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IBIMA Publishing

Journal of Electronic Banking Systems
Vol. 2010 (2010), Article ID 592297, 21 pages
DOI : 10.5171/2010.592297

Factors Affecting Customer Loyalty of
Using Internet Banking in Malaysia
Beh Yin Yee and T.M. Faziharudean
Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur, Malaysia,



Internet banking (IB) has become one of the widely used banking services among Malaysian
retail banking customers in recent years. Despite its attractiveness, customer loyalty towards
Internet banking website has become an issue due to stiff competition among the banks in
Malaysia. As the development and validation of a customer loyalty model in Internet banking
website context in Malaysia had not been addressed by past studies, this study attempts to
develop a model based on the usage of Information System, with the purpose to investigate
factors influencing customer loyalty towards Internet banking websites. A questionnaire survey
was conducted with the sample consisting of Internet banking users in Malaysia. Factors that
influence customer loyalty towards Internet banking website in Malaysia have been
investigated and tested. The study also attempts to identify the most essential factors among
those investigated: service quality, perceived value, trust, habit and reputation of the bank.

Based on the findings, trust, habit and reputation are found to have a significant influence on
customer loyalty towards individual Internet banking websites in Malaysia. As compared to
trust or habit factors, reputation is the strongest influence. The results also indicated that
service quality and perceived value are not significantly related to customer loyalty. Service
quality is found to be an important factor in influencing the adoption of the technology, but did
not have a significant influence in retention of customers. The findings have provided an insight
to the internet banking providers on the areas to be focused on in retaining their customers.

Keywords: Internet banking, banking website, customer loyalty, reputation

1. Introduction

Internet banking (IB) refers to the banking Act 1989 (BAFIA) and the Islamic Banking
services provided via a secure website Act 1983 are allowed to offer Internet
operated by the bank provider, thus banking services here. Table 1 provides a
facilitating the use of the Internet as a list of banks in Malaysia that now offer an
remote delivery channel. Internet banking Internet banking service.
allows bank customers with appropriate
access to manage their finances with In 2002 about 25,000 Maybank customers
minimal inconvenience as it provides a fast and 10,000 HSBC customers subscribed to
and convenient way to undertake various Internet banking in Malaysia (Yu, 2002;
banking transactions via the Internet Bernama, 2002). By 2008 there were over
banking website from home, office or 4.5 million registered Internet banking
elsewhere, 24 hours a day, 7 days a week. In customers in Malaysia in, which accounts
Malaysia, Internet banking services have for 85.5% of the total adult Internet user
been operational since the year 2000. population. Internet banking has a yearly
Currently, only banking institutions licensed growth rate of 40.6% compared to the
under the Banking and Financial Institution previous year that shows it is both growing
Copyright © 2010 Beh Yin Yee and Dr T.M. Faziharudean. This is an open access article distributed under
the Creative Commons Attribution License unported 3.0, which permits unrestricted use, distribution, and
reproduction in any medium, provided that original work is properly cited. Contact author: Beh Yin Yee, e-

Journal of Electronic Banking Systems 2

popularity and rapidly becoming one of the or improve their Internet banking services
most popular services utilized by Malaysian in order to make their bank a better choice
retail banking customers. Internet banking prospective customer and to retain existing
providers are working ceaselessly to add to ones.

Table 1: List of Internet Banking in Malaysia by Banking Providers

Bank Name Internet Banking (IB)
Al Rahji Bank Al Rahji Bank IB
Affin Bank
Alliance Bank Alliance Online
AmBank AmOnline
CIMB Bank CIMB Clicks
Citibank Citibank Online
EON Bank EON Bank IB
Hong Leong Bank Hong Leong Online
HSBC Bank Online@HSBC
Malayan Banking
Public Bank
RHB Bank RHB Bank IB
Standard Chartered Bank Standard Chartered Online
The Royal Bank of Scotland RBS Access Online
United Overseas Bank UOB IB
(Source: Bank Negara Malaysia)

Malaysia is expected to see further global al., 2004). In the online environment the
growth and expansion in Internet banking cost of obtaining and retaining a customer is
(Ayny, 2008). Despite Internet banking's usually higher than through traditional
attractiveness, website loyalty among channels (Reichheld and Schefter, 2000)
Internet banking consumers has become an and the customer’s loyalty is relatively
issue as there are many competing Internet lower, as customers are more interested in
banking website offerings in the Malaysian conviniences and ease of use when using
market. This is of concern to banks because Internet banking (Turban et al., 2000).
customer loyalty is important in that it has a While there is a rich body of literature on
positive effect on long-term profitability online financial services and their adoption,
(Ribbink et al., 2004). According to little is known about how to keep customers
Reichheld et al. (2000) and Reichheld and loyal to an online bank (Floh and
Schefter (2000) the high costs of acquiring Treiblmaie, 2006), This applies to Malaysia
new e-customers can lead to unprofitable as well as to other countries and therefore
relationships with new customers for up to suggests a crucial need for research into
three years. As a consequence, it is crucial which factors are responsible for keeping
for online companies to create and maintain customers loyal in Internet banking
a loyal customer base, and to monitor the environment.
profitability of each customer segment
(Reinartz and Kumar, 2002). Furthermore, Given that relevant research on loyalty in
new channels for online communication the Internet banking context is limited, the
offer a host of new and promising purpose of this study is to investigate the
opportunities for customer retention, while level of customer loyalty to Internet banking
at the same time intensifying competition websites in Malaysia with the following
(Vatanasombut et al., 2004). However, few research questions being addressed:
companies seem to succeed in creating e-
loyalty, and little is known about the 1. What factors determine the loyalty of
mechanisms involved in generating existing customers towards Internet
customer loyalty on the Internet (Ribbink et

