The Influence of Trial in Consumer Resistance to Switching Electronic Banking Channel from ATM to Internet Tuire Hiltunen, Tommi Laukkanen, University of Kuopio, Finland Mika Hiltunen, Nordea Bank Finland Abstract The purpose of this paper is to search for reasons for Internet banking resistance among those bank customers who already make their payment transactions via ATM. The objective is to ascertain how different service- and channel-related factors influence resistance to Internet banking before and after the trial phase of the adoption process. In other words, the aim of the paper is to identify factors causing resistance before and after the first trial of Internet banking after users have already adopted another electronic channel. In order to identify the values behind the reasons for not adopting the Internet instead of ATM, 30 customers of a large Scandinavian bank were interviewed in-depth using the means-end approach and the laddering interviewing technique. The results indicate some influence of the trial in the resistance to Internet banking. In general, respondents perceived no relative advantage in switching banking channel from ATM to Internet. Although recognising the benefits of Internet, the respondents preferred the old habit or felt that the Internet was unsafe, inefficient or inconvenient for payment transactions. With theoretical discussion and empirical conclusions, the objective of this paper is to produce an enhanced understanding of consumer resistance to Internet banking and to present empirical evidence and practical advice for service providers’ decision- making. Key words: consumer behaviour, innovation resistance, rejection, Internet banking, ATM Introduction The theory of innovation resistance has received relatively little attention in the marketing literature. The current literature on innovations has largely concentrated on the adoption of innovation and the factors influencing innovation adoption. However, Sheth (1981), for example, has highlighted the importance of studying the process of innovation resistance instead of adoption. He has argued that “…it is about time we paid respect to individuals who resist change, understand their psychology of resistance and utilize this knowledge in the development and promotion of innovations rather than thrust upon them preconceived innovations…” (p.274). It is important for companies that are committed to realising the potential of electronic channels to understand the phenomenon of innovation resistance and carefully deal with the aspects that it is possible to overcome. Furthermore, it is also valuable to understand the reasons for the difference in attitude to two forms of electronic delivery and not only between face-to-face customer service and an electronic service. This is also the case with the banks; they are actively directing their customers into electronic channels by marketing actions, offering better prices and informing customers about the advantages of electronic channels. For example, when compared to visiting a branch office or using ATM, Internet as a banking channel is low-priced, independent of place or the opening hours of banks, and moreover, gives the control to the customer (Karjaluoto, 2002). However, a large portion of bank customers still uses ATM and non-electronic methods for payment transactions. Although Internet banking is a growing phenomenon, the factors inhibiting its diffusion are still little known (Bradley and Stewart, 2002; Mols, 1999). The objective of this

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study is to search for reasons for consumers’ resistance to Internet banking. The reasons are explored in different phases of the adoption process (i.e. the innovation decision process), and especially before and after the first trial of Internet channel. Altogether 30 customers of a large Scandinavian bank were interviewed in-depth using the means-end approach and the laddering interviewing technique. The sample consists of individual customers, who have valid contracts for Internet banking but who prefer to use ATM for payment transactions. The study reveals barriers causing resistance to Internet banking and explores the values causing these barriers. The paper begins with a review of the relevant literature on innovation resistance and makes a recap of earlier studies on Internet banking. Moreover, the paper presents the method used and reports the main results of the study. Finally, a discussion is provided and suggestions for further research are made. Innovation resistance Resistance to innovation is perceived as resistance to the changes that an innovation causes to the status quo or as a conflict between innovation and the set of beliefs the consumer holds (Ram and Sheth, 1989). In short, resistance to innovations is conceptualised as consumer’s preference for familiar products and services instead of new ones (Arnould et al., 2004). Rogers (2003) calls the adoption process an innovation–decision process, which stands for the process that an individual (or a decision-making unit) passes through from gaining knowledge of an innovation to forming an attitude towards it and to making a decision either to adopt or to reject it, leading to implementation and to confirmation. He identifies five stages in the innovation decision process: knowledge, persuasion, decision, implementation and confirmation. Shiffman and Kanuk (2004) name the stages: awareness, interest, evaluation, trial and adoption / rejection (see Figure 1). Figure 1. An adoption process model Pre-existing problem or need

