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International Journal of Bank Marketing
Elucidating perceived overall service quality in retail banking
Zalfa Laili Hamzah, SIEW PENG LEE, Sedigheh Moghavvemi,
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To cite this document:
Zalfa Laili Hamzah, SIEW PENG LEE, Sedigheh Moghavvemi, (2017) "Elucidating perceived overall service quality in retail
banking", International Journal of Bank Marketing, Vol. 35 Issue: 5, doi: 10.1108/IJBM-12-2015-0204
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http://dx.doi.org/10.1108/IJBM-12-2015-0204
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Elucidating perceived overall service quality in retail banking
Introduction
Delivering high perceived overall service quality is essential for companies that intend to
distinguish themselves from their competitors and sustain their competitive advantages
(Staminkov and Dika, 2015; Chowdhary and Prakash, 2007; Wang, Lo and Hui, 2003). In a
competitive financial service environment, the pursuit of highly perceived overall service quality
is considered to be a central strategy to distinguish themselves in the quest of realizing long-term
success. Moreover, scholars and practitioners suggest that companies that provide good services
are perceived as being of high quality, which could then be used to build customer trust, increase
customer satisfaction, and improve corporate reputation (Kassim and Abdullah, 2010;
Eisingerich and Bell, 2007; Wang, Lo and Hui, 2003 and Dawar and Parker, 1994), all of which
will result in an increase in business and financial performances. However, it has been argued
that the provision of a high quality service is necessary but insufficient for a successful business
(Staminkov and Dika, 2015). This situation might be due to the fact that, thus far, most
measurements of service quality, such as service quality (SERVQUAL) and service quality
performance (SERVPERF), are insufficiently comprehensive to explain the construct, and
merely address generic scales across industries, which is unfeasible (Brady and Cronin, 2001 and
Mittal, Gita and Batra, 2015). By generic scales, customers tend to combine evaluations of
attributes, resulting in less accurate customer perception of the overall perceive service quality of
a particular industry.
Previous research on perceived overall service quality has received great attention in
recent decades, which is still being debated (Chowdhary and Prakash, 2007; Parasuraman et al.,
1998; Cronin and Taylor, 1992; Brady and Cronin, 2001; Kang and James, 2004 and Gronroos,
1984). Research in the past have solely focused on functional quality (Edvardsson, 2005), which
is inadequate for capturing all of the aspects of service quality (Mittal, Gita and Batra, 2015).
Furthermore, research on perceived overall service quality tends to be generic rather than context
specific. As a result, there is a lack of understanding of service quality in a context specific as
generic context does not capture the specific nature of the type of service (Mittal, Gita and Batra,
2015). A clear understanding of specific context is essential because customers have a unique set
of expectations based on the different types of services, such as the service industry. For
example, banking is regarded as a high contact service as customers are directly connected to
service providers (Lovelock, 1996). Furthermore, banks facing challenges with regards to
changes of marketing environment, fierce competition, technology innovation, and the complex
demand of customers, that necessitating continuous evaluations of the dimensionalities of service
quality (Tsoukatos and Mastrojianni, 2010).
Thus, an understanding of the specific dimensionalities of service quality is critical to all
service industries, including banks, as they need to deliver high quality of services in order to
fulfil customers’ demand and to survive in a competitive business environment (Chowdhary and
Prakash, 2007). As the current banking industry becomes more competitive, customers tend to
become more and more demanding. Therefore, it is important that banks be concerned with
delivering high quality services to customers (Chowdhary and Prakash, 2007). For example,
they need to understand specific dimensions (e.g., reliability, empathy, and convenience) applied
in banking in order to fulfil customer demand with different expectations of services being
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2
provided (Mittal, Gita and Batra, 2015 and Kang and James, 2004). Fulfilling customer demands
is important to banks, as it results in gained trust, improved reputation, and subsequently
retention of customers, especially when the bank industry is one of the fastest-growing sectors.
The importance of this sector in the national economy is reflected in its contribution to the GDP.
While researchers agree that perceived service quality is a multidimensional construct, no
consensus has been reached about its generally valid and generic dimensions (Korda and Snoj,
2010), and no general agreement has been agreed upon to the nature or content of the dimensions
(Brady and Cronin, 2001). For example, Parasuraman, Zeithaml, and Berry (1988) developed the
service quality measurement with five dimensions. They claimed that the scale can be
generalized across service industries and have received wide acceptance amongst researchers.
Nevertheless, the empirical evidence suggests that widespread usage of these dimensions is
unjustified (Gilmore, 2003). In the financial sector, Bahia and Nantel (2000) developed a bank
service quality model containing six dimensions (i.e., effectiveness and assurance, access, price,
tangibles, service portfolio, and reliability), while Guo, Duff, and Hair (2008) reported four
dimensions (i.e., reliability, human capital, communication and technology) for capturing service
quality in the Chinese banking sector. Despite these service quality studies conducted in the
financial sector, there is a lack of agreement regarding the specific dimensions of service quality
in the banking sector (Monferrer-Tirado, Estrada-Guillén, Fandos-Roig, Moliner-Tena and
García, 2016). In this context, understanding the service quality dimensions and their respective
relationships with the perception of overall service quality of banking sector remains a key issue
that requires further investigation. Moreover, Chowdhary and Prakash (2007) suggested that the
identification of the determinants of service quality is necessary in order to be able to specify
measure, control, and improve customer perceived service quality.
Perceived overall service quality was argued to have a significant impact on business
performance, such as customer satisfaction (Caruana, 2002; Hu, Kandampully and Juwaheer,
2009), customer trust, and bank reputation (Cronin, Brady and Hult, 2000). These researches,
however, were conducted independently. Research that integrates bank service quality
dimensionalities and its impact on consumer trust, customer satisfaction, and bank reputation is
still scarce (Tsoukatos and Mastrojianni, 2010; Caruana, 2002; Bahia and Nantel, 2000 and Lee
and Moghavvemi, 2015), particularly in a Malaysian context. This will limit the understanding
of how specific dimensionalities of service quality play their respective roles in developing trust,
enhance customer satisfaction, and build their reputation in banking. As pointed out earlier,
dimensions of service quality may differ according to the type of service industry. In this regard,
understanding service quality dimensions and perceived overall service quality remains a key
issue that requires further investigation vis-à-vis the financial sector.
Theory of expectancy/disconfirmation paradigm also provides the grounding of this study,
with service quality as an antecedent and customer satisfaction as an outcome. The theory
suggests that key determinants of satisfaction are expectations and perception of product and
service performances (Oliver, 1989). Previous researches also suggested that the theory provide
a complete picture of the role of perceived overall service quality as a determinant of satisfaction
and behavioural outcome (Gupta and Steward, 1996). Perceived overall service quality also has
been suggested to influence customer trust and bank reputation. However, the effect of both
constructs have not been tested in one model. Thus, a better understanding of the effect of
perceived overall service quality on customer satisfaction with the presence of customer trust and
bank reputation is helpful to the management when strategize their respective banks and
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allocating corporate resources (Caruana, 2002). Therefore, it is also crucial to look at developing
a richer model that incorporates these constructs simultaneously, as proposed in the current study.