. In online environments. have related perceived value as the customer’s overall the issues to the following factors: assessment of the benefits they receive relative to the sacrifice they make (Dodds et Service Quality al. assurance and order in Malaysia? management. fulfilment. and ability of another party customization / personalization. Literature Review essential strategy for firms to gain competitive advantage and long term Previous studies that have investigated the success (Parasuraman. including e-services. and delivery use and redemption value may emerge only of product and services (Zeithaml et al. dealing primarily with the integrity. (3) affect reflected in “feelings” multidimensional constructs of web design. also called trusting intentions (McKnight et scape. 2002). 1997. Which factors are essential in forming loyalty among Malaysian consumers in Perceived Value the Internet banking environment? Delivering superior customer value is an 2. Woodruff. trust has been responsibility. Perceived between online vendors and customers value is implied as a dynamic construct and across time and space (Featherman and may change its central component(s) over Pavlou. monetary costs (eg time. 1998) or the willingness of a party to be Cristobal et al. (Doney and Cannon. Based on previous research. perceived quality and websites resulted in the development of a other relevant high level abstractions. there are four distinct types of businesses have focused up on with e. Slater.. privacy. energy. According to Lin and Wang quality in terms of overall customer (2006). purchasing. (2) transaction value. 1997. 2. effort).. Various researchers have defined loyalty. 1997. 1991. during later stages of using the 2002). 2000. time. perceived value include intrinsic attributes (ie how a purchase makes one feel). 1997). issues of customer retention and customer 1997).. (2007) further developed a vulnerable to the actions of another (Mayer service quality scale which consists of et al. The service quality scale. It is slightly different from the e-SQ scale Trust developed by Zeithaml et al. According to Parasuraman and Grewal Service quality has become an issue that (2000). perceived value in their proposed expanded services that enable electronic model of customer loyalty: (1) acquisition communication. price knowledge. 1995). Gefen and Silver. acquisition and service quality is defined as the extent to transaction value may be dominant during which a website facilitates efficient and and immediately after a purchase.3 Journal of Electronic Banking Systems banking services among the consumers customer service. (3) in-use transaction processing and data interchange value. A study by Parasuraman et al. 1992). For instance. Furthermore. book and CD stores) the service quality 1995. and ease of defined as: (1) a set of specific beliefs navigation. (2005) on the extrinsic attributes (ie reputation of the Internet service quality of online shopping product/service). flexibility. efficiency. security. value. e. Santos (2003) described e-service product/service. while in- effective shopping. assurance. responsiveness and customization. al. include: monetary prices and non- system availability. (2001) which has 11 dimensions: reliability. the benefit components of delivery in the virtual marketplace. compensation and contact. a study by Ribbink et al. (2) a general belief that another (2004) in an e-commerce context (online party can be trusted (Gefen. Hosmer. 1999). 'sacrifice' components of perceived value consisting of seven dimensions: efficiency. Moorman et al. in their study on the determinants evaluations and judgments regarding the of customer loyalty in mobile commerce excellence and the quality of e-service contexts. responsiveness. information gathering. the e-SQ scale. of confidence and security in the caring . sometimes dimensions consisted of: ease of use. Woodruff. access. site aesthetics and benevolence.. and (4) redemption value.

1985). Srinivasan et al. not (trustee caring and motivation to act in the limited to online services that the banks are truster’s interest). and business transactions. ability and Reputation predictability to be applied in e-commerce. Trafimow. 1997). declaring the specific without conscious decision. Gefen et al. 2000. switching to use other websites that require (2003) adopted the conceptualization of new skill and familiarity. thereby causing repetitive same-brand or 2003. Ajzen. 1995). An organization can therefore have economic relationships that deal with numerous reputations (ie price. Other become a habit or well-practised behavior. Mayer and processes. Gefen. 1999. 1998. this study considers honesty and promise keeping).. 2003). Journal of Electronic Banking Systems 4 response of the other party (Rempel et al. The definition of trust as a specific set of beliefs Many studies have acknowledged the is adopted in this study as the Internet importance of loyalty in the electronic banking website context is a part of e. been verified in previous studies (Gefen. and having the potential to cause switching unconsciously (Aarts et al. Reichheld et al. researchers have split the first two it becomes automatic and is carried out conceptualizations.. (2003) defined habit is what an individual usually does when there is a behavioral Ranaweera et al.. 1998) and habit behavior (Oliver. effortlessly. Ouellette & Wood. (2008). making processes. Ganesan 1994. context have adopted the same view by The website is simply the main defining trust as a set of specific beliefs communication channel between consumer dealing primarily with the integrity (trustee and organization. 2003). trust as a set of specific beliefs which includes integrity. According to 1997. context and have analyzed this aspect in commerce which deals with buyer-seller detail (Lynch et al. rather than by elaborate decision Davis. Habitual behavior loyalty consists of both behavioral and leads to the continuation of the same type of attitudinal dimensions . Most habitual behavior arises and situational influences and marketing efforts proceeds efficiently. Gefen definition applies to online loyalty as well. Some researchers have combined the This is aligned with Ouellette and Wood first two conceptualizations into one (1998) who stated that once a behavior has construct (Doney and Cannon. same brand-set purchasing. benevolence. reputation must be et al. 1998. trustee to do what the truster's needs) and predictability (trustee’s behavioral Customer Loyalty consistency) of a particular m-vendor. 1990. Lin and Wang (2006) who understood as referring not only to the conducted their study in an m-commerce website. Mayer et al. product buyer-seller and business interactions quality and innovativeness reputations) (Crosby et al. 1999. despite 2000). Subsequently can predict customers future behavior Ribbink et al.. Doney and Cannon and/or global reputation. and specifically in the online shopping Herbig and Milewicz (1993) have defined context..more specifically: .. It will discourage of trust in previous literature. (2004) stated that this general (Bamberg. This implies beliefs as antecedents of the general belief that habit is guided by automated cognitive (Jarvenpaa and Tractinsky. Jarvenpaa Casalo et al. the acquire skill to use a particular website Despite the existence of different definition resulting in habit. & Schmidt. Gefen 2002. but also the entire organization. behavior (Aarts et al. The definition is aligned with the reputation as an estimation of the past literature where it has been most consistency over time of an attribute of an widely used in studies related to ongoing entity. 2001. Reichheld and Schefter. In Internet banking. benevolence a holistic perspective of reputation. Thus. 2000). Customer loyalty has been Habit defined as a deeply held commitment to re- purchase or re-patronize a preferred The role of habit in predicting behavior has product/service consistently in the future. (2003) explained that preference in the present. 2000). competence (ability of offering to their customers. 1999). 2002.

