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Adoption and Use of Internet Banking in the Sultanate of
Oman:
An Exploratory Study
By Imtiyaz Al-Sabbagh, IT Director, Oman
Email: mtsmas62@yahoo.com
By Alemayehu Molla, IDPM, The University of Manchester, M13 9QH
Email: alemayehu.molla@man.ac.uk
Abstract
The aim of this paper is to explore the drivers and inhibitors of customers's Internet banking
adoption in the Sultanate of Oman. Data from 225 respondents were used to address the aim.
Our preliminary findings indicate that, in Oman, only two banks offer Internet banking services
to customers. The main drivers of adoption appear to be compatibility, usefulness and ease of
use. The extent of use is affected by lack of government support, poor quality of connection and
page loading speed. Trust and face-to-face personal banking preference have been found as
major inhibitors of IB adoption. Some preliminary implications for practitioners are highlighted.
Introduction
The Internet is transforming the banking and financial industry in terms of the nature of core
products and services and the way these are packaged, proposed, delivered and consumed (Sathye,
1999). Subsequently, consumers' adoption of Internet banking (IB) has received significant research and
practitioners attention (Al-Ashban and Burney, 2001; Guru et al, 2000; Polatoglu and Ekin, 2001). In this
paper, we explore the factors that affect Omani consumers' adoption and use of IB.
The National Bank of Oman (NBO) pioneered the Sultanate's first Internet banking service in
February 2002. Bank Muscat (BM) followed suit by launching online service in June 2002. As of
September 2003, these two banks are the only banks providing IB services in Oman. However, other
banks such as Oman International Bank, Oman Arab Bank, and Central Bank of Oman maintain an
informational Website with basic interactive capability (Guru et al, 2003).
Theoretical Background
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Adoption of innovation has a well-established research tradition. Rogers (1983) suggested five
important characteristics of an innovation that influence its adoption. These are relative advantage,
compatibility, complexity, observability and trailability. Subsequent studies have expanded this list and it
is now possible to find as many as 15 items describing the characteristics of an innovation affecting its
adoption. Davis (1989), on the other hand, used the theory of reasoned Action (TRA) and developed
the technology acceptance model (TAM). TAM and TAM based studies posit that two sets of beliefs,
i.e., perceived ease of use (PEOU) and perceived usefulness (PU) determine individual's acceptance of
a technology. While PEOU refers to the degree to which an individual believes that using a particular
system would be free of physical and mental effort, PU is related to users' perception of the degree to
which using a system will be beneficial. In another related work, Ajzen (1985) developed the theory of
planned behaviour (TPB) which was later decomposed by Taylor and Todd (1995) and posits that
intention to adopt and use a technology is affected by attitude, subjective norms and perceived
behavioural control.
The theories mentioned above informed most of the studies that looked into the drivers and
inhibitors of consumers' IB adoption and usage (Polatoglu and Ekin, 2001; Mattila, 2002; Tan and Teo,
2000). Some of these studies have also introduced perceived risk, trust, security and privacy concerns
and IB cost structure as additional variables affecting consumers' adoption of IB. We have used the
findings and research instruments from previous studies as basis in conducting our research.
Research Method
Data were collected through a survey administered in Oman during September- November
2003. Based on the literature review, we developed a questionnaire containing 25 major questions and
several items. Some of the questions use dichotomous scale whereas others use Likert type scale
assessing the degree of agreement or disagreement. The questionnaire was initially prepared in English
and later translated into Arabic by a professional translator. To ensure readability, we pilot tested the
questionnaire with 16 users.
Our intention was to get as many responses as possible from customers with bank accounts
but with or without IB experience; hence we followed convenience sampling to distribute the
questionnaire. 500 bank customers were approached in three places, i.e., shopping malls, voting polls
and bank branches. A total of 225 usable responses were collected.
Demographic Profile
The respondents' demographic profile (Table 1) shows mainly young, educated group,
employed either in the private and public sector. 78% of them have used the Internet. Therefore, the
rest of the analysis will proceed with 175 dataset.
