Factors influencing the use of e payment

ABSTRACT Purpose – The main objective of this paper is to investigate determinants that influence the intention to use e-payment system for online shopping among young adults in Malaysia Design/methodology/approach – A survey was distributed to 200 respondents in Klang Valley area with 165 valid responses used as sample with the respond rate of 83% Multiple linear regression and independent t-test were conducted to analyze the data Findings – The results showed significant results between social influence, TAM factors, and security with intention to use e-payment for online shopping in Malaysia On the contrary, trust, quality of internet connection, and gender were found not to be significant in this study Research limitations/implications – Small sample size that only covered specific purpose, region and demographic – Other usable factors were not assumed The findings could be the evidence for online transaction facility providers to continually enhance their e-payment services and it must also meet customer expectation to have a positive growth rate Future research can use this study as an illustration to conduct similar studies in other region/countries or further develop actual use Originality/value – This study narrows the use of e-payment into more specific context, which is for online shopping and has not been studied in Malaysia yet – Combine both TAM and TRA factors to study the intention to use e-payment, and uses additional factors of gender and quality of internet connection that has not previously studied CHAPTER 1: INTRODUCTION 1.1 Background of the study We are living in the time when everything is available through the internet With such exposure, many things can be done promptly by anyone, anywhere and anytime Education started to utilize online systems gradually with e-books and e-learning (Sun et al., 2008; Chen, Chen, and Wang, 2009) Social networks are the biggest trend for young generation as a form of communication (Ellison, Steinfield, and Lampe, 2007; Pempek, Yermolayeva, and Calvert, 2009) Businesses also start to move towards online with the introduction of e-commerce in early 1990s (Monsuwe et al., 2004; Horrigan, 2008) and even banking transactions can be done instantly with internet banking (Tan and Teo, 2000; Lee, 2009) According to BNM payment statistics, the growth of e-payments in Malaysia has increased immensely due to the rapid development of e-commerce They are both interconnected as epayment systems are capable of making online money transfer available once customers made their purchases via Internet Specifically, a recent online survey by Wong (2014) revealed that 91% of the Internet users in Malaysia shop online regularly Over half (54%) of them confessed to shop at least once a month online, 26% shops once a week, and 7% shops online everyday The Nielsen Company also revealed that Malaysians spent RM1.8 billion shopping via Internet in 2010 (Ho, 2011) This is the reason why the development of e-payment is crucial in order to accommodate the demand in virtual shopping behaviour Despite the growth, many consumers are still reluctant to adopt e-payment systems, especially in emerging countries because they think it is more convenient to use physical money (cash) More than half (60%) of citizens make payment by cash (The Nielsen Company, 2014a) or cheques as a means of payment, even to the young adults who practically like everything to be faster and prefer using high technology system Moreover, there is still a large group of customers who refuse to adopt such services due to their risk perception (uncertainty and security concerns) in doing their transactions online Wong (2014) showed that the remaining citizens of Malaysia not shop online due to the lack of trust on the sellers and security issues 52% of the shoppers confess they not trust giving their credit card information to the virtual world (The Nielsen Company, 2014b) Additionally, another study has indicated customers’ apprehension or lack of interest in using online payment methods (Johar and Awalludin, 2011) 1.2 Research objectives and questions From the derived rationale and background above, this study is trying to investigate both of the positive and the negative side of the intention to use e-payment system Thus, this study will include the mainly used factors of e-payment usage such as Technology Acceptance Model, with the negative/resistance factors considered as perceived risk Furthermore, this research would like to study at a greater length by finding the relationship between social influence, quality of internet connection and demographic (gender) in the intention to use e-payment system to conduct purchases online Based on the past theoretical studies conducted with the aim of study to discover the intention to use e-payment, the research questions are proposed as follows: Does Technology Acceptance Model (perceived usefulness and perceived ease of use) integrated with the intention to use electronic payments? Do perceived risks (security and trust) influence the intention to use electronic payments? Does quality of internet connection could potentially influence the intention to use electronic payments? Does subjective norm factor (i.e social influence) could potentially influence the intention to use electronic payments? Is there any difference among gender (male and female) in the intention to use electronic payments? 