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Measuring Service Quality in Internet Banking

Article  in  Journal of International Consumer Marketing · August 2005

DOI: 10.1300/J046v17n04_06

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 Measuring Service Quality
in Internet Banking:
The Case of Hong Kong
Noel Yee-Man Siu
Jeremy Chi-Wah Mou

ABSTRACT. Past research on measuring service quality in Internet

banking is scarce. This study adapts the dimensions of the e-SERVQUAL
(Zeithaml et al., 2000, 2002) and attempts to examine customers’ service
quality perceptions in Internet banking, as well as the impact of these per-
ceptions on customer satisfaction and future consumption intentions.
Hong Kong, a regional trading and services hub in Asia, is adopted as a
case study. Four analytical dimensions are identified: credibility, effi-
ciency, problem handling and security. Findings indicate that all dimen-
sions except security are found to be important in determining overall
service quality perceptions. Credibility, problem handling and security
have significant impact on customer satisfaction. Moreover, security and
efficiency are significantly associated with future consumption behavior.
Implications are discussed and recommendations are offered for improv-
ing Internet banking services. [Article copies available for a fee from The
Haworth Document Delivery Service: 1-800-HAWORTH. E-mail address:
<docdelivery@haworthpress.com> Website: <http://www.HaworthPress.com>
© 2005 by The Haworth Press, Inc. All rights reserved.]

KEYWORDS. Service quality, Internet banking, Hong Kong, customer

satisfaction, future consumption behavior

Noel Yee-Man Siu is Associate Professor and Jeremy Chi-Wah Mou is Research As-
sistant in the Department of Marketing, both at Hong Kong Baptist University, Kowloon
Tong, Hong Kong (E-mail: nsiu@hkbu.edu.hk).
Journal of International Consumer Marketing, Vol. 17(4) 2005
Available online at http://www.haworthpress.com/web/JICM
© 2005 by The Haworth Press, Inc. All rights reserved.
doi:10.1300/J046v17n04_06 99
100 JOURNAL OF INTERNATIONAL CONSUMER MARKETING

INTRODUCTION

The digital revolution has undoubtedly changed almost every aspect of

daily life as we step into the twenty-first century. The power of the World
Wide Web and global e-commerce are becoming more significant with the in-
creasing number of people around the world connecting to the Internet every
day. When e-tailing was in its infancy, Web presence and low price were be-
lieved to be the drivers of success. Nowadays, superior service quality has en-
tered the picture as a differentiating strategy (Zeithaml, Parasuraman and
Malhotra 2002). In order to satisfy customers’ sophisticated needs, many com-
panies have set up web sites that provide quality information and services to
customers. It is argued that better service quality can typically reap higher
market share and better returns (Buzzell and Gale 1987; Philips, Chang and
Buzzell 1983) and lead to lower costs and higher profit margins (Garvin
1984).
Applications of information technology in the service industry are now
prevalent, and Internet banking is one of the prominent examples. For Internet
users, banking online is convenient and time-saving compared with traditional
retail banking. Being a regional trading and service hub in Asia, Hong Kong
offers a favorable environment for the development of electronic commerce.
By June 2004, Hong Kong had 2.4 million Internet users (approximately 35%
of the total population). According to ACNielsen, around one-third of these
Internet users accessed Internet banking services once a week or more, making
Hong Kong a more advanced Internet banking market than Singapore, South
Korea or Taiwan (Hong Kong Trade Development Council 2004). Of those
using Internet banking, ACNielsen (2002) found that 6% were dissatisfied
with the online service. This indicated that the service had not yet imple-
mented its full potential, and there was still room for banks to improve their
electronic service quality in order to maximize customer satisfaction as well as
the usage rate. This is echoed by the findings of Zeithaml et al. (2002) who
found that companies interacting with their customers through the Internet had
similar shortfalls as that of the traditional service quality gap model. For ex-
ample, customers could not complete transactions, desired information could
not be accessed, e-mails were not answered and so on. Research is therefore
warranted to advance the understanding of the dimensions of electronic
service quality.
It is argued that studies on linking service quality and self-service technol-
ogy with particular reference to Internet banking are needed. Nevertheless, the
growing role of technology in service delivery has been largely ignored
(Bitner, Brown and Meuter 2000), and limited research has been conducted on
the issue of service quality in the context of self-service technology (except
 Noel Yee-Man Siu and Jeremy Chi-Wah Mou 101

