Customer Retention and Customer Satisfaction In Relation to E-Banking

Abstract

In recent years, the banking industry around the world has been undergoing a rapid transformation and the Indian financial market is also witnessing a significant change in its growth pattern. The intensification of information technology has facilitated better tracking and fulfillment of commitments and multiple delivery channels for online customers. In India too, the wave of deregulation in the early 1990s has created heightened competition and greater risks for banks and financial intermediaries. Today, customers demand higher quality services from banks which, if fulfilled, could result in significantly improved customer satisfaction levels. Customer satisfaction and customer retention have received considerable attention from banking and marketing researchers and have been studied extensively in offline banking. With the emergence of tech-savvy environment and proliferation of electronic commerce, there is both a need and opportunity to examine Customer satisfaction and Customer retention in relation to online banking. Previous banking studies on customer retention focused narrowly on customer loyalty and customer satisfaction without attempting to link them in a model to further explore or explain customer retention. If retention criteria are not well managed, customers may still leave their banks, regardless of how hard bankers try to retain them. This study empirically examines the potential constructs in customer retention and customer satisfaction. So there was a need to present a comprehensive, integrated and holistic approach for designing a structural model for enhancing customer satisfaction and customer retention. The current research uses a questionnaire-based primary data to uncover the determinants of customer satisfaction and customer retention. For conducting customers’ survey, Likert scale based questionnaire was developed after review of literature and discussions with bank managers as well as academicians. The study is unique in its endeavor as it covers the attitude of users towards e-banking focusing on four factors, viz. convenience, costs, security and technology and relates this with customer satisfaction, which influences customer retention. Collected data was analyzed using statistical methods viz. descriptive statistics, ANOVA, factor analysis, regression and structural equation modeling. The regression results confirmed that customer satisfaction is related with customer retention in the context of e-banking. There are ten determinants of customer satisfaction of e-banking. The determinants of customer retention that emerge through factor analysis are: customer loyalty (CR1), technology invasion (CR2) and security & virtual banking vii (CR3). Customer loyalty (CR1) is relatively important factor influencing customer retention. The effective determinants of customer satisfaction influencing customer retention selected through regression are: Technology Adoption, Confidence, Ease of Use, Personal Services, Channel Activity and Relation among staff. The study also tried to find the difference in the attitude of users and non-users regarding convenience, security, cost and technology. The results for ANOVA for users and non-users highlight that there is a significant difference in attitude of users and non-users towards e-banking with respect to factors, namely; convenience, security, cost and technology. The structural model depicting relation among attitude of users, customer satisfaction and customer retention is a good fit model showing that there is a positive relation between customer satisfaction and customer retention. The present study suggests that there is a need to focus on security dimensions with greater impetus to enthuse customer confidence in e-banking.