Mobile Banking in Indonesia
Mobile banking is
an evolution of internet banking that provides direct access to banking
transactions via mobile applications
(Laukkanen & Kiviniemi, 2010). Zhou (2011) defines mobile banking as the
interaction between customers and financial institutions via smartphones. The
main mobile banking services include domestic or international fund transfers,
bill payments, and top-ups (Cruz et al., 2010).
The
first mobile banking application was launched in the late 1990s in Germany when
the German Company Paybox began partnering with Deutsche Bank (Shaikh &
Karjaluoto, 2014). Exelcom, in partnership with several banks, first introduced
mobile banking in Indonesia in 1995 (Mauluddi, 2020). Exelcom is a cellular
telecommunications operator that is now known as XL Axiata. Bank Central Asia
was the first bank to implement and develop mobile banking services between
2001 and 2003, followed by other Indonesian banks (Riza & Hafizi, 2020). Initially,
mobile banking was combined with web-based internet banking, known as
electronic banking. However, in recent years, the use of mobile banking has
been promoted by banks to increase customer trust through the utilization of mobile
technology (Kurniasih, 2020). Several banks in Indonesia, particularly state-owned
banks, have adopted this technology. In order to enhance their online banking
services, state-owned banks in Indonesia in particular have adopted and
implemented cutting-edge technology (Kesuma et al., 2016). Moreover, Indonesian
banks are enhancing the convenience of mobile banking services. More users are
switching to this service, which allows them to complete their financial
transactions without having to go directly to the bank office or ATM (Mushofa
& Lindiawati, 2018).
According
to Sukma (2018), mobile banking provides accessible, anywhere and anytime
services, allows users to access their most recent balance following the online
transaction, saves time, and is free to use. The functions of mobile banking
are also more comprehensive and easier to use through a smartphone application.
Compared to internet banking services, mobile banking offers cost savings, faster
service speed, and competitive strategies (Toloie & Bayanati, 2012).
In
contrast, mobile banking has several weaknesses, for instance, some mobile
banking applications are only compatible with certain providers, and data or
network speeds vary by location, and daily transaction limits (Hussain et al.,
2014). Mobile banking services typically consist of bill payments (electricity,
water, internet, credit card, and insurance), fund transfers, purchases,
digital wallet top-ups, printing bank statements, paying taxes, making
investment deposits, and others.
Diffusion of
Innovation Theory
The diffusion
of innovation theory was developed in 1930 by a French scientist, Gabriel
Tarde. In his book “The Law of Imitation,” Tarde (1930) revealed that an
innovation implemented by an individual or group is viewed from the perspective
of time (Rogers,
2003). Tarde’s idea was further developed by Everett M. Rogers in 1983 in a
book entitled “Diffusion of Innovation”. Rogers (1983) explains that the length of time it takes for an to be
adopted by individuals or social groups depends on the decisions made during
the innovation process, as does the innovation itself. Rogers (2003) further developed his theory and
published the fifth edition of the book “Diffusion
of Innovation Fifth Edition” in 2003.
Rogers (2003) defines diffusion as the process of
spreading information among individuals or social groups over a period of time.
On the other hand, an innovation is an idea, concept, process, and product or
object discovery that is perceived as new. The wider society will adopt,
implement, and accept this innovation (Rogers,
2003). The diffusion of innovation theory, thus describes how the innovation
process is communicated to individuals or social systems. The process of
communicating innovation involves five stages (Figure 1), knowledge,
persuasion, decision, implementation, and confirmation (Rogers, 2003).
Before the decision-making stage, there
are five main characteristics or indicators that
can influence the decision-making to accept or reject an innovation. Apart from
this, this characteristic is able to minimize the level of innovation
uncertainty, influence the speed of a community in adopting new innovations,
and increase the success of adopting an innovation (Indriyati & Aisyah,
2019).
According to Rogers (2003), the first indicator is
relative advantage, which is a new innovation that is perceived to be better
than previous innovations. The second indicator is compatibility, a new
innovation that is perceived as being in accordance with existing values, and past
experience, as well as accordance with individual or group needs. The next
indicator is complexity, a new innovation that is perceived as difficult to
understand or use. Trialability is the next most important indicator. Trialability
is an innovation that can be tested first in a limited scope. The final
indicator is observability, which means that the results of a new innovation
can be clearly seen for an individual or group. According to Rogers (2003), the
five main indicators of innovation play a very important role in persuasion in
innovation decisions.
Previous research states that Rogers' diffusion of
innovation theory is the most well-known and widely respected by researchers
(Bradford & Florin, 2003; Forman, 2005; Grantham & Tsekouras, 2005).
Initially, the diffusion of innovation theory was widely applied in
anthropology, sociology, education, communication, marketing, geography,
economics and management. Currently, diffusion of innovation theory has been
used as the main reference for research, especially in information systems and
accounting. In the past decade, diffusion of innovation theory was applied in
research on the internet and mobile technology (Al-Jabri & Sohail, 2012;
Chen et al., 2004; Forman, 2005; Nor et al., 2010; Park & Yoon, 2005). In
Indonesia, several previous studies have also used diffusion of innovation
theory in mobile and internet technology, including, Intani and Rikumahu
(2020), Kurniasih (2020), Wiratno (2020).