Dahbolkar 1996; Cheung 2000; Kassim and Bojei 2002; Kaynama 2000;
Dabholkar and Bagozzi 2002). Past studies of service quality have mostly
been based in the West, and they have often applied the SERVQUAL or
SERVPERP measurement scales (which emphasize the personal interaction)
to various industries. Such measurement instruments may not be applicable in
the context of self-service technology, with particular reference to Internet
banking. Therefore, the present research attempts to fill the theoretical gap.
The purpose of this study is to investigate customer perceptions of service
quality in Internet banking and the relationship between service quality di-
mensions and customers’ future consumption behavior. Specifically, the ob-
jectives are threefold: to explore the key dimensions of service quality
perceptions towards Internet banking; to examine the relationship between de-
mographic characteristics and the perceived service quality; and to find out the
relationship between perceived service quality and customer satisfaction as
well as future consumption behavior. Recommendations are offered to
practitioners for the further improvement of Internet banking.

LITERATURE REVIEW

Traditional Service Quality vs. Electronic Service Quality

Superior service quality is widely acknowledged as a driver of perceived

value, which, in turn, will enhance customer loyalty (Parasuraman and Grewal
2000) and improve the provider’s image, sales and profitability (Buzzell and
Gale 1987; Gummesson 1993). Therefore, the notion of service quality has
been examined in previous studies of various industries (e.g., Babakus and
Mangold 1992; Carman 1990; Chow, Fischer and O’Bryan 1995; Licata,
Mowen and Chakraborty 1995; Siu and Cheung 1999, 2001; Siu and Woo
1997, 1999).
More than a decade ago, Parasuraman, Berry and Zeithaml (1988, 1991)
conducted extensive studies in different industries and developed the
SERVQUAL instrument: a 22-item scale with a set of service quality dimen-
sions to quantify a customer’s assessment of a company’s service quality. Five
key dimensions of service quality–reliability, responsiveness, assurance, em-
pathy and tangibles–have been identified and form the foundation on which a
lot of other studies on service quality have been built. SERVQUAL is widely
recognized and used, and it is regarded as applicable to a number of industries,
including the banking industry (Yavas, Bilgin and Shemuell, 1997).
However, SERVQUAL has been subject to certain criticisms, including
vagueness in the definition of expectations, its dubious applicability in some
102 JOURNAL OF INTERNATIONAL CONSUMER MARKETING

industries (Teas 1993), the need for expectation measurement (Cronin and
Tayer 1992, 1994), and SERVQUAL’s dimensionality (Carman 1990). More-
over, the traditional service quality dimensions cannot directly apply to
Internet banking, because it represents a different and unique service delivery
process. Different dimensions have been adopted in previous studies measur-
ing electronic service quality. For example, in their examination of Internet
pharmacies, Yang, Peterson and Huang (2001) measured consumer percep-
tions of service quality using six dimensions: ease of use, content displayed on
the Web site, accuracy of content, timeliness of response, aesthetics and pri-
vacy. However, such a scale has not been empirically validated. Lociacono,
Watson and Goodhue (2000) established a scale called WEBQUAL with
twelve dimensions: informational fit to task, interaction, trust, response time,
design, intuitiveness, visual appeal, innovativeness, flow, integrated commu-
nication, business processes and substitutability. Their approach, however,
seems more pertinent to interface design than to service quality measurement
(Zeithaml et al. 2002). Based on concepts from both the service quality and re-
tailing literature, Wolfinbarger and Gilly (2002) developed a scale named
.comQ with four factors: Web site design, reliability, privacy/security and
customer service.
Previous studies of Internet banking service quality are scarce. After exten-
sive literature review, Zeithaml, Parasuraman and Malhotra (2000, 2002) de-
veloped the e-SERVQUAL measure of electronic service quality to study how
customers judge e-service quality. This new model was drawn up through a
three-stage process involving exploratory focus groups and two phases of em-
pirical data collection and analysis. It contains seven dimensions: efficiency,
reliability, fulfillment, privacy, responsiveness, compensation and contact.
The first four dimensions are classified as the core service scale, and the latter
three dimensions are regarded as a recovery scale, since they are only salient
when online customers have questions or problems. Efficiency refers to the
ability of the customers to get to the Web site, search for information and log
out with minimal effort. Fulfillment involves the accuracy of service promises,
having products in stock and delivering the products in the promised time. Re-
liability is associated with the technical functioning of the site, particularly the
extent to which it is available and functioning properly. Privacy is related to
assurance that shopping behavior data are not shared and that credit card infor-
mation is secure. Responsiveness refers to the ability of e-tailers to provide ap-
propriate information to customers when needed. Compensation involves
receiving money back and returning shipping and handling costs. Contact is
associated with the ability of customers to talk to a live service agent online.
The present study adapts these dimensions to measuring customers’ percep-
tions of Internet banking service quality.
 Noel Yee-Man Siu and Jeremy Chi-Wah Mou 103

