An Online Utility Bill Payment System

Abstract

With the growing number of people who are been increasing pressured for time, online utility bill payment has become a graceful solution for the consumers with busy life styles. Through online payment of utility bills, consumers are able to save time, hassle and therefore make their lives much easier. Although online utility bill payment has become one of the fastest growing trends in the world particularly in the US, in the Sri Lanka however, the progress of households’ adopting to online utility bill payments is rather slothful.

Thus, the primary objective of this study is to analyse the factors influencing the consumers’ intention to adopt an utility bill payment system in Sri Lanka alongside with the secondary objectives of identifying the awareness level on online bill payments systems, examining the most preferred utility bill payment options and models, and the degree of acceptance of online utility bill payment systems by the consumers and finally to analyse the future prospect with regards to online utility bill payments.

Hence a survey was conducted among 50 physicians from four major hospitals in the Colombo city. According to the result obtained from this research, it was revealed that although in general all the respondents were somewhat aware about online utility bill payment systems, the younger respondents acquired a better knowledge about online utility bill payments than respondents from older age categories. Furthermore, all the respondents positively reacted and stated that it is important for all the utility companies to mark their online presence thus allow customers to conduct online transactions as it would be more convenience. Moreover, factors categorised under perceived risks and perceived benefits were found to have a considerable force on the consumers’ intention to adopt an online utility bill payment system. Other factors such as services and features offered by companies, individuals’ computer knowledge and skill, and usage of credit and debit cards were also identified and are discussed in this research.

Key Words: Online utility bill Payment system; Credit card usage; e-commerce; adoption; User intention.

Chapter 1

Introduction

Today the improvement of e-commerce has led to the derivation of various internet based activities. For e.g. companies are able to conduct their business activities at all hours, reaching customers in all parts of the world thus expand their customer base without geographically being limited. Whereas in customers’ perspective, e-commerce provides a platform on which they can easily carry out the necessary transactions at their convenience. Hence even the companies which provide utility services are boldly revolutionizing their industry thus adopting internet for e-commerce purposes (Buccigross, 2000). This allows customers to make their utility bill payments directly through utility companies’ websites or through a third party website such as banks, financial institutions and aggregators.

Online utility bill payment is when the customer makes his or her payment transactions online for the utility services obtained from a particular company. By paying utility bills via online, consumers have the benefits of avoiding crowds, queuing, parking problems, and cutting their travelling costs and time (Ramayah et al, 2005). Hence consumers could simply get their utility bills paid with just a click of their mouse.

In Sri Lanka, the payment system of utility bills is rather different to the systems established in other countries. The utility bills usually arrive by post thus the consumers must visit the payment office in order to settle the payments. As mentioned earlier, this process is usually accompanied by queuing, parking problems, and limited payment options. For example, the CEB & NWS & DB only accepts payments made by cash or cheques at their payment counters. These issues can be considered as a hassle for people whose jobs are of hectic and stressful nature. Many utility companies in Sri Lanka have identified this problem thus have implemented various types of payment systems in order to provide their consumers with a wider choice when it comes to their payments (refer appendix A). Online utility bill payment is one of the elite choices of payment systems that have been implemented in the contemporary world.

Problem Statement

“What are the factors shaping and influencing an individual’s intention to adopt an online utility bill payment system?”

Problem Justification

There is a lack of understanding as to what is really happening in the local context with regards to the adoption of new technological services related to the internet. Hence there are hardly any researches that have been carried out in order to understand the consumers’ view point with regards to online utility bill payment systems that have been implemented. Therefore the knowledge about consumers’ behaviour related to this area of study is vital for utility companies and other vendors operating in similar businesses in order to estimate the potential market available hence utilize the internet as a tool of opportunity for those companies to grow and expand their market.

The study will also be essential for government utility companies (e.g. CEB) since they have not yet implemented the service of allowing the customers to pay their utility bills directly through the companies’ websites. The information originated from this research will enable both the government and private utility companies to identify the significance of the factors influencing the consumers’ intention to adopt online utility bill payment systems thus develop strategies to further enhance their business activities.

Objectives of the Study

To determine awareness level about online utility bill payment systems by consumers.

To analyse the factors influencing the consumers’ intention to adopt an online utility bill payment system.

To find out the most accepted online utility bill payment options and the preferred bill payment modes by consumers.

To analyse the degree of acceptance of an online utility bill payment system by consumers.

To examine the impending future prospect of online utility bill payment systems in Sri Lanka.

