Consumer perceptions of the barriers to adoption of internet banking: a case study in Libya

(1)

UNIVERSITY OF SOUTHERN QUEENSLAND

Consumer Perceptions of the Barriers to Adoption of

Internet Banking: A Case Study in Libya

A thesis submitted in fulfilment of the

Requirement for the award of

Doctor of Philosophy

By

Ghaled K. Elsaber Hossen

Student ID: 0050100884

School of Information Systems

Faculty of Business, Education, Law & Arts

(2)

I ABSTRACT

Banking services have been impacted by developments in information technology and considerable funds have been invested in the development of communications technology in the banking sector. E-banking is the major platform for adopting and using highly-developed IT systems in banking services. Evaluating an individual's acceptance of using e-banking technology, and Internet banking in particular, is a key issue facing the banking sector. Arguments remain about the most important factors that impact upon customers’ willingness to adopt Internet banking, despite considerable attention being paid to issues of assessment of the adoption of e-banking services in general, and Internet e-banking in particular. This study reviewed relevant IT literature which informed the development of an extension of the Technology Acceptance Model (TAM) by adding external factors with the aim of being more relevant for developing countries such as Libya. This study proposes an assessment methodology model to foster the adoption of Internet banking in Libya. The study model included six constructs: Trust, Security, Customer Support, Internet Network Quality, Perceived Ease of Use and Perceived Usefulness. The study model considered perceptions of bank customers about these constructs relating to the adoption of Internet banking services. The instrument was designed to measure the attitudes of bank customers towards the adoption of online banking. A quantitative study was conducted with survey responses received from 536 Libyan bank customers. The findings confirmed that the study model is valid and reliable to measure the adoption of Internet banking from the point of view of customers’ perceptions; and the study model supported the relationships among the seven constructs.

The findings of the study indicate that Libyan bank customers perceive Internet banking to be risky but essential to development and growth of the economy. Bank customers are planning to adopt banking services through the Internet despite their concerns relating to factors such as security, trust, support and Internet quality that relate to Perceived Ease of Use (PEOU), and Perceived Usefulness (PU) of the new technology. The adoption of Internet banking technology may expand extensively in the Libyan banking sector in the near future. The use of Internet banking still presents number of challenging issues. Assessing the acceptance of Internet banking usage is seen as an important issue encountered by the banking sector. The key reasons behind the reluctance by users towards use online banking services include the persistence of factors that impact upon the adoption of e-banking services. The quantitative analysis of results from the survey questionnaire confirmed all the relationships in the traditional TAM, as well as the importance of trust and security in the new technology and issues relating to Internet network quality and support. Factors such as PU were confirmed in terms of their impact upon user or non-users’ intentions towards using new technology. PEOU was another major determinant factor influencing customers’ intention towards the use of Internet banking technology.

(3)

II CERTIFICATION OF DISSERTATION

I certify that the ideas, results, analyses and conclusions reported in this dissertation are entirely my own effort, except where otherwise acknowledged. I also certify that the work is original and has not been previously submitted for any other award, except where otherwise acknowledged.

Candidate signature

______________________________ ______________________________ Ghaled K Elsaber Hossen Date

ENDORSEMENT Principal Supervisor

______________________________ ______________________________ Professor Jeffrey Soar Date

Co-Supervisor

(4)

III ACKNOWLEDGEMENT

Firstly, I would like to present my gratefulness to ALLAH (God) for assisting me in the completion of this dissertation.

All my deepest gratitude and thanks to Professor Jeffrey Soar, the principal supervisor of this study. He has great knowledge and experience in the information systems field and he guided and motivated me immensely to accomplish the research objectives effectively. He gave me a lot of time and he always was available for me. I do not have sufficient words that could describe the efforts that Prof Jeffrey Soar put in towards my research.

I would like to thank my co-supervisor Dr Mustafa Ally, who provided me with guidance, support and encouragement during all the stages and especially at the beginning of my study. His advice and suggestions helped me in selecting the study topic.

