KHAIRUL_ANUAR__MOHD_LAMIN_04_24_(2)

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CONSUMER AWARENESS TOWARDS ELECTRONIC PAYMENTAT THE KLANG VALLEY

This project is submitted to theMARA University of Technology

As partial fulfillment of the requirement for theBACHELOR OF SCIENCE (HONS) (BUSINESS COMPUTING)

By:KHAIRUL ANUAR BIN MOHD LAMIN

2000132410

BACHELOR OF SCINCE (HONS) (BUSINESS COMPUTING)FACULTY OF INFORMATION TECHNOLOGY AND QUANTITATIVE SCIENCES

MARCH 15,2004


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APPROVAL

This project paper is accepted to be pursued under my supervisions.

Puan Zaidah IbrahimLecturer,Faculty of Information Technology And Quantitative Sciences,Universiti Teknologi MARA,Shah Alam,Selangor.


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DECLARATION OF ORIGINAL WORK

B.Sc. (HONS) BUSINESS COMPUTINGFACULTY OF INFORMATION TECHNOLOGY AND QUANTITATIVE

SCIENCESUMVERSUITEKNOLOGI MARA

"DECLARATION OF ORIGINAL WORK"

I, Khairul Anuar Bin M ohd Lamin, 810611-05-5145

Hereby, declare that: This work has not previously been accepted in substance for any degree, locally

or overseas, and is not being concurrently submitted for this degree or any otherdegrees.

This project paper is the result of my independent work and investigation, exceptwhere otherwise stated.

All verbatim extracts have been distinguished by quotation marks and sources ofmy information have been specifically acknowledged.

Date: March 2004


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ABSTRACTThis study is carried out to determine the consumer awareness towards electronicpayment in the Klang Valley. The target group is among consumers in the Klang Valleyand focuses on people who had a past experience on using any of electronic paymentservices offered in Malaysia. This research w ill identify why, where, when, what, andhow they use the electronic payment system. This study will also focus on people whohad no experience on using any types of electronic payment services in Malaysia. This

research will also identify why they do not use the electronic payment services. Thepurpose of this study is to give a real scenario about the awareness of people at KlangValley towards electronic payment in Malaysia. This research will give somemeasurement about the frequency and consumer awareness and also highlight theknowledge level of Klang Valley peoples about electronic payment in Malaysia. Fromthe finding shows that most of the respondent are aware about electronic payment thatbeing offered. All of the respondents know about electronic payment before and like topay their utility and telecommunication bills. Most of the respondents that have anexperience on using electronic payment are satisfied and will recommend the electronicpayment services to their friends. Most of them also do not find any difficulties on usingelectronic payment services. Most of them agreed that electronic payment services areeasy to use. Most of them agreed that electronic payment is secured and saving their timecompared to queuing at the counter. Respondents believes that electronic payment isbeneficial to them but believe that electronic payment is slow in response time. They feelconvenience on using electronic payment and agreed that electronic payment system inMalaysia needs more improvement.

IV


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LIST OF TABLE

Table No. Page3.1 Mind Mapping 283.2 Work Breakdown Structure 294.1 Respondents Gender 324.2 Respondents Age 334.3 Marital Status 344.4 Education Background 364.5 Occupation 374.6 Working Sector 384.7 Income Level 394.8 Credit Card Holder 424.9 Experience User 434.10 How They Know 444.11 Types of Bill Paid 474.12 Last Time Using 484.13 Frequency of Usage Per Month 494.14 Place of Using Electronic Payment 504.15 Will Use Electronic Payment Again? 514.16 Would Recommend to Friends? 524.17 Find Any Difficulties? 534.18 Given Enough Information? 54


