Switching customers from branches to internet: A credit unions journey

Received (in revised form): 15th June, 2006

Srinivasa Katuri
has been in IT industry for 17 years. He has in-depth management experience for large and complex projects, IT strategic planning, application software design and development, systems integration, and off-shore development team. In addition, his extensive background in EFT and payment systems, such as ATM, POS, VISA, VISA DPS, COOP, Interlink, EBT, NYCE, PULSE and STAR Systems, helped shape industry policies and best practices. He is currently managing the payment processing network of Smart and Final Stores, Inc. in USA.

Monica Lam*
is a PhD graduate from the University of Wisconsin, Madison. Her research interests focus on Web application development, data mining, and system integration. She has published in Decision Support Systems, Annals of Operations Research, Neural Networks, IEEE Transactions on Knowledge and Data Engineering, Information Systems Management, European Journal of Operational Research, Journal of Operational Research Society, and others. She has co-authored two books: Accounting Information Systems Cases and Integrated Systems. She holds a copyright on a rule extraction program for the backpropagation learning algorithm.

Abstract This research paper reports how a credit union applied knowledge from the literature to solve a marketing problem. A credit union serves a unique group of customers who may be in the same profession, have the same employer, or simply in the same regional location. The marketing problem is how to switch bank customers from branches to internet for the main reason of reducing transaction costs. The research model comprises the independent factors of customer, transaction, application, and bank; and the dependent variables the number of internet banking transaction, perceived usefulness of internet banking, and willingness to use internet banking measuring different aspects of internet banking. We carried out an on-site survey in different branches of our subject credit union to capture the opinion of customers who rely solely on branches for banking transactions. To our knowledge, this study provides a pioneer internet banking survey in the context of credit unions. The survey results reveal different internet banking facilitators for customers with and without internet bank accounts. For customers with internet bank accounts, application security is the most important facilitator variable for them to continue its use in the future; while promises for continuous improvement can be a prohibitive variable. In order to encourage customers without internet bank accounts to adopt internet banking, the management should focus on strengthening the variables of bank diversied service, bank responsiveness, bank image, and extra online instruction and feedback for complicate internet transactions; and reducing the negative effect of web fun/entertainment. We also found that the variables of prociency in using computers, application security, and bank image have opposite effects on customers with and without internet bank accounts. Journal of Financial Services Marketing (2007) 11, 229 248. doi:10.1057/palgrave.fsm.4760041 Keywords Internet banking, credit union, case study

*Correspondence: Management Information Systems, College of Business Administration, California State University, Sacramento, 6000 J Street, Sacramento, CA 95819-6088, USA. Tel: + 1 916 278 7037 Fax: + 1 916 278 6489 E-mail: lamsm@csus.edu

INTRODUCTION As consumers are adopting the web to perform their economic activities, internet banking has become an efcient and essential distribution channel for banks. Internet

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banking not only reduces transactional costs, but also is a marketing force to enhance banks competitive advantages.1 According to the Online Banking Report,2 about 20 per cent of people who have access to internet perform online banking transaction, and the percentage will rise to 33 per cent by 2006. The TowerGroup3 predicts that about 37 per cent of all US households will register to use online banking by 2007. It is estimated that the cost range per transaction performed by a branch teller is $1.00 to $3.00, $0.20 to $2.25 in a call centre, $0.15 to $0.5 at ATM, and only $0.02 to $0.1 via internet.4 In terms of customer value, it is reported that customers who use online payment system have 75 per cent lower attrition rate, make 34 per cent fewer calls to service centres, have 28 per cent higher balances, and 23 per cent higher loan balances.5 In addition to operational savings, banks are under competitive pressure to provide online service to computing savvy customers in order to retain their patronage. In a recent longitudinal analysis of online banking,6,7 it was found that most banks are still pursuing ineffective strategies to attract customers to internet. Although online banking provides many benets, many bank customers, especially for those banks that serve limited geographical areas, continue to view branches as their primary banking channel, enjoying and valuing the personal touch and interaction with bank personnel.8 Once a bank has implemented its online banking facility due to competitive pressure, the next step is to recruit as many users as possible. The faster the bank can recruit, the lower the cost per customer, and the earlier the online investment can pay back. Does one marketing strategy t all? Is all the knowledge from across-the-board surveys in the literature applicable to a specic bank that has a unique base of customers? This research project performs a survey study on internet banking activities for a credit union. In this study, we dene a credit

union as a specialised bank that draws its customers from the same profession, employer, special interest group, or geographical region. A credit union usually does not offer a full range of services as a traditional bank but offers higher interest rates for deposits and special member benets. Since a credit union has a unique group of customers sharing a common bond, it is facing unique challenges and opportunities that may not be relevant in the general banking industry. When a credit union is facing a problem, solutions offered by the general banking industry may not be applicable. A credit union has to dene and analyse its problems, and then develop and implement its own solutions. That, however, does not mean all solutions and experience from the general banking industry can be disregarded. The key is to differentiate the applicable from nonapplicable. The credit union we investigated in this study is located in a western state in USA, which has more than 4bn assets, 500,000 members, and is among the largest ten credit unions in USA in the past three years. The credit union understands the potential benets from online banking and is on a mission to switch as many customers as possible from branches to internet. Since the online usage rates show that there is still reluctance among customers to use online banking, the management would like to identify the obstacles and remove them. The marketing problem for the credit union is how to switch customers from branches to internet for performing banking transactions. Although the literature has accumulated a long list of signicant factors for general internet banking and e-commerce activities, given the credit unions unique customer base, we suspect that some known factors may not be applicable and some important factors may have been overlooked. We propose a problem solution process for the credit union to identify its own problems and opportunities for switching customers from branches to internet. The problem solution

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Significant Variables from Literature