Service Quality, Customer Satisfaction and Future Consumption

Behavior

Service quality has been shown to be a significant predictor of behavioral

intentions, e.g., likelihood of recommending, repeat purchase, switching, and
complaining (Bitner 1990). Woodside, Frey and Daly (1989) found that there
is a significant correlation between service quality and repurchase behavior in
the health care industry. Findings from Dabholkar (1996) indicate that cus-
tomers’ feelings correlate positively with the intention to use. Moreover,
Wolfinbarger and Gilly (2002) state that different dimensions of their measure
of e-SQ have different effects, and hence different results. Reliability has been
found to be the most significant predictor of customer satisfaction. A survey
conducted by BizRate.com examining customer perceptions of their site
showed that customer service and on-time delivery were highly related to the
likelihood of repurchase, whereas the appearance of the web site and product
prices had little impact (Hanrahan, 1999). In light of these findings, the pres-
ent study investigates the relationship between service quality, customer
satisfaction and future consumption behavior.

METHODOLOGY

The dimensions from e-SERVQUAL (Zeithaml et al. 2000, 2002) were

adapted for the present study. Previous researchers (Babakus and Boller 1992;
Bouman and van der Wiele 1992; Cronin and Taylor 1992) have argued and
commented about the merit of perception-only measures. In light of these dis-
cussions, only perceptions about the service quality of Internet banking were
examined. To obtain a more comprehensive picture of customers’ perceptions
of Internet banking, a focus group discussion was conducted with six Internet
users who had direct experience in using Internet banking for transactions.
This was followed by another ten one-to-one interviews one week after the fo-
cus group discussion. The questions explored positive and negative Internet
banking experiences, criteria used in evaluating Internet banking service qual-
ity, and the characteristics of good or bad electronic service quality. Results
indicated that the items from the dimensions of fulfillment and compensation
had little local bearings on the electronic service quality perceptions. There-
fore, efficiency, reliability, privacy, responsiveness and contact were the di-
mensions adopted for the present study measuring service quality in Internet
banking. Findings from these qualitative studies also helped to modify items
in the questionnaire used in subsequent work. Specifically, two statements
104 JOURNAL OF INTERNATIONAL CONSUMER MARKETING

were added: “The speed of login of your account is fast” and “The site does not
confuse you in what you want to do.”
The questionnaire was in three parts. The first part consisted of the usage
data on Internet banking services. The second, third and fourth parts explored
the respondent’s perceptions of overall service quality, customer satisfaction
and future consumption behavior. A seven-point Likert scale with “1” for
strongly disagree and “7” for strongly agree was used to show perceptions of
service quality, customer satisfaction and future consumption behavior in
Internet banking. The fifth part solicited five items of sociodemographic infor-
mation about the respondent. Following the back-translation procedure
(Brislin 1986), the items in the questionnaire were first translated into Chinese
and then back translated into English. Ten Internet banking users were invited
to comment on the wording of the Chinese version. This ensured that confusing
or colloquial wording was minimized (Douglas and Craig 1983; Parameswaran
and Yaprak 1987).
Street intercept interviews were conducted in high traffic areas near retail
banks. Target respondents were customers who had current experience in us-
ing Internet banking for transactions and had operated at least one Internet
banking account during the previous 3 months. A total of 195 usable question-
naires were collected.
Descriptive analysis was used to present a profile of the respondents. Factor
analysis was used to reduce insignificant variables. An independent sample
t-test and one-way ANOVA were then conducted to compare the perception
means of groups with different demographic characteristics. Finally, multiple
regression analysis was used to gain an understanding of the relationship be-
tween various independent and dependent variables.

