A Study on the

Determinants of Customer Loyalty

Using Internet Banking Website

in Malaysia

Beh Yin Yee (Valerie)

Bachelor of Computer Science (Software Engineering)

University of Malaya

Malaysia

2004

Submitted to the Graduate School of Business

Faculty of Business and Accountancy

University of Malaya, in partial fulfillment

of the requirements for the Degree of

Master of Business Administration

June 2009
ACKNOWLEDGEMENT

I would like to take this opportunity to acknowledge the assistance, guidance and

encouragement of all who have supported me throughout this research project. Without

their guidance and advices, I would have never been able to accomplish my research

project successfully as part of the fulfillment of the requirements for the Degree of

Master Business of Administration.

First of all, I would like to express my sincere gratitude to my research project

supervisor, Professor Dr. Tengku Mohamed Faziharudean, for his continuous support

throughout the whole progress of this research project. His constant valuable ideas,

comments and encouragement had considerably enriched and improved my work.

Without his time, guidance, support, advice and expertise, this research project would not

be possible done successfully.

Secondly, I would like to thank you to all the participants for their valuable time, kind

assistance and support in participating in the surveys conducted as part of this research

project. Their opinions have provided the statistics necessary for both this research, as

well as future research in the field of internet banking website loyalty. Lastly, I am also

grateful to all my colleagues and friends for their knowledge sharing and comments in

which had helped me to enrich my research project towards a better quality work.

i
ABSTRACT

Internet banking has become one of the most popular services utilized by the Malaysian

retail banking customers in recent years. Multiple bank providers are working

continuously to add or improve their internet banking services in order to make their bank

a better choice among their customers as well as to retain them. 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 yet to be addressed by past studies, model has been

developed in this study based on IS and marketing literatures to investigate on the

customer loyalty towards internet banking website. Model was tested using data collected

from a survey of internet banking users in Malaysia. Testing involved investigating the

factors that influence customer loyalty towards internet banking website in Malaysia and

also identifying the most essential factors among the investigated factors.

Based on the findings, trust, habit and reputation were found to have a significant

influence on customer loyalty towards internet banking website in Malaysia. Out of the

three significant factors, reputation plays a stronger influence than trust and habit.

Nevertheless, the results also indicated that service quality and perceived was not

significantly related to customer loyalty. Based on the findings, the implications,

conclusion, limitations and suggestions are discussed.

ii
TABLE OF CONTENTS

ACKNOWLEDGEMENT .....................................................................................................i

ABSTRACT ............................................................................................................................ii

LIST OF TABLES ................................................................................................................vi

LIST OF FIGURES .............................................................................................................vii

CHAPTER 1: INTRODUCTION........................................................................................1

1.1 Research Background....................................................................................................1

1.2 Research Problem ..........................................................................................................4

1.3 Research Questions........................................................................................................6

1.4 Research Objectives.......................................................................................................6

1.5 Contribution of the Study..............................................................................................7

1.6 Organization of the Study .............................................................................................8

CHAPTER 2: LITERATURE REVIEW .........................................................................10

2.1 Theoretical Background ..............................................................................................10

2.1.1 Service Quality......................................................................................................10

2.1.2 Perceived Value....................................................................................................14

2.1.3 Trust.......................................................................................................................17

2.1.4 Habit......................................................................................................................18

2.1.5 Reputation .............................................................................................................20

2.1.6 Customer Loyalty..................................................................................................21

2.2 Relationship among Research Constructs ..................................................................24

2.2.1 Relationship between Service Quality and Customer Loyalty...........................24

iii
 2.2.2 Relationship between Perceived Value and Customer Loyalty .........................27

2.2.3 Relationship between Trust and Customer Loyalty............................................28

2.2.4 Relationship between Habit and Customer Loyalty...........................................30

2.2.5 Relationship between Reputation and Customer Loyalty ..................................31

CHAPTER 3: RESEARCH DESIGN AND METHODOLOGY .................................33

3.1 Research Design...........................................................................................................33

3.2 Research Model ...........................................................................................................34

3.3 Research Hypotheses...................................................................................................35

3.4 Questionnaire Design and Construct Measurement ..................................................38

3.4.1 Service Quality......................................................................................................38

3.4.2 Perceived Value....................................................................................................39

3.4.3 Trust.......................................................................................................................39

3.4.4 Habit......................................................................................................................39

3.4.5 Reputation .............................................................................................................40

3.4.6 Customer Loyalty..................................................................................................40

3.4.7 Information of Respondents .................................................................................40

3.6 Sampling.......................................................................................................................43

3.7 Data Analysis Procedures............................................................................................44

3.7.1 Pre-Analysis Data Screening...............................................................................44

3.7.2 Descriptive Statistic Analysis...............................................................................46

3.7.3 Reliability and Validity Test ................................................................................46

3.7.4 Multiple Regression Analysis...............................................................................47

CHAPTER 4: RESEARCH FINDINGS...........................................................................49

iv
 4.1 Pre-Analysis Data Screening ......................................................................................49

4.2 Reliability and Validity Test.......................................................................................53

4.3 Descriptive Statistics .............................................................................................57

4.3.1 Characteristics of Respondents ...........................................................................57

4.3.2 Descriptive Analysis of Research Variables.......................................................60

4.4 Multiple Regression Analysis...............................................................................61

CHAPTER 5: CONCLUSION...........................................................................................65

5.1 Research Conclusions and Implications.....................................................................65

5.2 Research Limitations and Recommendations ............................................................70

BIBLIOGRAPHIES ............................................................................................................73

APPENDICES ......................................................................................................................99

Appendix A: Normality Test for Research Variables....................................................100

Appendix B: Regression Assumption Test for Research Variables .............................107

Appendix C: Questionnaire Survey ................................................................................109

v
LIST OF TABLES

Table 1.1 ...................................................................................................................................2

Table 3.1 .................................................................................................................................41

Table 4.1 .................................................................................................................................51

Table 4.2 .................................................................................................................................51

Table 4.3 .................................................................................................................................52

Table 4.4 .................................................................................................................................53

Table 4.5 .................................................................................................................................54

Table 4.6 .................................................................................................................................55

Table 4.7 .................................................................................................................................55

Table 4.8 .................................................................................................................................58

Table 4.9 .................................................................................................................................61

Table 4.10 ...............................................................................................................................62

Table 4.11 ...............................................................................................................................62

Table 4.12 ...............................................................................................................................63

Table 5.1 .................................................................................................................................66

Table A.1 ..............................................................................................................................100

Table A.2 ..............................................................................................................................100

vi
LIST OF FIGURES

Figure 3.1................................................................................................................................34

Figure A.1 .............................................................................................................................101

Figure A.2 .............................................................................................................................104

Figure B.1 .............................................................................................................................107

Figure B.2 .............................................................................................................................107

Figure B.3 .............................................................................................................................108

vii
CHAPTER 1: INTRODUCTION

This study tends to investigate customer loyalty towards internet banking website in

Malaysia. This chapter firstly addresses the background and the issues of internet

banking. Then the research questions, the research objectives, the contribution of this

study and organization of the chapters of this study are presented.

1.1 Research Background

Internet banking refers to the banking services provided via a secure website operated by

the bank provider whereby it involves the use of the Internet as a remote delivery

channel. Banks offer Internet banking in two main ways. It can be an existing bank with

physical offices that establish a web site and offer Internet banking to its customers as an

addition to its traditional delivery channels. Another alternative is to establish a virtual,

branchless, or Internet-only bank. The computer server that lies at the heart of a

virtual bank may be housed in an office that serves as the legal address of such a bank, or

at some other location. Virtual banks may offer their customers the ability to make

deposits and withdraw funds via ATMs or other remote delivery channels owned by other

institutions (Furst et al., 2000). For Daniel (1999), online banking can be defined as the

provision of information or services by a bank to its customers over the Internet. Thus,

the definition of internet banking is equivalent to online banking.

Internet banking allows everyone to manage their finances without any hassle as it

provides a fast and convenient way to undertake various banking transactions via the

1
internet banking website from home, office or anywhere on 24 hours a day, 7 days a

week. In Malaysia, internet banking services have been operational since 2000. Presently,

only banking institutions licensed under the Banking and Financial Institution Act 1989

(Bafia) and Islamic Banking Act 1983 are allowed to offer Internet banking services here.

Maybank, the largest domestic bank in Malaysia has become the first bank to offer

internet banking, which was known as Maybank2u.com. This is followed by Hong Leong

Bank, Southern Bank, Alliance Bank and Public Bank. Table below provides the list of

banks in Malaysia that are offering internet banking service as of today.

