Introduction
For many years now, banks and other financial institutions around the world have used powerful computer networks to automate tens or possibly hundreds of millions of day to day transactions by users.
Now that most of its customers have ease of access to the internet through their PCs and smartphones, banks have identified several ways by which they can improve the quality of their services by integrating the internet in their day to day activities.
One of these ways is through internet banking, also known as on-line banking. Banks and customers alike view internet banking as a ‘value-added’ tool to attract and retain new customers while reducing the expenses associated with paper banking in the increasingly competitive banking industry.
Other benefits associated with this form of banking include convenience, ubiquity, transaction speed, efficiency, effectiveness, and a high degree of customization/personalization (Han &Baek, 2004). However, online banking is still on its early stages and faces numerous challenges.
One of these challenges is that of determining the quality of online banking initiatives with regards to attraction and retention of customers, customer satisfaction through effective customer relationships, and so on.
To give explanation for their investment in online services, a number of providers are trying to gauge the quality of their online services and investigate the links between service quality and customer satisfaction so that they can identify ways of retaining their customers and attract new ones. However, a recognized method for determining the quality of online banking services is not well developed yet.
Many studies into service marketing have attempted to define service quality and create methodologies to measure it. One of these instruments, known as the SERVQUAL, was developed in 1988 and has since been employed by many researchers studying service quality in various environments, ranging from financial services, travel agent services and retailing services, and restaurants.
SERVQUAL measures service quality through five dimensions: reliability, responsiveness, assurances, empathy, and tangibility. This instrument has been used in several studies either in its original form or modified to meet research conditions as will be seen in the paper.
The scope and objectives of the paper
The purpose of this paper is to undertake a comparative literature using five peer-reviewed articles discussing service quality in internet banking and finance and identify the main issues in the articles and relates them to service model in Internet banking and finance.
The paper will also discuss how the findings will affect managerial decisions regarding online banking services. The paper will focus on specific sections of the paper as outlined below:
- Methodology followed in collecting information
- Major findings of the papers
- Conclusion
- Limitations and implication for services marketing theories and practices
Methodology followed in collecting information
To determine service quality and its effects on internet banking and finance, a methodology for undertaking the research must be adopted. This methodology relates to the data collection process, analysis, results and the assumptions. Floh and Treiblmaier (2006) adopt a survey methodology in their study of the factors that keep online banking clients loyal.
Data was collected through a survey of 7,500 randomly selected members of an Austrian internet bank, out of this number, 2,075 valid responses were received. This survey was conducted in collaboration with one of the largest banks in Austria.
The data collection process was followed by a data analysis that involved comparing the demographic features of the valid respondents to those of the general Austrian internet users to which it was found that the difference was not significant.
Further T-test measures showed no significant difference between early and late respondents, which could have indicated a non-responsive bias. A similar approach was adopted by Han and Baek (2004), Wong et al (2008) and Rullis and Sloka (2011).
Han and Baek used a modified SERVQUAL instrument in sample analysis in conjunction with one of the major commercial banks in Korea. The authors also examined the link among service quality, customer satisfaction, and customer retention. However, this survey used an online survey rather than paper questionnaires as used in the earlier study.
The survey measured customer expectation of internet banks and generally the perceived performance of internet banking services. Survey questions were administered on the bank’s website. A total of 740 filled surveys were deemed as valid and used in the study. In the analysis, four out of the five dimensions of the SERVQUAL instrument were used: tangibles, reliability, responsiveness, and empathy.
The ‘assurance’ dimension was left out because the elements used to measure this property were not properly loaded in the data collection process. A possible explanation for this occurrence was that in online banking services, users did not interact with personnel, rather, they mainly relied on a non-human interface.
Customers’ assessments of the ‘assurance’ dimension are mainly influenced by the knowledge and politeness of personnel, which cannot be determined in online banking since there is minimal contact with human personnel. The information collected first underwent ‘data purification’ procedure. From this procedure, a high goodness of fit was observed, the experimental error was below the critical value of 0.08.
Besides, the authors found out that online service continuers to show a higher satisfaction level than online service switchers, an observation made in previous studies.The structural model of service quality, customer satisfaction, and customer retention dimensions were then used to analyze the data as provided by SERVQUAL.
Wong et al (2008) aimed to re-examine the role of traditional service quality in an online banking environment by providing a review of how traditional service quality insights have changed through the advent of online banking and how banks have reacted to these changes.
The authors mailed survey questions to its respondents. The survey questions included two sections measuring expectations and perceived performance from the SERVQUAL scale, and a number of personal and business demographic measures that provided categories on which the data would be analyzed. Out of the questionnaires mailed out, 706 were deemed valid, representing an overall response rate of 30.6 percent.
A research undertaken by Bauer et al (2004) determining the quality of online banking portals deviates from the previous studies in terms of the methodology used. The authors undertake expert interviews at banks and e-business consultancies as well as through detailed discussions with portal users.
It is important to note that findings from this study could be less accurate since priority is given to internet banking experts rather than the users, who are the target of the services, and whose opinion is very important in the study.
In the final paper, Rullis and Sloka (2011) undertake a research to determine consumer satisfaction with the quality of online banking services and customers’ loyalty. The authors adopted a multiple item scale for determining internet banking service quality created by C. B. Ho and W. Lin.
This tool consists of five dimensions used in measuring the service quality of internet banking, some of which are similar or related to those used in the SERVQUAL tool. The five dimensions are customer service, web design, assurance, preferential treatment, and information provision. Survey questions for online banking customers were designed based on the five dimensions mentioned above.
The surveys were sent to 1,273 respondents and 873 valid responses were returned. The data was then categorized based on internet banking reliability, internet banking usability, and internet banking service quality and satisfaction and loyalty. A Rotated Component Matrix analysis was then performed on the data.
