Qualitative case study to describe the facilitators and obstacles to entrepreneurial mobile banking (Research process)

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The Concept of Mobile Banking

Mobile banking has been defined by a number of authors. Georgi (2005 p. 57) defines “mobile banking as the carrying out of banking business with the help of a mobile device such as mobile phones or Personal Digital Assistant (PDAs)”. Mobile banking is one of the innovative services deliveries which have been adopted by banks and other organizations dealing with financial services in the market (Paul 2012). It is also defined as an emerging facet of electronic banking that, unlike the traditional banking services, offers a rich platform for automated banking and other financial services (Wessel and Drennan 2010; Zhou 2011). Peevers et al. (2010) shows mobile banking as applying to customers using their mobile device to perform banking activities. They also looked at mobile banking as services diversification, in that, banks offer increased value to customers. Yet other authors like Rajnish and Stephan (2007) defines mobile banking as the provision and availing of banking and financial services with the help of mobile telecommunication devices. The scope of the offered services may include facilities to conduct bank and stock markets transactions, to access customized information and to run accounts. Porteous (2006) defines mobile banking as including mobile payment but involves access thorugh mobile devices to broader range of financial services like account-based savings or transactions product offered by bank. According to Porteous, both mobile payment – which he defined as financial transactions undertaken using mobile devices such as a mobile phone – and mobile banking, are subsets of a broader domain of e-payment and e-banking respectively. In this study, Porteous’ definition is adopted and mobile banking is broadly defined here to include mobile payment.
Mobile banking can support a variety of services. It has been recognized as a driver of socio-economic development in emerging markets (Nir and Acharya 2012). In particular, it facilitates person-to-person transfer of funds which is very important for emerging economics because it offers financial services to the unbanked. According to Nir and Acharya (2012), it has also helped to facilitate emergency response and disaster recovery. Mobile phone operators have seen mobile banking as a potential service to offer customers and hence increase their loyalty while generating fees and messaging charges (infoDev 2006). Financial institutions which have had difficulty providing profitable banking services through traditional channels see mobile banking as branchless banking (Ivatury and Mas 2008; Donner and Tellez 2008).
Similarly, mobile banking offers a number of banking functions including micropayments to merchants, bill payments to utilities suppliers, person-to-person transfers of funds, and long distance remittances (Donner and Tellez 2008). According to Donner and Tellez (2008), most mobile banking in developing countries enable users to do three different types of transactions:
1. Store value in an account accessible via a mobile phone. In this case, if the user already has a bank account, their bank account is linked to it and if not, the process creates a bank account for them.
2. Convert value in or out of the store value account. Here, if the mobile banking account is linked to a bank account, users can visit the bank to carry out the cash transactions. If otherwise, the user can visit the GSM operator retail stores and in a more flexible situation, visit the corner kiosk or grocery shops to perform their transactions.
3. And finally, transfer stored value between accounts linked to two mobile phones by using a set of SMS messages and pin numbers.
Besides these benefits, Ignacio Mas (2010 p.10) identifies that mobile banking could be beneficial to all in many diverse ways. This is possible if everyone has access to secured saving accounts serviced through technology-enabled retail networks, and connected to the national payment systems including households, government and commercial providers. Ignacio points out that poor people would be better off as mobile banking affords families the opportunity to accumulate balances for lump-sum investments in their businesses. It also helps to cushion them against unexpected events and connect to wider economy through electronic remittances, wage payments and social payments. Women also would benefit as they could accumulate savings outside of homes thereby increasing their decision-making power over households’ resources allocation. Ignacio stated further that many benefits could also accrue to government agencies. Firstly, the development ministry could ensure that households have savings tools to self-insure against shocks and accumulate funds to purchase other development inputs. Secondly, the central bank could gain a better handle of the velocity of money in the economy by reducing cash holding under the mattress. Thirdly, it could benefit the ministry of finance as it affords her the opportunity for cost effective collection of taxes and fines. Also it could benefit the social ministry who could distribute welfare payments more cheaply, effectively and directly into people’s accounts even if they live in remote rural towns. Mobile banking could provide an extended history of transactions which could make tracing suspicious financial transactions quite easy. Finally, it can help politicians connect the previously disenfranchised people. This access reduces the vulnerability of the poor and hence tends to build or promote political and social cohesion.