Table 1.1

List of Internet Banking in Malaysia by Banking Providers

Bank Name Internet Banking

Al Rahji Bank Al Rahji Bank Internet Banking
Affin Bank Berhad affinOnline.com
Alliance Bank Malaysia Berhad Alliance Online
AmBank (M) Berhad AmOnline
CIMB Bank Berhad CIMB Clicks
Citibank Berhad Citibank Online
EON Bank Berhad EON Bank Internet Banking
Hong Leong Bank Berhad Hong Leong Online
HSBC Bank Malaysia Berhad Online@HSBC
Malayan Banking Berhad Maybank2u.com
OCBC Bank (Malaysia) Berhad OCBC Internet Banking
Public Bank Berhad PBeBank.com
RHB Bank Berhad RHB Bank Internet Banking
Standard Chartered Bank Malaysia Berhad Standard Chartered Online
The Royal Bank of Scotland Berhad RBS Access Online
United Overseas Bank (Malaysia) Berhad UOB Internet Banking
(Source: Bank Negara Malaysia)

2
The main offerings from the internet banking website consists of:

1. Checking of account balances and statements

2. Submission for new accounts, credit cards and loans application

3. Fixed deposits placement

4. Funds transfer

5. Bills, credit cards, loans and insurance payment

6. Create, change and cancel standing orders

7. Request for cheque books and statements

8. Check status or stop payment of cheques

9. Apply for bank drafts and telegraphic transfers

Some additional offerings subjected to the internet banking providers include

mobile/Internet/IDD/STD prepaid reload or purchase prepaid started pack, investments

trading, interest rates calculator, foreign currency converters, insurance policy renewal,

buying movie tickets and pizza online.

According to a survey conducted by Pew Internet and America Life, online banking has

been the fastest growing Internet activity in the United States over the last five years. As

of November 2004, a total of 53 million Americans (44% of all U.S. Internet users) use

some form of online banking service (McGann, 2005). In Germany the number of online

accounts has increased almost tenfold between 1999 and 2004, with 40% of all accounts

now being online (Association of German Banks, 2004).

3
In Malaysia, there are 25,000 Maybank customers and 10,000 HSBC customers

subscribed to internet banking in 2002 (Yu, 2002; Bernama, 2002). As of 2008, there are

over 4.5 million registered Internet Banking customers in Malaysia which accounts for

85.5% of the total internet population and internet banking has a yearly growth rate of

40.6%. Besides that, recently Bank Simpanan Nasional (BSN) has stated that its internet

banking service will be operated in 2009 which will enable account holders to make

utility payments, cash transfers and related transactions. Besides that, Maybank has also

launched the new look and feel of Maybank2u.com website which incorporating a

simpler experience in its layout, design and navigation.

Therefore, it has been seen that internet banking has become one of the most popular

services utilized by the Malaysian retail banking customers in recent years and bank

providers are working continuously to add or improve their internet banking services in

order to make their bank a better choice among their customers as well as to retain them.

1.2 Research Problem

Many banks in Malaysia are offering the internet banking services to their customers in

order to sustain at competitive advantage. Besides that, it is also to reduce costs

associated with having personnel serve customers physically, shorten processing periods,

increase speed, improve the flexibility of business transactions and provide better service

overall (Shih and Fang, 2004).

4
Malaysia is expected to see further global growth and expansion in internet banking

(Ayny, 2008). Ongoing innovative internet banking solutions have grown exponentially

from time to time to ensure quality of the e-services offered to the customers remains at

the competitive level and to create additional differentiation in order to attract new

customers while maintaining existing customers. As from consumer perspective, the e-

services have provided an alternative way of dealing banking transactions and this has

increase the widespread of internet banking adoption in Malaysia.

Despite its attractiveness, website loyalty among internet banking consumers has become

an issue as there are many internet banking websites offer in the Malaysia market. It has

to be aware that customer loyalty is important because it has a positive effect on long-

term profitability (Ribbink et al., 2004). According to Reichheld et al. (2000) and

Reichheld and Schefter (2000), the high costs of acquiring new e-customers can lead to

unprofitable customer relationships for up to three years. As a consequence, it is crucial

for online companies to create a loyal customer base, as well as to monitor the

profitability of each segment (Reinartz and Kumar, 2002). Furthermore, new forms of

online communication offer a host of new and promising opportunities for customer

retention on the World Wide Web, while at the same time intensifying competition

(Vatanasombut et al., 2004).

However, few companies seem to succeed in creating e-loyalty, and little is known about

the mechanisms involved in generating customer loyalty on the internet (Ribbink et al.,

2004). In online environment, the cost of obtaining and retaining a customer is usually

5
higher than through the traditional channel (Reichheld and Schefter, 2000) and the

customers loyalty is relatively lower (Turban, Lee, King, & Chung, 2000). Though

loyalty is crucial, much of the research done on consumer internet banking context has

been focusing on adoption (Brown et al, 2004). Addition to that, Floh and Treiblmaie

(2006) stated that while there is a rich body of literature on online financial services and

their adoption, little is known about how to keep customers loyal to an online bank. This

apply to Malaysia as well and therefore call for research of what factors that are

responsible for keeping customers loyal in internet banking environment is crucial.

1.3 Research Questions

Given that relevant research on loyalty in the internet banking context is limited, this

study suggests to investigating of how to keep customer loyal to an internet banking

website in Malaysia. The following research questions have been derived:

1. What factors determine customer loyalty towards internet banking among the

consumers in Malaysia?

2. Which factors are essential in forming loyalty among Malaysian consumers in

internet banking environment?

1.4 Research Objectives

As in increasingly competitive markets, being able to build consumer loyalty is seen as

the key factor in winning market share and developing a sustainable competitive

advantage (Lin and Wang, 2006). The primary objective of this research is to investigate

6
the level of customers loyalty to internet banking website in Malaysia. Following the

research questions to be answered in this study, the objectives of the study are addressed

as follows:

1. To understand and identify the factors that affect customer loyalty to an internet

banking website in Malaysia.

2. To investigate the essential factors that brings more influence to internet banking

website loyalty among consumers in Malaysia.

1.5 Contribution of the Study

This study has integrated different factors from past research to study customer loyalty in

the internet banking environment among Malaysian consumers. It is useful to both

practitioners and academics in the fields of relationship marketing and loyalty in

Malaysia in order to understand the consumer perspectives in the value of internet

banking services.

With accelerated business competition and the popularity of internet banking use, the

study will provide deeper insights to the Malaysia internet banking providers to

understand what factors influencing consumer repeatedly using the same internet banking

website. This will allow for improvement in internet banking providers strategies to

attract potential customers of internet banking services. Furthermore, by understanding of

what is the most needed among consumers in internet banking environment will provide

the management an insight into developing effective strategies to ensure financial

institutions to remain competitive and retain their customers in long term.

7
1.6 Organization of the Study

The study contains five chapters and the summary for each chapter is described as

follows.

The study begins with Chapter One which outlines the introduction of the research. It

consists of research background, research problem, research questions and research

objectives. Significance of the study and organization of the study are also addressed.

Chapter Two introduces the previous literature related to service quality, perceived value,

trust, habit, reputation and customer loyalty. The research constructs and their

relationships are identified respectively.

Chapter Three presents a research model that suggests the integrative interrelationships

among the research constructs in which it includes service quality, perceived value, trust,

habit, reputation and customer loyalty. The development of hypotheses is addressed as

well. Meanwhile, the research type, questionnaire design and construct measurement,

sampling and data analysis procedure are also discussed in this section.

Chapter Four discusses the pre-analysis data screening results (normality and regression

assumption test), the reliability test and validity assessment of the instrument. The

research outcomes which derived from multiple regression analysis are also reported here

which consist of the findings on the factors influencing loyalty.

8
Chapter Five is a conclusion of the findings and implications of the study. Research

limitations and recommendations are stated as well.

Bibliographies and appendices are included in the end of the paper.

9
CHAPTER 2: LITERATURE REVIEW

This chapter firstly reviews the theoretical background and concludes definitions of each

research construct. Then the interrelationships among research constructs are finally

described.

2.1 Theoretical Background

In this section, a review of theoretical background of service quality in virtual

marketplace, perceived value, trust, habit, reputation and customer loyalty will be

presented.

2.1.1 Service Quality

Rowley (2006) has defined online services (e-services) as deeds, efforts or performances

whose delivery is mediated by information technology. Such online service includes the

service element of e-tailing, customer support and service, and service delivery. Besides

that, the author also discussed that there are three characteristics of online service, which

are technology mediation, information service and self-service. For Rust and Kannan

(2002), online service is considered as the provision of service over electronic networks

such as the internet and includes the service product, service environment, and service

delivery that comprise any business model, whether it belongs to a goods manufacturer or

a pure service provider.

10
Luarn and Lin (2003) conceptualize e-services as an interactive content-centered and

Internet-based customer service, driven by customers and integrated with related

organizational customer support processes and technologies with the goal of

strengthening the customer-service provider relationship.