FINDINGS AND ANALYSIS

Profile of Respondents
All respondents were current users of Internet banking and had used the ser-
vice during the previous six months. More than half of the respondents were
male. All respondents were under 55 years of age, and the majority of them
were in the 16-to-35 age group. The education level of all respondents was
above secondary school, and most of them had studied in universities, or voca-
tional or technical institutes. About one-fourth of the respondents earned less
than HK $10,000 (US $1,285) per month, and about 20% belonged to the two
income groups of HK $10,001-$15,000 (US $1,286-$1,928) and HK $15,001-
$20,000 (US $1,929-$2,570). About 15% had monthly incomes between HK
 Noel Yee-Man Siu and Jeremy Chi-Wah Mou 105

$20,001 (US $2,571) and HK $25,000 (US $3,213) and only a few respon-
dents earned more than HK $25,001 (US $3,214) per month. 57.9% were sin-
gle, and amongst married respondents, about 18.5% had one child and nearly
17% had two or more (see Table 1).

Factor Analysis

A principal component factor analysis with varimax rotation was used on

the 25 items that assessed perceived Internet banking service quality. The

TABLE 1. Profile of Respondents

Items Basis data Frequency %

Gender Male 104 53.3
Female 91 46.7
Age 16-25 57 29.2
26-35 97 49.7
36-45 36 18.5
46-55 5 2.6
Monthly Income Under HK$10,000 (US$1,285) 49 25.1
HK$10,001-15,000 (US$1,286-1,928) 45 23.1
HK$15,001-20,000 (US$1,929-2,570) 42 21.5
HK$20,001-25,000 (US$2,571-3,213) 29 14.9
HK$25,001-30,000 (US$3,214-3,856) 18 9.2
Over HK$30,001 (US$3,857) 12 6.2
Education Secondary school 23 11.8
Vocational/technical institute 43 22.1
University 104 53.3
Others 25 12.8
Marital Status Single 113 57.9
Married 82 42.1
Number of Kids 0 126 64.6
1 36 18.5
2 or above 33 16.9
Banks HSBC 118 60.5
Standard Chartered 36 18.5
Citibank 17 8.7
Bank of China 6 3.1
Others 18 9.2
Internet Usage Rate Always 31 15.9
Often 95 48.7
Seldom 69 35.4
106 JOURNAL OF INTERNATIONAL CONSUMER MARKETING