Mobile banking services

According to Rajnish and Stephan (2007), services offered by mobile banking can be classified into three categories: mobile accounting, brokerage and financial information. Mobile accounting is defined as transactions based banking services that revolves around a standard bank account and are conducted via mobile devices (Georgi and Pinkl 2005 p.57, Rajnish and Stephan 2007 p.60). Mobile accounting can be further divided into account operation and account administration. Account operation refers to the activities that involve monetary transactions which may involve an external account such as when paying bills, or internal account such as transferring funds from one saving account to another (e.g., transfer of funds between sub accounts, money remittances). Account administration refers to activities that aid an account holder to maintain their account and this may include access administration, cheque book requests, change operating accounts and block lost cards.
Another service offered by mobile banking is mobile brokerage. This in the context of banking and financial services is defined as the intermediary services related to the stock exchange centre such as sales and purchases of stocks, bonds, funds, derivatives and foreign exchange among others (Rajnish and Stephan 2007). In other words, it is mobile financial services of non-informational nature revolving around a securities account (Georgi and Pinkl 2005). Like mobile accounting, it is also divided into two categories – account operation and account administration. This helps to differentiate between services required to operate a securities account and services required to administer such accounts. Therefore it requires informational services usually offered alongside mobile financial information. Account operation here is primarily concerned with the sale and purchase of financial instruments such as placing and cancellations of orders to sell or purchase securities. Account administration could be in the form of access administration, where a mobile device can be used to modify account details.
Georgi and Pinkl (2005 p.57), refer to mobile financial information as “non-transaction based banking and financial services of informational nature which could be inform of account information or market information”. Information services are necessary part of mobile accounting and brokerage but can also be offered independently (Rajnish and Stephan 2007). Mobile financial services are usually provided by financial services institutions and are subsets from both banking and other financial institutions. They are meant to provide customers with relevant information anytime anywhere. Such information may concern the bank, the securities account of the customers or market development.
Regarding mobile financial information, account information refers to information that is specific to a customer and their bank even though it may not involve a monetary transaction. Such services include, balance inquiries, account statement, list of latest transactions, branch and ATM locations, transaction threshold, product information and offers, returned cheques among others. On the other hand, market information refers to the information on the macro-level which is not related to a specific customer account. It may be generated externally (e.g. central bank interest rates) or internally by individual banks (e.g. bank interest rate).

