Adoption of Internet banking by Australian
consumers: an empirical investigation
Keywords
Banking, Internet,
Consumer behaviour, Australia
Abstract
Quantifies the factors affecting
the adoption of Internet banking
by Australian consumers. The
sample for this survey was drawn
from individual residents and
business firms in Australia. Shows
that security concerns and lack of
awareness about Internet banking
and its benefits stand out as being
the obstacles to the adoption of
Internet banking in Australia.
Suggests some of the ways to
address these impediments.
Further suggests that delivery of
financial services over the Internet
should be a part of overall
customer service and distribution
strategy. These measures could
help in rapid migration of
customers to Internet banking,
resulting in considerable savings
in operating costs for banks.
International Journal of Bank
Marketing
17/7 [1999] 324±334
# MCB University Press
[ISSN 0265-2323]
[ 324 ]
Milind Sathye
Lecturer, University of Southern Queensland, Toowoomba, Queensland, Australia
Introduction
The Australian financial system is under-
going a period of substantial change, the
impact of which is transforming the way
financial services are delivered. The changes,
among others, include a significant increase
in the number of alternative channels avail-
able for the delivery of services. The most
recent delivery channel introduced for fi-
nancial services is Internet or online bank-
ing. Internet banking involves consumers
using the Internet to access their bank and
account, to undertake banking transactions.
At the basic level, Internet banking can mean
the setting up of a Web page by a bank to give
information about its product and services.
At an advance level, it involves provision of
facilities such as accessing accounts, funds
transfer, and buying financial products or
services online. This is called ``transactional''
online banking and is the subject-matter of
this study. The objective of this paper is to
quantify the factors affecting the adoption of
Internet banking by Australian consumers.
Such a research will help banks to formulate
appropriate strategies to ensure rapid
migration of customers to online banking
and thus bring down their operating costs.
The rest of the paper has been organised as
follows: the next section gives an account of
the Internet banking scenario in Australia,
followed by a review of relevant literature,
research method and procedure, findings of
the study, discussion of results and limita-
tions of the study, implications for manage-
ment and areas for further research and
conclusion.
Internet banking
Transactional Internet banking is growing
rapidly. It has been estimated that 60 per cent
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of retail banking transactions will be online
in ten years' time (Barwise, 1997). A study by
Booz et al. (1997) on Internet banking shows
that ``up to 20 per cent of retail and 30 per cent
of corporate customers will use some form of
Internet banking capability within the next
five years''. This study further states that
Internet and other virtual banking channels
have significantly lower cost structure than
traditional delivery channels. ``Internet
banks can operate at an expense ratio of 15-20
per cent compared to 50-60 per cent for the
average bank'' (Booz, 1997). Thus, by
encouraging customers to use the Internet
for banking transactions, the banks would
save considerable operating costs. Competi-
tive pressures would also require banks to
offer Internet banking. New players such as
software and telephone companies will be
interested in entering the online banking
market (Hagel and Eisenmann, 1994; Hagel
and Lansing, 1994). One would, therefore,
expect that Australian banks would not only
be quick to provide Internet banking service
but would also encourage customers to
migrate to this form of delivery of banking
services.
The real picture is, however, different.
Only one of the four major banks in Australia
was providing an Internet banking facility by
the end of 1997 and the other three banks are
now slowly appearing on the Internet to
provide retail and corporate banking ser-
vices. As regards the use by bank customers
of Internet banking, it has been estimated
that only about 1 per cent of the retail
transactions are done over the Internet
(Ernst & Young, 1996). ``Advance bank, a
smaller bank which was quick to adapt new
technology and started to provide net bank-
ing one and a half years ago, has only 5,000
active users'' (Wood, 1996). Many explana-
tions have been offered for the slow growth of
Internet banking in Australia. Some contend
that security concerns among banks and
customers are keeping both away from
Internet banking, while others cite lack of
Milind Sathye
Adoption of Internet banking
by Australian consumers: an
empirical investigation
International Journal of Bank
Marketing
17/7 [1999] 324±334
knowledge about availability of such a ser-
vice, the Internet banking site being not user-
friendly and lack of access to computers/
Internet as the reasons (O'Connell, 1996).
