THE EFFECT OF ELECTRONIC BANKING SERVICE QUALITY ON CUSTOMER SATISFACTION: IN THE CASE OF COMMERCIAL BANK OF ETHIOPIA
THE EFFECT OF ELECTRONIC BANKING SERVICE QUALITY ON CUSTOMER SATISFACTION: IN THE CASE OF COMMERCIAL BANK OF ETHIOPIA
ABSTRACT
One of the biggest contemporary challenges of management in service industries is providing the right quality to maintaining customer satisfaction and getting positive word of mouth from the consumers. Service quality and customer satisfaction has increasingly been identified as key factors for influencing Electronic banking customers for their being loyal to the bank. This study seeks to examine the effect of electronic banking service quality on customer satisfaction among saving account customers in six selected branches of west Addis district (Habtegiorgis, Geja sefer, Teklehaymanot, pawlos, sumaletera and Anwar mesgid) of the CBE. A survey research was conducted that primarily used quantitative data. A total of 190 bank customers from all selected branches responded to the questionnaire items that measured the research variables. A descriptive ANOVA and correlation analysis was carried out and revealed that service quality dimensions are significant predictors of customer satisfaction. More over logistic regression analysis carried out and the result; Speedy and Quick service, adequate Amount of cash limit to be withdrawn in a day, Employees readiness to response quickly, easiness to regain the captured, expired and lost cards, simplicity and clear language, Appearance of the ATM facility and its Attractiveness, availability of statement printing are identified as a determining factors of Customer satisfaction. The effects of demographic and personal banking detail indicators of service quality perception, and customer satisfaction are also examined. The result revealed that saving account customers’ perception of service quality influenced by differences in age, level of education, occupation and average re-patronage per month. Age and sex were the demographic variables influencing customers’ satisfaction. To overcome the methodological limitation of this study, the branches shall use an in depth full study with a longitudinal design and relatively increased sample size. The result of this study implies management of the six branches shall design appropriate marketing strategies to achieve an increased service quality via boosting customer satisfaction. : Service quality, Customer Satisfaction, Electronic banking.
TABLE OF CONTENTS
ABSTRACT ...................................................................................................................................... V
ACKNOWLEDGEMENTS .......................................................................................................... VI
LIST OF TABLES .......................................................................................................................... X
LIST OF FIGURES ........................................................................................................................ X
LIST OF APPENDIX ..................................................................................................................... X
CHAPTER ONE ..............................................................................................................................1
INTRODUCTION ...........................................................................................................................1
1.1 Background of the study .........................................................................................................1
1.2 Statement of the Problem ........................................................................................................4
1.3 Research Question ..................................................................................................................5
1.4 Objective of the Study ............................................................................................................6
1.4.1 General Objective ............................................................................................................. 6
1.4.2 Specific Objectives ........................................................................................................... 6
1.5 Research Hypothesis ..............................................................................................................6
1.6 Scope and Limitation of the study ..........................................................................................7
1.6.1 Delimitation (Scope) of the Study ...................................................................................... 7
1.7 Significance of the Study .......................................................................................................7
1.8 Organization of the Paper .......................................................................................................8
CHAPTER TWO .............................................................................................................................9
LITRATURE REVIEW ...................................................................................................................9
2.1 Introduction ............................................................................................................................9
2.2 E-Banking ...............................................................................................................................9
2.2.1 Meaning of E-Banking ....................................................................................................... 9
2.2.2 Types of E-Banking ......................................................................................................... 10
2.3 Service ..................................................................................................................................11
2.3.1. What is Service? .............................................................................................................. 11
2.3.2. Service Quality ................................................................................................................ 12
2.3.3. The Five Service Quality Dimensions ............................................................................ 13
2.3.4. Electronic banking services quality dimensions ............................................................. 15
2.4. Customer Satisfaction .........................................................................................................17
2.4.1. Customer Satisfaction ..................................................................................................... 17
2.5. The Relationship between Service Qualities and Customer Satisfaction............................18
2.6. Difference between Physical and Virtual Banking .............................................................20
2.7. Conceptual Framework .......................................................................................................21
2.8 Empirical Framework ...........................................................................................................21
CHAPTER THREE .......................................................................................................................25