Therefore, an empirical investigation is required to properly address the following
questions: What are the dimensions of service quality in the banking context? To what extent do
the dimensionalities of service quality influence the perceived overall service quality? Does
perceived overall service quality influence consumer trust, customer satisfaction, and bank
reputation? Thus, this study examines the dimensionalities of service quality that affect the
perceived overall service quality and its impact upon customer trust, customer satisfaction, and
bank reputation in Malaysia. As such, collectively investigating the overall service quality
determinants is essential for strategizing their services marketing decisions, and thereby warrants
further investigation. The issue of overall service quality is important in Malaysia for many
reasons. First, there is a lack of research on how to manage service quality in the Malaysian
banking industry. Second, with the enormous growth of foreign banks, local banks are aware of
the competition, because there is a segment within the current market that would switch to
foreign banking services if the quality being offered were on par with the local banks. Since the
Asian Financial crisis in 1997, the Malaysian banking scene has undergone a number of
significant changes, including the restructuring and redesigning of the service delivery methods
being offered. Over time, the Malaysian banking sector is continuously improving, due to
increasing competition from the growth of foreign banks in local. As such, local banks are
pressured to find ways to sustain their respective competitiveness. Thus, this research is
considered to be timely.
The remainder of this paper is structured in the following manner. The following sections
will provide information on the constructs being examined in this study, explain the theoretical
background, as well as provide a proposed conceptual model and the research hypotheses. The
research methodology will then be detailed in the subsequent section. The following section
presents the analysis, results, and discussion of the research. The final section concludes the
study by pointing out research contributions, research limitations, and directions for future
research.
Service Quality
Service quality has been studied extensively in recent decades. Traditionally, service quality
refers to the customer’s overall evaluation of service firms’ attributes by comparing their
expectations and actual performance (Parasuraman, Zeithaml and Berry, 1988). Parasuraman et
al. (1988) developed a 22-item instrument, recognised as SERVQUAL, which is used widely for
measuring service quality. The five dimensions of service quality that rely on customers to form
their judgement on perceived service quality are: (i) Assurance – employees’ knowledge and
courtesy and their ability to convey trust and confidence; (ii) Empathy – caring, individual
attention given to customers; (iii) Reliability – ability to perform the promised service
dependably and accurately; (iv) Responsiveness – willingness to help customers and provide
prompt service; and (v) Tangibles – appearance of physical facilities, equipment, personnel, and
written materials (Parasuraman et al., 1988).
The scale of SERVQUAL was developed based on five industries, which are repair and
maintenance, retail banking, credit card companies, securities and brokerages, and long distance
telephone services. Despite their advantages and popularity, however, both scales have their
respective limitations. The main empirical problem is their unstable dimensions (Van Dyke,
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Kappelman, and Prybutok, 1997), which could differ depending upon the service industry to
which the scale was applied to (Babakus and Boller 1992). Babakus and Boller (1992) proposed
that a quality measurement scale be adapted to specific individual service industry, and that a
general scale should not be used at all.
Furthermore, scholars have argued that service quality is a multi-dimensional construct, with
no agreement on generic dimensions (Lee and Moghavvemi, 2015). However, this model has
been criticised by Babakus and Boller (1992) and Parasuraman et al. (1994), both of whom
suggested further modifications to the SERVQUAL model. This is because many studies fail to
fully appreciate all five dimensions, leading to an alternative conceptualisation of service quality.
Thus, the SERVQUAL model remains the guiding model in numerous studies in the service
sector, focusing on various organisations, such as banks, retail, and tourism. Many researchers
have incorporated other constructs and measures alongside the SERVQUAL dimensions in order
to enrich and extend the explanatory power of this model (Bahia and Nantel, 2000; Jamal and
Naser, 2002 and Al-Hawari and Ward, 2006). Bahia and Nantel (2000) proposed an alternative
measure of perceived quality in retail banking, consisting of 31-item with six dimensions (i.e.,
effectiveness and assurance, access, price, tangibles, service portfolio, and reliability). Jamal and
Naser (2002) and Al-Hawari and Ward (2006) have adopted the Parasuraman et al. (1988)
framework to examine the quality of service in retail banking services. However, most service
quality studies focused on developed countries, with limited number of works pertaining to
commercial banks. For example, Shafie, Wan Azmi and Haron (2004) examine the service
quality in Islamic banking industry. They suggested that an additional dimension (e.g.,
compliance with Islamic law) should be added to the SERVQUAL method, as the Islamic
banking industry operate under different principles and cultures compared to other service
industries. They posited that it is important for Islamic banks to consider cultural differences
when adopting service quality.
In the banking industry, the Internet revolution has changed the way banks interact with
customers, all in the name of enhancing their provision of services (Akinci, Aksoy and Atilgan,
2004); Jun and Cai, 2001 and Joseph, McClure, and Joseph, 1999). Banks not only provide their
services via traditional methods, they also introduced Internet banking services to build and
maintain relationships with customers (Mols, 2000). Internet banking has helped customers
conveniently manage their personal banking affairs. For example, banks offer their customers a
variety of services 24 hours a day with Internet access availability, anywhere, and anytime
(Hamzah, Alwi and Othman, 2014). Moreover, Internet banking provides customers with
enhanced control over their financial affairs that is user friendly and fits their lifestyle (Hamzah
et al., 2014). Internet banking also could potentially save costs, increase customer penetration,
and develop the bank’s non-core business. Due to these advantages, Internet banking is fast
gaining popularity among customers. The changing needs of customers have forced banking
services to transform their services by providing high quality Internet banking services.
Researchers have suggested that high quality of Internet banking services should have high
quality of interaction, empathy, and reliability (Karatepe, Yavas and Babakus, 2005), easy and
convenient (Pikkarainen et al., 2006) and perceived usefulness, ease of use, reliability,
responsiveness and secure (Liao and Cheung, 2008). Therefore, this study suggests that Internet
banking could be an important determinant of the quality of banking services, which will
influence customers’ perception of overall service quality.
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5
Customer Satisfaction
Jamal and Naser (2002) defined customer satisfaction as a feeling or evaluation by customers
towards products or services. Customer satisfaction is the result of the provision of goods and
services that meet or exceed customer needs (Szymanski and Henard, 2001). Satisfied customers
would be more than willing to pay premiums, provide referrals, and use more products
(Reichheld, 1996). In today’s highly competitive banking industry, customer satisfaction is
regarded as the essence of success (Jamal and Naser, 2002; Siddiqi, 2011). Satisfied customers
will be more than likely to stay and recommend their respective banks to their acquaintances.
