Total Quality Management, 2015

Vol. 26, No. 5, 550 568, http://dx.doi.org/10.1080/14783363.2013.856546

Internet-banking customer analysis based on perceptions of service

quality in Taiwan

Chih-Chin Liang and Wu Pei-Ching

Department of Business Administration, National Formosa University, Huwei Township, Taiwan,

Republic of China

All economic activities require monetary transactions, including those occurring

online. The Internet is thus an essential medium for monetary transactions. Because
Internet banking is highly profitable, competition among banks is fierce. However,
customer satisfaction is crucial for building a profitable business model. Satisfied
users tend to become loyal customers who adopt banking services that regularly
contribute to bank profits. Therefore, how to provide services that users require is an
important consideration when banks develop service products. Customer perceptions
of good service quality are perceptions that improve customer satisfaction. Although
service quality is important to users when selecting banking services, the effect of
perceived service quality on customer adoption of Internet banking in Taiwan is
rarely studied. This study identified three clusters of Internet banking customers
based on customer perceptions of service quality in order to help banks develop
service products. Each cluster was described in terms of demographics, consumer
behaviour, perceived service quality, customer satisfaction, and customer loyalty.
Keywords: Internet banking; segmentation; e-commerce; service quality

1. Introduction
With the increase in Internet use, online financial transactions such as money transfers, pay-
ments, and credit card transactions have rapidly increased (Meerkerk, Eijnden, & Garretsen,
2006). Studies show a correlation between the frequency of financial transactions and the
time spent online (Liao, Liu, & Chen, 2011). Although the increase in online financial trans-
actions should be a good opportunity for banks to deploy Internet banking service products,
promoting services to customers is difficult for banks that do not adequately satisfy customer
needs (Rivera, 2009). In service businesses, customer perceptions are positive if the service
quality is satisfactory to the customer (Guh & Po, 2007; Liao et al., 2011). To ensure positive
customer perceptions of online banking services, banks must understand user concerns
regarding banking service quality (Gilmore & Pine, 2007; Lee, 2009).
Previous studies have discussed numerous issues related to Internet banking services,
including the demographic characteristics of Internet-banking customers and the costs of
Internet-banking transactions (Lassar, Manolis, & Lassar, 2005), measurements of Inter-
net-bank service quality (Jayawardhena, 2004; Lee, 2009), customer satisfaction and
loyalty (Hwang, Chen, & Lee, 2007; Pikkarainen, Pikkarainen, Karjaluoto, & Pahnila,
2006), marketing segmentation (Heaney, 2007; Laforet & Li, 2005), lifestyles (Kavak
& Demirsoy, 2009), and even consumer behaviour (Maenpaa, 2006). Although the
studies listed above have investigated the factors which affect Internet-banking customer
intentions, few of them are focused on the analysis in terms of customer perceptions of

Corresponding author. Email: lgcwow@gmail.com

# 2014 Taylor & Francis

 Total Quality Management 551

service quality and in terms of satisfaction of customer needs. This study therefore per-
formed a questionnaire survey to cluster customers according to their perceptions of
service quality. Analysis of the survey results also clarified the service quality factors
affecting customer adoption of Internet banking services.
Previous work also showed that customer satisfaction with the service quality of Inter-
net services enhances customer loyalty (Chiou, Lin, & Perng, 2010; Ming, Yan, Lu, & Ma,
2005). However, no studies have specifically investigated the effects of service quality and
customer satisfaction on customer loyalty in the Internet-banking service industry. There-
fore, this study analysed the causal relationships among service quality, customer satisfac-
tion and customer loyalty to assist Internet-banking business in deploying marketing
strategies for specific customer clusters.
The rest of this paper is structured as follows. Section 2 presents a literature review.
Section 3 describes the research methods. Next, Section 4 discusses the analytical
results. Finally, concluding remarks are presented in Section 5.

2. Literature review
2.1 Internet banking
Evolving networking technologies have increased access to the Internet (Gardner, 2008).
Advances in networking technology have increased the time that people spend online.
Individuals who spend most of their time online can still have a significant economic
impact (Meerkerk et al., 2006).
Internet-banking services enable the convenient management of personal finances.
Users can check their accounts, pay bills, make investments, and transfer money online.
Restated, Internet banking is an efficient and convenient tool for managing personal
finances (Durkin, 2004; Howcroft, Durkin, Armstrong, & Emerson, 2007). Internet
banking has low setup costs. For example, banks pay minimal sums to purchase servers
and rent broadband networking connections rather than paying the high costs associated
with renting and decorating offices, purchasing equipment, and hiring staff. Internet
banking services are easily accessible at any time to anyone with Internet access (Jun &
Cai, 2001; Liang, Li, & Wu, 2010).
Although Internet banks clearly provide convenient financial services to customers,
whether online services satisfy customer needs remains unclear. Since banks can increase
revenues by providing the services demanded by their customers, banks must clearly
determine the needs of Internet-banking customers (Chen, Hsiao, & Hwang, 2012; Guh
& Po, 2007).

