Harvard Business Review

196www.palgrave-journals.com/fsm

Journal of Financial Services Marketing Vol. 11, 3 196–210 © 2007 Palgrave Macmillan Ltd 1363-0539 $30.00

INTRODUCTION

Generations X and Y are the ‘ younger ’ generations compared to the Baby Boomer generation and much has been written about their technological preferences and usage. In relationship to the consumer retail fi nancial services industry, little or no empirical

Correspondence: Joo-Gim Heaney, School of Business, The Uni-versity of Notre Dame Australia, Sydney Campus, 104 Broadway (PO Box 944), Broadway, NSW 2007, Australia; Tel: +02 8204 4155Fax: +02 8204 4403 E-mail: [email protected]

research has, however, been conducted into their attitude toward internet banking, with the one exception of LIMRA International ’ s 2002 Report. 1 Similar to LIMRA ’ s 2002 Report, most research on banking services has, however, focused on the large competitive US banking markets. 2,3

This paper provides a much needed contribution to research on fi nancial services by providing a comprehensive empirical investigation into internet usage and online banking behaviour and perceptions of two important emerging market segments: Generations X and Y. Generation X are

Analysis Papers

Generations X and Y ’ s internet banking usage in Australia Received (in revised form): 6th February, 2007

Joo-Gim Heaney has a PhD in Business Administration (Marketing) from Florida State University, and a BEc and LLB from Sydney University. She is a senior lecturer at the University of Notre Dame, Australia. Her areas of research focus on marketing education, professional services, marketing to Asian consumers, and marketing by non-profi t organisations. She has published in the International Journal of Bank Marketing (with a Highly Commended Award ) , International Journal of Nonprofi t and Voluntary Sector Marketing, Psychological Reports , and Southeastern Journal of Music Education and in numerous conferences including the Association of Marketing Theory and Practice , North American Case Research Association , The Academy of Marketing Science , and US Association of Small Business and Entrepreneurship .

Abstract This paper contributes to banking services literature by providing empirical research on internet banking behaviour and perceptions of Generations X and Y in Australia. More than 350 respondents aged 18 and above revealed that surprisingly, less than half of the mostly Generations X and Y respondents use internet banking. More Generation X are internet banking users compared to Generation Y, but Generation Y users use internet banking more frequently, use more virtual products, and have used internet banking for a longer time compared to Generation X users. Internet banking users perceive their banks as providing higher quality services compared to non-internet banking users. A large majority of non-internet banking users never tried internet banking at all. Security and privacy concerns were cited. Based on these fi ndings, it can be recommended that banks still need to provide both internet- and non-internet-based means of banking to their younger consumer segments. The banking industry needs to address concerns about security, trust and ease of use to persuade more of Generations X and Y to use internet banking. Journal of Financial Services Marketing (2007) 11, 196 – 210. doi: 10.1057/palgrave.fsm.4760052

Keywords Generations X and Y , consumer banking behaviour and perceptions , Australia , internet banking usage

Generations X and Y ’ s internet banking usage

© 2007 Palgrave Macmillan Ltd 1363-0539 $30.00 Vol. 11, 3 196–210 Journal of Financial Services Marketing 197

persons born between 1965 and 1977 and Generation Y between 1977 and 1995. 4,5 It addresses gaps in banking research conducted on banking behaviour of consumer segments by adding to what is already known about segments such as Baby Boomers. Generations X and Y differ from Baby Boomers in their experiences and expectation, such as in higher usage of technology and in different core values. 6,7 Table 1 summarises the differences between Baby Boomers, Generation X and Generation Y. In addition, banking research conducted in Australia contributes to understanding the banking industry outside that of the US. Additional contributions in this study include conducting differential analyses on Australian Generations X and Y ’ s respondents ’ internet usage and internet banking behaviour to investigate the effects of nationality, age, gender, whether English is the respondent ’ s fi rst language, and interests and activities.

This paper will begin with a discussion of the Australian consumer banking industry. Extant literature describing Generations X and Y will then be thoroughly discussed followed by internet banking. Hypotheses will be proposed. The methodology of this study will then be described. The results section will report on the hypotheses tested as well as other information revealed by the descriptive and differential analyses.

