Factors affecting the Adoption of Online Banking in Vietnam
I. Introduction and background
1.1. Preliminary background information
Growing disruption of business through globalization and technological change, combined with increasing competition and the search for ever-greater productivity, have created more choices and driven an increasingly competitive environment for the business leaders. The only way for business to remain relevant in today’s world is to keep making changes and evolving to meet and succeed in this highly competitive environment. The dynamics in the fast-changing market help organizations with rapid time to market to gain an edge over their competitors. The competitive advantages gained by enterprises in the fast-changing market are short term, however. An organization must have an innovation strategy in place if it is to maximize competitive advantage in the short term and sustain it for longer term. Innovation policies that focus on innovation within the existing business environment and do not create a clear innovation agenda will not be particularly successful. Today’s business customers expect more value, convenience, and efficiency in how they buy products and services. That means, they demand innovation. These trends have led to increased innovation investments in a wide range of organizations
Technological Innovations like mobile phones, internet and other media devices can improve the means of access to financial services for the financial sector, and subsequently can lead to the expansion of financial inclusion and other services. Ongoing improvements in financial inclusion can be attributed to technological innovations such as e-banking services
1.2. Specific information of the research
The key factors that influence the implementation of emerging innovations are relative advantages over other current methods, user usability, tastes and interpretation, the degree of difficulty with innovation, in particular the ease of use and perceived effectiveness, the consumer’s desire to try or evaluate innovation before adopting it, and finally the consumer will observe / sees what it is.
The banking industry in Vietnam is governed by the company’s act, the banking act the commercial bank of Government Act and the various prudential guidance issued by the central bank of Vietnam. The banking sector is liberalized in 1995 and exchange control upgraded (Pham et al., 2013). The commercial banks fall under the ministry of finance is responsible for formulating and implementing monetary policies and fostering the liquidity, solvency and proper functioning of the financial system. Commercial banks in Vietnam publish information they execute monetary policies and provide means for facilitating payment for goods and services in the domestic and international trade (Hoai Linh, 2017)
There are 47 registered commercial banks according to the central bank of Vietnam. The government and state companies include three banks, public financial institutions with controlling owners. The majority are private bodies. Of the private banks, 40 are local and seven are exchange banks overseas (Nhat Vuong et al., 2019). In Vietnam market banks play an important role. They add to the country’s economic development by making available loans and deepening funds for investors in the country. Therefore, commercial banks play a crucial role for the financial sector and the economy at large.
1.3. Research questions
RQ1: Are there any relationship between customer perception of trust and security from hackers and the utilization of e-banking services?
RQ2: Are there any relationship between the governmental support and the customers’ adoption of e-banking services?
RQ4: Are there any relationship between internet payment arrangements and the adoption of e-banking services?
1.4. Significance of the research
The new form of technological transformation seems to keep evolving through time and the banking industry changes to adopt new technological innovations. This study identifies the current status of technology adoption in the banks of VIETNAM and seeks to provide recommendations for the future by addressing the issues technological change like mobile banking, internet banking and electronic banking in VIETNAM. The findings with relevant to the factors that affect the adoption of the of e-banking services among the customers of VIETNAMESE commercial banks standard chartered bank, equity bank, cooperative bank and commercial bank of VIETNAM have both practical and theoretical significance.
The practical implication is that implementing the e-banking concept successfully means to offer high service satisfaction with low customer complaint ratios, a certain market penetration capacity, and improvement of the bank’s quality of corporate governance. The theoretical implication is that some e-banking concepts are difficult to translate into the reality because they need a new and different culture of service with strict expectations from clients. The problems of e-banking culture will require Vietnamese corporate and commercial banks to systematically upgrade and revamp their management’s value system and human resources development programs.
1.5. Overview of this proposal
The general objective of this research is to identify the factors that influence on the adoption of e-banking services of six banks in Vietnam. The population for the study comprised of Internet banking users from 6 commercial banks in operating in Vietnam who holds accounts with the specific banks for personal use. Additionally, these respondents were aged over 18 years of age and mostly made more than 50% of their banking transactions online.
II. Literature Review
2.1. Introduction paragraph
This section will provide theoretical and empirical information from research published on topics and related to the research problem. This section aims to review previous research in relevant to factors affecting the adoption of e-banking services with definition of relevant concepts a summarizes the information from other researchers who have carried out their research in the same area Review of Factors influencing Online Banking Adoption
2.2. Online banking Trust and Security
The perceived probability of hacking greatly affects the experience of e-banking adopters in Nguyen and Cao (2019) study. For non-adopters, however, the danger perceived is not important. Lower risk thresholds may be advantageous to e-tax services adopters, while non-adopters are likely to complain that expected danger is not easily interpreted or that they are allocated minimal weight (Nguyen & Cao, 2019). To address concerns and obstacles in e-transactions, the banks must take the task of improving their knowledge and building trust with their customers seriously. They can provide secure, fast and efficient internet banking services through secure application deployment with security services and user authentication functions ((Kaur, 2017). Also, banks should be quick to respond to any cyberattacks by expanding the level of cybersecurity protection for their networks and increasing the level of security management.
