Consumers Acceptance towards NFC Mobile Payments

Consumers  

Acceptance  towards  

NFC  Mobile  

Payments  

A  research  conducted  by  a  Business  Information  System  2013-­‐2014  student  of  the  University  of   Amsterdam  for  his  Master  Thesis  

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Date: 27th _{of August}

1.  Introduction  

Mobile payments is a combination of payment systems with mobile devices and services to provide users with the ability to initiate, authorize and complete a financial transaction over mobile network or wireless communication technology (Chandra et al., 2010). The boundless invasion of mobile devices and its

closeness to the user, with the far-reaching specification of the devices, makes them applicable for many payment scenarios and even for carrying everything that would fit into a wallet. This can provide the mobile network operators the opportunity to develop a new business model and increase their revenues (Chen, 2008). Mobile payments consist of many types of payments, like payment via a mobile app (called MyOrder), bank transfer via a mobile app, payment by sms etc. However this research will focus on near field communication (NFC). NFC is a two-way, short-range communication method. This method facilitates the transaction between two devices, the mobile devices and the payment terminal, when in close range of each other. The transactions can provide service

providers information on the consumers’ preferences, which can be used to offer personalized discounts, coupons etcetera.

Nowadays large international companies also make use of NFC mobile payments (Slade et al., 2014). For example, Google has the GoogleWallet and MasterCard with Samsung’s Smart Ticket app. Also on a national level in the Netherlands companies are more focusing on NFC mobile payments: Vodafone recently introduced the SmartPass and Rabobank has the MyOrder Cashless payment. Despite the investment of the providers made, worldwide adoption of NFC has been very low (Gartner, 2013). This proposethat NFC mobile payments

providers need to better understand the stimulators of consumers acceptance of NFC mobile payments to adjust their strategies according to consumer needs (Schierz et al., 2010). In addition, foreign business models of mobile payment cannot directly be applicable to different cultural contexts due to the different market constraints in terms of economic, technology and social aspects. NFC mobile payment adoption in the context of the Netherlands, where to date no similar research has been undertaken, is also important.

NFC mobile payments have a number of advantages, because of the ubiquity of the device, there is no fuss about bankcards, receipts and tickets; everything is available on the mobile device. Also the payment itself will be quicker and the

extra information, such as account balance, will be easier to see. However, there are uncertainties and risks involved due to the vulnerability of both the devices and the network to hacker attacks (Zhou, 2014). For example, the public transportation card (in Dutch: OV-chipkaart) in the Netherlands also works with NFC technology. This card was hacked shortly after it’s release (the card could be upgraded for free). The above-mentioned advantages and risks can influence the acceptance of NFC mobile payments.

In search for the factors, which affects the acceptance of NFC payments, several acceptance models and theories are available for research. For example,

Diffusion of Innovation (Rogers, 1962 & 1995), Theory of Planned behavior (Ajzen, 1991), Technology Acceptance Model (Davis, 1989) and the Unified Theory of Acceptance and Use of Technology (Venkatesh et al., 2003 & 2012). Most of these acceptance models are focused on the employee acceptance towards technology in a workplace context. However the focus of this research is the consumer’s acceptance of the use of technology for mobile payments. For the consumers focus, the Unified Theory of Acceptance and Use of Technology will be well suited for this research, because the model focuseson the consumer acceptance of technology. This model consists of constructs from different models on acceptance of technology. Moreover the construct selection is based on the consumers perspective and needs of the user of today.

Taking the above in consideration, the following research question will be central in this research:

“What factors influence the intention to use NFC mobile payments by consumers in the Netherlands?”

The research question will be supported by the following sub questions: - Which models/theories are available for technology acceptance? - Which model/theory is well suited to determine the factors, which

influence the intention to use NFC mobile payments?

- Which factor is the strongest for acceptance of NFC mobile payments? The remainder of the research is organized as followed:

Chapter 2 will describe the technology acceptance models. First, the models that are related to the UTAUT. Secondly, the UTAUT model will be described. Finally, the UTAUT2 model, which is an extension of the UTAUT, will be described.

Chapter 3 will describe the methodology of this research. First, the hypothesis will be described. Secondly, the conducted survey will be described.

Chapter 4 will present the results of the survey and research. First, demographic information about the respondents will be described. Secondly, a factor analysis will be conducted. Thirdly, the reliability of the results will be tested. Fourthly, a regression analysis will be conducted. Finally, the multicollinearity will be checked amongst the variables to test whether they measure redundant information. Chapter 5 will present the discussion section where explanation will be discussed on topics.

