Perceived Security And Consumer Trust In Adoption Of Fintech Service

Abstract

Financial Technology (FinTech) is the new technology and innovation in the delivery of financial services. The emergence of FinTech provides different benefits financial consumers and financial companies. For a consumer, FinTech carry weight in a way of global and online transaction, speedier transaction processing, among others. However, studies has shown that consumer trust is still low. Hence, this paper aims to investigate the impact of five variables, namely confidentiality, authentication, authorization, non-repudiation and privacy on consumer trust in the adoption of FinTech in online banking service. The research was an empirical investigation based on surveys completed by 200 students from higher educations in Muadzam Shah, Pahang. Using regression analysis, the paper found that confidentiality, authentication and privacy were found to be positively and significantly related to consumer trust. On the other hand, authorization was found to be negatively and significantly related to the consumer trust. Non-repudiation was found to have positive and insignificant relation to consumer trust. Hence, from this study its shows the importance of security mechanisms in building users perception of security. The study provides a deeper understanding into the impact of perceived security on consumer trust in the adoption of Fintech in online banking service.

Keywords: Trustconfidentialityauthenticationauthorizationnon-repudiationprivacy

Introduction

Financial Technology (FinTech) is the new technology and innovation in the delivery of financial services. Malaysian banking sector has greater internationalisation of the financial system as well as technological advancements. The objective of FinTech with a wider range of banking transactions is to deliver financial services saw a significant take-up. It was conducted increasingly through digital channels and self-service terminals for instance online banking, mobile banking and applications. By using smartphones for investing services and mobile banking, general public were more accessible to the financial services.

Furthermore, banking institutions also increasingly used artificial intelligence to support customer relationships as well as improve access to financial products. Communication technology continued to gain traction in the payments space and contactless payments. On the other hand, the compliance risks for banking institutions will be lower, and was remain challenging in efficiency gains. Mobile Automated Teller Machines (ATMs) and virtual teller machines would be key initiatives for rural communities for greater access to banking services.

According to a report presented by PricewaterhouseCoopers (2016), the acceptance of FinTech is increasing whereby 60% of financial companies’ clients will use mobile application within the next five years. Due to the high acceptance possibilities, six commercial banks in Malaysia, namely Maybank, RHB Bank, CIMB Bank, Ambank, Hong Leong Bank and Public Bank have been engage in joint partnership with FinTech companies.

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Figure 01 shows the use of self-service terminals and digital channels in 2016. It shows that mobile banking transactions increased up to 98.1%. Internet banking transactions and ATMs transactions were increased by 29.7% and 3.8% respectively. Next, the number of internet banking and mobile banking subscribers also increased with 15.2% and 22.9% respectively in year 2016. Even though FinTech continue rapidly new innovations, FinTech was face challenges on financial consumer trust and lack of familiarity in penetrating the market. Thus, this study will examine the impact of perceived security on consumer trust in the adoption of FinTech in online banking service.

Problem Statement

FinTech allows consumers to access the banking services without physical direct recourse to the bank premise. For instance, ATMs are widely used in rural and semi-urban areas. FinTech practise has been described as virtual banking. Thus, many banks were realized that more consumers like to do banking electronically. On the other hand, banks have implemented several important online banking applications that were benefited to consumers such as to pay bills, money transfer, check account history and download statement information.

Furthermore, perceived security is the key concerns on consumer trust in the adoption of online banking. However, consumer trust is extremely vital due to the lack of physical manifestation. Some of them are not feel comfortable to disclose personal information such as giving their bank account number; or doing transactions electronically such as to pay an invoice. It is because, consumers felt that transactions conducted through online banking were open to hackers and viruses, which are beyond their control. Other than that, consumers are lack of connectivity to the Internet due to financial constraints and lack of knowledge to use online banking.

Hence, consumer trust is recognized as the critical factor for the continued growth in the adoption of online banking. For the banks point of view, they need to understand the factors that influencing online consumers’ trust in online banking. This study will examine is there any impact of perceived security on consumer trust in the adoption of FinTech in online banking service.

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Figure 02 shows the number of transactions using online banking were increased every year from 2005 until 2016. The number of transactions were increased from 18.6 million in year 2005 to 434.7 million transactions in 2016. In year 2006 until 2015, the number of transactions were 27.2 million, 40.3 million, 57.0 million, 79.7 million, 104.7 million, 141.3 million, 161.7 million, 194.8 million, 252.2 million and 323.1 million, respectively.

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Figure 03 shows the value of transactions using online banking were increased every year from 2005 until 2016. The value of transactions were increased from RM18.6 billion in year 2005 to RM463.7 billion transactions in 2016. In year 2006 until 2015, the value of transactions were RM28.5 billion, RM48.5 billion, RM53.0 billion, RM87.7 billion, RM115.6 billion, RM153.6 billion, RM171.8 billion, RM224.9 billion, RM304.2 billion and RM352.1 billion, respectively.

Research Questions

Is there any impact of perceived security on consumer trust in the adoption of FinTech in online banking service?

Purpose of the Study

To examine the impact of perceived security on consumer trust in the adoption of FinTech in online banking service.

Research Methods

A survey questionnaire was designed to measure the conceptual framework. Each of the variables (e.g. confidentiality, authentication, authorization, non-repudiation and privacy on consumer trust in the adoption of FinTech in online banking service) was measured using multiple items. The samples were the student from two higher educations in Muadzam Shah, Pahang, Malaysia, namely Universiti Tenaga Nasional (UNITEN) and Politeknik Muadzam Shah. The samples were appropriate due to the facts that they are generation Y, that it is the most technically literate and technologically savvy generation. The convenience sampling method is used in this study. The researcher handed out the questionnaire if the student agreed to participate in the study. Originally, 300 questionnaires were distributed. However, only 200 returned questionnaires were used for the analysis for this study, providing a response rate of 66.67 percent.

Conceptual framework of the study

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Findings

Conclusion

This research investigates the impacts of perceived security on consumer trust in the adoption of Fintech in online banking service. A total of 200 students from two higher educations in Muadzam Shah, Pahang, namely UNITEN and Politeknik Muadzam Shah, were used for the analysis for this study. Based on the findings, confidentiality, authentication and privacy were found to be positively and significantly related to consumer trust. On the other hand, authorization was found to be negatively and significantly related to the consumer trust. These results are consistent with the claimed by Law (2007); Sarrafiaghdam (2008); Chellappa and Pavlou (2002) and Al-Sharafi, et. al. (2016). Non-repudiation was found to have positive and insignificant relation to consumer trust. This result is consistent with the assertion by Law (2007).

Hence, from this study its shows the importance of security mechanisms in building users perception of security. The study provides evidence into the impact of perceived security on consumer trust in the adoption of Fintech in online banking service.

Acknowledgments

The authors would like to thank the anonymous reviewers who will give their extensive and thorough comments which had enormously helped us improved the quality of our paper. The perspectives and the positioning of our paper has certainly benefited from their valuable feedback and comments.

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