Service quality has become an area to be focusing on with the present of e-services that

enable electronic communication, information gathering, transaction processing and data

interchange between online vendors and customers across time and space (Featherman

and Pavlou, 2002). According to Parasuraman et al. (1988), service quality has been

defined as a global judgment, or attitude, relating to the superiority of the service

whereby superiority is the gap in which practical service higher than consumer

expectation. In online environment, service quality is defined as the extent to which a

website facilitates efficient and effective shopping, purchasing and delivery of product

and services (Zeithaml et al, 2002). Santos (2003) described e-service quality as an

overall customer evaluations and judgments regarding the excellence and the quality of e-

service delivery in the virtual marketplace.

In this highly competitive age of e-commerce, delivering service quality through websites

is an imperative strategy to success and possibly plays an important role than low price

and web presence (Zeithaml et al, 2002). Prior to that, both practitioners and academics

are keen on accurately measuring perceived quality in order to better understand its

essential antecedents and consequences and, ultimately, methods for improving quality to

achieve competitive advantage and build customer loyalty (Palmer and Cole, 1995;

11
Zahorik and Rust, 1992). Moreover, according to Yang et al. (2007), service quality

measures have been applied to assess the quality of search engines and factors associated

with website success. However, evaluation on consumers perceptions of online service

quality is still limited. Therefore, service quality measurement is crucial to be as part of

the evaluation of customer loyalty in online environment.

From the past research, there is no consensus on the exact nature or number of quality

dimensions that customers consider when evaluating online services (Srinivasan et al.,

2002; Wolfinbarger and Gilly, 2003; Yang et al., 2003; Zeithaml et al., 2002).

According to Collier and Bienstock (2006), the author stated that previous research on

service quality in regards to the internet has primarily focused on system attribute which

stresses the interaction of consumer and website.

Zeithaml et al. (2001, 2002) and Parasuraman et al. (2005) have carried out a study on

internet service quality focusing on online shopping website, which have resulted the

development of service quality scale, the e-SQ scale. The e-SQ scale developed by

Zeithaml et al. (2001) comprised of 11 dimensions. Those dimensions involved are

reliability, responsibility, access, flexibility, ease of navigation, efficiency, assurance,

security, price knowledge, site aesthetics, and customization/personalization. Whereas for

Parasuraman et al. (2005), the e-SQ scale comprised of 7 dimensions that are efficiency,

system availability, fulfillment, privacy, responsiveness, compensation, and contact

dimensions.

12
Cox and Dale (2001) explained that traditional dimensions of service quality (e.g.

competence, courtesy, clarity, comfort and friendliness) were not relevant to online sales.

However, other factors (e.g. accessibility, communication, credibility, understanding,

availability and appearance) were very important to being successful in an online

environment and these factors are analyzed on the online shopping websites. Besides that,

Liu and Arnett (2000) have also highlighted the four factors which were used to analyze

the webmasters for Fortune 1000 companies. The four factors include information and

service quality, system use, playfulness, and system design quality.

Yoo and Donthu (2001) have developed the SITEQUAL scale to measure the perceived

quality of an online shop. This led to a nine-item scale of four dimensions, which consist

of ease of use, aesthetic design, processing speed and security. According to Gefen

(2002), service quality dimensions may be divided into three categories that are tangibles,

a combined dimension of responsiveness, reliability and assurance, and empathy. These

three categories are analyzed on the online shopping websites.

Meanwhile, Wolfinbarger and Gilly (2002) has developed .comQ scale which is made up

of 14 items divided into four factors to analyze on the online shopping websites: web site

design; reliability; privacy/security; customer service.

Besides that, based on the study conducted by Ribbink et al. (2004) in an e-commerce

context focusing on online book and CD stores, service quality dimensions consist of

ease of use, e-scape, responsiveness, and customization. Finally, Cristobal et al. (2007)

13
had developed a service quality scales in their latest study which consist of

multidimensional constructs of web design, customer service, assurance and order

management.

In conclusion, based on the above literatures, service quality has been termed in this

study as an overall customer evaluations and judgments regarding the excellence and the

quality of services being offered to them in the online environment.

2.1.2 Perceived Value

Delivering superior customer value is an essential strategy for firms to gain competitive

advantage and long term success (Parasuraman, 1997; Woodruff, 1997). Kotler (2003)

defined customer perceived value as the difference between prospective customers'

evaluation of all the benefits and all the costs of an offerings and the perceived

alternatives. Total customer value refer to the monetary value including economic,

functional and psychological benefits that customers expect to receive from a given

market offering. Total customer cost contains monetary, time, energy and psychic costs

that customers expect to incur in evaluating, obtaining, using, and disposing of the given

market offering.

Lu and Yen (2008) has conducted a study on individuals loyalty intention towards online

auction whereby perceived net benefits has influenced on buyers satisfaction. In this

study, perceived net benefits might be thought of as the balance of positive and negative

impacts of the online auction on the buyer. Buyers net benefits assessment refers mainly

14
to cost savings, time savings, reduced search costs, and incremental additional values.

Based on Kotlers definition and compare with this study, it has implied that perceived

value is also termed as perceived net benefits. For authors such as Dodds et al. (1991),

Fornell et al. (1996), Slater (1997), Woodruff (1997) and Zeithaml (1988), perceived

value is defined as the customers overall assessment of the benefits they receive relative

to the sacrifice they make.

Bolton and Drew (1991) described that perceived value is a richer measure of customers

overall evaluation of a service than perceived service quality. Zeithaml (1988) has

reported four consumer expressions of value from the exploratory investigation. First,

value is low price, secondly value is whatever the consumers want in a product/service,

thirdly value is the quality that the consumers get for the price paid and lastly value is

what the consumers get for what they give. Therefore perceived value is often assumed to

involve a consumers assessment of the ratio of perceived benefits to perceived costs.

Addition to that, the author also explained that customer does not always buy a product or

service with high quality. The purchase decision depends on which product/service can

generate higher perceived value.

According to Parasuraman and Grewal (2000), there are four distinct types of perceived

value in their proposed expanded model of customer loyalty: (1) acquisition value (2)

transaction value (3) in-use value (4) redemption value. Perceived value is implied as a

dynamic construct and may change its central component over time. For instance,

acquisition and transaction value may be dominant during and right after a purchase,

15
while in-use and redemption value may only emerge from later stages of using the

product/service. The authors further described that perceived value is a function of a get

component (the benefits a buyer derives from a sellers offering) and a give component

(the buyers monetary and non-monetary costs of acquiring the offering). Following this

definition, Lin and Wang (2006) have implied that the get components (benefit) of

perceived value include intrinsic attributes (ie how to purchase makes one feel), extrinsic

attributes (ie reputation of the product/service), perceived quality and other relevant high

level abstractions, while the give components (sacrifice) of perceived value include

monetary prices and nonmonetary cost (eg time, energy, effort) in their study on the

determinants of customer loyalty in mobile commerce contexts.

Hsu (2007) has compared the definition between customer value and perceived value.

The author explained that customer value is subjectively perceived by customers rather

than objectively determined by organizations and the value perceptions typically reflect a

trade-off between what customers receive and what they give up to obtain or use the

offerings, while perceived value is the customers perception of the value pertaining to

providers offerings. Therefore, perceived value is also termed as customer value,

consumer value, service value, experiential value or shopping value in different facets of

marketing literature.

In short, definition of perceived value in this study is deemed as the overall assessment

by the customers on the perception of the benefits they receive relative to the sacrifice or

cost they encounter.

16
2.1.3 Trust

In past studies, trust has been conceptualized in different ways and researchers have long

acknowledged the confusion in the field (e.g. McKnight et al. 1998; 2002; Shapiro 1987).

Based on previous research, trust has been defined as: (1) a set of specific beliefs dealing

primarily with the integrity, benevolence, and ability of another party (Doney and

Cannon, 1997; Gefen and Silver, 1999); (2) a general belief that another party can be

trusted (Gefen, 2000; Hosmer, 1995; Moorman et al., 1992), sometimes also called

trusting intentions (McKnight et al., 1998) or "the willingness' of a party to be vulnerable

to the actions of another" (Mayer et al., 1995); (3) affect reflected in feelings of

confidence and security in the caring response of the other party (Rempel et al., 1985).

Some researchers have combined the first two conceptualizations into one construct

(Doney and Cannon, 1997). Other researchers have split the first two conceptualizations,

declaring the specific beliefs as antecedents to the general belief (Jarvenpaa and

Tractinsky, 1999; Mayer and Davis, 1999; Mayer et al. 1995).

