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Investigating the Factors influencing the Consumers to Utilize and Adopt and

adapt Internet Banking: Situation of Saudi Arabia

Introduction

Internet has now been utilized globally and like any other country, Saudi Arabia

has also been able to utilize and adopt and adapt it in their society through Saudi Arabia

through King Abdulaziz City for Science and Technology (KACST). Conversely, it caters

to only a few utilizes and most of them are researchers. Prior to this restricted internet

access, the Saudi MOPTT has been able to host a service called Alwaseet that is a

packet switched national data network. Various individuals utilized this network access

in the earlier times through connection to their ISPs abroad. Such can be

accomplished, provided which they have existing accounts; if not, they will have to

request some joint service from Alwaseet. However, such joint services which they

provide were so costly and also the connection speed was so slow and low, which many

started to dial in into their ISP by calling internationally to Bahrain.

Nowadays, there are 10,000 Saudi Arabians which call Bahrain for internet

access. But in 1997, KSA have announced which the internet would available in the

locality. . This declaration came from KACST after months of anticipation by the people

of KSA. The city of science and technology city has set up a special unit that would

supervise the entire process of linking and connecting Saudi Arabia with the rest of the

world through Internet services.



In the commercial area banking and financial firms and banking institutions were

the first to adapt information technology and utilize it through the internet banking. Just

like what the National Commercial Bank and Arab National Bank which adapted the

concept of Internet Banking. Saudi Arabian banks are attempting to be the first to have

their services online. The race is being driven, as stated by KSA bank officials, with the

fear of not being able to consider online banking services which may result on clients

lost. Consequently, financial firms and banking institutions the country have seen online

banking as a modern trend in the industry, due to the improving numbers of clients who

are utilizing online banking (Mathai, 2001).

With the clients’ positive acceptance of the online banking in the entire region of

KSA, it is then significant and essential to investigate the factors influencing clients to

utilize and adapt intern banking. Primarily, the main goal of this research proposal is to

conduct an investigation to determine the factors or aspects which make Saudi Arabian

clients utilized or adopt and adapt the internet banking. In this proposed research and

dissertation, the background of the study; the objectives as well as the research

statements of the problem are given. Here, vital contexts, questions and assumptions

are being stated. Lastly, overview of the methodology to be considered as well as the

significance of the research is discussed. Further, this paper will include the analysis of

the study.

Background of the Study



The consideration of the internet approach as part of this information technology

has revolutionized the market environment. The utilization of the Internet is changing

high-tech marketing overnight while various companies have been attempting to utilize it

as part of their marketing approach. It does not only reconfigured the way various

companies as well as the way the consumers buy goods and services but it also

become instrumental in changing the value chain from manufacturers to retailers to end

consumers, which generates new retail distribution channel (Donthu & Garcia, 1999).

Because of these technological changes, product and service development became

faster as well as better and business approaches are more organized and systematized.

Indeed, the consideration of the internet to several companies has paved the way for

greater profitability in the future. With this, more and more firms and companies are

attempting to develop an innovative information system or information technology which

would ensure their competitiveness in this stiff competition (Kalakota & Winston, 1999).

It is said that one of the firms and companies which adopt and adapted and use new

technology is the financial institution, particularly banking firms. The increasing

competition among bank has driven them to develop new information technology and

tools to enable them to stay competitive or even survive in the marketplace and to serve

the changing demand of their clients. One of the examples of this new approach is the

so-called internet banking or online banking.

Online banking has emerged for at least two critical reasons. Firstly, it serves as

a new substitute and optional channel other than conventional branch network for

clients to contact banks. Presently, more and more clients, specifically younger ones

who are quicker to accept new technology, are using remote channels-telephone



banking; computer banking as well as other virtual banking-to transact their financial

transactions. These on-line clients demand even more control over their personal

accounts and finances and value “anytime, anyplace, anywhere” personalized access to

financial services (Jordan & Katz, 1999).

The other reason for the emergence of online banking is the increase of

electronic commerce that produces a corresponding demand of electronic payment

processes which has been offered by financial firms and banking institutions. In addition

to that, , other follow-up activities such as viewing account balances as well as viewing

transaction records, bill payments, transferring funds between accounts, and also credit

card soled transactions need to be processed online (Bielsi, 2001). Online banking is

not the same as banking via online service. Online banking permits clients to conduct

banking transactions directly from their Web-enabled computers. By maintaining a direct

relationship with end clients through the Web, banks can offer additional services as

well as provide a personal feeling to the interface without trying to seek the cooperation

of a software company. Online services entailed and compel clients to purchase

proprietary software, store data on their computers, and back up needed information for

specific services (Winter, 2001).