1993. Purchase intentions were it is possible for consumers to be loyal to defined as the propensity to purchase a different products with different qualities product or service at some point in the according to their needs and economic future (Ranaweera et al. 1998). loyalty both exists and is positive (Anderson Anderson and Srinivasan (2003) also and Sullivan. 1967).. dimensions. influence by other factors. 1999. an investigation of indicates that service quality has an impact perceived value as a predictor of customer on individual consumer behavior. Cristobal et al. Harrison-Walker. Furthermore. 2003).5 Journal of Electronic Banking Systems purchase intentions (Boulding et al. perceived value was not a predictor of Ruyter and Wetzels (1998) further posited customer store loyalty in a retail market the importance of determining the nature context. loyalty as the findings show that perceived product or service (Arndt. Past literature showed that perceived value Relationship between Service Quality and contributed to customer loyalty (Dodds et Customer Loyalty al. the existence of a switch to competing products in order to relationship between service quality and increase perceived value. mouth is defined as oral. and the purchase decision is (Jarvenpaa and Tractinsky. suggested that when perceived value was 1992. According to low customers would be more inclined to Zeithaml et al. 2001). service quality does not has a significant effect on loyalty. Loyalty However. a finding from while unfavorable behavioral intentions are the study by Omar et al. Cronin and Taylor. online influenced by perceived product quality in customers generally stay away from retail industry for product with low levels of electronic vendors whom they do not trust involvement. person to person (2007) rejected the hypothesis that higher communication between a communicator levels of perceived quality in web site and a receiver whom the receiver perceives services foster higher levels of web site as non-commercial with respect to a brand. where loyalty in the golf traveller market by superior service quality leads to favorable Petrick and Backman (2002) found it not to behavioral intentions (ie customer loyalty). (1996). Nevertheless... Previous research definite importance of perceived value in has also confirmed that a relationship determining a consumer's online purchase between perceived quality and customer intention (an aspect of customer loyalty). Voss et al. Trust is expected to affect customers’ consumer loyalty is not significantly willingness to purchase online.. The model supports the as a dependent construct. thus a decline in customer retention at a higher level loyalty.... 1992) not a predicting factor of customer loyalty. and strength of the relationship between perceived service quality and loyalty for a Relationship between Trust and Customer firm and/or different industry levels. 2003). Chen and Dubinsky (2003) Zahorik and Rust (1992) argued that established a conceptual framework of modeling perceived quality as an perceived value in a B2C e-commerce influencing factor of customer loyalty will setting for elaborating the relationship provide significant diagnostic ability to any between perceived value and key framework that includes customer loyalty determinants. The relationships between the previously described factors with respect to customer Relationship between Perceived Value and loyalty are further expanded upon in the Customer Loyalty following paragraphs. However. Word of involvement. This study word of mouth (Gremler et al.. 1991. Customer ability. Grewal et al. according to Manhaimer (2007). 1998. 1993). be predictive. Reichheld . 2001) and concluded that perceived product quality is commitment (Moorman et al. the author also stated commitment refers to the strength of that high perceived quality may lead to relational ties and to the desire to maintain loyalty if it involves high product a relationship (Bansal et al. (2007) showed that a consequence of inferior service quality. Meanwhile.

