Jurnal Ekonomi Bisnis dan Kewirausahaan (JEBIK)

2023, Vol.12, No. 2, 257-275

INVESTIGATING DRIVERS OF DIGITAL BANKING ADOPTION OF GEN Z

IN INDONESIA

Fortuna Tunggadewi Supriyadi*, Darwanto

Diponegoro University, Indonesia

ABSTRACT
Despite the fact that digital banks are the most recent financial service that provides online banking
services without direct contact with customers, they have yet to transform the whole financial sector.
This study was done in a quantitative manner utilizing primary data to investigate drivers of digital
banking adoption by Gen Z using the Unified Theory of Acceptance and Use of Technology 2
(UTAUT 2) approach. There was a total of 232 respondents participating in this study. The data was
analyzed using Structural Equation Modeling - Partial Least Square (SEM-PLS). The results show
that social influence, facilitating conditions, hedonic motivations, perceived value, and habit
positively influence the Gen Z’s behavioral intention to use the digital banks; while performance
expectancy and effort expectancy show the opposite influence. Further, the behavioral intention also
positively influences the Gen Z’s use behavior of digital banks. To promote digital bank customer
commitment and satisfaction, digital banking service providers are suggested to increase the value
of benefits outweighing the costs borne by users, as well as to improve service quality in terms of
user friendliness.
JEL: G40, O33.
Keywords: digital bank, behavioral intention, technology adoption.

1. INTRODUCTION
Innovation, technology, and developments in information and communication
technologies have an impact on all aspects of human existence since they can transform the
economy (Setiawan, Nugraha, Irawan, Nathan, & Zoltan, 2021; Suzianti, Haqqi, & Fathia, 2021).
The financial sector has been unable to avoid massive technological revolutions since there are
more advances in digital technologies emerged, including artificial intelligence (AI), blockchain,
and the Internet of Things (IoT) (UNCTAD, 2021). These technological advancements have been
used as innovations in credit decisioning, risk management, fraud prevention, trading, and banking
automation (Bachinskiy, 2019) to increase efficiency, profits, and market share (Leong & Sung,
2018).
Financial technology (fintech) is one of the emerging forms of financial technological
advancement. It is defined as a type of banking and financial services through the use of modern
technological breakthroughs, particularly those powered by software and algorithms that enable
individuals to make financial transactions easily and quickly (Ozili, 2018; Setiawan et al., 2021).
Considering that Indonesian society is open to the development of fintech, this industry has the
potential to grow very quickly (Bank Indonesia, 2019; Setiawan et al., 2021). Additionally, the
pandemic has encouraged internet users to use new online services more frequently (e-Conomy
SEA, 2021). There were approximately 81.87 million smartphone users in Indonesia in 2020,
making it the world’s fourth-largest smartphone market, after China, India, and the United States
(MEDICI, 2021).

*
Email : fortunasupriyadi@gmail.com
Received : 03-07-2023, Accepted: 04-11-2023, Published: 04-11-2023
P-ISSN : 2087-9954, E-ISSN: 2550-0066. DOI: http://dx.doi.org/10.26418/jebik.v12i2.67212

257
258 Supriyadi, & Darwanto

The banking industry introduces digital banks in order to compete with the fintech in this
technological era. The digital banks – known as an internet-only bank - have few or no branches
and perform the majority of their operations online utilizing personal computers or mobile devices
(Saif, Hussin, Husin, Alwadain, & Chakraborty, 2022; Yoon & Lim, 2020). Thus, users can access
financial services provided by the digital banks anytime and anywhere (Windasari, Kusumawati,
Larasati, & Amelia, 2022). However, the digital banking adoption in Indonesia is still
underutilized. A survey found that the ownership of digital banking applications in Indonesia was
only 25% in 2021 and it was expected to reach 31% in 2022 (Laycook, 2021). Similarly, Populix
(2022) predicted that the digital bank users might only reach 33% by 2022. Compared to the level
of smartphone ownership in Indonesia which reached 76.26% in 2021 (Statista, 2022) and the
financial inclusion rate reaching 85.10% by 2022 (OJK, 2022), the level of digital banking
adoption is still relatively low. This demonstrates that many Indonesians have not used the digital
banking services to make financial transactions.
Generation Z (Gen Z) – a group of individuals born in 1996-2010 – is obviously feeling
the ongoing technology development, making them the most adept generation in operating the
technology (Djafarova & Foots, 2022; Mahapatra, Bhullar, & Gupta, 2022; Oktavendi &
Mu’ammal, 2022). Compared to previous generations, Gen Z has different financial needs and
expectations, as evidenced by the banking demands to deliver a better banking experience and
service quality in addition to fees and interest rate considerations (Kaabachi, Mrad, & Barreto,
2022). Understanding consumer behavior is one of the factors that must be considered in a
business. For these reasons, examining the intentions and behavior of Gen Z is intriguing
(Chayomchai, 2021).
Numerous previously published studies, one of which is through the Unified Theory of
Acceptance and Use of Technology (UTAUT) approach and its extensions, provide insights into
the context of consumer behavior when utilizing the digital financial services. The UTAUT is a
theory that combines several theoretical models to produce seven independent constructs, namely
performance expectancy, effort expectancy, social influence, facilitating conditions, computer self-
efficacy, anxiety, and attitudes towards technology use (Venkatesh, Morris, Davis, & Davis, 2003).
The UTAUT demonstrates a variety of approaches in which each independent construct influences
the dependent construct, especially on the consumer behavior and intention to use the digital
financial services (Abrahão, Moriguchi, & Andrade, 2016; Abu-Taieh, AlHadid, Abu-Tayeh,
Masa’deh, Alkhawaldeh, Khwaldeh, & Alrowwad, 2022; Boonsiritomachai & Pitchayadejanant,
2019; Kwateng, Atiemo, & Appiah, 2019; Tan & Lau, 2016). Age limits within the Gen Z group
are an appropriate subject for analysis using the UTAUT approach which emphasizes the role of
age on individual intentions to adopt new technologies (Venkatesh et al., 2003).
This present study aims to identify drivers of digital banking adoption of Gen Z in
Indonesia using the UTAUT 2 approach focusing on seven independent variables. The results of
this study are expected to serve as a guide, particularly for the banks as financial service providers
and other interested parties, including the government, in determining the establishment of
financial service policies in order to increase the degree of financial inclusion in Indonesia.
Investigating Drivers of Digital Banking Adoption of Gen Z in Indonesia 259

