Research work

National College of Business
Administration & Economics
Internet banking service quality and its implication on
e-customer satisfaction and e-customer loyalty in
Pakistan
BY
MIRAH JAVED
MASTER IN COMMERCE
MAY,2017

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Internet banking service quality and its implication on
e-customer satisfaction and e-customer loyalty in
Pakistan
1 Introduction
1.1 Customer's Loyalty
The continuous purchasing of a product by a customer over a time period
with high satisfaction level is called Loyalty .If a customer is purchasing a
product again and again with extreme satisfaction, you can say it
Loyalty(Keller 1993)
loyalty means repeat purchase by customer with high level of
satisfaction.(Chaudhuri and Holbrook 2001)All the customers who are loyal
with the product, company or an organization, are having mental
attachment with all these. They are more specifically attached with the
product's continuous purchasing.
Reason of continuous purchasing is also that the customers are committed
with the continuous product purchasing behavior. They are loyal , attached
and committed with a product it doesn't mean that they have no other
options and alternatives. yes they have so many strong alternatives and
options to choose. and all other alternatives are more attractive. The loyal
customers who can switch to the other options and alternatives, and they
have capacity to pay the high cost , considered as most important
customers. In this research, loyalty is defined as promise and sympathetic

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feeling in the direction of an online retailer, which leads to repurchase
behavior.(Shankar, Smith et al. 2003)
1.2 Customer Satisfaction
Satisfaction is defined as the delightful fulfillment accumulated over
multiple business deal experiences, which comes from overall evaluation of
the online seller, while trust is defined as the confidence or
belief that the merchant will not take advantage of the customer's
weakness.(Shankar, Smith et al. 2003).The development of customer
loyalty has become important in the services marketing , due to the
benefits linked with keep hold of current customers.(Wu 2011). Loyal
customers are very important for the continued existence of any
business.(McKecnie, Ganguli et al. 2011). To be more specific, satisfaction is
the role of supposed performance and hope. When the actual service result
provided by the service provider is higher than the customer service hope,
then the customer will be very satisfied.(Joewono and Kubota 2007)
1.3 Service quality
In an e-commerce setting, service quality is defined as the consumers’
overall decision of the brilliance and the quality of e-service offerings in the
actual market place where there are almost no face-to-face
contacts.(Santos 2003)
The researcher believe that service quality can increase the performance of
a firm.(Al-Hawari 2006)
1.4 Trust

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Trust in e-banking can be divided into two categories , trust in mobile
technology and trust in internet technology.(Siau, Sheng et al. 2004)
1.5 Service quality in INTERNET BANKING & e-customer satisfaction and
e-customer loyalty
In the changing banking setting of 21st century, the banks had to have a
essential character to provide excellent services. Banks nowadays have to
be of first-class range, loyal to excellence in customer’s satisfaction and to
play a major role in the growing and expand monetary segment.(Guo, Duff
et al. 2008)
Internet banking plays an important role in reducing operating and fixed
costs. and helps the bank in building better relationship with their
customers.(DeYoung, Lang et al. 2007). E-customer satisfaction is a key to
continuing banking business achievement. To protect the online banking
sector, need to offer better high quality services to make sure the
satisfaction of customers.(Magesh 2010). In online banking industry we
found 5 (five) DIMENSIONS of service quality such as personal needs, site
organization, user-friendliness, efficiency and interactivity.(Dennis,
Merrilees et al. 2009)
Customers have an advantage of internet because they can interact with
the banking employees through internet and don’t bother to go to bank for
every transaction. Whereas if bank does not maintain their online system
for customers, customers can visit banks for each and every single
transaction. Moreover, the cost of carrying out and handling transactions
are low and less risky.(Angelakopoulos and Mihiotis 2011)
With the help of internet facility banking personnel’s can build profitable
relationship with their customers and attract new customers.(DeYoung,
Lang et al. 2007)
Internet facility in banking transactions is increasing day by day but the
adoption of this new technology is not in increasing trend because people
are less educated. Another reason of this slow adoption of internet