Many more banks are moving to or developing online banking since they foresee

many benefits. Major advantages of this channel include: economic advantage from

lower cost, development and improvement of clients satisfaction, online banking as a

tool for mass customization and personalization, development of non-core business.

The first benefit or advantages of online banking to banks is it enables economic



advantage from lower cost (Bielski, 2001). This also enables banks to offer low-cost,

high value-added financial service to their clients.

Another advantage of online banking is it develops client’s satisfaction. Online

banking can remove the conventional branch limitation by permitting clients to access

their banks 24 hours and 7 days a week with little or no waiting time regardless of the

location of the client. This can create convenience for clients, thus their satisfaction

toward banking services.

In Saudi Arabia, it is believed that online banking is the latest e-buzzword. It can

be seen that, banks in various parts of the region are rushing to provide their service

through electronic means. In KSA, each bank is now looking forward to make utilize of

the internet technology in order to gain clients. Online banking is gaining good

reputation and fame in the region in two sectors, the retail and the corporate sectors.

Saudi Banks has expanded. There are a number of banks across the region with fully

operational e- banking facilities and many others are in the process of jumping on to the

bandwagon.

In 2002, the firms and companies which utilizes online banking includes, Arab

National Bank, National Commercial Bank, Saudi British Bank, Saudi American Bank

and the Riyadh Bank (Moores, 2002) with functions such as account information, money

transfers, bill payment services, FX and mutual funds trading. The growing numbers of

clients of internet banking had made the banking institution in Saudi to become more

salient in giving quality service and provide a state of the art infrastructure to gain more

clients among its competitors. With the growth of banking industries that considered



online banking, it is also important to analyze the factors that influences the behavior of

the consumer with regards to using online or internet banking.

Purpose of the Study

The purpose of this research is to determine the factors that influence the behavior of

clients in Saudi Arabia in terms of using or considering online or internet banking. In this

study, the consumption pattern with regards to their baking transaction will be given

emphasis as well as identify how culture and religion affects decision of the consumers.

As markets are becoming increasingly globalize, the need for understanding consumers

in different markets is gaining increasing importance. This research attempts to analyze

the factors influencing the consumer’s decision-making process within the context of

Saudi Arabia.

Saudi Arabia has a different and unique set of characteristics that are associated withits dynamics and other variables. Some of these are listed as below:

- Firstly, the fact remains that Saudi Arabia with c.5.5 million expatriates (CIA:

World Fact book, 2005) on absolute basis has arguably the largest expatriate

population in the GCC, and they have strong affiliation with their nations, as they

cannot gain the citizenship status therewith.

- Secondly, Saudi Arabian nationals are not isolated from globalization and travel

overseas with varying lengths of stay (depending on leisure, work or academic



pursuits) thereby interacting with individuals from various customs, backgrounds,

religions, cultures, norms, etc.

- Thirdly, arguably as home to the twin holy cities, Islamic pilgrimage and

associated trade over the past 1300 years has been a factor in influencing the

resident population of particularly the Saudi west coast (Jeddah, Makkah).

- Fourthly, with the advent and increased acceptance of the ICT media such as

the Internet, satellite television is further acting as a catalyst in impregnating

foreign influences, further accelerating multi-culturalism both in the local and

expatriate population.

- Another point of consideration is the tremendous growth that is currently taking

place in Saudi Arabia, with a myriad of factors boosting consumer expenditure (c.

SAR 341 Billion p.a.) in a relatively high per capita wealth; it remains a key

geography for marketers in a regional context, both in scale and scope, the

following support the argument:

o Increase in personal income raises consumer spending: Saudi government

increased salaries of all government and quasi-government employees by

15% in 2006, with a further 5% in 2007. (Euromonitor, 2008)

o Borrowing on rise due to ease of consumer credit: consumer loans grew

from SAR 40.6 Billion in 2001 to SAR 414.6B in 2007 (Euromonitor, 2008).

o The unique demographic balance in Saudi Arabia where a large portion

(c.48%) of the total population is under the age of 20 (Euromonitor, 2008).



All in all, this illustrates the fact that Saudi Arabia has been under influence of variouscultures that has molded the character, customs and traditions of various individuals,which unconsciously influences the consumption decisions of individuals.

Research Hypothesis

This paper will work on the following hypothesis:

“The Clients look at the high technological ability of the internet

banking.”

The Clients look at the positive benefits of using online banking in

terms of time.”

“Saudi Arabian Clients adopt and adapt online banking due it

satisfies them to have fast transaction.”

Saudi Arabian decision to consider online banking were affected by

their culture and religion.

Statement of the Problem

The study will investigate the factors which influence the clients of Saudi Arabia

to utilize and adopt and adapt internet banking. Specifically, the researcher will answer

the following questions.