RESEARCH METHODS ..............................................................................................................25
3.1 Research Design ...................................................................................................................25
3.1.1 Population......................................................................................................................... 25
3.1.2 Unit of Analysis ............................................................................................................. 25
3.2 Sampling Techniques and Sample size .................................................................................25
3.3 Data source and collection procedures .................................................................................26
3.4 Method of data analysis ........................................................................................................27
CHAPTER FOUR ..........................................................................................................................29
DATA ANALYSIS AND PRESENTATION ...............................................................................29
4.1. Introduction .....................................................................................................................29 4.2 General Characteristics of Respondents ...............................................................................29
4.3 Descriptive Analysis of the Dependent and Independent Variables .....................................35
4.4 Econometric Analysis and Results .......................................................................................35
4.4.1 Correlation between explanatory variables .................................................................... 36
4.4.2 Analysis of variance ....................................................................................................... 37
4.4.3 Binary Logistic Regression Analysis ............................................................................... 41
4.4.3.1 Determinants of customer satisfaction using Logistic Model .................................... 42
4.4.3.2 Interpretation of Variables from the Model Output ...................................................... 44
CHAPTER FIVE ...........................................................................................................................47
CONCLUSIONS AND RECOMMENDATIONS ........................................................................47
5.1 Conclusion ............................................................................................................................47
5.2 Recommendations .................................................................................................................48
5.3 Recommendations for future research ..................................................................................49
BIBLIOGRAPHY ..........................................................................................................................50
List of tables
| Table |
Description |
Page |
| 4.1 |
Sex of the respondents |
29 |
| 4.2 |
Ages of the respondents |
30 |
| 4.3 |
Educational status of the respondents |
30 |
| 4.4 |
Occupation of the respondents |
31 |
| 4.5 |
Respondents average re patronage per moth |
32 |
| 4.6 |
Respondents banking experience with bank |
32 |
| 4.7 |
Respondents frequency of banking before introduction of e-banking |
33 |
| 4.8 |
Respondents frequency of banking with introduction of E-banking |
33 |
| 4.9 |
Problems/ Challenges pertain E-Banking |
34 |
| 4.10 |
Type of E-Banking service |
34 |
| 4.11 |
Descriptive Statistics |
36 |
| 4.12 |
Correlation between independent variables |
37 |
| 4.13 |
One way ANOVA test on the effect Reliability on Customer satisfaction |
38 |
| 4.14 |
One way ANOVA test on the effect Responsiveness dimension of service quality on the Customer satisfaction |
38 |
| 4.15 |
One way ANOVA test on Assurance dimension of service quality with Customer satisfaction |
39 |
| 4.16 |
One way ANOVA test on Empathy dimension of service quality with Customer satisfaction |
40 |
| 4.17 |
One way ANOVA test on Tangibility dimension of service quality with Customer satisfaction |
41 |
| 4.18 |
SPSS output of the logit model |
43 |
List of figures
| Figure |
|
Page |
| 2.1 |
Conceptual Framework |
21 |
List of Appendix
| Appendix |
|
Page |
| 1 |
English questionnaire |
54 |
| 2 |
Logistic regression results |
58 |
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
The new economy, also called e -economy, is the most frequently used term in economic and technical literature, discussions of scientists, businessmen and politicians beside globalization and information technology society. Three planes of understanding of the new economy can be distinguished: as a system of new principles explaining how economic subjects function on the market; as activities of economic subjects in the strongly changed Conditions (Anisoara, 2008). Owing to the dynamic development of technical progress, especially in information technology economic subjects change completely strategy of their activities many times. Information and knowledge as main economic categories, which are the basis of the contemporary business, are the foundation of activity another term is assigned to this understanding, namely knowledge based-economy. The third plane, new economy treated as a subject, namely determining activities of an enterprise in the IT sector. Therefore, the new economy, also called cybereconomy, constitutes a new paradigm of business. On this virtual market E-business is a new form of an exchange of resources by means of information technology systems and internet technologies, conducted on-line through electronic connections and an information exchange by use of electronic multimedia such as Internet, cable and satellite television, telephony, electronic cards, Intra and Extranet at the national and international level (Camelia, 2008).
E-banking can improve a bank’s efficiency and competitiveness, so that existing and potential customers can benefit from a greater degree of convenience in affecting transactions. This increased level of convenience offered by the bank, when combined with new services, can expand the bank’s target customers beyond those in traditional markets. A bank may be faced with different levels of risks and expectations arising from electronic banking as opposed to traditional banking (Olanipekun, 2013).
Furthermore, customers who rely on e -banking services may have greater intolerance for a system that is unreliable or one that does not provide accurate and current information. Clearly, the longevity of e-banking depends on its accuracy, reliability and accountability. The challenge for many banks is to ensure that savings from the electronic banking technology more than offset the costs and risks involved in such changes to their systems (Wahid, 2013). While financial institutions have faced difficulties over the years for a multitude of reasons, the major cause of serious banking problems continues to be directly related to lax credit standards for borrowers and counterparties, poor portfolio risk management or a lack of attention to changes in economic or other circumstances that can lead to a deterioration in the credit standing of a bank’s counterparties (Karen, 2002).
