Background Of Online Banking In Vietnam Marketing Essay


The explosion of Internet technology has revolutionized today’s economic globally. The changes and innovation of technology has altered the way banking industry can offer its services to customers. A makeable online banking has emerged as the most important online transaction platform for e-commerce, e-shopping, internet stock trading or online auction (Lee, 2009). Internet banking is utilized as a medium with faster transaction speed and lower handling fees (Kalakota and Whinston, 1997). Furthermore, there is no additional software needed when customers conducting transactions on websites (Polasik and Wisniewski, 2009). With the improved online security, customers not only can check their balances on banks’ websites; online banking allows conducting transactions that are more complicated such as transferring funds, paying bills or even writing checks. Their trustworthiness on online has nevertheless increased (Tan amd Teo, 2000).

Banking industry has initiated a paradigm shift from traditional brick and mortal branches to online. In banks’ websites, customers serve themselves without the need of frontline staff. To this, banks benefited from staff reduction, lesser branch sizes, and paper-related works (Tan and Teo, 2000; Compaq, 2001). According to Burham (1996), the establishment of website consumes less than US$25,000 in which the website maintenance also costs less than US$25,000 annually – a big different as compared to maintain a branch. For the customer point of view, convenience and efficiency are the great motivation for them to use online banking (Bruno, 2003). Customers do not need to go to bank, queue up, waiting or constrained by bank’s operating hours. It offers customers “anytime, anywhere” banking facilities (Lassar et al., 2005).

There is a rapid growth of customers in using online banking services. The report of International Data Corporation (IDC) report shows that the online banking users has surpassed a total of one hundred million by 2004 (Maenpaa et al., 2008). The importance and advantages of online banking has prompted banking industry to rethink their strategy and for long-term survival, most of the banks go online (Tan and Teo, 2000). To stay competitive in the global market, developing countries like Malaysia and Vietnam have tentatively launched their online banking. Malaysia has actively developed e-banking since the mid of 2000 (Poon, 2008). Vietnam Government emphasis strongly on telecommunication development and has implemented internet in order to increase e-commerce usage (Chong et al., 2010). Although Malaysia and Vietnam are from the Southeast Asia region, elements like legal, cultural, social, political, and technical influence among both countries are different. The different elements add further the complexity in using online applications (Tarasewich et al., 2002). The degree of different cultural context in both nations will influence the typical ways on how online applications are applied in an online banking system (Zakaria and Stanton, 2003). Beyond the recognition diverse in cultural aspects on consumer behaviors, there is a need to improve the conceptual underpinning the similarities and differences across both countries by understanding the factors that predict customers’ intention in using online banking.

To attract more customers engaging in online banking, it is crucial for banks to develop channel characteristics that are preferable by customers. This paper analyzes the customers’ attitude towards online banking in both Malaysia and Vietnam context and their preference factors in accepting online banking channel. An in-depth understanding of consumer perceptions and behavior are needed to be understood in order to enhance online banking functionality. For early adopter countries like Malaysia and Vietnam, the ultimate success of online banking still depended on customers’ willingness to use online banking. Thus, it is important to identify the antecedents of customer acceptance towards online banking.

Comprehending what are essentials enticing customers to use online banking will provide management great insight in developing effective strategies to remain competitive in the industry and hold market share. In our research, we rely on the technology acceptance model (TAM), in particular perceived usefulness and perceived ease of use in linking with behavioral intention to use online banking. The framework is then synthesized with other antecedents such as trust to study customers’ confidence in their decision to try a new technology; and government e-readiness factor in both nations of Malaysia and Vietnam. We begin the paper by exploring the background of online banking in both countries. Following by examining the theoretical used and hypothesis developed. After that, description on methodology and analysis is provided. We performed results, discussions on findings, limitations of the study, implications of study, and finally, conclusions.

Background of Online Banking in Malaysia

In Malaysia, the advancement in ICT has embarked a wide range E-business implementation in many companies. By launching Multimedia Super Corridor (MSC) as a mean to facilitate businesses through a host of privileges that entail world class services and infrastructure as well as financial incentives, Malaysia has captured a total revenue of US$383.5 million from E-commerce in 2000 and the figure boosted up to US$9336.2 million in 2005 (MDC, 2003).

