Services on Mobile Banking

Banks offering mobile access are mostly supporting some or all of the following services:

Account Information

• Mini-statements and checking of account history

• Alerts on account activity or passing of set thresholds

• Monitoring of term deposits

• Access to loan statements

• Access to card statements

• Mutual funds / equity statements

9

• Insurance policy management

• Pension plan management

Payments & Transfers

• Domestic and international fund transfers

• Micro-payment handling

• Mobile recharging

• Commercial payment processing

• Bill payment processing

Investments

• Portfolio management services

• Real-time stock quotes

• Personalized alerts and notifications on security prices

Support

• Status of requests for credit, including mortgage approval, and insurance coverage

• Check book and card requests

• Exchange of data messages and email, including complaint submission and tracking

Content Services

• General information such as weather updates, news

• Loyalty-related offers

• Location-based services

10 3. Advantages of Mobile Banking

The biggest advantage that mobile banking offers to banks is that it drastically cuts down the costs of providing service to the customers. For example in US, an average teller or phone transaction costs about $2.36 each, whereas an electronic transaction costs only about $0.10 each. Additionally, this new channel gives the bank ability to cross-sell up-sell their other complex banking products and services such as vehicle loans, credit cards etc.

For service providers, through mobile messaging and other such interfaces, banks provide value added services to the customer at marginal costs.

The most obvious advantage of mobile banking is the anywhere/anytime characteristics of mobile services. A mobile is almost always with the customer. As such it can be used over a vast geographical area. The customer does not have to visit the bank ATM or a branch to avail of the bank‟s services. Research indicates that the number of footfalls at a bank‟s branch has fallen down drastically after the installation of ATMs. As such with mobile services, a bank will need to hire even less employees as people will no longer need to visit bank branches apart from certain occasions. The use of mobile technologies is thus a win-win proposition for both the banks and the bank‟s customers.

The banks add to this personalized communication through the process of automation. For instance, if the customer asks for his account or card balance after conducting a transaction, the installed software can send him an automated reply informing of the same. These automated replies thus save the bank the need to hire additional employees for servicing customer needs.

11 4. Architecture of mobile banking

Figure 2: Mobile banking architecture Source: Infogile Technology

The figure presents a typical mobile banking architecture, enabled through a secure applet located in the end-user‟s SIM card. Generally, mobile banking system is a multi-player platform mainly including: financial institution (banks), mobile network operator, internet companies, content providers, application providers, m-commerce companies and users. The relationship among those players in maintaining a proper eco-system for mobile banking service are assigned differently according to different mobile banking business models, namely: bank- focus model, bank- led model and non-bank led model (Infogile Technology, 2007). The bank- focus model emerges when a traditional bank use mobile banking as an additional channel for its existing customers to perform a limited banking services. The bank-led model offers distinct alternative to conventional branch- based banking in that customer conducts financial transactions at a whole

12

range of retail agents through a mobile phone. This model is applied to increase to financial outreach to remote areas or distinct market, which is significant cheaper than establish a bank branch. The non-bank led model limits bank‟s role as a safe-keeping fund while all other functions will be conduct by non-bank (e.g. Telecommunication Company) who has direct contact with individual customers. In Philippine, Ghana, South Africa and India, where establishing a bank branch is not applicable, Bank-led model is the most popular model. In case of Vietnam, mobile banking is firstly designed as additional exposure channel of banks with customer; therefore, bank- focus model takes place.

5. Popularity of mobile banking

Mobile banking is gaining popularity over the world. For instance, it is believed that mobile technology has solidified enough to the point of having 25% of US mobile phone users adopting mobile banking technology. Nowadays in US, about 1,000 banks now offer mobile banking, out of approximately 30,000 financial institutions in the nation. A few of the top features being utilized are notifications of low balances, overdrafts, suspicious activity, fraud alerts, and credit limits.

According to 2010 white paper from Juniper Research, the number of worldwide mobile phone users who perform mobile banking will double from 200 million in 2010 to 400 million in 2013.