Models used to describe Mobile Banking

Two most commonly used models in the mobile banking research literature are the Technology Acceptance Model (TAM) (Davies 1989) and the Innovation Diffusion Theory (IDT) (Rogers 1985). Technology Acceptance Model helps to explain how users would accept some end-user computing technologies (Davies 1989; Davies et al. 1989 and Chen 2008). This model postulated that perceived usefulness (PU) and perceived ease of use (PEOU) are the primary determinants of system use. According to Davies (1989, Chen 2008 p.37), PU is defined as the “the prospective user’s subjective probability that using a particular application would increase his or her job performance within an organization context”. While PEOU “refers to the degree to which the prospective user expects the target system to be free of effort” (Davies et al. 1989). Chen (2008) stated that the model was based on the hypothesis that “actual usage of a system is a function of user’s Behavioral Intention (BI) to use, which is in turn influenced by user attitude to using (A).” Finally (A) is directly affected by the belief about the system which consisted of PU and PEOU. On the other hand, the Innovation Diffusion Theory (IDT) (Rogers 1962, 1983, 1995) explains among many things, the process of innovation decision process, the determinant of the adoption rate and the various categories of adopters (Chen 2008). It helps to predict the likelihood and the rate of the technology being adopted. An innovation is an “Idea, practice or object that is perceived as new by an individual or another unit of adoption” (Rogers 1995 p.10) and diffusion refers to “the process by which an innovation is communicated through certain channels over time among the members of a social system” (Chen 2008 p. 37). Innovation diffusion is achieved through user acceptance of a new idea or a new thing (Zaltman and Stiff 1973).
Although originating from different disciplines, TAM and IDT have some resemblances. The relative advantage construct in IDT is often viewed as the equivalent of PU construct in TAM, and the complexity construct in IDT is very similar to PEOU concept in TAM (Moore and Benbasat 1991). Empirical studies have suggested that TAM should be integrated with other acceptance and diffusion theories to improve its predictive and explanatory power (e.g. Hu et al., 1999). By including the compatibility (C) construct of IDT, the model is able to address the social context in which m-payment takes place. C is evaluated by assessing the innovation’s compatibility with existing beliefs and values, potential adopters’ needs and previously introduced ideas (Rogers 1995). These two models are the most influential theories in explaining and predicting system use and innovation adoption (Chen 2008). Both theories have been proved to be highly successful in empirical studies (Chen 2008) (e.g., Taylor and Todd 1995; Igbaria, et al. 1995 among others). They have also been very effective in studying e-commerce applications (Chen et al. 2004). In particular, TAM has been used to provide theoretical foundation for M-commerce issues (Yu 2003), Mobile services (Kiovumaki 2006) and Mobile data services (Lu 2007).
Efforts have been made to develop complementary models to the Technology Adoption Models (TAM) to accommodate these product contexts. This is beecause of the specific product context of mobile banking such as the difficulty to assess some of its experiential qualities and its inherent risk factors which are prevalent in new financial services technology. One of such complementary models was the “Benefit-cost framework” developed by Yung-Cheng et al. (2009) to study the consumers’ adoption of the mobile banking system. According to this framework, the key benefit of mobile banking is convenience while the key cost is security. It then modeled a set of abilities and risk factors via Structural Equation Model (SEM) as the antecedents of cost and benefits of adopting the mobile banking system. The framework suggested that in taking the decision to adopt a new technology such as mobile banking, consumers would consider both cost and benefits and the tradeoff (Cooper and Slagmulder 1998). This framework, like its counterpart, has been used to study the technology adoption behavior. For example, the adoption of advanced technology in Canada (Baldwin and Lin 2002), the adoption of the WLAN technology in the hotel industry (Christophe and Pratim 2006), the adoption of new engine and fuel technology (Keefel et al. 2008) and to study Web based training programs in organizations (Chan and Ngai 2007).
Other models include addictive and transformational banking models (Porteous 2006). Porteous differentiated addictive banking models from transformational banking models. Addictive banking models refer to the situation where the mobile banking services complements services offered by other banking systems. Some of these other services include checkbooks, ATMs, point of sales network, smartcards, voicemail, landline interface and internet resources. In this case, the mobile channel provides additional convenient methods of managing money without handling cash (Donner and Tellez 2008; Peter 2012). Similarly, transformational banking models are those in which the financial product linked to the use of mobile phone is targeted at the unbanked most of who are low income earner. Porteous further pointed out that a service becomes transformational when it causes a shift in the access frontier. It therefore means that the transformational models bring about new accounts to non-banking customers. This distinction is quite important because it provides guidance for the industry, researchers and policymakers in assessing the usage and impact of mobile banking (Donner 2007). Transformational mobile banking service has been viewed as one of the most important channel to bringing financial services to largely unbanked population of developing countries (Peter 2012).
In addition, Robert (2010) used the “open federated brick and click mobile banking model” to describe the phenomenon of mobile banking. This model consisted of three different sections that highlight what is needed to provide financial services to the poor. The models argued that, poor people in the rural areas, unlike their urban counterpart, must first be provided with incentives in terms of microfinance, investment advice, banking advice and mobile based banking services. This should enable them improve upon their living conditions.
A summary of existing models is presented as follows:
x “Technology acceptance model” (TAM) was used to explain the determinants of user acceptance of a number of end-user computing Technologies (Davies 1989; Lu 2007; Yu 2003).
x “Innovation Diffusion Theory” (IDT), explains in addition to other things, the process of Innovation decision processes, the determinant of the rate of adoption, and the various categories of adopters. It also helps predict the likelihood and the rate of the Technology being adopted (Rogers 1962, 1983, 1995, Chen 2008).
x The “benefits cost framework” investigated the specific product context of mobile banking such as the difficulty to assess some of the experiential qualities of mobile banking and the inherent risk factors which are prevalent in new financial services technology(Yung Chen at et.2009).
x The addictive and transformational model investigated mobile banking from a development perspective and highlighted how financial inclusion could be achieved with the use of mobile phones (porteous 2006).
x The “open federated brick and click” mobile banking model describes the phenomenon of mobile banking (Robert 2010).
There is a need for an alternative model. This is based on the fact that the existing models do not capture the scope of this study which intends to investigate the various variables that facilitate and that hinder entrepreneurial mobile banking.