Banking institutions have actively exploited the opportunities that arise from these developments. Since 2000, many banks anticipated in developing Internet banking (Poon, 2008). The electronic revolution in Malaysian banking sector has historically started by introducing Automated Teller Machines (ATMs) by 1981, which provide customers the extending banking hours beyond office hours (Jawahitha et al., 2003). This computerized telecommunication device provides customers the convenient to access to financial transactions in a wider geographical locations.

After that, another service channel was introduced in the early of 1990s, namely tele-banking. This service is eventually connected with Automated Voice Response (AVR) technology. However, Malaysian banks showed little interest as public showed a relatively low interest of response rate (Jawahitha et al., 2003).

With the strong emphasis and encouragement by government in the usage and adoption of personal computer, banking environment has undergone a more drastic revolution by offering online banking services through their interactive company websites in 2000. Maybank is the first bank that provides online banking services in Malaysia through portal. It was then followed by Hong Leong Bank, Southern Bank and Multi-Purpose Bank. (Suganthi et al., 2001).

At present, there are 24 banks offering online banking facilities. Online banking is getting its popularity in Malaysia. It has received overwhelming responses from customers due to its convenience and has proven advantage in reducing costs. The number of online banking subscribers has increased from 3.2 million in 2006 to 7.5 million in 2009, with the population penetration rate from 11.6% (2006) to 25.9% (2009) ( Apparently, this positive sign has enlighten the banks to continuous seeking ways to enhance the use of electronic applications more comprehensive and effectively.

Nevertheless, consumers are demanding for better transparency, integrity and communication of online banking services. Therefore, it is important to investigate the factors that influence the use of online banking. The strength and capability of financial institutions to harness appropriate ICT strategies is crucial to continue to position themselves for better success in this new era through customer retention and growth in the market share.

Background of Online Banking in Vietnam

In the mid-1980s, the Communist Party of Vietnam formally ended its centralized planned economy and began to adopt economic reform program, widely known as doi moi or ‘Renovation’, as a mean to open itself to the world. Since that, Vietnam has started to appear as one of the important economy emergence in Asia Pacific area (Phan, 2008).

The first entry of Internet was in November 1997. Given this opportunity, Vietnamese companies have increased their emphasis to implement computerized system and IT facilities in their daily business operations. However, most of the commercial websites are mainly used for promotion purposes instead of real existent of online transactions. (Huang and Swierczek, 2008).

Vietnam’s industrialization has led to rapid ICT growth. Under the Overall Plan on Developing E-Commerce, Vietnamese Government encourages more companies to implement e-commerce in their business operations (People’s Daily, 2006). In order to stay competitive in the challenging marketplace, companies encode e-commerce implementation as a vital element in their business strategy. As of 2000, the Internet penetration rate has reached 0.3 percent (0.2 million users) of the population. In 2009, the Internet users have surged to a total of 22 million, presented a 25.7 percent of total population (Internet World Stats, 2009).

Vietnam Government started to focus on service sector by realizing its feasibility and effective impact on the overall business. The Government aims to stimulate efficient e-commerce development by encouraging people to use it (Chong et al., 2010). With that, online banking is viewed as an important tool or medium to leverage the success of e-commerce implementation. Vietnamese banks have made efforts to establish inter-bank networks to support online payments. The system processing of commercial banks have been improved and banks applied more advanced software and application programs ( However, there is a lack of integrated technical system between organizations and banks to provide customers a more structured and systematic payment system. Furthermore, the lack of law and regulations establishment regarded to online banking issues still remained undefined which have led to many difficulties in dispute settlement. As online banking in Vietnam is getting popular and offer banks better cost-effective solution, therefore this study aims to examine factors that influence the acceptance of online banking in the country.

Technology Adoption Model

It has been found that users’ attitudes and behavior towards acceptance of a new information system indicated a critical impact towards the successful technology adoption (Davis, 1989; Venkatesh and Davis, 1996; Succi and Walter, 1999). This is due to the fact that, the more users accept new information system, the more they will try and start to use it (Succi and Walter, 1999). Given these, researchers have been trying to find factors that influence individual in accepting new technology.