Significance of the Study

This study will mainly facilitate the utility companies and other vendors in Sri Lanka to identify the factors influencing the consumers’ intention to adopt online utility bill payment systems, in this case physicians who are residing in Colombo, a highly skilled and a valued population in the country. Therefore by understanding such factors, companies will be able to eliminate the uncertainty levels and have a clear view about the potential market for online utility bill payment in Sri Lanka.

This study will further help the utility companies develop enhanced strategies regarding the payment options that are being made available to their clients. Awareness about online utility bill payment will allow consumers to acclimatize to these new technologies thus exploit the advantages of the internet. The information and data that have been collected in this study will aid the future researchers conducting researches related to consumers’ intention to adopt online bill payment systems in general.

Scope of the Study

This study was carried out to empirically investigate the factors affecting the consumer’s intention to adopt an online utility bill payment system. However, the survey sample of the study consisted only of physicians working in four (4) private hospitals situated within the Colombo city limits.

Furthermore, the physicians were from various backgrounds thus to achieve results that are more realistic and to better signify the people that pay utility bills, the sample have to be more “diversified in terms of age and geographical location” (He & Mykytyn, 2007), preferably homeowners who are responsible for their respective household bill payments.

Chapter 2

Literature Review

Online Utility Bill Payment

Online utility bill payment is when the consumer makes his/her payments for the utility service(s) obtained with the use of the internet. The types of utility services are illustrated in the table below.

Today, the consumers’ trend in making utility bill payments is increasing particularly in the developed nations Brant (2008). In the Sri Lankan context however, although the country illustrates a steady growth in terms of internet usage especially from the users in the urban areas (Sathrasinghe, 2004), this has not been escorted by a similar growth in the number of consumers making online utility bill payments. In fact according to the Central Bank of Sri Lanka (2008), the overall transactions made by consumers over the internet illustrated a declining trend.

Online Utility Bill Payment Models & Options

There are various payment models and payment options available to the customers when it comes to paying online utility bills unlike in the traditional (or offline) method of bill payment where the customer is limited to pay by either in cash, cheque, or electronic payment at a given payment centre.

There are two types of online utility bill payment models, namely direct model and indirect model. The following table describe further details on these two models.

Indirect Model (Third Party)

Consumers pay any biller through a third party website such as a bank or portal, or by using software that interacts with the payer’s bank (Flynn & Bowes, 2005)

Automatic Bill Settlement by American Express

(American Express, 2010)

HSBC Easy Bill Settlement for Utility Bills

(Hongkong and Shanghai Banking Corporation, 2010)

With the evolution of payment options from barter to commodity-based, to currency and coin, to card-based and, more recently, to electronic network-based systems (Mantel, 2000), modern consumers have a wider choice when it comes to paying their utility bills via online. The table 3 below illustrates various online payment options available for consumers.

Table 3 – Online Payment Options

Online Payment Options

Definition

Examples (Sri Lanka)

Virtual Credit cards

A disposable payment card that can be used to make purchases or payments over the internet (Economy Watch, 2010).

Sampath Web card

(Sampath Bank, 2010)

E-cheques

An electronic representation of a paper cheque (Acosta, 2008).

e-cheques by Union Bank

(New Sri Lanka, 2009)

Smart cheques by Standard charted

(Standard Chartered Bank, 2008)

E-Wallets

A software that has been installed on the consumer’s desktop which automatically fills payment forms (Acosta, 2008).

Sampath e-wallet

(Sampath Bank, 2010)

Credit Cards (VISA, MasterCard & American Express)

The money for purchases or payments is credited directly to the consumer’s bank account, allowing consumer to pay later.

HSBC credit cards (Premier, Platinum, Gold, Classic)

(Hong-Kong and Shanghai Banking Corporation, 2010)

Debit Cards

The money for purchases or payments is deducted directly from the consumer’s checking account.

HSBC VISA Debit card

(Hong-Kong and Shanghai Banking Corporation, 2010)

Sampath Bank Debit card

(Sampath Bank, 2010)

Online bank accounts

Allows users to manage their bill payments through online banking

Personal banking by HSBC

(Hong-Kong and Shanghai Banking Corporation, 2010)

Payeasy by Sampath Bank

(Sampath Bank, 2010)

Combank Online by Commercial Bank

(Commercial Bank, 2010)

Literate Review on Dependent Variable

Given the fact that online bill payment is one of the fastest growing consumer activities on the internet that has being accepted by the business world today (McCormick, 2005), a few published empirical studies have specifically addressed the underlying factors that could materially affect customers’ adoption of an online utility bill payment system (He & Mykytyn, 2007).