Despite different definition of trust exists in the past literatures, according to Gefen et al

(2003), the author has adopted the conceptualization of trust as a set of specific beliefs

which includes integrity, benevolence, ability and predictability to be applied in e-

commerce, specifically online shopping context. The definition is aligned with the past

literatures where it has been most widely used in studies related to ongoing economic

relationship that dealing buyer-seller and business interactions (Crosby et al. 1990;

Doney and Cannon 1997; Ganesan 1994; Jarvenpaa et al. 2000). Furthermore, the author

17
further commented that trust as a feeling (Rempel et al. 1985) has been previously

studied in the context of interpersonal relationships, such as friendship and love and

therefore, it is arguably irrelevant to a business transaction.

In consonance with the definition of trust of Gefen et al. (2003), Lin and Wang (2006)

who conducted their study in m-commerce context have adopted the same view by

defining trust as trust as a set of specific beliefs dealing primarily with the integrity

(trustee honesty and promise keeping), benevolence (trustee caring and motivation to act

in the trusters interest), competence (ability of trustee to do what the truster needs) and

predictability (trustees behavioral consistency) of a particular m-vendor.

As a result, as the current study is focusing on internet banking website context in which

is part of the e-commerce that dealing buyer-seller and business transactions, therefore

the definition of trust as a specific beliefs is adopted in this study.

2.1.4 Habit

In past research about repeated behaviors, the role of habit in predicting behavior has

been verified (Chaudhuri, 1999; Gefen, 2003, Limayem & Hirt, 2003; Ouellette & Wood,

1998; Trafimow, 2000; Triandis, 1971). Most habitual behavior arises and proceeds

efficiently, effortlessly, and unconsciously (Aarts et al., 1998) and habit can predict ones

future behavior (Bamberg, Ajzen, & Schmidt, 2003).

18
According to Lin and Wang (2006), it is a fact of life that force of habit still dictates

many behavioral intentions, once people have gained experience.

There are few characteristics about habit. Firstly, habits require learning (Verplanken,

Aarts, van Knippenberg and Moonen, 1998). Secondly, habits are automatic responses to

specific situations or stimuli, and are always limited in scope (Aarts et al., 1998;

Limayem and Hirt, 2003; Ouellette and Wood, 1998; Verplanken et al., 1998). Thirdly,

habits emerge from response repetition, and forthly habitual responses are automatic in

the sense that they can be performed quickly in parallel with other activities and with

allocation of minimal attention (Ouellette and Wood, 1998). Finally, habits reflect

automatic behavior tendencies developed during the past history of the individual

(Limayem and Hirt, 2003; Ouellette and Wood, 1998).

Habitual behavior leads to the continuation of the same type of behavior (Aarts et al,

1998; Gefen, 2003). This is aligned with Ouellette and Wood (1998) who stated that once

a behavior has become a habit, or well-practiced behavior, it becomes automatic and is

carried out without conscious decision. It has implied that habit is guided by automated

cognitive processes, rather than by elaborate decision processes. Thus examining the

effect of habit on behavioral continuance can improve the understanding of e-commerce

and web site adoption (Liao et al, 2006).

Prior to that, Liao et al (2006) has conducted a study on consumers continued behavior

of using a B2C web site and found that once the use of a specific web site becomes

19
routine among the user, habit should become an additional force that increases the

behavioral intention to continue using the web site.

Lastly, according to Gefen (2003), continued use or intention is not the same as habit.

Habit is what one usually does; it is a behavioral preference in the present, whereas

intended use indicates the specific behavioral intention referring to future activities.

When habit is strong, people rely much more on habit than they do on external

information and on choice strategies.

Therefore, habit referred as a behavioral preference in the present that what one usually

does and it leads to the continuation of the same type of behavior has been adopted in this

study.

2.1.5 Reputation

Reputation may be defined with regards to a certain attribute, such as relationship with

shareholders (Herbig and Milewicz, 1993). Besides that, reputation may also be

considered from a more global perspective, associating it with the credibility of the

organization. In this case, reputation would be the consequence of the comparison

between what the company promises and what it eventually fulfils. Thus, the reputation

image may gain as a result of how honest the company is and how much it cares for its

environment.

20
Furthermore, perceived reputation may be seen as a consequence of the interactions of

business with its environment. This set of interactions between the company and its

customers will be a source of information which enables customers to appreciate more

deeply the quality of the offer (Yoon, Guffey and Kijewski, 1993).

Herbig and Milewicz (1993) have defined reputation as an estimation of the consistency

over time of an attribute of an entity. An organization can therefore have numerous

reputations (one on each attribute such as price, product quality, innovativeness,

management quality) or a global reputation. In addition to that, Standifird et al. (1999)

defined reputation as the current assessment of a firms desirability as seen by some

external person or group of people.

According to Casalo et al (2008), reputation must not be understood as referred not only

to the website, but also the entire organization. Website is simply the main

communication channel between consumer and organization. Thus, this study considers a

global perspective of reputation as seen by others that consists of the assessment in terms

of the organization reputation attributes such as product quality, innovativeness,

management quality or global image.

2.1.6 Customer Loyalty

Many studies have acknowledged the importance of loyalty in the electronic context,

analyzing this aspect in detail (Lynch et al., 2001; Reichheld et al., 2000; Srinivasan et

al., 2002; Reichheld and Schefter, 2000).

21
Customer loyalty has been defined as a deeply held commitment to rebuy or repatronize a

preferred product/service consistently in the future, thereby causing repetitive same-brand

or same brand-set purchasing, despite situational influences and marketing efforts having

the potential to cause switching behavior (Oliver, 1999). Following that, Ribbink et al

(2004) stated that this general definition apply to online loyalty as well.

Ranaweera et al. (2003) explained that loyalty consists of both behavioral and attitudinal

dimensions, more specifically, purchase intentions (Boulding et al, 1993), word of mouth

(Gremler et al., 2001) and commitment (Moorman et al., 1992). Purchase intentions

defined as the propensity to purchase a product or service at some point in the future

(Ranaweera et al., 2003). Customer commitment refers to the strength of relational ties,

and the desire to maintain a relationship (Bansal et al., 2003). Word of mouth defined as

oral, person to person communication between a receiver and a communicator, whom the

receiver perceives as non-commercial, regarding a brand, a product or a service (Arndt,

1967). Ranaweera et al. (2003) further suggested that as the alternative means of

communication made possible by the presence of Internet, the definition is broaden to

include mediums other than oral communication as well as to include multiple recipients

of the communication.

Meanwhile, Chaudhuri and Holbrook (2001) suggested that behavioral, or purchase,

loyalty consisted of repeated purchases of the brand, whereas attitudinal loyalty included

a degree of dispositional commitment, in terms of some unique value associated with the

22
brand. Thus, customer loyalty here was considered bidimensional, including both

attitudinal commitment and behavioral re-purchase intention.

Based on previous research, Flavian et al. (2006) conceived online loyalty or e-loyalty as

a consumers intention to buy from a website, and that consumers will not change to

another website. To Cyr et al. (2007), e-loyalty is similarly defined as perceived loyalty

towards an online site, with intent to revisit the site, or to make a purchase from it in the

future. Therefore, e-loyalty refers to perceived loyalty towards an online service

provider, as opposed to actual loyalty behavior, such as repeat visits/purchases. Addition

to that, Jones and Sasser (1995) described that consumer loyalty is the feeling of

attachment or union to the people, products or services of a company.

Loyalty has been considered to be one of the main keys to achieving company success

and sustainability over time (Keating et al., 2003; Reichheld and Aspinall, 1993).

According to Gitelson and Crompton (1984), the high costs every company has to face in

order to win new customers make it increasingly necessary to reinforce the ties

established with customers. Thus, obtaining higher levels of loyalty is seen as a key

objective for management, since this not only helps to improve stability in company

turnover (Reid and Reid, 1993), but also to reduce price sensitivity (Lynch and Ariely,

2000), and create contact networks to facilitate awareness and the promotion of the

services being offered (Oh, 2000). Thus, retaining customers become a more attractive

strategy for business to increase profitability than capturing new customers (Hsu, 2007).

23
Cox and Dale (2002) described that loyalty may be considered to be the greatest

competitive advantage there is, thus providing a long-term perspective in both business

parties: the company and its customers (Gummesson, 1999; Heiens and Pleshko, 1996).

Addition to that, Kam et al. (2004) suggested that it is necessary not only to win new

customers, but to keep them over time and motivate the repeat purchasing or

consumption of the companys goods or services. Heskett et al. (1994) further highlighted

that loyal customers are also more inclined to recommend an online service provider to

other customers. As a result, referrals increase the customer base by lowering the costs of

attracting new ones (Reichheld, 1996).

Based on the above literatures, loyalty has been adopted in this study in the forms of

behavioral and attitudinal dimensions that consists of purchase intention, commitment

and word of mouth.

2.2 Relationship among Research Constructs

In this section, the interrelationship among each constructs will be discussed.