THE AUSTRALIAN CONSUMER BANKING INDUSTRY

The banking services industry in Australia can be described as competitive and

progressive, primarily due to deregulation more than 20 years ago. The 1980 Campbell and 1984 Martin Committee Reports resulted in the federal government deregulating the banking industry from the Reserve Bank and opening the domestic retail market to foreign competition (eg Citibank, Bank of Tokyo, Hongkong & Shanghai). Mergers resulted in the ‘ Big Four ’ in Australia: The Commonwealth Bank, ANZ Bank, National Australia Bank, and Westpac. From then on, with no caps on account fees or on profi ts, and with the infl ux of technology such as ATM and EFTPOS banking transactions, it was up to the banks to ensure that they provided the level of fi nancial services customers wanted at the cost of which they saw fi t. 12

Australian customers feel that banks have lost interest in customers to become solely interested with maximising profi ts. 12 Duncan and Elliott 13 also report that Australians feel the country is ‘ overbanked ’ , with many having widespread cynicism towards the larger banks. In an Australian Reader ’ s Digest Poll, more than one-third of respondents had closed an account due to dissatisfaction with mainly fees or the bank ’ s service. Many customers reported not knowing the fee existed, the fee had been raised, or the bank charging them fees without fi rst informing them. ATM fees did in fact double from 25 to 60 cents over ten years from the 1990s. Guy and Crofts 12 also found that there are more than 60 different bank charges, even on ordinary transaction accounts. Customers also were reportedly feeling like profi t numbers in a database, so that ‘ ordinary ’ customers were

Table 1 Generational characteristics

Context Baby Boomers Generation X Generation Y 1946 – 1964 1965 – 1976 after 1977

Economy Economic prosperity Downsizing economy Capitalism rules Cohort experience

Vietnam War Cold War

Death of socialism Rise of China and high technology

Core values Idealistic, individuality Pessimistic, diversity Positive, globalisation Buying habits

Spend a lot, brand loyalty Very sceptical consumers Products with cool images are important

Table summarised from Johnson and Moore, 6 Norum, 7 (p. 58), Mitchell, 8 Smith and Clurman, 9 Strauss and Howe, 10 Wellner 11 .

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treated differently, albeit, less well than the ‘ wealthy clients ’ . This latter segment comprised the top 20 per cent of the account holders.

Sathye 14 claims that only one in four of the major banks in Australia provided internet banking facilities by the end of 1997. Sathye 14 randomly sampled consumers living in cities and found that security concerns were the primary impediment to consumers adopting internet banking in Australia. Reid 15 reported fi ndings about the ‘ Big 4 ’ in Australia, and found that while the majority of ANZ Bank ’ s internet banking users were Generations X and Y (born between 1963 and 1983), most of the Commonwealth Bank ’ s and National Australia Banks ’ users were over 40 years old (Baby Boomers). Jones 16 reported that 23 per cent of adults in Australia were using internet banking, compared to 12 per cent of adults in the UK, and 15 per cent in the USA, demonstrating how technologically savvy Australian customers are. Therefore, research on Australian ’ s banking usage serves as a good leading indicator of internet banking usage internationally. This study will specifi cally address the issue of banking behaviour of Generations X and Y segments in Australia.

GENERATIONS X AND Y

Generation X comprises of persons born between 1965 and 1977; 4,5 however, Paul 17 includes the years of 1961 – 1981. Generation Y includes persons born between 1977 and 1995; 4 correspondingly, on a wider scope, it could also range between 1982 and 2001. 17 A Generation X person is aged from 30 to 42 years old in 2007, and Generation Y from 12 to 29 years old based on Bartlett ’ s 4 calculations. Descriptions of Generation X and Y are based mainly on research conducted in the US. As this study, however, deals specifi cally with banking usage and behaviour, only Generation Ys aged 18 and above are surveyed. These are the relevant consumers capable of owning and operating bank accounts.

Generation X

Known as the 13th Generation or the Lost Generation, Generation X is a generation that dislikes hierarchy and has faced frequent job changes. With about 40 million Generation Xs in the USA (about 15 per cent of the population), similarly in Australia they comprise nearly 15 per cent of the population with about 3 million consumers (estimated from AusStats). 18

Ryan 19 reports that Generation Xs are savvy with the media and information technology. They embrace change, forming the largest group of entrepreneurs. They are also highly educated, use debt and credit cards to fi nance education and almost 60 per cent have university or college degrees in the USA. 20 Stewart 21 reports that this generation is sceptical concerning job security, or in trusting companies based on stock market crashes and Enron scandals and therefore value trust, good communication, and healthy challenges personally and professionally.

As consumers, Generation Xs look for customer convenience, community relations, and branding. 22 Generation Xs still make purchases based on traditional search and decision-making methods. Harwood 22 suggests that banks should see themselves as fi nancial teammates of Generation X customers, adding contemporary features like online banking, and positioning themselves as hip and edgy.