Expertise from Credit Union Officers

Research Model Building

Hypothesis Formulation Preliminary Survey Design

Survey Pretest Survey Administration Result Analyses Unique Opportunities and Problems
Figure 1 Problem solution process

willingness to use internet banking in the future. After building the research model, we follow the step of hypothesis formulation, preliminary survey design, survey pre-test, on-site survey, and multiple regression analyses. As one focus is on the differences between internet users and branch goers, there are individual analyses and comparisons between the two customer segments. As size and expertise limit the product-market strategies a credit union can adopt,911 it is important for a credit union to identify its exact niche along the continuum from marketing personalisation to operational customerisation.12,13 Our research results shed lights on strategy and policy formulation for utilising internet as an effective banking channel for the credit union. The next section of this paper reviews relevant studies in the literature. The subsequent section describes the problem solution process for this study. Research results and discussion are presented in the penultimate section. The nal section concludes the paper by highlighting the important ndings in this study and discussing some potential research directions.

LITERATURE REVIEW This section presents the relevant research results for internet banking from the literature, as one input to the research model building step for the problem solution process in the next section. Since we did not nd any formal study about internet banking activities for credit unions from the literature, the research results presented in this section are based on traditional banks and general e-commerce activities involving performing transactions via internet. We include the research results from general e-commerce activities because internet banking transactions are a subset of e-commerce activities. Some general issues for e-commerce transactions are relevant to internet banking.

process is depicted in Figure 1. The process starts with synthesising knowledge from the literature and credit union ofcers as input for research model building. The factors we investigate for promoting internet banking in this study are customer, transaction, application, and bank. The variables we use to measure internet banking activities include the number of internet banking transactions performed in the past three months, perceived usefulness of internet banking, and

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Table 1

Signicant variables for internet banking and ecommerce activities in the literature Signicant variable Study McKinney et al.,11 Jun and Cai12 Koufairs,16 Tan and Teo17 Tan and Teo17 Xue and Harker,14 Kolodinsky15 Xue and Harker,14 Kolodinsky15 Kolodinsky15 Kolodinsky15 Kolodinsky15 Xue and Harker14 Xue and Harker14 Xue and Harker14 Sathye22 Gefen and Straub,9Kolodinsky15 Gefen and Straub,9 Jun and Cai,12 Agrawal and Venkatesh,18 Liao and Cheung,21 Johnston24 Liao and Cheung21 McKinney et al.,11 Agrawal and Venkatesh,18 Kim et al.,19 Palmer20 Liao and Cheung21 Agrawal and Venkatesh,18 Kim et al.19 McKinney et al.,11 Agrawal and Venkatesh18 McKinney et al.,11 Agrawal and Venkatesh,18 Kim et al.,19 McKinney et al.,11 Agrawal and Venkatesh18 Agrawal and Venkatesh,18 Kim et al.,19 Liao and Cheung,21 Sathye,22 Johnston24 Kim et al.,19 Liao and Cheung21 Koufairs,16 Agrawal and Venkatesh18 McKinney et al.,11 Southard and Siau,13 Agrawal and Venkatesh,18 Palmer20 Kim et al.19 McKinney et al.,11 Jun and Cai,12 Machauer and Morgner23 McKinney et al.,11 Koufairs,16 Kim et al.,19 Palmer20 Jun and Cai,12 Kim et al.,19 Palmer,20 Liao and Cheung,21 Johnston24 Agrawal and Venkatesh18 Agrawal and Venkatesh18 Tan and Teo17 Levesque and McDougall10 Machauer and Morgner23 Machauer and Morgner23 Xue and Harker,14 Kolodinsky,15 Machauer and Morgner23

Demographics

Access to internet Web skills, self-efcacy Banking needs Age Income Education Marital status Gender Number of children Race Region Cost Nature: purchase, information, etc Ease of use Convenience, less time Organised, complete structure Accuracy Feedback, error correction Information quality Information quantity Fun, interesting Credibility, security, privacy Screen layout, aesthetic Challenge, excitement Control, interaction Help facility Reliability Navigation, searching, browsing Speed, responsiveness Personalisation Sense of community

Transaction Web application

Bank/ nancial institute

Legal regulation, government supports Abilities to resolve service problems Service range Service hours Risk

Table 1 summarises the signicant variables for traditional banks and general e-commerce activities from the literature. There are four major factors of signicant variables including users demographics, transaction characteristics, web application characteristics, and bank/nancial institute characteristics. Each signicant factor has a list of variables. One research pattern in this eld we can

identify from the literature is the emphasis on one or two factors but not all the factors in one single research. For example, the study by Xue and Harker14 identied age, income, children, race, region, and website capacity as signicant variables for the concept of customer efciency. It conrms that high customer efciency leads to repeat purchase ratios. The study by Kolodinsky15 reported

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that income and education levels play a signicant role in the adoption of technology. It concludes that it is important to keep track of the general trends in the nancial services and information technologies since a broad range of consumers are adopting new technologies. Those studies emphasising on the demographic factor has none or minimal coverage of web application characteristics such as navigation structure, responsiveness, speed, screen layout, etc. Similarly, when a study focuses on web application characteristics, it covers none or minimal of the other factors. We have not encountered a study that includes all the four factors into its research model for internet banking activities. One contribution of this study is to investigate all the four factors together in a research model. The rst signicant factor is demographics, which has the variables of access to internet, web skills, self-efcacy, banking needs, age, income, education, marital status, gender, number of children, race, and region. Demographic variables are signicant for perceived usefulness,9 internet banking experience,12 intention to return,16 adoption of technology,15,17 satisfaction,11 or customer efciency14 in various studies. The general conclusion regarding demographic variables is that some of them are signicant depending on the concept under investigation. There is no conclusive evidence regarding which demographic variable is denitely important for which application. Demographic variables, unlike other factors, cannot be manipulated by management to achieve a certain effect. We can change the features of a web application but cannot change a customers education level. Because of demographics signicance, relatively uncontrollability, and context sensitivity, it deserves careful study for marketing strategy and policy formulation. For the second factor transaction, Gefen and Straub,9 in their study of the relationship between task nature and IS adoption, found that IT adoption is not affected by the perceived ease of use when the task is to

