Figure 1 Payment options for Online Shopping
Many companies have seen this huge opportunity, like EBay’s PayPal, they have entered in the Chinese market. PayPal is an online payment company which has become a global leader in this market. China also has other main online payment operators; PayPal faced huge competition (The Economist 2007). PayPal China supply easy and fast payment service and makes online payments extremely safe. The Mathias Entenmann, vice president of PayPal International, said PayPal China was an extremely efficient online payment network that will improve the payment experience and increase the velocity of ecommerce in China, as a pioneer of online payments, we are proud to bring our global payments expertise and local business knowledge to China (PayPal 2007).
Figure 2 Major Chinese Online Payment Operators
China Online payment is currently at its beginning stage. Although the large number of internet users in China, but there are still very few adopters of online payment. Many adopters worry about the security issues and some people are even unaware of this way to pay bills, so PayPal face a problem of accelerating the adoption of online payment. This research will focus on the factors influencing the adopting of online payment in China (The economist 2007).
3. Problem Definition
3.1 Management Problem
Given the background present in the previous section, the following management problem has been identified:
How can PayPal accelerate the adoption of online payment in China?
3.2 Research Problem
The management problem has lead to the identification of the following research problem:
What are the factors influencing adoption of online payment in China?
3.3 Research Objectives
The following objectives were derived directly from the research problem:
- To describe the general profile of users with adopting online payment
- To identify and examine factors influencing adoption of online payment
- To assist PayPal to find out the ways to accelerate the adoption of online payment
- To find if there is any association between demographics factors and low adoption of online payment.
4. Literature Review
There are numbers of literature addressing the factors influencing the adoption of online payment in China. This literature review are divided into three parts: the first part is online payment overview, which focuses on internet based financial services and the potential of these services, along with the associated risks and threats of such services, as these elements lead to users not to use online payment system. The second part is consumer attitude to adoption of online payment; consumer attitude is key way to analyze factors influencing the adoption of online payment. The third part is diffusion of innovations’ theory. This theory is used to analyze the factors to adoption of online payment. Literature is very important because user satisfaction with a new IT is often used as a key indicator of adoption, especially where credit card transaction is the main ingredient to the service provided by that technology (Greenstein & Vasarhelyi 2002).
4.1 Online Payment overview
4.1.1 E-commerce
‘Electronic commerce (e-commerce) is often thought simply to refer to buying and selling using the internet, but e-commerce involves much more than electronically mediated financial transactions between organizations and customers’ (Chaffey 2004, p7). Zwass (1988) uses a broad definition of e-commerce. He refers to it as:
the sharing of business information, maintaining business relationships, and conducting business transactions by means of telecommunications networks.
When e-commerce or e-business are gradually form a huge market, the businessman need an easy and safe payment method to handle financial transaction.
4.1.2 Online Payment
Online payment is a kind of payment via internet based on debit and credit card system (Bitpipe 2007). However, only a small proportion of total customers use online payment, the potential is enormous (Holland & Westwood 2001). By using the online payment, the customer can make a lot of financial transactions at a low finance cost. In a world that is becoming increasingly open as a result of the internet and the World Wide Web.
4.1.3 Risk
The risk exists in the using the online payment system. This is the main reasons to affect the adoption of online payment.
The threat, the threat can come from anyone with the motivation to attempt to gain unauthorized access to the network, or from anyone with authorized access to the network. Online payment system must protect the system safely (Kalakota & Robinson 2002).
The vulnerability, Vulnerability essentially comes from failures of the security system to protect the network from an unauthorized person gaining access to the online payment network system (Huff, Wade & Schneberger 2000).
Potential Attacks, There are several types of internet security attack that endanger the privacy of the users and the integrity of their data. The attacks can be carried out using the most common web browsers, such as Netscape Navigator and Microsoft Internet Explorer. Betts (2002, p.39) has following to say about Hackers:
Hackers count on the fact that many organizations won’t have addressed certain vulnerabilities on their systems; unfortunately, they are often correct.
4.2 Consumer attitude towards online payment
The adoption of online payment depend on users’ attitude, the users have get used to traditional payment method, the new payment method which need to let the customer to trust the new payment method. Trust is the foundation of any business. Fukuyama (1995, p.26) defined trust as ‘ the expectation that arises within a community of regular, honest, and cooperative behavior, based on commonly shared norms, on the part of other members of that community. For online payment, trust is divided on two parts: social trust and technical trust. Social trust can be seen as interpersonal trust, which built upon mutual involvement and faith (Saleh 2003). Technical trust is the social actors’ trust in information systems used in online payment system. Trusting online payment lies at the base of relationships between financial institutions and individuals, whose collective activity in competing and cooperating within a regional setting is a key aspect of prosperity.