Generation Y

Generation Y, also called the Echo Boomers, Boomlets or the Millennium Generation is the largest teen segment in the world; they are the children of the Baby Boomers. At 72 million strong in the USA, they comprise the largest segment of consumers, nearly 26 per cent of the population. 23 In Australia, the proportion is interestingly similar, with over 27 per cent of the population and 54 million consumers (estimated from AusStats 18 ). They



are a formidable consumer segment, where in 1999 Generation Ys spent $ 153bn of their own money in the USA. 24

Generation Ys are shaped by Nintendo, civic and hopeful perceptions along with the possession of grand ambitions. 25 Harwood 22 states that they are very globally and environmentally conscious; however, this generation is also the MTV generation and is open to chronic boredom, short attention spans, disruptive behaviour, a mistrust of the media, and paradoxically values reality television alongside a need for privacy. 17

Generation Ys lead relatively quiet lives — they hang out with their friends, go to movies, dine out, and watch television. Interestingly, they rarely participate in extreme sports but prefer value-oriented activities. 24 As consumers they will be the most savvy and informed consumers, looking for bargains and conducting well-researched online shopping transactions. These spending habits, however, go hand-in-hand with poor fi nancial skills (eg the inability to balance their own chequebook or a budget), with unrealistic market expectations in relationship to fi nancial planning. 23

Generation Ys are notoriously fi ckle consumers who want to embrace fast changes but are at the same time brand and fashion conscious. They have a particular preference for marketing strategies asking for short attention spans using core brand values and a soft sell. 4 Lecturing and traditional training manuals are not very effective on these consumers who have been using computers since pre-kindergarten. 26 This Net Generation uses e-mails, e-Commerce, and e-Finance, with 11 per cent of 16 – 22-year-old online consumers using comparison shopping sites every time they shop. 27 They are also four times as likely as adults to have applied online for fi nancial services products like credit cards, insurance and mortgages. 27

USAGE OF THE INTERNET FOR BANKING AND IMPEDIMENTS

The growth in supply and demand for the internet is undisputed. With 787.5 million users worldwide, 28 up from 266.8 million in 1999, Lawson 28 uses comScore Network sources to report that more than 24 million people will transact business online with large US banks each month. It therefore appears that the banking industry has succeeded in taking advantage of this explosion in consumers ’ use of the internet for banking activities. The OECD claims that electronic handling of consumer search for life insurance, completing bank transactions, processing a consumer or stock order or dealing with a consumer service question can reduce transaction costs by almost 80 per cent with average cost savings in the 15 – 20 per cent range. 29 – 31 Jeon and Rice 32 state that the internet makes banking available to customers 24 / 7 for transactions such as customer information, banking transactions, fi nancial calculators, worksheets, customised customer statements, and perhaps interactions with a fi nancial service adviser.

There are, however, a number of reasons that could impede consumers from using the internet for banking. First, Williams 33 suggested that internet banking could incur high fees, security problems along with inadequate service ; thus, while the internet makes strategic sense for the banks it may not be so for the customers. Sathye 14 found that only an average of 10 per cent of respondents used internet banking in Australia in 1998. Secondly, the country of residence may affect the extent of use of internet technology. Shiu and Dawson 34 found that whether the consumer was a resident of Britain versus Taiwan was the most signifi cant variable in determining internet shopping usage, with the British resident being more likely to use the internet. Income was the second most signifi cant variable. Thirdly, not all consumers are cyberconsumers , hence affecting their potential usage of the internet for banking.

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Although 88 per cent of US college students own computers and 93 per cent access the internet in a given month, Albro 35 and Wind and Mahajan 36 pointed out that not all Generation Ys are cyberconsumers. Only 51 per cent had made online purchases in the past year, 40 per cent learnt about the product online and bought later at the physical store, and only 9.3 per cent began and ended their search online. A more apt description may be ‘ centaur ’ consumers, and companies need to serve both aspects of this centaur.

Despite the above impediments, Coyne and Dye 37 report that the segment of customers who prefer to bank online is growing and those preferring to bank at branches are shrinking. In addition, it would seemingly benefi t banks to get more people to conduct internet banking. Mols 38 found that customers who bank online are more satisfi ed with their bank, less price sensitive, have the highest intentions to repurchase, and provide more positive word-of-mouth information compared to other banks ’ customers. More research is needed to understand internet banking behaviour.

HYPOTHESES

Back in 1999, Sathye 14 found that only 10 per cent of Australians were using internet banking in 1998. Jones 16 reported that in early 2000, a banking survey commissioned by Corillian International reported that 23 per cent of adults used online banking services in Australia. It is hypothesised that the percentage of Generations X and Y using internet banking in Australia is higher than in the past, and higher than the general adult segment.

H 1 : The proportion of individuals in Generations X and Y using the internet for banking is higher than that of the past general population in Australia.

Both Generations X and Y are frequent users of the internet. Research, however, cautions that Generation X are still using traditional search methods 22 and that not all Generation Y are making online purchases. 36 The impetus for internet banking may therefore be based on whether a person or segment frequently accesses the internet. It is posited that the consumer segments that access the internet frequently are those that are more comfortable with making transactions over the internet, such as internet banking. Use of the internet alone is not correlated with internet banking usage.