purchase products. The study did not investigate different transaction characteristics such as amount and cost, if the task is not to purchase products. Kolodinsky15 investigated signicant factors for different types of banking activities including automatic teller machine, automatic bill payment, electronic transfer of funds, and online banking. It was found that different banking activities have different signicant factors. For example, simplicity was signicant for online banking but not for automatic bill payment. The study did not focus on the effects of different transaction characteristics on online banking. Although the factor of transaction is the least researched, its limited results show that some transaction characteristics have impact on customers online behaviour. The third factor is web application, which by far is the most researched area that has generated the signicant variables of ease of use, convenience, organisation, accuracy, feedback, error correction, information quality, information quantity, fun, credibility, security, privacy, screen layout, challenge, excitement, control, interaction, help facility, reliability, navigation searching, browsing, speed, responsiveness, personalisation, and sense of community. The study of Agarwal and Venkatesh18 investigated the concept of website usability for the industries of airlines, online bookstores, automobile manufacturers, and car rental agencies. It identied a high correlation between measured site attributes and rated site usability. When customers have purchase intention, they tend to rate sites higher than others. To investigate customer satisfaction and loyalty with online business, Kim et al.19 carried out a survey for virtual mall, stock brokerage, search portal, and online game. Their study discovered that convenience of online business and delight of engaging in online business inuence customer satisfaction, which in turn leads to customer loyalty. The study by Koufairs16 focused on customers purchases and intention to return as the bottom line of measures for e-commerce success. The study

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concluded that product involvement, web skills, value-added search mechanisms, and challenges correlate with shopping enjoyment. In addition, product involvement, web skills, and challenges can inuence concentration. Finally, shopping enjoyment and perceived usefulness determine whether a customer will return. Another study by McKinney et al.11 investigated different attributes for web shopping transactions. They identied understandability, reliability, and usefulness as the rst-order factors for the expectation, performance, and disconrmation of web information quality, which are synthesised into the satisfaction of web information quality. Moreover, access, usability, and navigation are conrmed to be the rst-order factors for the expectation, performance, and disconrmation of web system quality, which also cumulate into the satisfaction of web system quality. The ultimate variable web customer satisfaction is determined by the satisfaction factors of web information quality and web system quality. The study by Palmer 20 used a random sample from US Fortune 500 corporate websites to investigate satisfaction, likelihood of return, and frequency of use as different measures for website success. The study conrmed that website success is affected by download delay, navigation, content, interactivity, and responsiveness. Overall, most studies focusing on the web application factor directed at general e-commerce activities especially web shopping behaviour. We found only a few papers12,21,22 having internet banking as its sole subject. For example, Jun and Cai12 focused on the concept of internet banking service quality. It was determined that there are no substantial satisfaction differences between internet-only banks and traditional banks offering internet banking. The issues of reliability, responsiveness, access, and ease of use are of the utmost concern to customers. Liao and Cheung21 performed a survey in Singapore regarding consumers attitude toward the usefulness of internet banking and willingness

to use internet banking. For usefulness, the variables of accuracy, security, speed, friendliness, involvement, and convenience were found to be signicant. For willingness, all the above variables except convenience were inuential. Sathye22 in his study of internet banking in Australia, concluded that security concerns, lack of awareness of internet banking, and of its benets are the signicant factors for not adopting it. Among all web application variables, the most investigated (at least ve research references in our literature review) are ease of use, credibility, security, privacy, speed, and responsiveness. The fourth factor of bank/nancial institute is unique to internet banking activities. There are only a few studies addressing the variables of bank features inuencing internet banking.10,15,17,23,24 The study by Kolodinsky15 found that risk and safety are signicant for online banking; and risk is signicant for only automatic bill payment. Another study10 indicated that service problems and a banks service recovery ability have a major impact on customer satisfaction and intention to switch to another bank. The study by Machauer and Morgner23 identied four different psychographic segmentations of bank customers including transaction-oriented, technology-opposed, generally interested, and service-oriented. Transaction-oriented bank customers pay attention to technology, online reliability, and independence from bank branch hours, but care little about information provision, service attitude, and service range. Technology-opposed bank customers do not care about technology and online reliability, but are concerned about bankers service attitude and information provision. The generally interest segment is positive on online applications, and strong on independence from branch hours. Serviceoriented customers avoid risk, care about service range, and do not pay attention to technology, online applications, information provision, and banking conditions. In another

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study of internet banking adoption in Singapore,17 it was concluded that relative advantage, values, internet experience, banking needs, trialability of internet banking, self-efcacy, and government support have positive inuence. Overall speaking, our review shows that the research interests in the area of internet banking scatter among the factors of demographics, transaction, web application, and bank/nancial institute characteristics. We found that studies investigated only one or two factors rather than all four factors together. A certain variable can be signicant in one study but not in another depending on the concept and subject under investigation. In addition, our review shows that the signicant variables for internet banking adoption are context-sensitive. To our knowledge, the research study in this paper is the rst attempt to incorporate all four factors for modelling internet banking activities in the context of a credit union, which has a niche market serving a group of customers sharing a common professional interest. PROBLEM SOLUTION PROCESS This section presents the problem solution process for this study, which is shown in Figure 1. The process includes the step of incorporating the literature and our credit union ofcers knowledge into building a research model, then formulating hypotheses based on the research model, conducting preliminary survey design, survey pre-test, survey administration, result analyses, and nally identifying unique opportunities and problems for our credit union. Research model building Since our credit union ofcers talked with customers when enrolling them into online banking, they have learned about customers concerns and preferences for online banking. We utilised semi-open-ended questionnaire,