4.3 Diffusion of innovations’ theory
The online payment is an innovation of payment method; Rogers (1995) developed a model to analyze the adoption of new technology. It is a general-purpose instrument to measure the user’s perceptions of the process of adopting an IT innovation. The result was a well-validated, highly reliable instrument to measure the independent variable of adopting an IT innovation. The instrument was used to measure the user’s perceptions concerning personal workstations, which provided empirical evidence to support.
Figure 3 Rogers’ Model of Innovation Adoption
5. Research Design and Methodology
In addition to bring an understanding of the complex factors influencing the adoption of online payment in China, and to extend experience and add strength to what is already known through previous research, the descriptive approach are used, the descriptive approach conducted on the existing historical research done on online payment security and consumers’ attitude towards online payment to evaluate their relationship. In addition, to research the factors impact on online payment, a survey was conducted on China internet users. Statistical data analyses were performed on the data collected from the survey.
5.1 Conceptual Framework
Conceptual framework has two main frameworks including positivistic and phenomenological frameworks. The positivistic framework draws conclusions based on empirical knowledge. The phenomenological framework proposes that reality is socially constructed and subjective. In this research, I will approach with the positivistic framework since the aim of the study was to identify the research issues, based on empirical findings about the factors influencing the adoption of online payment (Sekaran 2003).
5.2 Research Design
When the management problem and literature review has been finished, I need to decide on the best way to gather the information to provide the answers to the research objectives (Lawley 2007, p.33). So ‘A research design is a master plan specifying the methods and procedures for collecting and analyzing the needed information’ (Zikmund 2003, p.65). Research design includes three common research designs: exploratory research, descriptive research and causal or experimental research. Exploratory research is conducted to clarify ambiguous problems. The descriptive research is used in order to ascertain and be able to describe the characteristics of the variables of interest in a situation. Hypothesis testing is undertaken to explain the nature of certain relationship.
In this research, Descriptive research will be used which is to describe characteristics f a population or phenomenon. It often helps segment and target markets. A survey is conducted and I will conduct descriptive study in order to obtain a deeper understanding of the online payment. I need to describe the factors influencing the adoption of online payment in China.
How PayPal can accelerate the adoption of online payment in China, the purpose of the descriptive research is used in order to ascertain and be able to describe the characteristics of the variables of interest in a situation. The Online payment towards PayPal is a descriptive design which suits very well (Lawley 2006). Furthermore, a descriptive design will make it possible for PayPal management team to use the results for making accurate decisions concerning the target market (Zikmund 2003).
5.2 Research Methodology
Research methodology refers to the method used to conduct the research.
5.2.1 Data Collection Methods
‘Data can be obtained from primary or secondary sources. Primary data refers to information obtained firsthand by the researcher on the variables of interest for the specific purpose of the study. Secondary data refers to information gathered from sources already existing’ (Sekaran 2003).
5.2.1.1 Primary Data
Primary data can be obtained by using three main data collection methods in survey research: interviewing, administering questionnaires, and observing people and phenomena. In this report, I will use questionnaires to collect consumer responses to different online payment. The sample questionnaires are included in Appendix.
5.2.1.2 Secondary Data
Secondary data can be obtained from several sources including books and periodicals, government publications of economic indicators, census data, statistical abstracts, data base, the media, annual reports of companies, financial databases and others (Sekaran 2003). In this report, I will use several secondary data sources such as articles in journals and research reports, books, electronic databases, and internet documents.
5.2.1.3 Survey Instrument: Questionnaire
Sekaran (2003) defines a questionnaire as a reformulated written set of questions to which respondents record their answers, usually within rather closely defined alternatives. Questionnaire is an efficient data collection mechanism when the researcher knows exactly what is required and how to measure the variables of interest. For PayPal, it is easy to find the useful information from questionnaire to make decision to whole company.
In this research, the questionnaire will contain survey questions. The detail of the survey questionnaire is presented in Appendix. A five point scale was used to measure all questions in the questionnaire. The questionnaire is divided into 2 sections: Section A of the questionnaire collected the general information of respondents such as gender, age, race, marital status, highest education, and annual income. Section B is used to collect information on consumers’ attitude about online payment. The questionnaire will be emailed to total 30000 respondents from six major cities of China; the colleted data will be analyzed using SPSS software.
The survey was concerned with users and non-users of online payment. The questionnaire focused on the following main issues:
- consumers' attitudes and reactions to new technology;
- consumers' attitudes to the traditional payment channel;
- consumers' perceptions of online payment attributes;
- consumers' expectations and major concerns of online payment;
- psychological factors; and
- Demographic factors.