Table 1: Respondents demographic profile
Frequency
Gender
Male
Female
Age
20- 35
Occupation
Percentage
135
60%
90
40%
147
65%
36-50
50
22%
>50
28
14%
101
45%
Public sector
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Education
Monthly Income
(in Omani Rial,
1OR=$2.5)
Internet User
Private sector
79
35%
Others
45
20%
Completed primary education
25
11%
Completed secondary education
42
19%
Diploma holder
51
23%
First degree holder
73
32%
Post graduate degree holder
34
15%
1200
21
9%
175
78%
50
22%
Yes
No
Internet Banking Adoption
Of the175 Internet users dataset, 85 (49%) are banking with the two banks- National Bank of
Oman and Bank of Muscat- offering consumer IB services. However, only 25 respondents actively use
Internet Banking. Table 2 shows the length of IB use and the most frequently used IB services of the
25 IB users.
Table 2: Internet Banking Use
Frequency
Duration of IB
use
Frequently used
IB services
Percentage
< 6months
9
36%
6months ¨C 1 year
12
48%
> 1 year
4
16%
Statement enquiry
22
88%
Utility payments
19
76%
Loan application
12
48%
Paying school fee
10
40%
Debt or credit card application Inquires
and complaints
10
40%
8
32%
6
24%
5
30%
Fund transfer
Bill payments
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Check book order
3
12%
2
8%
2
8%
Daily
1
4%
Bi-Weekly
3
12%
Weekly
6
24%
Fortnightly
9
36%
Monthly
3
12%
Once in a while
3
12%
Home
12
48%
Work place
9
36%
Public Internet access points
4
16%
Card lost informing
Check stop order
Frequency of IB
use
IB Access
Drivers of Internet Banking Adoption
We asked respondents who have adopted IB (n= 25) to express their degree of agreement or
disagreement about the factors that motivated their decision on a five-point, 14 items, likert type scale.
In addition, to identify the factors affecting intention of IB adoption, respondents banking with banks that
are not offering IB but that have expressed interest to adopt IB, if their bank starts offering it (n=21)
were asked about the same 14 items. The results are summarized in Table 3.
Table 3: Drivers of Internet Banking Adoption
Adopters (n=25)
Intention to adopt
(n=21)
Weighted Mean
score
Weighted Mean
score
IB is compatible to my banking needs
3.92
3.84
IB is easy to use
3.68
2.95
IB is a cheaper way to conduct banking
3.64
2.84
IB is self service
3.56
3.26
IB makes conducting banking transactions easier
3.52
3.63
IB is a convenient way to manage my finances
3.36
3.58
My family members are using IB
3.28
2.89
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IB is compatible to my life style
3.24
3.79
My colleagues are using IB
3.24
2.84
My friends are using IB
3.04
3.05
IB offers greater control over my finance
3.04
2.53
Using IB is a sign of modernity
2.64
2.68
My bank offers additional benefits for IB users
2.32
2.79
My bank encourages me to use IB
2.00
2.26
Scale: 5=Strongly agree; 4= Agree; 3= Neutral; 2= Disagree; 1= Strongly disagree
Table 3 indicates compatibility, relative advantage and ease of use as the most important
factors affecting IB adoption (intention to adopt). On the other hand, external influence in the form of
peer pressure and supply push don't appear to play a major role in adoption decisions. However,
respondents who have adopted IB have indicated that clear government support and policy would
motivate them to use more IB services than the one they currently use. In terms of actual benefit and
constraints, while time saving (100%) and better service (40%) have been rated as the most
experienced IB benefits, frequent interruption of connection (50%) and longer page-loading times (25%)
are rated as the primary constraints affecting IB usage.
Inhibitors of Internet Banking Adoption
Inhibitors of IB adoption were identified from the respondents of the two banks offering IB
services but that haven't adopted IB (n= 60) and those that haven't expressed interest to adopt IB even
if their banks start offering one (n= 69). Table 4 summarizes the results.