Inevitably, this will reduce bank costs associated with the provision of services, due to fewer
complaints (Reichheld, 1993).
Bank Reputation
Scholars have suggested that service quality is important in increasing reputation(s) (Caruana
and Ewing, 2010 and Walsh, Mitchell, Jackson and Beatty, 2009). Consumers assume that
retailers who possess a reputation for providing high service quality and products are at a lower
risk (Purohit and Srivastava, 2001 and Dawar and Parker, 1994), which will shift their preference
towards these stores (Koistinen and Järvinen, 2009). In retail services, a good reputation is vital
for customers vis-à-vis purchasing or repeat purchasing behaviours (Wang, Lo and Hui, 2003
and Graham and Fearn, 2005). This implies that customers are more likely to purchase and
remain loyal to reputable retailers (Nguyen and LeBlanc, 2001). Ou, Abratt and Dion (2006)
stated that a retailer’s reputation is a sign of excellent quality. A favourable and well-known
reputation becomes an asset for a service provider, as it will reside in the minds of customers.
Moreover, customers tend to forgive minor mistakes if a service provider is of positive repute
(Kang and James, 2004).
There are two schools pertaining to company reputation and image: the similarity school
that states that company reputation is a synonym for company image, and the difference school
that differentiates these two phrases. The terms corporate image and corporate reputation are
considered as identical by Gotsi and Wilson (2001) who defined image as “the total impression
of the company’’. Image is about overall impression residing in the mind of customers. Fombrun
(1996) considers the term corporate reputation and corporate image as different concepts.
According to Wartick (1992), corporate reputation is an “aggregation of a single stakeholder's
perceptions of how well organizational responses are meeting the demands and expectations of
many organizational stakeholders”. Yoon, Guffey and Kijewski (1993) viewed corporate
reputation as the firm’s history of communicating to the customers, in terms of the quality, its
products or services compared to that of its competitors. Based on the discussions of the
definitions of reputation, corporate reputation is a stakeholder’s overall evaluation of a company
over time. This evaluation is based on the customer’s direct experiences with the bank.
Trust
Trust is formed when customers believe that banks will perform as promised (credibility trust)
and have confidence in employees’ ability and courtesy (benevolence trust) (Yap, Ramayah and
Shahidan, 2012). El-Manstrly, Paton, Velonstsou, and Moutinho (2011) defined trust as a
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function of the perceived reliability and integrity of a brand or service provider. Jan and
Abdullah (2014) reported that trust in the banking sector increases awareness concerning the
importance of technology-related critical success factors. Research has revealed that higher
overall service quality would lead to a higher level of trustworthiness, and positively increase the
level of customer loyalty.
Theoretical background and hypotheses development
Having identified the variables associated with service quality, this study modified the
measurement for service quality to capture customer perceptions of service quality in retail
banking, particularly in the context of Malaysia. This section presents the theoretical
background of a proposed conceptual framework for perceived overall service quality. The
conceptual framework is developed based on literature review and prior scales that are available
for investigating the relationships between the perceived overall service quality, trust, customer
satisfaction, and bank reputation. The overall perceived service quality is influenced by multiple
constructs within service quality (tangibles, empathy, reliability and security, convenience, and
Internet banking).
According to Lee and Moghavvemi (2015), many researchers (i.e, Behara, Fisher, and
Lemmink, 2002 and Ladhari, Ladhari, and Morales, 2011) found that service quality
(SERVQUAL) model and its measurement scales are changing in conformity to the different
types of service or country. Due to those reasons, we follow Bahia and Nantel (2004) and Lee
and Moghavvemi (2015)’s study, who identified dimensions based on the most cited and most
applicable dimensions of service quality in the context of banking in Malaysia, such as tangibles,
empathy, reliability and security, convenience, and Internet banking. These dimensions are
identified from our exploratory study, which was conducted previously. Additionally, the five
dimensions (tangibles, reliability, responsiveness, assurance and empathy) of the service quality
approach developed by Parasuraman et al. (1988) appears to be less universally applicable
(Gilmore, 2003). Thus, based on literature, the service quality model is further modified to
assess the level of service quality in the Malaysian banking sector. The research model and the
hypotheses relationship between the constructs in this study is presented in Figure 1.
“Insert Figure 1 here”
Earlier literature suggests that service quality incorporates a number of dimensions. For
the purpose of this study, the service quality model includes tangibles, empathy, reliability and
security, convenience, and Internet banking. Tangibles comprises the physical facilities,
equipment, and the appearance of personnel. Bank customers usually look for any tangibles as
indicators of a bank’s overall service quality. Customers can assess the premises of the bank or
the appearance of the bank’s staff. Physical facilities, availability, the adequacy of equipment,
and the appearance of a bank’s employees are viewed as important factors in terms of tangibility
amongst customers in Hong Kong (Lau et al., 2013). Therefore, the number of counters, the
design of the transaction form, and the availability of a water dispenser might increase the
perception of service quality being received. Moreover, bank users in India (Ravichandran,
Bhargavi and Kumar, 2010) and Bangladesh (Rahman, 2013) also ranked tangibles dimension as
highly important in increasing customer satisfaction and loyalty. Therefore, the following
hypothesis is developed:
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H1: There is a positive relationship between tangibles and perceived overall service quality.
Empathy is customers’ expectations with regards to the extent to which the service
provider appears to understand and is concerned about their individual needs and wants. The
concept of empathy is to understand the needs of the customers and provide individual attention
(Siddigi, 2011). Researchers revealed that empathy plays a vital role in influencing customer
satisfaction with regards to the value of the service quality provided by frontline staff
(Annamalah et al., 2011; Kamal et al., 2013; Shanka, 2012; Siddiqi, 2011 and Estiri et al., 2011).
Bank staff and customer interactions are reflected in the dimension of empathy. This means that
bank customers perceive good overall service quality in terms of banking hours and personal
attention given to them by the bank’s staff. Therefore, the following hypothesis is proposed:
H2: There is a positive relationship between empathy and perceived overall service quality
Reliability and security is the extent to which customers can rely on the service provider
to keep promises and perform in the best interests of the customers (Lee and Moghavvemi, 2015).