they the determinants of customer loyalty as the claimed that customers visit websites out of independent variables (IV). This was supported by a study strongly increased a consumer's intention by Corbitt et al. to establish greater customer loyalty Additionally. in which behavioral intentions are The model is summarized in Figure 1. Moreover. predicted that lack of trust is frequently Robertson. social norms and . change. (1999) online merchants. people tend to ignore external loyalty which consists of the relationship of information or rational strategy. trust. Relationship between Reputation and Ribbink et al. They concluded that (2004) found that perceived trust had direct habitual prior preferences in the use of and positive impacts upon the loyalty of specific m-commerce systems directly and customers. Gefen (2003) found that such as eBay and Google are the ones with habit alone can explain a large proportion of healthiest profits and a loyal client base. Conversely. Chiou affect caused by habit. Standifird et al. Eastlick and considered as a major contributor to loyalty. The model costs entailed. trust is not (even catalog shopping). will increase. 1998. 1987). When habit is well. Such an service quality. due directly to the reinforcement of the Based on the literature review.and cited as a reason for not purchasing from offline exchange. (2004) investigated the role of Customer Loyalty customer evaluations of electronic service and e-trust in explaining customer loyalty to A more positive reputation tends to develop online retailers. 1982) and trust directly and positively affects e-loyalty. The finding suggested that 3. When comparing on. and of habit. a conceptual habit of visiting that specific website. since such a medium of purchase from the same store through force exchange requires consumers to purchase of habit (Beatty and Smith. The findings showed that e. the variance in the continued use of a website. Research Methodology customers’ intentions of repeat purchases on a specific website (one they have Research Model habitually used in the past). the product of attitude. Trafimow without immediate delivery or tangible (2000) and Verplanken et al. (1998) exchange. focused on the factors influencing customer entrenched. Although most of the argued that the reputation of online literature showed a positive impact of trust suppliers are significantly more important on loyalty. habit effect is a central element in Triandis' and reputation with respect to customer (1971) theory of attitude and attitude loyalty towards Internet banking websites. (2003) on online firms to continue using the same systems. 1993). In the model was developed which consisted of research done by Lin and Wang (2006). Resnick and Zeckhauser (2002) highlighted that habit can directly affect further suggested that the best-known behavioral intentions more than do attitude service companies with good reputations and social norms. perceived value. Finn and Kayande (1997) found to online consumers than any offline context that in an online environment. rather than through a conscious customers’ loyalty behavior as the evaluation of the perceived benefits and dependent variable (DV). 2000). Feinberg (1999) argued that the behavioral intentions of catalog shopping customers (ie Relationship between Habit and Customer customer loyalty) as compared to Loyalty “conventional” brick-and-mortar shoppers are more influenced by the reputation of the About 40–60% of customers' repeat organization. Lee and Turban (2001) (Andreassen and Lindestad. Journal of Electronic Banking Systems 6 and Schefter. sales and market share (Shapiro. which demonstrated there is a strong positive effect of trust on loyalty.

as previously discussed. perceived product/services provided. the first hypothesis is it shows that there is an effect of trust on stated as follows: customer loyalty. Flavian et al. contribution of service quality of call Therefore. (2006) characteristics of the supplier (primarily suggested aspects such as how user-friendly regarding integrity. 2003). . benevolence. a service quality is described as the overall company must continuously work at customer evaluations and judgments enhancing perceived value in order to regarding the excellence and the quality of obtain higher customer loyalty. Floh and Treiblmaier (2006) investigated commerce. the web site is (a part of the service quality) competence and predictability) (Gefen et al. Lin and Wang (2006) also proved that trust has a positive effect on H1: Service quality has a positive customer loyalty in m-commerce. Wolfinbarger and Gilly (2002) showed that perceived quality is the second most Trust. Cyr et al.7 Journal of Electronic Banking Systems Service H1 Quality H2 Perceived Value Customer H3 Loyalty Trust H4 Habit H5 Reputation Fig 1. In the study loyalty towards e-services website. Internet banking websites. customers from switching to competitors. Dean (2002) in his study on the mentioned in the previous section.. are determinants of web site loyalty levels. Meanwhile. The e-service delivery in the virtual marketplace significant relationship between perceived (Santos. When value is related to the overall evaluation of investigating e-loyalty within an e-services the customer on the differences between context. refers to the important predictor of loyalty and intention consumer beliefs about certain to repeat a purchase. Conceptual Framework Research Hypotheses As discussed in the literature review. (2007) showed that the benefits they received and the sacrifice higher levels of trust will result in higher they make (Woodruff. Anderson and Srinivasan (2003) as 2007). value and loyalty is also supported by other customer service. quality of the Web site. As described in the literature review. conducted by Lin and Wang (2006) on m. influence on customer loyalty towards Customers who cannot trust an m-vendor Internet banking websites. even though they are satisfied with the Referring to the literature review. will not be loyal to that m-vendor. To discourage loyalty such as trust. a second hypothesis is proposed: centres to customer loyalty to the providing organization in Australia has found that H2: Perceived value has a positive perceived service quality is positively influence on customer loyalty towards related to customer loyalty.. perceived value is a significant the importance of antecedents of online predictor of customer loyalty. assurance and order researchers such as Hsu (2007) and management dimensions (Cristobal et al. Lastly. As a consequence. 2003) and is related to web design. 1997).