Table 4: Inhibitors of Internet Banking Adoption
Non Adopters
(n=60)
Intention not to
adopt (n=69)
Weighted Mean
score
Weighted Mean
score
I am concerned about the security of IB services
4.7
4.6
I don't trust IB services
4.5
4.8
I am concerned about the privacy of IB services
4.0
4.7
My bank doesn't offer incentive to use its IB service
3.8
--
I don't know how to use IB
3.8
3.8
My bank is conveniently located
3.5
3.1
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I prefer personal and face to face banking
3.4
4.7
My bank doesn't offer training to use its IB service
3.7
--
IB is not relevant for me
3.1
3.7
My bank doesn't offer IB
2.7
3.4
Scale: 5=Extremely Important; 4= Very Important; 3= important; 2= Less important; 1=Not important
Discussion
The findings of the study indicate that IB in Oman is in its early stages of development. In
addition, Omani customers appear to make their IB adoption decision based on its compatibility,
usefulness and ease of use. This result is consistent to the findings of previous studies. Hence, the
combination of diffusion of innovation theory (Rogers, 1995) and technology acceptance model (Davis,
1989) seems to be applicable in the context of Oman. The implication for practitioners is that they need
to sensitise and educate customers about the what, how and why of IB.
The extent of IB usage in Oman appears to be influenced, among other things, by the quality of
connection and access. For banks offering IB (and those that consider it in the future) this implies that
their Websites should be reasonably simple and less graphics-intensive. Another issue affecting level of
usage is the perception of government support. In Oman, the value of information and communications
technology in national development is well recognised. This is reflected in the sixth development plan,
which among other things, set up Oman's information technology task force. Hence, the government
need to be very vocal about its plans and intentions.
Perceived security and trust have emerged as the top issues inhibiting IB adoption. Banks
along with the government need to address the perception of risk and build the confidence of customers
in Internet use in general and IB in particular. Preference of face-to-face persona banking is another
inhibitor of IB adoption. This could be due to either lack of awareness or the contextually rich nature of
Omani's culture. Hence, banks should make their IB sites as customer friendly as possible and develop
relevant marketing strategy to win the trust of customers.
Conclusion
Internet Banking is still a relatively recent phenomenon, especially in Arab countries (Guru et al,
2003). A number of banks in Oman are considering going on-line. However, the wider diffusion of IB
and its business value depends on customers' IB acceptance. In this study, we have illustrated some of
the factors that drive and inhibit IB adoption and that affect its usage
The relatively short history of Internet Banking in Oman and the limited sample size of the study
don't allow generalization of the results. Hence, our findings could only be considered as preliminary and
should be explored further with a more rigours study.
References
Ajzen, I. (1985) From intentions to actions: A theory of planned behavior. IN Action Control: From
Cognition to Behavior. J, Kuhl and J. Beckmann (eds). New York: Springer Verlag. 11-39.
Al-Ashban, A. A., & Burney, M. A. (2001) Customer adoption of tele-banking technology: the case of
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Saudi Arabia. International Journal of Bank Marketing, 19( 5), pp. 191-201.
Black, N.J., Lockett, A., Winklhofer, H., & Ennew, C. (2001) The adoption of Internet financial services:
a qualitative study. International Journal of Retail & Distribution Management, 29 (8), pp.3908.
Davis, F. D. (1989) Perceived usefulness, perceived ease of use, and end user acceptance of
information technology. MIS Quarterly, 13, pp.318-339.
Guru, B. K., Shanmugam, B., Alam, N., and Perera, C. J. (2003) An Evaluation Of Internet Banking
Sites In Islamic Countries. Journal of Internet Banking and Commerce, November 2003, 8 (2).
Guru, B.K., Vaithilingam, S., Ismail, N. & Prasad, R. (2000) Electronic Banking in Malaysia: A Note on
Evolution of Services and Consumer Reactions. Journal of Internet Banking and Commerce, June
2000, 5 (1).
Mattila, M. (2003) Factors affecting the adoption of mobile banking services. Journal of Internet
Banking and Commerce, June 2003, 8 (1)
Polatoglu, V. N., & Ekin, S. (2001) An Empirical Investigation of the Turkish consumers' acceptance of
Internet Banking services. The International Journal of Bank Marketing, 19. pp 156-165.