Further, ``there is little evidence of consumer
demand for Internet banking services''
(Davidson, 1998). ``. . . the critical question is
whether customers will accept the electronic
form of receiving information and perform-
ing transactions'' (Oliver, 1997). A study by
Ernst & Young (1998) finds that financial
institutions are not sure about customer
acceptance of e-commerce. Mols et al. (1999)
state that ``the diffusion of electronic banking
is more determined by customer acceptance
than by seller offerings''. Though customer
acceptance is a key driver determining the
rate of change in the financial sector, em-
pirical studies on what is holding customers
from acceptance of Internet banking have
been few. A study by Booz, Allen & Hamilton
(1997) assessed the strategic impact of Inter-
net banking on financial services industry
and in particular the set-up and operating
cost of Internet banking. Thorton Consulting
(1996) conducted a survey in the USA which
focused on banks and concluded that 67 per
cent of the banks felt that ``security concerns''
is the major apprehension about Internet
banking. The behavioural consequences of
PC banking in Denmark were studied by
Mols (1998) and it was found that PC bank
customers are more satisfied than non-PC
bank customers. Daniel (1999) studied elec-
tronic banking in UK and Ireland and gives
excellent insights into the bank's adoption of
electronic banking. Customers' perception
about adoption of Internet banking was not
the focus of these studies. In particular, no
published study, regarding perceptions of
bank customers in Australia about Internet
banking, could be found by the author. The
present study is intended to fill this impor-
tant gap.
Literature review and development
of hypotheses
Adoption is the acceptance and continued use
of a product, service or idea. According to
Rogers and Shoemaker (1971), consumers go
through ``a process of knowledge, persuasion,
decision and confirmation'' before they are
ready to adopt a product or service. The
adoption or rejection of an innovation begins
when ``the consumer becomes aware of the
product'' (Rogers and Shoemaker, 1971). In
the context of bank marketing planning,
Guiltinan and Donnelly (1983) identify
``information about the benefits of using a
product/service'' as an essential service/
product promotion strategy. The Wallis
Report (1997) states that ``consumers will seek
out those financial products and suppliers
which offer the best value for money and they
are educated about it''. Hence, for adoption of
Internet banking, it is necessary that the
banks offering this service make the consu-
mers aware about the availability of such a
product and explain how it adds value
relative to other products of its own or that of
the competitors. The added value in electro-
nic banking, according to Trethowan and
Silicone (quoted in Daniel, 1999), was conve-
nience, sales orientation and lower costs.
Howard and Moore (1982) emphasise that for
adoption ``consumers must become aware of
the new brand''. An important characteristic
for any adoption of innovative service or
product is creating awareness among the
consumers about the service/product. ``Don't
assume good products sell themselves''
(Cooper, 1997). Hence, if Australian consu-
mers are not adopting Internet banking, it
may be because they are not aware about
such a service being available and the added
value that it offers. These findings and
observations lead us to the hypothesis:
H1: Australian consumers are not adopting
Internet banking service because they
are unaware of the service and the
benefits it offers.
The second factor that leads to adoption of
innovative service/product by customers is
the ``ease of use''. In his study, Cooper (1997)
finds ``ease of adoption'' as one of the three
important characteristics from the customer's
perspective for adoption of innovative service.
The Wallis Report (1997) identifies that tech-
nological innovation ``must be easy to use'' to
ensure customer take-up or acceptance. ``The
degree to which an innovation is difficult to
understand or use'' was one of the reasons for
failure of home banking in the USA (Dover,
1988). Rogers' (1962) analysis of diffusion
emphasises the importance of individual
perceptions and understanding of a new
technology in shaping its acceptance. Scar-
brough and Corbett (1992) find ``understand-
ings of consumers'' to be an important
element in the diffusion of innovative tech-
nology. Daniel (1999) identifies ``ease of use'' as
one of the factors for customer acceptance in
her study of electronic banking in the UK and
Ireland. If customers in Australia are not
adopting Internet banking, it could be because
the Internet sites are not easy to operate.
Hence, the following hypothesis is proposed:
H2: Australian consumers are not adopting
Internet banking service because they do
not find that it is easy to use.
[ 325 ]
Milind Sathye
Adoption of Internet banking
by Australian consumers: an
empirical investigation
International Journal of Bank
Marketing
17/7 [1999] 324±334
[ 326 ]
The third important factor that consumers
consider before adopting an innovation is the
level of risk involved. In the context of
Internet banking, it refers to the security and
reliability of transactions over the Internet.
Cooper (1997) identifies ``the level of risk'' as
an important characteristic from a consu-
mer's perspective in the adoption of innova-
tion. A report on Internet banking in
Australia finds that ``security concerns
among banks and customers'', are keeping
both away from Internet banking (ABF, 1997).