2.2.1 Relationship between Service Quality and Customer Loyalty

Zahorik and Rust (1992) argued that modeling perceived quality as an influencing factor

of customer loyalty will provide significant diagnostic ability to any framework that

includes customer loyalty as a dependent construct. Previous research also confirmed that

24
the relationship between perceived quality and customer loyalty is exists and is positive

(Anderson and Sullivan, 1993; Cronin and Taylor, 1992; Harrison-Walker, 2001)

Boulding et al. (1993) developed a behavioral process model of perceived service quality

with taking expectations (will and should) into account. The findings suggest that the two

different types of expectations make opposite influences on service quality and then

overall service quality exhibit positive impact on purchase intentions. As purchase

intention is part of customer loyalty, service quality is implied have a positive impact on

customer loyalty.

According to Zeithaml et al. (1996), the existence of a relationship between service

quality and customer retention at a higher level indicates that service quality has an

impact on individual consumer behaviour. The authors argued that superior service

quality leads to favorable behavioral intentions (e.g. customer loyalty), while unfavorable

behavioral intentions are resulted from inferior service quality. Ruyter and Wetzels

(1998) further suggested the importance of determining the nature and strength of the

relationship between perceived service quality and loyalty for a firm and/or different

industry levels.

Alexandris, Dimitriadis and Markata (2002) applied SERVQUAL and Zeithaml et al.'s

theoretical framework for investigating the extent to which service quality could predict

customer loyalty. The results of their exploratory study in the hotel sector indicate that

25
service quality has strong effect on customer loyalty in terms of word-of-mouth

communication and purchase intentions.

Moreover, Tam (2003) proposed a model that explains online consumer loyalty where

factors such as web design, security and privacy and customer service have a huge

influence on customer loyalty. These factors were part of the service quality

measurements. Hsu (2007) also explained in the study that online service quality has a

significant effect on consumers' behavioral intentions in online shopping environment.

However, according to Manhaimer (2007), consumer loyalty is not significantly

influenced by perceived product quality in retail industry for product with low levels of

involvement and the purchase decision is influence by other factors. This concluded that

perceived product quality is not a measure of customer loyalty, and consumers possible to

be loyal to different products with different qualities according to their needs and

economic ability. Nevertheless, the author also stated that high perceived quality may

lead to loyalty if involving high product involvement.

Meanwhile, Cristobal et al (2007) rejected the hypothesis that higher levels of perceived

quality in web site services foster higher levels of web site loyalty as the findings show

that perceived service quality does not has a significant effect on loyalty. Furthermore,

Kouthouris and Alexandris (2005) also found that from their study in an outdoor setting

of sport tourism industry, the finding of service quality increasing customer loyalty was

not supported.

26
2.2.2 Relationship between Perceived Value and Customer Loyalty

Past literatures showed that perceived value contributed to customer loyalty (Dodds et al.,

1991; Grewal et al., 1998; Voss et al., 1998). Cronin et al. (1997) demonstrated the value

added model to test whether service value construct plays a central role in predicting

buying behavior. The empirical evidence proved that perceived value has stronger effect

on purchase intentions than does quality or sacrifice. This implied that perceived value is

highly related to customer loyalty.

Chen and Dubinsky (2003) established a conceptual framework of perceived value in a

B2C e-commerce setting for elaborating the relationship between perceived value and

key determinants. The model supports the definite importance of perceived value in

determining a consumer's online purchase intention, which is part of the customer

loyalty.

Moreover, perceived value increase customers' willingness to repurchase and decrease

the tendency to search for alternatives (Grewal, Iyer, Krishnan and Sharma, 2003; Hellier

et al., 2003). Pura (2005) also indicated the direct influence of perceived value on

commitment as well as behavioral intentions (e.g. loyalty).

When applied in online shopping to study the relationship between perceived value and

behavioral intentions (e.g. loyalty), Hsu (2007) found that perceived value has a

significant effect on consumers' behavioral intentions toward e-shopping experiences.

Anderson and Srinivasan (2003) also suggested that when perceived value was low,

27
customers would be more inclined to switch to competing businesses in order to increase

perceived value, thus contributing to a decline in loyalty.

Meanwhile, an investigation of perceived value for the predictor of customer loyalty in

golf traveler market, Petrick and Backman (2002) found that current measures of

perceived value may be inappropriate and not applicable in prediction of loyalty of golf

travelers. However, according to Omar et al. (2007)s investigation on retail market

context to determine perceived value in influencing customer loyalty to the store, the

finding showed that perceived value was not a predictor of customer loyalty to the store.

2.2.3 Relationship between Trust and Customer Loyalty

Trust has been found to be important for building and maintaining long-term

relationships (Geyskens et al., 1996; Rousseau et al., 1998; Singh and Sirdeshmukh,

2000). Trust is expected to affect customers willingness to purchase online. Online

customers generally stay away from electronic vendors whom they do not trust

(Jarvenpaa and Tractinsky, 1999; Reichheld and Schefter, 2000).

Mayer and Davis (1999) further described that trusting beliefs directly influenced trusting

intentions (e.g. customer loyalty) and Anderson and Srinivasan (2003) suggested trust

appears to be especially important for creating loyalty when the perceived level of risk is

high.

28
Chiou (2004) found that perceived trust had direct and positive impacts on the loyalty of

customers. This was supported in a study done by Corbitt et al. (2003) to online firms

where they have suggested a strong positive effect of trust on loyalty. Pavlou (2003) also

showed that there is some evidence supporting a positive relationship between e-tailer

trust and e-loyalty, in terms of increased intentions to purchase.

While Pavlou (2003) stated that e-tailer trust increase e-loyalty (purchase intentions), Pan

et al. (2002) proved that e-tailer trust highly correlated with loyalty in terms of

repurchase intentions among consumers. Moreover, as e-tailer trust increased the

customer spending, Gefen (2000) has also proved that there is a positive effect of trust on

loyalty.

Meanwhile, Ribbink et al. (2004) investigated the role of customer evaluations of

electronic service and e-trust in explaining customer loyalty to online retailers. The

findings showed that e-trust directly and positively affects e-loyalty. In addition to that,

Lee and Turban (2001) explained that lack of trust is frequently cited as a reason for not

purchasing from online merchants.

Although most of the literatures showed a positive impact of trust on loyalty, Finn and

Kayande (1997) proved that trust is not the anticipated as a major contributor to loyalty in

an online environment.

29
2.2.4 Relationship between Habit and Customer Loyalty

About 4060% of the customers purchase from the same store through force of habit

(Beatty and Smith, 1987). Trafimow (2000) and Verplanken et al. (1998) highlighted that

habit as an antecedent of behavioral intentions have found that habit can directly affect

behavioral intentions more than do attitude and social norms. In this case, behavioral

intentions can be referred as customer loyalty.

Shapiro and Varian (1999) stated that information technology (IT) companies succeed,

among other things, by locking in customers through high switching costs, and also

through the mental effort required to learn a new IT. This mental investment in a new

system/website can make users become entrenched in that system even when superior

systems are available. In short, habit has been formed among the consumers which

resulting higher switching costs to another system/website, which in return created

customer loyalty.

Gefen (2003) found that habit alone can explain a large proportion of the variance in the

continued use of a website. The finding suggested that customers intentions of repeat

purchases on a specific website, (one they have habitually used in the past), will increase,

due directly to the habit of visiting that specific website.

In the research done by Lin and Wang (2006), they claimed that customers visit the

websites out of habit rather than through a conscious evaluation of the perceived benefits

and costs offered. When habit is well-entrenched, people tend to ignore external

30
information or rational strategy. Such an effect is a central element in Triandis (1971)

theory of attitude and attitude change, in which behavioral intentions are the product of

attitude, social norms, and affect caused by habit. Thus, they concluded that habitual

prior preferences, in the use of specific m-commerce systems, directly and strongly

increased a consumer's intention to continue using the same systems.

2.2.5 Relationship between Reputation and Customer Loyalty

A more positive reputation lends to develop the sales and market share (Shapiro, 1982)

and to establish greater customer loyalty (Andreassen and Lindestad, 1998; Robertson,

1993). When comparing on- and offline exchange, Standifird et al. (1999) argued that the

reputation of online suppliers are significantly more important to online consumers than

any offline context (even catalogue shopping).

Rogerson (1983) showed that a high reputation increases the likelihood that consumers

will provide a recommendation. Based on Rogerson findings, this implied that

recommendation is refer to word-of-mouth which is part of the loyalty is influenced by

reputation.

Eastlick and Feinberg (1999) argued that the behavioral intentions of catalogue shopping

customers (e.g. customer loyalty) as compared to conventional brick-and-mortar

shoppers are more influenced by the reputation of the organization, since such a medium

of exchange requires consumers to purchase without immediate delivery or tangible

exchange.

31
According to Kotha, Rajgopal, and Rindova (2001), reputation may have an influenced

on online services distribution in a significant way. So, the authors suggested that

reputation building activities may be a key determinant of competitive success for

Internet firms.