2.2 Market segmentation analysis

Before promoting banking services, customer needs must be clarified (Park, Lim,
Bhardwaj, & Kim, 2011). Market segmentation is thus proposed as a means of understand-
ing a group of customers based on their shared characteristics. Market segmentation can
present a large heterogeneous market as small homogeneous clusters so that marketing
researchers can focus on clusters of interest when developing marketing strategies. The
three variables used to segment consumer markets are geographic, demographic, and psy-
chographic variables (Kotler, 1998). Geographic variables that affect customer needs
include climate, terrain, city size, population density and distribution of urban/rural
areas. Demographic variables include age, gender, marital status, occupation, race,
income and education. Understanding psychographic variables such as consumer
552 C.-C. Liang and W. Pei-Ching

Table 1. The measurements of service quality.

Measurement
SERVQUAL (Zeithaml, Berry, &
Parasuraman, 1988)
E-SERVQUAL (Zeithaml, Parasuraman,
& Malhotra, 2002)
eTailQ (Wolfinbarger & Gilly, 2003)
E-S-QUAL (Zeithaml, Parasuraman, &
Malhotra, 2005)
Scale proposed by Jun and Cai (2001)
Scale proposed by Gerrard and
Cunningham (2005)
Measured variables
Tangibility, reliability, responsiveness, assurance and
empathy
Convenience, reliability, security, responsiveness and
empathy
Tangibility, reliability, security and empathy
Convenience, reliability and security
Tangibility, reliability, responsiveness, assurance,
empathy, convenience and security
Tangibility, reliability, responsiveness, assurance,
convenience and security

behaviours can help researchers forecast customer purchase intentions. Similar purchase
behaviours can also be used to cluster customers (Kotler, 1998; Li, Tan, & Xie, 2002).
Haley, who first proposed benefit segmentation in 1968, argued that the variables used
to segment customers into clusters, such as geographic variables, demographic variables,
and psychographic variables, should not be considered when promoting products to con-
sumers (Ritter & Andersen, 2010). Although these variables can characterise clusters, they
cannot further identify customer needs. Consumers buy goods not only for their functions,
but also for additional associated benefits (Ritter & Andersen, 2010). For example, custo-
mers may decline to use online banking services that have poor security if security quality
is their main concern. Restated, when analysing perceptions of service quality, customer
purchase intentions should be identified based on customer concerns (Park et al., 2011).
Differentiating customer clusters also requires the use of multiple variables to describe
customers within a cluster (Kotler, 1998).

2.3 Service quality variables

Table 1 shows the scales used to measure customer perceptions of service quality in this
study.
Variables for measuring service quality perceived by Internet-banking customers were
selected by performing a literature review and analysis of the above measurements. The
following seven service quality variables adequately described clustered customers:
tangibility, reliability, responsiveness, assurance, empathy, convenience and security.
Unlike websites that provide tangible goods, however, Internet-banking services cannot
be measured by observable characteristics. Like many other services, Internet-banking ser-
vices are intangible (Parasuraman, Zeithaml, & Berry, 1985). Therefore, this study
excludes the variable tangibility from consideration when clustering customers. The six
variables used to represent customer perceptions of Internet-banking services are
reliability, responsiveness, assurance, empathy, convenience and security.

3. Research method
3.1 Research framework
As noted above, this study defines service quality variables according to the perceptions of
service quality used to segment Internet-banking customers. Each cluster is characterised
 Total Quality Management 553

in terms of service quality, customer satisfaction, customer loyalty, consumer behaviour,

and demographics. Based on cluster variables, causal relationships among service quality,
customer satisfaction and customer loyalty are also analysed to develop effective market-
ing strategies (Lee & Chung, 2009; Merrilees, McKenzie, & Miller, 2007).