O'Connell (1996) finds ``security concerns'' as
an important reason for slow growth of
Internet banking in Australia. The Wallis
Report (1997) states that if ``security is
improved'' households will conduct their
financial transactions over the Internet.
Rothwell and Gardiner (1984), while devel-
oping the framework of user needs in tech-
nological innovations, identify ``safety in
use'' as one of the factors that influences
potential users. Daniel (1999) also identifies
``security'' as a factor influencing customer
acceptance. Obviously, Internet banking will
not be adopted unless it is considered safe
and secure by the customers. These findings
and observations lead to the following hy-
pothesis:
H3: Australian consumers are not adopting
Internet banking service because they
are concerned about safety and security
of transactions over the Internet.
Another factor that influences the consumer
adoption of innovation is the price/cost
factor. In the context of Internet banking, two
types of costs are involved. First, the normal
costs associated with Internet activities and
second, the bank cost and charges. Rothwell
and Gardiner (1984) observe that ``there are
two fundamental sets of factors defining user
needs, namely price factors and non-price
factors''. Guadagni and Little (1983), Gupta
(1988), Mazursky et al., (1987) identify ``price''
as a major factor in brand switching. Howard
(1977) gives importance to ``price factor'' in
adoption and diffusion of innovation. Cooper
(1997) states that innovative products often
have superior ``price/performance charac-
teristics''. Rayport and Sviokla (1994) also
emphasise the ``pricing'' aspect for electronic
distribution of goods and services. The Wallis
Report (1997) states that for ``consumers to
use new technologies, the technologies must
be reasonably priced relative to alterna-
tives''. Thus, if Internet banking is not being
adopted it could be because it is not reason-
ably priced. Hence, the following hypothesis
is proposed:
H4: Australian consumers are not adopting
Internet banking service because it is not
reasonably priced.
The fifth factor that affects adoption is that
the existing mode of service or product
delivery fulfils the customers' needs ade-
quately. In the context of Internet banking,
telephone banking and brick and mortar
branches are the existing modes of transact-
ing banking business. Adoption of new
technologies often comes across a certain
amount of resistance to change from present
ways of operating. Commenting about tech-
nology adoption, Quinn and Mueller (1982)
state ``human beings what they are, there
tend to be resistance to change''. Daniel (1999)
finds ``a high level of customer inertia in
changing their established banking arrange-
ments''. For customers to change present
ways of operating and take up new technol-
ogy, it must ``fulfil a specific need'' (Wallis
Report, 1997). Unless such a need is fulfilled,
consumers may not be prepared to change
from present ways of operating. Hence, the
following hypothesis is proposed:
H5: Australian consumers are not adopting
Internet banking service because they do
not want to change from currently famil-
iar ways of transacting.
Finally, availability of access to computers/
Internet is a prerequisite for adoption of
Internet banking. The more widespread the
access to computers/Internet, the greater the
possibility of use of Internet banking.
O'Connell (1996) identifies lack of access to
computers/Internet as one of the possible
reasons for slow adoption of Internet bank-
ing. Daniel (1999) found lack of customer
access to suitable PCs as the reason for low
usage of electronic banking in the UK and
Ireland. The Wallis Report (1997) states ``as
the Internet becomes more widely accessible
. . . households will conduct their financial
transactions over the Internet''. Hence, if
Internet banking is not being adopted in
Australia, it may be because of lack of access
to computers/Internet.
H6: Australian consumers are not adopting
Internet banking service because they do
not have access to computers/Internet.
These six hypotheses and their relation to
adoption of Internet banking can be seen in
Figure 1. There could also be other factors
influencing the non-adoption of Internet
banking by customers, e.g. the desire for
personal interaction with bank staff, tech-
nology phobia, widespread network of
existing branches, computer illiteracy among
customers (Mols et al., 1999). This study
focuses on the above six factors, because the
Milind Sathye
Adoption of Internet banking
by Australian consumers: an
empirical investigation
International Journal of Bank
Marketing
17/7 [1999] 324±334
Figure 1
A model for adoption of Internet banking
Wallis Report (1997) states that new technol-
ogy adoption by the majority of the custo-
mers depends, mainly, on these factors.
Further, these factors were also endorsed by
a focus group consisting of two students, two
housewives and five academics.
Research method and procedure
Population and sample
Internet banking service is presently being
offered to two sets of clients, i.e. personal
clients and business clients; hence the popu-
lation for this survey consisted of individual
residents and business firms in Australia.