email communications, and personal interviews to obtain credit union ofcers knowledge for online banking. The principles we used to select variables into our research model are as follows. First, if both the literature and credit union ofcers conrm the importance of a variable, it will be retained in our model. Secondly, if our credit union ofcers suggest a variable that is not mentioned in the literature, it will be included in our model. It is because of our belief that credit union ofcers have context knowledge that can expand the important variable list from the literature. As a result, we added occupation, bank transaction type (Tran2), continuous improvement (App10), bank image (Bank2), responsiveness (Bank6), advertisement (Bank9); rened accessibility into internet access from home (Conpro1), work (Conpro2), and public places (Conpro3); and rened web skills into prociency in using computers (Conpro4) and prociency in using internet (Conpro5). Thirdly, if the literature suggests a variable that is not conrmed by our credit union ofcers, it will be excluded from our model. For example, we excluded race, region, personalisation, and sense of community. Since there are many variables from the four factors in Table 1, this principle is necessary to reduce the number of variables in our model. The nal research model (Figure 2) has four major independent factors including customer, transaction, application, and bank. There are three dependent variables including IBTRANS, USEFUL, and FUTURE measuring internet banking activities. IBTRANS is the number of internet banking transactions performed in the past three months (IBTRANS), representing the current and actual adoption behaviour. Identifying the determinants for IBTRANS can help the management to strengthen those determinants for promotion purposes of internet banking. USEFUL is the perceived usefulness of internet banking, representing customers current attitude toward internet banking. Whereas IBTRANS measures

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Customer Factor: Demographics Internet Access Computing Proficiency

IBTRANS: # of Internet Transactions in the Past FUTURE: Willingness to Use Internet Banking in the Future USEFUL: Perceived Usefulness of Internet Banking

Transaction Factor

Application Factor

Bank Factor

Figure 2 The research model: four factors affecting internet banking activities

customers actual adoption behaviour, USEFUL measures customers attitude toward internet banking. FUTURE is the willingness to use internet banking in the future, representing the potential to continue with or adopt internet banking in the future. IBTRANS and USEFUL are also formulated as intervening variables inuencing FUTURE. The three dependent variables together provide a comprehensive understanding of internet banking, and FUTURE is the nal and ultimate dependent variable in the research model. The knowledge of what variables drive FUTURE can provide signicant input to the management for policy and strategy formulation. The next section describes hypotheses deriving from the research model. Hypothesis formulation This section lists the hypotheses in this study. We expect that some variables in our research model are more signicant than others determining IBTRANS, USEFUL, and FUTURE, respectively. Knowledge of signicant variables is critical to the

companys resource allocation decision. We have H1 as follows: H1: Some variables in the research model are more signicant than others determining IBTRANS, USEFUL, or FUTURE. Different dependent variables have different signicant independent variables. In addition, we expect that both customers actual behaviour (IBTRANS) and attitude (USEFUL) affect their willingness to adopt internet banking in the future (FUTURE). It will be revealing to see which variable, IBTRANS or USEFUL, is more important for FUTURE. This expectation generates the following H2: H2: IBTRANS and USEFUL have different signicance in determining FUTURE. Regarding different customer segments, we expect that customers who have an internet bank account behave or perceive differently than customers who have none. A focused analysis of each individual customer segment

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can help us understand its specic concerns leading to specic solutions. Why do not some customers open an internet bank account? Are they substantially different from customers who have an internet bank account? If yes, what are the differences? Answers to the above question can help formulate specic solutions for the goal of switching customers from branches to internet. We have the following H3 to compare the two groups: H3: For customers with (or without) an internet bank account, some variables in the research model are more signicant than others determining IBTRANS, USEFUL, or FUTURE. Different dependent variables have different signicant independent variables. The list of signicant variables is substantially different between the With and Without group. We will do a detailed comparison between the two groups signicant variable lists to identify both groups critical features. Survey design, pre-test, and administration A questionnaire was designed based on our research model. The preliminary questionnaire was pre-tested with 24 customers, whose feedback on the content and presentation of the questionnaire was used to improve the questionnaire. The variables used in the questionnaire are shown in Table 2. We used a seven-point Likert scale to measure the continuous variables. For example, respondents were requested to evaluate a certain application characteristic (such as continuous improvement) as not important at all, slightly important, slightly to medium important, medium important, medium to highly important, highly important, or extremely important to internet banking. In order to ensure that a respondent is serious in lling out the survey, we designated two

pairs of variables measuring about the same issue: App2 and App7 for the application factor, and Bank1 and Bank5 for the Bank factor. App2 is access convenience (whether I can access it anytime I want) and App7 is availability (whether I can use it whenever I need it). Bank1 is assurance from the bank (whether the bank gives assurance to x problems and release customers from nancial obligation if an online transaction goes wrong), and Bank5 is credibility (whether the bank is a member of the federal insurance programme FDIC). These two pairs of variables will be used for consistency check as a preprocessing step in the data analysis procedure. The questionnaire was administered to the credit union customers. As one objective of the study is to identify signicant factors for switching branch goers to internet surfers, it is essential to select a survey method that can reach both categories of customers. For convenience purposes, many surveys for internet applications are delivered through the internet. Internet surveys, however, can only reach respondents with internet access, which is not a suitable survey method in this study. In order to reach our targeted groups, we carried out an on-site customer survey in different branch locations. The sampling followed a stratied procedure to ensure a diversied group of customers in the survey. Different bank branches for the credit union serving customers with different income levels were selected as the target survey sites. The nal sample has two branches in less afuent area, one branch for students, one branch for employees with a specic employer and business people in the downtown area, two branches for middle to high income level, and two branches for afuent suburb. Within a time-frame of three weeks, the survey was administered at the selected branch sites. When a customer entered a branch, a survey administrator approached the customer and asked whether he or she was willing to participate in the survey, mentioning that the survey results will