3.2 Research design

Comparing the variables associated with customer clusters can reveal the differences
among them. From a literature review, Kotler (1998) found that similar customer beha-
viours can be used to cluster customers. Understanding consumer behaviours can help
researchers forecast the intentions of customers to purchase. Restated, the time spent on
Internet-banking services, knowledge about Internet-banking services, attitudes towards
Internet-banking services, and reactions to the use of Internet-banking services must be
discussed (Engel, Blackwell, & Miniard, 1995). There were studies confirming that con-
sumer behaviour was a determinant factor for characterising clusters (Lee, LaBrie, Grant,
Kim, & Shaffer, 2008), and it could differ significantly among the different Internet mar-
keting service providers (Wu, 2002). The following hypotheses are therefore considered.
H1: Consumer behaviours differ significantly among customer clusters.
H1-1: The days surfing the Internet differ significantly among customer clusters.
H1-2: The hours per day spent online differ significantly among customer clusters.
H1-3: The main reason for using the Internet differs significantly among customer clusters.
H1-4: Internet-banking services usually using differ significantly among customer clusters.
H1-5: Internet banking services used most differ significantly among customer clusters.
H1-6: The main motivation for using Internet banking services differs significantly among
customer clusters.
Kotler (1998) also stated that demographic variables are important to the development of
marketing strategies, because customer behaviours are strongly related to demographic
variables (Wheeler & Berger, 2007). Demographic variables including age, gender,
marital status, occupation, race, income and education should be considered in an analysis.
In the past studies, demographic variables have been those commonly to describe the seg-
mented markets. For example, Hoadley, Xu, Lee, and Rosson (2010) found the difference
between Facebook users and nonusers through education, occupation, gender, age, etc.
Therefore, the following hypothesis is presented.
H2: Demographic characteristics differ significantly among customer clusters.
H2-1: Gender differs significantly among customer clusters.
H2-2: Age differs significantly among customer clusters.
H2-3: Occupation differs significantly among customer clusters.
H2-4: Education differs significantly among customer clusters.
H2-5: Marital status differs significantly among customer clusters.
H2-6: Average monthly income differs significantly among customer clusters.
Additionally, companies must clearly identify customer needs to develop effective mar-
keting strategies. Customer perceptions of service quality are positive if the services ade-
quately meet customer requirements. Service quality refers not only to the overall
customer perceptions of service (Yang & El-Haik, 2009), but also to customer perceptions
of the service after it has been provided (Hurley & Estelami, 1998; Ruyter, Bloemer, &
Peeters, 1997). That means after-sales service in firms manufacturing and selling
durable goods has a strategic relevance in its potential contribution to company profitabil-
ity, customer satisfaction, retention and product development (Ramasubbu, Mithas, &
554 C.-C. Liang and W. Pei-Ching

Krishnan, 2011). Additionally, loyalty results from positive perceptions in customers who
are consistently satisfied (Heskett & Sasser, 2010). The above description indicates that
customer satisfaction positively affects customer loyalty (Ruyter et al., 1997). Service
quality may thus affect customer loyalty indirectly via satisfaction (Chiou et al., 2010;
Harris & Goode, 2004). However, no studies have investigated whether service quality
and satisfaction affect loyalty in the Internet-banking service sector in Taiwan. Therefore,
the causal relationships among service quality, customer satisfaction and customer loyalty
in the Internet-banking service industry must first be verified.
Since satisfaction denotes customer perceptions of service quality after receiving a
service (Hurley & Estelami, 1998; Ruyter et al., 1997), service quality also positively
affects customer satisfaction (Harris & Goode, 2004). In addition, studies have confirmed
that perception of service quality has a significant positive correlation with customer satis-
faction (He & Bai, 2011). Therefore, to clarify the relationships between service quality and
customer satisfaction with Internet banking services, the following hypothesis is proposed:
H3: Service quality has a significant and direct positive effect on customer satisfaction.
The effect is positive because customer satisfaction boosts customer loyalty (Harris &
Goode, 2004). In past studies, it has been concluded that customer satisfaction has a posi-
tive influence on customer loyalty (Chan, 2011; Chi & Qu, 2008), so the following hypoth-
esis is proposed for determining the relationships between the satisfaction and loyalty of
customers who use Internet banking services in Taiwan:
H4: Customer satisfaction has a significant and direct positive effect on customer loyalty.
Finally, regarding the relationship among service quality, customer satisfaction and custo-
mer loyalty, studies have found that service quality can indirectly affect customer loyalty
via satisfaction (Su & Fan, 2011). Therefore, this study proposes H5:
H5: Service quality has a significant but indirect positive effect on customer loyalty via cus-
tomer satisfaction.
The following five-part questionnaire was used in a survey to test the above hypotheses:

Part I Six-question survey of consumer behaviour in terms of Internet use and specifically
Internet banking activity (Engel et al., 1995):
c_a. How many days a week do you surf the Internet?
c_b. How many hours per day do you spend online?
c_c. What are your main reasons for using the Internet?
c_d. When do you usually use Internet banking services?
c_e. What Internet banking service do you use most often?
c_f. What is your main motivation for using Internet-banking services?
Part II The service quality scale is used to clarify user service expectations before using Internet
banking and perceived services after using Internet banking. Customers are
segmented using six variables of service quality, which are represented by 14 question
items used in previous studies of service quality (Gerrard & Cunningham, 2005; Jun
& Cai, 2001; Wolfinbarger & Gilly, 2003; Zeithaml et al., 1988; Zeithaml et al., 2002,
2005):
Q1. Data must be transmitted successfully.
Q2. Customer transaction information must be protected.
Q3. Investment information must be revealed as soon as possible.
Q4. Communication between the customer and call center must be convenient.
Q5. Announcements of system fault information and correction of faults must be
performed quickly.
Q6. Internet bank employees must solve customer problems enthusiastically.
Q7. The clerks require professional knowledge of Internet-banking services.
 Total Quality Management 555

Q8. All banking services must be provided.

