UNDERGRADUATES’ PERCEPTION OF SMS BANKING IN LABUAN: AN EMPIRICAL ANALYSIS

UNDERGRADUATES’ PERCEPTION OF SMS BANKING IN LABUAN: AN EMPIRICAL ANALYSIS

Amin, Hanudin

ABSTRACT

Mobile phone for banking purpose is crucial for those who are busy with daily routine activities, especially those who are employed. In contrast, mobile phone is evolved among undergraduate students as a key social tool to connect with family members, friends and lecturers. The objective of this study is to identify the key points which relevant to the students’ perception over SMS banking by the use of a survey conducted during July September 2005. This research used university students as the sample, namely from Labuan International Campus-Universiti Malaysia Sabah. A total of 317 students were approached which was considered as a preliminary way to observe their perception over SMS banking. Through various SPSS analyses, we discovered that 38 percent of the male respondents and 61 percent of the female respondents know what is SMS? Surprisingly, only female respondents used SMS banking with 0.95 percent, which is consistent with the study by Laforet and Li (2005) and Howcroft, Hamilton and Hewer (2002). Findings also discovered that all of the socio-demographic elements have their own level of significant. In general, it can be concluded that student’s perception were not homogeneous and an education level was insufficient to explain the SMS banking usage among the respondents.

Keywords: Mobile phone; SMS; Banking; Undergraduate students.

I. INTRODUCTION

The need for mobile banking has been given considerable attention by many researchers (for example, Karjaluoto, Koivumaki, and Salo, 2002; Mattila, 2003; Suoranta and Mattila, 2004; Laforet and Li ,2005; Riivari, 2005). The topic related to mobile banking has become important for academicians, practitioners and students. Exploring such information will help banks to identify students’ perception toward SMS banking which will be crucial for bank’s services selection by students.

There are two main questions in order to understand SMS banking. Firstly, what is SMS banking in the first place? SMS banking can be defined as banking transaction using mobile phone via SMS application. SMS stands for short message services. Bank Islam Malaysia Berhad (BIMB), Bank of Commerce (BCB), Maybank to name a few have introduced this application. Introduction for SMS has taken place due to competition among banking institutions as well as non-financial institutions. Secondly, why SMS banking? There are four points, which can be highlighted here. First, the growing population of mobile phone users in Malaysia can become as a good indicator, which will also affect mobile phone application for banking purpose (see appendix 2). Second, a mobile phone can act as a new platform to inform others regarding information dissemination. Third, internet/online server supports it. Fourth, it is flexible.

This field of research is very new in Labuan and in Malaysia as well. In fact, the potential of SMS banking is very obvious in Malaysia. As noted earlier, a dramatic increase in the number of mobile phone usage among Malaysian can be become as a yardstick to promote SMS banking as part of banks’ service (see appendix 2). According to statistic provided by Suruhanjaya Komunikasi dan Multimedia Malaysia (SKMM), the usage of SMS has drawn a dramatic increment in recent year. It stated that about 3.6 billion of SMS were sent in 2002, whereas in year 2003 the number of SMS increased to 6.1billion. In addition, on ownership of mobile phone, it has displayed an obvious increment. For example in 1998 total individuals with mobile phones were 2.15 million.

According to the present study, mobile phone only proliferated for communication with friends, family members and chatting purpose (99 percent for friends and family, but only 0.95 percent for banking). This practice among students showed the lack of understanding on the other benefits that can be extracted from mobile phone services. This situation was also due to security and reliability and also other factors associated with SMS banking. SMS banking took place in the late 1990s, but until today there is limited study conducted in this field. It may be helpful to perform this study in answering these possibilities. It may be valid to claim that the previous studies may not be applicable in Labuan, Malaysia due to differences in cultural, economic and banking environment.

II. RESEARCH OBJECTIVES AND HYPOTHESES

This study was considered as preliminary study where it discusses the results of SMS banking from undergraduates’ point of view. In order to achieve this, three objectives were verified:

i) To investigate students’ perception based on their awareness and usage of SMS banking;

ii) To clarify the students’ perception based on their expectation to the SMS banking as a new banking channel; and

iii) To determine students’ perception on SMS banking based on demographic variables.