Thakur and Srivastava (2014) state that there is a fee for electronic sales, internet access, and online banking. Recent increases in Internet banking fees when there were none before were listed by participants. Participants One non-user listed the lack of a “sophisticated operation,” so that he can escape expense. Some people were highly aware of even minor variations between alternative options in the transaction costs
A research by Nguyen (2020), conducted in Vietnam, showed that government support for consumers’ plan to use online banking is extremely significant. In addition, it was noted that governments should provide gratis basic ICT initiatives at basic schools focus on the teaching of basic computer skills and Internet knowledge to facilitate online services such as online banking, online shopping , online bill payments among others (Mensah et al., 2020). This is because the growing numbers of people are educated about IT, and in this sense, the more they embrace internet services
2.5. Identify gaps
In order to assess the customer’s understanding and acceptance of internet banking in the present society, numerous studies have been specifically carried out in various countries. In the United Kingdom and the Republic of Ireland, Spencer andLiu (2010) published a report that examined a strong relationship between the bank ‘s capability to provide their clients with online banking and its market share. The study was carried out in the developed nations, thus illustrating that banks are promoting the nation’s economic growth. The same case applies to Vietnam as a developing country. Likewise, numerous research have been carried out within Vietnam in the field of digital banking. However, there is a wide knowledge gap since most of these studies covered concepts of internet banking in comparison to financial performance of the commercial banks. Vu and Turnell (2010) conducted a study on the relationship between technology advancement and the service quality in the banking industry in Vietnam in which they came up with a conclusion that technology completely influenced on service quality in the Vietnamese Banking Industry. Therefore, this research project attempts to portray an overview of the factors that impact on the adoption of e-banking services. In specific, this study focuses on examining the key factors that customers consider including customer perception of trust and security, the extent to which introduction of online banking predict the customers’ altitude to adoption of e-banking services, effects of internet banking arrangements on the adoption of e-banking services, and governmental support and the customers’ adoption of e-banking services in Vietnam
2.6. Conclusion paragraph
This section presents the literature review of the research proposal. Relevant concepts and relevant previous studies are addressed and critically analyzed, and from the literature review, the research gap is identified.
III. Research methodology
3.1. Research approach
The research approach chosen for this study is fundamental to the quantitative research approach, as it ties the empirical finding to the statistical representation of an attribute. As the goal of quantitative studies is to develop and employ mathematical representations, theories and hypotheses relating to natural phenomena. Quantitative research attempts to formalize these relationships by linking the empirically observed data with the various theoretical systems that are developed in the various disciplines. In addition, this process helps in exploring underlying principles of observable phenomena, measure variability and predict their evolution. Cross-sectional data will be obtained through structured questionnaires from banks in Vietnam.
In this research, quantitative approach will be used to examine the variables which could affect e-banking adoptions among Vietnamese banking users.
Cooper and Schindler (2014) states that choosing the right research approach can help researchers successfully answer a research question or test a hypothesis and understanding the benefits allows them to make a better decision. Thus, quantitative research may be familiar when an issue or problem is examined by deducting a theory-derived hypothesis. Furthermore, the findings are reliable and applicable for a large population.
Quantitative data can assist to correlate between the given variables and the outputs. Such data could allow researchers to verify original findings by validating the analysis independently (Korner, 2004). In some instances, these correlations can help researchers build a theory of how the predictor variable may have influenced the outcome. The quantitative research method has been regarded as a friendlier and controllable instrument to analyze data in this research in comparison with its relative advantages with other approaches. This study will adopt the survey strategies; hence quantitative research approach is appropriate to the analysis of population samples to study their attributes.
3.2. Sample selection
The population of the study consists of customers currently used e-banking services in banks in Hanoi city of Vietnam. In this region, banks have 1.998.154 debit card holders, 1.700.614 mobile banking subscribers, 1011 internet banking users and 23 merchants working with agent banking, 8124 agent banking users, and 18 agents (performance report 2019/2020). Therefore, the researcher decides to focus on this area with purpose of Hanoi city banking customers are more diversified and efficient enough to provide information on determinants of e-banking adoption and in return helps achieve research objectives. Sampling is the statistical process of selecting a subset called a sample of a population of interest for purposes of making observations and statistical inferences about that population (Leavy and Hesse-Biber, 2016).
Due to the vast number of the sample unit, time and cost constraint, as well as the difficulty to know the lists of e-banking users in Hanoi, the researcher will use the non-probability sampling technique for the population sampling. Besides, this research will employ non-probability sampling due to the fact that sampling unit is unavailable and also it is challenging and much difficult to reach randomly selected samples in person based on the list of customers. Utilizing convenient sampling technique will be better and more efficient in case of infinite population to reduce cost time and easy to handle (Ly, Cockburn and Langholz, 2018).