An increase in social expectations in relation to subjects rendering financial services, dissemination of new technologies, more developing technical culture of society, an increase in importance on information technology in economy, business globalization, consolidation of banks and an increase in competitiveness are only a few reasons which had an influence on a type and quality of services rendered by banks. It leads to a necessity of bank strategies modification imposed by costs reduction, change of clients, consumption patterns, dynamic development of new technologies, and polarization of clients because of their ability to use the Internet and positive attitude towards electronic media. As a result, a new quality of bank services is being provided and clients will gradually change their perception of bank sector institutions (Mirabi, 2008).
Satisfaction is a crucial concern for both customers and organizations especially for banks. However, the concept of satisfaction is subjective and varies from person to person as well as product to product. Value and quality are the main concepts incorporated in many literatures of the customer satisfaction. According to (Zeithaml, Bitner, & Gremler, 2006) value is the importance attached to services based on their usage and the amount paid in exchange. On the other hand, there is no universally accepted definition of quality. For some quality is achieving or reaching for the highest standard instead of being satisfied with the sloppy or fraudulent (Parasuraman Z. &., 1991). To others, differences in quality amount to differences in the quality level of some desired ingredient or attribute. To many academics, quality refers to the amounts of the non priced attributes contained in each unit of the priced attribute (Garvin, 1988).
Service providers must render quality service to their customers. Moreover, understanding and meeting customers’ expectations and subsequently being different from competitors are important in order to survive and excel throughout the stiff competition (Kumbhar, 2011).
Customers in Ethiopia are late adopters of the internet and its applications with regard to electronic banking. It looks that electronic banking is facing difficulties in Ethiopia. Ethiopian banking system is still developing as compared to the rest of the world and electronic payment systems are at an embryonic stage. Creating an electronic banking in Ethiopia is the same as to building a web business for all who are participating in the economy of the country. This leads the country to the electronic business (e-business). The e-business or E-commerce is about using electronic techniques to create opportunities, create new markets, new processes and growth the creation of wealth using electronic mediums (Abreham., 2012).
The advancement of information technology in today’s banking system has become simple, speedier and readily accessible through various devices such as personal computers, mobile phones, etc. The electronic banking services include Automated Teller Machines (ATM), Mobile banking, Internet Banking, Tele Banking, Electronic Credit cards, (Abdi, 2006).
As a result of technological improvement and dynamism the Banking sector is experiencing rapid changes and this demands banks to serve their customers electronically. The evolution of ebanking started from the use of Automatic Teller Machine (ATM) and Finland is the first country in the world to have taken a lead in e-banking (Geeta, 2014).
The National bank of Ethiopia (NBE) inaugurated its new centralized, online, real-time, electronic (CORE) Banking system in effect since Nov 2013 in order to facilitate the payment of the banking system and also a mandatory to use electronic banking that enable banks to provide mobile, internet and card banking services. Following the implementation of the NBE’s national payment system(NPS) in 2011, a plat form which integrates all electronic inter-bank money transactions, all Ethiopian banks were required to deploy CORE banking solutions.
The Commercial Bank of Ethiopia is one of the publicly owned banks in Ethiopia. Currently under fifteen districts it has more than 980 branches all across Ethiopia. Aiming at enhancing efficient and effective service delivery, since November 2008 the bank engaged in full implementation business process reengineering.
Out of the 74 branches under West Addis district of the Commercial Bank of Ethiopia, this study was conducted on six branches which are Habtegiorgis, Geja sefer, Teklehaymanot, pawlos, sumaletera and Anwar mesgid Branches. It focuses on effect of E-banking service quality on customer satisfaction.
1.2 Statement of the Problem
One of the major significance of e-banking product and services is improved efficiently and effectiveness of the operations so that transactions can be processed faster and most conveniently. Thus, it has enhanced customer services, effective distribution, improved operations, faster access to information and improved internal processes. This implies that customers benefit ranges from reduced frequency of going to the banking halls to handling of cash (Wahid, 2013; Karen, 2002; Bordens & Abbott, 2011).
However, despite this importance of e–banking, closer observation shows that there are still long queues seen in some banking halls even as customer still handle too much cash, problem of frequent network failure which have adverse effect and inadequate awareness of available ebanking production and services, even as empirical evidence shows that level of understanding of a product and its commensurate benefits determines the reactions of customers to it and patronage (Simon, 2013).
The introduction of electronic banking in to the banking sector helps to bring customer satisfaction and service quality to enhance the banks’ profitability. This technology improves customer satisfaction and service quality. The old age people are generally shy of using ATM because of perceived risk of failure, complexity, security and lack of personalized service (Nupur, 2010). (Abreham., 2012) described several benefits of electronic banking like transferring money, collecting receivable, paying bill, productivity gains, transaction cost reduction, customer service improvement and the same time establishing a means to control the overall activities on banking accounts.