Bartlett test of sphericity was significant (Bartlett’s Test of Sphericity =

2155.593, Significance = .000) and the Kaiser-Meyer-Olkin measure of sam-
pling adequacy was larger than 0.6 (KMO = 0.896), which showed that the use
of factor analysis was appropriate. Nineteen of the 25 items in the question-
naires were reduced to four factors with factor loadings greater than 0.5 and an
eigen value greater than 1.0. These factors were used in the subsequent inde-
pendent sample t-test, one-way ANOVA and multiple regression analyses.
The resultant factor structure explained 66.311% of the variance. The four fac-
tor mean scores and the loadings of each item are listed in Table 2.
The findings indicated that the original electronic service quality dimen-
sions did not factor out. Some similarities and differences were found between
the present constructs and the original dimensions. The overall reliability of
the scale was satisfactory, since the Cronbach’s alpha coefficient was equal to
0.9218. In addition, all dimensions rendered standard coefficients larger than
0.7, and the reliability coefficient of each factor ranged from 0.735 to 0.893.
This showed good internal consistency, and deviations could therefore be
sought in the factorization.
Four factors were generated from the factor analysis: credibility, security,
efficiency, and problem handling. Credibility was composed of six items (al-
pha = 0.879), accounted for 43.248% of the variance and had the highest
mean score (5.415) among the four dimensions. The items “The bank’s site
is up and running for business,” “Pages do not freeze,” and “The site accu-
rately performs the service the first time” were from the original reliability
dimension. The statements “The site provides a confirmation of the service
ordered,” “The site provides quick confirmation,” and “Logout from your
account is fast” were from the responsiveness dimension. This dimension
was closely associated with the proper technical functioning of the bank’s
site, as well as the appropriateness of services provided by the Internet bank.
All of the items listed above were vital for the service providers to inspire
customers’ self-assurance in using the Internet banking service. Among the
six attributes, customers rated proper online service when logging on for the
first time and fast logout as the most important. This indicated that accurate
and quick Internet banking service was considered crucial to superior elec-
tronic service quality.
Factor 2 was efficiency, which was composed of five items (alpha =
0.8927), explained 9.656% of the variance and possessed the second highest
mean score (5.21) among the four dimensions. All of the items in this factor
were similar to the original dimensions of the e-SERVQUAL scale. Two new
items were added to the dimension: “The site does not confuse you in what you
want to do with the pages” and “Login to your account is fast.” All the items in
this dimension were related to the ability of the customer to access to the web
 Noel Yee-Man Siu and Jeremy Chi-Wah Mou 107

TABLE 2. The Factor Structure and the Mean Scores of Each Item Along Four
Dimensions

Factor 1 Credibility Loadings Mean Factor

Scores Mean
The bank’s site is up and running for business 0.812 5.48
The bank’s site provides a confirmation of the service ordered 0.837 5.37
The bank’s site pages don’t freeze after you have put in all your information 0.736 5.25
The bank’s site performs the service right the first time 0.755 5.54 5.415 (1st)
The bank’s site provides quick confirmation 0.648 5.31
The speed of logout of your account is fast 0.501 5.54
Reliability coefficient alpha = .879
Eigenvalue = 8.217, % of Variance = 43.248%
Factor 2 Efficiency Loadings Mean Factor
Scores Mean
The speed of login of your account is fast 0.587 5.31
The site does not confuse you in what you want to do with the pages 0.642 5.28
The bank’s site contains just the basics and is simple to use 0.622 5.41 5.21 (2nd)
The bank’s site does not have fine print that is difficult to read and hard to find 0.781 4.77
The bank’s site does not get you lost 0.526 5.28
Reliability coefficient alpha = .8927
Eigenvalue = 1.835, % of Variance = 9.656%
Factor 3 Security Loadings Mean Factor
Scores Mean
The bank shows care in how it collects your personal information 0.705 4.88
The bank’s site gives information on command rather than all at once 0.707 4.89
The bank’s site does not use banner ads with cookies to collect 0.818 4.62 4.885 (3rd)
The bank’s site is secure 0.766 5.15
Reliability coefficient alpha = .8142
Eigenvalue = 1.496, % of Variance = 7.872%
Factor 4 Problem Handling Loadings Mean Factor
Scores Mean
The bank compensates for the problem they create 0.514 3.91

You are able to talk to a “live” person using a telephone number 0.875 4.82

The bank’s site has online customer service representatives 0.639 5.19 4.6975 (4th)
The bank takes care of problems promptly 0.641 4.87

Reliability coefficient alpha = .7354

Eigenvalue = 1.052, % of Variance = 5.535%

site, check-in quickly and efficiently find the desired information or service.
Of the five items, customers rated most highly sites that contained just the ba-
sics and were simple to use. The statement “The site does not have fine print
that is difficult to read and hard to find” scored the lowest. This showed that
Internet banking users preferred simple, readable and user-friendly sites.
108 JOURNAL OF INTERNATIONAL CONSUMER MARKETING