2. THEORETICAL FRAMEWORK AND EMPIRICAL STUDIES

The fintech has been attracting the public’s attention. It can be defined as any innovative
idea that can improve 5h3 financial services using technological alternatives based on various types
of business situations, while the idea can also be directed at reforming business models to the
business itself (Leong & Sung, 2018). The fintech aims to promote the financial inclusion of those
who are currently not included in the conventional financial system and to provide financial
services to financially excluded individuals according to their needs (Ezzahid & Elouaourti, 2021).
As part of financial digital technology, the fintech had allowed its users to avoid going to bank
branches physically, using ATMs, or making cash payments during the COVID-19 pandemic
(Kakinuma, 2022). On the other hand, fintech services combined with technology have also
improved efficiency, convenience, and security for its users (Moreira-Santos, Au-Yong-Oliveira,
& Palma-Moreira, 2022).
One of the latest banking breakthroughs is the digital banks or internet-only banks, which
uses electronic means to provide services to the public while boosting the financial inclusion. In
the digital banks, all transactions are completed online, either through a certain banking application
or website. The customers can use an online self-service system to search, select, and use financial
products / services (Lee & Kim, 2020). The renewed interest of fintech has also resulted in changes
in the customer demand and behavior, supporting the development of digital banks as well as the
technological advances and the digital economy (Saif et al., 2022). Additionally, affordable prices,
quick account opening procedures, and easy access to account management draw a lot of customers
to this form of digital banking service (Kaabachi et al., 2022).
The Unified Theory of Acceptance and Use of Technology (UTAUT) has its foundation
on eight prior theories, including the theory of reasoned action (TRA), technology acceptance
model (TAM or TAM 2), motivation model, theory of planned behavior (TPB), the combination
of TAM and TPB, model of personal computer utilization (MPU), innovation diffusion theory
(IDT), and social cognitive theory (ICS) (Venkatesh et al., 2003). Based on the combination of
these theories, there are four main constructs in the form of performance expectancy, effort
expectancy, social influence, and facilitating conditions that affect the behavioral intention (as the
dependent variable), with moderators consisting of gender, age, experience, and willingness to use.
Although the UTAUT is used as an essential framework to examine diverse technologies, both
inside and outside of the organizational context, it is necessary to consider crucial elements that
motivate the customers to accept and use the new technology to understand their technology
adoption (Kwateng et al., 2019).
Venkatesh, Thong, & Xu (2012) developed the UTAUT 2 – an upgrade of the previous
theory. The four core elements of the UTAUT model influencing the customers’ behavioral
intention to use the technology have been adopted by the UTAUT 2 with a customer perspective
(Kwateng et al., 2019). Venkatesh et al. (2012) added three more constructs to the UTAUT 2
model for accuracy purposes in predicting the customers’ technology adoption. These constructs
include price value, habit and hedonic motivation. They only use three moderating variables of
age, experience, and gender. On the other hand, the behavioral intention serves as the dependent
variable in this theory. It is defined as a measure of the strength of intention that arises in an
individual to perform a certain behavior (Davis, Bagozzi, & Warshaw, 1992). Another dependent
260 Supriyadi, & Darwanto