The Far East and China currently account for about half of global mobile banking users, and that percentage will remain virtually flat as the number of users increases globally. Western Europe accounts for the second-highest percentage of users and the Middle East and Africa and North America ties for the third-highest percentage..Especially, Africa has been utilizing mobile banking as the main channel to reach and serve client in remote areas where setting a bank branch or office is too costly and unsecured. Mobile banking is also anticipated to play a key role in

13

bringing financial services to people in the Middle East and Africa. In Europe and North America, the technology will mainly serve as an extension of existing online banks as mobile handsets become more widely used for Internet access. By 2015, Berg Insight forecasts that mobile banking will attract 115 million users in Europe and 86 million users in North America.

According to the same paper, mobile banking will reach 816 million users in 2011, generate 37 billion USD revenue, recording as 13 times of that number in 2007. We share the same belief about promising future of mobile banking thanks to the global trend changing from 2G to 3G standards and the penetration of smart-phone which will encourage the uptake of mobile banking.

6. Overview of mobile banking service in Vietnam

Mobile phone has been developing at lightning speed and changing almost every aspect of our daily life. Particularly in financial industry, the internet boom and the appearance of more and more smart phones have allowed customers to use banking services at a long distance, thus making bank branches become deserted. In 2009, Bank of America was forced to close 10 percent of its 6,100 branches throughout the United States due to the dramatic increase in transactions via mobile phones and the internet (Review, 2009). However, this is not the case with Vietnam, despite it having among the highest telecommunications growth rates in the world (Dat, 2010).

Asia Commercial Bank (ACB) bank is the first bank introducing Mobile Banking service to Vietnam market in 2003. The move of ACB at that time was consider as “pioneer”, opening a new era of competition on technology oriented services in Vietnamese banking industry.

Since the first day of operation, ACB has indentified a vision to become the best commercial retail bank in Vietnam with customer- centric strategy. Target customers of ACB are individuals,

14

small and medium enterprises (SMEs). Year 2003 is a remarkable year of ACB when they tried to launch e-banking, phone- banking, mobile banking and home banking at the same time in order to compete over state-owned commercial banks.

At the early day of service, ACB bank account owner had to sign a contract of using Mobile Banking service. With a password provided by ACB, user could activate mobile banking service from their phone and use SMS to request for account balance, information about interest rate, exchange rate, and deposit money to their Visa Electron, Master Electronic or Citimart cart…By innovative service, ACB at that time attracted a lot of new customers. Its success was encouraged my Government in effort to break the Vietnamese habit of using cash and followed by other commercial banks. After ACB, other domestic banks like TienPhong- Bank, DongABank, Sacombank and Techcombank also activated their mobile banking service as an additional channel to communicate with current customers.

At that time, a primitive form of telephone banking worth mentioning is Vinaphone‟s EasyTopUp, which allows prepaid mobile phone subscribers with Sacombank credit cards to buy top-up cards via SMS. In mid-May 2009, TienPhongBank launched its Mobile Banking service to enable customers to make account inquiries, transfer money and pay internet fees with the aid of software installed in mobile phones. In addition, customers receive automatic notification about changes in the balance of their accounts. Set up by FPT Telecommunication Corporation (FPT), VMS (MobiFone), and VINARE (Vietnam National Reinsurance Corporation), TienPhongBank inherited strong capacity from Vietnam‟s two giants in information technology and telecommunications.

15

In more advanced level of service, Online transaction has been piloted by both Techcombank and DongABank. Clients need to have an account at DongABank, a mobile phone using GSM network and supporting JAVA software in order to register for the SMS banking service. The services provided include money transfer, prepaid cards purchase, online payment and electronic deposits. Techcombank allows customers to make payment through SMS, with customers simply sending a text message to give instructions to the bank.

Now all commercial banks in Vietnam are providing mobile banking service, in partnership with 7 mobile network providers and other payment service providers. However, mobile banking is still limited with non-financial service.

Currently, in a sustainable effort to reduce cash in daily transaction, Vietnamese government believed that mobile banking is one of the promising solutions for that issue. Either banks or mobile network providers have been pushed to participate in this game. So far, 100% banks in Vietnam are providing mobile banking services, in cooperation with one or all mobile network providers (State Bank, 2010). Mobile banking has become prior topic in most of banking conference and on media. For instance, the upcoming 14th Banking Vietnam conference in May, 2011 will focus on this topic under the theme of “Governance and Risk Management, Security in Banking system and Non-cash payment especially Mobile payment” (www.bankingvn.com.vn, 2011). However, mobile banking popularity and usage is still fairly questionable which also encourages this study.

