IMPACT OF MOBILE BANKING ON

CUSTOMER RETENTION WITH

MEDIATING ROLE OF PERCEIVED
PRIVACY & SECURITY: A CASE
STUDY OF BANKING SECTOR IN
PAKISTAN
Introduction

The customers all over the world are the centers of the individuals or organizational businesses,
businesses are attracting those customers with attractive steps like introducing different strategies
using innovative technologies, induction of mobile banking, internet banking facilities, intranet
banking facilities, approving digital loans and decreasing the load of documentation or manual
work. After the induction of mobile banking, banking sector is looking for other innovative
technologies to attract and facilitate the consumers at the advanced level. The study is being
carried out to investigate the impact of mobile banking on customer retention with the mediating
role of perceived privacy and security.

e-Banking is the new way forward in the banking system, through the different services of e-
banking banks are facilitating the customers. Mobile banking is among the latest form of internet
banking or e-banking, every banking sector is trying hard to make their system digital and
interact with the customer through cutting-edge technology. Each bank in the modern world has
its mobile banking services like mobile application, mobile wallet, by mobile banking customers
can make transactions online with just one click like bill payments, mobile top-up, online money
transfer, balance enquiry and much more. The motivation behind mobile banking is to ease the
customer and generate revenue along with easement. (Chiu et al. 2017)
Wei et al. (2019) suggested that banking sectoer is evolving istelf to meet the requirements of the
customer and provide best services by using modern technology. Even if the banking sector is
using technology to ease the customer but there are also challenges faced by that sector like lack
of acceptance to transform to digital ways, lack of internet connection around the counrty,
customer support system, online frauds. Apart from all these challenges mobile banking is a
good system to save the time and energy. Mobile banking has a very lethal system to protect the
customers from online frauds and the one time password (OTP) system is a good system for
secure login and making transactions anytime. (Aradhana et al., 2018)

With the wide range of usage of smartphones and internet, mobile banking has been growing
since then. With the growing trend of e-commerce and virtaul interactions mobile banking has
been quite effective and beneficial for the customers because banking sector is encouraging the
customers to use digital banking or mobile banking services through different media sources like
social media, mainstream media and arranging seminars. Banking sector is giving top-ups,
credits, and discounts to their new customers.

Literature Review

The adoption of the mobile banking is quite challenging especially in the rural areas where there
are a lot of factors like unavailability of the internet connection, traditional thinking, and trust
issues which is considered is to be the main obstacle in the adoption of the mobile banking (Chiu
et al., 2017). The research has been conducted by many researchers across many countries to
observe and calculate the factors behind the non-adoption of the mobile banking services. The
country among those country is leading its way by incorporating the servey research method in
which they used partial least square structural equation modeling (PLS-SEM) to analyze the
collected data and the researchers concluded that the low awareness of the mobile banking
services and perceived risk has been determined to be the main obstacle in the adoption of the
mobile banking services for chinese customers (Siyal et al., 2019). There are many other factors
like propaganda against the use of mobile banking which is carried out by some peer groups,
malware, online frauds, and low security levels (Danyali et al., 2018). Perceived risk is the main
factor which is resisting the customers to adopt the mobile banking services whivch has been
shown by many strudies like Fouad Bin et al., (2019) concluded it that perceived risk is an
essential element which is making the customers to think about mobile banking adoption.
Riquelme et al., (2010) concluded their research as the social norms, traditional social risk and
the advantage are the factors which are disabling the customers to adopt the mobile banking.

The innovations in the banking sector is directly linked to the customer satisfaction and customer
retention. Agolla et al., (2018) studied and came to a conclusion that innovations in the banking
sector attracts the customer and makes the customer loyal. Banking sector have to encourage the
innovations and introduce online customer feedback system from where the banking sector will
understand the needs of the customers and develop the models to increase the customer retention.
If a bank is using top-notch technologies and have a strong customer support system then that
bank will have a customer satisfaction level and maximum customer retention. Banking sector
should be customer centric like if a bank is introducing innovative technologies in banking
services then the bank should hit the whole community not some group and aware the whole
community.

The perceived risk is the main hurdle in customer loyalty. There is a not any significant
relationship between perceived risk and customer loyalty as suggested by Yen, (2015), changing
the costs without customer consent lowers the csutomer loyalty and that chaging cost has the
relatioship between loyalty of the customer and perceived risk.

The adoption of the mobile banking among the community depened upon the many factors but
one of the significant factor is trust, if the community trusts the mobile banking then they will
surely adopt it. If the csutomers trrust the banking sector then banking sector should take the
customer privacy and security serious and introduce techniques to make the customer’s data
secure and private. Earlier studies showed that intention and trust of the customer have positive
impact on the mobile banking Zalloum and Alghadeer, (2019). The privacy policies shouold be
very much clear and customer centric, if the policy is harsh but saving the customer’s data then
that policy means to be perfect. The construct perceived credibility was used by Tashmia
and Khumbula, (2011) which means that people believe that using mobile banking does not pose
a threat to security or privacy. Similarly, a lack of credibility is seen as synonymous with privacy
and security risks. In the meantime, Luarn and Lin (2005) supports security and data protection
as two important aspects in the structure of perceived credibility to use mobile banking. A lot of
researches support the main reasons people believes the reputation is reluctant to use mobile
banking. The study shows that perceived reputation will significantly affect those who wish to
use mobile banking Chian et al., (2012) and the advent of mobile banking has made customers
very concerned about security and privacy. Therefore, privacy and security have an impact on
the adoption of mobile banking.

Sampaio et al. (2017) investiagted the strategies of different banks and came to conclusion that
most the banks are investing in the mobile banking which lead them to customer satifaction.
After the introduction of different mobile application of mobile banking, many customers have
launched the complaints about security breach, services failure, online fraud and many more
concerns. The performance of a bank can be observed and measured by the scale of customer
retention, if the customer retention is high then one can estimate the good perfromance of the
bank and if the customer retention is quite low then there is a deficiency in the strategies and
performance of the concerned bank (Galetto, 2015).

The perception of a person is also a considersable entity in the banking sector, because
perception can increase or decrease the customer retention. Perception in the banking sector can
be defined as, ‘ it is a thought or belief which customer thinks about that bank or specifically
services of the bank’ whereas perceived security can be taken as the perception of the user when
customer thinks that the transactions over the web are secure and the online services which are
being provided by the banks are quite trustable and beneficial. This perception can be taken as
extreme as if customer wants his/her family to use internet banking or not (Ptael, 2017).
Nowadays businesses and banking sectors are implementing innovative technologies to facilitate
and satify the customers whereas there are many who believe in traditional thinking and quite
resistant to adopt new technologies which can be termed as perceived risk. Percieved risk can
affect the revenue of the bank and it can be removed through introduction and implementation of
the strong security policies.