1. Do Saudi Arabian clients aware of the existence of online banking in

the region?



2. Do Saudi Arabian clients have tried to utilize online banking in their

banking transactions?

3. What are the possible factors which influence the clients to utilize

internet banking?

4. What are the possible factors which influence the clients not to utilize

internet banking?

5. Do their religion and culture play a crucial role in their decisions on

considering internet banking?

6.

What is the overall perception of the Saudi Arabian Clients regarding

internet banking?

Scope and Delimitation

Online banking is definitely new in the contemporary Saudi Arabia. And this

concept has been utilized by various banking institutions in order to gain clients from

various parts of the region. Hence, this study will be conducted to determine the factors

which influence the clients of Saudi Arabia to utilize or adopt and adapt the internet

banking. The outcome of this study will be limited only to the information gathered from

books and journals and from the primary data gathered from the result of the

questionnaire survey and interview which will be conducted by the researcher. As the

research was completed in a relatively short period of time other factors and variables

are not considered. This might have an impact on the results of the study.



Personal Learning Objectives

For this research study, the key motivation is to gain a deeper understanding of

consumer behaviour to help business establishments to retain or gain loyal consumers.

Through this study, the researcher will be able to determine the latest trends in

marketing environment, specifically in internet banking regarding the consumption

patterns of the clients and how the banking institutions attempted to meet these

patterns.

This may have wider learning outcomes both from a topical perspective (which may

lead to practical implication on work related aspects) and procedural perspective

wherein through the scope of this project I expect to test and further develop my

understanding of various tools such as data analysis, project management, analysing

and framing the problem and conducting efficient exploratory research.

Furthermore, through the scope of this project I wish to further build on the conceptual

knowledge acquired over the term of the study and build on my knowledge through the

project process and a deeper understanding of what motivates consumers and translate

that into building and delivering incremental value to consumers in my current work role

(business development).

Sources of Data



The information mainly required will be to assess the total quantum of consumer

spend and the major product categories that it comprises of in Saudi Arabia.

In addition with a view to resolve the research question(s) primary data collection

will attempt to

· Identify main influences on consumer behavior in adapting or using online

banking

· Identify which aspects dominate in which buying situations.

· Identify main socio-cultural influences that dominate consumer behavior.

· Effect of marketing strategies on Consumers.

Primary Data

The key quantitative methods that will be used will be interviews, focus groups

and questionnaire developed, within that it is intentioned that more than one focus

group may be needed that may be organized around age group, length of stay, country

of origin and gender (in consideration of the conservative culture of Saudi Arabia).

In addition it is also being considered to interview select marketers who have a

long association with Saudi consumer markets to fill knowledge gaps from a

practitioner’s perspective.



Secondary Data

1. Government Sources/Publications:

a. Saudi Arabian monetary authority; economic release

b. Saudi Arabian Market information resource and directory

(SAMIRAD)

c. Central Department of statistics: Ministry of Economy and planning

d. Saudi Press Agency.

e. Saudi Arabian General Investment Authority (SAGIA)

f. King Fahad University of petroleum and minerals. Research

institute

g. Riyadh Chamber of commerce.

2. Non-Government /Consumer research services

a. Economist Intelligence unit: Country profile and reports

b. Nationsmaster.com

c. Global market information database (Euromonitor)

d. Business insight reports

3. Annual report of key Industry players in the Saudi FMCG sector (for retail

trend analyze

8 Proposed Methodology



The study intends to determine the factors that influence Saudi Arabian customers inbuying products or availing services. For this study, primary research and secondary

research will be used. Primary research will be conducted using the data that comesfrom consumers. The data will be analyzed and compiled for the correlation of thehypothesis. The data about the respondents’ perception regarding internet banking willthen be presented by means of graphical representations and illustration. Primaryresearch is conducted using questionnaire surveys that will be sent to the Saudi Arabiancustomers. Here, the questionnaires will be used to collect quantitative data and theinterviews will be used to provide qualitative insights into the data collected.

As stated above, this research will partially base its findings through quantitativeresearch methods because this permits a flexible and iterative approach. During datagathering the choice and design of methods are constantly modified, based on ongoing

analysis. This study will also employ qualitative research method because it will try tofind and build theories that will explain the relationship of one variable with another variable through qualitative elements in research. Through this method, qualitativeelements that do not have standard measures such as behavior, attitudes, opinions,and beliefs about internet banking will be analyzed.

Research Plan

For this research design, the researcher will:

A) Gather data pertaining to demographics, consumption criteria, collate publishedstudies from different local and foreign universities and articles from academic

journals; and make a content analysis of the collected documentary and verbalmaterial related to the factors that might influence customer behavior, as well asthe overall definition and perception about marketing strategy and consumption.