H 2 : Consumer segment(s) that accesses the internet more frequently are correlated with segments that use internet banking.

One of the main differences between Generations X and Y is that while Generation X embraces change such as technological advancement, 19 Generation Y has been using computer technology from a very young age. 26 This may result in Generation Y using internet banking differently from Generation X. One aspect that may differ is that Generation Ys who do use internet banking have been using it longer even though this is a younger generation.

H 3 : Generation Y internet banking users have been using internet banking longer compared to Generation X internet banking users.

The same rationale can be applied to how Generation Ys use internet banking. Because they are savvier with computers and more trusting of technology with the ability to use the internet for many fi nancial services activities, 27 Generation Y internet banking users may be using internet banking for many more products compared to Generation X users. Thus, it can be hypothesised that



Generation Y consumers who use internet banking conduct more types of banking activities compared to Generation X.

H 4 : Generation Y internet banking users use internet banking to conduct more types of banking activities compared to Generation X internet banking users.

Likewise, because Generation Y use internet banking for more fi nancial services activities, it would follow that Generation Y internet banking users are heavier users of internet banking compared to Generation X.

H 5 : Generation Y internet banking users use internet banking more often compared to Generation X internet banking users.

The fi nal hypothesis concerns customer perception of their banks. Mols 38 found that internet banking consumers have a more positive perception of their bank compared to other bank customers. This could be because these customers fi nd their bank easier to access or that it provides them with a wider array of products. It can be proposed, therefore, that consumers who do use internet banking have a more positive perception of their bank.

H 6 : Respondents who use internet banking have a more positive perception of their bank compared to respondents who do not use internet banking.

RESEARCH METHOD AND PROCEDURE

Population and sample

As this study is focused on Generations X and Y, a student sample was considered appropriate. The sample for Generation Y,

however, focuses only on persons aged 18 and above. This is done for a number of reasons: ethics clearance issues; the fact that persons above the age of 18 are considered adults in Australia; and they make decisions about banking. More importantly, persons over 18 have been operating their own bank accounts. The student sample included the Generation X age group, which is between the ages of 29 and 40. This is because over 30 per cent of students at this institution from which the sample is drawn are mature aged students who are over the age of 26 years.

The survey was tested for face validity using business students in a class discussing banking research; the survey instrument was then rewritten to take into account feedback on the instrument ’ s clarity, current representativeness and length. The survey was administered to a convenience sample at a large Australian university across three campuses, over a period of one month, and over seven timeslots (morning, afternoon, and evening). A total of 400 questionnaires were administered, and after incomplete and obviously ‘ patterned ’ responses (eg all ‘ neutral ’ ) were eliminated, 376 valid questionnaires remained as the dataset. Alreck and Settle 39 stated that for populations 10,000 or more, a sample size between 200 and 1,000 respondents would be considered adequate by most experienced researchers.

Survey instrument

The survey instrument was divided into a number of sections. The fi rst section asked for the respondents ’ demographics, including nationality, age, gender, whether English was their fi rst language, whether they were full-time or part-time students, and interests and activities. The second section contained questions about internet usage and the third section asked about internet banking usage and quality perception levels of both internet banking users and non-internet banking users.

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Items that dealt with demographics, product usage, and bank usage used nominal scales. Items that measured attitudes toward particular products and usage used 5-point Likert scales, from ‘ do not agree ’ to ‘ agree ’ . SPSS version 11.0 for Windows was used to perform descriptive and differential tests on the dataset.

The phrase ‘ internet banking ’ here was used to describe any activity where the respondent accesses the internet to conduct banking services activities, from paying bills to simply viewing their accounts at any fi nancial institution. It does not include investing activities, such as buying and selling stocks. Although the term ‘ banking ’ may be used — the fi nancial institution may be a bank, a credit union, and may or may not be a virtual bank.

RESULTS

Demographics

The majority of the respondents were females (70.5 per cent), Generation Y (85.1 per cent), Australians (61.4 per cent) with a corresponding majority stating that English is their fi rst language (63.8 per cent), full-time students (88.3 per cent) and with a wide spread of interests and activities (see Table 2 ). A similar percentage split between Nationality (61 per cent Australian and 36 per cent International) and whether English is their fi rst language (64 per cent yes and 36 per cent no) lends cross-validity to the responses.

Cross-tabulations performed between the two age categories and nationality, gender, and interests / activities (see Table 3 ) show that Generation X concentrated on reading, sports, internet, and investing; and Generation Y on reading, sports, movies, internet, with investing being the lowest. Again, the wide spread in interests / activities refl ect the validity of the survey responses; it is also interesting that the younger generations focused on a

wide array of entertainment activities (see eg Harwood 22 and Paul 17 ).

