied by traditional banks. Since shoe-leather and telecommunications costs are low and access is available most of the day, given the lower level of aggregation applicable here, it is possible to consider these facilities to be close substitutes for the relatively unsophisticated Internetbased products and services on offer during the introductory stage (it should also be noted that since Internet B2C e-commerce was also being introduced at the time of the survey, its differentiating effects on Internet and traditional e-retail banking were excluded from our questionnaire). Since under such circumstances changes in CONV would tend to be small and to exert small effects on willingness to use, the regression result that b7 is statistically insignificant does not contradict the finding that convenience is important with respect to perceived usefulness. As Internet e-retail banking develops, the substitutability noted above would tend to diminish, as specialization and product differentiation increasingly meet up to the expectations underlying perceived convenience. 6. Concluding remarks This paper employed survey data and regression analysis to measure consumer attitudes toward Internet-based e-retail banking as a financial innovation, and to explore its viability and prospects on the demand side. We found that individual expectations regarding accuracy, security, transactions speed, userfriendliness, user involvement, and convenience were the most important quality attributes in the perceived usefulness of Internet-based e-retail banking. 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Michael Tow Cheung is Associate Professor in the School of Economics and Finance, University of Hong Kong, Hong Kong. After receiving a PhD from London University, Cheung has been professionally associated with academic and research institutions in Canada, Hong Kong, Singapore, Sweden, the United Kingdom, and the United States. His research has mainly been in economic and financial modeling and applied mathematics, and the present paper is his second publication in Information & Management.