B) Questionnaire Survey: Primary data will be collected from 100-150 consumersbetween the ages of 18-30, 30-45 who uses online banking or internet banking

The next stage is empirical where propositions from preliminary stages are tested andthe range of methodologies is utilized, the researcher will summarize all the information,make a conclusion based on the null hypotheses posited and provide insightfulrecommendations on the possible things that must be consider by the Saudi Arabianbanking industries. The quantitative and qualitative research techniques that will beemployed in this present study are discussed in detail below.



Respondents of the Study

The research will target persons who live in key metropolitan areas of Riyadh, Jeddah

and Al-Khobar in Saudi Arabia and using online banking. The sample will be randomly

selected and a self-administered questionnaire (please refer to anticipated problems)

will be used to measure the theoretical constructs of consumers’ attitudes, preferences

and choices. A 5 point scale with end points like "strongly agree", "strongly disagree",

"very important", "not important at all", "absolutely right" and "absolutely wrong" will be

used to measure the items. On the scale, number 1 indicates the absolute positive

response and number 5 indicates the opposite extreme.

The main purpose of this research is to investigate the factors that affect the consumer

behavior in Saudi Arabia. Hence, the respondents of this study include 100-150

consumers, specifically shoppers between the ages of 18-30, 30-45. The consumers

are chosen because the respondents find them more reliable for this study. The true

identity of the respondents may not be revealed in consideration of the customs in

Saudi Arabia (particularly in context of Saudi Women).

After selecting the appropriate population, the researcher will use inferential statistics in

order to draw a concrete conclusion. Inferential statistics will be used to be able to

know a population’s attribution through a direct observation of the chosen population or

simply the sample. This is because it is easier to observe a portion or a part than

observe the whole population. However using a sample has also its own



disadvantages; hence, the need to choose the most suitable sample from any

population is recognized at the outset.

The quantitative approach is currently envisaged to be iterative with feedback loops

from the pilot, exploratory research phase and theoretical review to make the overall

process more robust with the aim of achieving quality and managing issues such as

sampling error.

9 Anticipated Problems

To provide a backdrop and further frame certain challenges in gaining access to

information Tunclap (1988) while studying the marketing research scene in Saudi

Arabia indicated that lack of market research was largely attributed to a production

oriented economy with monopolistic manufacturing and lack of competitive activity in the

past.

Since then fast paced evolution coupled with a strategic intent to diversify economic

activity, as evidenced by SAGIA 10/10 vision (to position Saudi Arabia amongst the top

10 most competitive economies by 2010) compared to a historic basis has vastly

improved the availability of data.



Given the scope of the project and the changes in the Saudi Arabian Landscape a

considerable amount of macro-economic data exists in the secondary data space for

estimation of market size, key product category consumption etc.

Conservative culture inertia can hinder effectively carrying out focus group discussions,

data collection this can be limitedly overcome by

· For each focus group session keeping a homogenous group (cultural

background, age etc) by and large mixed gender environment are deemed

acceptable by most expatriates, for the representation of Saudi female

views select respondents known will be used, should it materially hinder

the empirical process seeking research assistance from females will be

considered.

·

To draw meaningful conclusions of the interview process careful selection

of interviewees those are experts on the subject area, opinion leaders.

· To pursue an iterative process both in survey design and the spread of

measurable for more robust analysis, a more thorough understanding of

the empirical methods will have to be developed, knowledge gaps to be

addressed by revisiting relevant theory.

· The challenge of having a sample size that is representative of the

geographical context and the research issues means that innovative ways

for speedier questionnaire distribution and maximization of response rates

will have to be considered and may include distribution through graduate



students (it is currently being explored with the king Fahad university of

petroleum management).

10 Outline of Chapters

1. Introduction:

a. Background,

b. Analyzing the Problem

c. Research purpose and question,

d. Outline of the geographic environment, demographics, size of the

market etc.

2. Literature Review:

a. Evaluation of relevant past literature and contemporary/emergent

thoughts on the subject area, studies around the subject area in a

regional context.

b. Generic Factors Influencing Consumption (Perceived Service quality

and value, Customer satisfaction, Trust, Product Image and Brand

reputation, Service attributes etc).

c. Project Specific factors influencing consumption (e.g. nationality,

religion, language, country of origin etc)

d. Theoretical Conclusions, critique.



3. Methodology Review:

a. Overview

b. Research philosophy and approach design (exploratory research,),

c. Data collection and translation (analysis),

d. Pilot study, Choice of questionnaire, sample, Issues (Validity,

Reliability).

4. Findings:

a. Overview,

b.

Discussion and conclusion of findings (Consequence for the

hypothesis)

c. Implications

5. Limitations:

a. Limitations, critique

b. Suggestions for further research.

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