Journal of Global Information Management

Volume 25 Issue 1 January-March 2017

Understanding Online Banking

Adoption in a Developing Country:
UTAUT2 with Cultural Moderators
Ikram Ullah Khan, School of Management, University of Science and Technology of China, Hefei, China
Zahid Hameed, School of Management, University of Science and Technology of China, Hefei, China
Safeer Ullah Khan, Donlinks School of Economics and Management, University of Science and Technology Beijing,
Beijing, China

ABSTRACT

The massive growth in digital devices and communication has spotlighted the wisdom of doing
financial transactions through online banking. In developing Asian economies, online banking
technology can strengthen financial systems by developing a solid connection between financial
institutions and the local populace. Technology acceptance studies are under-researched in this region,
especially with innovative models. Filling the gap, this paper uses a comprehensive model of extended
Unified Theory of Acceptance and Use of Technology (UTAUT2), moderated by cultural variables.
This will provide new insights into the determinants of technology acceptance by considering cultural
effects on individual customers. The authors analyzed the model through structural equation modeling.
The results validated performance expectancy, facilitating conditions, habit, perceived security, and
price value as important antecedents of behavioral intentions. The cultural dimensions, collectivism,
and uncertainty avoidance were found to be significant moderators in explaining behavioral intention
and usage behavior for online banking.

Keywords
Asia, Behavioral Intentions, Culture, Online Banking, Perceived Security, UTAUT2

1. INTRODUCTION

Asian countries are becoming more and more involved in online banking services, and the consumers
in Asian countries are changing comfortably to online banking for their financial transactions.
Throughout Asia, branch usage has dropped by 27 percent and online banking has increased by 35
percent during the last five years. Asian consumers make 25 percent of their purchase decisions
through online devices (Sengupta, Lam, & Desmet, 2014). The developing countries are now quite
aware of the need to participate in the journey of online banking (Iqbal & Qureshi, 2012). In its
implementation of the paradigm shift from branch to digital banking, Pakistan is one of the success
stories in the Asian region. Among other e-developments, the online banking services increased 102
percent during the last five years in Pakistan1. The advancement in technology has converted the
preferences of individuals and corporate customers to avail themselves of online banking facilities in
Pakistan (Afshan & Sharif, 2016). The adoption of technology is a consistent process which enables
bank users to use the technology conveniently without the time and space constraints (Lin, 2013).
Online banking helps customers avoid long queues and reduces their time, effort, and cost (Gerrard,

DOI: 10.4018/JGIM.2017010103

Copyright 2017, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.

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Barton Cunningham, & Devlin, 2006). It helps individuals and corporate entities to access their
bank accounts anytime and anywhere, paying their utility bills, manage their money, and getting
other valuable services without the hassle of going to physical bank branches (Hamid, Amin, Lada,
& Ahmad, 2007; Simpson, 2002). Online banking strengthens the relationship between clients and
banks (Karjaluoto, Riquelme, & Rios, 2010), and allows banks to reduce the cost of employees, cost
of physical branches while simultaneously providing immediacy and ubiquity (Jayawardhena & Foley,
2000; Xue, Hitt, & Chen, 2011).
Several theoretical models (for example, the Technology Acceptance Model, Theory of Reasoned
Action, Theory of Planned Behavior, Unified Theory of Acceptance, and Use of Technology) have
been extensively used by previous studies to understand technology acceptance. Among them,
UTAUT2 (Venkatesh, Thong, & Xu, 2012) is considered to be more relevant and comprehensive
model for empirical analysis because it reviews and integrates the constructs of previous theories
(Baptista & Oliveira, 2015). UTAUT2 is preferable because it provides a clear relationship between
the core customer-oriented constructs and measure of behavioral intentions; it allows augmenting other
relevant factors into its domain according to given technology, group or context; and it has a proven
empirical background (Im, Hong, & Kang, 2011; Morosan & DeFranco, 2016). The current study
selected and revisited the UTAUT2 model with perceived security for more accurate evaluation of
customers acceptance in a developing economy. In addition to UTAUT2, the paper utilizes the cultural
theory of Hofstede (1980) for moderator constructs to make the model more relevant to Asian culture.
Security concerns in the adoption of online technologies have been considered as a key factor
inhibiting customers intentions and actual usage (Masrek, Mohamed, Daud, & Omar, 2014). Secured
networks reinforce the customers adoption of online banking because customers feel themselves
safe and secure (Malaquias & Hwang, 2016). Another study characterized customers as suspicious
about the security of transforming information through the Web and about the use of online banking
(Vatanasombut, Igbaria, Stylianou, & Rodgers, 2008). Prior studies in Asia, analyzing cultural
differences in technology acceptance are scarce. Cultural dimensions are an interesting inclusion in
evaluating the customers adoption of online banking because of globalization and systems (Straub,
Keil, & Brenner, 1997). Baptista and Oliveira (2015) recently testified to the effects of cultural
moderators on adoption of mobile banking in the African region. Using culture theory, they found
positive moderation effects on usage behavior of five cultural dimensions: Individualism/Collectivism
(I/C), Uncertainty avoidance (UC), Long/Short term (L/S), Masculinity/Femininity (M/F), and
Power Distance (PD). Abbasi, Tarhini, Elyas, and Shah (2015) found that I/C is an important cultural
moderator over academic behavioral intention and usage.
This study attempts to understand users acceptance of online banking adoption in a developing
Asian country, Pakistan. The banking sector of Pakistan is in swift transition from physical to online
banking. Traditionally, the Pakistani population tends to quickly adopt new innovations that provide
them ease of use and better performance (Afshan & Sharif, 2016). None of the previous studies
in Asia, especially in Pakistan, has addressed the customers acceptance of online technology in a
broader and integrative way. To date, there is no study with a comprehensive model to explore the
determinants of online technology in Asian countries. The previous works lack integration of the
cultural variables into a broader model to investigate the users acceptance of technology. Paying
heed to the recommendation of Abbasi et al. (2015), Pakistan could be more feasible ground for
evaluating and implementing customers acceptance of online banking, especially after the wave of
socio-political liberalization and the economic revival of its economy. This paper provides a unique
and improved model to investigate different factors influencing online banking adoption in Pakistan
and makes several contributions. First of all, taking the worthy suggestion of Venkatesh et al. (2012),
we tested the established UTAUT2 theory in new cultural context (Pakistan). Secondly, borrowing
from previous literature, we added perceived security as a predictor to account for the security
concerns that are normally considered inherent in online systems (Kim, Mirusmonov, & Lee, 2010;
Morosan & DeFranco, 2016). This addition is of particular interest because developing countries are