5.2.2 Sampling
Sekaran (2003) defines sampling as the process of selecting a sufficient number of elements from the population, so that a study of the sample and an understanding of its characteristics would make it possible for the researcher to generalize such characteristics to the population elements.
A random sampling procedure was employed to select the internet users for survey. The database of email address of China hotmail users will contact with Microsoft Hotmail department. 30000 email owners will be contacted to participate in the survey.
The participants received an email requesting their participation and directing them to the questionnaires. After two weeks of sending the email, a second email was sent to remind those who had not completed the survey. The response rate is expected to be higher than 10%.
5.2.3 Data Analysis
Data collected from the surveys need to be analyzed and presented to generate the objectives of this research. The descriptive statistical methods are used to analyze and present data derived form the surveys using questionnaires. Data analysis will divided in two levels: The first level explores relationships between online payment and consumers’ attitude towards PayPal. The second level determines relationships between PayPal and factors influencing the adoption of online payment. Statistics and qualitative data analysis will be used. The result will be in the form of Charts, tables, percentages, averages and others.
6. Additional Issues
6.1 Time Schedule
The time table below shows the timeline for the major tasks of the study.
Table 1 Time schedule
6.2 Budget
The budget of the research is total RM 18,350
Table 2 Budget
6.3 Limitation
Although this research will provide useful information for understanding online payment and factors influencing the adoption, there are some limitations of this research.
- The financial position of the PayPal is not considered in the study. Therefore the respondents are unable to determine the risk of using PayPal online payment system.
- Due to time constraint, the all questionnaires can not be collected beyond the respondent rate in time. The number of questionnaire might influence the final results of this research.
- Unequal weighting of age of the respondents, Majority of the respondents in this research from the age between 26 to 35 years old. Unequally distribution of age would affect the result of this research.
(2824 words excluding executive summary and references)
List of References
-
AC Nielsen 2002, China Online Banking Study, available at: <http://estore.chinaonline.com/chinonlbanstu.html>
-
Betts, W 2000, ‘Defying denial of service attacks’. Network Magazine, p. 36-41
-
Bitpipe 2007, Bitpipe Website, Viewed 11 April 2007, <http://www.bitpipe.com/tlist/Online-Payments.html>
-
Chaffey, D 2004, E-Business and E-Commerce Management, 2nd edn, Prentice Hall.
- China Online & Mobile Payment Market Report 2006, Viewed 15 April 2007
- Clinton, WJ 1997, Global Issues, 2(4),2
-
Greenstein, M & Vasarhelyi, M 2002, Electronic Commerce: Security, Risk Management, and Control, 2nd edn, McGraw-Hill Irwin.
-
Guo, W 2002, People Daily, Viewed 20 April 2007 <www.peopledaily.com.cn/business>
- Holland, CP & Westwood, JB 2001. Strategies in Banking. Communications of the ACM, p. 53-57
-
Huff, SL, Wade, M & Schneberger S 2000, Cases in Electronic Commerce, 2nd edn, McGraw-Hill Irwin.
-
Kalakota, R & Robinson, M 2002, E-Business 2.0: Roadmap for Success, Pearson Education.
-
Lawley, M 2007, Course Work Guide in BUS 703 Research Methods for Managers, University of the Sunshine Coast, Maroochydore DC, Australia.
-
O’ Brien, JA 2003, Introduction to information systems: essentials for the E-business enterprise, 11th edn, McGraw-Hill company.
-
PayPal 2006, PayPal website, viewed 10 April 2007, <http://www.paypal.com>.
-
Rogers, EM 1995. Diffusion of Innovation, 4th edn, Free Press, New York.
-
Saleh, ZI 2003. An examination of the internet security and its impact on trust and adoption of online banking, Capella University.
-
Sekaran, U 2003, Research Methods for Business, 4th edn, John Wiley & Sons, Inc.
-
Summers, J & Smith, B 2005, Communication Skills Handbook, 2nd edn, John Wiley & Sons, Brisbane.
-
The Economist 2007, ‘Finance and Economics: A battle at the checkout; Online payments’, The Economist, London: May 5, 2007, Vol. 383, Iss. 8527; pg. 82
-
Trappey, CV and Trappey, AJC 2001, ‘Electronic commerce in Greater China’, Industrial Management and Data Systems, Vol. 101 No. 5, pp. 201-20.
-
Wong, X, Yen, DC and Fang, X 2004, ‘E-commerce development in China and its implications for businesses, Asia Pacific Journal of Marketing and Logistics, Vol. 16 No. 3, pp. 68-83.
-
Zikmund, WG 2003, Business Research Methods, 7th edn, Thomson South-Western, USA.
-
Zwass, V 1998, ‘Structure and macro-level impacts of electronic ecommerce: from technological infrastructure to electronic marketplaces’. In Emerging Information Technologies, ed.k. Kendall, Sage, Thousand Oass, CA.