In line with the third objective as mentioned, five null hypotheses were verified to satisfy the objective:

i) There is no significant relationship between students’ perception over SMS banking exhibited by race discrepancy;

ii) There is no significant relationship between students’ perception over SMS banking exhibited by male and female;

iii) There is no significant relationship between students’ perception over SMS banking exhibited by schools;

iv) There is no significant relationship between students’ perception over SMS banking exhibited by age discrepancy; and

v) There is no significant relationship between students’ perception over SMS banking exhibited by religion discrepancy.

III. LITERATURE REVIEW

There are several articles that can be considered as related to the present study namely the study conducted by Al Ashban and Burney (2001), Howcroft et al. (2002), Karjaluoto et al. (2002), Mattila (2003), SKMM (2004), Suoranta and Mattila (2004), Laforet and Li (2005) and Riivari (2005). The following discussion highlights some of the key findings.

Laforet and Li (2005) research on mobile and Internet banking has produced interesting findings. The important finding claimed that respondents’ level of education was not found to influence online and mobile banking adoption in China. In fact, as far as mobile banking is concerned, lack of understanding of its benefits was found significant. At least among the urban population surveyed, 33 percent used online banking and 14 percent used mobile banking. Thus, the level of awareness of such services was low in China. Laforet and Li (2005) also claimed that the high response rate coming from younger consumers indicated that they were more interested in mobile banking topics

A study conducted by Howcroft et al. (2002) revealed that younger consumers value the convenience or time saving potential of online and mobile banking more than older consumers. Younger consumers also regarded the lack of face-to-face contact as less important than older consumers. Another important finding as highlighted by Howcroft et al. (2002) further found the educational levels of respondents did not affect the use of telephone or online banking.

According to study reported by SKMM (2004), mobile phone was considered as a necessity good instead of communication tools. Findings indicated that younger users equal to 12.3 percent of the total utilization, which is beyond the respondents, aged 50 (9 percent). “Younger users” mean teenagers (aged 15-25), consists of secondary students and university students. Another important finding revealed that, Malay teenagers were higher user among the other races comprising of 47.50 percent compared to Chinese (32.4 percent), Indian (6.9 percent) and other bumiputra (5.4 percent).

A study conducted by Manila (2003) discovered that the respondents aged 18-34 are considered as the population actively using mobile phones for banking purpose. Finding also indicated that “pay bills cheaper”, “have faster data transmission rate”, “authenticate with mobile phone to internet bank” are considered as the main factor why they used mobile phone for banking transaction.

A study conducted by Karjaluoto et al. (2002) discovered that technology perception for mobile phone (mobile data services can be classified in three “never”, “rarely” and “often”) claimed that for “never” the mean was 4.1205, “rarely” was 5.1356 and “often” was 5.1781. Finding also indicated that high frequency users for mobile phone, Internet bank, ATM and others were those aged around 35-49 were amounted 281, which were considered as profitability segment for banks. Karjaluoto et al. (2002) also claimed that socio-demographic elements such as gender, age, marital status, education, income level and profession affect mobile banking adoption which were significant at 0.001

Among other purposes, Al-Ashban et al.’s (2001) study was designed to investigate customer adoption of telephone-based banking. Generally, the study discovered that 87 percent of the respondents have an education higher than diploma, which was also parallel with the use of the service to be 72 percent during the past three years, 40.2 percent of them having started using tele-banking services less than one year. Other studies by Suoranta and Mattila (2004) and Riivari (2005) claimed that mobile phone banking were very sophisticated and considered as the newest channels to conduct banking electronically.