Reliability has been identified as an influential component in determining customer loyalty in
previous studies (Estiri et al., 2011; Kumar, Fong and Charles, 2010; Lau et al., 2013 and Mistry,
2013). Zafar et al. (2012) surveyed 192 bank users in Pakistan, and the results of their study
showed that reliability is positively correlated to customer loyalty, because customers expect
bank employees to have zero error records and fulfil their promise of delivering a certain service
within a stipulated time frame. Customers will not be satisfied with the overall service quality if
they do not feel reliable and secure about the competence of the service provider. Thus, banks
need to instil feelings of confidence in customers, and banks’ staff are expected to handle
customers in a professional and competent manner. In this study, security refers to the physical
reliability at the bank, such as adequate security guards and CCTVs, ATM machine, or bank
located at a secure location, etc. As such, reliability and security of the bank service is an
important factor for customers in evaluating the overall service quality (Lee and Moghavvemi,
2015). The hypothesis is as follows:
H3: There is a positive relationship between reliability and security, and perceived overall
service quality.
Kumar, Fong and Manshor (2009) included an additional dimension, convenience, to the
SERVQUAL model. Their findings indicated that the convenience factor plays a significant role
in delivering the service quality of banks in Malaysia. Therefore, the convenience dimension was
also added to the modified service quality model for the banks’ customers. Similarly, Awan,
Bukhari, and Iqbal (2011) found that the convenient availability of financial services is ranked
high on the list of priority by customers for service quality in the banking sector of Pakistan. This
implies that the greater the level of convenience, the greater the perceived overall service quality.
The convenience of service remains the responsibility of the service provider, indicating the full
range of available services, convenience, and ease-of-access via its location, operating hours,
employees, and operation systems. Hence, the following hypothesis is formulated:
H4: There is a positive relationship between convenience and perceived overall service quality.
Internet banking distinguishes itself from its competitors (Abdullah and Kassim, 2009).
Internet banking is the use of the Internet as a delivery channel for banking services, such as
opening a deposit account or transferring funds between different accounts, and new banking
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services, i.e., electronic bills and payments (Jun and Cai, 2001). The Internet has been accepted
as a new channel of banking transactions. With the high growth of new technology, the increased
use of the Internet has a great impact on the characteristics of subsequent services. Studies have
shown that the provision of Internet banking services is important in attracting more customers
(Hamzah et al., 2014). Rod, Ashill and Carruthers (2009), and Jun and Cai (2004) found that the
more positive the customer perception of the service quality of Internet banking, the greater the
likelihood that overall service quality will be perceived. Therefore, we include the provision of
high quality Internet banking as being influential to the overall service quality of the banking
sector. The developed hypothesis is as follows:
H5: There is a positive relationship between Internet banking and perceived overall service
quality.
In the banking industry, trust is regarded as one of the relevant collaborative relationships
between a customer and a bank, and as a channel to enhance competitiveness (Barney and
Hansen, 1994 and Levy and Hino, 2016). Trust is conceptualised as the customers’ expectations
and beliefs that their service provider will carry out actions as promised (Levy and Hino, 2016).
Singh and Sirdeshmukh (2000) found that trust is essential for building and maintaining long-
term relationships. They are of the believe that if one party can bring positive outcomes to the
other party, trust can therefore be developed. A high level of trust leads to the future potential of
the relationship between customers and service providers (Amin et al., 2013). The way in which
perceived overall service quality (such as speed and efficiency of transactions; employees of
bank are polite and friendly, and willingness to help) affects trust has yet been adequately
investigated. For this reason, one of the objectives of this study is to investigate the overall
perceived service quality of customer trust in a bank. Based on the above discussion, the
following hypothesis is proposed:
H6: There is a positive relationship between perceived overall service quality and customer trust.
The relationship between service quality and customer satisfaction has received
considerable academic attention in the past few years (Cronin, Brady and Hult, 2000;
Sureshchandar, Rajendran and Anantharaman, 2002). Service quality and customer satisfaction
are widely recognised as key influences in the formation of consumers' purchase intentions in a
service environment (Taylor and Baker, 1994). Perceived service quality and satisfaction have
generally been conceptualised to be distinct constructs (Spring and MacKoy, 1996). As such,
greater understanding of the relationship between perceived overall service quality and customer
satisfaction is required (Spring and MacKoy, 1996). Gonzaales, Comensana and Brea (2007)
found that perceived service quality influence customer satisfaction in behavioural intention of
tourism industry. Magi and Julander (1996) indicate that perceived service quality influence
customer satisfaction in Swedish grocery retailing. Based on earlier studies, this study
hypothesises that perceived overall service quality has a significantly positive effect on customer
satisfaction. Higher levels of perceived overall service quality will lead to higher customer
satisfaction. As such, the hypothesis is developed:
H7: There is a positive relationship between perceived overall service quality and customer
satisfaction.
It has been suggested that service quality performance is essential in building a good
reputation (Wang, Lu and Hui, 2003). Zeithaml and Shappiro stated that perceived service
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quality is associated with the reputation of brand name. Selnes (1993) found that the reputation
of a brand is influenced by how consumer experiences performance of quality of services or
product. Customers form a general overall evaluation of services based on their sum of beliefs
or expectations of a set of attributes. Their perceptions of quality of service is influenced by their
respective experiences on high or low quality performances. For example, when they experience
high quality services, the reputation of a bank will increase vis-à-vis customers. Thus, the
hypothesis is proposed as follows:
H8: There is a positive relationship between perceived overall service quality and bank
reputation.
Research Methodology
This study aims to examine the dimensions of service quality in the banking sector. It will also
look into how the dimensions will influence the perceived overall service quality, which results
in the building of trust, customer satisfaction, and bank reputation. A questionnaire survey was
conducted to examine the quality of services among local banks in Malaysia, particularly in the
Klang Valley area, Malaysia. Currently, there are twenty-seven commercial banks, sixteen
Islamic banks, and eleven investment banks offering various products and services to the public
(Bank Negara Malaysia, Monthly Statistical Bulletin, 2015). Since the pricing in Malaysian
banks is regulated, the service quality being delivered becomes important if the banks want to
retain and attract customers. With the increasing number of international banks, local banks are
competing in a highly competitive environment for the provision of quality services based on
customer expectations.
The judgment sampling method was used to collect data. Respondents were first asked
whether they had bank accounts with local banks; if they replied in the affirmative, they were
asked to participate in the survey. For each question, the respondents were asked to tick the
response that best described their degree of agreement/disagreement. Most of the questionnaire
items were adapted from previous studies on banking, and a few more constructs were
introduced in our study in order to obtain adequate measures of the dimensions of interest (see
Figure 1). All items were measured using a seven-point Likert scale – ranging from 1, indicating
strongly disagree to 7, indicating strongly agree. We measured (1) the antecedents of perceived
overall service quality (i.e., tangibles, empathy, convenience, reliability and security and Internet
banking) and (2) the consequences of perceived overall service quality on customer satisfaction,
trust, and bank reputation.