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Table 2 Variables used in the research framework Label: Variable description Age Male, Female Student, Clerical, Tech: Technician, Manager, Prof: Professional, Exec: Executive, Wife: House wife, Self: Self employed, Ocothers: Other occupations Single, Married, Divorced, Widowed, Msothers: Other marital status Children: Number of children living with the respondent House: Is the respondent a house owner? Income: Annual income of the respondent Primary, High: High School, Junior, Bachelor: Bachelor degree, Masters+: Masters degree and above, Edothers: Other education qualication IBA: Does the respondent have the banks internet account? Conpro1: internet access convenience from home Conpro2: internet access convenience from work Conpro3: internet access convenience from public places Conpro4: Prociency in using computers Conpro5: Prociency in using internet Tran1: Degree of importance of transaction amount Tran2: Degree of importance of transaction type Tran3: Degree of importance of transaction cost App1: Ease of application App2: Access convenience App3: Speed of execution App4: Efciency App5: Accuracy App6: Reliability/Consistency Bank1: Assurance from the bank Bank2: Bank image Bank3: Branch locations Bank4: Diversied service Bank5: Credibility App7: Availability App8: Screen design/Content App9: Navigation App10: Continuous improvement App11: Fun/Entertainment App12: Security Bank6: Responsiveness Bank7: Competence Bank8: Compliance with regulation/disclosure Bank9: Advertisement Bank10: Customer service and care

Category Demographic information

Accessibility and prociency

Transaction characteristics Application Characteristics

Bank characteristics

Dependent variables

IBTRANS: Number of internet banking transactions performed in the past three months USEFUL: Perceived usefulness of internet banking FUTURE: Willingness to use internet banking in the future

be used to improve customer service and there will be a bank souvenir (about US$10.00) as an appreciation gift to each participant. If the customer agreed to participate in the survey, the survey administrator will give a questionnaire to the customer after he or she nishes his or her credit union business. The survey administrator was available to answer customers questions while they were lling out the questionnaire. Most customers took about ten minutes to nish the questionnaire. A total of 636 customers were contacted at branches and 159 lled out the questionnaire.

Data analyses We adopted multiple regression models as the analytical tool in this study. The following data pre-processing procedures were performed before regression analyses. First, all cases without information for dependent variables were deleted. Secondly, cases with more than two-point difference for the variables of consistency check were deleted. The above pre-processing procedure gave us a total of 100 usable surveys. Summary statistics of the three dependent variables and the demographic independent variables are

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Table 3

Summary statistics for variables USEFUL: How useful are internet banking transactions to you? Not useful at all Slightly useful Slightly to medium useful Medium useful Medium to highly useful Highly useful Extremely useful 29% 12% 4% 14% 6% 10% 25% FUTURE: Will you use internet banking transactions more in the future if it is available to you? Denitely no Very unlikely Quiet unlikely Medium Quiet likely Very likely Denitely yes Annual income < 10,000 10,00024,999 25,00039,999 40,00054,999 55,00069,999 70,00084,999 85,000+ 8% 8% 7% 24% 12% 9% 32%

Dependent variables IBTRANS: How many internet banking transactions have you performed in the last three months? None 51% 15 17% 610 10% 1115 6% 1620 3% 2125 2% 26+ 11%

Demographic independent variables Age Occupation Under 18 3% Student 1920 5% Clerical 2130 28% Technician 3140 28% Manager 4150 22% Professional 5160 11% Executive 6170 3% Academic 71+ 0% House Wife Self-Employed Others Martial status Single Married Divorced Widowed Others House owner? Yes No 35% 54% 9% 0% 2% Education Primary High School Junior College Bachelor Degree Masters Degree+ Others Gender Male Female

9% 11% 14% 10% 37% 0% 0% 3% 8% 8% 0% 20% 40% 29% 8% 3% 46% 54%

9% 9% 26% 13% 12% 15% 16%

Number of children living with you 0 55% 12 31% 34 11% 56 2% 7+ 1% Have an internet bank account? Yes 62% No 38%

54% 46%

given in Table 3. Given the large number of independent variables including 21 dummy variables and 33 continuous variables, we adopted the backward stepwise regression method to allow insignicant predictors to be eliminated from the model. In addition, the backward stepwise method can also address the multicollinearity problem if it is present in the dataset. Each dependent variable was run against the entire set of independent variables using backward stepwise regression analysis generating All-I for IBTRANS, All-U for USEFUL, and All-F for FUTURE. The three regression models generated as above are to used to evaluate H1. For the entire dataset, we also run a regression model All-IUF using

IBTRANS and USEFUL as the independent variables, and FUTURE as the dependent variable, to evaluate H2. To evaluate H3, the dataset was divided into two subsets including one for customers with internet bank accounts and another for customers without internet bank accounts. The backward stepwise regression analysis was applied to each subset for comparison purposes. There are six regression models for H3 including With-I for the With group using IBTRABS as the dependent variable, With-U for the With group using USEFUL, With-F for the With group using FUTURE, WO-I for the Without group using IBTRANS, WO-U for the Without group using USEFUL, and WO-F for the Without group using

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FUTURE as the dependent variable. The next section presents the regression results and discusses our ndings. RESEARCH RESULTS AND DISCUSSION Tables 4 and 5 list the adjusted R-squares, F-values, signicant variable coefcients in regression models for H1 and H3. Table 4 is

for customer variables. Table 5 is for transaction, web application, and bank variables. All models are highly signicant with adjusted R-squares ranging from 26 to 81 per cent. Only those independent variables with p-values being less than or equal to 0.05 are listed in the tables. This section presents and discusses ndings for the three hypotheses in this research study.