For residents, the sample unit was indivi-
duals and for business, it was a single firm.
The total sample size was fixed at 500
(individual and business respondents being
250 each), in view of time and cost consid-
erations. ``For populations of 10,000 and more,
most experienced researchers would prob-
ably consider a sample size between 200 and
1,000 respondents'' (Alreck and Settle, 1985).
Considering the low response rates found in
surveys, 1,000 questionnaires (twice the
sample size) were sent out. The study was
limited to capital cities where use of Internet
was likely to be concentrated and also
because about 65 per cent of Australia's 17
million people live in cities. The question-
naires were allocated among the cities, in
proportion to the population of the cities. The
first subject was chosen using random num-
bers and thereafter an interval of 12,000
(population of cities 12 million divided by
1,000), was used. White and yellow pages
(telephone book) were used as the frame of
reference for personal and business custo-
mers, respectively.
Survey instrument
Non-availability of computers/Internet has
been identified as a possible reason why
consumers may not be adopting Internet
banking. An e-mail survey would not have
been able to capture this section of the
population; hence a mail survey. The total
design method (TDM) was applied in the
conduct of the survey. To enhance reliability
and validity, great care was taken while
designing the questionnaire. A 17-item ques-
tionnaire was used to measure the six key
constructs identified. Every question on the
questionnaire focused directly on a specific
issue and it was ensured that questions have
brevity and clarity. While designing the
survey instrument, it was ensured that
instrumentation bias is avoided. Multiple
choice questions, of both single and multiple
response, were used. The questionnaire was
then pre-tested among 25 individual and 25
business respondents. The pre-testing
brought to light some of the problems in
questionnaire completion. These problem
areas were then sorted out. The revised
questionnaire was again pre-tested among a
set of 20 individual and 15 business respon-
dents and it was found that it worked well.
Of the 17 questions, six related to demo-
graphic characteristics and the remaining 11
addressed the various constructs of the
study. Questions 1 to 4 were about access to
computers and the Internet and the place of
access. A three-item scale, i.e. regular access
(almost every day), occasional access (i.e.
once or twice a week), or no access was used.
The place of access also had a three-item
scale, i.e. home, office or other. Question 5,
was concerned with respondents' bank based
on a choice between the five major banks in
Australia and a category referring to others.
``Awareness'' was measured at question 6,
which asked whether any of the banks of the
respondents provide Internet banking ser-
vice. A three-item scale, ``yes'', ``no'' and
``don't know'', was used. If the respondents
were aware about the service, the next
question asked whether they were using it
and this was measured on a two-item scale,
yes or no. Those who were using the service,
were asked at question 8, how did they find
the available service. An eight-item scale was
used to measure the responses to this ques-
tion, i.e. easy to use, difficult to use, cheap
(reasonably priced), expensive, safe and
secure, unsafe and insecure, no way different
from current modes of service, e.g. tele-
phone/branch banking. Those who were not
using the service, were asked at question 9,
why they were not using the service, even
when it was provided by their banks. A six-
item scale (the six hypotheses) was used to
[ 327 ]
Milind Sathye
Adoption of Internet banking
by Australian consumers: an
empirical investigation
International Journal of Bank
Marketing
17/7 [1999] 324±334
measure the responses. Those who were not
using Internet banking were asked at ques-
tion 10, whether they would be prepared to
use it, if their bank provided it. Here, a three-
item scale of yes, no and unsure, was used.
Again, those who were prepared to use were
asked, what do they expect from the bank and
here again, a six-item scale (the six hypoth-
eses) was used to elicit responses. Those who
were not prepared to use were asked to give
responses on a six-item scale, i.e. on the six
hypotheses. The rest of the questions were
about demographics. These scales have some
limitations and these have been indicated in
a subsequent paragraph outlining limitations
of the study.
Findings of the study
Segment profiles
The data were collected from two broad
categories of respondents, i.e. personal and
business respondents. Tables II (a) and (b)
present the demographic characteristics of
these sets of respondents.
Testing of hypotheses
The responses of the personal and business
respondents to the six propositions as above
are shown in Table III. In Table IV, the above
two categories have been sub-divided into
two more categories, namely ``aware'' and
``unaware''. ``Aware'' represents those

Hypotheses tested Table II(a)

Through the questionnaire the following Profile of survey sample
hypotheses were tested:
Personal respondents
Bank consumers are not adopting Internet
Number of
banking due to: Respondents respondents
H1: lack of knowledge (awareness) of such a characteristics who answered %
service and its benefits.