Since e-banking service adoption by banks, customers seem not willing to adapt to these services and this is evident by increased queues in the banking halls, customers are still carrying large amount of cash, which points to their being dissatisfied with the services. However, banks have tried to improve their systems by building more infrastructures and new services like mobile banking to increase customer satisfaction but the problem has persisted. This is probably due to the increasing problems associated with e-banking systems.
Currently there are some factors which affect customer satisfaction and service quality in electronic banking service in most banks in general and in Commercial Bank of Ethiopia in particular. Those are machine out of service, machine run out of cash, failure to provide printing statement, card get blocked, frequent breakdown of ATM service, lack of sufficient technician for maintenance of the breakdown of ATM machine, lack of sufficient alternative system which substitute ATM service for the customer when temporary problem happen in the machine, interruption of network, and reversing a transaction and refund is not possible and hardly do people talk about problems of these services. Besides, lack of fair distribution of e-banking service in all over branches of CBE.
Satisfaction and service quality is a crucial concern for both customers and organizations including banks. Although many studies support the relationship, service quality measurement remain a controversial issue. In terms of measurement methodologies, some authors suggested that the service quality concept results from the comparison of performance perceptions with expectations (Parasuaman & Zeithmal, 1988). This conceptualization of service quality guided by a gap theory which uses a service quality scale called SERVQUAL to measure the quality of a service (Siddiqi K. O., 2011) studied the interrelationship between service quality and customer satisfaction using the five service quality dimensions (i.e. Tangibility, Reliability, Responsiveness, Assurance and Empathy) and the two dimensions (i.e. relative attitude and repeat patronage behavior) results showed in Bangladesh retail banking industry tangibility, reliability and responsiveness dimensions has medium correlation to customer satisfaction while assurance and empathy has a large positive correlation to customer satisfaction.
Standing on the above problems; the researcher is interested to investigate and analyze the Effect of e-banking Service Quality on customer satisfaction.
1.3 Research Question
- What are e-banking service quality factors to determine customer satisfaction?
- Does e-banking service quality reduced branch visits for customers?
- Which service quality dimensions (i.e. Tangibility Reliability, Responsiveness, Assurance and empathy) have significant positive contribution to customers’ satisfaction?
1.4 Objective of the Study
1.4.1 General Objective
The general objective of the study is to asses and examines the Effect of e-banking service
Quality on customers’ satisfaction of saving account holders of the commercial bank of Ethiopia with particular selected branches.
1.4.2 Specific Objectives
- To analyze if e-banking service has reduced the visits of branches for customers
- To identify factors that determine customer satisfaction
- To examine the major challenges of e-banking from customers point of view.
- To determine the effects of service quality dimensions (Reliability, Responsiveness, Assurance, Empathy and Tangibility) have on customers’ satisfaction.
1.5 Research Hypothesis
Based on the research objectives and questions of the study the following hypotheses are developed and were tested in this study:
H1: Reliability dimension of service quality has a significant positive effect on customer satisfaction.
H2: Responsiveness dimension of service quality has a significant positive effect on customer satisfaction.
H3: Assurance dimension of service quality has a significant positive effect on customer satisfaction
H4: Empathy dimension of service quality has a significant positive effect on customer satisfaction.
H5: Tangibles dimension of service quality has a significant positive effect on customer satisfaction
1.6 Scope and Limitation of the study
1.6.1 Delimitation (Scope) of the Study
The scope of this study is delimited to see the effect of e-banking service quality on customer satisfaction by using the five dimensions of service quality; these are reliability, responsiveness, assurance, empathy, and tangibles (Parasuaman & Zeithmal, 1988). The study was conducted on Commercial Bank of Ethiopia selected branches. The study was restricted to specific area which is west Addis District six selected branches (Habtegiorgis, Geja sefer, Teklehaymanot, pawlos, sumaletera and Anwar mesgid) as opposed to the entire branches of CBE all across the country.
The study only focus on Ebanking services ATM, POS and Mobile banking.
1.6.2 Limitation of the study
First, in this study those customers who have saving account and waiting for e-banking services at Commercial Bank of Ethiopia, selected branches in the time of data collection was taken as respondents. For instance like customers who send and receive local transfers were not included in the study unless they are account holders as e-banking service is given to account holders in the bank.
The Second limitation of this study is that it only considers customers perspective of e-banking and it does not take in to consideration what perspective do all bankers, employees and other stakeholders have on the technology. In addition to this, a larger and more representative sample will give broader representation to identify the effect of e banking service quality on customer satisfaction.