IV. METHODOLOGY

The sampling design was through convenience sampling, which involved 317 of the respondents at that university’s campus. The populations of students are amounted to 1920 approximately. In this regard, students have chosen as a sample of the study because of the two reasons. First, based on the preliminary observation found that, almost 100 percent of the students at the higher learning institutions have mobile phone, although they are students under first degree. Some of them have more than one mobile phone (Omar and Muda, 2004). Second, with high levels of mobile telephone penetration, a mobile culture has evolved, where the phone becomes a key social tool, and people rely on their mobile phone addressbook to keep in touch with their friends (Wikipedia, accessed on 25th May 2005). In fact, students have a potential to be banks’ consumer in the future in using SMS banking. Thus, it is interesting to investigate their perceptions toward SMS banking which will affect banks’ effort in educating the students about SMS banking. The data for this study were collected through self-administered questionnaires distributed by the researchers. The questionnaire contains of three sections, the first section was designed to gather the respondents’ personal and demographic characteristics. The second part was designed to gather the respondents’ awareness and usage for SMS banking. The last part was designed to gather the respondents’ expectation on SMS banking. By studying the sample, the researchers were able to draw conclusions that would be generalizable to the population of interest. Indeed, the researchers performed a number of chi-square tests to observe any significant relationship between socio-demographic elements with students’ perception measured by “Part II: Awareness and Usage” and “Part III: Expectation” in the questionnaire.

The proportion of race was not equal as explored in this study due to its nature of sampling which was based on convenience sampling. There were 27.1 percent Malays, 23.7 percent Chinese, 12.0 percent Indians, 31.5 percent Sabahan and 5.7 percent Sarawakian. In terms of gender, the proportion of male and female respondents was not equal due to convenience sampling, with 24.9 percent male and 75.1 percent female, school SPKAL (71.6 percent) and 28.4 percent for SSIL. In terms of age groups, aged less than 20 years (4.1 percent), 20-25 years old (95.6 percent) and 26-31 years old (0.3 percent). In addition, the proportion of religion groups to be found differs, with 42.3 percent Islam, 18.6 percent Buddhist, 8.5 percent Hindu and 30.6 percent Christian. In fact, it is useful by allowing students to participate in this study since the response rate was high from these students consistent with Laforet and Li (2005) who claimed that the high response rate coming from younger consumers indicated that they were more interested in mobile banking topics. A total of 317 questionnaires were useful for further data analysis.

Answer to objective no. one (1): Students’ awareness and usage of SMS banking

Table 2: “Awareness and usage”

Based on Table 2 as shown above, the results showed that 98.1 percent of the respondents claimed to understand what is SMS, only 1.9 percent ignored to understand it. Indeed, the respondents were used their phone for SMS purpose up to 98.7 percent which was considered as social interaction. This result was partially supported by SKMM (2004) who claimed that the mobile phone was considered as a necessity good instead of communication tools among younger users. In fact, although the respondents claimed to understand this SMS concept, but it was rare when it comes for SMS application for banking. It was reported only 0.9 percent of the respondents to apply SMS banking in their mobile phone. This mean although students familiar about SMS banking, but they did not understand the other functions can be found in their mobile phone. The respondents also claimed ever heard the use of SMS for banking purpose with 60.9 percent to claim so. In short, they have low awareness about SMS application for banking purpose. Again this result is consistent with the study by Laforet and Li (2005) who found the level of awareness of mobile banking was low in China.

In general, the respondents claimed to get through the implications brought by SMS application with 84.9 percent agreed on that basis. In fact, such implications include the legal requirement from using SMS for illegal action and divorce through SMS may increase social ills, to mention but few. On the positive implications, it suggested that SMS can increase social interaction, preventing unexpected criminal, recording disaster and asking for latest news, to mention but few.

Due to fierce competition in the banking sector in Malaysia, the researchers have looked at the Islamic banks and conventional banks being asked during the survey. First, the respondents asked to mark their priority, unfortunately only 7.6 percent of the respondents ever heard about SMS banking in Islamic banks. This result showed that they have tendency to ignore other banking channel, since the existing channel (i.e. ATM is located in the campus) was sufficient to fulfill their banking transaction. In contrast, the same question asked to the respondents about SMS banking in conventional banks. It was about 36.3 percent slightly higher than Islamic banks knew about the existence of SMS banking in conventional banks due to the familiarity factor.

In sum, the bank regardless Islamic banks or conventional banks, they must take corrective actions to improve the accessibility of SMS banking among university’s students. One of the solutions is improving the marketing’s part of the Islamic banking in allowing participation from students. This is can be done by organizing a seminar pertaining mobile banking at the university’s campus. If possible two days seminary may offer further elaboration of SMS banking.

