Editorial Board

A Refereed Monthly International Journal of Management

Digital Banking Service Quality and Customer Satisfaction:

An Empirical Assessment

Umar Amin

PhD Scholar (Commerce),

Vivekananda Global University, Jaipur

e-mail: umar9075@gmail.com

Corresponding Author

Dr. Sarita Agrawal

Associate Professor (Management Studies),

Vivekananda Global University, Jaipur

e-mail: sarita.agrawal@vgu.ac.in

Abstract

The widespread espousal of technology has fueled the need for digital makeover in the banking industry. Digital Banking is an umbrella term covering various services offered by banks via internet. Such services can be accessed remotely, without visiting the bank, from anywhere in the world round the clock. To endure the intense rivalry, banks worldwide are endeavoring to add new clients and keep current ones by offering highly featured, economical and tech-savvy products and services to the market.

This study endeavored to explore the nexus of the quality of digital service and its dimensions with satisfaction level of clients within the banking context of Jammu and Kashmir.It focuses on examining how key aspects of digital service qualityrelate to how satisfied clients are with their digital banking experiences.The study spawned a research model that included three aspects of the BSQ Model (reliability, service portfolio, and service charges) and the four elements of the E-S-QUAL Model (efficiency, ease of use, responsiveness, and security/privacy). Using purposive sampling technique, the study collected data from 200 active digital banking users. The constructs and measurement items have been adopted from prior studies. The instrument was evaluated for reliability and validity.

The study found Efficiency, Reliability and Security/Privacy significant determinants affecting customer satisfaction while Ease of use, Service Charges, Responsiveness and Service Portfolio were found insignificant. The results exhibit pragmatic inferences for practitioners and policy makers.

Keywords: Digital banking service quality, E-S-QUAL, BSQ and customer satisfaction

Introduction

The advent and convergence of ICT has profoundly revolutionized the banking industry around the global space. (George & Kumar, 2015). With an aim of augmenting operational efficiency, competitive footing and product innovation, banks have been considerably investing in strengthening IT to complement their business.Digital Banking is a general term encompassing diverse services provided by banks to customers through technologically mediated channels and devices employing internet like mobile phones, laptop computers, desktop computers and digital assistants. These channels allow for instant delivery of sophisticated financial services to customers and foster banker-customer relationship (Egala et. al., 2021). Online channels allow customers to conduct the same routine finance transactions, provided by a physical bank outlet, without any temporal and spatial constraint (Chen et. al., 2012). Internet Banking may lead to lower expense of operations than conventional banking, yet it may also lead to greater customer satisfaction and retention (Polatoglu& Ekin, 2001).

The banking sector is experiencing digitization incessantly and such a transformation is likely to augment progressively (Zouari &Abdelhedi, 2021). However, digitization has also led to an increase in mobility among customers between banks (Ndubisi, 2007) and has increased the expectation and bargaining power of customers vis-a-vis service quality and service portfolio. Now customers are demanding a new level of convenience and flexibility in services. It has become imperative for banks to develop enduring association with clients by enhancing digital offerings to augment clients’ access and usage to such cost-efficient channels (Halim et. al., 2023).Any gap between expectations and performance vis-a-vis digital banking service quality can significantly influence their continued usage, trust in the system and overall satisfaction level (Mbama&Ezepue, 2018).

Nowadays, the ability to deliver seamless, secure, reliable, cost-effective and responsive digital services is not just a differentiator, it is fundamental to customer satisfaction, retention and long-term success. Therefore, by examining customers’ opinions on a range of digital service quality aspects, this study empirically assesses the interplay between the quality of digital service and its dimensions with satisfaction level of clients within the banking context of Jammu and Kashmir.Understanding this dynamic is crucial for banks operating in the region, as it can facilitate strategiesthat align more closely with the clients’ expectations and warrant survival of banks.

