E-Business Adoption in Banking Sector: Empirical Study

Indian Journal of Science and Technology, Vol 8(27), DOI:10.17485/ijst/2015/v8i27/70739, October 2015 ISSN (Print) : 0974-6846 ISSN (Online) : 0974-5645 E-Business Adoption in Banking Sector: Empirical Study Mansour Naser Alraja 1* and Nazem M.M. Al-ahmad Malkawi 2 1 Management Information Systems department, College of Commerce and Business Administration, Dhofar University, Salalah state, Sultanate of Oman; malraja@du.edu.om 2 Management Information Systems department, Faculty of Economics and Business, Jadara University, Jordan Irbid; n_malkawi@hotmail.com Abstract Background / Objectives: Depending on prior models, especially Technology, Organization and Environment (TOE) framework, this study aims to develop a research model to study critical factors that affect E-Business Adoption in the Banking Sector. Methods / Statistical Analysis: The research model focuses on examining the impact of organizational capabilities, technology readiness, competition intensity and perceived benefits on adoption of e-business. Data gathered from 106 executives in Jordanian banks was employed to test the effects between the research model constructs using a multiple linear regression test. Findings: From the model factors of this study, the results highlight that perceived benefits, competition intensity and technology readiness are significant factors that shape and affect the e-business adoption. Implications: For practice and research are discussed. Keywords: Competition Intensity, E-business, Organization Compatibilities, Perceived Benefits, Technology Readiness 1. Introduction The emergence of digital technology and its multiple uses across all walks of life, led to increase in the demand technology swiftly with a view towards its acquisition and utilization. The great advances in the field of Internet have led to an increase in the speed of digitization, globalization and more economic liberalization 1. Thus, the adoption of this technology in business is a growing topic 2. Technology adoption will help firms in reaching out to potential customers across the globe 3. This study focuses on banks, as they are one of the most important pillars of economic development. Therefore, it can be said, that any greater development will increase the need for a more sophisticated banking system and a wider range of services. Especially in Jordan, more efforts are needed to improve e-business since Jordanian banks are under pressure from their main competitors; hence, they need to find new opportunities to reduce costs and improve performance. Consequently, it is essential to identify the critical factors that affect e-business adoption among banks in Jordan. To the best of our knowledge, very limited empirical research has been performed to identify the critical factors that affect e-business adoption among Jordanian banks using organizational compatibilities, perceived benefits, competition intensity and technology readiness constructs. The main objective of this study is to identify the extent to which the adopted factors affect e-business adoption in Jordanian banks, and to subsequently fill this gap. The focus on information technology led many studies to investigate the level of information technology adoption in different disciplines such as e-commerce and e-government using validated models such as Technology Acceptance Model (TAM) and Unified Theory of Acceptance and Use of Technology (UTAUT) 4 6. However, the increase in the level of technology accumulation may help to increase firm s capability to adopt e-business 7. So e-businesses can create significant capital for corporations while enhancing *Author for correspondence

E-Business Adoption in Banking Sector: Empirical Study long-term efficiency 8. Despite the positive effect of e-business solutions on different business processes 9,10, the benefits do not always lead to improved profits and sales 11. Thereby, even though there are a lot of advantages of e-business, the risk associated with its activities is also great 12. In Zilber and Araújo 13 study, it was found that firms using e-business could broaden their business scope, but they faced obstacles with regard to technology readiness, especially in web activities and in training of personnel to work on the internet. In another study, trust had a direct effect on e-business 14. The readiness to adopt e-business is a vital tool for success in e-business 15. The initial intent of trial and error process is a salient variable for E-business adoption 16. 1.1 Technology Readiness (TR) This refers to the sophisticated level of information systems usage in companies 17. Companies with sufficient level of information technology resources have increased their chances to successfully adopt e-business 18 20. Within the banking sector, we need to focus on the ways of conducting transactions and provide services. Additionally, emphasis is to be laid on how to process and coordinate information within the bank and its partners, alongside tools that companies should use to support the applications that can be used in collaboration with e-business on the front and back end 21. Therefore, this study is focused on the same context as the previous study. Regarding our study, we will use technological readiness construct to measure the actual usage of internet by banks. This construct refers to the combination of website functionality, technology in use, and back end integration, which is reflected by the extent to which the existing bank technology is ready to adopt e-business. This leads to suggest the following hypothesis: H 1 : There is a positive effect of technology readiness for the adoption of e-business. H 2 : There is a positive effect of organization compatibility on the adoption of e-business. 