Effect of Internet Banking Service Quality on Customer Satisfaction

 

Internet banking is an electronic payment system that allows customers of a financial institution to conduct financial transactions on a website operated by an institution such as a retail bank, virtual bank, credit union or building society. Online banking is also known as internet banking, e-banking, virtual banking and some other terms. This new channel has added a new dimension to the concept of customer satisfaction and has shown how it can be affected in a positive way. 

All organizations exist and strive to become an integral part of their customers’ lives. So they always strive to satisfy their customers through the best channels of delivering their offerings. There are many factors that affect customer satisfaction. Chief among them is the quality of service. Due to the different nature of products offered in the manufacturing sector and the service sector, the definition and measurement of service quality may not be the same for both. Especially, in the current era, with the Internet emerging as a major channel of service delivery, the need for a scale to measure service quality in electronic media has been strongly addressed. Therefore, research scholars have specifically taken up service quality in the context of e-services leading to the development of various models that help measure e-service quality in the service sector.

Internet banking

With the rapid and vast increase in technology, innovation and telecommunication, new delivery channels in the financial sector are coming rapidly in number and form from ATMs, telephone banking. The latest in the internet banking chain is the invention of technological marvels. According to Accenture (2005), Internet banking is thought to herald a revolution in banking delivery. Banks have invested heavily in internet channel development. Internet banking has seen explosive growth in many countries and has replaced the inevitability of traditional banking practices. Internet banking will revolutionize the current traditional banking industry and provide greater opportunity to provide better customer services through enhanced communication, data mining and customization in Internet banking services.

According to Kalakota and Winston, online banking was first introduced in the early 1980s in which the customer was provided with an application software program running on a personal computer (PC) that could be dialed into the bank through a modem, telephone line, and programs operated remotely on the customer’s PC. However, due to the lack of internet users and the costs associated with using online banking, the growth of internet banking suffered a setback. However, Internet banking made a big comeback in the 1990s, as the Internet explosion made it convenient for customers to conduct transactions over the Internet worldwide. 

Thus, Internet banking became an important channel for banks to deliver services and made business and other banking activities more convenient for customers. As Hua documented, Internet banking is considered an important way to reduce costs and maintain or enhance services for customers. Banking institutions intend to use Internet banking as a tool to reduce operational costs, improve banking services to customers, retain them and expand the customer base. In India, Internet banking was introduced by ICICI Bank in 1995 and soon followed by HDFC Bank.

As the Internet is a cheaper delivery channel for banking products, banks can reduce the number of branches and their staff by using the Internet as a service delivery channel. Qureshi et al. Internet banking is defined as a process of innovation whereby customers perform their own banking transactions without visiting bank tellers. Recent evidence suggests that an Internet-based consumer banking strategy can be effective, with reports of more profitable, loyal, and committed consumers compared with traditional banking consumers (ABA, 2004; Fox, 2005). 

Therefore, Gartner concluded that banks now treat the Internet as a replacement for traditional branch offices, automated teller machines (ATMs), telephone banking, and call centers. In the new banking environment, Internet banking is managed as an operational activity and a key component of a multi-channel strategy as noted by Black et al.

E-Service Quality and Internet Banking

As service delivery channels changed from traditional to electronic, the need for a scale to measure e-service quality was felt. Researchers have developed many scales to evaluate web sites. A rating scale for websites called WebQual was created by Lochiacono et al. This scale is based on twelve dimensions: namely function, communication, trust, response time, design, intuitiveness, visual appeal, novelty, flow, emotional appeal, integrated communication, business processes and replaceability.

Efficiency: The ease and speed of accessing and using the Site.

Fulfillment: The extent to which the site’s promises about order delivery and item availability are fulfilled.

System Availability: Proper technical functioning of the Site.

Privacy: The degree to which the site is secure and protects customer information.

Accountability: Effectively managing issues and returns through the site.

Website Design: The level of ease of navigating through and using a website. Which site solves customer problems.

Contact: Availability of assistance through telephone or online representatives.

Based on the above model and its dimensions, a framework is developed for the present study to develop the relationship between e-service quality and customer satisfaction in internet banking.