E-payment is away of making transactions or paying for goods and services through electronicmethod without the use of cash and check. It’s also called an electronicpayment system or online payment system. In short, e-payment isfacilitated by internet access. It includes all financial operations usingelectronic devices such as computer, smartphones or tablets. The e-payment system has grownrapidly over the last decades due to the widespread of internet-based banking.As the world more on technology development, a lot of e-payment systems andpayment devices have been developed to increase and improve payment transactionswhile reducing the transaction of cash and cheque.
E-paymentsinclude a various method which is Electronic Funds Transfer (EFT) and CreditPayment system. EFT is anelectronic system used to transfer money from one bank account to anotherwithout any exchange cash by hand. EFT include direct debit, e-cheque,electronic billing, electronic cash and stored value card. For the creditpayment system, it iscredit transfer through payment provider, which is an intermediarybetween the customer’s bank and the retailer. These include credit cards ande-wallet. Generally, these are the most popular and actively used by manyconsumers and businesses in their daily transactions. Facilitatedby the use of Information and Communication Technology(ICT) and digitalinnovation, the banking sector has changed whereby the transactions areshifting from traditional banking to electronic banking system which ise-payment (Slozko&Pelo,2014).Traditional banks were the first financial institution which provides currentaccount and saving account, acts as the depository institution to acceptdeposits, make loans and payment of the cheque.
In short, traditional bankinginvolves cash and other paper-based transactions. In comparison, e-payments are effective andefficient especially in international transactions because payment ismade instantly and so its save time. Along with the electronic commerce(e-commerce), e-payment has expanded rapidly over the years as e-commerce allowconsumers exchange goods and services electronically without barriers of timeand distance.
E-commerce is a term for any form of business transaction thatconducted across the internet. Today, the world payment system drive towardsthe current trends of cashless transactions has further extended the need forcountries to provide efficient e-payment system to promote growth and economyefficiency. Furthermore, efficiency payment system would also help to reducethe costs related to cash and cheque transaction. Although e-payment has received recognitionthroughout the world, there are still a lot of consumers are not adopted thee-payments especially in developing countries such as Malaysia. It is anunavoidable fact that perceived risk is associated with the e-payment systemsand it contributes to the decision factors in its adoption.
This paper examinesthe factors influencing consumer’s intention to adopt e-payment. These factorsthen disclose including individual differences and consumer’s demographiccharacteristics on e-payments. The findings based on various literature reviewsrecommend that consumer awareness, convenience, security, and availability ofe-payment tools are the elements which can boost the adoption of e-paymentsystem. According to the Visa consumers payment report 2015, smartphonepenetration, worldwide connectivity, cloud computing and the internet of thingsare the various trends of transactions of consumers in future. In the next section, e-payment has beenreviewed and previous research on security and trust issues are examined.Following this section, a theoretical framework is presented.
Subsequently, theresearch methodology and results are discussed. Finally, conclusion andresearch implications are provided in the last section. 1.2Statement of ProblemThe appearance of Internet, the innovation oftechnology, and the rapid growth of wireless device and network, e-payment hasbecome a critical component for the success of financial services. The keyfactors for the importance and popularity of e-payment are due to itscharacteristics such as efficiency, convenience, and scalability. Thus, greaterrecognition of e-payment system has been deployed by individuals and businessesthroughout the world.
According to Bank Negara Malaysia, it is important totake priority over the e-payment as it is important to improve productivity andcontribute towards raising a country’s competitiveness. Also, having anefficient payment system is the major support of a highly competitive country. Developedcountries such as United States, United Kingdom, and France have fully migratedto an electronic payment system, meanwhile developing countries such ascountries of the Asia Pacific provide the force and encouragement to theindustry. For instance, the Bank Negara Malaysia has defined that Malaysiawould achieve higher economic growth and higher competitiveness by fullymigrating from traditional banking method to electronic payments, to boostproductivity and lower consumption. Accordingto Bank Negara Malaysia, Malaysia is still far behind towards e-paymentadoption due to consumers lack awareness.
This paper presents an enhancedtheoretical framework that examines major factors concerning e-payment adoptionsuch as infrastructure, literacy, security, and trust. Furthermore, the results of this study may begeneralized in other developed countries whose faced significant challenges.For instance, the e-payment instruments are not used with equal intensity indeveloped countries as caused by factors of infrastructure, security, andsociocultural challenges (Ingenico,2012). These factors are deemed to be important to provide Malaysia withthe confidence to fully migrate e-payment system. Malaysia is classified as acash-based society with nearly to 90 percent of Malaysia’s transactions arestill conducted in physical cash.
On the other hand, the most developedcountries such as UK and Australia conduct 90 percent of transactions viae-payment (The Star,2015). The growth in cashless transactions for the2010-2015 period in Malaysia is only 9 percent, compared to China and Indonesiawith 27 percent and 23 percent respectively (Table1). These figures show that Malaysians are still heavily dependent on cashand other paper-based payments. Table 1: The growth in cashless transactionsSource: McKinsey,2017 Given theimportance of e-payment, Malaysia with a strong vision to achieve developedeconomy from developing country under the Vision 2020, needs to promote andfully migrate from traditional banking to electronic payment system in theregion. However, Malaysia’s consumers are still hesitant to fully adopt thee-payment technology. For instance, many consumers in Malaysia are more likelyto act with human interaction instead of using the electronic technology to purchasegoods and services, especially the elderly residents.
Therefore,the knowledge of factors influencing the adoption of e-payment by consumers andthe challenges encountered in Malaysia have to improve in providing efficientand reliable services to the users. Also, understanding the determinants andthe factors on e-payment adoption will be important to the Malaysia who attemptto fully migrate to e-payment. 1.3Purpose of studyExamining and investigating the determinants thatencourage consumers adoption behavior is important as consumers are alwaysfaced with technology adoption decisions. In addition, especially fordeveloping countries such as Malaysia, where the opportunity to achieve higheconomic growth and the benefits of technology. This study focuses on all types oftransactions by consumers and businesses, including business to business(B2B),business to consumers(B2C), consumers to business(C2B), consumers toconsumers(C2C). These are the common transactions in the payment industry andindicate the large-scale of an e-payment market in a country.
It is importantto look into views and perspectives from the different users for e-paymenttransactions to understand the overall issues on the lower rate of e-paymentadoption in Malaysia. Moreover, it also allows understanding more on thefactors that influence consumers decision to adopt e-payment while engaging ineach e-payment transaction in this study. So, I targeted on consumers fromvarious demographic characteristics because I focus on the individual behaviorthat influences e-payment adoption. Other than that, the challenges encounteredby e-payment adoption in Malaysia also can be identified.
Subsequently, the interconnectionbetween the factors that influence consumers e-payment adoption is discovered.Therefore, the implications of the e-payment adoption can be discussed and makesuggestions for further improvement in Malaysia.