Review of Literature

Digital banking has spawned extensive empirical studies, from all around the globe, pertaining to its different aspects like adoption, service quality, trust and security, customer attitude and preference and continuance intentions. With respect to Digital Banking and its Adoption, Jena (2023) endeavored to study the behavior of the elderly in Central India and concluded that users’ intention was influenced by performance expectations, perceived risks, effort required, trust, self-efficacy, and anxiety.Kyambade et. al., (2023) found internet banking adoption as a complicated and multifaceted process and refers to it as the collaborative evaluation of clients’ behavioral, utilitarian, social, psychological and personal characteristics. Akhter et. al., (2022) advocated that customers’ propensity to adopt online banking services is statistically and significantly affected by usefulness, perceived ease of use, concerns about social influence, securityand their openness to innovation.Agyei et. al., (2021) highlighted the role of performance expectation, word of mouth, perceived enjoyment, trust and users’ internet experience. Viet & Huynh (2021) are of the view that users’ propensity to opt online banking services in Vietnam is considerably influenced by domain-specific and innate innovativeness, perceived usefulness and risk, attitude and internet experience.Fawzy and Esawai (2017) revealed computer efficacy, quality of the website, and perceived risks to have been the determinantal factors for client acceptance of electronic bank services. Alwan & Al-Zu’bi (2016) confirmed internet bank adoption in Jordan to be significantly driven by users’ perceptions of security and privacy, services quality, trust, ease of access and feedback. Sharma et al. (2015) similarly noted in Oman that trust, ease of use,service quality, usefulness, and demographics were all determinantal factors.

With respect to Customer Satisfaction vis-a-vis Online Banking Services, Bashir et al. (2023) revealed service quality and user experience to have strong implications for levels of satisfaction in Bangladesh. Tran et. al., (2023) validated positive correlation of e-banking services quality with the e-satisfaction level of customers as well as of e-satisfaction with e-loyalty with regards to e-banking services. From Mwiya et al. (2022), factors such as security, privacy, efficiency, responsiveness, reliable websites, and service fulfillment played critical roles in shaping satisfaction levels. Pooya et. al., (2020) noted technological preparedness to have strong implications for customer satisfaction through enhanced quality of self-service. Hadid et al. (2020) identified responsiveness, tangibility, reliabilityand assurance as effective determinants of clientsatisfaction. Amin et al. (2018) as well as Amin (2016) revealed digital banking to have enhanced service quality and revealed strong relationships between customer loyalty and satisfaction.

Security and Trust continue to be foundational concerns in digital banking. On Security and Trust in Digital Banking, Kumar & Gupta (2020) emphasized that users are most concerned about security risks, followed by privacy and overall trust in the system. Aboobucker and Bao (2018) identified website usability and trust as key obstacles for internet banking users. Likewise, Damghanian et al. (2016) confirmed that perceived security and trust significantly impact adoption decisions.

In connection with Customer Attitude and Preference towards Digital Banking, Selase and Benedict (2021) argued that the progress of online banking is a reaction to evolving consumer needs, driven by convenience, trust, and usability.Mengistie& Worku (2020) supported this by identifying compatibility, social norms, trust, and usability as critical influencers. Kavitha & Gopinath (2020) revealed perceived ease of use,quality of IB service and usefulness as significantly related and strongly impacting attitudes of consumers. Mathiyarasan and Chitra (2019) identified convenience and friendly nature of e-banking as a reason for its growing popularity. Samar et al. (2017) identified ease of use, perceived usefulnessand enjoyment as critical aspects in framing user attitudes.

While examining users’ intention to continue usage of digital banking, Rahi & Ghani (2021) found bank transparency as the prime influencer while as users’ satisfaction and usefulness as second level factors. Al-Hattami et. al., (2021) viewed trust, quality of service and degree of satisfaction as most significant determinants. Ofori et. al., (2017) found quality of information and services and level of security and privacy as significant determinants affecting degree of satisfaction and continuance intention. Rahi et. al., (2021) advocated the significance of the factorshighlighting self-determination, commitment-trust, and expectation–confirmation frameworks.

The above review indicates that research around the world has explored multiple dimensions of digital banking, focusing on its various aspects including adoption, service quality, security and trust, customer attitude and preference, continuance intentions, etc.Even as such studies have been valuable in bringing to light various aspects about digital banking, context-specific knowledge about digital banking in India, specially pertaining to service quality and its nexus with customer satisfaction, is relatively less addressed.This is still truer in the case of the Jammu and Kashmir region, where digital infrastructure and banking habits are most likely to differ considerably from the rest of India. Plugging into the research vacuum, this study endeavored to explore the nexusofthe quality of digital service and its dimensions with satisfaction level of clients within the banking context of Jammu and Kashmir.

Objectives of the Study

• To examine the linkage between different aspects of the quality of digital banking services and customer satisfaction.

• To examine the degree to which each service quality dimension individually influences clients’ satisfaction level.