Hypotheses tested

Hypothesis 1 is confi rmed. Compared to the general population of 23 per cent in the early 2000s as stated by Jones, 16 this survey shows that 40.7 per cent of Generation X and 55 per cent of Generation Y respondents 18 years and above use internet banking.

Table 2 Characteristics of respondents

Percentage

Nationality Australian 61.4 International 36.2 Generation X 11.7 Generation Y 85.1 Gender Female 70.5 Male 27.7 Is English the fi rst language? Yes 63.8 No 36.2 Occupation Full-time student 88.3 Part-time student 10.9 Interests and activities Reading 23.7 Sports 20.5 Movies 26.9 Internet surfi ng 20.2 Investing 8.8

Table 3 Cross tabulations between Generations X and Y and demographics

Generation X Generation Y

Nationality (% within age category) Australian 34.1 65.6 International 45.1 34.4 Gender (% within age category) Female 45.4 72.8 Male 38.6 27.2 Interests/activities (% within age category) Reading 50 19.1 Sports 11.4 22.5 Movies 31.6 Internet surfi ng 20.5 20.9 Investing 18.2 5.9



As shown in Table 4 , less than half of all the respondents used internet banking but that fi gure is higher than that compared to the past for the adult segment.

Did particular segments use the internet for banking? Table 5 shows that signifi cant differences were found between age categories: more Generation X used the internet for banking compared to Generation Y. More part-time students used the internet for banking than full-time students. Interestingly, more of those whose interests were reading, investing, and internet surfi ng used internet banking.

Hypothesis 2 is confi rmed in that consumer segment(s) that access the internet more frequently are correlated with segments that

use internet banking. More Generation X used internet banking compared to Generation Y (see Tables 4 and 5 ). This was correlated with Table 5 showing signifi cantly more Generation X accessing the internet daily (63.6 per cent) compared to Generation Y (39.7 per cent). In other words, it is not just that consumers who have access to the internet use internet banking; they need to be extremely cognizant with the internet to use internet banking.

Hypothesis 3 is confi rmed in that the relatively younger Generation Y internet banking users have been using internet banking longer compared to Generation X internet banking users. Tables 6 and 7 shows that the there is a signifi cantly larger Generation Y segment compared to Generation X segment who has been using internet banking for more than 1 year.

Hypothesis 4 is confi rmed in that Generation Y internet banking users use internet banking to conduct more types of banking activities compared to Generation X internet banking users ( Table 6 ). While Generation X used internet banking solely to view accounts and transfer funds — Generation Y used all fi ve of the products.

Hypothesis 5 is confi rmed in that Generation Y internet banking users use internet banking more often compared to Generation X internet banking users. Table 8 shows that Generation Y appeared to be the heavier users, with almost 44 per cent accessing the internet 2 – 5 times a week. The signifi cantly heavier users were also the Australians students, males, and full-time students. Almost 60 per cent of those who liked to surf the internet accessed the internet 2 – 5 times for banking, compared to 26.3 per cent of those who invested.

Hypothesis 6 is confi rmed in that respondents who use internet banking have a more positive perception of their bank compared to respondents who do not use internet banking. The overall perception of service quality of internet banking users was 4.48 compared to 3.51 (out of a possible 5)

Table 4 Usage of internet

Description of internet activity Percentage

When respondent last used the internet 0 – 1 days ago 88.3 2 – 3 days ago 3.4 4 – 5 days ago 1 6 – 7 days ago 2.9 How often respondent uses the internet per week 7 days a week 43.5 6 days a week 17.2 5 days a week 21.6 4 days a week 9.9 3 days a week 4.2 Less than 3 days a week 1.6 When respondent fi rst used the internet 1 year ago 2.1 2 years ago 10.7 3 years ago 7 4 years ago 8.6 5 years ago 26.6 More than 5 years ago 39.3 Respondent uses the internet to shop Yes 26 No 69.3 Respondent uses the Internet to obtain other information Yes 72.7 No 25.3 Respondent uses the internet for banking Yes 48.4 No 46.6 Generation X 54.5 Generation Y 40.7

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for non-internet banking users. The standard error of skewness and kurtosis were low, indicating the data is relatively normally distributed.

Table 9 shows that for internet banking users , there was no signifi cant difference between male and female students; between Australian and international students; and between full-time and part-time students. Generation X, however, had a signifi cantly lower overall perception of quality compared to Generation Y.

When overall service quality perception for non-internet banking users was grouped

by segments (see Table 10 ), International students rated the bank signifi cantly higher than their Australian counterparts. Generation X respondents rated their banks lower, as did part-time students and male students.