Q9. Banking services must be provided continuously.
Q10. Internet-banking transactions must be provided at a discount to the same
transactions performed via a bricks-and-mortar branch.
Q11. Internet-banking applications must be issued frequently.
Q12. Customer privacy must be protected.
Q13. Customer financial information must be classified and protected.
Q14. Internet-banking transactions must be secure.
Part A customer satisfaction scale was used to measure user satisfaction with Internet
III banking services (Hurley & Estelami, 1998; Ruyter et al., 1997). Nineteen question
items were used to measure customer satisfaction (Gerrard & Cunningham, 2005; Jun
& Cai, 2001; Wolfinbarger & Gilly, 2003; Zeithaml et al., 1988; Zeithaml et al., 2002,
2005):
S1. Additional functions are provided on the Internet banking homepage (e.g. fast links/
search).
S2. The web page is attractively designed.
S3. Website information can be updated at anytime.
S4. The banking industry has a good overall public image and reputation.
S5. The Internet banking system is stable and effective.
S6. The bank system website has adequate speed.
S7. The information is correctly transmitted.
S8. Customer data, including deposit and loan data, trading information, etc. are
consistently accurate.
S9. Online transactions are completed efficiently.
S10. Financial information can be managed in a timely and reliable manner.
S11. Channels are provided for two-way communication (e.g. customer service hotlines,
etc.).
S12. System failures are quickly identified and repaired.
S13. The staff are enthusiastic about helping customers solve their problems.
S14. Internet banking services provide service personnel with professional knowledge.
S15. Internet banking customer service personnel display good attitudes.
S16. The Internet banking service can be accessed at any time or place.
S17. Measures are taken to protect customer privacy.
S18. The security of customer financial information is maintained.
S19. Mechanisms are provided to ensure secure Internet transactions.
Part The customer loyalty scale measures effectiveness in retaining customers. The scale uses
IV the three question items proposed by Gronholdt, Martensen, and Kristensen (2000) for
measuring customer loyalty.
L1. The customer would continue using Internet banking services.
L2. The customer would recommend the bank network to friends and family.
L3. The customer would buy/use other online goods/services offered by the bank.
Part V User profiles are generated according to six demographic variables: gender, age,
occupation, education level, marital status, and average monthly income (Kotler,
1998).

The question items of Parts II IV are measured using a five-point Likert scale (1
strongly disagree, 2 disagree, 3 no comment, 4 agree, and 5 strongly agree).
After gathering the survey results for Parts II IV, reliability analysis is performed to
confirm the validity and accuracy of the questionnaire (Liang et al., 2010; Wu, 2010).
To find customer groups, the cluster analysis conducted in Part II is used to identify homo-
geneous groups of target customers. Two-stage clustering is used to identify an appropriate
number of clusters, and discriminant analysis is used to test the stability of the clustering
results. To ensure that the results of customer clusters have minimum variance within a
cluster given a large sampling size (.200), the number of customer clusters and their
centres are identified by hierarchical clustering. Next, non-hierarchical clustering to
556 C.-C. Liang and W. Pei-Ching

group samples is performed according to the distance between the sampling results and the
centre of each cluster. This K-means method was used as the non-hierarchical clustering
method. Using the posterior comparisons of Scheffe to analyse variables revealed the sig-
nificance of differences between clusters. The factor analyses performed in Part II (the per-
ceptions to service quality), Part III (satisfaction), and Part IV (loyalty) revealed fewer
factors, i.e. fewer unobserved variables of service quality. The factors derived from
factor analysis can be used to further describe customer clusters. Each cluster could
also be profiled by the descriptive statistical data obtained in the chi-square tests in Part
I (consumer behaviour) and Part V (demographics). Finally, effective marketing strategies
for increasing the number of loyal customers in each cluster were identified by analysing
the causal relationships among service quality, satisfaction and loyalty.

3.3 Sampling
To survey the Internet-banking behaviour of users, a rule-based sampling method was
developed. All respondents were required to be at least 20 years old since only individuals
aged 20 years or older can utilise Internet-banking services in Taiwan (Liang et al., 2010).
Snowball sampling, which was used because privacy laws in Taiwan complicate surveys
of personal financial behaviour, confirmed that all users had experience using Internet-
banking services. This study selected 20 seeds from Facebook. Each seed of snowball
sampling was selected from fan groups of banks of Facebook. The selected one must be
a qualified Internet-banking user following the abovementioned criteria and distribute
questionnaires to their friends who have used Internet banking services. All of
the above 48 question items were included in a user survey. This study obtained 514
valid samples.
Before analysing the survey results, reliability tests are needed to confirm the consist-
ency and accuracy of the sampling results. The Kaiser Meyer Olkin (KMO) and Bartlett
tests are typically used to determine whether the study scales are suitable for factor analy-
sis (Kaiser, 1974). All three variables (perceptions of service quality, customer satisfac-
tion, and customer loyalty) are qualified for factor analysis (all KMO values are all
.0.5, and all Bartlett test scores reache statistical significance). Reliability measurements
of each question item in terms of Cronbach a (where an a exceeding 0.7 indicates high
reliability) indicated high reliability in all proposed scales (Churchill, 1995; Nunnally,
1967) (Table 2).