Appendix ------ Sample Questionnaire
Questionnaire
Title: Factors influencing the adoption of online payment in China
Dear Sir or Madam:
Please be informed that I am a student of The University of Sunshine Coast. I am currently conducting a study to investigate the factors influencing the adoption of online payment in China, to fulfill the requirement for my Master of Business Administration Degree. Therefore, you opinion and cooperation in answering the enclosed questionnaire will contribute towards the completion of this research. Your response will be kept strictly confidential.
Thank you for your time and cooperation.
Yours sincerely,
Guo Xiaobin
The University of Sunshine Coast
Section A
Please tick (√) that corresponds to your response.
1. Sex:
□ Male □ Female
2. Age:
□ 18-25 years old □ 26-35 years old □ 36-45 years old □ 46-55 years old
3. Race:
□ Han □Others, please specify________
4. Marital status:
□ Single □ Married
5. Highest Education Qualification:
□ Middle School □ Diploma □ Degree □ Master □ PHD
6. Annual Income:
□ Below RMB 10,000.00 □ RMB 10,000.00 - RMB 30,000.00
□ RMB 30,001.00 - RMB 60,000.00 □ RMB 60,001.00 - RMB 100,000.00
□ RMB 100,001.00 - RMB 200,000.00 □ RMB 200,001.00 and above
7. Please rate your skill level using computer
□ Don’t use computer Low
□ Less than average □ Average □ Better than average □ High
8. Please indicate the approximate numbers per week you use the online payment system.
□ Don’t use the online payment system
□ 1 to 5 □ 6 to 10 □ 11 to 15 □ 16 to 20 □ More than 20
Section B
Please circle the number that best represents you choice.
9. Although it might be helpful, using PayPal online payment system is certainly not compulsory in my life.
□1 □ 2 □ 3 □ 4 □5
10. Using PayPal online payment enables me to conduct financial transactions more quickly.
□1 □ 2 □ 3 □ 4 □5
11. Using PayPal online payment improves the quality of the financial service.
□1 □ 2 □ 3 □ 4 □5
12. Using PayPal online payment makes it easier to do conduct financial transactions.
□1 □ 2 □ 3 □ 4 □5
13. Using PayPal online payment enhances my effectiveness of my financial transactions.
□1 □ 2 □ 3 □ 4 □5
14. Using PayPal online payment gives me greater control over my finances.
□1 □ 2 □ 3 □ 4 □5
15. Using PayPal online payment is compatible with all aspects of my life.
□1 □ 2 □ 3 □ 4 □5
16. I think that using PayPal online payment fits well with the way I like to do things.
□1 □ 2 □ 3 □ 4 □5
17. Using PayPal online payment fits into my life style.
□1 □ 2 □ 3 □ 4 □5
18. My interaction with PayPal online payment is clear and understandable.
□1 □ 2 □ 3 □ 4 □5
19. I believe that it is easy to get PayPal online payment to do what I want it to do.
□1 □ 2 □ 3 □ 4 □5
20. Overall, I believe that PayPal online payment is easy to use.
□1 □ 2 □ 3 □ 4 □5
21. Leaning to conduct PayPal online payment is easy for me.
□1 □ 2 □ 3 □ 4 □5
22. I would have no difficulty telling others about the results of using an online payment.
□1 □ 2 □ 3 □ 4 □5
23. I believe I could communicate to others the consequences of using an online payment.
□1 □ 2 □ 3 □ 4 □5
24. The results of using PayPal online payment are apparent to me.
□1 □ 2 □ 3 □ 4 □5
25. I would have difficulty explaining why using online payment may or may not be beneficial.
□1 □ 2 □ 3 □ 4 □5
26. Online payment is widely used.
□1 □ 2 □ 3 □ 4 □5
27. Online payment is not very visible to many people
□1 □ 2 □ 3 □ 4 □5
28. Online payment implement security measures to protect Internet users.
□1 □ 2 □ 3 □ 4 □5
29. Online payment usually ensures that transactional information is protected from accidentally altered.
□1 □ 2 □ 3 □ 4 □5
30. Online payment is unreliable.
□1 □ 2 □ 3 □ 4 □5
31. Online payment cannot be trusted; there are just too many uncertainties.
□1 □ 2 □ 3 □ 4 □5
32. In general, I cannot rely on online payment to keep the promises that they make.
□1 □ 2 □ 3 □ 4 □5
33. Online payment is risky.
□1 □ 2 □ 3 □ 4 □5
34. Online payment entails uncertainty or vulnerability.
Thank you again for your participation.
Prepared by Guo Xiaobin 1035088 -