One of the most popular and utilized model of technology adoption is the technology acceptance model (TAM) (Davis et al, 1989; Davis and Venkatesh, 1996; Al-Gahtani, 2001). As online banking is one type of technology innovation (Lin and Lee, 2005), we propose the technology acceptance model (TAM) as the theoretical foundation in this study to predict users’ online banking usage and preference, which in turn, determined users’ beliefs towards the online banking system (Joaquin et al, 2009).

There are two important components in TAM, which are perceived usefulness (PU) and perceived ease of use (PEOU). The first determinant refers to “the degree to which a person believes that using a particular system would enhance his or her job performance” (Davis et al., 1989). In the context of online banking, it refers to the degree on how effective an online banking system assists in productivity, work, and cost-saving (Rao, 2003).

Perceived ease of use is “the degree to which the prospective adopters expect new technology adopted to be free effort regarding its transfer and utilization” (Davis et al., 1989). In this context, the easier adopters find it to learn and use online banking system, the higher the potential he or she will adopt it (Chong et al., 2010).

Although many studies showed TAM is a useful, valid and reliable model (Jeyaraj et al., 2006), many researchers have extended the model by adding different variables based on the types of information system or technology they studied. A critical review from Legris et al. (2003) revealed that there is a need to include other components in order to have better explanations and broader view in new technology adoption. In this cross-cultural study, trust and government e-readiness components are added in order to have better picture in their decision on online banking adoption. The two additional components can be varied as they posit different cultural backgrounds within these both countries.

Perceived Usefulness

In the model of TAM, perceived usefulness is a significant factor affecting in the acceptance of information system (Davis et al., 1989). It is also has been found to have direct effect towards online banking adoption (Eriksson et al., 2005; Pikkarainen et al., 2004). Similarly,

Numerous papers have been studied about perceived usefulness on online banking. For example, Wong et al. (2003) explored that perceived usefulness has positive significant effect on behavioral intention towards online banking in Taiwan context. The study concluded that Taiwanese exploit online banking systems as they find the system is useful and comfortable to use. Pikkarainen et al. (2004) further indicated that perceived usefulness was found to be the most influential driver in online banking service. The findings explained that users choose to use online banking because of it anticipates better advantages as compared to other delivery channels. In Thailand, perceived usefulness is significant among Thai consumers’ intention to use and it has became a prominent encouragement for them to use online banking services (Jaruwachirathanakul and Fink, 2005).

In this research context, perceived usefulness refers to consumers’ perceptions in using Internet as a financial transaction medium in order to enhance their banking experiences. These perceptions will influence consumers’ attitude toward online banking and their intention to use it. The main reason users start to use online banking services as they find the systems are useful and convenient during their transactions. Therefore, we test the following hypothesis:

H1. Perceived usefulness has a positive association with consumers’ intention to adopt the online banking.

Perceived Ease of Use

Besides perceived usefulness, perceived ease of use is found as one of the important influential in adopting new technology (Davis et al., 1989). Perceived usefulness is the extend on how effective Internet and it’s applications in assisting consumers to accomplish tasks; on the other hand, perceived ease of use is the degree on how easy to use Internet as a medium to complete tasks (Toñita et al., 2004). The beliefs of a person on the difficulty to use online systems will affect his or her intention to continue to use a technology (Davis, 1989). In the words, the complexity of certain online applications will tend to discourage or slow down technology adoption (Rogers, 1995).

Various studies have offered insights on the significant effect of perceived ease of use on behavioral intention. According to Moon and Kim (2001), information systems not only should be easy to use, it should also stress on user friendly features. With that, users will feel less threatening and have more confident when using it. Eventually, this implies that perceived ease of use will affect the users’ perceived credibility during their interaction and exchanges on Internet.

In a subsequent study, Wang et al (2003) documented that perceived ease of use had a significant effect on behavioral intention. This is highly related to users that have higher self-efficacy towards computer usage. The finding indicated that Taiwanese views interfaces and applications on banks’ websites are understandable and online banking is easy to apply and use. In a later study, Amin et al (2008) also revealed that there is a positive relationship between perceived ease of use and mobile banking adoption.