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Figure 1. Online banking development in Pakistan

especially vulnerable to security issues. Finally, using the cultural theory of Hofstede 1980, the study
incorporates two cultural parameters as moderators to fully understand online banking adoption in
an Asian country. The inclusion of the two cultural moderators will reasonably help reevaluate the
Hofstede culture theory in a non-Western context and secondly it will help us test the model in an
individual-level study of technology acceptance.

1.1. Online Banking in Pakistan

Facing stiff competition, the banking system of Pakistan is making rapid progress in the journey of
automation, connectivity, and innovation. The current statistics of the State Bank of Pakistan portray
a fast-growing trend in the number of online banks, online transactions, and the value of online
transactions (See Figure 1). Table 1 depicts more explicitly that during the last five years there has
been a 102% increase in the number of online banking transaction in Pakistan while the value of
online transactions grew from 22365 billion to 34450 billion rupees (54% increase). The online bank
branches, providing real time online banking services, numbered 3424 in 2005 (Kundi & Shah, 2009)
and reached 11315 in 2015, more than doubling during the last decade2.
The magnificent growth in Pakistans telecom sector has also been contributing to the rapid
innovation and online banking. The Pakistan Telecommunication Authority (PTA) reported an
enormous increase in teledensity from 4% to 64% during the last 12 years and the number of cellular

Table 1. Trend of online banking in Pakistan

No of Value of
No of Online Transactions Transaction
Year Branches Growth (%) (Thousand) * Growth (%) (Billion)* Growth (%)
2011 7,416 - 243,354 - 22,365 -
2012 9,291 25 288,094 18 26,408 18
2013 10,015 35 334,904 38 30,225 35
2014 10,640 44 426,036 75 34,450 54
2015 11,315 53 491,873 102 36,763 64
Source: State Bank of Pakistan, Annual Report 2015, Statistical supplement, Chapter No: 6
* Includes both E-banking Transactions + Other E-Banking Channels

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subscribers reached 122,595,936 in 20153. The boom of 3G and 4G networks, smartphones, and
internet access has paved the way for online banking in Pakistan.
There is scant research work on the adoption of online banking technology in Pakistan. Although
several studies in Pakistan attempted to investigate the acceptance of technologies with the theoretical
help of the Theory of Reasoned Action (TRA), Technology Acceptance Model (TAM), and Theory
of Planned Behavior (TPB) (Hussain Chandio, Irani, Abbasi et al., 2013; Kazi & Mannan, 2013;
Khurshid, Rizwan, & Tasneem, 2014; Muhammed, Jabbar, Mujahid et al., 2013; Saleem & Rashid,
2011; Zahid, Mujtaba, & Riaz, 2010), these works lacked comprehensive models to explore the most
relevant antecedents of online banking adoption. Shakil Ahmad, Rashid, and Ehtisham-Ul-Mujeeb
(2012) analyzed the case of Pakistans Askari Bank regarding the electronic customer relationship
management (ECRM) and explored the operational problems of banks. Using TAM, Raza and Hanif
(2013) conducted their study to identify the factors which influence the internal and external customers
in the adoption of internet banking. Investigating the acceptance of mobile banking frameworks
in Pakistan, Afshan and Sharif (2016) recently used the UTAUT model and examined the role of
technological, behavioral, and environmental factors to investigate the customers behavioral intentions.
In another recent study, Abbasi et al. (2015) worked on behavioral beliefs, subjective norms, and
governmental support along with the individualism/collectivism aspect of culture to understand and
compare individual technology acceptance in Turkey and Pakistan. The model of UTAUT (Venkatesh,
Morris, Davis et al., 2003), as used by Afshan and Sharif (2016), was appropriately designed in
the context of employees/organizations (Venkatesh et al., 2012). Moreover, previous researchers in
Pakistan used very simplistic models to approach the acceptance of online technology (Afshan &
Sharif, 2016). Therefore, we used the comprehensive UTAUT2 model to understand online banking
adoption in a developing Asian country.