1.3 Significance of the study The significance of this study is to create awareness among all Malaysian consumers to conduct payment electronically as it would create benefits to them; i.e: convenience, efficient, and flexible (He and Mykytyn, 2007) Moreover, it is to promote more e-payment system usage among customers in Malaysia as it is believed that efficiency of financial system could be achieved if epayment systems are developed Cost of transaction would be reduced, enhanced liquidity, and better allocation of financial resources to everyone participated in the financial sector (BNM, 2015b) 1.4 Research Design A quantitative method in a form of survey with questionnaires (offline) was conducted for the research It was based on purposive sampling technique in intention to assess specifically on epayment usage A total of 200 questionnaires were distributed in Klang Valley area with 165 valid responses The main targeted respondents were young adults with age range from 18 to 26 and above For the reliability of this research, Cronbach’s Alpha test was used to score the validity for all the constructs in the questionnaire, with an addition of face validity To test the hypothesis and see the significance between the constructs, Multiple Linear Regression was carried out on the factors extracted in the factor analysis For the demographic variable, an Independent t-test was conducted 1.5 Findings After the regression analysis was conducted to test hypotheses, four of them showed significant results with p-value below 0.05 The significant factors are Perceived Ease of Use, Perceived Usefulness, Social Influence, and Security The remaining factors (Quality of Internet Connection and Trust) showed insignificant results In addition, independent t-test for gender (H 7) showed an insignificant result with p-value above 0.05 Therefore, out of hypotheses proposed, four of them were supported whereas three were rejected 1.6 Research limitations and future research Unequal ratio of respondents that might affect overall significance level, the small sample size effect in relation to specific respondents and geographical area does not cover population generalizability and only creates conceptual generalizability Moreover, this research only selected particular factors that are deemed to be important in the researcher’s own perspective Therefore, some suggestions that could be given for future studies are consideration of larger sample size that will cover more range of population in broader area and more important factors that have been done by past researchers should also be taken into consideration in order to enhance the results and generalisation 1.7 Conclusion After the overall of this study is introduced, this study will be organized as follows: Chapter will highlight literature review, along with the theoretical framework and hypotheses in accordance with research questions The research methods are developed in Chapter Chapter will elaborate on the results tested And lastly, Chapter will provide implications based on the findings, along with conclusion of this study with some recommendations that include the research limitations as well as future studies CHAPTER 2: LITERATURE REVIEW 2.1 Electronic Payment 2.1.1 Background of the study Presently, electronic payment (e-payment) has become a popular means for paying online purchases due to the growth of e-commerce This market is expected to grow by 18.1% from 2010 per year until 2014 (with an estimated total of 34.8 billion and a value of $1,792.4 billion) Subsequently for e-payments, as shown by the trends in e-commerce, are expected to grow by 18.1% yearly to a total of 34.8 billion transactions (Capgemini, 2013) The expansion of both sectors is one of the vital factors to economic growth For instance, the immense escalation of credit and debit cards use as means of e-payment has added $983 billion to 56 countries’ GDP between 2008 and 2012 (Visa, 2012) This has contributed to 0.8% increase in GDP in emerging markets and 0.3% increase in developed markets; creating an equivalent of 1.9M more jobs (Moody’s Analytics, 2013) In Malaysia, payments by cards and e-money remained as the mostly used method (71.6%), followed by payment through mobile and internet banking (13.2%), and with others being direct debit and e-cheques (BNM, 2012) It has continued to expand, with almost 90% of the 1.8 billion cash non-payments, amounting to RM 17.1 trillion are now made electronically compared to 52.6% a decade ago (BNM, 2012) Particularly, 80% of retail payment transactions were conducted electronically in 2012 and have it has lifted the transactions amounting RM49.5 trillion (Teoh et al., 2013) Additionally, Bank Negara Malaysia (BNM) with the association is currently conducting a roadshow with objectives of creating awareness of e-payment systems and educating the public on e-payment services The roadshow will be held by BNM for major financial institutions and payment system operators to showcase their products on card acceptance and online banking They could also offer various incentives and promotions for businesses to accept payment card and use online banking As Malaysia is one of the biggest and most successful emerging countries, the use of e-payment is essential to achieve higher economic growth and keep up with the competitive edge among the developed countries (BNM, 2015b) 2.1.2 Definition of e-payment The most basic definition of e-payment is an action of paying something (payer) or someone or of being paid (payee), electronically Likewise, electronic Payment Systems Observatory (ePSO) defines e-payment as electronic transfer of payment from the payer to the payee through the use of an e-payment instrument E-payment could also be described as transferred monetary value between two entities as compensation for the receipt of goods and services through electronic channel (Tan, 2004) Many of e-payment context are associated to banking/financial sector (e-banking) It mainly includes paying electronic bills and tax, electronic fund transfer (EFT), online credit/debit card payments, and reload/top-up using stored-value money (Özkan, Bindusara and Hackney, 2010) Bank accounts are accessible and manageable remotely by customers through web-based interfaces, that is e-payment services (Weir, Anderson and Jack, 2006; Lim, 2008) Aside from e-banking, many have associated e-payment with e-commerce American University (2004) described e-payment as a subset of e-commerce to carry out an electronic payment from the goods and services to be bought or sold via Internet Moreover, e-payment is defined as a financial exchange between buyers and sellers with digital financial instrument ( such as encrypted credit card numbers, electronic cheques or digital cash) It is done through online environment, assisted by