In total, 400 questionnaires were gathered over a six-week period. However, only 375 were
usable for further data analysis. The two-step approach of structural equation modelling (SEM)
using AMOS 18.0 (maximum likelihood estimation) was employed to predict the relationships
between the constructs. This approach was selected due to its capability of testing the causal
relationships between the constructs with multiple measurement items.
Results
Profile of respondents
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The demographic profile of the respondents is presented in Table 1. Based on the results, 61 per
cent of the respondents were females, while 39 per cent (229) were males. The smaller
percentage of the latter is due to difficulties in approaching them. The majority of the
respondents (75.4 per cent) were between 21 - 40 years old. The largest group of respondents’
works for the public and private sectors (68 per cent), while those who are self-employed were
10 per cent, and students, housewife, or others (investment consultants, insurance agents) made
up of 22 per cent of the total respondents. Personal income was measured in Malaysian Ringgit
(RM). Thirty per cent of the respondents had a monthly income of between RM2001 and
RM4000. Most of the respondents prefer Internet banking (68%) and use ATMs (79%), while a
lower percentage (40%) prefer tellers at the bank. These results are consistent with the statistics
published by the central bank, which indicated that online banking has become very popular in
Malaysia. Currently, 31 banks in Malaysia offer Internet banking, and nearly 19.8 million
Internet banking subscribers (penetration to population of 63.7%) conducted more than 210
million banking transactions, valued at 2.33 billion Ringgit as of June 2015 (BNM, 2015).
“Insert Table 2 here”
Exploratory Factor Analysis
Table 2 presents the mean scores, standard deviations, Cronbach Alpha value, and the results of
the exploratory factor analysis of the constructs in this study. The mean scores have been
computed by equally weighing the mean scores of all of the items. The analysis shows that on a
seven-point scale, the mean scores of the independent variables range from 4.53 - 5.19, which
indicates that customers perceive that the quality of service being offered by the banks is
moderate. The mean score for Internet banking is 5.19 (SD = 1.02), which suggests that
customers find the service provided by the Internet as highly important. The mean score for
overall service quality is 4.95 (SD = 0.87), which implies that the customers of banks indicate
that the overall service quality is moderate. The mean score for trust is 5.25 (SD = 0.86),
suggesting that the customers find the service provider trustworthy. The results of the
exploratory factor analysis show that the factor loadings for all items are greater than 0.50, and
each of these items load strongly onto their respective associated factors.
“Insert Table 2 here”
Measurement Model
In order to achieve an adequate goodness of fit on the measurement model and identify possible
problems, this study assessed the path estimates, standardised residuals, and modification indices
of the measurement model (Hair et al., 2006). The assessment of the standardised regression
weight indicates that all items were loaded high within their constructs, which was within the
acceptable values of 0.70 and above, except for three items, thus, these items were deemed
unsatisfactory (Hair et al., 2006) and deleted from the measurement model. In terms of the
assessment of the standardised residual values, the results indicated that all of the items have
standardised residual values of less than │2.5│, with the exception of one item from reliability
and security, which was deleted from the model. The modification indices assessment shows the
co-variance between some of the items in the tangibility and empathy construct with high error
co-variance between these indicators. The estimation of a coefficient may be considered
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11
removed from the measurement model if the modification indices value is equal to 4 or greater
(Hair et al., 2006). The substantial modification indices value is assumed to be 7.88 for a
significant model improvement. Based on the results of the aforementioned assessment, these
items were dropped from the initial measurement model in order to improve the model’s fit.
Furthermore, these items add very little explanatory power to the measurement model, and thus
they were removed from further analysis. The estimated parameters were all statistically
significant between the latent and measured variables. The results of the measurement model –
χ²/df (2.53), TLI (0.91), CFI (0.91), IFI (0.91), RMSEA (0.06), and GFI (0.82) – indicate the
acceptable model fit of the data.
Convergent and Discriminant Validity
According to Hair, Anderson, Tatham and Black (1995), uni-dimensionality should always be
assessed prior to examining validity. This is due to the fact that the analysis of validity is based
on the assumption of uni-dimensionality (Nunnally and Bernstein, 1994). In order to test for uni-
dimensionality, the confirmatory factor analysis (CFA) was conducted (Anderson and Gerbing,
1991) through Structural Equation Modelling (SEM), AMOS 18.0 to ascertain that each item in
the model represents the same measure (Ahire et al., 1996). SEM takes a confirmatory approach
rather than an exploratory approach to analyse data and provide a confirmatory test of
measurement theory for the constructs. SEM explains how variables measured logically and
systematically represent the constructs involved in the theoretical model. This study applied the
pre-validated measurement to prior studies, thus, confirmatory factor analysis (CFA) is the most
appropriate approach in assessing a construct’s validity (Hair et al., 2006). CFA describes the
extent to which a set of measured items actually reflects the theoretical latent construct.
The construct validity test was performed to determine to what extent the items appear to
measure the construct of interest instead of other constructs. The convergent validity of the
measurement items can be assessed by composite reliability and the variance extracted measure.
Composite reliability depicts the degree to which the item indicates a common construct. The
variance extracted measure reflects the amount of variance in the items captured by the construct.
The CFA results showed that the standardised parameter estimates were higher than 0.70, and the
signs of parameter estimation were all in the same direction to measure specific latent variables.
The composite reliability, correlation, average variance extracted (AVE), and square root
of the AVE were calculated and presented in Table 3. The results revealed that the composite
reliability of all of the constructs was greater than 0.72, and the output of AVE for the model
with independent and dependent variables exceeded 0.50 (Fornell and Larcker, 1981). Hair et al.
(1995) and Carmines and Zeller (1988) recommended that composite reliability should be greater
than 0.70, and AVE should be greater than 0.50 to indicate construct validity. In order to
evaluate discriminant validity, this study compared the square root of each construct’s AVEs to
its correlation with other variables (Chin 1998). The results showed that all items were loaded
significantly on their predefined constructs, and that the construct correlations were all below the
square root of AVE for each construct. If the square root of the AVE for each construct is larger
than the correlation between the construct and any other construct in the model, then the
measures should be considered to possess adequate discriminant validity (Fornell and Larcker,
1981). Thus, our results proved the reliability of the data and convergent validity.
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12
“Insert Table 3 here”
Structural Model and Hypothesis Testing
After conducting the validity and reliability tests for all the constructs through the measurement
model, it is also necessary to demonstrate the overall fit of the structural model (see Figure 2). In
this study, the hypothesised model was assessed using multiple model-fit measures to assess its
overall goodness of fit.