Also my thanks to my all Family, friends and banks staffs for their support and help to gather the data. My great thanks to banks customers who participated in my study. Without your assistance this study would not have been completed. Thanks are due to the Ministry of Higher Education and Scientific Research of Libya for giving me the opportunity to complete my PhD study.

I would like to acknowledge the people who assisted me during my study: Ahmed Moftah and his family, Imad Alhouny, Raf-Allah Algoabily, Mohamed Bonowara and Monsef Mousa. I would like to appreciate the efforts of Farj Alshwihidy and Hafz Alsedig for their worthy help and suggestions about the statistical methods. Thanks for Libyan PhD students (colleagues) at USQ.

I am particularly grateful and my special thanks go to the editor Chris O’Reilly, I am greatly indebted to her. I also acknowledge the work put in by the editor Libby Collett to edit and improve the English usage within the thesis.

(5)

IV Table of Contents

1. CHAPTER ONE: INTRODUCTION ... 2

1.1. Introduction ... 2

1.2. Online banking services ... 2

1.3. Background to Libya ... 5

1.3.1. Geographical location and population ... 5

1.3.2. The history of Libya ... 6

1.3.3. Italian colonial period ... 6

1.3.4. Libya's political history ... 6

1.3.5. The Revolution of 17th of February ... 7

1.3.6. Religions ... 8

1.3.7. Libya’s judicial system and legislation ... 9

1.4. Libyan economy ... 9

1.5. Libyan banking sector ... 12

1.5.1. Islamic banks ... 12

1.5.2. Libyan commercial banks ... 13

1.5.3. Information technology in commercial banks... 14

1.6. Research approach ... 15

1.7. Research Motivation and Contribution ... 15

1.8. Research objectives ... 16

1.9. Statement of the problem ... 16

1.9.1. Research Questions ... 17

1.10. Significance of the study... 17

1.11. Chapter summary ... 18

2. CHAPTER TWO: LIBYAN BANKING SECTOR ... 20

2.2. About the banking sector in Libya ... 20

2.3. Development of Libyan banking sector ... 22

2.4. Organising the Libyan banking sector ... 24

2.5. Technology in Libyan banking sector ... 26

2.5.1. The national payments system ... 26

2.6. Banking sector reform ... 29

2.6.1. Privatisation of commercial banks ... 30

2.6.2. Standards of conduct for companies in the banking business ... 31

2.6.3. Abolition of bank interest ... 32

2.7. Banking Supervision ... 32

(6)

V

2.8.1. Central Bank of Libya (CBL) ... 34

2.8.2. Commercial banks:... 36

2.8.3. Libyan Foreign Bank... 40

2.8.4. Specialised banks ... 41

2.9. Chapter Summary ... 42

3. CHAPTER THREE: LITERATURE REVIEW ... 44

3.2. Background ... 44

3.3. Electronic banking ... 46

3.3.1. History ... 46

3.3.2. Features of electronic banks ... 47

3.4. Importance of information technology in banks ... 47

3.5. Arab electronic banking services: ... 48

3.6. Obstacles facing e-banking services in the Arab countries ... 52

3.7. Mechanisation difficulties in Libyan banks ... 55

3.7.1. Economic constraints (financial): ... 56

3.7.2. Technical limitations: ... 56

3.7.3. Administrative and social obstacles ... 56

3.8. The need for online banking services in Libya ... 57

4. CHAPTER FOUR: RESEARCH METHODOLOGY ... 62

4.2. Research Methodology ... 62

4.2.1. Quantitative Approach ... 63

4.3. The research problem ... 64

4.3.1. Research Questions ... 66

4.4. The research framework ... 66

4.4.1. Technology Acceptance Model (TAM) ... 67

4.4.2. The extension of TAM ... 68

4.4.3. TAM framework for use in developing countries ... 68

4.5. Research model and hypotheses ... 69

4.5.1. Research Model ... 69

4.5.2. Research Hypothesis ... 70

4.5.3. Hypotheses and definition of key factors ... 71

4.6. The research community and the study sample ... 74

4.7. Data collection ... 75

(7)