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4.19 Easy to Use 564.20 Expensive Fees/ Service Charges 574.21 Secure 584.22 Save Time 604.23 Mobility 614.24 Beneficial 624.25 Quick Response Time 634.26 Convenience 644.27 Need Improvement? 654.28 Know About Electronic Payment? 684.29 How They Know? 694.30 Lack of Knowledge 704.31 Facility Not Available 714.32 Do Not Trust On Security 724.33 Prefer Old Payment Method 734.34 Do Not Have Time 744.35 Resistance To Change 754.36 Do Not Like New Technology 764.37 Difficuh To Use 774.38 Frequency of Using Other Payment Methods 78

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LIST OF FIGURE

Figure No. Page2.1 Future of Consumer Payment 122.2 Growth of Personal Spending By Payment Type 133.1 Mind Mapping 283.2 Work Breakdown Structure 294.1 Respondents Gender 324.2 Respondents Age 334.3 Marital Status 344.4 Education Background 364.5 Occupation 374.6 Working Sector 384.7 Income Level 394.8 Credit Card Holder 424.9 Experience User 434.10 How They Know 444.11 Types of Bill Paid 474.12 Last Time Using 484.13 Frequency of Usage Per Month 494.14 Place of Using Electronic Payment 504.15 Will Use Electronic Payment Again? 514.16 Would Recommend to Friends? 52

VII


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TABLE OF CONTENTS

CONTENTACKNOWLEDGEMENTSABSTRACTTABLES OF CONTENTSLIST OF TABLESLIST OF FIGURES

PAGE NO.Ill

IV

IX

Vll

CHAPTER 1 INTRODUCTION1.1 Introduction1.2 Statement Of The Problem1.3 Objective Of The Study1.4 Scope Of The Research1.5 Significant Of The Study1.6 Limitation Of The Study

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CHAPTER! LITERATURE REVIEW2.1 Introduction2.2 Definition Of Pertinent Terminology2.3 History of Electronic Payment2.4 Types of Electronic Payment2.5 Characteristics of Payment Systems

78101314

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2.6 Past and Current Research2.6.1 Technology Adoption and Consumer Payments:Evidence from Survey Data 152.6.2 Diary Study on Internet Payment Systems 172.6.3 Electronic Banking in Malaysia: A Note onEvolution of Services and Consumer Reaction 182.6.4 Risk, Convenience and Cost of Online

Payment 192.6.5 High Performance Payment Systems

In Developing Countries 19

CHAPTER 3 RESEARCH METHODOLOGY3.1 Introduction 213.2 The Research Approach 213.3 The Problem Definition

3.3.1 Problem Statement 223.3.2 Problem Objectives 223.3.3 Problem Scope 23

3.4 Data Collection3.4.1 Questionnaire 233.4.2 Interview 253.4.3 Observation 26

3.5 Data Analysis 26


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3.6 Research Model3.6.1 Mind Mapping 273.6.2 Work Breakdown Structure (WBS) 27

3.7 Conclusion 27

CHAPTER 4 RESULT AND FINDING4.1 Introduction 304.2 Respondent's Personal Information

4.2.1 Gender 314.2.2 Respondents Age 314.2.3 Status 314.2.4 Education Background 314.2.5 Occupation 354.2.6 Working Sector 354.2.7 Personal Household Income 354.2.8 Credit Card Holder 414.2.9 Electronic Payment User 41

4.3 Experience on Using Electronic Payment4.3.1 How Do They Know About Electronic 41

Payment4.3.2 What Types of Bills Paid 454.3.3 How Often They Use Per Month 454.3.4 Where Do They Use Electronic Payment 45

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4.3.5 Electronic Payment Service4.3.6 Consum ers Satisfaction

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4.4 Non Experience On Using Electronic Payment 66

CHAPTER 5 CONCLUSION AND RECOMMENDATION5.1 Introduction5.2 Conclusion5.3 Recommendation

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REFERENCES 82

APPENDIX 83

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CHAPTER 1PROBLEM DESCRIPTION

1.1 IntroductionThis chapter will explain briefly about the study of consumer awareness towardselectronic payment (e-pay) in the Klang Valley area. This chapter is veryimportant to illustrate the overall study that has been done which includesbackground of the study, statement of the problem, purposes of the study and thelast part is the scope of the study.