variable employed is use behavior. It is the result of the customers’ practical application of
technology.
Performance expectancy is a measure of the extent to which individuals believe that using
a system will help them achieve better job performance (Venkatesh et al., 2003). It has been proven
to have a variety of effects on the individuals’ intentions to use new technology services.
Researches by Rahim, Bakri, Fianto, Zainal, & Shami (2022), Abrahão et al. (2016), Abu-Taieh
et al. (2022), Alkhwaldi, Alharasis, Shehadeh, Abu-AlSondos, Oudat, & Atta (2022), Almaiah,
Al-Rahmi, Alturise, Alrawad, Alkhalaf, Lutfi, & Awad (2022), Chan, Troshani, Hill, & Hoffmann
(2022), Farah, Hasni, & Abbas (2018), Purohit, Kaur, & Chaturvedi (2022), and Tan & Lau (2016)
found that the behavioral intentions of the users of the latest technology were significantly
influenced by the performance expectancy. However, Boonsiritomachai & Pitchayadejanant
(2019) and Sebastián, Antonovica, & Guede (2023) demonstrated the opposite, where the users’
behavioral intention to adopt new financial technology was not significantly influenced by the
performance expectancy. While the digital banks provide virtual financial services with no space
or time constraints, their performance advantages are expected to be a crucial factor in their
adoption. Therefore, the first hypothesis that can be proposed is as follows:
H1: Performance expectancy positively influences the behavioral intention of Gen Z in adopting
the digital banks.
Effort expectancy measures the extent to which the ease of a system function can be
performed (Venkatesh et al., 2003). The customers’ intentions to adopt a new fintech are
significantly influenced by the effort expectancy (Abrahão et al., 2016; Abu-Taieh et al., 2022;
Chan et al., 2022; Farah et al., 2018; Purohit et al., 2022; Tan & Lau, 2016). Meanwhile, there
were also several studies which found the opposite, where the users’ behavior intention to use the
new technology was not significantly influenced by the effort expectancy (Alkhwaldi et al., 2022;
Boonsiritomachai & Pitchayadejanant, 2019; Rahim et al., 2022; Thaker, Thaker, Khaliq, Pitchay,
& Hussain, 2022). When the customers believe that the digital bank technology is simple, clear
and easy to understand and use, they are more likely to use it. Therefore, the second hypothesis
that can be proposed is as follows:
H2: Effort expectancy positively influences the behavioral intention of Gen Z in adopting the
digital banks.
Social influence measures the extent of an individual’s believe that he / she has to use a
new system because the people in their lives also believe it (Venkatesh et al., 2003). Abrahão et
al. (2016), Tan & Lau (2016), Farah et al. (2018), Al-Sabaawi, Alshaher, & Alsalem (2021),
Sebastián et al. (2023), and Purohit et al. (2022) found that the social influence significantly
affected the customers’ behavioral intention to adopt a new technology. In contrast, Thaker et al.
(2022), Senyo & Osabutey (2020), and Moorthy, T’ing, Yee, Huey, In, Feng, & Yi (2020) found
the opposite finding. When the customers realize that the digital bank is important for the people
around them, along with their positive views, then the customers are also encouraged to adopt the
digital bank. Therefore, the third hypothesis that can be proposed is as follows:
H3: Social influence positively influences the behavioral intention of Gen Z in adopting the digital
banks.
Investigating Drivers of Digital Banking Adoption of Gen Z in Indonesia 261

