Consumer adoption and diffusion of technological innovations : a case of electronic banking technologies

Today, technological advancements occur rather constantly as companies introduce innovative products and services to consumers. Consequently, technological innovations have brought fundamental changes in many areas of consumers\u27 lives. One such area is exchange, transactions, and contacts mediated by electronic technology. Among many technological innovations, electronic banking is currently one of the most available technological options to consumers. Electronic banking technologies refer to all the financial activities involving electronic media such as Automated Teller Machines (ATMs), debit cards, direct deposit/payment, smart cards, and computer banking. Using these electronic banking technologies, consumers can conduct fast and convenient financial transaction activities and obtain their account information without paying a visit to bank branches. This study presents a model of consumer adoption and diffusion of technological innovations. This model conceptualizes that an individual consumer\u27s adoption of a technological innovation is influenced by consumer, innovation, and communication factors. First, consumer factors refer to characteristics of consumers such as demographic and socioeconomic characteristics. Consumers\u27 particular characteristics may affect their decision to adopt technological innovations. Second, innovation factors include consumers\u27 perceived innovation characteristics. How consumers perceive a technology, e.g., as useful, reliable, secure is believed to influence their decision to adopt and use the technology. Finally, communication factors refer to how the information about technological innovation is passed on to consumers. Channel and mode of communication are considered to have impacts on consumer adoption of technological innovations. Three research objectives are generated from the conceptual model. The first objective is to examine the extent to which consumers adopt a variety of electronic banking technologies and to describe the characteristics of adopters and non-adopters of electronic banking technologies. The second objective is to identify the underlying factors that affect consumer adoption of electronic banking technologies accurately. The third objective is to investigate the role of communication in consumer adoption of electronic banking technologies. In order to address each objective, three independent yet related studies were conducted employing two nationally representative databases: The 1995 Survey of Consumer Finances (SCF) commissioned by Federal Reserve Board and the 1999 University of Michigan Survey of Consumers. The first study examined the diffusion of various electronic banking technologies, such as ATMs, debit cards, smart cards, direct deposit, and direct payment, along with the characteristics of adopters and non-adopters of those technologies. Using the 1995 Survey of Consumer Finances, it was found that, in general, more educated, more affluent, and younger consumers who are likely to communicate with professional information providers tend to adopt electronic banking technologies more readily than their counterparts. However, the specific factors that affect the adopters\u27 decision varied across different types of banking technologies. The second study investigated the impacts of innovation and consumer factors on adoption of both mature and newer innovations, i.e., ATMs and computer banking. Accessibility is an important factor that needs to be accounted for in modeling consumer adoption of computer banking because a consumer\u27s decision to adopt the electronic banking technologies can be restricted by whether the consumer has access to the technologies. Therefore, accessibility was explicitly incorporated in modeling consumer adoption of computer banking. An adjustment to avoid biased estimation was made by employing a censored probit model. Using a national sample of 890 consumers, the empirical model estimated the effects of perceived innovation characteristics and consumer characteristics on the adoption computer banking and the ATM. Results suggested that there was significant sample selection bias with regard to access when estimating the consumer adoption of computer banking. It was found that individual socioeconomic characteristics were significant predictors of accessibility to computer banking. Perceived innovation characteristics were highly significant in influencing consumers\u27 adoption of both computer banking and ATMs. The results suggest the importance of communication strategies to change consumers\u27 perceptions of electronic banking technologies as secure, reliable, convenient, and easy-to-use. The third study explored communication strategies to facilitate diffusion of innovations. More specifically, the effects of channel and communication mode on consumers\u27 adoption of electronic banking innovations were examined with the proposed taxonomy of channel and communication mode. Using data from the 1999 University of Michigan Survey of Consumers, consumers were classified into five electronic-banking-user dusters, individual consumers\u27 adoption was influenced by communication patterns, and innovators and laggards were found to have different preferences for channel and communication mode. Therefore, innovators and laggards can be reached effectively by adopting the right channel and communication mode. Laggards need tailored communication efforts that consider their preference for interpersonal, conversational communication, innovators can be reached relatively easily via written communication from professional information sources. In sum, the three research studies reveal that consumer adoption and diffusion of electronic banking technologies are influenced by joint influences of consumer, innovation, and communication factors. Among these factors, consumers\u27 perceptions of innovations are a more important determining factor of their adoption decisions than consumers\u27 demographic characteristics. In addition, when predicting adoption of newer innovations such as computer banking, accessibility also needs to be considered In order to adjust for sample selection bias. Communication is the process that diffusion agents, such as financial institutions and the government, can use to influence consumer adoption of electronic banking technologies. In order to facilitate consumer adoption. It is necessary to promote convenient, secure, reliable, and easy-to-use features to potential adopters by employing appropriate channels and communication modes. Finally, implications for practitioners, policy makers, and future research are discussed