In the first part that is background of the study explaining about the reasons ofchoosing this issue. The second part is regarding the statement of the problemwhich explains the issues faced by company that doing business of electronicpayment in Malaysia. The third part is the objectives of the study that illustratewhy this topic has been chosen. The next part is scope of the study that defineswhich area the research will focus on and the last part is the significant of thisstudy.

1.2 Statement of the ProblemOver the past twenty years, with the advent of computers, the majority of moneyhas come to be stored as bits and bytes in bank computers, and exchangeddigitally through telephone or satellite links rather than physically. Today, the


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majority of the w orld's cash does not exist in notes and coins at all. Plastic cardsholding personal data on magnetic strips were developed to give people access totheir money stored electronically. Cheque, debit and credit cards now enablenearly every kind of payment, through the users' bank account. As with everyother stage in the evolution of money, however, even these cards have theirlimitations. For example, the cost of using them means that coins and notes arestill the most suitable means of making small payments. Cards also have to besigned for when used, slowing downs the transaction process when compared tocash.

Even with the popularity of credit and debit cards, the vast majority of alltransactions worldwide are still carried out using cash. Cash remains the onlyuniversally acceptable form of payment even when a retailer does not accept aparticular credit card, cash will be taken. When it is, the exchange of value isimmediate. No clearing or processing is needed, no signatures and no electronictransfers. Smart cards have been used as cash substitutes for a decade, in phonecards, vending cards and transit cards. However, the value stored on these cardshas already been paid, and cannot usually be exchanged for other goods and

services. A true cash alternative, replicating the core features of notes and coins,would have to be universally recognized and acceptable. Like cash, transactionswould have to offer immediate transfers of value. Finally, like hard cash,electronic cash has to enable easy person-to-person payments. Electronic cash


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also has to be able to work in different currencies. And it would have to be securefrom forgery.

The most desirable, in fact essential, feature that any electronic payment systemmust have is the complete security and integrity of data. If people do not feelconfident that their data is safe and secure they will refuse to use the electronicpayment system. This research will identify either people in the Klang Valleytrust the security of electronic payment system.

Customers will also demand that any payment system be easy to use. People arereluctant to try something they do not or cannot understand, so simplicity isprincipal to any electronic payment system for wide spread acceptance.Comm ercial business will also demand that transaction costs be low. Companieswill only conduct this business if they have a reasonable chance of making profits.This research will identify the user acceptance and problem that faced byconsimier towards electronic payment and also valuable for any company whowant to look at the user acceptance and awareness.

1.3 Objective of the StudyThe main objectives of this research are divided into the following major part,which are:

To identify consumer awareness towards electronic payment services inthe Klang V alley.


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To identify the consumer adoption of using electronic payment services inthe JClang Valley.

To recommend an alternative on how to make public aware aboutelectronic services in the Klang Valley.

1.4 Scope of the ResearchThe scope of the research will be focus on people who are living in Klang Valleyand this research contains two sections which is the first section focuses on peoplewho had a past experience on using any of electronic payment services offered inMalaysia. This part w ill identify why, where, when, what, and how they use theelectronic payment system.

The second part of this study will be focus on people who had no experience onusing any types of electronic payment services in Malaysia generally. This partwill identify why they do not use the electronic payment services offered inMalaysia and the frequency of using any types of payment methods that they use.

1.5 Significant of the StudyGenerally, this research w ill give benefits to others in terms o f

To give a real scenarios about the awareness of people at Klang Valleyabout electronic payment in Malaysia.


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This research will give some measurement about the frequency andconsumer awareness towards electronic payment.

This research will highlight the knowledge level of Klang Valley peoplesabout electronic payment in Malaysia.

The results from this research will give some usefiil information forbusiness people who want to invest in the electronic payment business atMalaysia in friture.