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The Concept of Entrepreneurship

The term “entrepreneurship” has been defined by various authors. Shane (2003, p.4) defines entrepreneurship as “an activity that involves the discovery, evaluation and exploitation of opportunities to introduce new goods and services, ways of organizing, markets and raw materials through organizing efforts that had not previously existed”. However, given his own critique of the definition that it is difficult to operationalize in empirical research, Shane (2003) provided two operational definitions of entrepreneurship used in empirical research. On the one hand, he defines entrepreneurship as “new firm formation” – forming of a new business venture or a new non-for-profit organization. On the other hand, he defines it as “self-employment” which is performing work for personal profit rather than for wages paid by others.
Henry (1968, p.228) quoting Benjamin Higgins, defines entrepreneurship as “the function of seeing investment and production opportunities, organizing an enterprise to undertake a new production processes, raising capital, hiring labor, arranging for the supply of raw materials, finding a site and combining these production factors into a going concern, introducing new techniques and commodities, discovering a new sources of natural resources and selecting top managers for day to day operations”. Henry argues that the concept of entrepreneurship could be divided into at least three sub functions: Entrepreneurship in the Schumpeterian sense (that is, seeing and seizing opportunity for a new economic venture), financial risk taking and managerial function. Henry stresses further that the key figure in the process of technological advance is the entrepreneur who sees the opportunity for introducing the new commodity, technique, raw material or machine and brings together the necessary capital, management, labor and materials to do it. The entrepreneur may or may not be the scientific inventor, having skills that are less scientific than organizational, and having skills which are also different from that of the salaried managers who takes over the business after it has been launched (Henry 1968).
According to Henry (1968), his argument for at least a three-way division of entrepreneurial activities stems from the reconsideration of the behavior of firm where the total entrepreneurial functions are divided into three separate subfunctions. As stated earlier, the first of these entrepreneurial sub-functions is innovation in a Schumpeterian sense: to reorganize new business opportunities which result from new technological knowledge or environmental changes. In this case it does not matter whether the opportunity is for a new product or service but the crucial element is the innovative aspect of entrepreneurship. The second sub-function of entrepreneurial activities is that of “risk taking”. Someone must undertake the risk of financing a new venture and in a capitalist economy, the motive for such risk is the potential profit that could be gained. Finally, the third sub-function which was excluded by Schumpeter is that of actually running the enterprise after it has been organized.
Howard (2006, p.3) sees entrepreneurship as a management approach that is defined as follows: “the pursuit of opportunity without regard to resources currently controlled”. This definition stems out of his criticism of the various schools of thought on entrepreneurship which he roughly divided into those that define entrepreneurship as an economic function and those that identify entrepreneurship with individual traits. The functional approach focuses on the role of entrepreneurship in the economy. The proponents of this view according to Howard include Richard Cantillion (1680-1734), who argued that entrepreneurship entailed bearing the risk of buying at a certain price and selling at an uncertain price; and Jean-Baptise (1767-1832) who broadened the definition to include the concept of bringing together the factors of production. Schumpeter (1911) added the concept of innovation to entrepreneurship. However, the focus on individual traits identified certain common characteristics among entrepreneurs to include the need for achievement, perceived locus of control and risk taking propensity. He stresses that neither of the approaches was sound (Howard 2006). Gartner (1988) suggests that entrepreneurship is the creation of new organizations. Low and Macmillan (1988) define entrepreneurship as the creation of new enterprises, consistently stating “new venture” and “new enterprises” rather than new firm or new organization and stressed on the creation of new economic activities regardless of what type of organization introduces it. Similarly, Stevenson and Jarrilo (1990) define entrepreneurship “as the process by which an individual either on their own or within an organization pursue opportunities without regard to the resources they currently control”.

Necessary conditions for entrepreneurship

Shane (2003) identifies the presence of entrepreneurial opportunity, differences between people, willingness to take risk, organizing and innovation as conditions for entrepreneurship. Entrepreneurship requires the existence of opportunities. The argument was that while people’s perception influences the identification, evaluation and exploitation of opportunities, opportunities themselves are available to all. Thus, entrepreneurship is a function of the perception of opportunities for profit. According to this view, entrepreneurs combine resources to fulfill unsatisfied needs or to improve market inefficiencies or deficiencies (Wennekers and Thurik 2002). Entrepreneurship requires variation between people and in a more specific term, it requires preferential access to or ability to recognize information about opportunities. The existence of this variation is a necessary condition for entrepreneurship. This is because in the absence of such differences everyone would recognize the opportunities and act on them thereby making it impossible to make profit. In other words, resources owners would recognize the same opportunities and simply would be unwilling to sell those resources at a price that would be profitable to the entrepreneurs. These variations in people must also reflect in their decision-making ability (Shane 2003).
Another necessary condition for entrepreneurship is risk taking (Shane 2003). The profit potential of opportunities is uncertain. This is because, the information needed to determine whether a particular effort would be profitable cannot be known with certainty beforehand. This is not unexpected since the pursuit of opportunity itself could determine whether there is a demand for the product or services, whether the entrepreneur can compete with others and whether value can be created (Shane 2003; Arrow 1974; and Venkataraman 1997).
Entrepreneurship requires organizing. It requires new ways of exploiting the new and existing opportunities (Shane 2003; Per et al. 2006). An innovative entrepreneurial act might be a new process of organizing.