1.3 Perceived Benefits (PB) It means that adopted technology will provide more advantages than previously used technology. Potential benefits, such as cost effectiveness and flexibility, of e-business are important factors in e-business adoption 20. Lina and Lin 18 found that higher the level of expected advantages of e-business adoption will aid in the facilitation of the use of e-business by firms. In the context of this study, banks which expected high benefits of e-business are more likely to adopt e-business. So we formulate following hypothesis. H 3 : There is a positive effect of perceived benefits for the adoption of e-business. 1.4 Competition Intensity (CI) In adoption literature, competition intensity was considered a vital factor 21 where some studies found that companies may be able to change competition principles when they adopt technology 21 23. High level of competition intensity is linked to high levels of information technology usage 17. Implementation and operations of e-business may be more successful in an environment with high level of competition. With regard to the banking sector, competition intensity means the degree to which the bank will be affected by competitors within the banking industry; hence, banks that face high competition intensity are more likely to adopt e-business. This discussion leads to suggest the following hypothesis: H 4 : There is positive effect of Competition intensity on adoption of e-business. In following Figure 1 research model it depicts key variables affecting e-business adoption. 1.2 Organization Compatibilities (OC) Refers to the extent to which e-business is consistent with work practices and existing beliefs 18. Using internet will improve connectivity and data exchange and that will lead to removal of inconsistency found in traditional information systems 22. In this study, we suppose that banks expect e-business content to be compatible with their needs, operating practices and beliefs that it is easy to adopt e-business. This leads to formulation of the following hypothesis: Figure 1. Research model. 2 Vol 8 (27) October 2015 www.indjst.org Indian Journal of Science and Technology

Mansour Naser Alraja and Nazem M.M. Al-ahmad Malkawi 2. Methodology Our model was tested using a paper questionnaire to collect data. We applied this study in the Jordanian banking sector to investigate banks attitudes towards adoption of electronic business in their operations. The goal of this questionnaire was to assess the awareness of bank s employees, about the use of electronic business in their banking operations. For analyzing the results, multiple linear regression technique was employed. 2.1 Sample A random sample was selected for data collection. To add more transparency to our study only employees, who are most knowledgeable about electronic business, were eligible to fill the questionnaire. The number of received, completed and valid questionnaires was 106. 76% of the participants were male, ages ranging from 30-60. All respondents were familiar with electronic business. 2.2 Instrument Development Depending on validated instruments, we prepared the questions of our survey 17,20,22. We made some modifications to fit our topic content and environment. A review of content validity was done by two different groups. The first one contained expert people, who are working in banking sector; and the second group contained faculty members, who are interested in electronic business. Next, we randomly ordered result items for each construct. The survey instrument is comprised of the 5-point likertscale, which has been used for measuring the responses. The Likert-scale was based on 1-5 scale, where 1 = strongly agree and 5 = strongly disagree. For reliability purposes, all items were tested using chronbach s alpha in Table 1. The table includes the reliability scores of independent variables used in the survey instruments. The score highlights the extent to which the results obtained by this instrument are reliable and can be generalized. Table 1. Reliability Analysis Variables # Items Reliability Technology Readiness TR 9 0.833 Organization Compatibilities OC 3 0.711 Perceived Benefits PB 4 0.725 Competition Intensity CI 4 0.799 E-Business Adoption EB 5 0.783 2.3 Data Analysis The research model was tested using multiple linear regression analysis. Four independent variables: Technology Readiness, Organization Compatibilities, Perceived Benefits and Competition Intensity were used, whereas one dependent variable: E-Business Adoption was used. The aim of this research was to set the extent to which Jordanian banks are affected by information technology (independent variable) to adopt electronic business (dependent variable). 3. Results Results of multiple linear regression analysis are seen in Table 2. The adjusted R 2 = 0.79, which means that the model explicated 79% of the variance in respondents adoption of ecommerce. The whole model was significant based on calculations of F = 99.101 and P = 0.00. Moreover, each variable was tested for significance. Depending on this test, all four hypotheses are supported in general. Table 3 shows the significance of constructs and supported hypotheses. The table highlights the F score and sig. value obtained by MLR performed between TR, OC, PB, CI, EB. This table represents the sig. values, coefficients and acceptance of the research hypotheses indicated by H 1, H 2, H 3, H 4. Table 2. Multiple Linear Regression Adjusted R Square F Sig. 0.79 99.101 0.000 Predictors: (Constant), TR, OC, PB, CI, EB Dependent Variable: EB Table 3. Hypotheses Test Hypotheses Coefficients T value Sig. Supported H1 (TR).206 2.759.007 YES H2 (OC).136 2.122.036 YES (week effect) H3 (PB).402 4.479.000 YES H4 (CI).268 3.470.001 YES 4. Discussion and Implications In this study, we examined the effect of independent variables (technology readiness, organization compatibility, Perceived Benefits and Competition Intensity) on the Vol 8 (27) October 2015 www.indjst.org Indian Journal of Science and Technology 3