Besides that, Standifird (2001) and Chen and Chang (2003) claimed that perceived

reputation of online suppliers is an important driver of online consumer intentions or

actions. Finally, Resnick and Zeckhauser (2002) suggested that the best-known service

companies with good reputations like eBay or Google are currently boasting the

healthiest profits and a loyal client base.

32
CHAPTER 3: RESEARCH DESIGN AND METHODOLOGY

This chapter first introduces the research design, conceptual model and hypotheses to be

tested. Then, the research methodology including the questionnaire design and

measurement of the research variables (including service quality, perceived value, trust,

habit, reputation and customer loyalty), sampling and data analysis procedures are

described.

3.1 Research Design

The research adopted in this study is a descriptive study where the study is undertaken to

describe the answers to questions of the factors in determining customer loyalty towards

internet banking website in Malaysia and, which of the factors play the most important

role to achieve customer loyalty. Cross-sectional study was conducted via questionnaire

survey to take a snapshot of the population at a point in time as the research is studying

based on existing internet banking user and not focusing on the impact of before and after

a customer becoming internet banking user.

The research strategy is a quantitative approach, which is also referring to a positivism

paradigm. Positivism is an approach to social research that seeks to apply the natural

science model of research to investigations of social phenomena and explanations of the

social world (Denscombe, 2003). The research framework is derived from previous

33
literatures and this study seeks to investigate and explain the model in internet banking

website context in Malaysia.

3.2 Research Model

Based on the literatures presented in Chapter 2, a conceptual model has been developed

which consists of the independent variables (IV) of determinants of customer loyalty and

the dependent variable (DV) of customers loyalty behavior. The model focuses on the

factors influencing customer loyalty which consists of the relationship of service quality,

perceived value, trust, habit and reputation with customer loyalty towards internet

banking website. The model is summarized as in Figure 3.1 below:

Figure 3.1

Research Framework

Service
Quality H1

H2
Perceived
Value
Customer
H3
Loyalty
Trust
H4

Habit
H5

Reputation

34
3.3 Research Hypotheses

As discussed in the literature review of Chapter 2, service quality is described as an

overall customer evaluations and judgments regarding the excellence and the quality of

services being offered to them in the online environment (Santos, 2003) and it is related

to web design, customer service, assurance and order management dimension (Cristobal

et al., 2007). In addition to the literatures of Chapter 2, Dean (2002) in his study on the

contribution of service quality of call centres to customer loyalty to the providing

organization in Australia, the author has found that perceived service quality is positively

related to customer loyalty. Meanwhile, Wolfinbarger and Gilly (2002) stated that

perceived quality is the second most important predictor of loyalty and intention to repeat

a purchase, and Flavian et al. (2006) suggested aspects such as how user-friendly the web

site, which is part of the service quality have been put forward as determinants of web

site loyalty levels. As a consequence, the first hypothesis is stated as follows:

H1: Service quality has a positive influence on customer loyalty towards internet

banking website.

Refer to Chapter 2, perceived value is related to the overall assessment by the customers

on the perception of the benefits they receive relative to the sacrifice or cost they

encounter (Woodruff, 1997). In the study conducted by Lin and Wang (2006) on m-

commerce, perceived value is a significant predictor of customer loyalty. To discourage

customers from switching to competitors, a company must continuously work at

enhancing perceived value in order to obtain higher customer loyalty. The significant

relationship between perceived value and loyalty is also supported by other researchers

35
such as Hsu (2007) and Anderson and Srinivasan (2003) as mentioned earlier in Chapter

2. Therefore, second hypothesis is proposed as below:

H2: Perceived value has a positive influence on customer loyalty towards internet

banking website.

Trust as discussed in Chapter 2, is referring to a set of specific beliefs by consumers on

the supplier dealing primarily with the integrity, benevolence, competence and

predictability (Gefen et al., 2003). As described in Chapter 2, literature reviews show that

there is an effect of trust on customer loyalty. In addition to that, Lin and Wang (2006)

also proved that trust has a positive effect on customer loyalty in m-commerce.

Customers who cannot trust an m-vendor will not be loyal to that m-vendor, even they

are satisfied with the product/services provided. When investigating e-loyalty within an

e-services context, Cyr et al. (2007) showed that higher levels of trust will result in higher

loyalty towards e-services website. Lastly, Floh and Treiblmaier (2006) investigated the

importance of antecedents of online loyalty such as trust, quality of the Web site, quality

of the service and overall satisfaction in online banking environment. They found out that

trust can be seen as major antecedents of customer loyalty. In light of the above

researches, the third hypothesis is proposed as below:

H3: Customer trust has a positive influence on customer loyalty towards internet

banking website.

Habit is what one usually does, that is a behavioral preference in the present and it leads

to the continuation of the same type of behavior (Gefen, 2003). Based on literatures in

36
Chapter 2, past studies by researchers such as Lin and Wang (2006) and Gefen (2003)

highlighted that habit directly influences loyalty. As an addition to the existing literatures

in this study, Liao et al (2006) described that habitual activity with a web site will

positively affect users intention to continue using the web site. The author showed that

consumers habit was verified to be a major predictor of loyalty. According to the

statement mentioned above, the forth hypothesis is presented as below:

H4: Customer habit has a positive influence on customer loyalty towards internet

banking website.

Chapter 2 discussed that reputation refer to the global perspective of reputation as seen by

others that consists of the assessment in terms of the organization reputation attributes

such as product quality, innovativeness, management quality or global image (Herbig and

Milewicz, 1993, Standifird et al., 1999). In the study conducted by Casalo et al. (2008), a

more favourable website reputation will lead to a greater degree of loyalty. Goode and

Harris (2007) also described that favorable interpretations of the online reputation of an

online supplier are directly and positively associated with the behavioral intentions

consumers such as loyalty. Other literatures mentioned in Chapter 2 also supported the

relationship between reputation and loyalty. As a consequence, the fifth hypothesis is

stated as follows:

H5: Reputation has a positive influence on customer loyalty towards internet

banking website.

37
3.4 Questionnaire Design and Construct Measurement

Structured questionnaire was developed to obtain the responses from internet banking

users about their opinions on various research variables. The questionnaire of this study

consists of seven variables: service quality (17 items), perceived value (3 items),

trust (5 items), habit (4 items), reputation (4 items), customer loyalty (5 items).

The variables mentioned in above are operationalized in current research whereby the

measurement items are totally adapted according to the previous researches with respect

to online environment setting. The measurement items are then rephrased so that all items

are reasonable to be applied on internet banking context.

3.4.1 Service Quality

To measure internet banking users perceptions of service quality, this study adapted

totally 17 questionnaire items from Perceived e-Service Quality (PeSQ) scale which was

developed by the study done by Cristobal et al. (2007). These 17 measurement items are

grouped into four dimensions: (1) web design, which is related to the design of the web

site (e.g. contents layout, contents updating and user-friendliness); (2) customer service,

which is related to the service performance, customer sensitivity (willingness to help

customers), personalised service and fast response to complaints; (3) assurance, which

related security, privacy and reliability elements; (4) order management, which relates to

the possibility of modifying and/or postponing the purchasing process at any given

moment and with no obligation, and of obtaining information on product availability at

the moment of purchase. Seven-point Likert scales are employed to evaluate service

quality. Respondents are asked to indicate their level of agreement toward each

38
statement, from strongly disagree (=1) to strongly agree (=7). The questionnaire items for

service quality are listed in Table 3.1.

3.4.2 Perceived Value

To measure customers value perceptions of internet banking website, this study adapted

3 questionnaire items based on the work of Lin and Wang (2006). All items are measured

by seven-point Likert scales ranging from strongly disagree (=1) to strongly agree (=7).

The perceived values questionnaire items are exhibited in Table 3.1.

3.4.3 Trust

Trust is operationalized into 5 questionnaire items which was adapted from Lin and

Wang (2006) study. Internet banking users are asked to indicate their level of

agreeableness on their trust towards internet banking website based on their experience.

These measurement items are measured in seven-point Likert scales ranging from

strongly disagree (=1) to strongly agree (=7) and are listed in Table 3.1.

3.4.4 Habit

Habit questionnaire items were adapted from Lin and Wang (2006) and it consists of 4

items which are used to measure how customer think that habit will influence their

decision making in choosing which internet banking website to use. Seven-point Likert

scales, rating from strongly disagree (=1) to strongly agree (=7) are used to measure these

4 items. The questionnaire items for habit are presented in Table 3.1.

39
3.4.5 Reputation

To measure customer assessment towards internet banking website provider reputation in

determining their choices of internet banking website, this study adapted past study from

Casalo et al. (2008) which consists of 4 items measurement. Respondents are asked to

indicate their level of agreement using seven-point Likert scales which range from

strongly disagree (=1) to strongly agree (=7). List of the questionnaire items are listed in

Table 3.1.