Table 4 Coefcients for customer variables with p < =0.05 in regression models All-I R-Sq (Adj.) F-value Age Male Female Student Clerical Tech Manager Prof Exec Wife Self Ocothers Single Married Divorced Widowed Msothers Children House Income Primary High Junior Bachelor Masters+ Edothers IBA Conpro1 Conpro2 Conpro3 Conpro4 Conpro5 39.24 0 0.37 1.21 All-U 44.2 0 All-F 45.65 0 With-I 27.37 0.001 With-U 31.3 0.0006 With-F 43.75 0 WO-I 38.12 0.0001 WO-U 26.17 0.0048 WO-F 81.31 0

0.99

0.81

0.83 0.23

0.63

1.36 3.56 2.01 2.43 0.27 0.2

2.3 2.11 2.41

0.97 1.99 2.8

0.22 0.22 0.2 0.77 0.23 0.47 0.19 0.78 0.11

0.24

0.16

0.62

All-I: All customers using IBTRANS as the dependent variable All-U: All customers using USEFUL as the dependent variable All-F: All customers using FUTURE as the dependent variable With-I: Customers with an internet bank account using IBTRANS as the dependent variable With-U: Customers with an internet bank account using USEFUL as the dependent variable With-F: Customers with an internet bank account using FUTURE as the dependent variable WO-I: Customers without an internet bank account using IBTRANS as the dependent variable WO-U: Customers without an internet bank account using USEFUL as the dependent variable WO-F: Customers without an internet bank account using FUTURE as the dependent variable

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Table 5 Coefcients for transaction, web application, and bank variables with p < =0.05 in regression models All-I R-Sq (Adj.) F-value Tran1 Tran2 Tran3 App1 App2 App3 App4 App5 App6 App7 App8 App9 App10 App11 App12 Bank1 Bank2 Bank3 Bank4 Bank5 Bank6 Bank7 Bank8 Bank9 Bank10 39.24 0 All-U 44.2 0 All-F 45.65 0 With-I 27.37 0.001 With-U 31.3 0.0006 With-F 43.75 0 WO-I 38.12 0.0001 WO-U 26.17 0.0048 WO-F 81.31 0

0.41

0.51

0.79 0.76 1.04 0.95 0.41 0.76 0.31 0.33 0.56 1.41 0.63 0.36 0.4 0.44 0.56 0.48 0.14 1.19 0.31 0.54 0.47 0.52 0.19 0.68 0.48 0.64 1.17 1.29 1.33 1

0.45

All-I: All customers using IBTRANS as the dependent variable All-U: All customers using USEFUL as the dependent variable All-F: All customers using FUTURE as the dependent variable With-I: Customers with an internet bank account using IBTRANS as the dependent variable With-U: Customers with an internet bank account using USEFUL as the dependent variable With-F: Customers with an internet bank account using FUTURE as the dependent variable WO-I: Customers without an internet bank account using IBTRANS as the dependent variable WO-U: Customers without an internet bank account using USEFUL as the dependent variable WO-F: Customers without an internet bank account using FUTURE as the dependent variable

Hypothesis I IBTRANS, USEFUL, and FUTURE have different signicant predictors A review of the signicant coefcients for the three models of all cases, All-I, All-U, and All-F, in Tables 4 and 5 supports H1 that some variables are more signicant than others in determining IBTRANS (number of internet banking transaction, current and actual adoption behaviour), USEFUL (perceived usefulness, current attitude toward internet banking), and FUTURE (willingness to use in the future). Our analysis strategy for all cases is to focus on signicant variables

that appear in more than one model among the three. This strategy leads us to the variables Children ( ), IBA ( + ), Conpro1 ( + ), Conpro3 ( + ), App10 ( ), and Bank4 ( + ). IBA is whether the customer has an internet bank account. It is logical to nd that when customers have internet bank accounts, they tend to perform more internet banking transactions and perceive internet banking as useful. The coefcient value for IBA is at a very high level of 2.01 and 2.43, which is ve times stronger than Bank4. Therefore, simply persuading or enticing customers to open up an internet bank account regardless of whether they have the

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intention to use it should be the rst step to promote internet banking. Bank4, diversied bank service, is signicant for current internet banking adoption and willingness to use it in the future. Conpro1, internet access convenience from home, is signicant for perceived usefulness and willingness to use in the future. Conpro3, internet access convenience from public places, is signicant for all aspects of internet banking. For our credit union, internet access convenience is a major facilitator for customers to use internet banking. Number of children in a customers household is negatively correlated to current adoption behaviour and perceived usefulness. This indicates that customers with more children tend to use less internet banking and not to perceive it as useful. A possible explanation for this phenomenon may be as follows. When a household has many children, the parents need to be on the road and in many different places performing chores and child caring activities. They have more opportunities to use a credit union branch than other customers who may have to take special trips for that purpose. This nding identies a special customer group for the management to improve the utilisation of internet banking. App10, continuous improvement of web application for online banking, is negatively correlated to current and future internet banking adoption. Since App10 is also signicant for the customer segment with internet bank accounts, we will discuss its implication in H3 below. Hypothesis II IBTRANS and USEFUL have different signicance for FUTURE The regression model All-IUF for IBTRANS and USEFUL determining FUTURE is as follows: FUTURE = 2.4250.0184+0.622 The above All-IUF model is highly signicant with model F-value at 0 and (1)

adjusted R-square at 0.525. IBTRANS is not a signicant predictor (p-value = 0.859), whereas USEFUL is a highly signicant predictor (p-value = 0). The regression result does not support our hypothesis, which expects both variables to be valid predictors with different signicance. This nding implies that perceived usefulness of internet banking is highly correlated with willingness to use internet banking in the future. Surprisingly, customers current adoption behaviour does not affect their willingness to use it in the future. Therefore, if a customer is not using internet banking, he or she may use it in the future if internet banking is perceived as useful. Then for management, focusing on changing customers perception on internet banking is a vital strategy to pursue. Hypothesis III customers with internet banking accounts and customers without internet banking accounts behave or perceive differently To compare the With and Without group, we review the models With-I, With-U, and With-F for the With group against the models WO-I, WO-U, and WO-F for the Without group in Tables 4 and 5. Our comparison strategies are rst to look for presence of signicant variables in one group but not the other; and second to look for signicant variables opposite effect (ie, positive vs negative coefcient) on the two groups. We rst discuss signicant variables in one group but not the other. The rst nding is the presence of Conpro1 and Conpro2 in the Without group but not in the With group. A close look at the Conpro variables in the columns of WO-I, WO-U, and WO-F in Table 4 reveals a progressive pattern for the Without group. Conpro3 (0.11 in WO-I), internet access convenience from public places, has a positive effect on current adoption behaviour; Conpro2 (0.22 in