Rogers, E. M. (1983) Diffusions of Innovations, 3 rd ed. New York: The Free Press.
Sathye, M. (1999) Adoption of Internet banking by Australian consumers: an empirical investigation. The
International Journal of Bank Marketing, 17( 7), pp.324-334
Tan, M., & Teo, Thompson, S. H. (2000) Factors influencing the adoption of Internet Banking. Journal
of Association for Information Systems, July, 2000, 1(5), pp. 1-41.
Taylor , S. & Todd, P. A. (1995) Understanding information technology usage: A test of competing
models. Information Systems Research, 6(2), pp. 144-176.
■ Transportation Research Record 1763
Paper No. 01-2802
6
Environmental and Economic
Effects of E-Commerce
A Case Study of Book Publishing and Retail Logistics
H. Scott Matthews, Chris T. Hendrickson, and Denise L. Soh
The advent of the Internet and e-commerce has brought a new way of
marketing and selling many products, including books. The systemwide
effects of this retailing shift on costs and the environment are still unclear.
Although reductions in inventories and returns provide significant environmental savings, some major concerns of the new e-commerce business
models are the energy and packaging materials used by the logistics networks for product fulfillment and delivery. This study analyzes the different logistics networks and assesses the environmental and cost effects
of different delivery systems. The definition of analysis system boundaries
determines the overall assessment of economic and environmental effects
of e-commerce for book retailing. With a return (remainder) rate of
35 percent for best-selling books, e-commerce logistics costs less and
has fewer environmental effects, especially if private automobile travel
for shopping is included. Excluding the need to return books, costs and
environmental effects are comparable for the two delivery methods.
Shopping via the Internet [i.e., business-to-consumer (B2C) retailing]
is increasing rapidly. In the fourth quarter of 2000, retail e-commerce
sales were up 70 percent, yet represented only 1 percent of total
retail sales (1). It is tempting to assume that selling products via the
Internet benefits the environment. For example, emissions from
vehicles driven to shopping malls can be avoided, retail space can
be decreased, and inventories and waste can be reduced.
However, a product ordered online may be shipped partially by airfreight across the United States and require local truck delivery. Also,
the product is likely to be packaged individually, and the packaging
may not be reused. The adverse environmental effects of such transportation can be significant, and the net effect of different logistics
systems is not obvious (2).
The book publishing industry is an excellent industry to study
when assessing the environmental effects of e-commerce. Books are
regularly purchased online as well as in retail stores. The high number of remainders (books that remain unsold) also makes the publishing industry an interesting case study. After sales have peaked,
these remainders are either discarded, recycled, or sold to discount
bookstores. Selling books by e-commerce allows for lower inventories (because there is only one inventory point) and a smaller number of remainders, thus benefiting the environment by avoiding book
warehousing and paper production.
The environmental implications of e-commerce have not received
much attention to date, at least relative to the economic and social
implications of this new commercial paradigm. E-commerce warrants
H. S. Matthews, Graduate School of Industrial Administration, and C. T.
Hendrickson, Department of Civil and Environmental Engineering, Carnegie Mellon University, Pittsburgh, PA 15213. D. L. Soh, Department of Mechanical
Engineering, Stanford University, Stanford, CA 94305.
attention because of its widespread effects and its susceptibility to corporate and public policy. Further, there are potential implications from
business-to-business (B2B) e-commerce systems as well. For example, the movement toward virtual warehousing has large potential in
environmental benefits as companies outsource such processes to
companies with more efficient economies of scale (3).
COMPARISON FRAMEWORK
Two generic models of logistics networks are considered in this case
study. First, traditional retailing involves selling a book through a
brick-and-mortar retailer (e.g., a mall bookstore). A book is shipped
from the publisher through various distributors and warehouses and
finally to a retail outlet. The customer purchases the book at the retail
store and brings it home. Second, the e-commerce model involves
shipping a book from a publisher to a single warehouse by truck
and then air freighting to a regional airport or hub, from where it is
transported by delivery truck to the customer’s home.