privacy and reliability elements. In light of the above research. As a banking website. banking users about their opinions on various research variables. As an addition to the existing previous researches. which is related and Milewicz. related to the design of the web site (eg content layout. the forth Perceived e-Service Quality (PeSQ) scale hypothesis is presented as below: which was developed for a study done by Cristobal et al. which is Internet banking websites. this study adapted a past consequence. (2007). content updating and user- The literature review discussed that friendliness). past studies by researchers such as Lin variables mentioned above are used in and Wang (2006) and Gefen (2003) have current research with the measurement highlighted that habit directly influences items are totally adapted based on the loyalty. which relates to the website reputation led to a greater degree possibility of modifying and/or postponing of loyalty. to of “reputation” as proxies for measure customer assessment of Internet trustworthiness. (2) customer service. leads to the perpetuation of the same type perceived value (3 items). product quality. or global reputation (Herbig complaints. reputation in term of price. distrust each consisting of 3. the Questionnaire Design and Construct third hypothesis is proposed as below: Measurement H3: Customer trust has a positive A Structured questionnaire was developed influence on customer loyalty towards to obtain the responses from Internet Internet banking websites. trust (5 items). habit (4 items). customer of an attribute of an organization such as sensitivity (willingness to help customers). 1998. this study major predictor of loyalty. Lastly. (3) assurance. be seen as a major antecedent of customer loyalty. Following the adapted 17 questionnaire items from the statement mentioned above. the fifth hypothesis is stated study from Casalo et al. trust and habit are as loyalty. It showed that online consumers adapted from Lin and Wang (2006). the behavioral intentions of consumers such Then. The seven 2. Goode and Harris (2007) also the purchasing process at any given described that favorable interpretations of moment and with no obligation. 2003). that is it is a questionnaire of this study consists of seven behavioral preference in the present and variables: service quality (17 items). and of the online reputation of an online supplier obtaining information on product are directly and positively associated with availability at the moment of purchase. Liao et al (2006) items are then rephrased so that all items described that habitual activity with a web can be applied to Internet banking context. They found out that trust can banking websites. of behavior (Aarts et al. That author In order to measure Internet banking users’ also verified that a consumer’s habits were a perceptions of service quality. These 17 H4: Customer habit has a positive measurement items are grouped into four influence on customer loyalty towards dimensions: (1) web design. As for . site will positively affect a user’s intention to continue using that web site. perceived value. Other literature previously banking website provider reputation in mentioned also supports the relationship determining their choices of Internet between reputation and loyalty. with are tend to be extremely cautious. a more favourable (4) order management. personalised service and fast response to innovativeness. 1993). In the study conducted to security. by Casalo et al. which is reputation relates to consistency over time related to service performance. (2008) which as follows: consists of 4 items measurement. The Habit is what one usually does. Journal of Electronic Banking Systems 8 quality of the service and overall H5: Reputation has a positive influence on satisfaction in the online banking customer loyalty towards Internet environment. Gefen. (2008). 5 and 4 items “new” online suppliers and use perceptions measurement respectively.. The measurement literatures in this study. reputation (4 items) and Based on the literature described in Section customer loyalty (5 items).

6. measurement items of each construct are This indicates that the constructs are significant at level 0. as suggested by Pallant Consequently content validity is also (2001).7 million in 2005 (Dali. (1998).847 For construct validity in term of the For construct validity in term of convergent discriminant validity test. Overall. (2003) and the KMO index is be at an acceptable level of discrimination. as proposed by Bagozzi (1994).57%. Based on Table 4.01. KMO and Bartlett’s test. Data Analysis and Findings respect to each item. from the total of 350 each tested variable (service quality.741 Reputation 4 .884 Customer Loyalty 5 . were examined. as recommended by Sanzo et al. with values no higher item. as well performed. Cronbach’s alpha higher than 0. This response rate operationalized into a total of 5 items which is still adequate when compare to other are adapted from the research of Lin and similar studies which have involved sample Wang (2006). 2008). based on Table 5. This industrialized region in Malaysia with a suggests that the items concerned total population of 6. 0. reputation and month data collection period. all than 0. more than 0. (=7) and respondents were asked to indicate their level of agreement with 4. confirmatory factor analysis was analysis between the variables was performed.70 as which is the most populous. Respondents were also required to indicate their usage of Internet Pre-Analysis Data Screening banking websites and provide demographic information. could be used for further analysis. strongly disagree (=1) to strongly agree 2006).50. the data used in this study in this study for data collection was a is fit for further statistical analysis. urbanized and suggested by Hair et al. questionnaires distributed during a one perceived value.820 Habit 4 .9 Journal of Electronic Banking Systems customer loyalty. correlation validity. trust. convenience sampling method through questionnaire survey with a pre-planned Reliability and Validity Test sample size of 350 respondents. adequately measure a single construct for 2008). Therefore. Moreover. 2007). with a Table 2: Reliability Measurement Number of items Variable Cronbach’s Alpha (N) Service Quality 17 .. The questionnaire its constructs indicated by values of survey was distributed in Klang Valley.912 Perceived Value 3 . there were customer loyalty). The regression assumption test indicated that linearity and homoscedasticity are Sampling ensured and multicollinearity. The result shows that as factor loadings for each measurement correlations are low. All items were measured by sizes of 461 (Cristobal et al.8. Reliability measurements only 289 valid questionnaires received that for each construct are shown in Table 2. The target sample in this study was experienced All items shows strong internal consistency Internet banking users. 255 (Lin and Wang. most of established. Table 3 shows the analysis of the individual factor loadings are more than correlation between the variables. . habit.. the construct is response rate of 82. 335 seven-point Likert scales ranging from (Casalo et al. as suggested by distinct from one another and is deemed to Sanzo et al.770 Trust 5 . auto- correlation and multivariate outliers do not The sampling procedure that was adopted exist.

178 3 0.826 630. it is dealt with SQ7 .551 .381 .467 .761 241. In conclusion. However.488.492 .811 136 0.524 .483 1 .650 6 0.524 . SQ16 factor loading is close validity has been achieved in this study. Therefore item In general. to 0.659 276.811 479.522 .720 When promise to do something within a certain timescale.439 .689 SQ5 Full information on product features and services offered .626 . Table 3: Pearson’s Correlation Coefficient between the Research Variables Servic Perceiv e Reputatio Customer Variables ed Trust Habit Qualit n Loyalty Value y Service Quality 1 .356 6 0.545 . for which it is and convergent validity test.000 Reputation . these which permits further assessment of the results confirm that the measurement items relationships between the independent of the same construct are highly correlated. Journal of Electronic Banking Systems 10 (2003). based on the discriminant trust. Service Quality variable. except for item SQ16.483 . habit.597 SQ3 Website pages load quickly .492 Perceived Value .554 SQ2 Website information is regularly updated .923 2169.360 10 0.674 done When customer has a complaint or grievance.515 .563 Habit . variables (service quality.700 rapidly and effectively (continued) .563 .551 1 .572 1 .000 Perceived Value .626 . reputation) and the dependent variable (customer loyalty).000 Habit . Overall. construct 0.381 .691 .010 level Table 5: Factor Loadings and Measures of Research Variables Factor Variabl Measure Loadin e g Service Quality SQ1 Products/services and its features are correctly presented .646 SQ4 The contents are easily found in the web site (ease of navigation) .000 Customer Loyalty .000 Trust . perceived value.522 Reputation .769 688. it is SQ6 .591 1 Loyalty Table 4: KMO and Bartlett’s Test of Sphericity of Research Variables Bartlett’s Test of Sphericity Variable KMO Chi-Square df p-value* Service Quality . the measurement scales used in SQ16 is deemed as a valid item within the this study are broadly valid and reliable.653 10 0.439 Trust .545 .50 and the KMO and Bartlett’s test showed satisfying result.515 .691 .000 Note: * Indicates significant at the p < 0.467 1 .591 Customer .572 .