1.6 Limitation of the StudyDuring conducting of this research, there are some limitation encountered such as:

Faced with poor respond from the target respondent at the initial stage ofdata collection activity. M ost of the respondents refuse to answer becausethey are not interested to being a part of this study and also believe that itis just wasting their time to answer the questions. This problem has beenfaced when making a survey at a shopping complex and the targetrespondent are quite busy with their shopping activity and refused to cooperate.


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There are some respondents who did not return the questionnaires thathave been given to them. Most of the respondents also did not finishanswering the questionnaire that has been given to them even though in atwo or three days after they get the questionnaires.


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C H A P T E R !LITERATURE REVIEW

2.1 IntroductionThis chapter will review the literatures that summarize what others had found throughstudies and research regarding electronic payment (e-pay). Most of the literatures arerelated to the study that is being carried out. The entire information is gathered fromarticles, books, magazines, journals and Internet searching.

This chapter contains about the past research and will define about what exactly theelectronic payment that have been mentioned in this study. It will include the definitionof electronic payment itself, the components of electronic payment and also the benefitsof using electronic payment.

2.2 Definition of pertinent terminologyAccording to Carmel (2004), "Electronic payment is a subset of an e-commercetransaction to include electronic payment for the buying and selling goods or servicesoffered through the Internet, there are actually many forms of electronic payments."

According to Abhiraj S. Kulkami(2004), "A payment is a transfer o f monetary value. Apayment system consists of the mechanisms including the institution, people, rules, andtechnologies that make the exchange of payments possible. Finally an electronic payment


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The electronic value is purchased by the consumer (for example, in the way that otherprepaid instruments such as travelers' cheques might be purchased) and is reducedwhenever the consumer uses the device to make purchases. In contrast to the manyexisting single-purpose prepaid card schemes (such as those offered by telephonecompanies), e-money products are intended to be used as a general, multipurpose m eansof payment. Moreover, the definition covers both prepaid cards (sometimes called"electronic piu-ses") and prepaid software products that use computer networks such asthe Internet (sometimes referred to as "digital cash"). From a policy point of view, themain interest in these schemes lies in who issues the prepaid value, how it is used as ameans of payment and the impact on central banks' balance sheets, the banking industryand on consumers and merchants.

The second type of e-money refers to "access" products. E-money as just defined differsfrom access products, which are products that allow consumers to use electronic means ofcommunication to access otherwise conventional payment services (for example, use of astandard personal computer and a computer network such as the internet to make a creditcard payment or to transmit instructions to make fund transfers between bank accounts).The significant novel feature of these access schemes is the communication method (forexample the use of a computer network rather than a visit to a bank branch) and so,although they are of interest, they do not raise exactly the same concerns as e-moneyschemes (Bank for International Settlements, 1996).


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The development of the modem electronic payment network took an important stepforward in the mid-1970s with the creation of a global join t venture that would eventuallybe known as Visa. Through shared investments, the Visa association created a globalsystem to authorize transactions, clear and settle electronic payments, codify operatingregulations to protect consumers and merchants alike , and set interoperability standardsto ensure that, unlike cash and cheques, a Visa card could be used anywhere in the world.Two developments in the 1990s further broadened the utility of electronic paym ents:

Debit cards, a popular "pay now" product, allowed consumers to access funds ina demand deposit account to conduct a transaction at the point of sale; and,

E-commerce emerged as a mainstream business channel, both relying on andstimulating electronic payments.

The rapid adoption of these relatively recent developments demonstrates the speed atwhich the payments landscape is changing. Looking forward, there is broadexperimentation in ways to m igrate electronic payment functions into consumer devicessuch as mobile phones, PDAs and other popular electromc products. This process is wellunderway in some European and Asian markets where mobile phones are nearly asubiquitous as payment cards. Visa describes this new range of payment choices as "u-commerce," or universal commerce - the ability to conduct commerce anywhere,anytime, or any way.

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