4. Data analysis
Internet-banking customers were then classified in terms of their perceptions of service
quality. The question items of customer perceptions of service quality and customer

Table 2. Cronbach a.
Scales Cronbach a
The scale of service quality (benefit) 0.872
The scale of customer satisfaction 0.953
The scale of customer loyalty 0.810

The Cronbach a for each scale is the high reliability values that Nunnally (1967)
recommended, because a is larger than 0.7.
 Total Quality Management 557

satisfaction are selected for describing factors if the factor loading of a question item
exceeds 0.5 (Overall & Klett, 1972). The factors, selected question items, factor loadings,
eigenvalues, and variance extracted values are shown in Table 3. The factors within a con-
struct are extracted based on the following rules: The factor must comprise at least three
qualified question items (Overall & Klett, 1972), where a factor is qualified if it has an
eigenvalue exceeding 1 and the factor loading of each question items exceeding 0.5
(Kaiser, 1960; Maenpaa, 2006), and the Item-Total Correlation and Cronbach a are
adopted to validate the results of factor analysis. Factor analysis of the characteristics
of selected qualified question items revealed three factors of benefit perceptions of
service quality. The presence of Factor 1 (Internet Security) shows that the security of
banking services is a major customer concern. This investigation denoted Factor 2 as
On-line Call Centre because its characteristics are eagerness to receive positive
responses to on-line inquiries. Three customer characteristics, assurance, convenience,
and empathy, can be grouped together since Factor 3 is Customer Rights. Based on
the characteristics of selected qualified question items, Loyalty is the only factor ident-
ified based on the characteristics of selected qualified question items. For finding the
causal relationship among loyalty, service quality, and satisfaction, Loyalty is used to
represent the customer loyalty variable in factor analysis. The cumulative variance of
the factor is 64.076%, meaning that the factor identified in this study could be used to
describe 64.076% of the variance in customer perceptions of service quality, customer sat-
isfaction, and customer loyalty. In this study, the reliability test shows that eliminating one
of the selected question items of the factors of the perceptions of service quality results in a
smaller Cronbach a value. Reliability testing shows that all the selected question items of
service quality, customer satisfaction, and customer loyalty should be retained.
Strategies for dealing with target customers are identified by clustering them (Lederer
& Sethi, 2007) using the hierarchical method developed by Ward. This study found that,
whenever the number of clusters decreased from three to two, the rate of change in the
condensation coefficient significantly increased (the largest increase was 32.31%). The
largest rate of change in the condensation coefficient indicates the number of clusters
that are correct (Lederer & Sethi, 2007). After determining the number of clusters,
sample segmentation is performed by K-means method, a non-hierarchical method of
segmenting large samples. After dividing the samples into training and testing
samples, discriminant analysis is also used to verify the results of clustering analysis.
Here, 10% of the samples are used for training, and 90% are used for testing.
Discriminant analysis shows accuracies of 99.1% and 98.0% in the grouping results
for training and testing samples, respectively. Therefore, three consumer clusters are
identified (Table 4).
The analysis also shows that other consumer behaviours related to Internet banking,
such as time spent accessing banking services each week, heavy/light networking
usage, and the motivation to use Internet banking, significantly differed between clusters
whereas the daily time spent using the Internet and Internet-banking services remains con-
stant (Table 5). Therefore, hypothesis H1 could be accepted (time spent accessing banking
services per week, heavy/light networking usage, and motivation to use Internet banking)
or rejected (time spent on the Internet per day and the time spent on Internet-banking ser-
vices) depending on the behaviour of the individual consumer. Demographic variables
such as gender, age, marital status differ significantly between clusters, but occupation,
education and income do not (Table 6). Hypothesis H2 could be accepted (gender, age,
marital status) or rejected (occupation, education and income) depending on the
demographic data. Service quality, customer satisfaction, and customer loyalty also
 558 C.-C. Liang and W. Pei-Ching
Table 3. The factor load of question items of the perceptions to service quality and consumer satisfaction.