2. THEORETICAL BACKGROUND AND HYPOTHESES DEVELOPMENT

The foundation work of Venkatesh et al. (2003) appeared as the Unified Theory of Acceptance and
Use of Technology (UTAUT). Reviewing the extant previous models, their comparison, along with
synthesis of major similar constructs and their validation led to the development of UTAUT. In
proposing the integrative model (UTAUT), they reviewed the previous eight models of technology
acceptance (see Table 2): the Theory of Reasoned Action (TRA), Technology Acceptance Model
(TAM), Motivational Model (MM), Theory of Planned Behavior (TPB), Combined TAM-TPB, Model
of PC Utilization (M-PCU), Innovation Diffusion Theory (IDT), and Social Cognitive Theory (SCT).
UTAUT theorized four main constructs, i.e. Performance expectancy (PE), efforts expectancy (EE),
social influence (SI), and facilitating conditions (FC) as the direct determinates of behavioral intentions
(BI). Gender, age, experience, and voluntariness of use were introduced as moderators (Venkatesh
et al., 2003). Several authors used UTAUT as a theoretical base for their empirical and investigative
studies in organizational and non-organizational contexts (e.g. (Afshan & Sharif, 2016; Chiu & Wang,
2008; Oliveira, Faria, Thomas, & Popovi, 2014; Zhou, Lu, & Wang, 2010). The original model of
UTAUT was mainly focused on understanding the acceptance of technology in organizational and
employee context. Venkatesh et al. (2012) introduced hedonic motivation (HM), price value (PV), and
habit (HB) as additional constructs to mold UATUT from an organizational perspective into a customer
perspective. This extended version (UTAUT2), validated by users of mobile internet in Hong Kong,
was supposed to be a more integrative model. In addition, age, gender, and experience were assumed
to moderate the different relationships in UTAUT. The previous moderator voluntariness of use was
dropped in UTAUT2 to make it more compatible with the context of voluntary consumers behavior. In
some recent studies UTAUT2 was used in the context of computer-supported collaborative classrooms
(CSCC) in a hospitality and tourism school in Malaysia (Ali, Nair, & Hussain, 2016); in students
perspective of learning management system acceptance (Ain, Kaur, & Waheed, 2015); in health care
sector to investigate the professionals acceptance of electronic health records (AlAzzam, Basari,

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Table 2. Overview of Technology Acceptance Models

Sibghatullah, & Doheir, 2015); and in hotel settings to explain the use of near field communication
mobile payments (NFC-MP) by hotel consumers (Morosan & DeFranco, 2016).
According to Venkatesh et al. (2003), the five constructs (perceived usefulness (PU), extrinsic
motivation, job fit, relative advantage, and outcome expectations) of previous theories laid the
foundation of performance expectancy. They defined performance expectancy as the degree to which
an individual believes that using the system will help him/her to attain gains in job performance.
Venkatesh et al. (2003), explained that performance expectancy is considered to be the most important
predictor of behavioral intentions, as it is believed that the system will help users to attain and enhance
their performance. It is supposed that customers use online banking when they know that online
banking will improve their performance. Therefore, we posit the following hypothesis.

H1: Performance expectancy (PE) will have positive impact on behavioral intentions (BI) to use
online banking.

Effort expectancy is defined as the degree of ease associated with the use of system (Venkatesh
et al., 2003). Venkatesh et al. elaborated that effort expectancy has been based on three existing
models, i.e., perceived ease of use (TAM1/TAM2), complexity (MPCU), and ease of use (IDM).
Martins, Oliveira, and Popovi (2014) concluded that EE has influence on BI. The same findings were
reported by (Kim & Park, 2009). We expect that bank customers in Pakistan prefer effort expectancy
while adopting online banking. Therefore, the following is proposed.

H2: Effort expectancy (EE) positively affects customers behavioral intentions (BI) to use online
banking.

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Social influence has been explained as the degree to which an individual perceives that important
others believe he/she should use the new system (Venkatesh et al., 2003). Social behavior was
concluded as a predictor of behavioral intentions (Chong, Chan, & Ooi, 2012; Venkatesh et al., 2012).
Kim, Shin and Kim (2011) empirically examined the users in South Korea and concluded that social
influence is the most important factor in the formation of BI. Lu (2014) described social influence
as dynamic but less influential compared to personal innovativeness. Individuals live in a society,
so they will be influenced by other people in their social network, such as friends, superiors, peers,
relatives, and family, to use online banking (Lpez-Nicols, Molina-Castillo, & Bouwman, 2008).
Chong et al. (2012) also observed that social influence affects behavioral intentions which further
lead to adoption of online banking. In their empirical study on determinants of users behavioral
intention, Kalinic and Marinkovic (2015) stated that SI is the antecedent of perceived usefulness and
perceived ease of use which are the drivers of BI. Chaouali, Yahia, and Souiden (2016) studied the role
of counter-conformity motivation, social influence, and trust to research the customers adoption of
online banking services. They found that in contrary to online banking (that is physical banking) the
social influence and trust have an indirect impact on customer intentions to use online banking while
effort expectancy does not affect BI. In a cross-cultural study of Thailand and Australia, Mortimer et
al. (2015) found that perceived ease of use, perceived usefulness, and perceived risk were the main
determinant for Australian customers, while the Thai customers were influenced by PU, PR, and SI.
Therefore, it is proposed:

H3: Social influence (SI) affects behavioral intentions (BI) in a positive way to use online banking.

One of the drivers for online banking users is facilitating conditions. In earlier studies, FC has
been shown to have a positive effect on behavioral intention and adoption of technology. FC is defined
as the degree to which an individual believes that an organizational and technical infrastructure
exists to support use of the system (Venkatesh et al., 2003). The customers need to have access
to the Internet, internet devices, tablets, PCs, and relevant native software, as well as the skills to
operate these systems well. All these facilitating conditions will reinforce their behavioral intentions
and usage of online banking. Several studies found a positive and significant relationship of FC with
BI and with UB (Ali et al., 2016; Morosan & DeFranco, 2016), although some recent researchers
indicated insignificant relationships of FC to BI and to UB (Ain et al., 2015; Baptista & Oliveira,
2015). Being in a developing economy, the customers in Pakistan having sufficient facilitating
conditions are supposed to have more intention and usage of online banking. It is, therefore, posited:

H4a: Facilitating conditions (FC) positively affect behavioral intentions (BI) to use online banking.
H4b: Facilitating conditions (FC) have positive impact on usage behavior (UB).