Third, only the five service quality dimension variables were used to see their Effect. Incorporating other variables like company reputation, access, security etc may give a more comprehensive picture.
1.7 Significance of the Study
First, the study would be useful for Commercial Bank of Ethiopia in order to see the Effect of Ebanking service quality on customers’ satisfaction. Second, it helps in understanding what attitude customers’ have towards e-banking. Third, it would be a good indicator for the managers to identify the gap between the perception about electronic banking and the actual customer satisfaction generated from this service. This will shade some light on what actions the branches should take in order to benefit from the opportunities.
1.8 Organization of the Paper
This study is organized in five chapters. The first chapter presents, background of the study, statement of the problem, objectives of the study, Scope and Limitation of the study Significance of the study, and Organization of the paper. Chapter two presents literature review. Third chapter deals with the methodology of the study in which data type and source, method of data collection and instrumentation, research design and sampling procedure, data processing and method of data analysis. Chapter Four presents the results and discussion. Finally, chapter five provides conclusions and recommendations.
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THE EFFECT OF ELECTRONIC BANKING SERVICE QUALITY ON CUSTOMER SATISFACTION: IN THE CASE OF COMMERCIAL BANK OF ETHIOPIA
THE EFFECT OF ELECTRONIC BANKING SERVICE QUALITY ON CUSTOMER SATISFACTION: IN THE CASE OF COMMERCIAL BANK OF ETHIOPIA
ABSTRACT
One of the biggest contemporary challenges of management in service industries is providing the right quality to maintaining customer satisfaction and getting positive word of mouth from the consumers. Service quality and customer satisfaction has increasingly been identified as key factors for influencing Electronic banking customers for their being loyal to the bank. This study seeks to examine the effect of electronic banking service quality on customer satisfaction among saving account customers in six selected branches of west Addis district (Habtegiorgis, Geja sefer, Teklehaymanot, pawlos, sumaletera and Anwar mesgid) of the CBE. A survey research was conducted that primarily used quantitative data. A total of 190 bank customers from all selected branches responded to the questionnaire items that measured the research variables. A descriptive ANOVA and correlation analysis was carried out and revealed that service quality dimensions are significant predictors of customer satisfaction. More over logistic regression analysis carried out and the result; Speedy and Quick service, adequate Amount of cash limit to be withdrawn in a day, Employees readiness to response quickly, easiness to regain the captured, expired and lost cards, simplicity and clear language, Appearance of the ATM facility and its Attractiveness, availability of statement printing are identified as a determining factors of Customer satisfaction. The effects of demographic and personal banking detail indicators of service quality perception, and customer satisfaction are also examined. The result revealed that saving account customers’ perception of service quality influenced by differences in age, level of education, occupation and average re-patronage per month. Age and sex were the demographic variables influencing customers’ satisfaction. To overcome the methodological limitation of this study, the branches shall use an in depth full study with a longitudinal design and relatively increased sample size. The result of this study implies management of the six branches shall design appropriate marketing strategies to achieve an increased service quality via boosting customer satisfaction. : Service quality, Customer Satisfaction, Electronic banking.
TABLE OF CONTENTS
ABSTRACT ...................................................................................................................................... V
ACKNOWLEDGEMENTS .......................................................................................................... VI
LIST OF TABLES .......................................................................................................................... X
LIST OF FIGURES ........................................................................................................................ X
LIST OF APPENDIX ..................................................................................................................... X
CHAPTER ONE ..............................................................................................................................1
INTRODUCTION ...........................................................................................................................1
1.1 Background of the study .........................................................................................................1
1.2 Statement of the Problem ........................................................................................................4
1.3 Research Question ..................................................................................................................5
1.4 Objective of the Study ............................................................................................................6
1.4.1 General Objective ............................................................................................................. 6
1.4.2 Specific Objectives ........................................................................................................... 6
1.5 Research Hypothesis ..............................................................................................................6
1.6 Scope and Limitation of the study ..........................................................................................7
1.6.1 Delimitation (Scope) of the Study ...................................................................................... 7
1.7 Significance of the Study .......................................................................................................7
1.8 Organization of the Paper .......................................................................................................8
CHAPTER TWO .............................................................................................................................9
LITRATURE REVIEW ...................................................................................................................9
2.1 Introduction ............................................................................................................................9
2.2 E-Banking ...............................................................................................................................9
2.2.1 Meaning of E-Banking ....................................................................................................... 9
2.2.2 Types of E-Banking ......................................................................................................... 10
2.3 Service ..................................................................................................................................11
2.3.1. What is Service? .............................................................................................................. 11
2.3.2. Service Quality ................................................................................................................ 12
2.3.3. The Five Service Quality Dimensions ............................................................................ 13