742 TR4 Based on my experience in the past.638 SQ9 The provider provides its customers with a tailor-made service .749 TR5 Based on my experience in the past.11 Journal of Electronic Banking Systems Table 5 continued Variabl Factor Measure e Loading SQ8 The service is performed properly first time .725 from this website .896 PV2 Price/fee charges are acceptable .784 TR3 Based on my experience in the past. my preference LOY3 .711 purchase/transaction Security elements are incorporated in the website.746 When I need to buy/use banking products/services through the HB3 .818 PV3 Product/service is considered to be a good deal/buy .860 relationship with its users Customer Loyalty LOY1 My preference for this website would not willingly change .656 agreed on An image of reliability and trustworthiness in one’s transactions is SQ11 .796 LOY2 It would be difficult to change my beliefs about this website .488 process without commitment Contains information on product availability when SQ17 .847 websites RP3 This website/provider has a reputation for offering good services . at the time of delivery SQ10 .616 dealing/transacting Perceived Value PV1 Product/service is good value for money .742 banking product/service I intend to keep purchasing/using the banking products/services LOY5 .750 Internet.844 This website/provider has a good reputation compared to other rival RP2 .803 Trust TR1 Based on my experience in the past.773 Reputation RP1 This website/provider has a good reputation . I know it is honest .690 made aware of these Customer can opt to modify and/or defer at any time the transaction SQ16 .564 The stated delivery period is adhered to.689 The operation carried out satisfactorily once the customer has SQ13 . and customer is SQ15 .842 for this website would not change I will buy/deal from this website the next time I purchase/need the LOY4 .689 transmitted SQ12 The confidentiality of customer data is ensured .750 confirmed the transaction Clear information is provided on how to make the SQ14 . I know it is predictable . I know it cares about customers . this is the first website I try HB4 I often buy/use the banking products/services from this website .773 Habit This website is where I usually go to buy/use banking HB1 . I know it knows its market .765 products/services through the Internet HB2 This is my preferred website providing banking products/services .899 This website/provider has a reputation for being fair in its RP4 .781 TR2 Based on my experience in the past. I know it is not opportunistic .751 HB1 Based on my experience in the past.829 Even if close friends recommended another website. I know it knows its market .

9 Chinese 215 Internet banking 29 10.2 Demographic Profile Online Gender Online@HSBC 54 18.8 Table 6: Profiles of the Sample UOB Internet Banking 12 with 60.001 – RM9.3 16-20 3 1 3-5 times per month 85 29. age group.2 are in the majority (70.6 Latest Time Usage of Internet Banking Website 36-40 25 8. Divorced 2 0. Journal of Electronic Banking Systems 12 Descriptive Statistics Classification Frequency % Race Characteristics of Respondents Malay 46 15. CIMB Clicks 77 26.5% of the RHB Internet Banking 28 9.7 last time used.001 and RM5.9 between 26 years old and 30 years old Certificate (61. OCBC Internet Banking 35 12. RM1.7 1 weeks ago or lesser 224 77. marital status) and (2) Single 195 67.1 in this study: (1) demographic profiles ( 221 76.5 Maybank2u.2 Citibank Online 69 23.500 15 5. It showed that there were slightly Education Level more of male respondents (54%) than PMR/LCE or Below 1 0.000 12 4.0 Value) website which was the first Internet banking website to be introduced in Usage Profiles Malaysia by Maybank.9%).2 41-45 7 2.3 26-30 179 (Public banking website more than five times per 49 16.000 32 11.4 21-25 24 8.5 2-3 weeks ago 41 14.501 – RM3.001 – RM7. Marital Status income level.4 Female 133 46 Usage Frequency of Internet Banking Website Age Group 1-2 times per month 79 27. last Internet banking website used).9 majority of the respondents (76.000 117 40.1 RM5.6 Most of the respondents use an Internet PBeBank. a >= RM9.9 Classification Frequency % Standard Chartered 44 15.8 Internet banking used.9 Bank) month (43. race.000 67 23.4%).9%) and are of Chinese ethnicity Postgraduate 50 17. Furthermore.4 respondents belongs to the age group Degree/Professional 205 70.4%) and 77.3 (74.2 40.6 sample (N=289).000 and more than 67% of the RM7.6% of last users. frequency of usage. The majority of the Certificate/Diploma 33 11.5% of the respondents are from the RM3. The most frequently List of Internet Banking Website Used last used Internet banking website was also Maybank2u.4 Table 6 presents descriptive profiles of the Indian 19 6.9 31-35 51 17.001 – RM5.3 female (46%).6 website either a week ago or less.5 group with incomes between RM3.1 AmOnline (Ambank) 14 4.4 . Moreover.7 Male 156 54 Others 7 2.5 Internet banking usage profiles (list of Married 92 31. Respondents who possess a bachelor degree or professional certificate Monthly Income <= RM1.5%) is Unknown (Missing using the Maybank2u. education level.001 17 5.7 respondents had used an Internet banking Hong Leong Online 19 6. including two major items Others 9 3.3 > 5 times per month 125 43.2 respondents were single.