Hedonic motivation is theorized to be a predictor of behavioral intentions (Venkatesh et al.,

2012). HM is defined as the fun or pleasure derived from using a technology (Brown & Venkatesh,
2005). According to Zhang, Zhu, and Liu (2012), the acceptance of online technology depends on
the entertainment provided by the technology. Usually, when facing tough working environments,
social pressures, and other mental stresses, customers are more willing to pay attention to technologies
providing fun and amusement. Therefore, we expect that:

H5: Hedonic Motivation (HM) will have positive impact on behavioral intentions to use online banking.

Consumers have to pay for the use of online banking services. In an organizational context, the
employees are not supposed to pay the price. Consumers do pay a price for the benefits they expect
to derive from the use of the service or product. The price value is defined as consumers cognitive

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tradeoff between perceived benefits of the application and the monetary cost for using them (Dodds,
Monroe, & Grewal, 1991; Venkatesh et al., 2012). PV has been reported to be positively associated
with BI (Ali et al., 2016). The customers in Pakistan, being in comparatively low per capita income
country, are likely to be more conscious of the price value of online banking. Therefore, it is postulated:

H6: Price value (PV) has positive impact on behavioral intention to use online banking.

Habit has been defined as the extent to which people tend to perform behaviors automatically
because of learning (Limayem, Hirt, & Cheung, 2007). Habit is one of the predictors affecting
behavioral intentions. Habit is different from experience in two ways. First, habit formation does not
necessarily need experience, and second, experience does not provide the same level of habit, rather
it depends on the level of using the target technology (Venkatesh et al., 2012). Kim, Malhotra, and
Narasimhan (2005) argued the automaticity factor in habit. Ajzen (2002) concluded that the present
behavior is mainly determined by the past behaviors. He explained that a past behavior performed
several times is more likely to be performed in the present and in the future. Habit has been found
to have a direct effect on BI and usage behavior (Baptista & Oliveira, 2015; Venkatesh et al., 2012).
Therefore, we posit the hypotheses:

H7a: There is positive impact of consumers habit (HB) on behavioral intentions to use online banking.
H7b: The consumers habit (HB) will have positive impact on usage behavior of online banking.

Perceived security refers to the consumers perception that the online banking system is safe
for transactions (Shin, 2010). Vatanasombut et al. (2008) explained that perceived security can be
connoted in two senses; in terms of customers trust of the web for transmitting information and the
customers trust on the banks online system. Some researchers conceptualized it as trust or perceived
privacy and described its relation with BI (Kim et al., 2010; Morosan, 2014). Being in a fragile security
environment, the Pakistani customers are more concerned about the security and trust issues. The
customers perception of the legal framework and the informational domain could assist to determine
the perceived security level. Trust of technology and mobile banking satisfaction were found to be
positively related to each other in Malaysia; the results showed a positive connection between the
three groups of technology trust (network trust, website trust, and the mobile phone trust) and mobile
banking satisfaction (Masrek et al., 2014). A relevant study of technology acceptance in Mauritius
revealed that security has a crucial role in the explanation of technology adoption (Devi Juwaheer,
Pudaruth, & Ramdin, 2013). Baptista and Oliveira (2015) found insignificant result for relationship
of BI and user behavior, and suggested including security/risk in future models. Therefore, we make
the following hypothesis.

H8: Perceived security (PS) has positive impact on behavioral intentions to use online banking.

Behavioral intentions urge people to start actual usage of technology. Many theoretical models
of psychological theories and technology acceptance studies showed that individual usage behavior
is influenced by behavioral intentions (Yu, 2012). Consistent with previous models, UTAUT and
UTAUT2 also support that behavioral intentions lead to behavioral usage (Venkatesh et al., 2003;
Venkatesh et al., 2012). Therefore, it is posited that:

H9: Behavioral Intentions will have positive impact on usage behavior in online banking.

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2.1. Moderating Role of Culture

Cultural dimensions are considerably significant to include in technology adoption studies (Srite &
Karahanna, 2006; Straub et al., 1997). Culture is defined as the way people think, feel, and act
(Hofstede, 2010). The cultural values were found to be significant moderators in the relationship of
BI and adoption of technology (Park, Yang, & Lehto, 2007). Hofstede (1980) provided a detailed
analysis of how national cultural is an important dimension in organizations. Our selection of the
Hofstede (1980) culture model is more reasonable over the Hall (1989) and Trompenaars and Hampden-
Turner (1998) models because the latter two are more complex and are suitable at the organizational
level while the Hofstede (1980) model is appropriate for different groups at both organizational
and professional levels (Abbasi et al., 2015). The cultural dimensions of the Hofstede model can be
used on an individual level to show the individual difference variable (Kirkman, Lowe, & Gibson,
2006; Srite & Karahanna, 2006). Relevant to our study, we use two dimensions of culture, namely
individualism/collectivism and uncertainty avoidance, to understand the acceptance of online banking
at the individual customer level. The scores for I/C and UA in Pakistan were reported to be 14%
(individualism) and 70% while the scores for PD, M/F, and L/S were 55%, 50%, 50% respectively
(Hofstede, 2014). We selected the two dimensions because they indicate interesting results on the
Hofstede continuum. The scores of other three dimensions (PD, M/F, and L/S) were almost at the
middle (50%), so they were not attractive enough for determining customer preferences (Hofstede,
2014). I/C focuses on whether people give preference to a network of people or prefer to be alone in
the process of technology adoption.
In an individualistic culture the people are oriented towards self and personal achievements,
therefore independent in technology acceptance, while in collectivist cultures the behavior is shaped
by groups (Abbasi et al., 2015; Hofstede, 1980). In individualistic cultures, the people will themselves
decide about the technology while in collectivist cultures, the people will be inclined to use technology
because of others opinion (Zakour, 2004). In collectivist cultures like Pakistan, the customers are
more likely to accept the online banking technology. The domain of uncertainty avoidance explains
how people of any society feel uncomfortable while facing uncertainty and ambiguity (Hofstede,
1980). The more the uncertainty avoidance, the lower will be the technology acceptance rate. In cases
of high uncertainty avoidance, individuals face ambiguities and have low inclination to adopt new
technology (Baptista & Oliveira, 2015; Zakour, 2004). Therefore, we posit that:

H10: Individualism/collectivism (I/C) moderates the relationship between behavioral intention and
usage behavior in such a way that the relationship will be stronger among people with collectivist
values.
H11: Uncertainty avoidance (UA) moderates the relationship of behavioral intentions and usage
behavior in such a way that the relationship will be weaker among individuals with higher level
of uncertainty avoidance.

2.2. Theoretical Model

The theoretical model is shown in Figure 2.

3. RESEARCH METHODOLOGY

3.1. Measurement Development

The study was conducted in Pakistan to examine the customers adoption of online banking with the
help of UTAUT2 model (Venkatesh et al., 2012). Furthermore, our model used perceived security
(Vatanasombut et al., 2008) as an additional predictor of behavioral intentions. Perceived security
provides trust and safety to the customers to make online transactions with a peaceful mind. Moreover,

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Figure 2. Theoretical model

our model borrows from Hofstede (1980) and includes Individualism/Collectivism and uncertainty
avoidance as moderator constructs. The research model consisted of eight independent variables: PE,
EE, SI, FC, HM, PV, HB, and PS; one mediating variable (BI); and two moderating variables (I/C
and UA). The instrument and scales of PE constructs were adopted from (Venkatesh et al., 2003); EE
from (Davis, Bagozzi, & Warshaw, 1989); SI and FC from (Ajzen, 1991); BI from Kim, Shin and Lee
(2009); and the items and scales of UB were chosen from the previous study of Zhou et al. (2010).
For measuring the survey items, the study used 5-point Likert scales, ranging from 1 (strongly
disagree) to 5 (strongly agree). We ensured content validity and refined the instruments through
conducting a focus group. The questionnaire was originally set in English and then, following Van
de Vijver and Leung (1997), was translated into Urdu by five students who were fluent in English.
Initially, it was tested by a pilot study amongst a group of 40 respondents, who were then excluded
from final analysis. Confirmatory factor analysis showed that the instruments were valid and reliable,
with the exception of following items PE1, FC1, FC5, PO1, BI5, and BI6. Their loadings were less
than 0.70, so following Henseler, Ringle, and Sinkovics (2009), we eliminated them.

3.2. Survey Design

To examine relationships between variables in our model, a survey questionnaire was used. Survey
methods have been used when behavior is predicted and the relation among variables and constructs
are examined (Newsted, Huff, & Munro, 1998). Moreover, the survey questionnaire method has usually
been adopted for measuring behavior change in electronic and social commerce studies (Huang &
Benyoucef, 2015). Those respondents who had experience of bank accounts and had certain digital
devices (smartphones, tablets, laptops, PCs, etc.) for internet connectivity were preferred to participate
in the survey. Unlike case studies and experiments, where difficulties exist in the measurement of
variables, online surveys are more advantageous and helpful due to their ease of formation and wide
reach (Cheung & Lee, 2009; Liu, Chu, Huang, & Chen, 2016).

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3.3. Data Collection

Following the customary way of data collection in the studies of technology acceptance (Venkatesh
et al., 2003; Venkatesh et al., 2012), the data was collected using an online survey conducted through
personal emails from university students. Only those students who had experience with a bank
account participated in our survey. A questionnaire was emailed to 800 bank customers (students)
with personal hyperlinks where could be used only once to prevent repeated responses. To encourage
the response rate, we told recipients that every respondent could get a copy of our final results and
one respondent would be chosen to receive a prize of a power-bank among all the participants
through a lucky draw. We sent a follow-up reminder to non-respondents after two weeks. A total of
352 responses were received, but 24 responses were invalid due to various data constraints, leaving
328 valid responses that were used for data analysis.
Table 3 shows the overall composition of the collected data. The male-female ratio of respondents
was 52.7% and 47.3% respectively in the study. A high percentage of respondents were below the age
of 25 years. Our data was comprehensive in terms of qualification and experience of respondents. The
composition of data reveals that 64.9% of the respondents were bank customers having experience of
less than 5 years. The educational background of respondents was that 45.7% of them had masters
qualification, 13.4% bachelors, 31.1% MPhil/MS, and 20.4% PhD qualification. The multiplicity of
different locations, age, qualification, and experience of respondents validate the data.