Other fi ndings

Internet usage There were a number of other fi ndings based on the results. As shown in Table 4 , almost 20 per cent of the respondents only started to use the internet within the last three years.

Table 5 Usage of internet

Asymp. Sig. (2 sided) Pearson Chi-square

Nationality Age category Gender English as the fi rst language

Student status

Interest and activities

Respondent last used the internet

0.000* 0.000* 0.000* 0.003* 0.000* 0.000*

How often respondent uses the internet per week

0.000* 0.000* 0.000* 0.000* 0.000* 0.000*

When respondent fi rst used the internet

0.000* 0.000* 0.000* 0.000* 0.000* 0.000*

Respondent uses the internet to shop

0.000* 0.000* 0.000* 0.000* 0.000* 0.000*

Respondent uses the internet to obtain other information

0.000* 0.000* 0.000* 0.026* 0.011* 0.000*

Respondent uses the internet for banking

0.218 0.000* 0.238 0.403 0.000* 0.021*

*Signifi cance at the 0.05 level.

Table 6 Usage of internet banking


Nationality Age category

Gender English as the fi rst language

Student status


Where respondent access internet banking

0.002* 0.542 0.043* 0.006* 0.000* 0.002*

How often respondent used internet banking

0.000* 0.000* 0.022* 0.001* 0.000* 0.004*

How long respondent has been using internet banking

0.000* 0.000* 0.000* 0.000* 0.001* 0.000*

Main reason for using internet banking

0.000* 0.000* 0.000* 0.001* 0.000* 0.000*

Internet banking product used

0.000* 0.000* 0.000* 0.000* 0.000* 0.000*




Only 26 per cent of the respondents use the internet to shop (an activity that requires higher involvement and trust) and the reverse, almost 73 per cent use the internet to obtain

information. Table 5 of usage of internet , Australians had more recent use of the internet compared to International respondents. Those who had English as their

Table 7 How long respondent has been using internet banking: % within each variable

Less than 1 month 1 – 6 months 7 months – 1 year More than 1 year

Nationality Australian 0 23.9 26.5 49.6 International 19.1 17.6 19.1 44.1 Age Gen X 0 33.3 45.8 20.8 Gen Y 4.6 23.5 21.6 50.3 Gender Female 10.4 26.4 17.6 45.6 Male 0 11.7 36.7 51.7 Is English respondents ’ fi rst language? Yes 0 22.6 27.4 50 No 20 24.6 15.4 40 Student status Full-time 4.3 21.1 25.5 49.1 Part-time 21.4 35.7 10.7 32.1 Interest and activities Reading 2.1 18.9 24.5 49.1 Sports 0 20 20 60 Movies 0 20 17.8 62.2 Internet surfi ng 7.1 33.3 33.3 26.2 Investing 31.6 26.3 15.8 26.3

Table 8 How often respondents used internet banking: % within each variable

Once a week

2 – 5 times a week

More than 5 times a week

Nationality Australian 47.9 49.6 2.4 International 79.4 20.6 0 Age Gen X 66.7 20.8 12.5 Gen Y 56.2 43.8 0 Gender Female 65.6 32 2.4 Male 46.7 53.3 0 Is English respondents ’ fi rst language? Yes 50.8 46.8 2.4 No 78.5 21.5 0 Student status Full-time 59 41 0 Part-time 67.9 21.4 10.7 Interest and activities Reading 73.6 20.8 5.7 Sports 56.7 43.3 0 Movies 60 40 0 Internet surfi ng 40.5 59.5 0 Investing 73.7 26.3 0

Table 9 Quality perceptions of internet banking users

Test Level of signifi cance

Quality perception grouped by:

t -test (equal variances assumed)

0.501 Nationality (Australian; International)


0.805 English as the fi rst language (Yes; No)


0.066 Gender (Male; Female)

t -test (equal variances assumed

0.007* Age group (Generation X; Generation Y)


0.644 Student type (Part-time; full-time)


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fi rst language mirrored this. Generation Y were signifi cantly more recent users compared to Generation X. Males were also signifi cantly more recent users compared to females. The two segments that showed most recent access to the internet were those who did internet surfi ng and those who did investing. As for how often respondents use the internet , males used the internet signifi cantly more often than females — with nearly 80 per cent accessing the internet 6 – 7 times a week, compared to 54 per cent of females. Interestingly, the highest internet usage was recorded by those whose interest was investing (100 per cent accessed the internet 6 – 7 times a week), reading (70 per cent), and internet surfi ng (58 per cent). In relationship to when respondents fi rst used the internet , a signifi cantly larger proportion of International students had been using the internet fi ve or more years ago. Generation Y (almost 80 per cent) was in the same usage category, in comparison to Generation X (30 per cent). Males dominated in the ‘ more than 5 years ’ category (50 per cent) compared to females (39.4 per cent). As expected, respondents who indicated interests in investing and internet surfi ng were the two highest use categories. More International students than Australians used the internet to shop .