H2: service available being not easy to use or Age
18-25 5 12
perceive it difficult to use.
26-40 101 38
H3: fear of security of doing banking trans-
41-65 114 33
actions over the Internet.
Over 65 45 17
H4: service available being not reasonably
Total 265 100
priced.
Occupation
H5: resistance to change from current modes
Self-employed 45 18
of operation.
Salaried employment 151 61
H6: non-availability of access to computers/
Household 8 3
Internet. Other 45 18
Total 249 100
Responses received
Education
The questionnaires were sent in September
Junior school 11 4
1998 and 612 questionnaires were received
Senior school 90 34
after follow-up with an overall response Undergraduate 90 34
rate of 61 per cent This response rate was Postgraduate 66 25
far beyond expectations and much above Other 5 2
the acceptable response rate by social Total 262 100
sciences standards. Of these, 23 question- Income
naires were discarded as these either were Below 25,000 (A$) 37 18
blank or answered the demographic ques- 25,000 to 50,000 91 44
tions only. The remaining 589 question- 50,000 to 75,000 37 18
naires were used for data analysis. The 75,000 to 100,000 23 11
profile of the respondents has been shown Above 100,000 18 9
Total 206 100
in Table I.
Place of residence
New South Wales 56 26
Table I Victoria 74 34
Respondent profile Queensland 26 12
South Australia 26 12
Survey Questionnaires Responses Response Western Australia 18 8
class sent out received rate % Aus. Capital Territory 5 2
Personal 500 265 53 Tasmania 11 5
Business 500 324 65 Northern Territory 0 0
Total 1,000 589 59 Total 216 100

[ 328 ]
Milind Sathye Table II(b) 1 respondents who are aware about avail-
Adoption of Internet banking Profile of survey sample ability of Internet banking service and are
by Australian consumers: an
empirical investigation using it (AU);
Number of 2 respondents who are aware about avail-
International Journal of Bank respondents
Marketing ability of Internet banking service but are
17/7 [1999] 324±334 Respondent who
not using it (ANU);
characteristics answered %
3 respondents who are unaware about
Form of business availability of Internet banking but are
Proprietary 100 31 prepared to use it, if made available
Partnership 38 12 (UPU); and
Company 181 56 4 respondents who are unaware about
Other 5 2 availability of Internet banking and are
Total 324 100 not prepared to use it, even if made
Nature of business available (UNPU).
Agriculture/fishing 4 1
Table III has also been presented in the form
Mining 34 10
of a bar chart (Figures 2 and 3). The chart
Manufacturing 63 19
shows that security concerns and lack of
Construction 41 13
awareness about Internet banking and its
Wholesale/retail
benefits stand out as the reasons for non-
trade/transport 53 16
adoption of Internet banking. As a factor for
Finance/insurance 52 16
non-adoption, ``unreasonable price'' ranks
Small business 69 21
third. It may be interesting to note that a
Other 8 2
study by www.consult (1999), in Singapore,
Total 324 100
found this to be the prime reason for non-
Annual turnover adoption of online banking. This chart also
Under 100,000 (A$) 32 11 shows that non-access to computers/Internet,
100,000 to 500,000 107 36 resistance to change and difficulty in use are
500,001 to less than not the major factors affecting adoption of
2 million 128 43
Internet banking by Australian consumers.
2 million and over 32 11
These results are not surprising given the
Total 299 100
fact that 18 per cent of Australian households
Location of business have access to the Internet from home
New South Wales 72 22 (Alston, 1999).
Victoria 63 19 Australia has the world's third highest use
Queensland 48 15 of EFTPoS per head and a long way ahead of
South Australia 32 10 the USA (Macfarlane, 1997) and, as such,
Western Australia 39 12 Australians are considered as technology
Aus. Capital Territory 29 9 savvy. Another point to note is in this study,
Tasmania 32 10 the personal users of Internet banking were 22
Northern Territory 9 3 (8 per cent), while the business users were 39
Total 324 100 (12 per cent), with an overall percentage of 10.
The ABS (1999) report states that about 2 per
respondents who are aware about availabil- cent of adults used the Internet to pay bills or
ity of Internet banking service, while ``una- transfer funds. The results in this sample are
ware'' represents those respondents who on the higher side, probably because our
have no knowledge that such a service was sample was restricted to capital cities only.
available. In Table V, these two groups were The paragraphs below discuss the findings
further classified, as follows: with respect to each of the six propositions.