Table 3. Demographic information of respondents

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Table 4. Confirmatory Factor Analysis

Constructs Alpha CR AVE Constructs Alpha CR AVE

Performance Expectancy .770 .849 .586 Perceived Security .792 .798 .512
Effort Expectancy .731 .833 .556 Habit .814 .874 .636
Social Influence .780 .858 603 Behavioral Intentions .780 .865 .624
Facilitating conditions .725 .845 .645 Individualism/Collectivism .761 .848 .582
Hedonic motivation .712 .794 .566 Uncertainty Avoidance .720 .810 .519
Price Value .814 .860 .607 Usage Behavior .726 .830 .550

3.4. Data Analysis

To test the measurement and structural model, SPSS 20 was used for descriptive statistics and
AMOS for structural equation modeling (SEM). AMOS is a powerful tool which is used to analyze
confirmatory factor analysis and SEM; it provides a user-friendly interface allowing users to configure
the path diagram, estimate parameters, and calculate model fit (Nachtigall, Kroehne, Funke, &
Steyer, 2003). AMOS provides a very comprehensible framework to understand the analysis and
results. Steiger (2001) argued that AMOS has been popularly used because of its ease of use and
wide availability.

4. RESULTS

4.1. Measurement Model

The study evaluated the measurement model through confirmatory factor analysis (CFA) for testing
constructs reliability, and convergent and discriminant validity (Hair, Anderson, Tatham, & William,
1998). The pilot study and review of previous literature helped to assess the content validity. The
model also measured Cronbachs alpha (C), composite reliability (CR), and average variance
extracted (AVE). Table 4 shows that the results of the CFA for C, CR, and AVE values are above
the accepted threshold level, being 0.70, 0.70, and 0.50 respectively (Flynn, Sakakibara, Schroeder,
Bates, & Flynn, 1990; Nunnally, 1978).
The CMIN/df value is 3.25 in this model, which is within the range of acceptable goodness of
fit models. Hu and Bentler (1999) explained that the ideal threshold value for CMIN/df is below 3
but up to 5 is acceptable. To further support this minimum discrepancy result with reference to other
sophisticated fit indices, our CFI = .93 is more than the traditional fitness level of 0.90 (Hu & Bentler,
1999). The Root Mean Error of Approximation of the model is RMSEA=.07, which is less than the
suggested level of 0.08 (Browne, Cudeck, Bollen, & Long, 1993). The Normed Fit Indices result
(TLI=.91) is also considerably higher than the suggested 0.90 value (Hu & Bentler, 1999) which
shows fitness of this model. The fit indices indicate that the data fits our model. Table 5 shows the
descriptive statistics and correlation among constructs.

4.2. Structural Model

The path significance levels were predicted using bootstrap confidence interval. To assess the
predictive capacity of the structural model (see Figure 3 and Table 6), the R2 criterion was used
(Chin, 1998). Results of the analysis indicate that PE (= 0.13; p<0.05), FC (= 0.16; p<0.01), HM
(= 0.14; p<0.01), PV (= 0.13; p<0.01), HB (= 0.28; p<0.01), and PS (= 0.27; p<0.01) have
statistically positive effects on behavioral intentions (BI), therefore confirming the hypotheses H1,
H4a, H5, H6, H7a, and H8. The results show that HB is more important construct in explaining the
individual behavioral intentions towards online banking. When HB increases by one standardized

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Table 5. Descriptive statistics and correlation

unit, BI increases by 0.28 standardized units. Keeping other things constant, our model explains 58%
of the variation in BI. Our results indicate that EE and SI have no significant impact on BI. Hence,
hypotheses H2 and H3 are not supported. The study hypothesized that UB is explained by BI and FC.
The results make it clear that hypotheses H9 and H4b are supported, as BI (=0.20; p<0.01) and FC
(=0.15; p<0.01) are statistically significant to online usage behavior. Moreover, our results show that
BI is an important factor to explain adoption of online banking. An increase of one standardized unit
in BI results in an increase of 20 standardized units in UB and thus explains 50 percent of the variation
in adoption of online banking. Moreover, the effect of HB is not significant to usage behavior, so
hypothesis H7b is not supported. The model fit indices are CMIN/DF=3.36, CFI=.98, and TLI=.92,
with the value of REMSA being .07 which indicates that the model fits the survey data well.

4.3. Moderation Analysis

Table 7 shows the results of moderation effects for individualism/collectivism and uncertainty
avoidance. Our results show that the interaction effect of BI with IC was significant in predicting
usage behavior (= -.08; p<0.05) and the interaction effect of BI with UA was also significant in
calculating usage behavior (= -.12; p<0.01). Furthermore, individualism/collectivism, with p<.01 and
uncertainty avoidance, with p<.01, were found to be significant, showing support for the moderating
effect of I/C and UA on behavioral intention and use behavior, so hypotheses H11 and H12 are accepted.
The model fit indices for the first structural model (when the moderator is individualism/collectivism)
are CMIN/DF=1.86, CFI=.99, TLI=.97, and REMSA=.05 which shows that the overall model is
good. The model fit indices for the second model (when uncertainty avoidance is the moderator) are
CMIN/DF=3.06, CFI=.98, TLI=.95, and REMSA=.07 which again shows the fitness of our model.

5. DISCUSSION

The current study examined the factors affecting behavioral intention to adopt online banking at the
individual customer level in Pakistan. The theoretical model is unique in using UTAUT2 augmented
with perceived security. In this respect, a survey questionnaire was used in the light of UTAUT2
framework along with perceived security as an additional determinant of behavioral intentions. The
paper examined the moderating role of two cultural dimensions (I/C and UA) from Hofstede (1980)
on usage behavior. The model explained 50% of the variation in usage behavior. We found that

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Figure 3. Structural model results

performance expectancy, facilitating conditions, hedonic motivation, price value, habit, and perceived
security have a positive influence on BI. The study concludes that customers intentions are heavily
dependent on refinement of performance (PE), availability of digital and supportive equipment (FC),
entertainment factors (HM), habitual activities (HB), price and cost factors (PV), and securities
and trust perceptions (PS). HB and PS are the most important antecedents of customers behavior.
Customers are mostly influenced by their repetitive habits and the price of using online banking. The
results are consistent with the previous studies of Venkatesh et al. (2012) and Zhou et al. (2010). In