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technology is lack of interest and poor service quality offered by banks
which leads to dissatisfaction of customers.(Li-hua 2012)
The behaviors of customers are the main hurdle in using internet for
banking transactions, but the users try to change their trend and mind sets,
because internet is facilitating the lives of people.(Hanafizadeh and
Khedmatgozar 2012)
Service quality is another issue in adopting the internet facility in daily
transactions of banks. Customers seek the website which is of high quality
and attractive for the users. In today’s banking environment internet play a
vital role of obtaining high quality service which leads to customer’s
satisfaction.(Chaudhuri and Holbrook 2001)
Quality of service is evaluated through different dimensions of service
mostly the SERVQUAL is important and prominent scale of measuring
service in any sector to gain higher results. Due to cultural difference and
policies and environment vary in one industry to another most of the
dimension in service quality is adapted and incorporated according to the
situation.(Dennis, Merrilees et al. 2009)
Service quality as well as the customer’s satisfaction and loyalty of
customers are identified as the major indicators for measuring the offerings
of banks to users. If the quality is good, then the customers become loyal to
firm and ultimately loyalty achieved.(Aldas-Manzano, Ruiz-Mafe et al. 2011)
Furthermore, building a profitable relationship with customer’s firms are
getting involved in online business rather than traditional business. There
are many examples around the world who are running successful online
business like Amazon.com who is online seller of books and can facilitate
the customers at doorstep. Internet is becoming the major channel for
doing business online.(Parasuraman, Zeithaml et al. 2005)

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2 Literature Review
Definition of e-banking:
Internet base banking system was obtained since 1955.but the concept of
online transaction is so much old. online banks are also known as internet
banks, Cyber banks, virtual banks, internet base banks, and E-banks.(Laio
and Cheung 2002).
The concept of electronic banking has defined in any ways. According to
(Pikkarainen, Pikkarainen et al. 2004) internet banking is a portal through
which customers can use for different tasks for example paying bill and for
investment purpose.
Now customer can use his/her account from anywhere with only one click.
now it become more competitive because of new challenges and globally
competitors. internet banking is low cost, fast and quick way to transact
and its extend the relationship between customer and
banks.(Jayawardhena and Foley 2000).
Internet banking service quality:
E- service quality is defined as the overall value of a customer and judgment
of the quality of the service which a bank delivered through
internet.(Bauer, Falk et al. 2006). dimensions of service quality are the way
to measure the value of service quality in all around the world. here are 5
purposed dimensions of service quality , interactivity, user-friendliness,
personal need, site organization, efficiency.(Dennis, Merrilees et al. 2009)
internet banking now a day's fulfilling all the requirements and giving
security to customers as they are expecting. now research on s-quality is
being criticize.(Yu, Balaji et al. 2015)
E-customer satisfaction:

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If a customer meet all his requirements and expectations or if a customer's
expected values matches with the actual given services then customer will
satisfy otherwise customer will not satisfy with your services. (Fullerton and
Taylor 2015)
In online context, the traditional way to check the satisfactory level of a
consumer is to check his/her dealings through internet. if a person is
committed with the online services then he/she will always choose the
online way to transact (Dennis, Merrilees et al. 2009)
According to a research customer is satisfied with web base transaction
because it is easy to use, useful and cheap.(Liébana-Cabanillas, Munoz-
Leiva et al. 2013).
E-customer loyalty:
There are two ways to measure the loyalty of a customer. behavior and
attitude. behavior means actions of customers and behavioral loyalty
means the repurchase of customer due to liking brand or services.(Cyr
2008)while e-customer loyalty in banking sector means the use of a
specific web site of banking by customer again and again, most of time
he/she visited that web site .according to researcher it is a critical and as
well as positive attitude.(Gera 2011)
Trust:
Trust is one of the main factor in researchers purposed theoretical model.
Trust means the confidence in others goodwill. And also view it as ideas. In
e-banking services the benefit of trust is the strong relationship between
customer and bank. And it gives economical and commercial benefit to
customer. It solves the security problem of customer and describe the
customers believe.(Lee 2005)
Relationship between Service Quality and Customer Satisfaction:
In today's competitive banking market these two factors are playing vital
role for success. Service quality have dimension while satisfaction have a
broader concept. Its depend on quality, situational factor and personal