Meaning of Entrepreneurial opportunity

Shane (2003) defines entrepreneurial opportunity as a “situation in which a person can create new means-end framework for recombining resources that the entrepreneur believes will yield profit”. Entrepreneurial profit is the difference between the ex-post value of a resource combination and the ex-ante cost of obtaining the resources, also factoring in the cost of recombining them (Rumelt 1987). The main difference between entrepreneurial opportunity and many other situations in which people seek to make profit is that an entrepreneurial opportunity is the creation of new means-ends framework rather than optimizing within the existing framework (Shane 2003). Casson and Wadeson (1982) and Jeffrey et al. (2007 p.280), define entrepreneurial opportunity as “a project that would form part of the optimal set if information was not scarce but which were not in operation because information is scarce to generate goods and services”.
Two perspectives on the existence and sources of entrepreneurial opportunities are those of Schumpeter (1934) and Kiezner (1973). The main difference between these two perspectives is their disagreement over whether the explotation of entrepreneurial opportunities involves the introduction of new information or just differentiated access to existing information. While Kizner (1973; 1985; and 1997) argued that the existence of opportunities requires only differentiated access to existing information and that people use the information that they possess to form beliefs about an efficient use of resources, Schumpeter (1934) argued that new information is important in explaining the existence of entrepreneurial opportunities.
Following Kiezner’s view, Gaglio and Katz (2001) explained that because people’s decision-making frameworks are not always accurate, they make errors when they make decisions which in turn create shortages or surpluses. Hence, by responding to these shortages and surpluses, people can obtain resources, recombine them and sell the output in the hopes of making a profit (Shane and Venkataraman 2000; Shane 2003). On the other hand, Schumpeter argued that changes in technology, political forces, regulation, macro-economic factors and social trends can create new information that entrepreneurs can use to create a new means–ends framework for recombining resources at a profit. This view is based on the fact that these changes alter the equilibrium price of resources and allow people to have access to new information which helps to purchase resources at low prices, recombine them into more valuable form and sell the output with expectation of a profit (Shane 2003; Shane and Venkataraman 2000; Schumpeter 1934).

Table of contents :

1. Introduction
1.1The Problem Discussion
1.2 Problem Formulation and Purpose
1.3 Delimitation
1.4 Structure of the Thesis
2. Theory
2.1. The Concept of Mobile Banking
2.1.1 Mobile banking services
2.1.2 Models used to describe Mobile Banking
2.2. The Concept of Entrepreneurship
2.2.1 Necessary conditions for entrepreneurship
2.2.2 Meaning of Entrepreneurial opportunity
2.2.3 Sources of entrepreneurial opportunities
2.2.4 The role of entrepreneurship in economic development
2.3 Factors Influencing Entrepreneurial Mobile Banking
2.4. The Conceptual Model
3. Method
3.1. Qualitative case study to describe the facilitators and obstacles to entrepreneurial mobile banking (Research process)
3.1.1 The Theoretical Process
3.1.2 The Empirical Process
3.2 Research Population and Sample
3.3 Data Collection
3.3.1 Semi structured interview
3.3.2 Study of other Archival Documents
3.4 Data Analysis Methods
3.5 Qualitative Data Analysis Process
3.6 Quality of Research (Validity and Reliability)
3.7 Methodological Limitations
4. Case Description (Nigeria)
4.1 Political History
4.2 Economic History
4.3 The Nigerian Telecom sector
4.4 Why is this Case Important for this Study
5. Data Analysis
5.1 Facilitators of Entrepreneurial Mobile Banking
5.2 Obstacles to entrepreneurial Mobile banking
6. Discussions
7. Conclusions
7.1 Limitations and Scope for further Research.
7.2 Recommendations
References

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