Cheung et al (2003) have stated that theories such as the TRA, the TPB and the TAM are the most dominant theories that are been used to test studies related to the online consumer behaviour. Hence out of the three theories, TAM is considered as a suitable theory to analyse the factors influencing the physicians’ intention to adopt an online utility bill payment system (Taylor and Todd, 1995 cited Karami, 2006). (Please refer Appendix B for further details on the theories).

Literature Review on Independent Variables

In order to address the problem in this study, the following independent variables were selected as suggested by many previous studies.

Perceived Characteristics

Perceived risk – Previous findings on the impact of perceived risk on consumer behaviour have suggested that the consumers consider adopting online payment methods more risky than tradition offline methods (Palvou 2003 and Koufaris et al 2002 cited He & Mykytyn, 2007). In the Sri Lankan context, the risk of online utility bill payment is relative moderate. This is complemented by the fact that there are many banking services providing secure methods for the online financial transactions. However, according to the central bank’s statistics (2008), the total volume of transactions decreased by 5.7%. This indicates that there is a tendency that Sri Lankan consumers are concerned about the perceived risk associated with online payments in terms of security, trust and privacy.

Perceived benefits – the intention of online utility bill payment can be explained by the two components of TAM; PU and PEOU. Hence according to these components, when physicians consider online utility bill payments is more useful in terms of time saving, convenience and service reliability, and it is easy to use, they should be more likely to pay their utility bills online. Previous findings by (He & Mykytyn, 2007 and Ramayah et al, 2006) revealed that perceived benefits are the significant drivers of consumers’ intention to adopt an online utility bill payment system. These findings were also consistent with previous studies on TAM (Chan & Lu, 2004 cited Ramayah et al, 2006).

Consumer Characteristics

Consumer characteristics variables include gender, age, and nature of occupation, credit/debit card usage, attitude towards innovative payment methods, and individuals’ personal computer knowledge and skills.

Gender – Most of the previous researches on online bill payment, it is found that males are more willing to pay their bills through online than females. However, in a study by Masters (2006) it was found that the gender difference between males and females rate of internet usage among physicians are diminishing. In the Sri Lankan context, the computer literacy between males and females are 22% and 18.7% respectively (Department of Census & Statistics, 2009). This indicates that the gender differences in how each perceives internet technology are blurring.

Age – Most studies indicates that the tendency of younger consumers’ intention of online bill payment is much higher than that of old consumers. This maybe mainly due to the familiarity of the internet based activities at an early stage. The circumstances in Sri Lanka are also similar; this may be mainly due to the high percentage of computer literacy in young people than older people (Department of Census & Statistics, 2009). However, in the case of online utility bill payment, a study by Mantel (2000) showed that older people are more likely to pay utility bills via online than young people.

General physicians/ Specialists – Although most previous researches did not find a significant positive relationship between the user intention in online bill payment and education level, in study by Masters (2006) an interesting relationship between the nature of the work and internet usage was revealed. The study showed that there is a greater tendency for specialists to use the internet more than general physicians (Masters, 2006).

Credit/Debit Cards Usage – A study by Hayashi & Klee (2003) stated that consumers’ who intent to use new technology have a more tendency in utilizing electronic payment methods than those who do not. Though the credit cards usage in Sri Lanka has indicated a declining trend since the recessionary months of 2008 the debit card usages have shown a considerable increase. Thus this could be assumed as a factor influencing the intention to pay utility bills via online.

Attitude – Attitude refers to the one’s evaluation of consequences on performing a particular behaviour (Karami, 2006). Thus attitude has long been shown to influence behavioural intentions (Ajzen and Fishbein 1980 cited Pavlou and Fygenson, 2006).

Computer Skills – In most cases this stands as a key barrier for adoption of online transactions. Computer skills are mainly a person’s ability to understand the set-up of online payments and the ability to use such online payment systems. Most of previous studies indicate that there is a significant positive relationship between individuals’ computer skills and intention to adopt an online utility bill payment system.

(Please refer appendix C for the summarised table on literature review).

Chapter 3

Methodology & Secondary Data Analysis

Population & Sample

The population selected for this study comprised of registered physicians in Sri Lanka. In order to obtain the sample, multistage sampling method was used. As illustrated in the figure below, initially cluster sampling method was used to divide the population into sub categories based on geographical area and then on obtaining a list of physicians employed in private hospitals in Colombo city, stratified sampling method was used to further divide the sample into homogeneous groups based on nature of occupation, hence a simple random sample was drawn from the two combined categories. (Please refer appendix D for further details).