banks, intermediaries, or legal tenders (Kalakota and Whinston, 1997; Fok, 2013) This study is specified on the use of e-payment system for online shopping Therefore, this study adopts the definition of e-payment as a manner of delivery payments from customers to vendors after the customers have decided to pay for the particular products or services The purchases made will be via Web browser and paid using credit or debit card (Bitpipe, 2006, cited by Teoh et al., 2013) It is believed that e-payment is the most effective, efficient, and problem-free way to pay for those purchases (Abrazhevich, 2004) 2.1.3 E-payment as a subset of e-commerce In a broad sense, many people associated e-commerce with “shopping via Internet” (Schneider, 2012) However, many businesses in this era have now migrated to their dealings electronically, even government agencies also take part in it The categorization of e-commerce based on its entities are as follow: B2B (business to business), B2C (business to customer), C2C (customer to customer), and B2G (business to government) As the focus of this study is a payment made through customers’ web shopping experience, B2C and C2C is the suitable approach According to Schneider (2012), C2C can be categorized into B2C because even though C2C only includes one party selling to another party (purchases made to each other such as online auction), it is still acting as a business Effective in 2014, the most frequently items to purchase (or intended to purchase) online in order are airline tickets and reservation, clothing and accessories, tours and hotels reservation, and hardcopy books (The Nielsen Company, 2014b) Since e-payment refers to financial exchange, it is regarded as one of the main role of online shopping payment mechanism E-payment systems are pivotal for e-commerce future because the e-commerce growth will be depending on the development of e-payment systems (Abrazhevich, 2004) In addition, banks have tried to keep up with the competitive development of e-commerce activities by introducing several products that could enhance such actions They also took advantages of the growth by expanding their services exclusively for e-commerce purposes (Wenninger, 2000) 2.1.4 Types of e-payment (E-payment instruments) In general, e-payment can be classified into five categories (Lawrence et al., 2002; Abrazhevich, 2004; Dai and Grundy, 2007; Schneider, 2012) Yet, for e-commerce purposes, the most widely used instruments are electronic cash, debit cards, and credit cards (Tsiakis and Sthephanides, 2005) Electronic cash (e-cash) is online cash based system that is used as a payment method through electronic currency exchange (Kim et al., 2010) The amount of money to be used is identified with the unique identification number How it works is customers must purchase electronic digital cash from the issuing company (Abrazhevich, 2004); and those digital cash will be transferred through computers or other telecommunications channels The development of this ecash has now been considered as one of the alternatives to the credit card spending on online purchases of goods or services This paying method does not require a high cost Thus, it is convenient for micro-payment (Lawrence et al., 2002; Kim et al., 2010) Credit card uses server authentication along with bank verification from customers to verify the sufficient funds needed to purchases goods or services It is an account based system that works both online and offline The amount will be charged to the customers’ account and it is payable in a form of credit card bills (Kim et al., 2010) Due to this system, credit card is usually used for heavy purchases; and it might not be suitable for small-value transactions (less than a dollar) (Kalakota and Whinston, 1997) Additionally, the system makes it available for customers to track their transaction record The substitute of credit card and the most used method for e-payment is debit card Banks usually issue debit card where credit cards are not accepted (Abrazhevich, 2004) The difference between this and credit card is customers must have a positive balance in their bank account in order to proceed with their purchases The money from customers’ account will be automatically deducted once they finish their debit transactions (Kim et al., 2010) 2.1.5 Antecedents of e-payment The use of e-payment system has become popular throughout the year; proven by quite a number of previous research for e-payment for e-commerce purposes, including Abrazhevich (2004); Tsiakis and Sthephanides (2004); Kim et al (2010); Aw, Ab Hamid and Eaw (2011); Özkan, Bindusara, and Hackney (2010); Lin and Nguyen (2011); and Teoh et al (2013) All of these researchers found that most consumers have adopted e-payment to their online transactions These researches were done based on the technological factors and users’ acceptance Most of these studies emphasize on trust and security issues, but in a different manner It is said that these factors are the key of why consumers’ are still hesitant and have a negative feeling about using epayment Kim et al (2010) focused on using technical protections, transaction procedures, security statements, and e-payment objective dimension as their variables to study the significance between trust and security to e-payment system Tsiakis and Sthephanides (2004) suggested that a high level of mechanism should be used in order to increase the confidence in security and trust This mechanism involves cryptography that has both symmetric (secret) form and asymmetric (public) form Aw, Ab Hamid and Eaw (2011) emphasized on risk perception in adoption of e-payment for e-commerce purposes The models used were based on five different risk perceptions, which are physical risk, performance risk, psychological risk, time-loss risk, and financial risk Others studies have adopted the widely used Technology Acceptance Model (TAM) (Teoh et al., 2013; Lin and Nguyen, 2011; Özkan, Bindusara, and Hackney, 2010) Additionally, further variables have been tested such as anonymity, reliability, traceability, and convertibility (Abrazhevich, 2004) 2.2 Frameworks