Facilitating conditions measure the extent of an individual’s belief that the conditions
(infrastructure and technical) within an organization are available to support a system adoption
(Venkatesh et al., 2003). Nel, Boshoff, & Raleting (2012) defined the facilitating condition as an
individual’s level of belief that external and internal environmental factors around him / her support
the adoption of new technology. Boonsiritomachai & Pitchayadejanant (2019), Alkhwaldi et al.
(2022), Rahim et al. (2022), Thaker et al. (2022), and Almaiah et al. (2022) found that the influence
of facilitating conditions on behavioral intention was significant; while Farah et al. (2018), Abu-
Taieh et al. (2022), and Purohit et al. (2022) found the opposite. Infrastructure (such as stable
internet access) and personality characteristics (such as feeling comfortable using a smartphone
for making online payments) are necessary for the use behavior of digital banks (Migliore, Wagner,
Schneider, Francisco, & Cabanillas, 2022). As a result, supporting operational infrastructure will
encourage the intention to use digital banks. Therefore, the fourth hypothesis that can be proposed
is as follows:
H4: Facilitating conditions positively influence the behavioral intention of Gen Z in adopting the
digital banks.
Hedonic motivation is defined as an individual’s feelings of satisfaction and pleasure as a
result of using a technology (Venkatesh et al., 2012). Boonsiritomachai & Pitchayadejanant
(2019), Moorthy et al. (2020), and Farah et al. (2018) demonstrated that the hedonic motivation
had a significant influence on the users’ behavioral intention of using a new technology. However,
Thaker et al. (2022), Al-Sabaawi et al. (2021), and Sebastián et al. (2023) did not find it significant.
If a technology offers the users with pleasure and excitement when they use it, this will affect their
behavioral intention in using the technology (Moorthy et al., 2020). Therefore, the fifth hypothesis
that can be proposed is as follows:
H5: Hedonic motivation positively influences the behavioral intention of Gen Z in adopting the
digital banks.
Venkatesh et al. (2012) essentially initiated the price value construct – defined as a
cognitive tradeoff made between the benefits of using a system and the costs that must be incurred
by the users. However, in its development, the digital bank applications provided by banks do not
charge fees from their users. Therefore, perceived value is emerged as a new construct. It refers to
an individual’s evaluation of the overall value of goods or services by comparing the benefits with
expected costs (Zhu, Sunanda, & Ting-Jie, 2010). Regardless of the amount of money and time
invested in the activity, the perceived value drives attitudes, intentions, and adoption (Joshi &
Chawla, 2023; Zhang, Ying, Khan, Ali, Barykin, & Jahanzeb, 2023). According to Farah et al.
(2018) and Yan, Siddik, Akter, & Dong (2021), the perceived value significantly affected the
customers’ intentions to use the digital bank. Individuals who believe they are receiving more
benefits from the technology than predicted costs find it simpler to accept the technology.
Therefore, the sixth hypothesis that can be proposed is as follows:
H6: Perceived value positively influences the behavioral intention of Gen Z in adopting the digital
banks.
Habit is a stage in which a person performs a behavior automatically as a result of prior
experience (Venkatesh et al., 2012). According to researches conducted by Farah et al. (2018),
Sebastián et al. (2023), and Thaker et al. (2022), the consumer behavior, including the decision to
use new technologies, was significantly influenced by habit. Conversely, Pramusinto, Nurkhin,
262 Supriyadi, & Darwanto

Saputro, Kholid, & Septiarini (2021) and Senyo & Osabutey (2020) did not confirm the findings.
Individuals may develop a habit after using the digital banking services frequently, which could
eventually change their behavior while using the technology (Senyo & Osabutey, 2020). Therefore,
the seventh hypothesis that can be proposed is as follows:
H7: Habit positively influences the behavioral intention of Gen Z in adopting the digital banks.
Behavioral intention describes the likelihood that a user will be interested in a specific
behavior (Ajzen, 2002). In relation to the digital banks, it is assumed that someone who has
excellent intentions will utilize them more frequently, and vice versa (Senyo & Osabutey, 2020).
Pramusinto et al. (2021), Rahim et al. (2022), Almaiah et al. (2022), and Senyo & Osabutey (2020)
have demonstrated a positive and significant relationship between the customers’ behavioral
intentions and the use behavior of new technologies. Therefore, the last hypothesis that can be
proposed is as follows:
H8: Behavioral intention positively influences the use behavior of Gen Z in adopting the digital
banks.
Figure 1 depicts the conceptual framework of this study, developed based on the
theoretical aspects and findings of previous researches as follows:

Performance Expectancy H1

Effort Expectancy H2

Social Influence H3

H8 Use
H4 Behavioral Intention
Facilitating Condition Behavior
H5
Hedonic Motivation
H6
Perceived Value
H7
Habit

Figure 1. Conceptual Framework

3. RESEARCH METHODS
This study was conducted using a quantitative manner. The data was collected from a
questionnaire distributed online using Google Forms. The population of this study was Gen Z who
were users of digital banks in Indonesia. Considering that the population was very huge and
possibly unknown, this study employed a purposive sampling technique based on several criteria
as follow: (1) the respondent must be Indonesian citizen; (2) the respondent must be between 17 -
27 years old; and (3) the respondent must be users of digital banking services. The questionnaire
was distributed online for 40 days from March to April. There was a total of 232.
Investigating Drivers of Digital Banking Adoption of Gen Z in Indonesia 263

The questionnaire distributed consisted of two sections, including the demographic profile
and questionnaire items measuring each variable of this study. The questionnaire items were
indicators adopted from Venkatesh et al., (2012), except for the perceived value variable which
was adopted from Farah et al. (2018). The questionnaire items were measured using a five-point
Likert scale, ranging from 1 (strongly disagree) to 5 (strongly agree). Many previous studies using
the same measurement had shown that the five-point Likert scale was an excellent indicator of the
extent to which certain behaviors were implicit (Abu-Taieh et al., 2022; Farah et al., 2018;
Kwateng et al., 2019; Thaker et al., 2022).
The data was tested for its reliability and validity before it was processed for further
analysis. A pilot study was conducted to 40 respondents and the results show that all Cronbach’s
Alpha values of each variable are higher than 0.70, indicating that they are reliable. Likewise, the
results also show that each indicator has an r-statistic of greater than the r-table of 0.304 (α: 5%),
indicating that they are valid. Therefore, the data could be used for further analysis.
Furthermore, the data was analyzed using Structural Equation Modeling – Partial Least
Square (SEM-PLS) approach using SmartPLS 3.2.9. According to Hair, Joe, Sarstedt, Hopkins, &
Kuppelwieser (2014), in cases when the population was unknown, the SEM-PLS minimum sample
size was determined by multiplying the minimum sample size of the indicator by five. The SEM-
PLS analysis conducted outer model and structural model / inner model evaluations. The two
models were tested for its discriminant and convergent validity and reliability. Hair, Sarstedt,
Ringle, & Gudergan (2017) stated that the analysis consisted of several stages, including the
coefficient of determination test, predictive relevance test, and path coefficient test.