16

Chapter 3: Literature Review

1. Technology Acceptance Model

One of the most common models used by researchers in the study about adoption of innovation technology is Technology Acceptance Model (TAM). TAM, firstly established by Davis, was often used to the test computer applications as computer adoption, word processors (Davis, 1989).

TAM later has been expanded used for internet, e-mail, WWW, GSS, intranet, e-commerce, m-commerce, e-learning, e-book (Al-Gahtani & King, 1999; Davis, 2007; Horton et al., 2001; Kim

& Han, 2008; Porgieter & Kang, 2010) under different situations (e.g, time and culture) with different control factors (e.g. gender, education…). Since mobile banking technology is considered as innovation technology, applying TAM model for this study should be most suitable.

In the other hand, TAM is chosen, because it is appreciated as the most parsimonious and widely accepted model (Srite & Karahanna, 2006) to examine adoption decisions at an individual level.

TAM proposed that both the perceived usefulness and perceived ease of use can be used to predict the attitude towards using new technology, which in turn affects the behavioral intention to use the actual system directly (Davis, 1989; Venkatesh et al., 2003). Perceived usefulness is defined by Davis, 1989 as „„the prospective user‟s subjective probability that using a specific application system will increase his or her job performance within an organizational context” and perceived ease-of-use is defined as „„the degree to which the prospective user expects the target system to be free of effort”. Thus for users of mobile banking, they will adopt the system if they believe the system will bring benefits such as reducing time spent on going to bank and improving efficiency (Rao & Troshani, 2007). Also, if users feel that mobile banking is easy to use and free of hustle, then the chances of them to use the system will be greater

17

Obviously, perceived usefulness is related to productivity but perceived ease-of-use is related to effort. These two dimensions will influence an individual‟s attitude that result in his/her behavioral intention, which affect his/her actual usage of technology (Davis, 1989). In addition, perceived ease-of-use affect perceived usefulness because the easier technology is to be used, the more useful it will be.

Figure 3: TAM model

After Davis, argued that the original TAM may have only limited ability to explain mobile banking adoption, because TAM neglects the social influence in the adoption of new technology.

TAM also assumes that there are no barriers to prevent an individual from using a particular system if he or she has chosen to do so (Mathieson, Peacock, & Chin, 2001). Therefore, prior studies have extended the original TAM with added constructs such as perceived playfulness (Moon& Kim, 2001), perceived credibility (Wang et al., 2003). Some even modified TAM to become a new model. For instance, Unified Theory of Acceptance and Use of Technology (UTAUT model) aimed to explain users‟ intention to use an information system and their subsequent usage behavior, holding four key constructs performance expectancy, effort

expectancy, social influence, and facilitating conditions) as direct determinants of usage intention and behavior (Venkatesh et al., 2003). The variables of gender, age, experience, and

18

voluntariness of use are posited to moderate the impact of the four key constructs on usage intention and behavior (Venkatesh et al., 2003).

In more recent research on internet banking or mobile commerce, researchers also applied TAM as the base model and extend the model by including other variables, such as perceived risk, perceived financial cost, perceived self- efficacy, government support (Luan, &Lin, 2006; Wu

&Wang, 2005, Yiu et al., 2007). Motivated by those researches, this study also found that TAM model must be the most suitable theory could explain users‟ behavioral intention and actual usage of mobile banking in Vietnam.

2. Research on Mobile banking

The adoption of mobile banking has become the game- changer in banking and finance sector around the world which made it become an attractive topic for research. The following table presented a brief summary of research done on mobile banking adoption recently:

Table 2: Research on Mobile Banking

Author Research model Measurement variables Country

Minna Mattila (2002) Rogers' diffusion

model Relative advantage

Luarn & Lin (2005) TAM model Perceived usefulness Perceived ease of use

Taiwan

19

Perceived credibility Perceived self- efficacy Perceived financial cost Behavioral Intention Sulaiman et al., (2007) Rogers' diffusion

model

Demographic

Personal innovativeness Mobile banking adoption

Malaysia

Gu & Lee (2009) TAM model Perceived usefulness Perceived ease of use

Sustained usefulness and sustained usage

Ghana

Riquelme, Hernan E.; Rios, Rosa E (2010)

TAM model Perceived of relative advantage Perceived risk

Either using Roger‟s diffusion model or TAM model, previous research shared the same point of using perceived usefulness, perceived ease of use and perceived risk or trust in mobile banking system as the main construct for research model. Other variables such as facilitating conditions or

20

personal innovativeness were also taken into consider depending on each country‟s problem situation.