To increase the representation of samples equal number of respondents was selected from all
twelve bank branches purposively in Hanoi, Vietnam, in order to avoid lower responsiveness, the questionnaires are collected through the immediate help of the researcher in person. In addition to increase the representation of samples, the data will be collected in different times and dates continuously from October 20 – December 20, 2020. This method is believed to help the researcher get highly representative information in an expertise way.
3.3. Data collection methods and sources
The research consists of an e-banking survey of users in Hanoi. Many techniques for conducting surveys are employed. Nonetheless, questionnaires for survey are popular (Lim, 2014). Although it is costly and time-consuming to obtain primary data, the primary data, obtained by structured questionnaire surveys, are the most valuable data (Malhotra, 2006). A structured questionnaire developed with closed-ended questions, will be the primary technique for data collection in this study. The aim of using such questionnaire is that respondents are much easier to answer. The data collection process is conducted separately, primary data will be obtained through using a standardized questionnaire survey and secondary data will be obtained from previous research and institutional documents published, journals, work documents and reports are reviewed to develop basic information on e-banking adoption. The data that is to be obtained are quantitative in nature. Questionnaire based data obtained in the field survey assessment on e-banking adoption factors with a strong supervision by the researcher, including the following variables: age, gender, literacy level and income level. In order to improve the response rate, the questionnaire survey will be handled face to face and to assure the content validity the contents of the question items are developed based on the literature utilized in other study.
3.4. Variables included in the study
Dependent variable: In this research, the dependent variable is E-banking adoption. The dependent variable can be impacted by different known and unknown factors but in this study, it is supposed to be affected by four factors. In other words, E-banking adoption is the integrated result of various independent variables or factors and it can be measured and assessed by using the integrated effect and significance relationship of factors with regression and correlation analysis model.
Independent variable: Independent variables are those which are not affected by any factors and those which can affect other variables. In this study, there are 3 independent variables which are thought to directly affect the e-banking adoption of customers in Vietnam, including trust and security, government support and internet payment arrangements. The values of independent variables are measured via frequency, mean and standard deviation of the level agreement of the respondents with regard to e-banking services
3.5. Data analysis techniques
After the necessary data are collected, they will be coded, screened and analyzed by using both descriptive analysis, correlation analysis and inferential statistics. There will be the employment of different statistical techniques by statistical package for social science (SPSS, v.20) for automated analysis of the data.
Descriptive statistics Descriptive statistics will be employed for analyzing data that is concerned to demographic profile of the surveyed participants and the factors affecting their e-banking adoption via descriptive statistics for likert items. To analyze these; frequency table, percentage, mean and standard deviation will be used
Correlation Analysis The intensity and direction of the linear relationship between two variables are defined by Correlation Analysis. The interdependency between the 3 explanatory factors (trust and security, government support and internet payment arrangements) is suggested by the Pearson correlation coefficient (Alwan and Al-Zubi, 2016). The connection between e-banking adoption and trust and security, government support and internet payment arrangements is shown by Pearson correlation. The higher the correlation coefficient are evident of the stronger the relationship between the explanatory variables with the dependent variable.
Multiple regression analysis consists of statistical techniques to investigate the relation between a single continuous dependent variable and a variety of predictive factors or variables. The interrelationship between a variety of variables is focused on correlation but permits a more nuanced exploration (Karakaya and Awasthi, 2014). Regression analysis was used to assess the relevant contribution to the dependent variable e-banking adoption of each independent variable.
Researchers are supported by computational techniques to understand whether explanatory variables would take account of the variation in e-banking adoption.
4.1. Brief summary of proposed research
In summary, the proposed research of Factors influencing Online Banking Adoption of customers in Vietnam provides statistics, trends and forecasts on customers’ banking behavior and factors affecting it. The research will consider the factors that are driving the adoption of e-banking through quantitative research approach. This proposal presents the introduction to the research study. Specific information and research questions have been formulated. The preliminary research background, significance, and research gaps are clearly defined. The proposal presents literature review and describes the research methodology and how the data is collected and analyzed. The project end with a conclusion, expected outcomes and implications and recommendations for future research.
4.2. Expected outcomes and implications
The electronic banking services in Vietnam are a recent phenomenon and are thus expanding dramatically from time to time both at State and private banks, making it a crucial problem because it has important consequences for all banking operations, at the same time it is hard to implement it and demands a great deal of commitment from Vietnam’s customers and employees, so it needs integrated efforts to adopt e-banking. Guaranteed security, ease of use, government support with arrangement of online payment in internet banking on electronic banking service is the most effective ways for banks to develop and lead, thus the full use of all these channels will allow banks to offer the consumers and investors convenient services that will support business continuity and growth of the bank.
4.3. Recommendations for future research
Limitation has become inevitable in every research and there is no exception for this study. Provided that this research is descriptural and explanatory in nature, a more comprehensive longitudinal study should be carried out in future studies. As consumers are used to and will use the technology-based banking service entirely in the future, behavioural motives such as loyalty, the tendency to switch, obstacles and other related problems may be examined.