4. DATA ANALYSIS AND DISCUSSIONS

There were 232 respondents participating in this study. All of them had completed the
questionnaire and were valid. This study finds that most of the respondents are male (50%),
between 18 – 22 years old (62%), had a bachelor degree (44%), and were mostly students (39%)
with an average monthly of IDR 0 – IDR 2,000,000 – indicating that they had no job.
In relation to the use behavior of Gen Z in using the digital banks, the Gen Z were allowed
to choose more than one digital bank listed in the questionnaire. The results show that most of
them have used the digital banks for less than two years (39%), and have used them for five to ten
times in a month (40%). Blu by BCA (44%) and Sea Bank (35%) are the favorites.
264 Supriyadi, & Darwanto

Table 1. Respondent Profiles

Demographic Characteristic Total Percentage
Gender
Male 117 50%
Female 115 50%
Age
18 – 22 years old 143 62%
23 – 27 years old 89 38%
Latest Education
Middle school or equivalent 1 0%
High school or equivalent 88 38%
Diploma 18 8%
Bachelor 102 44%
Masters 23 10%
Occupation
Student 91 39%
Private employee 41 18%
Civil servant 18 8%
Self-employed 20 9%
Freelance 40 17%
Others 22 9%
Monthly Income
IDR 0 - 2,000,000 95 41%
IDR 2,000,001 - 4,000,000 40 17%
IDR 4,000,001 - 6,000,000 55 24%
≥ IDR 6,000,000 42 18%
Digital Banking Adoption Total Percentage
Length of Use
≤ 2 years 91 39%
2 – 4 years 42 18%
4 – 6 years 55 24%
≥ 6 years 44 19%
Frequency of Use (Monthly)
0 – 5 times 85 37%
5 – 10 times 92 40%
10 – 15 times 38 16%
≥ 15 times 17 7%
Types of Digital Banks
Blu by BCA 102 44%
Bank Jago 50 22%
Bank Jenius 10 4%
SeaBank 81 35%
Neo Bank 14 6%
Line Bank 38 16%
TMRW by UOB 18 8%
Others 63 27%
Source: Processed data, 2023

The results of this study show that there were several indicators that must be removed
since the loading factor value was not higher than 0.7 and the Average Variance Extracted (AVE)
value was also not higher than 0.5 (Hair, Hult, Ringle, Sarstedt, & Thiele, 2017). The results of
convergent validity test after removing several indicators are shown in Table 2 below:
Investigating Drivers of Digital Banking Adoption of Gen Z in Indonesia 265

Table 2. Results of Convergent Validity Test

Variable Code Loading Factor AVE
Performance Expectancy PE.1 0.842
PE.2 0.743 0.625
PE.4 0.784
Effort Expectancy EE.2 0.792
EE.3 0.882 0.711
EE.4 0.854
Social Influence SI.1 0.859
SI.2 0.878 0.748
SI.3 0.857
Facilitating Conditions FC.1 0.812
FC.2 0.821 0.637
FC.3 0.759
Hedonic Motivation HM.1 0.837
HM.2 0.838 0.638
HM.3 0.716
Perceived Value PV.1 0.777
PV.2 0.855 0.678
PV.3 0.837
Habit HB.1 0.866
HB.2 0.873 0.690
HB.3 0.748
Behavioral Intention BI.1 0.854
BI.2 0.858 0.740
BI.3 0.869
Use Behavior UB.1 0.929
0.854
UB.2 0.919
Source: Processed data, 2023