Factor Factor Factor Factor Factor Factor Factor Factor Variance

Factor Variables QID 4 1 5 2 6 7 3 8 Eigenvalue (cumulative) a

The perceptions to Factor 1: Internet Security Q12 .085 .687 .312 .143 2.074 .131 .036 2.061 4.718 9.928% 0.893
service quality Security Security Q13 2.004 .673 .237 .222 .145 .018 .129 .011 (9.928%)
Security Q14 .182 .667 .241 .033 2.045 .200 .014 .053
Reliability Q1 .130 .584 2.130 .391 .247 .076 .172 .110
Reliability Q2 .119 .581 2.092 .222 .298 .013 .232 .212
Factor 2: On-line Call Responsiveness Q3 .084 .289 2.026 .796 .167 2.003 .141 .076 3.961 8.253% 0.823
Centre Responsiveness Q4 .110 .314 2.010 .768 .155 2.018 .167 .052 (18.181%)
Responsiveness Q5 .098 .281 2.035 .768 .149 .020 .113 .046
Assurance Q6 .118 .278 2.132 .563 .132 .024 .110 .042
Assurance Q7 .055 .252 2.163 .562 .120 .026 .109 .040
Factor 3: Customer Assurance Q8 .225 .242 .067 .202 .019 .082 .712 .144 2.584 5.384% 0.782
Rights Convenience Q9 .090 .141 .217 .160 2.037 .274 .673 .101 (23.565%)
Empathy Q10 .118 .147 2.001 .186 .227 .021 .533 .109
Empathy Q11 .120 .150 .004 .196 .284 .017 .500 .107
Consumer Factor 4: Reliability S10 .713 .049 .171 .415 .207 .045 2.039 .138 5.811 12.106% 0.907
Satisfaction Communication Responsiveness S11 .712 .063 .142 .451 .237 .052 2.070 .117 (35.671%)
Responsiveness S12 .695 .058 .118 .438 .187 .035 2.077 .183
Responsiveness S13 .691 .135 .204 2.068 .200 .229 .191 .109
Assurance S14 .653 .139 .309 2.104 .202 .216 .116 .032
Assurance S15 .623 .156 .250 .007 .317 .184 .143 .035
Factor 5: Reliability Tangibility S4 .279 .113 .771 .047 .209 .114 .132 .083 4.335 9.032% 0.885
Reliability S5 .284 .053 .770 .000 .182 .130 .176 .104 (44.703%)
Reliability S6 .281 .112 .765 .067 .226 .143 .109 .115
Reliability S7 .353 .254 .623 .038 .077 .241 2.040 .054
Reliability S8 .406 .252 .546 2.008 .252 .122 2.027 .184
Reliability S9 .411 .262 .536 2.014 .263 .112 2.034 .189
Factor 6: Privacy Convenience S16 .268 .058 .186 .184 .729 .135 .036 .040 3.609 7.518% 0.904
Security S17 .407 .148 .204 .201 .636 .153 .006 .061 (52.221%)
Security S18 .279 .152 .271 .066 .588 .303 .014 .217
Security S19 .424 .082 .235 .180 .563 2.022 .179 .094
Tangibility S1 .136 .046 .135 .022 .149 .772 .177 .090 3.175 0.795
 Factor 7: Website Tangibility S2 .186 .034 .304 .123 .256 .707 .041 .091 6.614%
design Tangibility S3 .280 .211 .056 .091 .223 .663 .046 .073 (58.835%)
Customer loyalty Factor 8: Loyalty Loyalty L1 .128 .047 .102 .196 .203 2.013 .138 .806 2.516 5.241 0.810
Loyalty L2 .140 .149 .132 2.072 .055 .157 .073 .778 (64.076%)
Loyalty L3 .232 .080 .128 .130 .066 .154 .086 .770

Notes: The grey parts forms means the factor could be forms by the question items that the factor loading of the question item is .0.5. For example, the Factor 1 forms from question
item 1, 2, 12, 13 and 14.

Total Quality Management 559

560 C.-C. Liang and W. Pei-Ching

Table 4. The condensation process of the number of clusters.

Cluster number Coefficient The incremental rate of condensation coefficient
5 610.62
4 711.33 16.49%
3 896.64 26.05%
2 1186.37 32.31%
1 1539.00 29.72%

Table 5. Differences of consumer behaviours between clusters.

p-Value
x2 ( significance) Results
H1: Consumer behaviours differ significantly among
customer clusters
H1-1: The days surfing the Internet differ significantly 25.260 0.032 Accept
among customer clusters
H1-2: The hours per day spending online differ 34.330 0.079 Reject
significantly among customer clusters
H1-3: The main reason for using the Internet differ 6.904 0.032 Accept
significantly among customer clusters
H1-4: The Internet-banking services usually using differ 6.539 0.366 Reject
significantly among customer clusters
H1-5: The Internet banking services using most differ 21.752 0.040 Accept
significantly among customer clusters
H1-6: The main motivation for using Internet banking 22.246 0.014 Accept
services differ significantly among customer clusters

Table 6. Differences of demographics between clusters.

p-Value
x2 ( significance) Results
H2: Demographic characteristics differ significantly
among customer clusters
H2-1: Gender differs significantly among customer 6.404 0.041 Accept
clusters
H2-2: Age differs significantly among customer clusters 21.506 0.043 Accept
H2-3: Occupation differs significantly among customer 25.936 0.254 Reject
clusters
H2-4: Education differs significantly among customer 4.770 0.782 Reject
clusters
H2-5: Marital status differs significantly among customer 6.904 0.032 Accept
clusters
H2-6: Average monthly income differs significantly 22.381 0.130 Reject
among customer clusters

significantly differ between clusters (Table 7). Hypothesis H1 is thus accepted.