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WO-U), internet access convenience from work, has a positive effect on current attitude toward internet banking; and Conpro1 (0.24 in WO-F), internet access convenience from home, has a positive effect on willingness to use internet banking in the future. The progressive pattern of public places work home signals an important message about the role of access convenience in the future utilisation of internet banking for the Without group. Access convenience from home is a major facilitator for customers without internet bank accounts to use internet banking in the future. Although our credit union cannot purchase computers and internet service for customers to use at home, the nding shows that marketing campaigns should target at customers who are going to buy computers, and the management should keep track of their customers purchasing and subscription activities. The second nding is the presence of Conpro5 in the With group but not the Without group. This nding indicates the sensitivity of the With groups prociency in using internet toward adoption behaviour and willingness to use. On the other hand, the variation of the Without groups prociency in using internet probably is not great enough to affect the dependent variables in models. The third nding is Tran2, the degree of importance in transaction type, which does not affect the With group but affects the Without groups willingness to use internet banking. This transaction type concern may be similar to how some people trusted ATM for withdrawals but not for deposits when the ATM technology was rst introduced. To overcome customers fear of complicate internet transactions, there is the need of developing extra instruction and feedback message to render the sense of control and safety to internet banking users. Fourthly, in the application factor in Table 5, a comparison between the With and Without group for identifying unique variables belonging to just one group reveals

that their application concerns are very different. The With group has App2 ( , access convenience) and App10 ( , continuous improvement) as its unique concerns, while the Without group has App3 ( , execution speed), App5 ( + , accuracy), App7 ( , availability), App9 ( + , navigation), and App11 ( , fun/entertainment). The Without group is different from the With group in terms of both quantity and quality. In terms of quantity, the Without group shows its more concerns about internet banking application than the Without group by selecting more signicant application variables. Also, the Without group shows its inexperience with internet banking application by its inability to focus on a few critical application variables. In terms of quality, the Without group has many operational and upfront issues such as accuracy and navigation, which have no effect on the With group. This can mean that the With group has well passed the stage of struggling with application nuts and bolts. There are a few negative application variables for both groups, which are difcult to explain. For example, for the Without group, App11, fun and entertainment, affects negatively both current and future adoption behaviour. Our credit union needs to avoid the overuse of fun and entertainment in its website. This nding is contradictory to the suggestion from study by Southard and Siau13 that urges local banks to convey a community atmosphere in their websites by providing links to sport news and entertainment. This provides evidence that knowledge from across-the-board surveys may not be suitable for our credit union. For the With group, App10, continuous improvement, affects negatively both current adoption and attitude for internet banking. This may suggest that customers with internet transaction experience prefer what they can have here and now to what they may have in future improvement. For the bank factor in Table 5, we identify the presence of Bank5 ( , credibility), Bank6

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( + , responsiveness), Bank7 ( , competence), and Bank8 ( , compliance with regulation/ disclosure) in the Without group but not in the With group. Again, the Without group selects more variables in the Bank factor than the With group. Regarding signicant variables opposite effect on the two groups, we discover several interesting contrasts. First, in Table 4, Conpro4, prociency in using computers, is positive for the With group but negative for the Without group. If a customer is procient at computing but does not bother to get an internet bank account, he or she may have determined that internet banking is not useful. Then, the marketing strategy is to demonstrate the value of internet banking to them via different means. Secondly, in Table 5, App12, application security, is positive for the With group but negative for the Without group. That means for the Without group, the more they value the security issue, the more unwilling they are to use internet banking in the future. It is probably because they perceive internet as insecure. If internet is perceived as insecure and security is very important to customers, the logical response is not to use it. Then, the marketing strategy is to convince customers that sending out important information via internet is actually more secure than giving credit cards to a sales clerk in a store due to encryption technology. Thirdly, also in Table 5, bank2,

bank image, is negative for the With group but positive for the Without group. The With group does not care much about the bank image but it helps the Without group to adopt internet banking. To conclude our comparison between customers with internet bank accounts and customers without internet bank accounts, our analysis shows positive evidence for H3 meaning that the With group is substantially different from the Without group. To ensure that the With group will continue to use internet banking, the most critical variable is application security (App12, the highest positive coefcient in the With-F model in Table 5). To motivate the Without group to use internet banking, our credit union has to work on bank responsiveness and bank diversied service (Bank6 and Bank4, the two highest coefcients in the WO-F model in Table 5). Positive and negative variables in internet banking Table 6 summarises the signicant variables for internet banking activities we identied in this study for our credit union. Positive variables are critical success variables, which must be preserved and enhanced in order to promote internet banking activities. For existing internet bank customers, application security and bank diversied service play a

Table 6 Positive and negative internet banking variables from survey results Positive variables Customers with internet bank accounts Application security Bank diversied service Internet access convenience from work and public places Prociency in using computer and internet Internet access convenience Help for complicate transactions Application navigation Application accuracy Bank diversied service Bank image Bank responsiveness Negative variables Promise to improve application based on feedback Bank assurance Bank image Prociency in using computer Application fun/entertainment Bank assurance Bank regulations/disclosure