Chapter 6 will present the conclusion with the future research.

2.  Theory

2.1  Literature  review

Studies on the user’s acceptance of technology mobile payments are quite extensively. There have been developed several models and theories for

technology acceptance: Diffusion of Innovation (DOI), Theory of Planned Behavior (TPB), Technology

Acceptance Model (TAM) and Unified Theory of Acceptance and Use of

Technology (UTAUT). These models are selected from literature of studies on mobile payments. The following section will describe the models and one will be suitable for investigate the factors that influence the intention to use NFC mobile payments. Table 1 gives an

overview of the relevant literature on mobile payments with their location and subject.

Table 1 - Overview of acceptance research of mobile payments.

S o u r c e T h e o r y A p p l i c a t i o n

L o c a t i o n Brown et al., 2003 DOI Mobile banking South Africa Chen, 2008 TAM Mobile

payment United- States of America Cheong et al., 2004 TAM Mobile payment Korea Dahlberg & Oorni, 2007 UTAUT Mobile payment Finland Goeke & Pousttchi , 2010 TAM Mobile payment Germany Hongxia et al., 2011 UTAUT Mobile payment China Kim et al.,

2010 UTAUT Mobile payment Korea Leong et al., 2013 UTAUT2 Mobile payment Malaysia Puschel et al., 2010 D-TPB Mobile banking Brazil Schierz et al. 2010 TAM Mobile payment Germany Shin, 2010 TAM Mobile

payment United- States of America Slade et al., 2014 UTAUT2 Mobile payment United Kingdom Suoranta, 2003 DOI Mobile banking Finland Wang & Yi,

2012

UTAUT Mobile payment

China Wu & Wang,

2003 TAM Mobile payment Taiwan Zmijewska et al., 2004 UTAUT Mobile payment Australi a

D i f f u s i o n o f I n n o v a t i o n ( D O I )

First, Rogers (1962,1995) developed the DOI, although this model was not designed for Information System (IS) research it has been used for explaining the acceptance of IS. The DOI suggests that when consumers

perceive the innovation to have a greater relative advantage,

observability, trialability and

compatibility, the rate of technology adoption will increase. Brown et al. (2003) and Suoranta (2003) are the only two quantitative studies in mobile

banking adoption, which have used the DOI as their core theory.

According to Slade et al. (2013) DOI was relative, in comparison to other studies, which applied different research models, unsuccessful due to its low percentage of variance in behavior intention. The DOI will be

insufficient for the acceptance of NFC mobile payments, due to the purpose of the model which is explaining the

acceptance of IS and not NFC mobile payments.

T h e o r y o f P l a n n e d B e h a v i o r ( T P B )

The Theory of Planned Behavior suggests that behavior is a direct function of behavioral intention which itself is driven by an

individual’s attitude, subjective norms and perceived behavioral control (Ajzen, 1991). The TPB is extended, also known as D-TPB, by decomposing the antecedents of

attitudinal beliefs. Puschel et al. (2010) is the only study which has used the D-TPB as the core theory. In this study there is a high percentage of variance in behavioral intention to adopt mobile banking. According to Slade et al. (2013) components such as subjective norm have been included by other research (Schierz et al, 2010; Sripalawat et al, 2011). The component subjective norm has also been used in the UTAUT2 model of Venkatesh et al.

(2012). This model will be

NFC mobile payments due to the context of the application of TPB, which is in the health care and not NFC mobile

payments.

T e c h n o l o g y A c c e p t a n c e M o d e l ( T A M )

The Technology Acceptance Model (TAM) is developed for IS by Davis (1989). According to TAM, usage is a direct function of behavioral intention, which itself is influenced by

attitudes towards the IS formulated from the innovation’s perceived usefulness and perceived ease of use (Davis, 1989). The model is

originally intended to predict

employee the acceptance and the usage of technology in organizational

context. Schepers & Wetzels (2007) are the first who applied the TAM to examine individual acceptance of technology in a consumer context, but have not

empirically validated their

research. According to Slade et al. (2013), TAM is the most used amongst all theories in research for mobile payments. Since the development of the TAM (Davis, 1989) studies have used the model with mobile payments.For example, Dahlberg, Mallat, & Öörni, (2003) is one of the first mobile

payments adoption study.They added in their study the factor ‘trust’ to the TAM to better describe consumer acceptance of mobile payment solutions. The studies (e.g. Dahlberg et al., 2003; Lee &

Warkentin, 2004) on the adoption of mobile payments before 2003 were mostly

qualitative or descriptive of nature. In 2004 quantitative

research on mobile payment adoption began to emerge. Cheong & Park,

(2004) was one of the first who did a quantitative research on mobile

payment adoption using the TAM, after Cheong & Park (2004) several studies (Chen, 2008; Goeke & Pousttchi, 2010; Shin, 2010) examining followed.