Awareness

Interest

Evaluation

Trial

Adoption/ Rejection

Evaluation

Rejection

Discontinuance or Rejection

Source: Adapted from Shiffman and Kanuk, 2004. It is argued that one of the major causes for the market failure of innovations is the resistance they encounter from consumers (Ram and Sheth, 1989). According to Ram (1987), adoption begins only after the initial resistance is overcome. It is worth noting that resistance and possibly subsequent final rejection may take place at any stage of the adoption process. Szmigin and Foxall (1998) argue that resistance may also manifest itself as postponement and opposition. The former refers to procrastination of the adoption decision, whereas the latter refers to rejecting the innovation or searching for further information after the trial. Therefore, understanding the factors causing resistance at different stages of the process is the key to the successful development of innovations.

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Obstacles to Internet banking adoption It is argued that consumers are reluctant to make online transactions due to concerns about privacy (Kiely 1997) and security (e.g. Gervey 2000; Kiely 1997). Security concerns and perceived risk are also perceived as the major obstacles to adoption of Internet banking (Bestavros, 2000; Polatoglu and Ekin, 2001; Rotchanakitumnuai and Speece, 2003; Sathye, 1999; Singh and Malhotra, 2004). In addition, Mattila et al. (2003) argue that some customers have concerns about lack of training. Support before but also during the use of Internet banking is reported by customers to be important. Adequate training could reduce perceived risk, negative attitudes to the service and the number of errors occurring during usage. Filotto et al. (1997) argue that information is also needed in order to enable customers to perform transactions individually. Web pages should provide information that is detailed enough and easily accessible (Jayawardhena and Foley, 2000). Problems occurring while making transactions should also be easily and immediately resolved (Rotchanakitumnuai and Speece, 2003). Gerrard and Cunningham (2003) argue that compared to ATM, Internet has not demonstrated additional relative advantage to all customers. Furthermore, Moon and Frei (2000) argue that customers do not appreciate the Internet channel, as it requires self-service but merely see the channel as inconvenient. ATM, on the other hand, may be perceived as more compatible and less risky and include less effort in learning. It is also argued that some customers do not even want to become PC-literate or familiar with Internet (Mols, 1999). Method The purpose of this paper is to search for reasons for Internet banking resistance before and after the trial phase of the adoption process. Bagozzi and Lee (1999) propose that consumer decision processes concerning innovations can be conceived of as an instance of purposive behaviour, where the consumer makes decisions about goals related to his subjective wellbeing. In this paper, the goals are seen as the values of customers. It is argued that innovations threatening values are a significant reason for resistance to adopting the innovations (Arnould et al., 2004). The values of an individual are seen as the most basic and fundamental motivators of behaviour (Woodruff and Gardial, 1996) and are claimed to guide selection or evaluation of human behaviour (Schwartz and Bilsky, 1987). However, the underlying attribute-value connections driving the resistance to Internet banking have not been accounted for in the literature so far. Gutman (1982) has argued that the means-end approach is appropriate for determining why certain products are not chosen. Furthermore, the strictly defined approach diminishes the influence of the interviewer typical in qualitative research. Therefore, a means-end theory explaining how product or service attributes facilitate consumers’ achievement of values was applied and the consumers’ dominant means-end hierarchies driving the resistance were investigated. The means-end approach suggests a hierarchical representation of how customers view products and services. Concrete product attributes describe the perceived characteristics of the product; consequences describe the benefits that the customer derives as a result of product or service consumption. Thirdly, values of customers are seen as the ultimate ends served by the product or service means. The interviews were carried out among the bank’s private customer base in Helsinki, Finland. The sample consisted of those customers who primarily use ATM for payment transactions although they have made Internet banking contracts with the bank. Within this group of customers simple random sampling was executed in order to gain as representative a sample as possible. Altogether 30 in-depth interviews were conducted, of whom 24 interviewees had