Table III Security concerns

Views of personal and business respondents to the six propositions Table III shows that 75 per cent of the total
Personal Business Total respondents had security concerns. Further,
No % No % No % 78 per cent of personal and 73 per cent of
business respondents had security concerns.
Difficulty in use 132 50 101 31 233 40 Thus, personal respondents have more
Security concern 206 78 238 73 443 75 security concerns than business respondents.
Unreasonable price 158 60 167 51 325 55 Table IV shows that the security concerns
Resistance to change 144 54 46 14 190 32 were much higher (77 per cent), among those
No access to Internet 99 37 15 5 115 19 personal respondents who were aware about
Benefits of IB not clear 194 73 208 64 402 68
Internet banking, than the business
n 265 100 324 100 589 100
respondents in this category (47 per cent).
[ 329 ]
Milind Sathye Table V shows that 95 per cent of personal technology compared to business respon-
Adoption of Internet banking respondents who were aware about Internet dents who have or can hire skilled staff. It is
by Australian consumers: an
empirical investigation banking but were not using it ascribed interesting to note from Table IV and V that
security concern as the reason compared to irrespective of the category of respondents
International Journal of Bank
Marketing 64 per cent of business respondents. These ``security'' is identified as the biggest obstacle
17/7 [1999] 324±334 results could be due to lesser exposure of to adoption. These results are consistent with
personal respondents to information those found in other studies; for example,
security concern among customers was the
Table IV top ranking obstacle for non-adoption of
Views of personal and business respondents to the six propositions Internet banking in Latin America (Booz,
according to awareness of Internet banking Allen & Hamilton, 1997). In a subsequent
paragraph, suggestions have been given to
Aware Unaware Total deal with this issue.
No % No % No %
Personal Lack of awareness about IB and its benefits
Difficulty in use 19 28 113 58 132 50 Table III shows that 68 per cent of the total
Security concern 53 77 153 78 206 78 respondents were not clear about the benefits
Unreasonable price 16 23 142 73 158 60 or added value that Internet banking can
Resistance to change 34 49 110 56 144 54 offer. Of these 73 per cent were personal
No access to Internet 18 26 81 42 99 37 respondents and 64 per cent were business
Benefits of IB not clear 38 55 156 80 194 73 respondents. Table IV shows that 74 per cent
n 69 196 265 of personal respondents and 70 per cent of
Percent 26 74 100 business respondents were unaware about
Business the availability of Internet banking service.
Difficulty in use 27 28 74 32 101 31 As can be seen from Table V, where banks
Security concern 45 47 193 85 238 73 are providing the service, 81 per cent of the
Unreasonable price 21 22 146 64 167 52 personal customers and 69 per cent of busi-
Resistance to change 14 15 32 14 46 14 ness customers were not using it because
No access to Internet 6 6 9 4 15 5 they were not clear about the benefits of
Benefits of IB not clear 39 41 169 74 208 64 Internet banking. Further, 86 per cent of
n 96 228 324 personal customers and 78 per cent of busi-
Percent 30 70 100 ness customers would like the benefits to be
explained before they would be prepared to

Table V
Views of personal and business respondents according to awareness and use of Internet
banking (IB)
Aware Unaware
Au ANU UPU UNPU Total
No % No % No % No % No %
Personal
Difficulty in use 0 0 19 40 35 43 78 68 132 50
Security concern 8 37 45 95 61 75 92 80 206 78
Unreasonable price 0 0 16 33 66 82 76 66 158 60
Resistance to change 0 0 34 73 9 11 101 88 144 54
No access to Internet 0 0 18 38 9 11 72 63 99 37
Benefits of IB not clear 0 0 38 81 70 86 86 75 194 73
n 22 47 81 115 265 100
Business
Difficulty in use 0 0 27 48 58 31 16 40 101 31
Security concern 9 23 36 64 158 84 35 87 238 73
Unreasonable price 10 25 11 19 120 64 25 63 166 51
Resistance to change 0 0 14 24 0 0 32 80 46 14
No access to Internet 0 0 6 10 0 0 9 23 15 5
Benefits of IB not clear 0 0 39 69 147 78 23 57 209 65
n 39 57 188 40 324 100
Notes: The vertical totals will not tally since a respondent could tick more than one response
AU = aware and using Internet banking; ANU = aware but not using Internet banking
UPU = unaware but prepared to use Internet banking; UNPU = unaware and not
prepared to use Internet banking

[ 330 ]
Milind Sathye
Adoption of Internet banking
by Australian consumers: an
empirical investigation
International Journal of Bank
Marketing
17/7 [1999] 324±334
Figure 2
Percentage responses to each of the six propositions
adopt it. A total of 75 per cent of personal
customers and 57 per cent of business custo-
mers were not prepared to use Internet
banking, as they were unclear about the
benefits. These results drive home the point
that there was a general lack of awareness
among Australian consumers about Internet
banking and the benefits it offers.