Secondary Data Analysis

The Future of Online Utility Bill Payment Systems

Although the idea of online utility bill payment is quite unfamiliar to most Sri Lankan households, online utility bill payments is one of the popular method of paying utility bills, mostly in developed countries such as the US. Hence according to a survey by the NLCCDG in 2005, 75% of the US cities had already implemented a separate webs5%ite for their citizens in order to make utility bill payment (IT Facts, 2005).

According to Forrester Research, it is estimated that “some47 million US households will pay utility bills online” at the end of year 2010, which is a 75% increase from 2004 (illustrated in the figure below).

Furthermore, the survey reported that among the consumers who are below the age of 30, the interest in online utility bill payment will grow by 219% and 32% of increase among baby boomers (BCR Access, 2006).

Although there are no direct surveys that has been carried out in the Sri Lankan context with regards to online utility bill payments, according to the internet world stats website, the internet users have increased significantly during the past few years hence the percentage of penetration have increased by approximately 3% in year 2010 compared to 1.8% increase in year 2009 (internet world stats, 2010). The figure below illustrates the trend in internet users in Sri Lanka (source: internet world stats, 2010).

Although the adoption of new technologies by the Sri Lankans is comparatively sluggish when compared to other Asian countries in the region, the government of Sri Lanka has taken numerous steps in order to enhance the e-commerce base activities. Hence one of the most significant episodes in the authorized regulation of e-commerce in Sri Lanka was the endorsement of the “Electronic Transactions Act in 2006”. This act was implemented in order to assist the “commercial and financial activities by removing barriers to electronic transactions” (Kariyawasam, 2008). Consequently since then many companies providing various services, especially utility services, have implemented systems that allows consumers to conduct their transactions via online.

Chapter 4

Data Analysis

The primary data for this study were collected through a survey based field study which consisted of thirteen questions (please refer appendix E for the questionnaire). The survey was administered to the physicians working at four major private hospitals in Colombo, namely Lanka Hospitals, Oasis Hospital, Asiri Surgical Hospital and Nawaloka Hospital.

Fifty (50) questionnaires were randomly distributed among the physicians employed at all four hospitals and the responses were collected two days after the initial distribution of the survey. In total, forty four (44 i.e. 88%) physicians responded.

Total of 29 items were used in this empirical study, including customer characteristics, perceived risk, perceived benefits, and merchants’ website and service features. To calculate the “internal consistency” of these items, a reliability analysis was performed by computing Cronbach’s Alpha for each item. Hence all items are within the range of 0.746 (illustrated in the figure below) which is within the commonly accepted range, i.e., α ≥ 0.69 (He & Mykytyn, 2007).

According to the findings about the awareness level on online utility bill payment systems in Sri Lanka, the results indicated that in general all the respondents were moderately aware. However, when categorized according to the age, those of who were over 46 years old were only slightly aware about online utility bill payment systems, and male respondents demonstrated more knowledge on online utility bill payment systems than female respondents.

1= Never, 2= Almost never, 3= Sometimes, 4= Almost every time, 5= Every timePreferred Bill Payment Options

The respondents mostly preferred to use credit and/or debit cards for their online transactions. The debit card usage frequency was higher than the credit card usage for online utility bill payments, although in general a higher number of respondents acquired a credit card.

The indirect bill payment method was the most preferred among the respondents, i.e. most consumers preferred to pay their utility bills (excluding the telephone bills) through a “third party website such as a bank or portal, or by using software that interacts with the payer’s bank” (Flynn & Bowes, 2005).

Despite of any age differences, the consumers attitude towards online utility bill payment systems were positive. Hence most respondents thought that it is important that all companies must implement online bill payment systems as opposed to offline payment methods.

Regression Analysis

A regression analysis was performed using the individual’s intention (UI) as the dependent variable and perceived risk (PR), perceived benefits (PB), merchant’s website service and features (MWSF) and computer skill (CK) as the independent variables. The Equation for this model is as follows

Individuals Intention to adopt an online utility bill payment system (UI) = β0 + β1Perceived Risk (PR) +β2 Perceived Benefits (PB) + β3 Merchants’ Website Service & Features (MWSF) + β4 Individual’s Computer Skill (CK)

i.e.