Wu & Wang (2003) used the TAM2

(Venkatesh & Davis, 2000) to model users acceptance of using mobile

payments. The TAM2 is an extension of the TAM, as you can see in figure 1. In this extension the social influences and cognitive instrumental processes are added. However, this model is also intended to predict employee acceptance of technology and the usage of

technology in organizational context.

U n i f i e d T h e o r y o f A c c e p t a n c e a n d U s e o f T e c h n o l o g y ( U T A U T )

After the TAM2 model Venkatesh et al. (2003) developed the Unified Theory of Acceptance and Usage of Technology (UTAUT). The UTAUT model is derived from several theories and models. From these models several key

constructs were derived:

• _{Performance expectancy was}

derived from the TAM’s perceived

usefulness and from the DOI’s relative advantage;

• Effort expectancy was derived

from TAM’s perceived ease of use and

from DOI’s complexity;

• Social influence was derived

from the TPB’s subjective norm and

DOI’s image and

• Facilitating conditions was

derived from the DOI’s

compatibility and TPB’s perceived behavioral control (Venkatesh et al., 2003).

These constructs on behavioral intention of use behavior are

moderated by different combinations of gender, age, experience and

voluntariness of use. Hongxia et al. (2011) and Wang & Yi (2012) have empirically validated UTAUT in the mobile payment context, but excluded the UTAUT moderators. Several studies

(Dahlberg & Oorni, 2007; Hongxia, Xianhao, & Weidan, 2011; Kim,

Mirusmonov, & Lee, 2010; Zmijewska, Lawrence, & Steele, 2004) have used the UTAUT in mobile payment adoption.

The TAM, TAM2 and UTAUT models were

originally developed to explain employee technology acceptance within an

organizational context, for the consumer context Venkatesh et al (2012) developed the UTAUT2 model, which is an extension of the UTAUT model. This model is tailored to the consumer technology acceptance

context, which is also the context of this research and therefore will be used in this research. In the study of Leong, Hew, Tan, & Ooi (2013) the

UTAUT2 is used to determine the factors influencing the adoption of Near

Field Communication (NFC)-enabled mobile credit card in Malaysia. Another study by Slade et al. (2014) used the UTAUT2 to show that

performance expectancy is the

strongest predictor in their research on mobile payments in the UK.

According to Slade et al. (2013) mobile payment adoption research is still in its infancy with regard to the TAM, UTAUT and UTAUT2 models. The relevant studies, mentioned earlier, have taken place across different countries. The table gives an overview of the studies with the theories they have used for their research.

Moreover, it shows that there haven’t been conducted a research on mobile

payment adoption in the Netherlands context.

2.2. Unified Theory of

Acceptance and Use of

Technology (UTAUT)

Venkatesh et al. (2003) developed the Unified Theory of Acceptance and Use of Technology (UTAUT) model. This model is based on eight acceptance models, each with a different set of acceptance determinants. These eight models are the theory of

reasoned action (TRA), the

technology acceptance model (TAM), the motivational model (MM), the

theory of planned behavior (TPB), a model combining the technology

acceptance model, the theory of planned behavior, the model of PC

utilization (MPCU), the innovation diffusion theory (IDT) and the

social cognitive theory (SCT). These models are described in appendix A, with their core constructs and it’s definition.

Of all the constructs from the different models there are four constructs that will play a

significant behavioral role as direct determinants of intention and usage: performance expectancy, effort expectancy, social influence and facilitating conditions (see figure 2).