Ease of use
It can be seen from Table III that 40 per cent
of respondents overall ascribed difficulty in
use as the reason for non-adoption of
Internet banking. Table IV shows us that, of
those who were aware of Internet banking,
only 28 per cent ± both business and personal
respondents ± ascribed this as the reason for
non-adoption. Further, according to Table V,
40 per cent of personal respondents and 48
per cent of business respondents who were
aware about Internet banking but were not
using it found it difficult to use. It could be
because some banks require downloading of
software before Internet banking can be used.
It appears that the problem of difficulty in
use could be handled by appropriate custo-
mer education.
Pricing/cost aspects
As already mentioned, ``cost'' was cited as the
top-most reason for non-adoption of Internet
banking in Singapore. In the Australian
context, it was found that 55 per cent of all
respondents consider that unreasonable
price was preventing them from adoption of
Internet banking. Internet banking services
are generally free for personal customers:
still, 60 per cent of the personal respondents
indicated this as the reason for non-adoption.
Obviously, these respondents were unaware
that the service is generally offered free of
charge. Table IV shows that 23 per cent of
personal customers and 22 per cent of busi-
ness customers, who were aware about
Internet banking, found the price unreason-
able. Table V throws further light on this and
shows that those who are using the service do
not have any price concerns. In sum, the
results again highlight the importance of
customer education and appropriate publi-
city.

Resistance to change
Table III shows that only 32 per cent of the
customers cite this as the reason for non-
adoption. Understandably, the resistance to
change was found to be much higher (50 per
cent), in the case of personal customers than
in the case of business customers (14
per cent). Table V shows that 73 per cent of
the customers, who were aware but not using
the service, have shown resistance to change.
This could be due to customer inertia
Figure 3 (Daniel, 1999), need for personal interaction
Views of personal and business respondents to the six propositions especially among the senior customers or
technology phobia. As more and more custo-
mers migrate to Internet banking, the resis-
tance of the remaining customers could
disappear. Demonstration kiosks at super-
markets could help in this direction.

No access to computers/Internet
This is the least cited, of all the factors, for
non-adoption of Internet banking. Most cus-
tomers have access to Internet, at home or at
the office or both. Statistics show that 18 per
cent of all households in Australia have
access to Internet from home (NOIE, 1999).
Table IV shows that, of the personal respon-
dents who are aware of Internet banking, 26
per cent cited this as the reason for non-
adoption, compared with only 6 per cent of
[ 331 ]
Milind Sathye
Adoption of Internet banking
by Australian consumers: an
empirical investigation
International Journal of Bank
Marketing
17/7 [1999] 324±334
[ 332 ]
business respondents. From Tables III to V, it
can be seen that this was the least cited
reason for non-adoption of Internet banking.
Supplemental analysis and findings
Chi-square tests were conducted to deter-
mine the relationship between the respon-
dents who were willing to use Internet
banking and the four characteristics of
personal and business respondents. The
analysis is shown in Table VI.
No correlation was found between the
factors like age, occupation, income and
education and interest in Internet banking.
These findings were surprising, since a
survey by the Australian Bureau of Statistics
about use of the Internet (ABS, 1998) shows
that use was related to income, age and
education. As regards business, no correla-
tion was found between form and nature of
business but a high degree of correlation was
found between turnover, location and inter-
est in Internet banking.