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factor. Demographic changes must be considered by banking
sector.(Sureshchandar, Rajendran et al. 2002)
Relationship between Service quality and customer loyalty:
Relationship between service quality and customer loyalty is most debated
subject in educational sector. Researcher argued that satisfaction and
loyalty are not substitute for each other and that it is possible for a
customer to be loyal without being highly satisfied and to be highly satisfied
and yet not be loyal.(Naumann, Haverila et al. 2010)
Relationship between Service quality and Trust:
Trust is used as dimension of service quality in electronic banking. because
most of customers are dealing online without any fear.(Ranaweera and
Prabhu 2003).
Trust reduces the risk of economic crisis in banking sector. service quality is
important to develop the stable trust of customer.(Dia 2011)
Hypothesis development:
in banking sector researcher highlighted that dimensions of service quality
are correlated with e-customer satisfaction, e-customer loyalty and
trust.(Joseph and Stone 2003).
similarly , according to researchers internet banking service quality have
positive relation with customer satisfaction.(Aksoy 2014)
there is a relationship between internet banking service quality and trust.
trust has a positive relation with customer loyalty.(Ramseook-Munhurrun
and Naidoo 2011)
trust and internet service quality have also a positive
relationship.(Dahlstrom, Nygaard et al. 2014)
H1: Internet banking service quality has a positive relationship with e-
customer satisfaction
H2: Internet banking service quality has a positive relationship with e-
customer loyalty

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H3: e-Customer satisfaction has a positive relationship with e-customer
loyalty
H4: internet banking service quality have a positive relationship with
trust.
H5 e-customer loyalty have a positive relationship with trust.
H1 indicates that higher the internet banking service quality leads to higher
satisfaction level of customer. From the five dimensions of service quality
are the most effective predictor of high level of satisfaction. In addition
internet banking service quality has a positive relationship with e-customer
satisfaction.(Carlson and O'Cass 2011, Ho, Kuo et al. 2012, Kaura, Durga
Prasad et al. 2015)
H2 and H3 status that internet banking service quality has a positive
relationship with e-customer loyalty, and e-customer satisfaction has
positive relationship with e-customer loyalty. This finding is consistent with
the results found in the previous study.(Kashif, Wan Shukran et al. 2015)
H4 and H5 have a positive relation with each other. trust factor can
determine the level of satisfaction and loyalty of a customer on online
banking. Good service quality leads to customer's trust and customer
loyalty have a positive relationship with trust.(Dahlstrom, Nygaard et al.
2014, Yu, Balaji et al. 2015)

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Purposed Theoretical Model
Interactiv
ity
Site
Organizatio
n
User
Friendline
ss
Eefficien
cy
Personal
need
EBSQ
ECS
ECL
Trust
Dimensions of
Service Quality

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3 Methodology
Data collection process
Data was collected from a structured questionnaire as measurement tool. Since
no sampling frame was available, samples could not to be obtained through
probability sample technique. A convenience sampling approach was used in this
study. The interviewers visited and distributed questionnaires to outside the
bank customer. the purpose of filtered question was to make sure that the
respondents fit to two restrictions, being 18 years old or over. This study was
conducted in four big cities of Pakistan from 31 local banks offering online
services. in this study 10 local banks and forty branches were selected. the
banking sector were chosen because they represent one of the typical services
provider involved in economic growth of Pakistan.(Dennis, Merrilees et al. 2009)
Questionnaire Design
Fifty questionnaire were distributed to bank customers who have experience in
using online banking, and minor changes to scale were made according to ensure
that the question were not repeated. A five point Likert scale was used to
measure the internet banking service quality and e-customer loyalty from
‘strongly disagree’ (1) to ‘strongly agree’ (5). In addition, to measure e-customer
satisfaction, a five-point scale was used, ranging from ‘strongly dissatisfied’ (1) to
‘strongly satisfied’ (5).(Ramseook-Munhurrun and Naidoo 2011)
A total of 1000 questionnaires were distributed and 520 were returned. 5
questionnaires were considered invalid because respondent did not completed
the answers . Female account 61.3% and males 38.7% of the internet banking
customers. Majority of users was in age group of 20-30 years old. In addition,
majority respondents claimed that they use internet for 1–3 hours daily (37.3%),
followed by 2-5 hours (19%), below 1 hour (17%), 7 hours above with 15.2%, and
5-7 hours (11.5%).(Anderson and Swaminathan 2011, Hair, Sarstedt et al. 2012)

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