24/17) in a seven-point Likert scale PBeBank. trust and service quality) with the dependent variable.47) and 46.90/4) and for reputation. maximum.575 Reputation 12 28 21.619 Customer Loyalty 12 35 24.90 3. the average means score for UOB Internet Banking 3 1.0 (=90. (Public that shows the respondents have slightly 16 5. 13 Journal of Electronic Banking Systems Classification Frequency % and standard deviation for the research 1-3 months ago 13 4. reputation and customer More than 6 months ago 10 3. the means score Descriptive Analysis of Research Variables is 4.14 for the Hong Leong Online 2 0.464).24 11.0 trust is 5.745 Multiple Regression Analysis perceived value.01). the result suggests that the respondents tend to be only slightly Table 7 shows some descriptive results for loyal to the Internet banking website. customer In order to examine the factors influencing loyalty (R = . 5. Maybank2u.3 trust.21 (=26.5 variables of service quality.0 AmOnline (Ambank) 3 1.43/5). multiple regression explain 47% of the variance in customer analysis was performed.23 3. mean Table 7: Descriptive Statistics of Research Variables Min Max Mean Standard Deviation Service Quality 62 119 90. Reputation. The table shows minimum.03/5).43 3.5 loyalty. perceived value. trust and service quality websites in Malaysia. There is a correlation between the 5 independent variables (reputation. for the customer loyalty variable.23 Citibank Online 8 2. for habit it is 5. Table 8 and Table 9 loyalty (R² = 0. habit.43/3).23/4). Lastly.8 websites.8 the average means score of 5. The results shown below are the summation of all the items belong to each Latest Internet Banking Website Used variable from the seven-point Likert scale.8 ( 175 60. OCBC Internet Banking 23 8. .0 Besides that.803 Perceived Value 6 21 15.7 perceived value variable (=15.43 4.29 CIMB Clicks 29 10.89 (=24. as does the * Note: The sample size (N) is 289 Internet banking website/provider's (positive) reputation.3 their Internet banking choice. These scores mean that 13 4.6 The mean scores of service quality is 5. More than 3 months ago 1 0.069).5 Online respondents tend to: trust Internet banking Online@HSBC 8 2.5 positive evaluations of the service quality of Bank) Internet banking website. population (Adjusted R² = 0.4% of the show that the regression coefficient is variance of customer loyalty of the significant (F (5. 283) = 50. habit. Respondents also had slightly higher perceptions of the value Latest Internet Banking Website Used of Internet banking websites as indicated by RHB Internet Banking 8 2. habit.03 4. customer loyalty towards Internet banking perceived value. p < 0.079 Habit 13 28 20.95. if at the research variables used in this study.31 Standard Chartered (=21. agree that habit does influence Others 1 0.212 Trust 15 35 26. Thus.

083 .28) and habit (β = 0. (Constant) 1.25 for Habit Cristobal et al.245 4.773 .440 Trust .35. and H5 are supported in this study. 0. thus. This indicates p<0. 0.069 . H1 and H2 are On the other hand.95 .000 Based on the findings.539 .074 .464 3.029 . p < 0. of Squares Regressio 3072. R2 Standard Error of the Estimate . positive past studies by Kouthouris and Alexandris influence on customer loyalty.04. positive predictor of customer = 0. service quality and loyalty in the golf traveller market.473 8 Table 9: Significant of IVs on DV (Customer Loyalty) Sum df F Sig. are in line with the evidence offered by Lin Furthermore.28.027 -.68 . Rejection of H1 is supported by reputation have a significant.68 283 Total 6484.07. follow by trust (β = loyalty (β = 0.25). However.10 5 50. p>0.073 -1.474 .284 Perceived Value .683 .05) was found not significantly service quality and perceived value are not predicting customer loyalty. (2008).01) and reputation (β = 0. Besides that.79 288 Table 10 shows that trust.680 .35 for Reputation against Customer context where higher level of service quality Loyalty. . Thus. Table 10: Significant of IVs on DV (Customer Loyalty) Unstandardized Unstandardize Coefficients d Coefficients B Std.456 .675 .000 n Residual 3412. p > 0.082 .043 .641 .000 Reputation . H3. Habit (β = 0. Trust was found as a findings show that reputation coefficients (β significant. The empirical findings of this study apparently do not foster customer loyalty. habit and rejected. customer loyalty towards Internet banking websites in Malaysia. service quality reputation correlate positively and (β = -0. habit and customer loyalty.25. Error Beta t Sig. trust.144 1.348 5.000 Habit .01) and perceived value (β significantly with customer loyalty. with Manhaimer (2007) in the retail industry and Beta values of 0. Journal of Electronic Banking Systems 14 Table 8: Multiple Regressions of IVs on DV (Customer Loyalty) R R2 Adj.01) that reputation is more predictive of also is a significant.01).35) is the highest. positive predictor on customer loyalty than trust and habit.325 . p < 0. indicated that trust. on perceived value do not appear to foster Major findings from these two studies have customer loyalty in a retail market context. (2007) in an online usage and 0.064 . support perceived value are not predictors of the rejection of H2. findings by Omar et al. habit and reputation and by Petrick and Backman (2002) on play an important role in building customer perceived value not being the prediction of loyalty in an Internet banking website context in Malaysia.325 . H4 (2005) in the sports tourism industry.28 for Trust. so correlated. but not = 0.070 .495 Service Quality -. (2007) and Wang (2006) and Casalo et al.280 4.