Figure 2 - The UTAUT model (Venkatesh et al., 2003)

P e r f o r m a n c e e x p e c t a n c y

According to Venkatesh et al. (2003), the determinant

performance expectancy can be

defined as the degree to which an individual believes that using the system will help him or her to attain gains in job performance. From the different models, five constructs relate to performance expectancy:

perceived usefulness from the TAM,

extrinsic motivation from the MM, job- fit from the MPCU, relative

advantage from the IDT and outcome expectation from the SCT. These

constructs are all related to

enhancing the job performance. As visible in the figure2, the

relationship link between performance expectancy and

gender and age. Based on research, men tend to be more task-oriented

(Minton & Schneider, 1980) and

therefore performance expectancy is strongly noticeable to men because the focus of performance expectancy is on task accomplishment (Venkatesh et al., 2003). Comparable to gender, age is to play a moderating role

according to research (Hall &

Mansfield, 1975; Porter, 1963).

E f f o r t e x p e c t a n c y

Effort expectancy is the degree of ease associated with the use of the system (Venkatesh et al., 2003). This determinant captures three constructs from the different

models of acceptance: perceived ease of use from the TAM, complexity from the MPCU and ease of use of the IDT. These constructs (see appendix A) have

similarities in the definitions; all of them are related to the usability of a system. Also effort expectancy has moderators, these are gender,

age and experience. Venkatesh & Morris (2000) suggests that effort

expectancy is more notable for women than for men. According to earlier research (Plude & Hoyer, 1985),

when men get older their ability to

process complex stimuli and allocating attention to information on the job tends to be difficult. These are necessary when using software systems.

The degree to which an individual perceives that important others

believes he or she should use the new system, is called social influence (Venkatesh et al., 2003). This

determinant captures three constructs from the different models of

acceptance: subjective norm from the TRA, social factors from the MPCU and image from the IDT. Similarity can be seen in the definitions of these constructs, all are associated with influence of the status of a person or group. This determinant, social influence, is the only one that has 4 moderators: gender, age,

experience and voluntariness of use. Venkatesh et al. (2000) suggests that women look to be more sensitive to others opinion and find social influence to be more notable when forming an intention to use new technology. According to Rhodes

(1983) that affiliation needs is to be increased with age. Older workers are more likely to place increased

importance on social influence with the effect of decrease with

experience.

F a c i l i t a t i n g c o n d i t i o n s

The last determinant is

facilitating conditions, this is the degree to which an individual believes that an organizational and technical infrastructure exists to support the use of the system.

Facilitating conditions is a

determinant consists of three

different constructs: perceived behavioral control from the TPB,

facilitating conditions from the MPCU and compatibility from the IDT. The similarity among these constructs is that, according to Venkatesh et al. (2003), they are used to include aspects of the technological and/or organizational environment that are designed to remove barriers to use the system. The influence of

facilitating conditions of usage will be moderated by age and experience (Venkatesh et al., 2003).

According to Venkatesh et al.

(2003), behavioral intention will have a positive influence on

technology usage. This is consistent with the underlying theory of all the intention models mentioned before. This is also visible in the model (see figure 2) by the relation between

behavioral intention and use behavior.

As mentioned before the UTAUT model is originally developed to explain employee technology acceptance and use. The

focus of this research is on the consumer use context, therefore the extension of the UTAUT by Venkatesh et al. (2012), also called UTAUT2, will be appropriate.

U T A U T 2

Venkatesh et al. (2012) developed an extension of the UTAUT, called the

consumer use and context. Venkatesh et al. (2012) added three new

constructs: hedonic motivation,

price value and habit. Various

constructs related to hedonic behavior (for example: enjoyment) are

important in consumer product and/or technology use (Brown & Venkatesh

2005; Holbrook & Hirschman 1982;

Nysveen et al. 2005; van der Heijden

2004). According to Venkatesh et al. (2012), hedonic motivation will

complement UTAUT’s strongest predictor that emphasizes utility.

Furthermore, contradictory to workers in an organization

consumers have to pay the costs and these can be of an influence to the consumer’s decisions (Brown & Venkatesh 2005; Chan et al. 2008; Coulter & Coulter

2007). By adding a construct that is related to price and costs will

complement UTAUT’s existing resource

considerations that focus only on time and effort. Finally, habit as

another critical predictor of technology use will complement the focus on intentionality as the

overarching mechanism and key driver of behavior (Venkatesh et al., 2012).

As regards to the moderators, the moderator voluntariness from the UTAUT model is dropped, because the most consumer behaviors are completely

voluntary (Venkatesh et al., 2012).