• To assess the impact of service quality on clients’ satisfaction level in the online banking context of Jammu and Kashmir.
• To offer suggestions in light of the findings of the present and earlier studies conducted on the subject which will have implications for the banking sector.

Research Methodology

A multistage structured methodology was followed to ensure a representative and meaningful data collection process. Two public sector banks (State Bank of India and Punjab National Bank) and two private sector banks (J&K Bank and HDFC Bank) were selected purposefully due to their wide operational reach within the Union Territory of Jammu and Kashmir. Branches of the above banks were selected at random to collect data. 200 active retail users of digital banking services from both public and commercial sector institutions were surveyed equally.

The research incorporated dimensions from two well-established service quality measurement models to build one solid model. Four constructs (efficiency, ease of use, security/privacy, and responsiveness) were specifically adopted from the E-S-QUAL model (Parasuraman et al., 2005)whereas three constructs(service charges, reliability, and service portfolio) adopted from the BSQ model(Bahia & Nantel, 2000)This combined approach provided a more holistic view of how digital banking quality affects customer satisfaction.

The study employed correlation and multiple regression analysis techniques to examine how different facets of service quality relate to clients’ satisfaction level and to assess their ability to predict it. Moreover, descriptive statistical toolshave been used to profile the demographic information of the participants to enable better interpretation of the findings.

To ensure internal consistency of items, the study conducted reliability testing by examining values of Cronbach Alpha, and they were found acceptable to be greater than 0.70 (Nunnaly, 1978). All the items showed standardized factor loadings exceeding 0.60 andComposite Reliability scores were also found acceptable, being above 0.70 (Hair et al., 2013).Further, multicollinearity was verified to not pose any problem, thereby ensuring the solidity of the regression results.

Data Analysis

The collected data weresubjected to correlation as well as regression analyses to identify the correlation and predictive relationships between the principal variables. Descriptive statistical methods were, furthermore, utilized to obtain information about the demographic profile of the responders to help interpret findings better.

Demographic Analysis

Demographic assessment reveal that the majority of digital bank users were males (61%). Out of the 200 users, the highest proportions were from 25–35 years old (37%) and 35–45 years old (35%). In educational level, 51% of the respondents were graduates and 37% were holding postgraduate qualifications. In occupation, 44% were salaried and 26% were self-employed. Urban users comprised 46% of the sample while 24% were from rural background, which depicts slightly urban-centric user grouping.With regards to distribution of income, the statistics reflectmost digital bank usersbelong to the middle-income group. Specifically, 32% have an income ranging from Rs. 6–8 lakhs, 22% have income ranging from Rs. 8–10 lakhs, and 18% have income ranging from Rs. 4–6 lakhs. In case of duration of association of the users with the specific bank, 37% have been users for above 10 years, 28% have been users for 8–10 years, and 15% have been users for 6–8 years.29% of the users were using digital bank services from 6 to 8 years, 22% from 8 to 10 years, 17% have been using services for above 10 years followed by 16% from 4 to 6 years. As regards frequency of using digital bank services, 48% take such services daily or alternatively followed by 29% users using such services weekly, 16% using such services fortnightly, and 7% using services monthly. The data reflects that most of the subscribers use digital banking services for their day-to-day banking transactions.

Correlation Analysis

Table – 1 reveals a substantial positive relationshipof customer satisfactionwith different aspects of service quality in the digital banking context.  Of these, efficiency was found leading with the correlation coefficient of 0.709, which further supports its dominant influence in the formation of user perceptions. This is followed by security/privacy (r = 0.705), and reliability (r = 0.681), which have both strong and positive correlations with levels of customer satisfaction as well. Responsiveness, service charges and ease of use also contribute to further positive and substantial correlations with customer satisfaction. Finally, the service portfolio factor, although slightly weaker in strength, is seen to have a positive correlation (r = 0.537) with customer satisfaction among digital banking services.

Table – 1 (Correlation Analysis)

Multiple Regression Analysis

The regression coefficients in Table – 2 highlight the relative influence of different service quality dimensions with most and the least impact on the customer satisfaction.Of all the dimensions, efficiency, reliability, and security/privacy emerge most impactful, as demonstrated by theirstatistically significant p-values (p < 0.05), signifying a considerable contribution to overall client satisfaction. Specifically, the standardized regression coefficients for efficiency (β = 0.225), reliability (β = 0.276), and security/privacy (β = 0.293) suggest that a 1% increase in each of these dimensions is associated with an approximate 22%, 27%, and 29% increase, respectively, in customer satisfaction, assuming other variables remain constant. These findings underscore the importance of these three dimensions as key drivers of user satisfaction in digital banking environments.