“Insert Figure 2 here”
The structural model revealed an adequate model fit with the data. The results in Table 4
show that χ²/df (2.46), TLI (0.91), CFI (0.92), IFI (0.92), RMSEA (0.06), and GFI (0.82) were
above or quite close to the cut-off criteria. The table also shows the recommended level of each
index (Hair et al., 2006 and Meyers, Gamst and Guarino, 2005). In this study, the GFI values of
0.70 and 0.82 were lower than the commonly cited thresholds of 0.90; however, they were within
range of the recommended levels. Yen and Lu (2008) argued that a GFI ranging from 0.80 - 0.90
could be interpreted as a reasonable fit. In Table 4, all the model-fit indices on the measurement
and structural model were above or quite close to the cut-off criteria suggested by (Hair et al.,
2006). This indicates that all the data fit reasonably well with the proposed model. Thus, it can
be concluded that the models are valid, and we can continue to analyse the outcome of the
hypothesised effects.
“Insert Table 4 here”
Results of hypotheses testing
The relationship between the independent variables and overall service quality was investigated.
Table 5 summarises the results of the hypothesised relationships. As shown in the table, tangibles,
empathy, Internet banking, and reliability and security have a positive and significant influence
on the overall service quality, thus supporting H1, H2, H3, and H5. This indicates that tangibles,
empathy, Internet banking, and reliability and security are all important factors that influence
customer perception of the overall service quality received from the bank. These factors
accounted for 73% of variance in the overall service quality. Reliability and security was a
stronger predictor of the overall service quality. The results in Table 5 show that hypothesis H4
is not supported. The result shows that the coefficient from convenience to overall service
quality is not statistically significant, with a very weak standardised estimate (β = 0.013, p <0.78).
A possible explanation is that customers are more prone to utilising online services and devices,
making convenience irrelevant vis-à-vis their perception of the quality of services offered by
banks.
“Insert Table 5 here”
Hypotheses 6, 7, and 8 are concerned with the direct effect of perceived overall service quality
on trust, customer satisfaction, and a bank’s reputation. It is observed that the overall service
quality has a positive and significant effect on trust (β = 0.91 and p < 0.00), customer satisfaction
(β = 0.92 and p < 0.00), and bank reputation (β = 0.51 and p < 0.00), thus supporting H6, H7,
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13
and H8. This indicates that the overall service quality is a significant contributor in building
customer trust in relation to banks, and customers will be satisfied if the perceived overall
service quality is high. Our results also suggest that good overall service quality is an important
aspect in enhancing a bank’s reputation.
Discussion and Implications
Based on the work of Caruana (2002), Bahia and Nantel (2000) and Lee and Moghavvemi
(2015), this study presented and tested an empirical study of a model of perceived overall service
quality in the banking industry, particularly in a Malaysian context. This research identified
dimensions of service quality (i.e., tangibles, empathy, reliability and security and Internet
banking) that influence the overall perceived service quality, and examine how these overall
perceptions will eventually influence customer trust, customer satisfaction, and bank reputation
being valid and reliable in the retail banking industry. Knowledge from the findings of this study
is critical to practitioners and academics alike, especially in the context of accurately measuring
service quality in order to better understand its essential antecedents and consequences for
improving quality to achieve a competitive advantage.
Our findings confirm that all hypotheses (H1, H2, H3, H5, H6, H7, and H8) were
supported and confirmed, albeit H4 was not supported. This research suggested a number of
implications to the theory. First, this study confirms that there are four dimensions (i.e.,
tangibles, empathy, reliability and security and Internet banking) of service quality that influence
the perceived overall service quality in banking. Second, this study confirms that the perceived
overall service quality positively effects customer trust, customer satisfaction, and bank
reputation. This study also confirmed the theory of expectancy of disconfirmation on the possible
relationship between service quality and satisfaction and behavioural outcome. This study has
presented a model of perceived overall service quality pertaining to the banking industry. This
research explains how the dimensions of service quality influence the overall perceived service
quality, and how these overall perceptions will eventually influence customer trust, customer
satisfaction, and reputation. The significant relationship between the overall perceived service
quality and customer trust indicates that when customers perceive the overall service quality to
be high, they will trust the banks more, which results in satisfied customers and better bank
reputations. The findings of this study are consistent with previous studies. For example, Cronin
et al. (2000) reported that service quality is an important driver of overall perceived service
quality.
Second, our results also suggest that perceived overall service quality be represented by
tangibles, empathy, reliability, while security and Internet banking is significantly related to
customer satisfaction, customer trust, and bank reputation. The significant relationship between
perceived overall service quality and customer satisfaction, trust, and bank reputation indicates
that the quality performance of tangibles, empathy, reliability and security and Internet banking
is important for banks to satisfy customer, increase customer trust and enhance perception of
good bank reputation of bank. The findings on the significant relationship between perceived
overall service quality and trust also support Singh and Sirdeshmukh (2000) and Amin et al.
(2013), both of whom found that service quality is essential in building trust. In the context of
the banking industry, trust is defined as a bank being trustworthy, honest, practices integrity, and
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14
is reliable in delivering service to its customers. The test results indicate that there is enough
empirical evidence to state that the overall service quality significantly enhances customer trust.
The significant relationship between perceived overall service quality and customer
satisfaction supporting the previous research by Spring and MacKoy (1996) and Gonzalez et al.
(2007), McDougall and Levesque (2000) and Glaveli, Petridou, Liassides and Spathis (2006).
The positive relationship between perceived overall perception service quality and customer
satisfaction suggests that customers are more likely to be satisfied with their bank when the
perceived overall service quality is high. This finding suggest that customer will be satisfied
with a bank when service performance being delivered met their needs and expectations.
Finally, our findings on the relationship between dimensions’ overall service quality and bank
reputation is supported by Wang, Lo and Hui (2003).
Overall, our research contributes to theoretical implications. Specifically, it examines the
specific dimensions of service quality and its influence on the perceived overall service quality.
We also provide an empirical examination of the direct relationship between the perceived
overall service quality and customer trust, customer satisfaction, and bank reputation. This
empirical investigation forms a novel contribution to the literature.
With respect to managerial implications, this study help managers identify specific
dimensions of service quality (i.e., tangible, reliability and security, empathy and Internet
banking), which will allow them to improve the overall service quality of banking. This research
has provided managers with a model to help them measure service quality performance. This
suggests that banks should not sacrifice personnel quality (i.e., staff professionalism and training,
etc.) and tangible quality to maximise profitability.
Tangibility has been shown to be one of the dimensions of service quality. This means
that customers need more tangibility to identify services where value is created in their physical
presence on the service process, for example, in the context of banking. This would suggest that
banks should provide adequate infrastructure and facilities, such as parking space and ATMs,
modern looking equipment in the bank, attractive brochures and statements, and comfortable
lobby area in order to gain trust, increase customer satisfaction, and enhance perception of better
reputation.