Figure 3 - UTAUT2 model (Venkatesh et al., 2012)

H e d o n i c m o t i v a t i o n

According to Venkatesh et al. (2012), hedonic motivation is defined as the fun or pleasure

derived from using a technology. Hedonic motivation plays an important role in determining technology

acceptance and use (Brown &

Venkatesh, 2005). Research on IS (van der Heijden 2004; Thong et al. 2006) showed that hedonic

motivation can be of an influence on the technology acceptance and use. Also in consumer context is hedonic motivation an important determinant of technology acceptance and use

P r i c e v a l u e

In an organizational use setting the employees do not have the costs of the technology, in contrary to consumers

who do have costs of use. According to Chan et al. (2008), cost and price may have a convincing impact on

consumers’ technology use. Venkatesh et al. (2012) define price value as

consumer’s cognitive tradeoff between the perceived benefits of the

applications and the monetary cost for using them. When the perks of using a technology are perceived to be greater than the monetary costs and such price value has a positive impact on

intention, then the price value can be marked as positive.

H a bi t

Habit is defined as the extent to which people tend to perform behaviors

automatically because of learning

(Limayem et al., 2007). According to Venkatesh et al (2012), habit is

operationalized in two ways: habit is viewed as prior behavior and is

measured as the extent to which an individual believes that behavior has to be automatic.

The models, DOI, TPB, TAM, UTAUT and UTAUT2 are models to investigate the technology acceptance. To determine which model is well suited to

investigate what factors influence the intention to use NFC mobile payments is it important to look at the focus of

this research and the models. The focus of this research is on the

consumers, the factors of the

intention of the consumers to use NFC mobile payments what is going to be

investigated. Therefor, The UTAUT2 model of Venkatesh et al. (2012) is the best model to use to investigate the factors of the intention to use NFC mobile payments for consumers in the Netherlands. The focus of this model is on the consumers whereas the focus of the other models is on the employee in a workplace, which implies that the context is also different.

Furthermore, the UTAUT2 model is

developed in 2012 and therefor is it more up-to-date then the other models, this will provide the research more representative results. This is also answers sub question one and two.

3 . Meth od ol og y

In this chapter the research design (see paragraph 3.1) and the survey design (see paragraph 3.2) will be described. In paragraph 3.1

hypotheses will be described. The hypotheses are each based on every construct of the UTAUT2 model. Paragraph 3.2 will describe the construction of the survey.

3.1 Research Design

Figure 4 presents the model for this research. It is derived from the UTAUT2 model of Venkatesh et al.

(2012). Every hypothesis corresponds to a construct or moderator. The

hypotheses are divided into two groups: hypotheses on the constructs that are directly connected to the intention to

use NFC mobile payments and hypotheses on the moderators. These hypotheses are tested with the help of a survey (see appendix B). The participants of the survey were recruited by using online networks such as Facebook, Twitter

and email. The questions in the survey were based on the hypotheses that are

described in the next paragraph. For example, in appendix B is the survey presented and the questions are coded like PE1, PE2, PE3, EE1, EE2,

EE3, EE4, etcetera. PE1, PE2 and PE3 correspond to the construct

performance expectancy and the same principle with the other. The survey will give quantitative results for the UTAUT2 model. According to Slade et al. (2014), a survey is a good way to

gather information for the model.

3.1.1 Hypotheses

The hypotheses were implemented from the constructs and moderators of the UTAUT2 model (Venkatesh et al.,

2012). In the paper of Venkatesh et al. (2012) the constructs were in the

context of mobile internet. In this research the context will be NFC mobile payments. Therefore, the hypotheses will be formulated in the context of mobile payments. Paragraph 3.1.1.1 will describe the hypotheses that are directly related to the constructs and paragraph 3.1.1.2 will describe the hypotheses that are related to the

moderators.

3.1.1.1 Hypotheses - Direct links

In the consumer’s context, performance expectancy is the degree to which using a technology will provide benefits to consumers in performing certain activities (Venkatesh et al.,

2012). In UTAUT, the original model, Venkatesh et al. (2003) found

performance expectancy to be the

strongest predictor of intention, this applies in the employee context. However, in the consumer context,

Venkatesh et al. (2012) found in the UTAUT2 model hedonic motivation and habit the strongest predictors of

behavior intention. Performance expectancy has been supported in the mobile payment context by studies of Hongxia et al. (2011) and Wang & Yi

(2012). As NFC mobile payment could lead to the end of carrying cash and