Surprisingly, more Generation X used the internet to shop compared to Generation Y. More males compared to females, and part-time students compared to full-time students used the internet to shop. This can be contrasted with whether the respondents used the internet to obtain information . More International students than Australians used the internet to obtain information, which was the same trend as for shopping. Seventy seven per cent of Generation Y, however, used the internet for obtaining information, compared to Generation X with only 45.4 per cent.

Internet banking users

Table 11 shows that most of the internet banking users (almost 83 per cent) accessed

Table 10 Quality perceptions of non-internet banking users

Test Level of signifi cance

Overall service quality of bank grouped by:


0.024* Nationality (Australian; International)


0.019* English as the fi rst language (Yes; No)


0.003* Gender (Male; Female)


0.022* Age group (Generation X; Generation Y)


0.006* Student type (Part-time; full-time)

*Signifi cance at the 0.05 level .

Table 11 Usage of internet banking

Description of internet banking activity Percentage

Where respondents access internet banking Home 82.8 Work 9.9 How often respondents use internet banking Once a week 60.3 2 – 5 times a week 38.1 >5 times a week 1.6 Internet banking product used View account balance and transactions

65.6

View information, eg interest rates 6.3 Financial planning, eg calculators 3.2 Schedule and pay bills 10.6 Transfer funds 14.3 How long respondent has been using internet banking Less than 1 month 6.9 1 – 6 months 23.3 7 months – 1 year 23.3 More than 1 year 46.6 Main reason for using internet banking Lower/no fees 13.2 Prefer to use the technology 22.2 Effi cient and quick 51.9 Supplements current banking services

12.7

Mean Satisfaction with internet banking 4.40 Overall perception of services quality of internet banking

4.48



the internet from their home and conducted internet banking once a week (60.3 per cent). Most of them used the internet to view account balances and transactions — a supervisory rather than transactional activity. Interestingly, most of the respondents ’ main reason for using internet banking was its effi ciency and speed — not so much the low fees.

In relationship to the main reason for using internet banking , this is expanded in Table 12 . Speed and effi ciency was the main focus of Generation Y — but Generation Y also cited all the other reasons. In addition to speed and effi ciency, female students cited a preference for technology, compared to males, who cited low / no fees. Full-time students also cited a preference for technology — but a large proportion of part-time students cited supplementing current banking services. Preference for technology was very important to those who surfed the internet, read and went to the movies.

Non-internet banking users Forty-nine per cent of the respondents did not use internet banking. Of those, 71.2 per cent never tried using internet banking at all. The other 28.8 per cent tried using internet banking but gave up. The reasons stated as to why respondents did not use internet banking were numerous — but the largest proportion (40.4 per cent) stated security concerns. The next largest proportion was the preference for face-to-face banking (9.9 per cent) followed by privacy concerns (8.5 per cent), fi nding technology diffi cult to use, and fi nding the bank ’ s website complicated (7.4 per cent each).

When the data was differentiated by segment, Table 13 shows a higher proportion of male students (88.6 per cent) compared to female students (65 per cent) never tried using internet banking at all. In addition, those whose interests were internet surfi ng and investing were the largest proportion that tried internet banking but gave up, in

Table 12 Main reason for using internet banking: % within each variable

Lower/no fees Prefer to use technology

Effi cient and quick Supplements current banking services

Nationality Australian 17.9 25.6 40.2 16.2 International 5.9 11.8 75 7.4 Age Gen X 29.2 37.5 33.3 0 Gen Y 11.8 21.6 51 15.7 Gender Female 7.2 24 57.6 11.2 Male 26.7 13.3 43.3 16.7 Is English respondents ’ fi rst language? Yes 16.9 26.6 41.1 15.3 No 6.2 13.8 72.3 7.7 Student status Full-time 15.5 23.6 52.8 8.1 Part-time 0 14.3 46.4 39.3 Interest and activities Reading 0 26.4 52.8 20.8 Sports 20 16.7 53.3 10 Movies 6.7 28.9 64.4 0 Internet surfi ng 31 23.8 21.4 23.8 Investing 15.8 0 84.2 0

Heaney


comparison with the other segments. Over 65 per cent of people whose interests was internet surfi ng and 35.7 per cent of people interested in investing tried internet banking and gave up.

