Adoption of e-Banking in Context of a Developing Country, Pakistan

Abstract

Based on the notion of e-Readiness, this research aims to provide a detailed and original explanation of the factors that may affect the adoption of Internet banking, which is a relatively latest variant of electronic banking, by banking organizations in Pakistan. Moreover, it explores the relationship between Internet banking adoption and the contextual factors in a way to classify and relate these factors according to their role assessed in the adoption of Internet banking. The existing body of knowledge in this area is mainly concentrated in the cultural context of developed countries which fails to capture the idiosyncrasies in the contextual environment of the banks in Pakistan and hence their affect on the adoption of Internet banking. In Pakistan, there is very little research conducted on banking organizations, particularly none of research studies has addressed the factors and their role in influencing Internet banking adoption in Pakistan, the focus of this research. This study uses mixed research methods in a manner in which the quantitative methods and data analysis approach is employed to supplement the core of data analysis which is carried out using qualitative and interpretive approach. First stage in this research involved, an online survey of the entire banking sector of Pakistan which was conducted to assess the level of Internet banking functionality extended by the banking organizations in Pakistan. Next, the key factors influencing the adoption of Internet banking were identified through field interviews and case study on a banking organization. This was followed by case studies on three banking organizations two of which had already adopted Internet banking and the remaining one was contemplating to adopt. And finally, data was collected through a web based survey from eighteen banking organizations to supplement the analysis of case studies. This research identified the following factors as the key factors influencing the adoption of Internet banking; Organizational Readiness and its constituent factors namely Organizational structure; Resources; Commitment; Adoption strategy; 2. Internal Technological Readiness and its constituent factors namely Relative advantage, Security Risk, Compatibility, Technology complexity); 3. External Technological Readiness and its constituent factors namely Access Technology and Infrastructure; Availability of complementary assets; 4. Environmental Readiness and its constituent factors namely Policy Readiness; Market Readiness; and Society Readiness. The research demonstrates that the factors shaping the internal e-Readiness dimension of an organization are more likely to determine the decision on adoption of Internet banking. Whereas, the factors that shape the external e-Readiness dimension of an organization are likely to determine the decision to move to a next higher level of adoption. These factors based on their perceived role in influencing the adoption of Internet banking were further classified and grouped as Motivational, Inhibiting and Situational factors. Motivating factors included commitment, compatibility, availability of complimentary assets, and relative advantage. Inhibiting factors included security risk, technology complexity, access technology infrastructure, market readiness, and society readiness factors. Situational factors included organizational structure, adoption strategy, resources and policy readiness.