Table 6. Results for Structural Equation modeling

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Table 7. Results for moderation

the collectivist culture of Pakistan (Abbasi et al., 2015), bank customers are characterized as willing
to adopt online banking because of being motivated by other people and groups. Results show that FC
has a positive and significant effect on online banking adoption in Pakistan. Banks can increase the
acceptance rate by facilitating customers with online resources and providing necessary knowledge
to boost their banking activities.
Moreover, improvement in technology and organizational infrastructure bring optimism in
individuals behavioral intention that leads towards the adoption of online banking. The previous study
of (Weerakkody, El-Haddadeh, Al-Sobhi, Shareef, & Dwivedi, 2013) evidenced the same results. Our
findings support and validate the results of Carlsson (2006), Venkatesh et al. (2003), Venkatesh et al.
(2012), and Weerakkody et al. (2013). Unlike the findings of Venkatesh et al. (2003) and Venkatesh
et al. (2012), our results testify that EE and SI have no significant relationship with BI. Our result
of EE and SI supports the findings of Ain et al. (2015), Baptista and Oliveira (2015), and Cohen,
Bancilhon, and Jones (2013). FC has direct impact on BI and also is significantly related with UB.
Our results show that the cultural moderators (I/C and UA) have an effect on the relationship of BI
and UB. Our result of I/C shows that customers in Pakistan are influenced by the collective behavior
of groups, colleagues, and peers; they are molded by peer group pressures. Our results are consistent
with the findings of Abbasi et al. (2015). The results of UA are counter-intuitive and different from
the findings of Hofstede (1980). Similar results were found and were termed to be a study artifact
or a sample characteristic by Baptista and Oliveira (2015). The results of UA may be different in
Pakistan and can be linked to the religious outlook.

6. CONCLUSION AND IMPLICATION

This study provides a unique model to unveil the factors affecting online banking in Pakistan. The
current research used a comprehensive model to ascertain the most relevant factors of customers
behavioral intentions. Perceived security has a significant relationship with behavioral intention,
which means that customers will adopt online banking if they have some trust of the Internet and trust
bank online technology. Therefore, bankers need to pay heed to the customers concerns regarding
security and trust. Customers need to be assured of complete safety and security while they do their
online banking. The information management/IT department of banks needs to have special focus
or training to ensure the customers security, privacy and trust. They can design software which is
more easy, reliable, and safe. It is also very advantageous to educate the bank customers about special
securities measures (security codes, mobile phone transaction codes, dynamic tokens, etc.) so that
they can operate the online system conveniently and safely. The State Bank of Pakistan can better

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regulate commercial banks to overcome the trust and security issues faced by bank customers in
Pakistan. The cultural aspects of Pakistani customers are moderating the relationship of BI with UB.
The present study highlights consideration of the antecedents that stimulate online banking. Along
with better performance, reducing efforts, motivating environment, and societal pressures, there are
price concerns, motivation, habits, and security factors that influence behavioral intentions. Regulators
and owners of financial institutions can enhance the satisfaction level of their customers when their
strategies rightly consider and address the determining factors for promoting online banking.

6.1. Theoretical Implications

This research work contributes to IS literature by focusing on online technology acceptance. The
study also contributes to the customer satisfaction and banking literature. UTAUT is a good base for
future researchers. UTAUT was born out of the integration of eight previous theories. After almost
one decade of multiple applications in various contexts and technologies in the IS domain, UTAUT
was extended to include some additional constructs and emerged as UTAUT2. The model of this paper
uses seven constructs of UTAUT2 in a new cultural context (Pakistan) and augments the theory with
PS to make it more relevant in the context of a developing economy. Moreover, the paper introduces
two cultural variables (I/C and UA) as moderators, which means it adds to the existing literature as
a response to the suggestion of Venkatesh et al. (2012) that UTAUT2 may be extended to various
contexts, technologies, and users groups. Scant attention has been paid to studying the effect of
cultural variables in eastern contexts (Zhang et al., 2012). Our study combined the cultural theory
of Hofstede (1980) and UTAUT2 in a non-Western culture. The cultural variables are an interesting
contribution to evaluate the online banking acceptance in the collectivist culture of Pakistan, where
group orientations and societal pressures have proven to be important factors in the adoption of
online services.

6.2. Managerial Implications

The findings of our study have implications for management, government, and policy makers. From the
findings of our paper, it is evident that many customers in Pakistan are still not using online banking
and are deprived of its benefits. The findings notify banks administrators to pay more attention to the
customers instead of to technology. The main focus should be customer satisfaction by providing the
best quality services, but the technology focus should not be separated from the customer satisfaction
aspect. Secondly, the managers and regulators must consider the most relevant factors like effort and
performance expectancy, motivation, cost, and security. Such factors will boost how much customers
are attracted towards accepting technologies and online bank services with trust and a peaceful mind
(Kim, Shin, & Lee, 2009). Performance expectancy is highly valued by customers, so bank management
may upgrade the technology to provide better performance opportunities to the customers. Management
will also find it valuable to know that FC is an important driver of online banking adoption in Pakistan.
The banks can support their customers by providing them better facilities and/or can provide easy
ways to make them more knowledgeable about digital devices. Our findings suggest that hedonic
motivation is a significant antecedent of BI, so management needs to pay attention to the customers
entertainment and interest while using online transaction services. To do so, the banks may add
some intriguing music, games, or other information bundles to attract customers. Price value is also
considered important by the customers. Customers in Pakistan evaluate online banking in terms of
costs and benefits. This urges bank regulators to minimize the costs of online service that are borne
by the general customers. If the costs of online banking are more than the costs of physical banking,
the banks might lose many customers who are price-sensitive. Customers are security-conscious, so
management can devise policy to equip their databases with more sophisticated security systems.
In this regard, it is also advisable to manage financial services and information as per the latest
techniques of cryptography and steganography. Such precautions will help the customers get positive
perceptions about their security concerns. Well-trained, well-equipped, and professional personnel can