3.4.6 Customer Loyalty

In this section, totally 5 items were adapted to measure customer loyalty toward internet

banking website, based upon the research of Lin and Wang (2006). These 5 items are

measured using seven-point Likert scales ranging from strongly disagree (=1) to strongly

agree (=7). The questionnaire items are depicted in Table 3.1.

3.4.7 Information of Respondents

In order to obtain experienced internet banking respondents to evaluate the questionnaire

items rather than based on perception evaluation instead, information regarding the usage

of internet banking are captured in this section. The respondents are asked about whether

they are an existing internet banking user to ensure that the study involve experienced

respondents only. Information pertaining to the frequency of usage of internet banking,

list of internet banking website being used, the last time using the internet banking

website and the latest internet banking website that have used are captured as well.

40
Besides that, the different demographic of the respondents are also captured in this study.

The questionnaire items pertaining to respondents are contained in the last section of the

questionnaire and are categorized into the following:

1. Gender of the respondent

2. Year of birth of the respondent

3. Race of the respondent

4. Education level of the respondent

5. Income level of the respondent

6. Marital status of the respondent

Table 3.1

Measurements of Research Variables

Literature
Variable Measurement Items
Based
Service Website Design Cristobal
Quality 1. The products/services and its features are correctly presented in et al.
the internet banking website (2007)
2. The internet banking website information is regularly updated
3. The internet banking website pages load quickly
4. The contents are easily found in the internet banking web site
(ease of navigation)
5. The internet banking website provides full information on
product features and services offered

Customer Service
1. When the internet banking provider promise to do something
within a certain time, they do it
2. When a customer has a complaint or grievance, it is dealt with
rapidly and effectively
3. The internet banking service is performed properly first time
4. The internet banking provider provides its customers with a
tailor-made service
5. The stated delivery period is adhered to, at the time agreed on
(eg: interbank giro transfer)
(continued)

41
Table 3.1 continued

Literature
Variable Measurement Items
Based
Service Assurance Cristobal
Quality 1. The internet banking provider show an image of reliability et al.
and trustworthiness in ones transactions is transmitted (2007)
2. The confidentiality of customer data is ensured
3. The operation has been carried out satisfactorily once
customer confirm the transaction that has been made
4. The internet banking website provide clear information on
how to make the purchase/transaction
5. Elements of security are incorporated in the website and the
customer is made aware of these

Order Management
1. Customer has the option to modify and/or defer at any time
the transaction process without commitment (eg: FD
placement and upliftment)
2. The internet banking website contains information on
product availability when dealing/transacting

Perceived 1. The product/service of the internet banking website is good Lin and
Value value for money. Wang
2. The price/fee charges of the internet banking website is (2006)
acceptable.
3. The product/service of the internet banking website is
considered to be a good deal/buy.

Trust 1. Based on my experience with the internet banking website Lin and
provider in the past, I know it is honest. Wang
2. Based on my experience with the internet banking website (2006)
provider in the past, I know it cares about customers.
3. Based on my experience with the internet banking website
provider in the past, I know it is not opportunistic.
4. Based on my experience with the internet banking website
provider in the past, I know it is predictable
5. Based on my experience with the internet banking website
provider in the past, I know it knows its market.

Habit 1. This internet banking website is where I usually go to Lin and

buy/use banking products/services through internet. Wang
2. This is my preferred internet banking website providing the (2006)
banking products/services.

(continued)

42
Table 3.1 continued

Literature
Variable Measurement Items
Based
Habit 3. When I need to buy/use the banking products/services Lin and
through internet, this is the first internet banking website I Wang
try. (2006)
4. I often buy/use the banking products/services from this
internet banking website.

Reputation 1. This internet banking website/provider has a good Casalo et

reputation. al. (2008)
2. This internet banking website/provider has a good reputation
compared to other rival websites.
3. This internet banking website/provider has a reputation for
offering good services.
4. This internet banking website/provider has a reputation for
being fair in its relationship with its users.

Customer 1. My preference for this internet banking website would not Lin and
Loyalty willingly change. Wang
2. It would be difficult to change my beliefs about this internet (2006)
banking website
3. Even if close friends recommended another internet banking
website, my preference still for this internet banking website
would not change
4. I will buy/deal from this internet banking website the next
time I purchase/need the banking product/service.
5. I intend to keep purchasing/using the banking
products/services from this internet banking website

The detailed contents of the final form including the statement of the questionnaire items

and the ranging or the scale are shown in Appendix C.

3.6 Sampling

The sampling procedure that was adopted in this study for data collection was

convenience sampling method through questionnaire survey with a pre-planned sample

size of 350 respondents. The questionnaire survey was distributed in Klang Valley, which

43
is the most populous, urbanized and industrialized region in Malaysia with total

population of 6.7 million in 2005 and expecting to reach 8.5 million by 2020 (Dali,

2008). Respondents were asked to indicate whether they were existing internet banking

user in the questionnaire as the study is focusing on experienced internet banking users.

Overall, from the total of 350 questionnaires distributed during a one month data

collection period, there were only 289 valid questionnaires that can be used for further

analysis after excluding the non-experienced internet banking users. This represents a

response rate of 82.57%, in which it is still adequate to arrive at the desired and expected

achievement of this study as compare to other similar past studies that involved sample

size of 461 (Cristobal et al., 2007), 335 (Casalo et al., 2008), 255 (Lin and Wang, 2006).

Further discussion about the descriptive analysis of the samples characteristics were

given in the next chapter.

3.7 Data Analysis Procedures

In order to achieve the purposes of this study and test the hypotheses, Statistical Package

for Social Science (SPSS) 15.0 was used to analyze the collected data. The current

research conducted the following data analysis.

3.7.1 Pre-Analysis Data Screening

Preliminary analyses were performed to ensure there is no violation of the assumptions of

normality and regression test. Normality test was performed to determine whether the

variables are normally distributed, to remove extreme outliers and also to determine

44
whether parametric or non-parametric test can be used in this study. Such normality test

would include Skewness and Kurtosis, M-Estimators, Histogram and Box-Plot analysis.

Besides that, regression assumption test was performed to ensure the data fit for

regression analysis without any violation of the assumptions. Those assumptions include

the following:

1. Ratio of cases to independent variables the number of cases needed for regression

model should have 20 times more cases than the predictors.

2. Normality, linearity and homoscedasticity these assumptions assume that the

differences between the obtained and predicted dependent variables scores are

normally distributed and the residuals (independent variables) have a linear

relationship with the predicted dependent variable scores. Residual scatter plot and

residual normal plot of were used to analyze these assumptions.

3. Multicollinearity and auto-correlation the assumptions here are the IVs must not be

significantly correlated to avoid multicollinearity and there is no auto-correlation

whereby the observations or values is independent (there are no systematic trend in

the errors of the observation of the values). Multicollinearity can be confirmed via

Tolerance and Variance Inflation Factor (VIF) while auto-correlation is detected via

Durbin-Watson statistic.

4. Multivariate outlier extreme cases that have impact on the regression solution

should be deleted or modified to reduce their influence. Multivariate outlier can be

detected by using Mahalanobis Distance statistical test. The method involves

comparison of the Mahalanobis distance with a critical value of chi-square.

45
3.7.2 Descriptive Statistic Analysis

To better understand the characteristics of the sample, descriptive statistics analysis was

used to illustrate the respondents characteristics and means and standard deviation of

each variable.

3.7.3 Reliability and Validity Test

Reliability and validity are of vital importance in the measurement scales. Reliability

analysis is a measure of the internal consistency of indicators for a construct (Hair et. al,

1998). The purpose of reliability analysis is to determine how well a set of items taps into

some common sources of variance (Viswanathan, 2005), and is frequently measured with

Cronbachs coefficient alpha. Cronbachs coefficient alpha is the ratio of the sum of the

covariances among the components of the linear combination (items), which estimates

true variance, to the sum of all elements in the variance-covariance matrix of measures,

which equals the observed variance (Nunnally and Bernstein, 1994, p. 212).

Validity is the extent to which a scale or set of measures accurately represents the

concept of interest. Content validity (Devellis, 2003, p. 49) was established during

preparation of the questionnaire by using scales already validated in the literature,

carefully analyzing the items. All the traditional measures are based upon previously

validated measures (Venkatesh and Morris, 2000), and their reliabilities were considered

acceptable.

46
Then, construct validity test was performed which consists of discriminant validity and

convergent validity. Discriminant validity reflects the degree to which two conceptually

similar constructs are distinct, and the correlation here should be low. Correlation

analysis can be used to assess this type of validity. If the correlation result indicated that

the correlation between variables were not higher than 0.8 (Bagozzi, 1994), this would

conclude that the different constructs are not measuring the same thing.