2.3.4. Electronic banking services quality dimensions ............................................................. 15
2.4. Customer Satisfaction .........................................................................................................17
2.4.1. Customer Satisfaction ..................................................................................................... 17
2.5. The Relationship between Service Qualities and Customer Satisfaction............................18
2.6. Difference between Physical and Virtual Banking .............................................................20
2.7. Conceptual Framework .......................................................................................................21
2.8 Empirical Framework ...........................................................................................................21
CHAPTER THREE .......................................................................................................................25
RESEARCH METHODS ..............................................................................................................25
3.1 Research Design ...................................................................................................................25
3.1.1 Population......................................................................................................................... 25
3.1.2 Unit of Analysis ............................................................................................................. 25
3.2 Sampling Techniques and Sample size .................................................................................25
3.3 Data source and collection procedures .................................................................................26
3.4 Method of data analysis ........................................................................................................27
CHAPTER FOUR ..........................................................................................................................29
DATA ANALYSIS AND PRESENTATION ...............................................................................29
4.1. Introduction .....................................................................................................................29 4.2 General Characteristics of Respondents ...............................................................................29
4.3 Descriptive Analysis of the Dependent and Independent Variables .....................................35
4.4 Econometric Analysis and Results .......................................................................................35
4.4.1 Correlation between explanatory variables .................................................................... 36
4.4.2 Analysis of variance ....................................................................................................... 37
4.4.3 Binary Logistic Regression Analysis ............................................................................... 41
4.4.3.1 Determinants of customer satisfaction using Logistic Model .................................... 42
4.4.3.2 Interpretation of Variables from the Model Output ...................................................... 44
CHAPTER FIVE ...........................................................................................................................47
CONCLUSIONS AND RECOMMENDATIONS ........................................................................47
5.1 Conclusion ............................................................................................................................47
5.2 Recommendations .................................................................................................................48
5.3 Recommendations for future research ..................................................................................49
BIBLIOGRAPHY ..........................................................................................................................50
List of tables
List of figures
List of Appendix
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
The new economy, also called e -economy, is the most frequently used term in economic and technical literature, discussions of scientists, businessmen and politicians beside globalization and information technology society. Three planes of understanding of the new economy can be distinguished: as a system of new principles explaining how economic subjects function on the market; as activities of economic subjects in the strongly changed Conditions (Anisoara, 2008). Owing to the dynamic development of technical progress, especially in information technology economic subjects change completely strategy of their activities many times. Information and knowledge as main economic categories, which are the basis of the contemporary business, are the foundation of activity another term is assigned to this understanding, namely knowledge based-economy. The third plane, new economy treated as a subject, namely determining activities of an enterprise in the IT sector. Therefore, the new economy, also called cybereconomy, constitutes a new paradigm of business. On this virtual market E-business is a new form of an exchange of resources by means of information technology systems and internet technologies, conducted on-line through electronic connections and an information exchange by use of electronic multimedia such as Internet, cable and satellite television, telephony, electronic cards, Intra and Extranet at the national and international level (Camelia, 2008).
E-banking can improve a bank’s efficiency and competitiveness, so that existing and potential customers can benefit from a greater degree of convenience in affecting transactions. This increased level of convenience offered by the bank, when combined with new services, can expand the bank’s target customers beyond those in traditional markets. A bank may be faced with different levels of risks and expectations arising from electronic banking as opposed to traditional banking (Olanipekun, 2013).
Furthermore, customers who rely on e -banking services may have greater intolerance for a system that is unreliable or one that does not provide accurate and current information. Clearly, the longevity of e-banking depends on its accuracy, reliability and accountability. The challenge for many banks is to ensure that savings from the electronic banking technology more than offset the costs and risks involved in such changes to their systems (Wahid, 2013). While financial institutions have faced difficulties over the years for a multitude of reasons, the major cause of serious banking problems continues to be directly related to lax credit standards for borrowers and counterparties, poor portfolio risk management or a lack of attention to changes in economic or other circumstances that can lead to a deterioration in the credit standing of a bank’s counterparties (Karen, 2002).
An increase in social expectations in relation to subjects rendering financial services, dissemination of new technologies, more developing technical culture of society, an increase in importance on information technology in economy, business globalization, consolidation of banks and an increase in competitiveness are only a few reasons which had an influence on a type and quality of services rendered by banks. It leads to a necessity of bank strategies modification imposed by costs reduction, change of clients, consumption patterns, dynamic development of new technologies, and polarization of clients because of their ability to use the Internet and positive attitude towards electronic media. As a result, a new quality of bank services is being provided and clients will gradually change their perception of bank sector institutions (Mirabi, 2008).