Discussion of results and
limitations of the study
This study shows the major factors that
influence the consumer uptake of Internet
banking in Australia. As identified, security
concerns and lack of awareness about Inter-
net banking and its benefits stand out as the
obstacles to non-adoption of Internet banking
in Australia. Security is a burning issue and
even one instance of adverse media publicity
can damage consumer confidence in the
system. A quick response to such publicity
can help ease customer concerns and restore
their confidence. One of the major banks,
gives such an update to the customers. Some
of the banks have included an undertaking
that they will indemnify the losses incurred
through unauthorised use except under cer-
tain circumstances. Such an undertaking can
help build customer confidence. In addition,
Table VI
Interest in Internet banking
Chi-square
value DF p value
Personal
Age 3.96 3 0.26
Occupation 5.05 4 0.28
Income 8.66 5 0.12
Education 5.31 5 0.37
Business
Form 2.86 4 0.58
Nature 1.35 6 0.96
Turnover 1.62 4 0.80
Location 2.81 6 0.83
the information on security aspects needs to
be presented in simple and non-technical
form. Issues like lack of awareness about the
service and its benefits, difficulty in use,
resistance to change, are matters of customer
education and thus controllable from a
managerial perspective. Possible solutions
could include giving wider publicity under-
scoring the benefits, demonstration kiosks at
supermarkets or public libraries, where
people can have hands-on experience of
Internet banking, a third party, like, say,
industry association/consumer groups/gov-
ernment, publishing educational literature,
etc. The Commonwealth Government has,
recently, published a fact sheet on Internet
banking for consumers along with a status
report on Internet banking (NOIE, 1999).
Such documents could help in customer
education. The above documents reproduce
the security systems in use in the banks but
do not provide analysis and recommenda-
tions. The customer is again left to himself to
analyse the security information, which is
provided mostly in technical terms. There
appears to be a role here for the consumer
organisations to guide the customers suita-
bly. Similarly, banks may consider passing
on some of their gain in reduced operating
cost to customers and thus offer a low-cost
service. This may ensure customer loyalty to
the service and switching to other modes of
delivery or banks could be avoided.
It appears that the uptake of Internet
banking will not be uniform. The young,
educated and wealthy groups of customers
need to be targeted first for migration to
Internet banking. It is important to identify
the relevant customer segments and predict
the development of their growth. The pro-
ducts could include account maintenance,
account monitoring, and credit card trans-
actions, mortgage loans, stock market trad-
ing, margin loans and vehicle loans. Farm
loans and other products for the farmers and
others in remote areas and various deposit
schemes could also be the possible targets.
Internet banking will also give rise to issues
that influence banker and customer rela-
tionships. Establishing identity of both par-
ties, authentication of transactions,
resolution of disputes, etc. The Australian
government was quick to identify and initi-
ate suitable steps to remove the legal and
regulatory barriers to e-commerce in general
and Internet banking in particular.
This study has the following limitations.
Given the fact that banks are reluctant to
disclose the names and addresses of their
customers, this study does not specifically
look at those customers who are presently
using Internet banking. It would be very
Milind Sathye
Adoption of Internet banking
by Australian consumers: an
empirical investigation
International Journal of Bank
Marketing
17/7 [1999] 324±334
useful to study these sets of customers
exclusively. Further, being an exploratory
study, multiple choice questions have been
used, instead of Likert-scale, to measure
various constructs. With a Likert-scale mea-
surement, it could be possible to compare the
two groups more rigorously. Further, the
relative importance of these factors could
also be established. It could be possible to
conduct an exclusive e-mail survey, holding
the factor, ``access to computers/Internet'',
constant. This study looks at Internet bank-
ing from a consumer perspective only. A
relevant area for study could be the factors
that affect the provision of Internet banking
by banks, given that only nine out of 52 banks
are offering online transactional banking.
Another area could be the effect of online
banking on credit unions and building
societies. Yet another area of study could be
customer satisfaction with alternative ser-
vice delivery channels.
Conclusion
The objective of this study was to quantify
the factors preventing adoption of Internet
banking in Australia. The literature on
Internet banking in Australia does identify
lack of awareness and security concerns as
the prime reasons for slow adoption thereof
by consumers. However, no empirical evi-
dence was available to support the theory
that these factors are in fact responsible. The
above analysis shows that security concerns
and lack of awareness stand out as the
reasons for non-adoption of innovation of
Internet banking by Australian customers.
Bank managements could build awareness
by emphasising the benefits of Internet
banking vis-aÁ-vis telephone and brick and
mortar (branch) banking and educate custo-
mers about security concerns on the lines
suggested in this paper.
Further, the delivery of financial services
over the Internet should be treated as a part
of overall customer service and distribution
strategy. The relationships developed could
then be used as a gateway for delivery of
product information. These measures could
help in rapid migration of customers to
Internet banking, resulting in considerable
savings in operating costs for banks.
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