Major findings of the papers
All five studies investigated the role of service quality in customer attraction, retention and the overall customer satisfaction with online banking services. All of the studies concluded that service quality was a core component of customer attraction, customer retention, and customer satisfaction in online banking.
From the analysis of the data, Floh and Treiblmaier (2006) found out that loyalty among online banking customers is directly related to satisfaction, which in turn are determined by web site quality and service quality. Study variables such as gender and age significantly affect the proposed link between customer satisfaction and service quality.
These results are consistent with those of Bauer at al (2004), who found out that the ‘security’ dimension is heavily reliant on the quality of the online banking portals, ‘trustworthiness’ is heavily reliant on the reliability and credibility of the provider.
A sense of security comes in the way the provider handles customer data, such as payments, transfers and debits, while trustworthiness can be enhanced through carefulness. Hence, customer information must be handled cautiously, that is, it must neither be sold to competitors nor used for unauthorized market researches.
Using the SERVQUAL tool, Wong et al (2008) found out that ‘reliability’ and ‘assurance’ were the most important factors to be considered by an online banking provider aiming to satisfy its customers.
The two dimensions had the highest measurements regarding customers’ expectations and should receive high attention. Responsiveness and Empathy dimensions came third and should receive a lower resource allocation than ‘reliability’ and ‘acceptance.’ ‘Tangibles’ came last and should receive the lowest priority in resource allocation.
Despite having the lowest score on customer expectations, this dimension is still important in ensuring customer satisfaction (Han & Baek, 2004) since it relates to the physical facilities, equipment, personnel and communication devices that are just as important as all the other elements of online banking.
Without tangibles, an online banking service would inevitably collapse because it is through the physical equipment such as PCs, smartphones and ATMs that users are able to undertake financial transactions conveniently. Han and Baek also stress the collective importance of the four SERVQUAL dimensions they used in their study.
From the study, they found out that the degree of service quality has a positive effect on customer satisfaction and the degree of customer satisfaction affects customer retention. Interestingly, the study found no direct relation between service quality and customer retention.
In a related finding, Rullis and Sloka (2011) found out that the quality of internet banking is not a hindrance towards the adoption of this form of banking and use of internet banking environment for promotion purposes, however, the quality of the service affects its adoption.
Conclusion
Internet banking possesses several advantages over the conventional paper banking services, including the possibility to save paper, energy and other resources and as result to decrease carbon footprint and to provide other business with possibility for sustainable development. Internet banking services can also be extended by the provider to be used for marketing purposes.
However, to enjoy all of these benefits, the provider must attract new customers and retain the existing ones. One way to achieve this is to enhance customer satisfaction in all online banking processes. Generally, this paper discussed the connection between customer satisfaction and service quality. From this study, we make the following conclusions:
- Service quality is a universal tool that should be used by providers to enhance customer satisfaction. Service quality consists of a number of dimensions, however, some of these dimensions are much more significant than others. For instance, a number of studies give priority to reliability, security and trustworthiness of the provider as the main dimensions that determine service quality.
- Despite being developed more than 10 years ago, the SERVQUAL instrument is still a very important tool in determining the level of customer satisfaction by any given online banking service, and in general ,the role of service quality in enhancing customer satisfaction. Whether it is used in its original form or modified to fit the research objectives, this tool is very important in exploring the links among customer satisfaction, customer retention, and service quality.
Limitations and implication for services marketing theories and practices
In order to improve service quality in the online banking sector, additional or future studies should focus on identification of the present state of the adoption online banking products due to the constant technological changes. Research findings would enable providers to increase internet banking service quality and consequently fast track the shift from paper banking to online banking.
The research papers used in this paper exhibited this limitation. Secondly, future research should look into whether findings from one study can be generalized to the entire online banking industry.
Thirdly, since all of these surveys were undertaken in developed nations, they should be replicated in other countries with varying levels of economic development and internet penetration and use. Finally, future studies should investigate how traditional service quality affects the rate of adoption.
These studies have numerous implications to management as outlined below:
- As earlier, the importance of service quality in the online banking industry cannot be underrated. The degree of service quality has a directly affects consumer satisfaction and this in turn affects retention of present consumers and attraction of new ones, therefore, service quality should be given priority in any internet marketing strategy.
- Since security, reliability and credibility are the most important dimensions of service delivery. Management must allocate maximum amount of resources in these two areas to achieve maximum growth and expansion.
- The research findings provide managers with a scale to evaluate the quality of their services either from the SERVQUAL or from modifications of the instrument.
- The study also provides market managers, particularly those in online banking institutions, with knowledge on how to increase the number of customers while retaining the existing ones.
Reference List
Bauer, H. H. et al. (2004). Measuring the quality of e-banking portals. International Journal of Bank Marketing, Vol. 23 No. 2. pp. 153-175
Floh, A. and Treiblmaier, H. (2006). What keeps the e-banking customer loyal? A multigroup analysis of the moderating role of consumer characteristics on e-loyalty in the financial service industry. Journal of Electronic Commerce Research, vol 7(2), 97-110
Han, S. and Baek, S. (2004).Antecedents and Consequences of Service Quality in Online Banking: An Application of the SERVQUAL Instrument. Advances in Consumer Research, Volume 31. 208-214
Rullis, H. and Sloka, B. (2011). Internet banking quality: marketing possibilities and customers’ loyalty. Management theory and studies for rural business and infrastructure development, Nr. 2 (26). 193-200
Wong, D. H. et al. (2008).Re-examining traditional service quality in an e-banking era. International Journal of Bank Marketing, Vol. 26 No. 7, 2008. pp. 526-545