The monetary costs incurred in each model are evaluated first. The
calculations are based on the comparative costs in selling $1 million
worth (at production) of books, or approximately 286,000 books at an
assumed production cost of $3.50 apiece. Each book is assumed to be
23 × 6 × 16 cm in size (9 × 2.25 × 6.25 in.) and weigh 1.1 kg (2.4 lb).
Remainders are especially significant for best-sellers because of the
extra volume of books printed, and the calculations focus on the costs
associated with best-sellers. The environmental effects of each of the
logistics models are estimated.
TRADITIONAL RETAILING METHOD
The traditional method of retail, by which books are sold through
retail stores, can be modeled as a series of transport links among
organizations and facilities, as shown in Figure 1.
The books are transported from the printer to a national warehouse
and then shipped again to a regional warehouse. From the regional
warehouse, the books are transported to a retail store, and a customer
purchases a book and takes it home. Also, there is a return link for
unsold copies, because some 35 percent of best-sellers are not sold (4).
An assumption of the model for this method is that all transportation is by truck in the traditional distribution network. The distance
between all destinations (e.g., warehouses and stores) is assumed
to be separated into 805-km (500-mi) segments. Thus, the model
can be easily adjusted for different distances. The average consumer
lives 16 km (10 mi) away from a bookstore (5). However, as consumers tend to buy more than one item at a bookstore (or as part of a
Matthews et al.
Paper No. 01-2802
FIGURE 1
Traditional book publishing logistics chain.
larger shopping trip), only a round-trip distance of 8 km (5 mi) was
allocated for the round-trip distance to the bookstore.
Another assumption is that a 35 percent remainder rate for books
in traditional retail inherently results in the production of 35 percent
more books than sold (or a total of 386,000 books). All of these books
are transported in boxes of 10 to bookstores through the network (Figure 1). Assuming that each box is 51 × 41 × 41 cm (20 × 16 × 16 in.)
and weighs 910 g (2 lb), the cost of each box is $1.33 (6). Thus, the
total cost of the packaging used in traditional retail is approximately
$51,000.
The environmental effects of automobile trips to bookstores to purchase books must also be considered. Taking the fuel economy of a
passenger car to be 9.6 km/ L (22.5 mpg), and the fuel economy of a
light truck to be 6.5 km/ L (15.3 mpg) (7), the energy required per mile
for a passenger car is 3.6 MJ/km (5.8 MJ/mi) and for a light truck is
5.3 MJ/km (8.6 MJ/mi). A weighted average of the environmental
effects of passenger cars and light trucks can be taken into account,
given that light trucks constitute approximately 35 percent of the passenger fleet (8). The environmental effects of an average trip made to
a bookstore are shown in Table 1.
Returns of unsold books from retailers in the traditional model
are an important issue. Shipping of returns involves an additional
truck leg, which again can be assumed as 805 km (500 mi). Returns
from customers after purchase are ignored; they are assumed to
involve similar personal trips for both traditional and e-commerce
retailing.
E-COMMERCE RETAILING LOGISTICS
Another assumption is that the e-commerce method of selling a book
(a book is marketed and sold online) has fewer links but involves
airfreight from an e-commerce warehouse to a regional logistics
center (Figure 2). The warehouse is collocated near, or at, an air hub
of a major logistics carrier (e.g., United Parcel Service, Federal
Express), so transfer from the warehouse to the carrier is not included.
Although not all orders are shipped by air, this assumption is intended
to represent a worst-case scenario for analysis.
TABLE 1
7
The books are shipped from the printer to the company’s major
distribution warehouse via truck, with 805 km (500 mi) assumed for
this link. The books are then air freighted to a regional center (again
assuming a distance of 805 km), from which they are delivered by
local courier truck to the customer’s residence.
The packaging used in e-commerce usually is corrugated cardboard
box. Assuming a box size of 30 × 23 × 11 cm (12 × 9 × 4.5 in.), a
weight of 317 g (0.7 lb), and a cost of $0.41 (6), and individual packaging of books, the cost to pack the total shipment of $1 million worth
of books is $117,000. No remainders or returns are assumed in this
model. However, the cost of the bulk packaging of 286,000 books
needs to be included, $38,000. Thus, the total cost is $155,000.