Factor 3 was labeled security. This included four items (alpha = 0.8142)
and accounted for 7.872% of the variance. The items in this factor were similar
to those in the original dimension. This dimension is constructed to represent
the security of a bank’s web site and customers’ perceived risk in internet
banking. Respondents said that they preferred a site to be able to give informa-
tion on command rather than to all at once. Among the four items, customers
rated security of the site the most important, and they felt that Internet banking
in Hong Kong could provide secure service.
Factor 4 concerned problem handling, with four items (alpha = 0.7354) ex-
plaining 5.535% of the variance and having the lowest mean score (4.6975)
among the four dimensions. Customers used this dimension to judge the ser-
vice quality of the bank in situations where they had problem or questions with
their Internet banking service or the site itself. Customers were concerned
about whether or not they were able to talk to a “live” person on the phone,
whether the site has online customer service representatives, whether banks
would compensate for problems that they had created and whether their prob-
lems were promptly taken care of. Among the four items, “The bank’s site had
online customer service representatives” was considered as the most impor-
tant element. In general, customers would ask for help from the online cus-
tomer representatives when they had problems or questions.
According to the perception means shown in Table 2, the credibility dimen-
sion was ranked first with a mean of 5.415, followed by efficiency (mean =
5.21), security (mean = 4.885), and problem handling (mean = 4.6975). The
findings indicated that credibility was the most significant factor for the cus-
tomers. In addition, the ease and speed of accessing and using the Internet
banking web site were also important. Problem handling had the lowest mean
score.

Service Quality Perception, Customer Satisfaction and Future

Consumption Behavior

Table 3 reports the results of the multiple regression model with the elec-
tronic service quality dimensions used as the independent variables while
overall service quality, customer satisfaction and future consumption behav-
ior were treated as dependent variables. In terms of the relationship between
the four service quality dimensions and overall service quality, the adjusted R2 =
0.516 was statistically significant. Three dimensions, namely credibility,
problem handling and efficiency were also statistically significant (Sig. T <
0.05). In addition, efficiency had a greatest influence on overall service qual-
ity.
 Noel Yee-Man Siu and Jeremy Chi-Wah Mou 109

TABLE 3. Relationship Between Four Dimensions and Overall Services Qual-

ity, Customer Satisfaction and Future Consumption Behavior

Relationship Between Four Dimensions and Overall Service Quality

Dimensions B Beta Sig. T
Credibility 0.217 0.202 0.004
Security 6.468E-02 0.064 0.286
Problem Handling 0.169 0.170 0.009
Efficiency 0.403 0.410 0.000
Note: adjusted R 2 = .516 *p < 0.05
Relationship Between Four Dimensions and Customer Satisfaction
Dimensions B Beta Sig. T
Credibility 0.308 0.302 0.000
Security 0.283 0.293 0.000
Problem Handling 0.228 0.241 0.001
Efficiency –1.382E-02 –0.015 0.867
Note: adjusted R 2 = .417 *p < 0.05
Relationship Between Four Dimensions and Future Consumption Behavior
Dimensions B Beta Sig. T
Credibility 0.165 0.135 0.101
Security 0.383 0.331 0.000
Problem Handling –2.336E-03 –0.002 0.978
Efficiency 0.272 0.242 0.010
2
Note: adjusted R = .339 *p < 0.05

Moreover, the four dimensions accounted for 41.7% of the variation in cus-
tomer satisfaction (adjusted R2 = 0.417). All dimensions except efficiency
showed statistical significance (Sig. T < 0.05). In addition, the strongest corre-
lation was found with credibility in this case. In terms of future consumption
behavior, the adjusted R2 = 0.339 was statistically significant. Security and ef-
ficiency were found to be statistically significant (Sig. T < 0.05). Security ex-
hibited the strongest association with the future consumption behavior.