Several
studies agree that the diffusion of innovation theory is appropriate to be
applied to information systems because of its ease of application and
simplicity (Al-Jabri & Sohail, 2012; Nor et al., 2010; Park
& Yoon, 2005). The diffusion of innovation theory
is also an appropriate theory for predicting the level of use or adoption of
new technology. In addition, the diffusion of innovation theory can be
modified by adding several constructs to increase its predictive power
(Grantham & Tsekouras, 2005; Intani & Rikumahu, 2020; Moore &
Benbasat, 1991).
Mobile Banking Adoption and Diffusion of Innovation
According to the diffusion of innovation theory,
relative advantage is the perception that a new innovation is better than the
previous innovation. A better level of relative advantage accelerates the
implementation of the new innovation (Rogers, 2003). An individual who perceives
that mobile banking has more value compared to previous banking services will
quickly integrate mobile banking into their daily activities. Previous studies
such as Mandatra and Sutarso (2019) and Kaur et al. (2020) find that relative
advantage has a positive and significant effect on mobile banking adoption.
Diffusion of innovation theory views compatibility as
a perception that new innovations are by existing values, past experiences, and
individual or group needs. A high level of compatibility with an innovation accelerates
the implementation of the innovation (Rogers, 2003). Nor et al (2010) suggest
that online banking services need to adapt to current lifestyles or needs of
the time. This is supported by previous researchers such as Al-Jabri and Sohail
(2012), Ravichandran and Madana (2016) and Sukma (2018) who argue that
compatibility has a significant influence in accelerating the adoption of
mobile banking.
In the context of complexity, the diffusion of
innovation theory assumes that an innovation is perceived as difficult to use
and understand. Rogers (2003) believes that low complexity in terms of using new
innovations will accelerate the implementation of the innovation. In general,
mobile banking services were created to provide more convenience to customers
in direct transactions (Lin, 2011). Features were modified to make all services
simpler and easier to use (Latip et al., 2017). Thus, if mobile banking has a
high level of complexity, it will slow down customer adoption (Akmalia &
Rikumahu, 2020). Indriyati and Aisyah (2019), Entele (2019), and Kurniasih
(2020) agree that complexity needs to be minimized to accelerate mobile banking
adoption.
According to the diffusion of innovation theory,
trialability is a new innovation that can first be tested in a limited scope.
Thus, if the innovation can be tested, it accelerates the adoption of an
innovation (Rogers, 2003). The use of mobile payment methods by developers has
a significant influence on the use of mobile banking, this will minimize user
concerns and motivate other users to adopt mobile banking (Intani &
Rikumahu, 2020). New users of mobile banking will tend to try it out first
before deciding to implement it. Therefore, if mobile banking can be tested, it
will further accelerate the adoption of mobile banking (Mushofa &
Lindiawati, 2018). Kurniasih (2020), and Nor et al (2010) state that
trialability has a positive effect on mobile banking. They also emphasize that trialability
makes it easier and faster to adopt mobile banking.
Finally, Diffusion of innovation theory explains that
observability is a new innovation that can provide benefits for an individual
or community. An optimal level of observability will therefore accelerate the
adoption of the innovation itself (Rogers, 2003). Observability in the context
of mobile banking is the personal perception of the use of mobile banking will
provide clear benefits (Cruz et al., 2010). An individual will get direct
benefits from using mobile banking if these benefits can be seen so that it
will speed up the adoption of mobile banking (Al-Jabri & Sohail, 2012).
Kaur et al. (2020), and Entele (2019) agree that observability has a positive
effect on mobile banking adoption and recommending the service.
Conclusion
Currently, mobile banking is one of the most popular
banking services. Mobile banking is an evolution of internet banking which provides
primary access to banking transactions through mobile application. In
Indonesia, the government together with several leading banks in Indonesia have
promoted the use of mobile banking to all their customers. Currently, mobile
banking is widely used by bank customers in Indonesia. Mobile banking is widely
popular among students in Indonesia, particularly accounting students. Students
generally use mobile banking for online shopping transactions. The convenience
and integration with the leading online marketplace in Indonesia are some of
the drivers of increasing mobile banking adoption.
According to the Diffusion of Innovation theory, to
accelerate the adoption of innovation either in terms of individuals, groups or
social systems. The Diffusion of Innovation Theory can be used to accelerate
the adoption of innovations, both in terms of individuals, groups or social
systems. Moreover, the diffusion of innovation theory is an appropriate theory
for predicting the level of use or adoption of new technology, including Mobile
Banking. The diffusion of innovation theory proposes five key indicators to
accelerate mobile banking adoption. These indicators are relative advantage,
compatibility, complexity, trialability, and observability. Several previous
researchers agree that the five indicators suggested by the Diffusion of
Innovation theory are able to accelerate the adoption of an innovation.
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