Answer to objective no. two (2): Students’ expectation about SMS banking

In this aspect, it is interesting to understand what students expect from this service. The belief about this matter has been explored with respect to the eight (8) attributes were used to verify the students’ expectation about SMS banking, which is differ from one students to another. Therefore, it creates a gap on how they look at the SMS banking. In short, their experience on mobile phone usage and banking transaction may affect their perception on how they are scaled the eight (8) said attributes.

The results showed that the respondents gave priority to the “time and cost saving” for the new product or service offered by banks. As far as SMS banking is concerned, what the students needed are supported by the function of mobile phone which is time and cost saving. This result is ranked number 1 by the respondents which are consistent with the study conducted by Mattila (2003), pay bill cheaper is one of the components under “time and cost saving” in SMS banking. Then, this followed by “advance technology” which is understood that the mobile phone is creating a mobile phone culture based on new technology adoption. At the same time, the respondents also required banks to give them a right guideline on how to use SMS for banking. Simply providing brochure may not be sufficient. People have tendency to learn based on human interaction where “question and answer” (Q&A) can be discussed in case of misunderstanding. This component (educating customers) has mean 4.27 ranked number 6, although it ranked number 6 but it is still important attribute to give attention by bank when offer new service or product such as SMS banking. Based on this study, finding indicated that low level of understanding about the SMS application for banking purposes has suggested low usage of SMS banking among the university’s students. Therefore, banks must provide corrective actions to increase a usage of SMS banking on a continuous basis.

Answer to objective no. three (3): Demographic factors

Chi-Square Analysis based on Race

According to the table above, for “Part II” the relationship between items Q1, Q4, and Q6, and “race” were significant, null hypotheses were rejected. Thus, “race” discrepancy may valid to claim that differences can be observed through item Q1, Q4, and Q6. “Part III” the relationship between item “security”, “time and cost saving”, “advance technology”, “punctuality”, “educating customers”, “customer friendly service”, “effectiveness” and “race” were significant, null hypotheses are rejected. In fact under race for “Part II”, for Q1, “Malays” were majority with 105 of the total respondents which is consistent with the research conducted by SKMM, followed by “Chinese”, “Indians”, “Sabahan” and “Sarawakian”. Also under “Part III”, for item “security” 58 Chinese respondents indicated this item to be “very important” with 18.30 percent, followed by “Malays” with 17.03 percent and “Sabahan” 17.98 percent. Overall, “Part II” and “Part III” were found to be significant with “race” discrepancy.

Chi-Square Analysis based on Gender

The relationship between “gender” and various items in the “Part II” and “Part III” were observed to be significant. Among the items in the “Part II” to be significant were Q1 and Q4. Under these items, “Q1” majority of the female respondents who participated in this study answer “yes” which is 60.57 percent, only 37.54 percent of the male responded to the same item. For “Q4”, about 59.6 percent of the female respondents ever heard about the use of SMS for banking, male respondents were more conscious with 39.1 percent. Under “Part III”, only “time and cost-saving”, “educating customers” and “effectiveness” discovered to be significant at 0.005, 0.05 and 0.05 respectively. It means that there is significant difference that can be observed between those three elements and “gender”.

Chi-Square Analysis based on School

Under “school”, for “Part II” only one element was discovered to be significant namely “Q6”. This is because students under SPKAL relatively have exposed to the banking industry includes an Islamic bank compared to students under SSIL programs, those who are exposed in Information Technology (IT). Currently, there is one Islamic bank offers SMS banking namely BIMB. This bank promotes wireless banking among Malaysian. “Part III” revealed that the same pattern as “Part II” where only three elements observed to be significant namely “reliability”, “security” and “advance technology”.