We could not find any empirical study on mobile banking in Vietnam although it has been introduced for 10 years. Most of the discussions about mobile banking in Vietnam are presented in term of news report or expert opinion on banking industry newspaper or forum. Therefore, more systematic study about this important topic is needed.

Responding to previous researches, this study will also use TAM as based model and include more additional variables which are believed to be important for In order to increase the predictive power of TAM in measuring the mobile banking adoption in Vietnam, additional construct were added to the original factors- perceived usefulness and perceived ease of use. The new factors included in this study are believed to play potential influences on adoption behavior of mobile banking users:

 Perceived risk (Pikkarainen, 2004)

 Facilitating conditions (Crabbe, Standing, & Standing, 2009)

 Personal innovativeness in technology (Rogers, 1995; Agarwal & Prasad, 1998; Lu, Yu, Liu, & Yao, 2003).

3. Constructs of the model

3.1. Perceived usefulness

Perceived usefulness is known as performance expectancy when people think that based on advantages of innovation, information technology (IT) can help them enhance productivity and aid work performance (Davis, 1989; Davis, 2007).

21

Liao and Cheung (2002) in their study about electronic banking measured perceived usefulness in a multi dimension with vast variables such as transaction speed, use-friendliness, user experience, accuracy, convenience, etc.

The importance of perceived usefulness has been widely recognized in technology adoption in past study. Jeyaraj et al. (2006) in their review of technology adoption studies from 1992-2003, found that of the 29 studies on technology adoptions, perceived usefulness was found to have significant influence on the user‟s intention to adopt and technology.

Perceived usefulness is also one of the common factors applied in existing electronic banking study. Guriting and Ndubisi, 2006; Laforet and Li, 2005; Liao and Cheung, 2002 have approved the significant effect of perceived usefulness on adoption intention, where perceived usefulness is known as advantage of innovation over existing banking channels. Pikkarainen et al, 2004, in their study of online banking in Finland, found that perceived usefulness is one of the most significant influence on the intention to use online banking among the consumers. Moreover, Polatoglu and Ekin, 2001 pointed out the greater the perceived usefulness of using electronic banking service, the more likely that electronic banking will be adopted. Evidently, Luarn and Lin (2005) examined that perceived usefulness has significant impact in the development of initial willingness to use mobile banking.

This study found that Davis‟s definition of perceived usefulness most applied where perceived usefulness means that the application is found available and helpful for customer at anytime and anyplace, allowing them to conduct their needed banking services more efficiently and encourage them to take part in more banking transactions.

22 3.2. Perceived ease of use

Perceived ease of use is defined as “the degree to which a person believes that using a particular system would be free of effort” (Davis, 1989). Innovative technology system that is perceived to be easier to use and less complex will have a higher likehood of being accepted, and used by potential user (Davis, 1989). Besides perceived usefulness, perceived ease of use has also been validated as important determinant in adoption of a lot of information technologies, such as intranet (Chang, 2004), WWW (Lederer, Maupin, Sena, & Zhuang, 2000), online banking (Wang, Wang, Lin, & Tang, 2003), and wireless internet (Lu, Yu, Liu, & Yao, 2003). Rogers, 1995 also pointed out that the complexity of one particular system will discourage the adoption of an innovation.

Consult (2002) noted that perceived ease of use refers to the ability of consumers to experiment with a new innovation and evaluate its benefits easily. He also affirmed that the drivers of growth in electronic banking are determined by the perceived ease of use which is a combination of convenience provided to those with easy internet access, the availability of secure, high standard electronic banking functionality, and the necessity of banking services.

In Vietnam, as (Hoang, 2003) pointed out, Vietnamese users have little experience in using the internet and therefore the ease of use of the online banking web site might influence their adoption decision. According to Thatcher & Perrewe, 2002, the ease of use of a new system is

In Vietnam, as (Hoang, 2003) pointed out, Vietnamese users have little experience in using the internet and therefore the ease of use of the online banking web site might influence their adoption decision. According to Thatcher & Perrewe, 2002, the ease of use of a new system is