Satisfaction is a crucial concern for both customers and organizations especially for banks. However, the concept of satisfaction is subjective and varies from person to person as well as product to product. Value and quality are the main concepts incorporated in many literatures of the customer satisfaction. According to (Zeithaml, Bitner, & Gremler, 2006) value is the importance attached to services based on their usage and the amount paid in exchange. On the other hand, there is no universally accepted definition of quality. For some quality is achieving or reaching for the highest standard instead of being satisfied with the sloppy or fraudulent (Parasuraman Z. &., 1991). To others, differences in quality amount to differences in the quality level of some desired ingredient or attribute. To many academics, quality refers to the amounts of the non priced attributes contained in each unit of the priced attribute (Garvin, 1988).
Service providers must render quality service to their customers. Moreover, understanding and meeting customers’ expectations and subsequently being different from competitors are important in order to survive and excel throughout the stiff competition (Kumbhar, 2011).
Customers in Ethiopia are late adopters of the internet and its applications with regard to electronic banking. It looks that electronic banking is facing difficulties in Ethiopia. Ethiopian banking system is still developing as compared to the rest of the world and electronic payment systems are at an embryonic stage. Creating an electronic banking in Ethiopia is the same as to building a web business for all who are participating in the economy of the country. This leads the country to the electronic business (e-business). The e-business or E-commerce is about using electronic techniques to create opportunities, create new markets, new processes and growth the creation of wealth using electronic mediums (Abreham., 2012).
The advancement of information technology in today’s banking system has become simple, speedier and readily accessible through various devices such as personal computers, mobile phones, etc. The electronic banking services include Automated Teller Machines (ATM), Mobile banking, Internet Banking, Tele Banking, Electronic Credit cards, (Abdi, 2006).
As a result of technological improvement and dynamism the Banking sector is experiencing rapid changes and this demands banks to serve their customers electronically. The evolution of ebanking started from the use of Automatic Teller Machine (ATM) and Finland is the first country in the world to have taken a lead in e-banking (Geeta, 2014).
The National bank of Ethiopia (NBE) inaugurated its new centralized, online, real-time, electronic (CORE) Banking system in effect since Nov 2013 in order to facilitate the payment of the banking system and also a mandatory to use electronic banking that enable banks to provide mobile, internet and card banking services. Following the implementation of the NBE’s national payment system(NPS) in 2011, a plat form which integrates all electronic inter-bank money transactions, all Ethiopian banks were required to deploy CORE banking solutions.
The Commercial Bank of Ethiopia is one of the publicly owned banks in Ethiopia. Currently under fifteen districts it has more than 980 branches all across Ethiopia. Aiming at enhancing efficient and effective service delivery, since November 2008 the bank engaged in full implementation business process reengineering.
Out of the 74 branches under West Addis district of the Commercial Bank of Ethiopia, this study was conducted on six branches which are Habtegiorgis, Geja sefer, Teklehaymanot, pawlos, sumaletera and Anwar mesgid Branches. It focuses on effect of E-banking service quality on customer satisfaction.
1.2 Statement of the Problem
One of the major significance of e-banking product and services is improved efficiently and effectiveness of the operations so that transactions can be processed faster and most conveniently. Thus, it has enhanced customer services, effective distribution, improved operations, faster access to information and improved internal processes. This implies that customers benefit ranges from reduced frequency of going to the banking halls to handling of cash (Wahid, 2013; Karen, 2002; Bordens & Abbott, 2011).
However, despite this importance of e–banking, closer observation shows that there are still long queues seen in some banking halls even as customer still handle too much cash, problem of frequent network failure which have adverse effect and inadequate awareness of available ebanking production and services, even as empirical evidence shows that level of understanding of a product and its commensurate benefits determines the reactions of customers to it and patronage (Simon, 2013).
The introduction of electronic banking in to the banking sector helps to bring customer satisfaction and service quality to enhance the banks’ profitability. This technology improves customer satisfaction and service quality. The old age people are generally shy of using ATM because of perceived risk of failure, complexity, security and lack of personalized service (Nupur, 2010). (Abreham., 2012) described several benefits of electronic banking like transferring money, collecting receivable, paying bill, productivity gains, transaction cost reduction, customer service improvement and the same time establishing a means to control the overall activities on banking accounts.
Since e-banking service adoption by banks, customers seem not willing to adapt to these services and this is evident by increased queues in the banking halls, customers are still carrying large amount of cash, which points to their being dissatisfied with the services. However, banks have tried to improve their systems by building more infrastructures and new services like mobile banking to increase customer satisfaction but the problem has persisted. This is probably due to the increasing problems associated with e-banking systems.
