The Determinants of Consumers’ Adoption of Internet Banking

The purpose of the study is to investigate determinants of Internet banking adoption based on an individual’s benefits and costs of adopting Internet banking. Using data from the 2001 Survey of Consumer Finances, this paper estimates an adoption model for Internet banking. Our findings show that consumers’ ability, attitude and opportunity cost of time play a significant role on the decision of adopting Internet banking. Younger and well-educated consumers are more likely to adopt Internet banking. However, when individual’s age associated with the level of education, the age effect varies across education groups. Among people with a low educational background, the effect of age on the probability of adopting Internet banking is hump-shaped. However, among people with a higher educational background, the probability of using Internet banking decreases with age. This study also investigates differences across households that use checks, ATM or debit card, direct payment and Internet banking as the payment methods. Our findings show that there are significant differences in terms of the demographics of these households that use different payment methods. The results of our study will help banks and financial institutions to implement successful distribution strategies and consumer educators to guide consumers on how better to use banking services.