Tables 8 10 summarise the profiles of clusters described by analysing the differences
among demographics, consumer behaviour, service quality, customer satisfaction, and
customer loyalty.
 Total Quality Management 561

Table 7. Differences of service quality, customer satisfaction, and customer loyalty between
clusters.
F-value
Cluster 1 Cluster 2 Cluster 3 ( Significance) Scheffe
Service quality
Internet security 21.24626 0.78000 0.40022 755.437 1-2,1-3,2-3
Online call centre 20.23062 20.32328 0.48888 40.618 1-3,2-3
Customer rights 20.20299 20.81583 0.90161 278.914 1-2,1-3,2-3
Customer satisfaction
Interaction 0.01072 20.39697 0.34247 26.118 1-2,1-3,2-3
Security 20.35100 0.10458 0.21655 16.183 1-2,1-3
Privacy 20.46381 0.13747 0.28679 29.686 1-2,1-3
Customised customer 20.05861 20.25454 0.27729 13.318 1-3,2-3
service
Customer loyalty
Loyalty 20.30000 20.15508 0.40047 26.659 1-3,2-3
Note: Scheffe: 1-2 means Cluster 1 is different from Cluster 2 significantly.

Table 8. The profiles of Cluster 1 (no factor of the perceptions to service quality is customers
major concern).
Cluster 1: The users who care nothing about benefits (samples of Cluster 1 163)
Demographics Age: 21 25 years and 31 35 years
Marital status: The number of singles is larger than married ones
Monthly income: Less than US$666, or between US$1333 and
1666
Consumer behaviour to Accessing Internet: Every day
Internet-banking Heavy users: 17.2%
Usages: Account access/transfer payment
Motivation: Financial control
The perceptions of using Service quality: Care no special needs (Factor 1, Factor 2 and
Internet-banking services Factor 3 are not customers major concerns)
Customer satisfaction: Focus on the interaction with the service
provider (communication)
Customer loyalty: Low intention to reuse Internet-banking
services

Figure 1 shows the causal relationships among service quality, customer satisfaction,
and customer loyalty. The factor analysis also showed that only one factor (Loyalty) in the
customer loyalty variable should be used as the exogenous variable for causality analysis
(Table 3). The causality analysis therefore used the variable Loyalty as the exogenous
variable rather than customer loyalty, and used Repurchase, Recommendation, and
Extended Purchase to represent the indicator variables derived from the question
items L1, L2 and L3 to explain the exogenous variable Loyalty.
The results of the causality relationship show that the path from service quality to cus-
tomer loyalty must be eliminated owing to the insignificance of statistics (p . 0.05). In
service quality, because of the insignificance (p . 0.05) of the dependence between
Internet Security and Service Quality, the path from Internet Security to Service
Quality must be eliminated from the causality model. Additionally, the residual errors
e5 and e6 are related through co-variation (Figure 2). The overall model fit (Bagozzi &
562 C.-C. Liang and W. Pei-Ching

Table 9. The profiles of Cluster 2 (factor 1, Internet security, is customers major concern on the
perceptions to service quality).
Cluster 2: The users who pay attention to quality (samples of Cluster 2 165)
Demographics Age: 21 25 years and 3135 years
Marital status: The most of samples are married
Monthly income: Less than US$666; or between US$1000 and 1666
Consumer behaviour to Accessing Internet: Every day
Internet-banking Heavy users: 25.5%
Usages: Account access/transfer payment
Motivation: Financial control
The perceptions of using Service quality: Care Internet security extremely (Factor 1)
Internet-bank services Customer satisfaction: Focus on the security and privacy
Customer loyalty: Low intention to reuse Internet-banking services

Table 10. The profiles of Cluster 3 (Factor 2, on-line call centre, and Factor 3, customer rights, are
customers concerns on the perceptions to service quality).
Cluster 3: The users who care everything (samples of Cluster 3 186)
Demographics Gender: female mainly
Age: between 21 and 30 years
Marital status: the most of samples are single
Monthly income: less than US$1333
Consumer behaviour to Accessing Internet: almost every day
Internet-banking Heavy users: 29.0%
Usages: fund/foreign exchange
Motivation: convenience
The perceptions of using Service quality: care customer rights (Factor 2) and online call
Internet-bank services centre (Factor 3)
Customer satisfaction: focus on every kind of Internet-banking
services
Customer loyalty: the loyalty is highest within the three clusters

Yi, 1988) shows that the modified model could be used to explain the validity of the analy-
sis of causality relationship. The analytical results of overall model fit were qualified
(Table 11).
Causality analysis yields the following results: service quality has a significant and
direct positive effect on customer satisfaction (the value of the path coefficient between
service quality and customer satisfaction is 0.69), and customer satisfaction has a signifi-
cant and direct positive effect on customer loyalty (the value of the path coefficient
between service quality and customer satisfaction is 0.58). Finally, although service
quality has a direct positive effect customer loyalty, the effect did not reach statistical sig-
nificance. Service quality has a significant but indirect positive effect on customer loyalty
via customer satisfaction (the value of the path coefficient between service quality and cus-
tomer satisfaction is 0.40).