Furthermore, this study confirmed that reliability and security construct having a strong
impact on the perceived overall service quality. This indicates that the banks need to address
reliability and security concerns in the context of the ability to perform services accurately and
without error, and the banks’ ability to inspire feeling of security. For example, banks should
maintain error-free records (e.g., accurate bills and statements), keep confidentiality of account
and privacy of customers, provide adequate physical security, and alert customers quickly for
any suspicious or fraudulent transaction. In most cases of services evaluation, customers expect
service processes to be reliable (Chowdhary and Prakash, 2007).
Empathy is clearly regarded as important to the perceived overall service quality.
Customers expect the banks to personalise their attention. For example, banks should train their
staff to always respond to customer request, understand customer's specific needs, be friendly
and polite, responsive to customer complaints, and maintain politeness when handling customers.
Finally, this study empirically confirmed that Internet banking was found to have a
considerable effect on the perceived overall service quality in the proposed relations. This may
be due to the majority of customers searching for Internet banking facilities, making it a key
determinant of overall service quality. This suggests that bank management should make the
effort to promote online banking in their respective marketing strategy. For example, banks
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15
should provide adequate security features, quick transactions, appropriate confirmation
concerning the completion of transactions, and user-friendly features.
Although our findings agree with previous findings on service quality, we did not find
any significant support for the impact of convenience on the overall service quality. The most
possible explanation is that customers do not consider convenient location of banks, working
hours, the number of ATM to satisfy, build trust, and have a good reputation.
As such, these dimensions should be continuously monitored in order to build customer trust,
improve customer satisfaction, and enhance the reputation of an organisation. By carefully
focusing on these dimensions, managers would be able to build enduring relationships with their
customers. To strengthen competitiveness, it is recommended that banks should not just focus on
customer satisfaction, but also emphasise service quality (tangibles, empathy, reliability and
security, and Internet banking) in order to achieve high levels of perceived overall service quality
and trust, and the reputation of the banks. In most service industry, e.g. banking, an
improvement of service quality will certainly contribute to positive reputation (Wong, Lui and
hui, 2003)
All in all, a proper understanding of the determinants and consequences of perceived overall
service quality is essential to the organisation in order to be competitive. As a result of this,
further research exploring the relationship between service quality and trust, customer
satisfaction and bank reputation are clearly necessary and appropriate.
Conclusion, limitations and future research
Customers are the core focus of banks. Thus, it is essential for the banks’ management to
understand how customers’ perceive overall service quality. Due to the fact that banks do not
provide tangible products, their service quality is usually assessed by measures of the service-
provider’s relationship with customers. Thus, the perception will affect customer trust in banks,
customer satisfaction, a bank’s reputation. Service quality can be used as a tool to distinguish,
provide a competitive edge, and increase the market size of the banks.
Furthermore, a high quality bank-customer relationship can help bank serve customers in
a more satisfactory manner; and customers are more likely to trust a bank, which will ultimately
enhance a bank’s reputation. This study examines the service quality issues in the Malaysian
banking industry from the perspective of customers. Based on the data furnished by bank
customers in Malaysia and the subsequent analysis, some important findings were made. It is
therefore important for local banks to improve service quality if they are to build and enhance
customer trust, satisfaction, and reputation. This would attract a larger share of profitable
customers and maintain a sustainable competitive advantage in the long run in the banking
industry.
This study also found that customer experience on the overall service quality significantly
affects customers’ trust towards a bank, customer satisfaction, and bank reputation. This suggests
that customer perception of the overall service quality is another strategy that banks should
emphasise, as high-quality service results in customer trust, satisfied customers, and enhanced
bank reputation. This study is a preliminary attempt to explore the dynamic relationship between
service-related factors: tangibles, empathy, reliability and security, convenience, Internet
banking, overall service quality, bank reputation, trust, and customer satisfaction. There are,
however, limitations to the current study. This study only identified five dimensions of service
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quality, future research should consider another dimensions of service quality that have potential
to influence customer satisfaction, trust and bank reputation. This study also focused on the
banking industry. Given the diversity of the service industry, these findings may have to be
tested for applicability in different service industries. Most importantly, the results indicated that
service quality might play an important role in producing a strong image and reputation, trust,
and satisfaction.
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Biography
Dr. Zalfa Laili Hamzah is currently serves as Senior Lecturer in the Marketing Department of
the Faculty of Business and Accountancy at University of Malaya, Kuala Lumpur, where she
received her PhD in Corporate Branding. She has taught courses at postgraduate programme in
Marketing Management, Brand Management and Services Marketing. Her research interests are
corporate brand, corporate image, service/brand management, consumer behaviour and online
branding. Dr. Zalfa has presented her research papers at several international conferences
including the Thought Leader Conference of Brand Management, Academy of Marketing,
London, ANZMAC International Corporate Identity Group.
Dr. Sedigheh Moghavvemi is a Senior lecturer within the Faculty of Business and
Accountancy, University of Malaya. Her primary research activities involve the area of adoption
behaviour of innovative information systems by individuals and organisations, the area of
information management and it effect on organsations and also Tourism. Sedigheh has
researched on the effect of Information technology on tourism industry, Islamic medical tourism,
Halal tourism and impact of social network on islamic medical tourism.
Dr. Lee Siew Peng is Assistant Professor of finance at the Faculty of Accountancy and
Management, Universiti Tunku Abdul Rahman, Malaysia. She also served as an ad hoc referee
for national and international journals. Her primary research interest is in corporate finance, and
Islamic banking and finance. She has researched and published in national and international
journals and presented papers at conferences.
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Figure 1:
Figure 1: The Conceptual Research Framework
Internet Banking
Tangibility
Empathy
Reliability &
Security
Convenience
Perceived
Overall Service
Quality
Customer
Satisfaction
H7
H8
Trust
H6
Bank
Reputation
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TABLES
Table 1: Demographic Profile of Respondents
Profile Description Frequency Percentage
(%)
Gender Male 146 38.9
Female 229 61.1
Age Below 20 years 5 1.3
21- 30 years 153 40.8
31 – 40 years 129 34.4
41 – 50 years 61 16.3
51 years above 27 7.2
Profession Salaried-private sector 169 45.1
Salaried-government 88 23.5
Student 59 15.7
Business/ Self employment 37 9.9
Housewife 12 3.2
Others 10 2.7
Monthly income Below RM2000 53 14.1
RM2001-RM4000 113 30.1
RM4001-RM6000 63 16.8
RM6001-RM8000 28 7.5
RM8001-RM10000 41 10.9
RM10001 and above 77 20.5
Preferred
transaction Automated Teller Machines 294 78.4
Internet Banking 255 68.0
Tellers at bank 150 40.0
Phone banking
19 5.1
Duration of
being bank
customer
Less than 1 year 14 3.7
1-5 years 149 39.7
6-10 years 110 29.3
More than 10 years 102 27.2
Notes: N=375.