Chi-Square Analysis based on Age

The relationship between various items and “age” also produced interesting results. The chi-square test yielded statistically significant differences between the age groups in each items of the questions in “Part II” and “Part III”. Result imply statistically significant differences for “Part II”, items “Q3” and “Q6” were found to be significant to “age” at 0.005 (observed value of chi square, 13.99 and 12.45 respectively), the observed value of chi-square is greater than the critical value of chi-square, 10.5966, hence the null hypothesis was rejected. Whereas for “Part III” there were six elements have significant relationship to “age” namely “reliability” (p 21.9550), “security” (p 21.9550), “time and cost saving” (p 21.9550), “punctuality”(p 20.0902), “educating customers” (p 21.9550) and “effectiveness” (p 20.0902). Again, the null hypothesis was rejected.

Chi-Square Analysis based on Religion

Last but not least, the relationship between religion groups in each items of the questions discovered to produce a variety of results. It found that five elements for “Part II” significant at 0.005 namely (Q1: observed value of chi-square, 18.43), and (Q4: observed value of chisquare, 15.05). These observed values are greater than critical value of chi-square, 12.8381. Therefore the null hypothesis was rejected. Whereas for “Part III”, the relationship between various items and “religion” produced seven elements to be significant named “reliability” (p critical value of chi-square, 28.2995), “security” (p critical value of chi-square, 21.0261), “time and cost saving” (p critical value of chi-square, 28.2995), “advance technology” (p critical value of chi-square, 28.2995), “punctuality” (p critical value of chi-square, 28.2995), “educating customers” (p critical value of chi-square, 28.2995) and “customer friendly service” (p critical value of chi-square, 28.2995). Thus the null hypothesis was rejected.

In sum, the results clearly addressed the students’ perception of SMS banking in terms of demographic elements. There are individual differences have found in this study, meaning that they have difference perception for the new products and services offered by commercial banks in Malaysia. The results also consistent with the study conducted by Karjaluoto et al. (2002) claimed that socio-demographic elements such as gender, age, marital status, education, income level and profession as noted earlier are significant at 0.001. This will give us a signal that students’ market segment can be regarded differently in accordance to demographic elements. The next step will be an action by banks for customers’ market segmentation to increase more participation among younger users for SMS banking.

VI. CONCLUDING REMARKS

In particular, this study has discussed three issues namely (1) students’ awareness and usage of SMS banking (2) students’ expectation for the new service (i.e. SMS banking) and (3) the relationship between demographics elements with the former and latter elements.

On the students’ awareness and usage side, it discovered that there was lack of understanding of SMS banking benefits consistent with the study by Howcroft et al. (2002) who revealed the education levels of respondents did not affect the use of telephone or online banking. This result showed that the respondents experience mobile phone as a key social tool (Wikipedia, accessed on 29 March 2006) however this mindset can be altered through corrective actions taken by banks. In fact, Mattila (2003) claimed that the individuals aged 18-34 are considered as the population actively using mobile phones for banking purpose. Therefore this present study provides informal platform to encourage students use their mobile phone for SMS banking in the future where their age will be jumped to 23-34 years old as active users for mobile banking claimed by Mattila (2003).

On the expectation side, the eight (8) attributes as stated in the questionnaire found to be important to give attention by banks when offering new service or product such as in this paper refers to SMS banking. Although, “educating customers” was ranked number 6, relatively it offers insight about further action by banks to be taken to increase students’ knowledge and skill in applying their mobile phone for SMS banking. This education program is started from banks, then to mobile phone users and lastly disseminate through mouth to mouth based on informal conversation among public people include students. Providing customer service education center for SMS banking may helpful to educate public on how to use SMS banking. Simply providing brochure, and let the public learn may not be a good solution.

On the demographics side, this paper could provide a general guideline to bankers about students’ attitude may differ according to age, gender, education, religion and school when perceiving mobile phone as a new channel for banking transaction. This is consistent with Howcroft et al. (2005), financial providers cannot assume that consumers are homogeneous in terms of their attitudes towards home banking. Thus it is extremely important to enable bankers to target specific segments of the customer base with messages aimed at changing consumer attitudes and ultimately their perception.