By understanding that perceived ease of use will affect consumers’ attitude and intention, therefore it is important to identify the latent dimensions of this construct in online banking. Thus, we hypothesized that:

H2. Perceived ease of use has a positive effect on consumers’ intention to adopt the online banking.


Trust is a crucial factor in many transactional relationships. Trust exists when one party is confident with another’s reliability and credibility (Morgan and Hunt, 1994; Ranaweera and Phrabu, 2003). According to Eriksson et al. (2005), trust is defined as the perceptions towards security and reliability of online banking system from the perspective of customers. The issue of online banking is more critical in comparing to offline banking (Al-Somali et al., 2008). As online banking transactions required sensitive information and access to critical files which transferred via Internet (Alsojjan and Dennis, 2006; Suh and Han, 2002). Therefore, it adds further the complexity to examine online banking trust as the interpersonal trust not only relying between banks and customers, but also between customers and information system (McKnight and Chervany, 2001-2002). To this, Grönroos (2001) concluded that the professionalism in the aspects on intelligent systems and operations is important in building customers’ trust.

Collectively, customers have doubts on the overall security policies in online banking. Especially new adopters in developing nations like Malaysia and Vietnam have found to have less confident in trying online banking due to security reason (Gerrard and Cunnningham, 2003). In many banking websites, security technology like encryption, password, identifiers, or inactivity automatically logs users off the account are implemented to reduce the overall risk during transaction process and the same time increase customers’ trustworthiness in using the system (Hutichinson and Warren, 2003).

In Malaysia, a total number of 500 respondents from different banks’ customers have been investigated and found that security factor showed the highest Cronbach alpha score. This indicates that security and trust towards online systems are ultimately important in order to encourage customers to start to use online applications. Therefore, the major concern for banks to implement online banking falls on the extent to how customers perceived trustworthiness of a particular system (Poon, 2008).

In the study of Al-Somali et al (2008), trust has found to have significant impact in influencing customer attitudes towards online banking usage in Saudi Arabia community. Whereby, Sathye’s (1999) identified security and privacy as “the biggest obstacles” towards the adoption of online banking in Australia. Thus, it is clear that without trust, customers will avoid making any transactions in virtual online environment.

Although the consequence of trust in business-customer relationship has been established, the trust construct in virtual online banking is still in a somewhat ambivalent manner, especially in developing countries context. Thus, we proposed the following hypothesis:

H3. Trust will have a positive effect on consumers’ intention to adopt the online banking.

Government Support

Government plays a vital role in creating institutional environment to encourage the nation to adopt online banking services. In the efforts of government by investing heavily in the aspects of availability and quality of labor, technical infrastructure, policy, work force training and maintaining have nevertheless prepared banks a better platform to foster online banking service (Gibbs et al., 2003).

It has been observed and verified in the previous studies that governmental support either in projects funding or adoption schemes have leveraged technology diffusion in a shorter period of time (Tan, 2000). For example Tan and Teo (2000) mentioned in their study that Singapore Government has successfully promoted the adoption of electronic data interchange (EDI) through educational program (Burn, 1995).

In Malaysia, with the launch of Multimedia Super Corridor (MSC) which is fully supported by government in 1996 has prepared Malaysia a great advancement into the thriving of ICT world. One of the key efforts of MSC is to provide the necessary facilities and technical skills for local and foreign businesses through its flagship applications and business services. With the implementations of electronic government, multi-purpose identification card, smart schools and telemedicine, government have tentatively encouraged the citizens to conduct transaction online.

Vietnam, an emergence fast growing economy country has started to invest and improve its ICT infrastructure throughout the country. Rahn Wood, a senior executive of Techcombank, said that, although online baking remains unfamiliar in Vietnam, but it has foreseen to be potentially welcomed by Vietnamese people (VietnamNet, 2009). Although most of the people in Vietnam still prefer offline banking, there have seen an overwhelming increased usage in online banking, mobile banking, home banking, phone banking and other card and e-payment services. This phenomenon is particularly significant in the Ho Chi Minh capital (VietnamNet, 2009). Government should play the role to encourage citizens in order to increase the usage rate in online banking. Thus, we hypothesized that:

H4. Government support has a positive effect on consumers’ intention to adopt the online banking.

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