Customers without internet bank accounts

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critical role in retaining their patronage. To switch customers from branches to internet, the management should focus on internet access convenience, application navigation, application accuracy, providing extra online instruction and feedback for complicate transactions, bank diversied service, bank image, and bank responsiveness. On the other hand, management should minimise the undesirable effects from negative variables, such as unrealisable promises for continuous improvement in web applications, bank assurance, and bank image for the With group, as well as fun/entertainment in web applications, bank assurance, and bank regulations/disclosure for the Without group. Although continuous improvement is an important internal activity in an organisation, requests for feedback should be carried out with extra caution and care. If the management has no intention of using the feedback or cannot show customers how the feedback has been used to improve the applications, it is advisable not to ask for any feedback. It will not take long for customers to realise that their feedback will not be taken seriously and feel annoyed by the time-consuming process of providing feedback. As the With group is veteran internet users and has experience dealing with website surveys, being bombarded by feedback mechanism in the name of continuous improvement may cause annoyance as shown by the negative effect of that variable. For customers without much internet banking experience, the fun/ entertainment component of nancial websites cannot attract them to the web. Finally, the variable of bank assurance has negative effect on internet banking activities for both the With and Without groups. That may be due to the bad publicity generated by major nancial faults in the markets. As it seems to customers that assurance from banks themselves is not reliable, credit unions may seek guarantees from external web organisations to increase customers condence in their web applications.

Comparing signicant factors between literature surveys and our credit union Table 7 compares the signicant variables from the literature and our credit union. The column of signicant variables from acrossthe-board surveys in Table 7 is from Table 1 that lists the signicant variables for internet banking and e-commerce activities from the literature. The second and third columns in Table 7 show the signicant variables from this survey for the group with internet bank accounts and the group without internet bank accounts in our credit union, respectively. Signicant variables with a plus (minus) sign indicate positively (negatively) signicant effect on internet banking. We can see two characteristics from Table 7. First, many signicant variables from the literature are not signicant for our credit union. Secondly, the Without group has many more signicant variables than the With group for our credit union. We presented the survey results to the credit union ofcials and collected their feedback on the differences between across-the-board surveys and the credit union. As for the rst characteristics of fewer signicant variables than the overall market, it is probably due to credit union customers expectation for the credit union. Credit union customers prefer their credit unions higher interest rate to large banks convenience, efciency, and service. They understand that credit unions do not have as much resource as large banks to promote their business and to satisfy customers banking needs, and they are willing to accept less quality service for higher investment return. Instead of demanding a lot of variables under control, credit union customers will be happy with a few critical variables being satised. The survey results provide some insight for credit unions to allocate their resource for achieving maximum utility for some critical variables in internet banking services.

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Table 7

Variable comparison between across-the-board surveys and our credit union Signicant variables from across-theboard surveys With group in credit unions Without group in credit unions Signicant (+)

Demographics

Access to internet Web skills, self-efcacy Banking needs Age Income Education Marital Status Gender Number of children Race Region Cost Nature: purchase, information, etc Ease of use Convenience, less time Organised, complete structure Accuracy Feedback, error correction Information quality Information quantity Fun, interesting Credibility, security, privacy Screen layout, aesthetic Challenge, excitement Control, interaction Help facility Reliability Navigation, searching, browsing Speed, responsiveness Personalisation Sense of community Legal regulation, government supports Abilities to resolve service problems Service range Service hours Risk

Transaction

Signicant (+) (transaction parties)

Web application

Signicant (+)

Signicant ( ) Signicant (+)

Signicant (+)

Bank/nancial institute

Signicant (+) Signicant ( )

Signicant ( ) Signicant (+) Signicant (+) Signicant ( )

Signicant (+): positively signicant Signicant ( ): negatively signicant

As for the second characteristic, the Without group having more signicant variables than the With group, the credit union ofcers agreed that it is due to the Without groups relative inexperience with internet banking, which causes the Without group to be less focused than the With group in selecting critical variables. The Without groups choices of critical variables are also different from the With group as mentioned in H3 above. The positive variable Bank4 (diversied service); and the negative variable

Bank1 (assurance from bank) are, however, chosen by both groups. The common positive variable diversied service reects that even though credit union customers are not concerned about every aspect of bank operation, they care about whether the credit union can provide diversied service. To account for the negative relationship between assurance-from-bank and internet banking activities, a credit union ofcial responded, They know our bank doesnt spend a lot of advertisement dollars to create a security

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image or to provide assurance, but we do follow all legal requirements. Actually, the more they see us on TV, the more waste they perceive. Credit unions should take advantages of customers expectation and understanding to create competitive edges in the market. CONCLUSION As internet banking has become an essential component in banking business and there is no formal study on internet banking activities for credit unions, this study investigated the effects of all major factors on three aspects of internet banking including the number of internet banking transaction in the past three months, the perceived usefulness of internet banking, and the willingness to use internet banking in the future as three measures for internet banking in a major credit union. The survey results indicate that there are different signicant variables for customers with and without internet bank accounts. For customers with internet bank accounts, access convenience from public places, prociency at computing and internet, application security, and bank diversied service are positively correlated with internet banking activities. For customers without internet bank accounts, bank management should focus on enhancing the variables of internet access convenience, application navigation, application accuracy, providing extra online instruction and feedback for complicate transactions, bank diversied service, bank image, and bank responsiveness. The results from this study reveal that credit union customers have their unique concerns for internet banking as many internet banking variables from the literature were not found to be signicant in this study. On the other hand, some variables that are added or rened by our credit union ofcers, including internet accessibility, bank transaction type, continuous improvement, bank responsiveness, and bank image, are found to be signicant. Individual credit

unions should pay attention to their customers unique understanding and expectation in order to fully realise the benets from internet banking.

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