VI

4.7.2. Research Ethics ... 79

4.8. Data analysis ... 80

4.8.1. The Components of SEM technique ... 81

4.8.2. Absolute Fit Indices ... 82

4.8.3. Validity and Reliability ... 83

4.8.4. Squared Multiple Correlation (SMC)... 84

4.8.5. Cronbach's alpha ... 84

4.8.6. T-test ... 84

5. CHAPTER FIVE: RESULTS ... 87

5.1 Introduction ... 87

5.1.1. Overview ... 87

5.2. Descriptive statistics ... 87

5.2.1. Sample Characteristics ... 87

5.3. Measurement model and testing study model and hypotheses ... 91

5.3.1. One-factor congeneric measurement model for constructs ... 91

5.3.2 Exogenous and endogenous factors first-order CFA ... 97

5.3.3 Measurement Model... 100

5.3.4 Validity and reliability ... 101

5.3.5 Testing the study model and the hypotheses ... 103

5.4 Content Analysis of Bank Customers’ Comments ... 106

5.4.1 Communications infrastructure ... 107

5.4.2 Online banking products and services... 107

5.4.3 Safety and Security ... 108

5.4.4 Trust factor ... 109

5.4.5 Culture and Media ... 109

5.4.6 The technology used in commercial banks ... 109

5.4.7 Privacy... 110

5.4.8 Other issues ... 110

5.5 Chapter summary ... 110

6. CHAPTER SIX: DISCUSSION ... 112

6.4 The findings of demographic data ... 113

6.5 Discussion of the measurement model ... 116

6.5.1 Perceived Ease of Use ... 116

6.5.2 Perceived Usefulness ... 116

(8)

VII

6.5.4 Support ... 117

6.5.5 Security ... 118

6.5.6 Trust ... 118

6.6 Discussion on the structural model and hypotheses ... 118

6.6.1 Discussion on the results of the endogenous factors ... 119

6.6.2 Discussion the results of the exogenous factors ... 121

6.7 Discussion of content analysis of bank customers’ comments ... 124

6.8 Chapter summary ... 126

7. CHAPTER SEVEN: CONCLUSION AND RECOMMENDATIONS ... 128

7.2 Research objectives ... 129

7.3 Research problem ... 130

7.3.1 Research questions ... 130

7.4 Research contributions ... 131

7.4.1 Contribution to knowledge ... 131

7.4.2 Contribution to practice... 132

7.5 Recommendations ... 133

7.6 Research Limitations ... 134

7.7 Future research ... 135

8. REFERENCES LIST: ... 136

9. APPENDICES ... 153

9.3 Appendix A: Ethics Approval of USQ ... 153

(9)

VIII LIST OF FIGURES

Figure 1 Structure of Libyan Banking System ... 34

Figure 2 the Research Model ... 69

Figure 3 Gender... 88

Figure 4 Ages ... 89

Figure 5 Educational levels ... 89

Figure 6 One-factor congeneric measurement model of Perceived ... 92

Figure 7 One-factor congeneric measurement model of Perceived ... 92

Figure 8 One-factor congeneric measurement model of Perceived usefulness (First iteration) ... 93

Figure 9 One-factor congeneric measurement model of Perceived usefulness (Final iteration) ... 93

Figure 10 One-factor congeneric measurement model of Internet quality (First iteration) ... 94

Figure 11 One-factor congeneric measurement model of Internet quality (Final iteration) ... 94

Figure 12 One-factor congeneric measurement model of Support ... 95

Figure 13 One-factor congeneric measurement model of Support (Final iteration) .. 95

