Empirical analysis of internet and mobile banking in Malaysia

Internet and mobile banking deliver banking services through various cashless payment tools, such as debit and credit cards, direct transfers and electronic wallets. The usage of internet and mobile banking in Malaysia has increased, but it is uncertain if they facilitate retail consumption. If internet and mobile banking are the preferred banking services, their usage could stimulate retail consumption; otherwise, their usage will be short-lived and more work must be done to develop the internet and mobile banking sector. This study aims to determine the influence of internet and mobile banking on retail consumption in Malaysia. The diffusion of innovation theory is applied by examining how technologically aids cashless payment systems and how internet and mobile banking might facilitate retail consumption. The short-run and long-run influences of internet banking and mobile banking are analyzed based on the autoregressive distributed lag (ARDL) unrestricted error correction model. The ARDL unrestricted error correction model was estimated for retail consumption, represented by the monthly retail trade index, and internet banking and mobile banking are represented by the number of monthly internet and mobile transactions. The results suggest a bi-directional causal relationship between retail consumption and internet banking in the short run. In the long run, the internet and mobile banking transactions were found to significantly facilitate household retail consumption, but not vice versa.