Furthermore, the results of discriminant validity are presented in the following Table 3.
The items had met the requirements for the cross-loading value and Fornell-Larcker criterion if
their cross-loading value is higher than 0.7. In addition, the results show that the value for each
latent variable is greater than the correlation value between other latent variables (Hair, Black,
Babin, & Anderson, 2014).
Table 3. Results of Discriminant Validity Test (Fornell-Larcker Criterion)
PE EE SI FCs HM PV HB BI UB
PE 0.791
EE 0.676 0.843
SI 0.220 0.248 0.865
FCs 0.582 0.607 0.252 0.798
HM 0.590 0.620 0.338 0.579 0.799
PV 0.555 0.596 0.223 0.569 0.541 0.824
HB 0.523 0.509 0.308 0.507 0.617 0.545 0.831
BI 0.524 0.582 0.351 0.617 0.627 0.649 0.624 0.860
UB 0.476 0.428 0.268 0.602 0.558 0.544 0.698 0.690 0.924
Note: PE = Performance Expectancy; EE = Effort Expectancy; SI = Social Influence; FCs = Facilitating
Conditions; HM = Hedonic Motivation; PV = Perceived Value; HB = Habit; BI = Behavioral Intention; UB
= Use Behavior.
Source: Processed data, 2023

However, a number of studies suggested that the cross-loading value and the Fornell-
Larcker criterion were insufficient to assess the discriminant validity. The Heterotrait-Monotrait
(HTMT) correlation ratio was more preferred. Henseler, Ringle, & Sarstedt (2015) suggested the
266 Supriyadi, & Darwanto

rule of thumb for the HTMT criterion was not to be higher than 0.90. The following Table 4
presents the results of discriminant validity test using the HTMT criterion, showing that all
variables have values of less than 0.90. Therefore, the data had met the requirements for
discriminant validity testing.
Table 4. Results of Discriminant Validity Test (HTMT Criterion)
PE EE SI FC HM PV HB BI UB
PE
EE 0.899
SI 0.293 0.303
FC 0.808 0.802 0.327
HM 0.800 0.812 0.448 0.797
PV 0.753 0.765 0.280 0.767 0.730
HB 0.696 0.647 0.390 0.677 0.820 0.709
BI 0.677 0.719 0.423 0.805 0.810 0.816 0.781
UB 0.604 0.525 0.323 0.780 0.720 0.682 0.866 0.833
Note: PE = Performance Expectancy; EE = Effort Expectancy; SI = Social Influence; FCs =
Facilitating Conditions; HM = Hedonic Motivation; PV = Perceived Value; HB = Habit; BI =
Behavioral Intention; UB = Use Behavior.
Source: Processed data, 2023

Furthermore, the data was tested for its reliability and the results were determined based
on the composite reliability (CR) and Cronbach’s Alpha value. The following Table 5
demonstrates that all constructs have met the requirements, since their CR value is higher than 0.7
(Hair et al, 2014). Likewise, the Cronbach’s Alpha value is also higher than 0.7 (Chin, 1998).
Thus, the data could be considered reliable and can be used for further analysis.
Table 5. Results of Reliability Test
Variable C. R. Cronbach Alpha’s
Performance Expectancy 0.833 0.703
Effort Expectancy 0.881 0.796
Social Influence 0.899 0.831
Facilitating Conditions 0.840 0.714
Hedonic Motivation 0.840 0.716
Perceived Value 0.863 0.762
Habit 0.869 0.773
Behavioral Intention 0.895 0.824
Use Behavior 0.921 0.829
Source: Processed data, 2023

In addition, the data was tested for its multicollinearity based on the Variance Inflation
Factor (VIF) value. The results shown in Table 6 show that there is no indication of
multicollinearity problems in the model, because the VIF value is lower than 5 (Hair et al., 2014).
Investigating Drivers of Digital Banking Adoption of Gen Z in Indonesia 267

Table 6. Results of Multicollinearity Test

Variable VIF Variable VIF Variable VIF
Performance PE.1 1.406 Facilitating FC.1 1.523 Habit HB.1 1.901
Expectancy PE.2 1.356 Conditions FC.2 1.562 HB.2 1.976
PE.4 1.356 FC.3 1.260 HB.3 1.343
Effort EE.2 1.492 Hedonic HM.1 1.522 Behavioral BI.1 1.817
Expectancy EE.4 1.842 Motivation HM.2 1.525 Intention BI.2 1.862
EE.3 2.001 HM.3 1.276 BI.3 1.906
Social Influence SI.1 1.879 Perceived PV.1 1.393 Use UB.1 2.001
SI.2 2.038 Value PV.2 1.673 Behavior UB.2 2.001
SI.3 1.848 PV.3 1.698
Source: Processed data, 2023

After evaluating the outer model, the inner model was evaluated to determine the amount
of influence between the constructs of the research variables. The results of determination
coefficient are presented in Table 7 below. Based on the table, this study could explain 59.3% of
the behavioral intention variable and the remaining 40.7% could be explained by other variables
not included in the study. Then, the behavioral intention could explain 47.3% on the use behavior
and the remaining 52.7% could be explained by other variables not included in the study. Further,
the predictive relevance represented by Q2 value shows that the behavioral intention and use
behavior variables have a Q2 value of 0.435 and 0.399, respectively. This indicated that the research
model had good predictive capability (Ghozali & Latan, 2015).
Table 7. Results of Determination Coefficient
Variable Adjusted R2 Q2
Behavioral Intention 0.593 0.435
Use Behavior 0.473 0.399
Source: Processed data, 2023