According to the findings, it indicated that 0.32 percent of the India, Sabahan and Sarawakian respondents used their mobile phone for SMS banking. Under “religion”, only students from Buddhist, Hindu and Christian used their mobile phone for SMS banking with a small percentage 0.32 percent each of the respondents. A similar pattern also occurred to “age”, “school” and “gender”. This reflected the low understanding on the benefits that could be extracted from mobile phone SMS banking due to difference perceptions can be observed through this study. Again, this result is consistent with Laforet and Li (2005), which claimed that lack of understanding the benefit of mobile banking, was found significant.

In fact, high level of education cannot be used as a benchmark to assume students most likely use SMS banking as indicated by the present finding which is consistent with Howcroft et al. (2005) as mentioned earlier. However this in contrast with Al Ashban, et al. (2001) which claimed that 72 percent of the respondents which used telephone- based banking have an education higher than diploma, the discrepancy with the present study due to the respondents were employed. Under “Part II” of the questionnaire, require the respondents to give their expectation what they want from banks when it offers new services. It discovered that “time and cost-saving” was ranked very important among the respondents (mean=4.56), which was parallel with the study conducted by Howcroft et al. (2005).

Like other studies, this study also has it own limitation since it only use students as the sample of the study, which may have an affect on the generalization of the results. Thus, in the future a larger sample should be incorporated that may consist of general population, which will produce interesting findings, perhaps. Indeed, this study was developed only in Labuan, in an offshore banking center where the results may differ compared if conducted in other locations.

REFERENCES

Al Ashban, A., & Burney, M.A. (2001). Customer adoption of tele-banking technology: The case of Saudi Arabia. International Journal of Bank Marketing, 19, 191-201.

Berita Harian. (2004). Telefon Bimbit Jadi Pilihan Utama. Retrieved December 21, 2004 from http://www.bharian.com.my

Howcroft, B., Hamilton, R., & Hewer, P. (2002). Consumer attitude and the usage and adoption of home-based banking in the United Kingdom. International Journal of Bank Marketing, 20, 111-121.

Karjaluoto, H., Koivumaki, T., & Salo, J. (2002). Individual differences in private banking: Empirical evidence from Finland. Proceedings of the 36th Hawaii International Conference on System Sciences, 196-204.

Laforet, S., & Li, X. (2005). Consumers’ attitudes towards online and mobile banking in China. International Journal of Bank Marketing, 23, 362-380.

Mattila, M. (2003), “Factors affecting the adoption of mobile banking services”. Journal of Internet Banking and Commerce, June 2003, Vol.8, No. 1, Retrieved May, 25th, from the World Wide Web: http://www.arraydev.com/commerce/JIBC/0306-04.htm

Omar, S.Z., & Muda, M. (2004). Memahami makna telefon bimbit kepada remaja. Seminar Kebangsaan Komunikasi Kedua 2004, Langkawi, Malaysia.

Ricard, L., Prefontaine, L., & Sioufi, M. (2001). New technologies and their impact on French consumer behavior: An investigation in the banking sector. International Journal of Bank Marketing, 19, 299-311.

Riivari, J. (2005). Mobile banking: A powerful new marketing and CRM tool for financial services companies all over Europe. Journal of Financial Services Marketing, 10, 11-20.

Suoranta, M., & Mattila, M. (2004). Mobile banking and consumer behavior: New insights into the diffusion pattern. Journal of Financial Services Marketing, 8, 354-366.

Wikipedia. Mobile Phone. Retrieved May 25, 2005 from http://en.wikipedia.org/wiki/ Mobile_phone

Hanudin Amin[clubs], Suddin Lada, Mohd Rizal Abdul Hamid and Geoffrey H. Tanakinjal

Labuan School of International Business and Finance, Labuan International Campus- Universiti

Malaysia Sabah,

87015 Labuan Federal Territor, Sabah, Malaysia

[clubs] Corresponding author: Hanudin Amin, Labuan School of International Business and Finance, Labuan International Campus- Universiti Malaysia Sabah, P.O. Box 80594, 87015 Labuan Federal Territory, Sabah, Malaysia. E-mail: hanudin_zu@.yahoo.com

Copyright Universiti Malaysia Sarawak Jul 2006

Provided by ProQuest Information and Learning Company. All rights Reserved