5. Discussion and implication

Marketing strategies can be proposed based on the analysis of cluster profiles in Section
4. Causality analyses of service quality, customer satisfaction, and customer loyalty
show that, since service quality has a direct positive effect on customer satisfaction,
 Total Quality Management 563

Figure 1. The predefined causality relationship.

customer satisfaction can be increased by improving service quality in relation to infor-

mation service and customer rights (specifically in relation to information service and cus-
tomer rights since the path from Internet Security to Service Quality is eliminated from
the analysis of causality relationship). Second, since customer satisfaction has a direct
positive effect on customer loyalty, customer loyalty can be increased via improved cus-
tomer satisfaction (for all factors derived from customer satisfaction). Finally, service
quality has no positive affect on customer loyalty, but the effect is indirect through custo-
mer satisfaction. This study thus proposes the following marketing strategies for banks:

(1) For customers in the users who care nothing about benefits cluster (Cluster1),
communication between customers and banks is crucial because users in
Cluster 1 have positive intentions in relation to communication (Tables 8
and 9). Customers are concerned about service, and companies must encourage
them to use Internet-banking services habitually by increasing their satisfaction
through good interaction with service providers. The service quality factor
online call centre is related to the interaction. That is, the bank must increase
the quality of online call-centre service. Banks should also provide efficient
methods for helping customers achieve financial control (Table 9).
(2) Customers in the users who pay attention to quality cluster (Cluster 2) require
highly secure Internet-banking services (customers within Cluster 2 display
564 C.-C. Liang and W. Pei-Ching

Figure 2. The modified causality relationship.

Table 11. Model fit summary.

Statistics Mean Criteria Results
Absolute Fit Indices
SRMR Standardised root mean square residual ,.05 0.033
RMSEA Root mean square error of approximation ,.08 0.061
GFI Goodness-of-Fit Index ..90 0.970
AGFI Adjusted Goodness-of-Fit Index ..90 0.945
Normed Fit Indices
NFI Normal Fit Index ..90 0.965
RFI Relative Fit Index ..90 0.947
IFI Incremental Fit Index ..90 0.976
TLI (NNFI) Tacker Lewis Index (Non-normal Fit Index) ..90 0.964
CFI Comparative Fit Index ..90 0.976
Parsimony Goodness-of-Fit Indices
PGFI Parsimony Goodness-of-Fit Index ..50 0.518
PNFI Parsimony-adjusted NFI ..50 0.643
PCFI Parsimony-adjusted CFI ..50 0.651
CN Critical N .200 266
x2 ,3.00 2.928

The index is significant.

 Total Quality Management 565

positive intentions regarding three factors: Internet Security, Security, and

Privacy) (Tables 8 and 10). Ensuring that online services are provided in a
safe environment gives customers the confidence to use online banking services.
Restated, high-quality Internet security is essential for customer satisfaction.
Banks can attract security conscious customers to reuse Internet-banking services
(increasing loyalty) by emphasising security when they promote Internet-banking
services.
(3) Customers in the users who care everything cluster (Cluster 3) require timely and
appropriate portfolios. These users are concerned with customer rights (customers
in Cluster 3 display positive intentions for all factors, and Customer Rights have
the highest factor load (0.90161) (Tables 8 and 11). Based on the causality
relationship, customer satisfaction should be increased to protect customer
rights. By providing convenient (motivation) portfolio recommendations in
relation to investment in funds or foreign exchange, the bank can help maintain
and enhance customer fortunes/rights (Table 11), which should then increase
customer loyalty.

6. Conclusion
The development of online financial transactions must keep up with the growth of elec-
tronic commerce. Providing services based on user needs is essential for high customer
satisfaction. Satisfied users perceive service quality positively. Therefore, banks must
measure banking service quality in a way that represents customer perceptions of good
service.
This study analysed Internet-banking users in Taiwan based on customer perceptions
of service quality. The analytical results show that Internet-banking customers can be
classified into three clusters: users who are not concerned about benefits, users who
are concerned about quality, and users who are concerned about everything. These
three clusters are described in terms of demographics, consumer behaviours, and percep-
tions of service quality, customer satisfaction, and customer loyalty. In relation to the
variable service quality, this study identified three factors that can be used to describe
each cluster: Internet Security, On-line Call Centre, and Customer Rights. For
the customer satisfaction variable, this study found that each cluster can be described
with four factors: Communication, Reliability, Privacy, and Website Design.
For the customer loyalty variable, one factor could be used to describe the Loyalty
cluster. The causal relationships observed among service quality, customer satisfaction,
and customer loyalty in the Internet-banking industry have revealed that: service
quality has a significant and direct positive effect on customer satisfaction; customer sat-
isfaction has a significant and direct positive effect on customer loyalty; and service
quality has a significant but indirect positive effect on customer loyalty via customer
satisfaction.
Finally, without loss of generality, all of the above may be applied to mobile-banking
services. However, further work must be done to survey customers who use mobile-
banking services, because this study primarily analyses customers of Internet-banking ser-
vices. Furthermore, perceptions of the quality of Internet-banking services are important to
a customers choice to adopt such services and this fact is considered herein, but other
information about users browsing behaviours is also important, and should be addressed
in a further study.
566 C.-C. Liang and W. Pei-Ching

Acknowledgements
The authors would like to thank the National Science Council of the Republic of China,
Taiwan, for financially supporting this research under Contract No. NSC 102-2410-H-
150-007.

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