Currently there are some factors which affect customer satisfaction and service quality in electronic banking service in most banks in general and in Commercial Bank of Ethiopia in particular. Those are machine out of service, machine run out of cash, failure to provide printing statement, card get blocked, frequent breakdown of ATM service, lack of sufficient technician for maintenance of the breakdown of ATM machine, lack of sufficient alternative system which substitute ATM service for the customer when temporary problem happen in the machine, interruption of network, and reversing a transaction and refund is not possible and hardly do people talk about problems of these services. Besides, lack of fair distribution of e-banking service in all over branches of CBE.
Satisfaction and service quality is a crucial concern for both customers and organizations including banks. Although many studies support the relationship, service quality measurement remain a controversial issue. In terms of measurement methodologies, some authors suggested that the service quality concept results from the comparison of performance perceptions with expectations (Parasuaman & Zeithmal, 1988). This conceptualization of service quality guided by a gap theory which uses a service quality scale called SERVQUAL to measure the quality of a service (Siddiqi K. O., 2011) studied the interrelationship between service quality and customer satisfaction using the five service quality dimensions (i.e. Tangibility, Reliability, Responsiveness, Assurance and Empathy) and the two dimensions (i.e. relative attitude and repeat patronage behavior) results showed in Bangladesh retail banking industry tangibility, reliability and responsiveness dimensions has medium correlation to customer satisfaction while assurance and empathy has a large positive correlation to customer satisfaction.
Standing on the above problems; the researcher is interested to investigate and analyze the Effect of e-banking Service Quality on customer satisfaction.
1.3 Research Question
1.4 Objective of the Study
1.4.1 General Objective
The general objective of the study is to asses and examines the Effect of e-banking service
Quality on customers’ satisfaction of saving account holders of the commercial bank of Ethiopia with particular selected branches.
1.4.2 Specific Objectives
1.5 Research Hypothesis
Based on the research objectives and questions of the study the following hypotheses are developed and were tested in this study:
H1: Reliability dimension of service quality has a significant positive effect on customer satisfaction.
H2: Responsiveness dimension of service quality has a significant positive effect on customer satisfaction.
H3: Assurance dimension of service quality has a significant positive effect on customer satisfaction
H4: Empathy dimension of service quality has a significant positive effect on customer satisfaction.
H5: Tangibles dimension of service quality has a significant positive effect on customer satisfaction
1.6 Scope and Limitation of the study
1.6.1 Delimitation (Scope) of the Study
The scope of this study is delimited to see the effect of e-banking service quality on customer satisfaction by using the five dimensions of service quality; these are reliability, responsiveness, assurance, empathy, and tangibles (Parasuaman & Zeithmal, 1988). The study was conducted on Commercial Bank of Ethiopia selected branches. The study was restricted to specific area which is west Addis District six selected branches (Habtegiorgis, Geja sefer, Teklehaymanot, pawlos, sumaletera and Anwar mesgid) as opposed to the entire branches of CBE all across the country.
The study only focus on Ebanking services ATM, POS and Mobile banking.
1.6.2 Limitation of the study
First, in this study those customers who have saving account and waiting for e-banking services at Commercial Bank of Ethiopia, selected branches in the time of data collection was taken as respondents. For instance like customers who send and receive local transfers were not included in the study unless they are account holders as e-banking service is given to account holders in the bank.
The Second limitation of this study is that it only considers customers perspective of e-banking and it does not take in to consideration what perspective do all bankers, employees and other stakeholders have on the technology. In addition to this, a larger and more representative sample will give broader representation to identify the effect of e banking service quality on customer satisfaction.
Third, only the five service quality dimension variables were used to see their Effect. Incorporating other variables like company reputation, access, security etc may give a more comprehensive picture.
1.7 Significance of the Study
First, the study would be useful for Commercial Bank of Ethiopia in order to see the Effect of Ebanking service quality on customers’ satisfaction. Second, it helps in understanding what attitude customers’ have towards e-banking. Third, it would be a good indicator for the managers to identify the gap between the perception about electronic banking and the actual customer satisfaction generated from this service. This will shade some light on what actions the branches should take in order to benefit from the opportunities.
1.8 Organization of the Paper
This study is organized in five chapters. The first chapter presents, background of the study, statement of the problem, objectives of the study, Scope and Limitation of the study Significance of the study, and Organization of the paper. Chapter two presents literature review. Third chapter deals with the methodology of the study in which data type and source, method of data collection and instrumentation, research design and sampling procedure, data processing and method of data analysis. Chapter Four presents the results and discussion. Finally, chapter five provides conclusions and recommendations.
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