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tried Internet banking and six respondents had no experience of using it. An in-depth interviewing technique called laddering was used. Laddering refers to a one-to-one interviewing technique developed to gain an understanding of how respondents associate product attributes and consequences to their desired end-states and underlying values (Reynold and Gutman, 1988). It allows the researcher to “dig” below the consumers’ surface knowledge about the product attributes and consequences to their deeper meanings and beliefs about value satisfactions (Peter and Olson 2005). The premise of the method is that lower levels imply the presence of higher levels, so that product or service attributes have consequences that lead to values. Laddering involves a specific interviewing format using a series of probing questions beginning with distinctions between product attributes and leading to different consequences and the values behind the obvious attributes (Reynolds and Gutman, 1988). The laddering began with respondent-perceived distinctions between ATM and Internet as payment channels. The laddering process then continued with questions like “Why is that important?” after each response. The answers typically led from attributes to consequences and finally to the personal values of the respondent. The interview continued until the respondents could no longer provide any further information. The most significant attribute-consequence-value chains are summarised in hierarchical value maps represented graphically in a tree diagram, in which the factors are summarised and the value chains simplified in the interests of informativity. The thickness of the line represents the connection intensity. Results and discussion The results of the study indicate that usage experience and the trial phase in the adoption process affect consumer resistance to Internet banking. It seems that resistance to change is greater among those respondents who have not tried Internet banking. The respondents argued that the newness of the Internet channel as well as the force of habit cause reluctance to learn new service methods. Some respondents suffered from lack of information about using the channel. Furthermore, some respondents argued that Internet banking usage does not feel comfortable. Some respondents, who did not have a computer or Internet access, resisted the channel for economic reasons. Some also argued that it is important for them to have daily tasks like going out to the ATM. They felt that it enhanced the feeling of importance and selfesteem (see Figure 2). Figure 2. Hierarchical Value Map: respondents with no trial experience Resistance to change

Certainty

Convenience

Uncertain to use Difficult to use

Does not Does not want to feel learn No proof of comfortable payment Newness of the channel or used to use ATM

Efficiency

Slow to use

Economy

Self -esteem

Does not feel Costs of purchase important

Lack of knowledge Does not to channel produce usage daily tasks

Lack of Absence of computer or No official Changeable bar code Internet No need receipt passwords reader connection to go out

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Those who had usage experience in Internet banking felt that Internet surroundings pose possible threats and insecurity in the usage process, and therefore, felt it was uncertain. In addition, the respondents were reluctant to carry passwords with them due to difficulty in using them and the resulting inconvenience. This is in line with the findings of Laukkanen and Lauronen (2005), who argue that customers perceive banking services that do not require the input of Transaction Numbers (TAN) as more convenient. The results of this study also indicate that some respondents with usage experience believe that the risk of password misuse increases the uncertainty of Internet banking. Some respondents, moreover, suffered from absence of documentation in the Internet channel as they were unable to obtain a receipt i.e. proof of payment. Furthermore, some respondents with trial experience argued that the payment process is unclear on the monitor screen (see Figure 3). Figure 3. Hierarchical Value Map: respondents with trial experience Resistance to change

Certainty

Control

Convenience

Difficult Possibility to Does not Insecure to use password feel to use Uncertain misuse to use comfortable Have to Lack of carry the Fear of the knowledge passwords possible to channel along No proof of threats in usage payment Internet Newness of the channel or used Internet to use ATM surroundings

No official receipt

Changeable passwords

Absence of bar code reader

Efficiency Slow to use

Unclear to use

Unclear proceeding at monitor

The respondents of both groups perceived the absence of a bar code reader in Internet service as a barrier to service adoption. They argued that ATM is more efficient, since without the bar code reader the payment service is slow to use and is inefficient. Both groups also valued certainty in the payment process, and therefore complained about the lack of an official receipt through the Internet channel. The respondents argued that they were not able to have any proof of having made their payments, and therefore found the Internet payment process uncertain. The respondents of both groups also argued that changeable passwords are difficult to use, and therefore, caused inconvenience. To conclude, in line with the findings of Gerrard and Cunningham (2003), the respondents in general were aware of no relative advantage in switching banking channel from ATM to Internet. Many of them preferred the old habit or perceived Internet as unsafe, inefficient or inconvenient. The compatibility of the Internet was seen to be low, especially among those respondents who had not tried Internet banking. They also reported more negative attitudes and beliefs towards Internet banking than the respondents with trial experience. It can be concluded that resistance to change seems to be stronger before than after the trial phase of the adoption process. It seems that in order to increase the adoption of Internet services banks should facilitate the use of the Internet channel, provide more information about how to use it, likewise attend to privacy and security issues and encourage customers to make the first trial of the Internet service.

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