E-Business Adoption in Banking Sector: Empirical Study dependent variable (E-Business adoption). The findings of this study indicate that Jordanian Banks are ready to adopt E-business and they are aware of the benefits, which can be gained once they convert to E-business. Furthermore, they were convinced if they adopted E-business, it will give them a competitive edge, depending on competition intensity. On the other hand, respondents are worried that the current infrastructure in their banks will not be enough to adopt E-business. So these banks should make some significant changes, especially in information systems infrastructure. The first implication of this study is that information technology infrastructure is the key to success in: Serving different functional areas, providing more flexibility to the bank, and increasing the bank s ability to satisfy all their stakeholders. Firstly, this would lead successfully to facilitate E-business adoption. Secondly, because expected benefits have a positive impact on the adoption of E-business, bank managers should seek to convert those opportunities into reality, in order to ensure fruitful results alongside the shift towards e-business. Thirdly, because of competitive pressure, managers should take into consideration that e-business adoption will give them a competitive advantage. In order to exploit this opportunity, they have to move forward to implement changes in work procedures, especially when they know that their company has insufficient capabilities to adopt e-business, which is the main implication of this study. 5. Conclusion Following our study model, future research can be conducted on the same banks after a while to determine their developments in adoption of e-business. For organizational compatibility, future research may use different indicators with more clarification to investigate the real effect on compatibility. 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Mansour Naser Alraja and Nazem M.M. Al-ahmad Malkawi 17. Hsu P-F, Kraemer KL, Dunkle D. Determinants of E-Business Use in U.S. Firms. International Journal of Electronic Commerce. 2006; 10(4):9 45. 18. Lina H-F, Lin S-M. Determinants of e-business diffusion: A test of the technology diffusion perspective. Technovation. 2008; 28(3):135 45. 19. Morrison AJ, King BEM. Small tourism businesses and e-commerce: Victorian tourism online. Tourism and Hospitality Research. 2002; 4(2):104 15. 20. Wang S, Cheung W. E-Business Adoption by Travel Agencies: Prime Candidates for Mobile e-business. International Journal of Electronic Commerce. 2004; 8(3):43 63. 21. Zhu K, Kraemer KL, Xu S, Dedrick J. Information technology Payoff in E-Business Environments: An International Perspective on Value Creation of E-Business in the Financial Services Industry. Journal of Management Information Systems. 2004; 21(1):17 54. 22. Zhu K, Kraemer KL, Xu S. Electronic Business Adoption by European Firms: A Cross Country Assessment of the Facilitators and Inhibitors. European Journal of Information Systems. 2003; 12(4):251 68. 23.Porter ME, Millar VE. How information gives you competitive advantage. Harvard Business Review. 1985; 63(4):149 60. 7. Appendix A Survey Questionnaire Items # Items Mean Std. D TR1 The telecommunications infrastructure in your bank is good. 4.1132.63727 TR2 Our bank Web applications are integrated and serving different functional areas. 3.9717.54261 TR3 Using reachable central database for various applications gives the bank more flexibility. 3.4528.99649 TR4 Bank employees are aware of e-business functions. 3.9245.61254 TR5 IT employees are highly specialized and knowledgeable of e-business functions. 3.8208.68726 TR6 The training courses will increase their awareness about new updates in e-business field. 3.6981 1.07942 TR7 The bank benefit too much extent using an intranet and extranet. 3.8679.89523 TR8 I think that our partners are satisfied of using our extranet. 3.6981.64983 TR9 by using a call center we can be in touch with all stakeholders. 3.8019.94031 TR 3.8166.52544 OC1 Implementing the changes caused by the adoption of e-business is compatible with existing 3.7925.67213 operating practices OC2 Implementing the changes to work procedures initiated by the adoption of e-business is 3.8208.70098 compatible with the beliefs and values in our firm OC3 The adoption of e-business is compatibility with existing IS infrastructure 3.6981.64983 OC 3.7704.53721 PB1 E-business is useful to expand market for existing products/services 4.0094.71040 PB2 E-business is useful to provide more timely and accurate information for decision-making 3.8679.57030 PB3 E-business is useful to provide a better mode of transaction communication 4.0472.57540 PB4 E-business is useful to improve coordination with trading partners 4.0566.59889 PB 3.9953.45641 CI1 I think that our bank affected by national competitors. 3.9623.66080 CI2 I think that our bank affected by international competitors. 3.7925.47242 CI3 we moved to e-business because of competitive pressure 3.9151.48043 CI4 our bank will lose its competitive advantage if does not transfer to e-business. 3.9057.48850 CI 3.8939.41968 EB1 In near future the bank has Intention to expand on-line business. 3.8962.49626 EB2 The bank has intention To increase involvement in e-commerce 4.0472.62308 EB3 the bank focus on e-commerce for business development 3.7925.72660 EB4 The bank use CRM system to support customers on-line 3.7547.62961 EB5 The bank s employees have sufficient knowledge how to implement on-line processes. 4.0283.59294 Vol 8 (27) October 2015 www.indjst.org Indian Journal of Science and Technology 5