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Table 2: Mean Scores, Cronbach Alpha and Factor Loading
Constructs Item statements Mean S.D α Factor
Loading
Tangibles Infrastructure and facilities, such as parking space and ATMs, are
adequate.
Equipment in the bank is modern-looking.
Printed materials, such as brochures and statements are attractive.
Maintain clean and pleasant branch facilities.
The lobby area is comfortable while waiting for services.
Provide easy-to-read and understandable bank statement.
4.46 0.14 0.802 .579
.780
.758
.831
.817
.719
Empathy Bank gives customers individual attention.
Bank staff never too busy to respond to my requests.
Bank staff understand customer's specific needs.
Bank staff are friendly and polite.
Bank is very responsive to customer complaints.
Bank staff are polite when handling customer complaints.
Bank staff willing to help elderly and disabled customers and give them
special attention.
4.74 0.91 0.832 .754
.608
.777
.667
.831
.828
.599
Reliability
and Security Bank maintains error-free records (e.g., accurate bills and statements).
Bank keeps confidentiality of account and privacy of customers.
Bank delivers up to date records.
Physical security at bank is adequate (e.g., security guards, CCTVs).
ATM machine is located at a secure location.
Bank is located in secure location.
Bank is quick to alert customers to any suspicious or fraudulent
transaction.
Bank always asks questions for verification in phone banking.
5.11 0.89 0.894 .791
.746
.711
.633
.775
.825
.686
.564
Convenience Bank branches are located in a convenient location.
Bank extends its working hours in order to meet customer needs.
Number of open tellers during peak hours is adequate.
Waiting time for receiving services is not too long.
Bank provides the necessary convenience for customers (e.g., parking
area and special counters for elderly/disabled customers).
ATMs are conveniently located (e.g., shopping malls, government
departments, etc.).
Bank service is easily accessible by telephone.
4.53 0.95 0.817 .729
.639
.655
.685
.644
.732
.595
Internet
Banking The online banking has adequate security features.
The online banking is fast for making transactions.
It is easy to learn how to operate online system.
The online system makes appropriate confirmation concerning the
completion of transactions.
I received confirmation of every online transaction by SMS.
The online banking system has a user-friendly interface.
5.19 1.02 0.929 .844
.901
.902
.890
.766
.887
Overall
Service
Quality
My bank always delivers excellent overall service.
The services offered by my bank are high quality.
My bank delivers superior service in every way.
My bank offers me a complete range of products.
The personnel provide a friendly atmosphere.
The bank insists on error-free records.
4.95 0.87 0.915 .849
.878
.861
.789
.831
.831
Trust The bank staff are trustworthy.
The bank treats me in an honest way in every transaction.
I feel safe in my transactions with the bank.
The bank will not let other people know my account balance.
Bank tellers accurately verify all transaction requests.
Overall, I have complete trust in my bank.
5.25 0.86 0.918 .839
.840
.865
.817
.842
.855
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…cont’d Table 2: Mean Scores, Cronbach Alpha and Factor Loading
Constructs Item statements Mean S.D α Factor
Loading
Customer
Satisfaction The services of this bank meet my expectations.
I did the right thing when I chose this bank for its services.
I am satisfied with the quality of the bank’s services.
I am satisfied with the various bonus link programmes of the bank.
I am satisfied with the interactions that I have had with the bank.
The bank satisfies my needs.
5.01 0.85 0.883 .827
.861
.859
.614
.818
.830
Bank
Reputation I will continue to patronize this bank even if the service charges are
increased.
I am willing to pay more for using the services of this bank.
To me, this bank would rank first among the other banks.
The bank I patronize reflects a lot about who I am.
This bank has a good reputation in this industry.
The bank does what it promises for its customers.
4.59 0.99 0.874 .769
.832
.828
.845
.692
.736
Notes: scores based on a seven-point scale ranging from 1 = strongly
disagree to 7 = strongly agree, SD = Standard Deviations.
Table 3: Composite Reliability, Average Variance Extracted, Correlation
Construct
CR AVE 1 2 3 4 5 6 7 8 9
Tangibles
0.80 0.82 0.90
Empathy
0.81 0.82 0.587
**
0.90
Reliability and
Security
0.72 0.67 0.533
**
0.429
**
0.81
Convenience
0.78 0.79 0.592
**
0.716
**
0.361
**
0.88
Internet Banking
0.93 0.85 0.437
**
0.355
**
0.720
**
0.305
**
0.92
Overall Service
Quality
0.92 0.83 0.505
**
0.435
**
0.698
**
0.320
**
0.666
**
0.91
Trust
0.90 0.82 0.467
**
0.383
**
0.713
**
0.282
**
0.626
**
0.772
**
0.90
Customer Satisfaction
0.88 0.80 0.500
**
0.409
**
0.594
**
0.320
**
0.571
**
0.822
**
0.744
**
0.89
Bank Reputation
0.82 0.73 0.403
**
0.234
**
0.580
**
0.222
**
0.517
**
0.641
**
0.596
**
0.587
**
0.85
Notes: Values on the diagonal are the square root of the AVE; CR=Composite reliability; ** p<0.01
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Table 4: Goodness of Fit Indices of The Measurement and Structural Model
Quality-of-fit
measure
Recommended
value
Measurement
model
Structural model
χ²/ df ≤3.00 2.53 2.47
TLI ≥0.90 0.91 0.91
CFI ≥0.90 0.91 0.92
IFI ≥0.90 0.91 0.92
RMSEA ≤0.08 0.06 0.06
GFI ≥0.90 0.80 0.81
Notes: the ratio of χ² to degree-of-freedom (d.f.), Tucker-Lewis Index (TLI), comparative fit index (CFI),
incremental fit Index (IFI), root mean square error of approximation (RMSEA) and goodness of fit index (GFI).
Table 5: Hypotheses Testing Results
Constructs Hypotheses β SE CR P-value Support
Tangibles → Overall service quality H1 0.10 0.06 1.98 0.04
**
Yes
Empathy → Overall service quality H2 0.24 0.07 4.27 *** Yes
Reliability & Security → Overall service quality H3 0.41 0.07 6.42 *** Yes
Convenience → Overall service quality H4 0.01 0.03 0.02 0.78 No
InternetBanking → Overall service quality H5 0.23 0.04 4.48 *** Yes
Overall service quality → Trust H6 0.91 0.05 16.44 *** Yes
Overall Service quality → Satisfaction H7 0.92 0.05 15.11 *** Yes
Overall service quality →
Image/reputation H8 0.51 0.06 8.55 *** Yes
Notes: β= Standardized Regression Weight, SE = Standardized Error, CR = Critical Ratio. * implies significant at p< 0.05;
** implies significant at p< 0.01; and *** implies significant at p< 0.001.
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