UIn = β0 + β1PRn +β2PBn + β3 MWSFn + β4CKn

Where

β01234 = Regression coefficients

n = 1, 2, 3… 44

Table – Regression Analysis Result

Dependent Variable: Individuals’ Intention to Adopt an Online Utility Bill Payment Option

Figure – Framework on Factors Affecting the Individual’s Intention to Adopt an Online Utility Bill Payment System

.316

.418

-.281

.238

Individuals’ Intention to Adopt an Online Utility Bill Payment System

Individual’s Computer Skill

Merchants’ Website Service & Features

Perceived Benefits

Perceived Risks

Therefore from the findings above, it is evident that perceived risks, perceived benefits and individuals’ computer skill variables indicate a positive relationship with the intention to adopt an online utility bill payment system variable. The merchants’ website service & features variable, however, indicates a negative relationship, this explains that more than the services offered by certain merchants regarding online utility bill payments, respondents were more concerned about factors such as security, trust, privacy, time, and other beneficiaries when it comes to adopting an online utility bill payment system.

Chapter 5

Conclusion & Recommendation

The main objective of this study was to empirically investigate the factors affecting the individual’s intention to adopt an online utility bill payment system in Sri Lanka. The primary investigation on the topic identified that there are several factors influencing the adoption of online utility bill payment systems by consumers in the country.

Since the country is still in its infancy of adopting online payment methods as oppose to offline payment methods, the study was conducted among physicians, a highly qualified and professional set consumers who are more likely to be in touch with new technologies. Thus the findings of this study are from a survey that consisted of 44 physicians employed at four major private hospitals in the Colombo city.

The results indicated that although in general all the respondents were reasonably aware about the online utility bill payment systems that were available for them, the younger who were below the age of 30 were extremely aware about online utility bill payment systems compared to the rest of age groups. Additionally it was also found that male respondents were more aware about online payments than female respondents.

The general usage of credit/debit cards and online bank accounts for the payments of utility bills was found to be relatively less. This can be also related to the finding from the secondary research which analysed that the usage of credit and debit cards has declined in Sri Lanka due to various reasons such as the economic turmoil and high interest charges applied by subsequent banks which issue the credit/ debit cards. Thus, the use of online bank accounts for the settlement of online utility bill payments showed a higher rate over credit and debit card usages.

Moreover, although most respondents stated that they preferred to pay their telephone bills directly from the consequent merchant’s website, for other payments such water and electricity, most respondents preferred to adopt payment systems that were implemented by third party vendors such as banks.

Concerning the consumers’ attitude towards online utility bill payment systems, majority of the respondents stated that it is important for utility service companies to mark their presences on the internet thus implement online payment systems. Interestingly, apart from the younger age group below 30, respondents between the ages 41-45 also indicated a high positive attitude towards the importance of online utility bill payment systems.

Hence the survey revealed that most respondents were concerned about the credit cards frauds, security levels, and privacy when it came to making online payments. Thus these factors which fell under the variable perceived risks indicated a positive relationship with the individual’s intention to adopt an online utility bill payment system.

Furthermore, it was found that respondents enthusiasm to make online utility bill payments also depended on perceived benefits, which included factors such as ease of use of the system, speed, avoidance of late payments and queues, and time. This also supported as positive with the individual’s intention to adopt an online utility bill payment system.

Moreover, individuals’ computer skill which was measured using the information based on the years of computer experience and internet experience which the respondents possessed supported positive (although weak) relationship with the adoption of an online utility bill payment system. Nevertheless, the impact of merchant’s website service and features were not considered as an important or influential factor by the respondents to adopt an online utility bill payment system. This may be due to the lack of design and service features that are made available to the customers by the existing utility companies.

In conclusion, this investigation was carried out as an extension of the Technology Acceptance Model (TAM) which was initially developed by Davis in 1989 (cited in Ramayah et al., 2005); with additional variables that were assumed to affect the individuals’ intention to adopt online utility bill payment systems, which is a branch of e-commerce associated with online consumer behaviour.

Hence according to the findings in this investigation, it could be assumed that the youthful consumers who have received a higher level of education are more aware about online bill payment systems thus are more notably agreeable to adopt online bill payment systems as a convenience way of settling utility bills. It can also be assumed that the method of online utility bill payment is not being widely accepted in Sri Lanka due to the lack in consumers’ confidence on security of payments, privacy issues, and their trust on particular merchants. Therefore companies must take necessary actions required to improve to consumers’ confidence about online bill payments and further emphasis and educate the consumers on particular benefits that will be offered to them through the utilisation of online bill payment systems.