Determinants of Internet banking adoption by banks in India

Abstract

Purpose

The current exploratory study is an attempt to discover the factors affecting a bank's decision to adopt Internet banking in India. Particularly, it seeks to examine the relationship between the bank's adoption decision and various bank and market characteristics.

Design/methodology/approach

The data for this study consist of panel data of 88 banks in India covering the financial years 1997‐1998 to 2004‐2005. Logistic regression technique is employed to study the relationship.

Findings

The results show that the larger banks, banks with younger age, private ownership, higher expenses for fixed assets, higher deposits and lower branch intensity evidence a higher probability of adoption of this new technology. Banks with lower market share also see the Internet banking technology as a means to increase the market share by attracting more and more customers through this new channel of delivery. Further, the adoption of Internet banking by other banks increases the probability that a decision to adopt will be made.

Research limitations/implications

The primary limitation of this study is the scope and size of its sample as well as other variables (e.g. market, environmental, regulatory etc.) which may have an effect on the decision of the banks to adopt Internet banking.

Originality/value

An understanding of the factors affecting this choice is essential both for economists studying the determinants of growth and for the creators and producers of such technologies. From this perspective, understanding the factors determining the adoption of technology becomes highly relevant from the policy point of view. Moreover, the studies on the adoption of financial innovations are related to developed markets, e.g. US or European banking markets. Hence, this paper contributes to the empirical literature on diffusion of financial innovations, particularly Internet banking, in a developing country, i.e. India.

Citation

Malhotra, P. and Singh, B. (2007), "Determinants of Internet banking adoption by banks in India", Internet Research, Vol. 17 No. 3, pp. 323-339. https://doi.org/10.1108/10662240710758957