All these results lead to the achievement of although the Internet banking providers the stated research questions and provide high quality services and have consequently lead to a number of gained high customer perceived value. loyalty towards Internet Gefen (2003). These are followed in significance The analysis finds that hypotheses three to by trust and habit accordingly. loyalty towards Internet Lin & Wang (2006). (2004).073 Not Manhaimer (2007). H4 Habit has a positive . (2007). loyalty towards Internet Andreassen & Lindestad banking website (1998). customers tend not to be loyal banking providers in Malaysia heed to . Results of the hypotheses testing are summarized in Table 11. Robertson (1993). influence on customer Floh & Treiblmaier (2006). Internet Malaysia. while hypotheses one trust and habit are still necessary for and two are rejected at the significance level customer loyalty to Internet banking of 0. the results have shown that variables. Table 11: Summary of Hypotheses Testing Coefficien Hypothesis Result Supported Literatures t H1 Service quality has a -. (2007). banking website. when compared. habit and reputation have a highly significant. (2008). independent 5. there are few publications that Firstly. From a managerial perspective. positive influence on Research Conclusion and Implications customer loyalty towards Internet banking website. banking website Ribbink et al.348 Supported Casalo et al. reputation is the best predictor of reputation has becoming an essential factor customer loyalty towards an Internet for ensuring customer loyalty in Malaysia. positive influence on Supported Cristobal et al. banking website H5 Reputation has a positive . customer loyalty towards Petrick & Backman (2002) Internet banking website H3 Trust has a positive .043 Not positive influence on Supported Omar et al.280 Supported Cyr et al. influence on customer Goode & Harris (2007). influence on customer Liao et al (2006).01. Although five are supported. Among the five independent websites. service quality and perceived value support the negative findings which were is not a predictor of customer loyalty produced by this study. customer loyalty towards Kouthouris & Alexandris Internet banking website (2005) H2 Perceived value has a . (2007). Conclusion variables of trust.15 Journal of Electronic Banking Systems Additionally. conclusions and managerial implications Although it is not consistent with most of which are as follows: the previous studies in the Western countries. as shown in Table towards Internet banking websites in 11.245 Supported Lin & Wang (2006).

it is important banking websites. As factors as they are the fundamental repeated use of Internet banking website attributes to be incorporated into Internet increases. contests and coupons. For example. However customers begin using the website and for customer retention strategy. Continuous effort to to emphasize on customers' welfare. even though superior Internet banking This perception will result in the bonding websites are available. Internet becoming familiar with it. Customers that are used to a particular Internet banking . websites in Malaysia. the habit of using it is developed banking services to strategize the Internet within the customer. Service quality is not a major switch to another Internet banking website. consumer habit is contributing Awards 2008” and “Reader’s Digest Trusted towards loyalty to Internet banking Brands . increase or maintain the website or ability to meet customer needs and provider reputation is a must to ensure consistency in delivering services can also customer loyalty. Internet banking quality and perceived value are website providers should attract customers fundamental attributes for retention the to their Internet banking website through users of the Internet banking that Internet promotions. consumers who place a high Finally. Besides that. Journal of Electronic Banking Systems 16 realize that providing good Internet banking website are unlikely to switch to another services alone does not guarantee customer site. This is due to the fact that when they retention. customers will tend to stay loyal and is expected to be offered by each to the current Internet banking website. The build. Internet banking website provider. for the Internet banking provider. It should be noted that service Internet banking website.Bank . Once banking providers must facilitate. Internet banking provider in the first place. Customers who do not trust their most important factor in Malaysia in Internet banking provider will not use and retaining customer Internet banking remain loyal to that Internet banking website use. From a prior studies as shown in Table 11. From a managerial standpoint it is important that managerial standpoint. reputation is the website. they have to learn how to use the new site. Internet banking providers must try to establish an image website providers can also increase their which includes integrity. can be enhanced by developing a habit However. factor to differentiate competitive offerings. with a greater importance than website. This finding is consistent with both trust and habit factors. among particular bank consumers to use they should not totally ignore these two the bank Internet banking website. Internet banking Internet banking website providers website providers should create a trust consider reputation as the most critical relationship with the customers by being factor in encouraging loyalty among honest. good service quality is a must Therefore. In fact. Based on comments by some of the which means a high switching cost. customer loyalty. customer loyalty loyalty is not so strong in Malaysia. In order to encourage banking business and increase user customers to repeatedly use the same retention. As for the relationship between service quality and managerial implications. for other factors that can help to create This will reduce switching behavior to the loyalty in order to sustain competitive rival websites and consequently build advantage in long run. keep their customers loyal. they may banking providers in Malaysia should look continue of using it if it has become a habit. the reputation of the Internet degree of trust in an Internet banking banking website or provider has influence provider are more likely to become a loyal on customer loyalty towards Internet customer to that particular Internet banking banking website. respondents. This can be done via create trust in customer towards the campaigns or advertising highlighting the Internet banking website provider. In positive aspects of both website and conclusion. Secondly.Gold Award” in 2008. reputation by gathering reputable awards competence and predictability in order to such as brand awards. benevolence. Maybank was awarded “Best Brands - Banking Online” in “The Brand Laureate Thirdly. sincere and keeping their promises Malaysian customers towards their Internet to their customers. Moreover.

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