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safely manage the customer accounts and financial information. In the collectivist culture of Pakistan,
the moderator results in this study suggest that management should focus on group training and a
vision of spreading technology awareness through local management, colleagues, and peers. The
local populace is heavily influenced by various religious and other congregational activities so such
gatherings could be used by the banks management to enlarge their numbers of online customers.

6.3. Limitations and Future Research Direction

There are various limitations of the study. The first is related to the generalizability issue. The study
has been contextualized to Pakistan, where online banking is in early development stage. This study
and its results can be applied to those countries having similar technological pace but cannot be
generalized to developed countries. Our study worked on a small sample framework and it used a
web-based data collection technique. Future work on bigger data and a population with widespread
demographics will be interesting. The research did not take into account the social, legal, and political
aspects affecting the adoption of online banking. Future researchers may work to include social,
legal, and economic factors into this domain. Another limitation of this study is that majority of the
respondents were masters degrees or doctoral students. Although students have been used as the sample
in previous studies (Zhou, 2012), this practice may lead to the problem of external validity. Our study
considered only online banking technology, but it could be extended to a variety of technologies and
user groups, which could be validated in various contexts, countries, cultures, groups, and settings.
Another aspect of future research is related to data. This study used cross-sectional data, but analyzing
the longitudinal data to show the customers acceptance at different time intervals would be more
rigorous to test the acceptance of IS/ICTs in multiple industries.

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ENDNOTES
1
State Bank of Pakistan Annual Report, 2015.
2
State Bank of Pakistan, Annual Report 2015.
3
Pakistan Telecommunication Authority, Annual Report 2015.

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APPENDIX: SURVEY QUESTIONNAIRE

Performance Expectancy (Venkatesh et al., 2003; Venkatesh et al., 2012)

PE1: I find online banking useful in my daily life.

PE2: Using online banking increases my chances of achieving things that are important to me.
PE3: Using online banking helps me accomplish things more quickly.
PE4: Using online banking increases my productivity.

Effort Expectancy (Venkatesh et al., 2003; Venkatesh et al., 2012)

EE1: Learning how to use online banking is easy for me.

EE2: My interaction with online banking is clear and understandable.
EE3: I find online banking easy to use.
EE4: It is easy for me to become skillful at using online banking.

Social Influence (Venkatesh et al., 2003; Venkatesh et al., 2012)

SI1: People who are important to me think that I should use online banking.
SI2: People who influence my behavior think that I should use online banking.
SI3: Use of online banking is a status symbol in our environment.

Facilitating Conditions (Venkatesh et al., 2003; Venkatesh et al., 2012)

FC1: I have the resources necessary to use online banking.

FC2: I have the knowledge necessary to use online banking.
FC3: Online banking is compatible with other technologies I use.
FC4: I can get help from others when I have difficulties using online banking.

Hedonic Motivation (Venkatesh et al., 2012)

HM1: Using online banking is fun.

HM2: Using online banking is enjoyable.
HM3: Using online banking is very entertaining.

Price Value (Venkatesh et al., 2012)

PV1: Online banking is reasonably priced.

PV2: Online banking is a good value for the money.
PV3: At the current price, online banking provides a good value.

Habit (Venkatesh et al., 2012)

HB1: The use of online banking has become a habit for me.
HB2: I am addicted to using online banking.
HB3: I must use online banking.
HB4: Using online banking has become natural to me.

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Perceived Security (Vatanasombut et al., 2008)

PS1: I feel secure sending sensitive information across the Internet.

PS2: The Internet is a secure means through which to send sensitive information.
PS3: I feel secure managing my personal finances with the banks Online Banking.
PS4: The banks Online Banking offers a secure means through which to manage my personal finances.

Behavioral Intention (Venkatesh et al., 2003; Venkatesh et al., 2012)

BI1: I intend to continue using online banking in the future.

BI2: I will always try to use online banking in my daily life.
BI3: I plan to continue to use online banking frequently.

Individualism/Collectivism (Srite & Karahanna, 2006)

I/C1: Being accepted as a member of a group is more important than having independence
I/C2: Group success is more important than individual success
I/C3: Being loyal to a group is more important than individual gain
I/C4: Individual rewards are not as important as group welfare

Uncertainty Avoidance (Srite & Karahanna, 2006)

UA1: Rules and regulations are important because they inform workers what the organization expects
of them
UA2: Order and structure are very important in a work environment
UA3: It is better to have a bad situation that you know about, than to have an uncertain situation
which might be better
UA4: People should avoid making changes because things could get worse

Usage Behavior (Venkatesh et al., 2003; Venkatesh et al., 2012)

UB1: I use online banking.

UB2: I use online banking to manage me account(s).
UB3: I use online banking to transfer money.
UB4: I subscribe to financial products available online.

Ikram Ullah Khan is a PhD student in the School of Management at the University of Science and Technology of
China.

Zahid Hameed is a PhD student in the School of Management at the University of Science and Technology of China.

Safeer Ullah Khan is a PhD student in the Donlinks School of Economics and Management at the University of
Science and Technology Beijing (USTB) in Beijing, China.

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