In relationship to reasons for not using internet banking , while most of the respondents stated security as the main reason, a signifi cant proportion of International students (15.6 per cent) also stated that liability for unauthorised transactions was of concern; this was compared to no Australian student who had the same concern. While Generation Y respondents were spread out across all areas of concern in addition to security concerns, the two additional disproportionate areas for Generation X were privacy concerns (15 per cent) and complicated bank website (20 per cent). In addition to security concerns, male students also had a disproportionately high concern in fi nding technology diffi cult to use (31.8 per cent).

DISCUSSION

Australian Generation X and Y banking customers do not all use internet banking. For the almost 50 per cent of respondents who did use internet banking, 60 per cent of them used internet banking only once a week. Therefore, at least 30 per cent of the respondents used the internet at least once a week. This is higher than the 10 per cent

average of Australians who used internet banking, as reported by Sathye 14 but it also shows quite a superfi cial use of internet banking by most respondents. The implication for banks is that they still need to provide face-to-face tellers and other means of facilitating banking transactions, even for Generation X and Y customers. The image of fully ‘ online ’ younger customers is not yet a reality in this 21st century.

While fewer Generation Y respondents used the internet, the heavier users were Generation Y, males and full-time students. Almost 44 per cent of Generation Y respondents accessed the internet 2 – 5 times a week. These Generation Y respondents also exhibited more involved use of internet banking — from viewing accounts to transferring money. Generation Y males and full-time students have also been using internet banking for a longer period compared to other segments. Speed and effi ciency were the main reasons cited, although surprisingly, a preference for technology was cited by females and part-time students. Generation Ys are therefore different from Generation Xs. They are savvier than Generation Xs and at a younger age as well. The implication for banks is that if the banks can indeed persuade a Generation Y customer to use internet banking, they will use it more effectively, more often and for a wider array of products compared to Generation X customers.

Table 13 Non-internet banking usage


Nationality Age category

Gender English as the fi rst language

Student status


Tried/never tried internet banking

0.261 0.200 0.006* 0.461 0.505 0.000*

Reasons for respondents not using internet banking

0.000* 0.004* 0.000* 0.000* 0.000*




People who use internet banking appear to rate their banks as providing higher quality services compared to non-internet banking users. Perhaps this is linked to internet banking users perceiving their banks as providing a better array of services. Banks should work harder to ensure that customers use internet banking as this adds value to their banking services; internet banking can also add to customer loyalty by providing a structural tie to the bank.

It is apparent here that internet banking usage results in a number of advantages for the bank: higher quality perceptions and possibly higher loyalty to the bank; more frequent usage of internet banking; and use of a wider array of virtual services with the possible introduction of new virtual products, all resulting in possible cost saving to the bank. The crucial question then lies in how banks can ‘ convert ’ and persuade customers, and in particular, Generation X and Y customers to be internet banking users. This study shows that a higher proportion of Generation Xs, part-time students and respondents who liked to read and internet surf use internet banking. Internet banking may be more closely related to the behaviour of using the internet for shopping than merely using the internet to gather information. More Generation Xs use the internet to shop and for banking compared to Generation Y; a similar comparison can be made for part-time students. High involvement internet users, for example internet surfers use the internet for both shopping and information gathering. Banks can encourage consumers who use the internet for shopping and those who are more highly involved in using the internet (eg investing and surfi ng); these are customers who have confi dence and trust in using the internet. Security fears, as stated by non-internet banking users, will not be a barrier here. In addition, banks need to promote the security of their website more strenuously. Public relations promoting this issue as a whole for the banking industry may be an

effective means. This bridging behaviour is important to customers regardless of internet age segment or frequency of internet usage; for example, Generation Ys are more recent and frequent internet users but fewer of them use the internet for shopping and internet banking; it is the type of internet usage that is important, not just simply using the internet.

LIMITATIONS AND FUTURE RESEARCH DIRECTIONS

Although more than 350 respondents were surveyed, most of the respondents were females who belonged to Generation Y. The study was also limited to drawing a student sample from one regional university in Australia, although students from that University come from all over Australia and from over 80 countries, with over 30 per cent of respondents coming from outside Australia. This study therefore focuses on banking attitudes towards Australian banks, and may have limited generalisability to other Australian consumers and to other countries. It, however, makes an important contribution to understanding banking behaviours and attitudes of Generations X and Y in relationship to Australian banks.

Future research directions would include extending this research into investigating and understanding internet banking behaviour of Generations X and Y in other countries. In addition, research could be extended into understanding other important fi nancial services used by Generations X and Y such as investing and retirement planning. Important decision variables could be uncovered and then taken into account to test fi nancial services decisions using a decision model, such as regression analysis, structural equations modelling, and Theory of Planned Behaviour. Detailed and thorough understanding at the consumers level will go far in uncovering what is important and pertinent to younger consumer segments in relationship to banking and investing decisions.

Heaney


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