Lastly, the hypotheses of this study were tested. Based on the bootstrapping analysis, it
was found that seven out of nine structural relationships are significant (p ≤ 0.05). The results can
be seen in the following Table 8:
Table 8. Results of Hypothesis Testing
Hypothesis β T-Statistics p-Value Conclusion
H1 PE → BI -0.031 0.516 0.303 Not Supported
H2 EE → BI 0.081 1.245 0.107 Not Supported
H3 SI → BI 0.105 2.073 0.019 Supported
H4 FC → BI 0.200 2.820 0.002 Supported
H5 HM → BI 0.161 2.161 0.016 Supported
H6 PV → BI 0.276 4.351 0.000 Supported
H7 HB → BI 0.215 2.948 0.002 Supported
H8 BI → US 0.690 15.308 0.000 Supported
Source: Processed data, 2023

The results show that the perceived value has the greatest positive and significant influence
on the behavioral intention (β = 0.276 | t = 4.351 | p ≤ 0.05), followed by habit (β = 0.215 | t =
2.948 | p ≤ 0.05), facilitating conditions (β = 0.200 | t = 2.820 | p ≤ 0.05), hedonic motivation (β =
0.161 | t = 2.161 | p ≤ 0.05), and social influence (β = 0.105 | t = 2.073 | p ≤ 0.05). Meanwhile, the
performance expectancy (β = -0.031 | t = 0.516 | p ≥ 0.05) and effort expectancy (β = 0.081 | t =
1.3245 | p ≥ 0.05) have no positive and significant influence on the behavioral intention. On the
268 Supriyadi, & Darwanto

other hand, the behavioral intention is found to have a positive and significant influence on the use
behavior (β = 0.690 | t = 15.308 | p ≤ 0.05).

Source: Processed data, 2023

Figure 2. Path Analysis of Research Model

The first hypothesis of this study proposes that the performance expectancy positively
influences the behavioral intention of Gen Z in adopting the digital banks. Meanwhile, the results
show that the performance expectancy has no positive and significant positive influence on the
behavioral intention, indicating that the first hypothesis cannot be supported empirically. This
finding supports Boonsiritomachai & Pitchayadejanant (2019) and Sebastián et al. (2023) who
found that the performance expectancy did not significantly affect individual behavioral intentions
to use a new fintech. However, this finding is not in line with the UTAUT 2 and studies by Abrahão
et al. (2016), Al-Sabaawi et al. (2021), Almaiah et al. (2022), Farah et al. (2018), Moorthy et al.
(2020), Purohit et al. (2022), Rahim et al. (2022), Senyo & Osabutey (2020), Tan & Lau (2016),
and Thaker et al. (2022). The Gen Z, who had been familiar with new technological developments
and digital services, had no performance expectation which affected their decision to use new
digital services (Miah, Singh, & Rahman, 2023). In addition, there were many other fintech
services that also offered similar performance benefits, reducing the influence of performance
expectations on the behavioral intention to adopt the digital banks.
Further, the second hypothesis of this study proposes that the effort expectancy positively
influences the behavioral intention of Gen Z in adopting the digital banks. However, similar to the
first hypothesis, the effort expectancy has no positive and significant influence on the behavioral
intention, indicating that the second hypothesis cannot be supported empirically. Individual belief
Investigating Drivers of Digital Banking Adoption of Gen Z in Indonesia 269