Service Quality Perceptions and Demographic Profiles

Independent t-tests and one-way ANOVA were used to test the differences
between groups in terms of the four service quality dimensions and the demo-
graphic characteristics of the sample. The findings showed that there was no
significant difference in terms of gender, marital status, number of children,
age group and income group. However, the results indicated that there were
significant differences in terms of the education levels. The Bonferroni test
showed that the “University or above” group had a significantly higher factor
110 JOURNAL OF INTERNATIONAL CONSUMER MARKETING

score on credibility than the “Vocational/Technical Institute” group. In addi-

tion, the test indicated that the “University or above” group had a significantly
higher factor score on security than the “Secondary school” group. That
means, the higher educated customers agreed that the Internet banking ser-
vices were more credible and secure compared with those of lower educated
customers.
Internet banking usage rate was found to have a significant impact on credi-
bility (F = 47.803, p-valve = 0.000), security (F = 5.721, p-valve = 0.004),
problem handling (F = 4.773, p-valve = 0.009) and efficiency (F = 24.981,
p-valve = 0.000). The Bonferroni test showed that the most frequent users had
significantly higher factor scores on credibility and efficiency than the fre-
quent users and non-frequent users. In addition, the most frequent users had
significantly higher factor scores on security and problem handling than the
non-frequent users. That means, the most frequent users tended to believe that
the Internet banking services were more credible, efficient and secure com-
pared with those of the other two groups and they agreed that the Internet
banks could handle problems in general.
Correlation analysis was used to examine the relationship between overall
service quality and customer satisfaction, as well as future consumption be-
havior. As would be expected, findings showed that overall service quality
was positively related to customer satisfaction (r = 0.654, p < 0.01) and to fu-
ture consumption behavior (r = 0.611, p < 0.01). This is consistent with previ-
ous studies showing that service quality was positively related to customer
satisfaction (Cronin and Taylor 1992; Dabholkar 1996; Woodside, Frey and
Daly 1989).
Moreover, there was a significant positive relationship between customer
satisfaction and future consumption behavior (r = 0.636, p < 0.01). This is con-
sistent with past studies. Anderson and Sullivan (1990) found that customer
satisfaction was positively correlated to repurchase intention. Satisfied cus-
tomers spread positive word of mouth about the company to others (Boudling
et al. 1993) and they are more likely to recommend the company or service to
others (Parasuraman, Berry, and Zeithaml 1988, 1991 and 1994).

CONCLUSIONS AND IMPLICATIONS

Studies of perceptions of service quality in Internet banking are somewhat

scarce. The findings from this study provide initial direction in determining
the optimum service quality attributes to focus on in evaluating Internet bank-
ing service quality. The conceptual framework for this research is based on the
dimensions proposed by Zeithaml et al. (2000, 2002). Four dimensions were
 Noel Yee-Man Siu and Jeremy Chi-Wah Mou 111

generated in the current study, namely credibility, efficiency, security and

problem handling. Only one dimension, efficiency, was found to have re-
mained the same as the original construct. New factors labeled credibility, se-
curity and problem handling were formed.
The credibility factor had the highest mean score, and this indicates that
Internet banking users are most impressed by technically functioning web
sites and quick confirmations. Bank managers need to emphasize the credibil-
ity aspect of their services. On the other hand, the problem handling factor
showed the lowest mean score, indicating that most of the respondents dis-
agreed that the bank would compensate them for problems their service had
created. Problem handling is related to what Zeithaml et al. (2002) describe as
a recovery dimension. In routine interactions with sites, consumers seem not
to be concerned about the availability of online customer service representa-
tives or the compensation policy of Internet banks. However, when customers
confront problems and questions, such dimensions would be used in evaluat-
ing electronic service quality. Therefore, it is necessary for practitioners to in-
vestigate present problem handling policies to identify perception gaps
between customers and management. This will help to inspire customers’
confidence in using Internet banking services.
Credibility, problem handling and efficiency have been shown to be moder-
ately good predictors of overall service quality. The most significant correla-
tion was found in the efficiency factor. The ease and speed of accessing and
using a web site is a vital factor in evaluating overall service quality. These re-
sults are consistent with those of previous studies (Zeithaml, Parasuraman and
Malhotra 2001) that efficiency is the core dimension in electronic service
quality. This may be explained by the fact that too much information and
graphics can be confusing and would slow down transaction speed.
In the case of a pure service such as Internet banking, service quality is gen-
erally believed to be the most important determinant of customer satisfaction.
However, the results indicate that service quality dimensions have only weak
predictive power in terms of the relationship between the overall service qual-
ity and customer satisfaction. The strongest association is with the credibility
dimension. This shows that technically functioning web sites and quick con-
firmations are the essential elements in satisfying customer needs. Meeting
customer expectations alone is no longer enough. Bank managers should de-
light their customers by exceeding their expectations to enhance customer sat-
isfaction. Such a principle could be applied to technology-based service
encounters such as those in Internet banking.
Moreover, the findings indicate that the variance in future consumption in-
tentions explained by the four dimensions is low. Other factors, such as ser-
vice variety, brand or corporate image, may play a more significant role in
112 JOURNAL OF INTERNATIONAL CONSUMER MARKETING