COMPARATIVE COSTS OF TRADITIONAL AND
E-COMMERCE LOGISTICS
The different categories of costs are compared for the two generic
logistics systems in the sale of $1 million of books. Approximate costs
are calculated, without including small categories of costs or items
such as external congestion costs. Selling $1 million of books in the
traditional model with remainders requires that 386,000 books be produced and shipped, given the 35 percent remainder rate. The total
weight of shipments in the traditional model is 454 Mg (501 short
tons), including 420 Mg (463 short tons) of books and 34.5 Mg
(38 short tons) of bulk packaging. A base production of $1 million of
best-seller books in the e-commerce (no remainders) model requires
the shipment of only 286,000 books. The e-commerce model ships a
total of 336.5 Mg (371 short tons) in bulk (including 343 short tons of
books and 29 short tons of packaging) and a total of 402 Mg (443 tons)
individually. A comparison of these costs is shown in Table 2. Estimates are presented for two traditional models—with and without
remainders. The 35 percent remainder rate is used to scale up costs.
The results indicate that the fraction of returns is critical in assessing relative overall costs. With a zero return rate, the traditional system
has a slightly higher overall cost than e-commerce, but can provide
immediate service to customers. Generally, however, a certain percentage of the books published will remain unsold, either being
Environmental Effects of a Round-Trip to a Bookstore in a Passenger Vehicle (7, 8 )
8
Paper No. 01-2802
FIGURE 2
Transportation Research Record 1763
E-commerce book retailing logistics.
returned to the publisher for recycling or sold to discount stores.
Assuming 35 percent as the average return rate for best-sellers, the
estimated e-commerce retailing costs are far lower than for the traditional system. General booksellers have a lower overall average return
rate of 11.2 percent, whereas specialty booksellers have an average
return rate of 6.4 percent (9).
Several items not included in these retail and logistics costs affect
the benefits and marketing effectiveness of the two retailing modes.
First, the estimates do not include any costs associated with stockouts in the traditional system; the e-commerce model places books
not immediately available on back order for eventual delivery. Second, benefits are associated with immediately purchasing and examining books. Third, online booksellers may have a wider selection
than conventional bookstores.
The personal (not corporate) costs associated with automobile travel
are also an important factor in the relative costs of the two delivery
systems. The cost estimates do not include any time cost associated
with driving, assuming that shopping trips may be pleasurable.
A final important factor affecting relative costs is the relative
efficiencies of the overhead operations of the two systems. Table 3
compares the difference between conventional and online retail
operations (10).
COMPARATIVE ENVIRONMENTAL COSTS
Turning to environmental implications, the e-commerce logistics systems rely more on airfreight service than truck or rail modes. Figure 3 compares energy and fuel use for shipments via air, truck, or rail
in the United States. Direct and total inputs (including the entire supply chain) are shown for the three modes (10). Airfreight requires
much more energy and fuel, resulting in high air pollution emissions.
The model assumes that trucking is used in the traditional system
rather than rail; rail is included only for completeness.
Table 4 shows some supply chain environmental effects from
$1 million of trucking, airfreight, and book publishing (11). Combining the data from Tables 1, 2, and 4, Tables 5 and 6 show the use of
energy, emission of conventional air pollutants, hazardous waste generated, and greenhouse gas emissions for trucking, air freight, packaging, fuel production, and book production for the retail models
TABLE 2 Comparative Estimated Costs of Logistics and Returns for Traditional Versus
E-Commerce Book Retailing
Matthews et al.
Paper No. 01-2802
9
TABLE 3 Comparison of Costs for Models of Traditional Versus Online Bookstore
Overhead Operations (10 )
described earlier. Conventional air pollutants include sulfur dioxide,
carbon monoxide, nitrogen dioxide, volatile organic compounds, lead
particulate emissions, and particulate matter (
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