in the convenience offered by the new technology failed to encourage the individual behavioral
intention to use the new financial services, including the digital banking services. This finding is
consistent with earlier researches conducted by Boonsiritomachai & Pitchayadejanant (2019),
Moorthy et al. (2020), Rahim et al. (2022), and Sebastián et al. (2023). The Gen Z, who were
accustomed to dealing with similar technologies, no longer saw the digital-based services as an
obstacle. Therefore, difficulties in using the digital banking services were never a concern for the
Gen Z users, especially because the technology offered today had been more user-friendly
(Alkhwaldi et al., 2022; Mensah, 2019; Tarhini, El-Masri, Ali, & Serrano, 2016).
In addition, the third hypothesis of this study proposes that the social influence positively
influences the behavioral intention of Gen Z in adopting the digital banks. This study finds that the
social influence has a positive and significant influence on the behavioral intention, indicating that
the third hypothesis can be supported empirically. This finding strengthens previous researches by
Al-Sabaawi et al. (2021), Farah et al. (2018), Purohit et al. (2022), Sebastián et al. (2023), and Tan
& Lau (2016) which claimed that the social influence had a significant impact on the individual
behavioral intention to use the new financial services. The Gen Z spent a lot of time socializing
with peers. This made their financial behavior in the group of friends was something that
influenced individual financial behavior, including the use of digital banks. This form of
socialization was also supported by social media which allowed them to receive recommendations
from friends and even social media influencers to take certain actions, including using the digital
banks (Djafarova & Foots, 2022).
Next, the fourth hypothesis of this study proposes that the facilitating conditions positively
influence the behavioral intention of Gen Z in adopting the digital banks. This study confirms that
the facilitating condition is a variable with a positive and significant influence on the behavioral
intention, indicating that the fourth hypothesis can be supported empirically. Individual interest in
new fintech, including the digital banks, was driven by the effect of external and internal factors
that could facilitate the use of technology. This finding was supported by Al-Sabaawi et al. (2021),
Almaiah et al. (2022), Boonsiritomachai & Pitchayadejanant (2019), Moorthy et al. (2020), Rahim
et al. (2022), Tan & Lau (2016), and Thaker et al. (2022). Compared to earlier generations, the
Gen Z was more familiar to using various digital technologies. As a result, knowledge of new
technologies was easy to obtain (Philippas & Avdoulas, 2020). Similarly, the resources needed to
use the new technologies, such as smartphones, internet networks, and numerous supporting
facilities, were readily available, making the adoption of new financial technology simple.
Individuals’ access to the technology and digital tools was a significant resource for using the
fintech services (Odei-Appiah, Wiredu, & Adjei, 2022; Sahay, Allmen, Lahreche, Khera, Ogawa,
Bazarbash, & Beaton, 2020).
Furthermore, the fifth hypothesis of this study proposes that the hedonic motivation
positively influences the behavioral intention of Gen Z in adopting the digital banks. The results
of this study confirm that the hedonic motivation has a positive and significant influence on the
behavioral intention, indicating that the fifth hypothesis can be supported empirically.
Boonsiritomachai & Pitchayadejanant (2019), Farah et al. (2018), and Moorthy et al. (2020) also
found similar results. Feelings of satisfaction, pleasure, and excitement when using a technological
service drove individuals to use the new fintech. The Gen Z would be more likely to use the digital
banking services if they felt satisfied, happy, and excited.
270 Supriyadi, & Darwanto

Additionally, the sixth hypothesis of this study proposes that the perceived value positively
influences the behavioral intention of Gen Z in adopting the digital banks. This study finds that the
perceived value has the biggest positive and significant influence on the behavioral intention,
indicating that the sixth hypothesis can be supported empirically. This finding is in line with studies
by Almaiah et al. (2022), Farah et al. (2018), and Thaker et al. (2022). This finding also suggested
that the Gen Z perceived the digital banks as a service with more benefits than the cost and effort
required. As a result of the various advantages that the digital banking services offered, the Gen
Z’s behavioral intention to use them continued to increase.
Besides, the seventh hypothesis of this study proposes that the habit positively influences
the behavioral intention of Gen Z in adopting the digital banks. This study finds that the habit is
the second factor which has the biggest impact towards the behavioral intention. Repeated use of
digital banking services by the users developed into a habit, which influenced the users’ future
behavioral intention. This finding is supported by Farah et al. (2018), Sebastián et al. (2023), and
Thaker et al. (2022). This finding implied that the users who had become used to using the digital
banking services via apps were more likely to use the services again. Furthermore, the Gen Z’s
experience with the digital banking services could also influence their decision and commitment
to continue using the services (Windasari et al., 2022).
Finally, the eighth hypothesis of this study proposes that the behavioral intention positively
influences the use behavior of Gen Z in adopting the digital banks…

5. CONCLUSION, SUGGESTION, AND LIMITATION

The growth of digital banking adoption in Indonesia is a novel phenomenon that merits
more investigation. This study concludes that the perceived value, habit, facilitating conditions,
hedonic motivation, and social influence variables have a positive and significant influence on the
Gen Z’s behavioral intention in adopting the digital banks; while the performance expectancy and
effort expectancy do not. Further, this study also finds that the behavioral intention has a positive
and significant influence on the use behavior of Gen Z in adopting the digital banks. Considering
that the Gen Z was accustomed to dealing with multiple fintech advancements, they had the
knowledge and skills to use a wide range of digital services. As a result, they were no longer driven
to use the digital banking services because of the expectations, benefits and convenience they
provided.
To attract the Gen Z to use the digital banking services, the service providers are suggested
to employ several strategies. One of them is by providing profitable benefits compared to the
expenses anticipated by them. The ease with which the Gen Z has the access to a wide range of
digital information enables them to select the most profitable financial services. Furthermore, a
user-friendly application design can also improve the experience of using digital banks and
increasing customer commitment to continue using the service. This will also improve the users’
satisfaction with the digital banking services. The government, as a regulator, can then establish
an environment that fosters the digital bank development, both in terms of policies and supporting
facilities for the digital ecosystem.
Investigating Drivers of Digital Banking Adoption of Gen Z in Indonesia 271

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