used in investigating the intention to use electronic payments (research model and gap) This study will integrate factors from several existing models and theories, to indicate the intention to use e-payment This includes factors from both Technology Acceptance Model (TAM) and Theory of Reasoned Action (TRA) It is believed that these two models are the main factors to explain the reasons behind the behavioural intention, which is e-payment in this context Moreover, the significance of these models has been tested by Özkan, Bindusara, and Hackney (2010) and Teoh et al (2013) and it shows a positive relationship between TAM and TRA factors with the use/adoption of e-payment Factors used derived from TAM will be Perceived Usefulness (PU) and Perceived Ease of Use (PEOU), adapted from the origin of Davis, Bagozzi, and Warshaw (1989) This study 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my purchase if: No Item The structure and contents of the online payment website are easy to understand Learning to use the online payment system is easy for me Strongly Disagree Disagree Neutral Agree Strongly Agree I would find the online payment procedure to be flexible to interact with The online payment website / system is easy to navigate and user friendly The online payment system is easier to use compared to traditional ways The use of online payment system does not require my mental effort My interaction with the payment procedure would be clear and understandable The website is practical for me to conduct my online payment transaction It allows me to increase my efficiency in doing my transactions (save time) 57 No 10 11 12 13 14 Item Strongly Disagree Disagree Neutral Agree Strongly Agree Agree Strongly Agree It increases my productivity when doing my transactions (enables me to complete more tasks) The website provides information that is useful for my online transactions The online payment system can enhance my job performances The payment system makes it easier for me to my online purchases I think the online payment system is more useful than the traditional ways of paying transactions Quality of Internet Connection In my opinion, the following characteristics are important to carry out my online transaction: No Item The internet connection is stable The internet connection is trustworthy The internet connection is efficient The internet connection is easy to access The internet connection is freely available The internet download speed is good Overall, I am satisfied with the quality of the internet connection Strongly Disagree Disagree Neutral 58 Security When I am paying for my online transactions: No Item Strongly Disagree Disagree Neutral Agree Strongly Agree I am concerned with the security of my payment transactions I will be concerned about the risk of fraud (e.g: credit card fraud) I will be alert for security breaches I will discontinue the transaction if I know there is a security breach If I think the website lacks security measures, I will refrain from using it Matters of security have significant influence on me in doing my transaction (e.g: personal information, credit card number) The security statement for me to my transactions is important 59 Trust in online payment transactions I will make my payment for the online transactions when: No Item The company providing the service is trustworthy I trust the system and processes backing my transactions Strongly Disagree Disagree Neutral Agree Strongly Agree I trust the information provided during the payment process (e.g: clear and detailed steps) The payment system is proved by an independent institution I have faith in the company’s reputation in fulfilling my transaction I have faith in the effort taken by the provider to ensure the payment system to conduct my transaction is safe The payment system has a reputable track record The payment system gives me a reliable impression Other people I know also trust the payment system that I use 60 Social Influence In my opinion: No Item Strongly Disagree Disagree Neutral Agree Strongly Agree The people whose opinions I value would approve of me doing online transactions Most of the people I have in mind think that I should online transactions Online communities that I frequently visit encourage me even more to online transactions The people who are close to me would agree with me using online transactions Peer pressure have an impact on me to online transactions (e.g: following the trend) Reviews and reputation from the people I know influence me to online transactions 61 SECTION B Intention to use online payment transactions No Item Strongly Disagree Disagree Neutral Agree Strongly Agree I would use online payment platforms (online shopping carts) to buy goods and services online I am willing to provide information that will assist online vendors to service my future transaction needs I am attracted to the potential of using online payment methods (e.g credit cards) for online shopping I intend to use online payments frequently in the future I will be open to explore more ways to use online payments for shopping I will recommend online payment platforms to my friends I am satisfied with the effectiveness of the current online payment systems SECTION C PERSONAL PARTICULARS 62 Please fill in your personal detail below by ticking the appropriate boxes Gender: Male Female Age 18 – 20 21 – 23 24 – 26 Programme of Study Business Hospitality Engineering Others ( ) Income / Allowance Level 26 >RM2000 Others > years **THANK YOU FOR YOUR COOPERATION** 63 64 ... (perceived usefulness and perceived ease of use) integrated with the intention to use electronic payments? Do perceived risks (security and trust) influence the intention to use electronic payments?... attract users’ acceptance toward e- payment Therefore, the proposed hypothesis is: H2: Perceived ease of use (PEOU) will exert a significant influence on intention to use e- payment systems 2.4 Perceived... rejected The hypotheses for test of significance are: H0: μmale = μfemale (there is no difference between male and female in the intention to use epayment for online shopping) H1: μmale ≠ μfemale