Table – 2 (Regression Analysis)

In contrast, the dimensions of ease of use, service charges, and responsiveness exhibit lower coefficients of 0.086, 0.090, and 0.102, respectively,signifying a relatively moderate influence on customer satisfaction. Moreover, their associated p-values exceed the 0.05 threshold, highlighting that their influence is not significant within the current model. These results suggest that while these attributes may still influence user experiences, they are not the primary determinants.

Table – 3 (Summary)

The coefficient of determination (R²) reported in Table – 3 manifests that the 71.6% variation in customer satisfaction can be attributed to service quality dimensions of the model while as 28.4% of the variation is due to other factors (Table – 3). Furthermore, the Adjusted R Square value (0.705) lends credence to it as it indicates that the model explains 70.5% of the movement in overall customer satisfaction. Given that both values surpass the 0.7 benchmark, the model demonstrates a strong explanatory power, indicating a good fit and validating the predictive relevance of the service quality dimensions.

Conclusion and Suggestions

This paper endeavored to explore the nexusofthe quality of digital service and its dimensions with satisfaction level of clients within the banking context of Jammu and Kashmir. The study found Efficiency, Reliability and Security/Privacy to be significant predictors of customer satisfaction while as Ease of use, Service Charges, Responsiveness and Service Portfolio are found insignificant. The model accounted for approximately 70.5% of the movement in overall customer satisfaction. The values exceed 0.7 and therefore exhibit that the measures employed are reasonably good in predicting customer satisfaction, indicating a robust fit and substantial explanatory power. The study offers the following suggestions, in light of the findings of the present and earlier studies conducted on the subject, which will have implications on the banks:

• It necessitates banks to design their online services in a manner that prioritizes user-friendliness and ease of navigation, ensuring that customers can access and utilize digital platforms with minimal effort or confusion.
• Customers have a wide choice of banking products and services available to them from a number of service providers. The banks should strengthen their service portfolio. Products should be designed to suit the diverse requirements of various niche markets based on gender, age, occupation, income, etc.
• Given the extensive range of banking products and services available across multiple financial institutions, it is impressed upon banks to continually upgrade their service portfolios to both attract prospective customers and retain their existing clientele. Tailoring financial products to align with the specific needs of diverse market segments, such as those differentiated by age, gender, occupation, and income, can significantly improve customer engagement and satisfaction.
• After-sales service plays an important role in every business segment. Banks should pay attention towards responsiveness and ensure to resolve issues related to digital services within reasonable time.
• Digitization has sparked a change in traditional power balance between the banks and customers. Understanding customers’ preferences not only enables institutions to anticipate potential switching behaviors but also equips them to actively shape such decisions. By doing so, banks can reduce customer attrition and foster enduring bonds with clientele (Beckett et al., 2000).Moreover, the customer-oriented marketing strategy will ensure survival of banks.
• Digitization has reduced the cost of banking services to a very large extent. The benefit of reduced costs should be passed on to the customers. As far as possible, service charges on account of online banking products should be reduced and kept at minimum keeping in view their low cost.
• The fast-changing nature of technology consistently affects banks and influences customers’ expectations regarding digital service quality. It is necessary for banks to conduct regular assessment of service quality to identify lacunas and implement measures to improve service quality that meet and exceed customer expectations.

Limitations of the Study

Nevertheless, there were obstacles in conducting this study that could limit the applicability of its results. Various limitations of the study are:

• This research included only 200 people in its sample. A large sample size could have improved the generalization of the results.
• The study followed purposive sampling technique.
• The study is restricted to the Jammu and Kashmir (J & K) UT only which makes the results unrealistic and affects the generalization of the results.
• The study is restricted to the retail banking segment only.
• Despite respondents being impacted by environmental factors, the questionnaire could not reveal how they responded while answering. Additionally, it couldn’t tell whether the participants had understood the questions completely while marking responses.

Scope for Future Research

• Only retail banking clients’ perceptions were considered in the study.
• To warrant that the survey sample is closer representative of the population, researchers can use a probability sampling approach on a comprehensive list of digital banking users.
• Additional dimensions of service quality may be incorporated in future studies.
• Research focused on specific banks may produce more rational outcomes.

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