Figure 14 One-factor congeneric measurement model of Security ... 96

Figure 15 One-factor congeneric measurement model of Security ... 96

Figure 16 One-factor congeneric measurement model of Trust ... 97

Figure 17 One-factor congeneric measurement model of Trust ... 97

Figure 18 One-factor congeneric measurement model of Intention ... 97

Figure 19 One-factor congeneric model exogenous constructs ... 98

Figure 20 One-factor congeneric model endogenous constructs ... 99

Figure 21 Seven first-order correlated factors for measured model ... 101

(10)

IX LIST OF TABLES

Table 1-1 GDP of Libya (1980-2010) ... 11

Table 2-1 Assets & Liabilities of Central Bank of Libya ... 21

Table 2-2 Companies Listed in Libyan Stock Market 2013(Million L.D.) ... 30

Table 2-3 Percentage of banks owned ... 31

Table 2-4 Deposits in Central Bank of Libya (Million L.D.) ... 36

Table 2-5 Liabilities of commercial banks (Million L.D.)... 37

Table 2-6 Loans of specialised banks (Million L.D) ... 41

Table 3-1 Internet user in Arab world ... 51

Table 5-1 Demographic variables results ... 88

Table 5-2 Population's sample results answer ... 90

Table 5-3 Customers methods of using banking services ... 90

Table 5-4 CFA goodness of fit for Perceived Ease of Use ... 92

Table 5-5 CFA goodness of fit for Perceived Usefulness ... 93

Table 5-6 CFA goodness of fit for Internet quality ... 94

Table 5-7 CFA goodness of fit for support ... 95

Table 5-8 CFA goodness-of-fit for security ... 96

Table 5-9 CFA goodness-of-fit for Trust ... 96

Table 5-10 CFA goodness of fit for intention to use online banking ... 97

Table 5-11 CFA goodness of fit for exogenous constructs ... 98

Table 5-12 CFA goodness of fit for endogenous constructs ... 99

Table 5-13 CFA goodness of fit for full model ... 100

Table 5-14 Reliability and validity indicators ... 102

Table 5-15 Discriminant validity analyses ... 103

Table 5-16 Regression weights of the model ... 105

Table 5-17 Themes and sub-themes of customers’ comments ... 108

Table 6-1 Summary of the sample gender ... 114

Table 6-2 Summary of the sample education level ... 114

Table 6-3 Summary of the sample Internet experience ... 114

Table 6-4 Summary of the survey participants of each bank ... 115

Table 6-5 Summary of face to face banking ... 115

Table 6-6 Summary of Internet banking users ... 115

Table 6-7 Results of the hypotheses of the endogenous factors ... 121

(11)

X LIST OF ABBREVIATIONS

α Cronbach's alpha

AGFI Adjusted Goodness-of-Fit Index AVE Average Variance Extracted β Results of regression

BCD The Bank of Commerce & Development

BJ Bank Journal

BN Bank of the Nation CBL Central Bank of Libya CFA Confirmatory Factor Analysis CR Composite Reliability

DCB Development and Commerce Bank GDP Gross Domestic Product

GFI Goodness-of-Fit Index GNC General National Congress GPC General Planning Council

GPCCM General People's Committee for Culture and Media

IDT Innovation Diffusion Theory IMF International Monetary Fund Int Intention to use

IQ Internet Quality IS Information system IT Information Technology

JB Jumhouria Bank

L.D Libyan Dinars

LFB Libyan Foreign Bank LIG Libyan Interim Government LNC Libyan National Congress LSM Libyan Stock Market NAB National Agricultural Bank NCB National Commercial Bank NPS National Payments System PEOU Perceived Ease of Use

PCI Perceived Characteristics of the Innovation PU Perceived Usefulness

RMR Root Mean-square Residual

RMSEA Root Mean Square Error of Approximation

S Security

SB Sahara Bank

SEM Structural Equation Modelling SMC Squared Multiple Correlation

Sp Support

SPA Service Provider Applications

SRMR Standardised Root Mean-square Residual

T Trust

TAM Technology Acceptance Model

TL Transparency-Libya

(12)

XI TRA Theory of Reasoned Action

UTAUT Unified Theory of Acceptance and Use of Technology

WB Wahda Bank