determining future intent to continue using their current supplier. Of the four
dimensions, security had the strongest association with future consumption
behavior. Security has long been considered one of the most crucial issues for
Internet banking users (Liao 1996; Rust, Kannan and Peng 2002; Feldman
2000, Black et al. 2001). Findings from the focus groups and the interviews in-
dicated that Internet banking at its present stage is considered relatively se-
cure. This has been attributed to Hong Kong’s Electronic Transaction
Ordinance and the establishment of a public key infrastructure to enhance
public confidence in the legality and enforceability of e-transactions (Hong
Kong Trade Development Council 2004). Consequently, users are more likely
to adopt Internet banking and to recommend their banks to others.
According to the demographic data, customer perceptions of credibility, se-
curity and efficiency are significantly correlated with the education level. This
may be due to the fact that professionals or those with tertiary education are
more knowledgeable about and more receptive to self-service technology such
as Internet banking.
In addition, customers’ perceptions of the credibility, efficiency, security
and problem handling of a bank are significantly correlated with their usage
rate of Internet banking. This may be explained by the fact that customers tend
to use more Internet banking if they feel that Internet banks are trustworthy
and can fulfil their needs. Previous studies have indicated that customers’ feel-
ings of trust or confidence were the most essential issue (Gwinner, Gremler
and Bitner 1998; Zeithaml and Bitner 2003). The more transactions the cus-
tomers conduct online, the more they trust or have confidence in their banks.
Nowadays, banks are more aware of the need to enhance future usage and
to build long lasting relationships with customers. They seek to exceed cus-
tomer expectations and, by doing so, keep them away from their competitors.
Customers are encouraged to practice convenient one-stop shopping at the
banks’ web site. Banks could sell more products and services to their existing
customers by further expanding their non-core online businesses such as insur-
ance, stock brokerage and fund marketing. Banks could continuously improve
and enhance their electronic customer relationship management (e-CRM) pro-
gram so as to strengthen their relationships with customers. Practitioners
could continuously conduct electronic service quality research using the four
dimensions–credibility, efficiency, problem handling and security–as a frame-
work, and attempt to monitor the perceived gaps between customers’ and
managers’ perceptions of online service. The four dimensions could be inte-
grated into marketing strategies in order to develop unique and superior
Internet banking experiences for customers. The insight gained in this study
may offer a foundation for future research on self-service technology, and pro-
vide useful recommendations for improving Internet-banking service.
 Noel Yee-Man Siu and Jeremy Chi-Wah Mou 113

Limitations and Future Research

Limitations must be acknowledged which suggest that caution should be

exercised in making generalizations. The most severe limitation of this study
is that it tested the model in a single context–Internet banking services in Hong
Kong. Extending the results to similar contexts appears appropriate; however,
research on service quality in Internet banking is still in its infancy, and rele-
vant literature is scarce. Furthermore, the small sample might not be represen-
tative of the whole population, and hence the results of this study should be
interpreted with caution. Further research should be conducted using a larger
sample. This would facilitate a robust examination of the utility of the domi-
nant constructs in evaluating electronic service quality and its relationship
with other variables. In addition, future study on the relationship between
management expectations and users’ perception levels is warranted. Valida-
tion of the model and extension of the results to other industries certainly seem
called for. The potential to test the model in other cultures appears appealing,
since several of the constructs identified may be culturally bound. Despite the
need for additional research, the current study does provide critical informa-
tion and a foundation that academics and practitioners can use in evaluating
service quality in a self-service technology environment.

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SUBMITTED: June 2004

FIRST REVISION: September 2004
SECOND REVISION: December 2004
ACCEPTED: January 2005
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