Convergent validity refers to the degree to which the measures of the same construct are

correlated, and the correlation here should be high. It can be assessed via confirmatory

factor analysis (CFA) which is a common accepted method for this test (Netemeyer et al.,

2002). CFA allows the researcher to verify the factor structure of a set of observed

variables based on the existing knowledge of the theory, empirical research, or both. If

the measurement items of each construct have individual factor loadings at least 0.50 and

all measurement items are significant (level of .01) for Bartletts test of sphericity (Sanzo

et al., 2003) and index for Kaiser-Meyer-Olkin (KMO) is at least 0.6 (Pallant, 2001), the

scale is concluded has convergent validity.

3.7.4 Multiple Regression Analysis

Multiple regression is used to account for (predict) the variance in an interval dependent,

based on linear combinations of interval, dichotomous, or dummy independent variables

(Garson, 2005). Multiple regression can establish that a set of independent variables

explains a proportion of the variance in a dependent variable at a significant level

(significance test of R square), and can establish the relative predictive importance of the

47
independent variables (comparing beta weights) (Garson, 2005). Multiple regression

analysis is used to test the proposed hypotheses on the constructs of service quality,

perceived value, trust, habit, reputation and customer loyalty. The regression analysis will

determine which factors influencing the customer loyalty and which factor is the best

predictor of customer loyalty towards internet banking website in Malaysia.

48
CHAPTER 4: RESEARCH FINDINGS

This chapter shows the pre-analysis and descriptive results of data collection and presents

the findings of data analysis associated with the research hypotheses. There are four

sections in this chapter. The first section includes the summary of the pre-analysis data

screening result before further data analysis can be conducted. This section will present

the normality and regression assumption test result. The second section consists of the

reliability test result of each variable in the study and validity test result which covers the

aspect of content validity and construct validity (discriminant and convergent validity). In

third section, the descriptive results of the sample profiles and research variables are

presented. Lastly, the forth section is the multiple regression results that describe the data

analysis associated with the research hypotheses and validation of the research

framework as a whole.

4.1 Pre-Analysis Data Screening

Data screening using box-plot method is performed to identify if outliers exist. Before

that, tested variables (service quality, perceived value, trust, habit, reputation and

customer loyalty) which are in ordinal type (7-point Likert scale) are converted into

interval data using Compute function. From the box-plot analysis, outliers identified from

the cases were removed. Moreover, normality tests which include skewness, kurtosis, M-

estimators, histogram and box plot are conducted to ensure all the tested variables meet

the criteria for normal distribution. The skewness and kurtosis test shows that the value of

the tested variables is between -2 and +2 where the variables (service quality, perceived
49
value, trust, habit, reputation, customer loyalty) are negatively skewed. M-estimators

values are similar to the variables mean, 5% trimmed mean and median. Addition to

that, box-plots analysis shows that there are no more outliers for all the variables. All

these tests proved that the variables are normally distributed. Therefore, as the variables

are in interval type and each of them proven was normally distributed, parametric test is

used for further data analysis. The normality test results are provided in the Appendix A.

Apart from that, regression assumption test was performed to ensure assumption 1 to 4

presented in Section 3.7.1 are not violated (assumption 1: ratio of cases to IVs;

assumption 2: normality, linearity and homoscedasticity; assumption 3: multicollinearity

and auto-correlation; assumption 4: multivariate outlier). From the test, the result shows

that assumption 1 is not violated as there are 289 cases used in this study in which it has

met the minimum 100 cases needed for the five predictors (number of cases = 20 times

more than the predictors). For assumption 2, the residual scatterplot shows the scores are

evenly distributed and the residual normal plot shows the scores distributed along the

regression line. This indicated assumption 2 is not violated whereby that the differences

between the obtained and predicted variables scores are normally distributed and the

residuals have a linear relationship with the predicted dependent variables scores. Thus,

normality, linearity and homoscedasticity are ensured.

According to Tolerance and VIF test, multicollinearity does not exist if the Tolerance

level is more than .1 and VIF is less than 10 (Ho, 2006). All the independent variables are

not significantly related as the collinearity statistics shows Tolerance level is more than .1

50
and the VIF level is less than 10. Table 4.1 below shows the values of multicollinearity

test result.

Table 4.1

Tolerance and VIF Test for Multicollinearity

Collinearity Statistics
Variable
Tolerance VIF
Service Quality .406 2.460
Perceived Value .591 1.693
Trust .512 1.952
Habit .679 1.472
Reputation .472 2.117

The Durbin-Watson statistic also shows that there is no autocorrelation with the statistic

value of 1.862 falls within the acceptable range of 1.5 to 2.5 as recommended by Norusis

(1995). Table 4.2 below shows the autocorrelation test result.

Table 4.2

Durbin-Watson Test for Autocorrelation

Model Summaryb

Model R R Square Durbin-Watson

a
1 .688 .474 1.862
a. Predictors: (Constant), Reputation, Habit,
Perceived Value, Trust, Service Quality
b. Dependent Variable: Loyalty

As a result, assumption 3 is not violated where multicollinearity and autocorrelation do

not exist.

51
Lastly, Mahalanobis Distance statistical test indicates that maximum value of

Mahalanobis Distance is 23.53. The percentage of cases with the Mahalanobis Distance

value exceeding the critical values of chi square for the commonly employed significance

levels is as follows (the relevant critical values are presented in parentheses); 0.01 (15.09)

= 2.4%, and 0.001 (20.52) = 1.0%. Frequency of Mahalanobis Distance is presented in

Appendix B.

According to Crawford and Allan (1994), the percentage of subjects exceeding the

critical value (e.g: 6.5%) corresponded closely to the expected percentage at certain

significant level (e.g. 5% at .05 level), it would be advisable to interpret and report this as

only exceeding the .05 level and data can be accepted to use for further analysis. Thus,

based on Crawford and Allan suggestion, the percentage of cases exceeding the critical

value for significance at the .01 level (2.4%) which corresponded closely to the expected

percentage (1% at .01 level) will be deemed as acceptable in this study. Therefore

assumption 4 with no multivariate outliers exist is not violated. Table 4.3 below displays

the multivariate outlier result.

Table 4.3

Mahalanobis Distance Test for Multivariate Outlier

Residuals Statisticsa

Statistics
Minimum Maximum Mean Std. Deviation N
Mahal. Distance .058 23.533 4.983 3.886 289
a. Dependent Variable: Loyalty

52
In conclusion, all the variables are normally distributed and the assumptions of multiple

regression analysis are not violated, thus the data used in this study is fit for further

statistical analysis.

4.2 Reliability and Validity Test

To ensure data validity and reliability, this study first pre-tested the questionnaire by

having the research supervisor to review it.

Regarding reliability, all items shows strong internal consistency measuring its constructs

by achieving the Cronbachs alpha higher than 0.70. The result was found to

satisfactorily meet the minimum acceptable level of Cronbachs alpha coefficient that is

0.70 as suggested by Hair et al. (1998). Therefore, these have suggested that items

involved adequately measure a single construct for each tested variables (service quality,

perceived value, trust, habit, reputation and customer loyalty). Reliability measurement

for each construct is shown in Table 4.4.

Table 4.4

Reliability Measurement for Research Variables

Variable Number of items (N) Cronbachs Alpha

Service Quality 17 .912
Perceived Value 3 .770
Trust 5 .820
Habit 4 .741
Reputation 4 .884
Customer Loyalty 5 .847

53
Regarding validity, previously validated measurements from the past literatures are used

to ensure the validity of the measurements. Thus, content validity is achieved.

For construct validity in term of discriminant validity test, correlation analysis between

the variables is performed. The result shows the correlations are low, in which the values

are not higher than 0.8 as proposed by Bagozzi (1994). This indicates that the constructs

are distinct from one another and deemed as an acceptable level of discrimination. Table

4.5 below shows the correlation analysis between the variables.

Table 4.5

Pearsons Correlation Coefficient between the Research Variables

Service Perceived Customer

Variables Trust Habit Reputation
Quality Value Loyalty
Service Quality 1 .551 .626 .515 .691 .492
Perceived Value .551 1 .572 .381 .524 .439
Trust .626 .572 1 .467 .545 .563
Habit .515 .381 .467 1 .483 .522
Reputation .691 .524 .545 .483 1 .591
Customer
.492 .439 .563 .522 .591 1
Loyalty

Likewise, for construct validity in term of convergent validity, confirmatory factor

analysis is performed. KMO and Bartletts test as well as factor loadings for each

measurement items are examined. According to Table 4.6, all measurement items of each

construct are significant at level .01 as suggested by Sanzo et al. (2003) and the KMO

index is more than 0.6 as suggested by Pallant (2001). Moreover, based on Table 4.7,

most of the individual factor loadings are more than 0.50 as recommended by Sanzo et al.

(2003) except item SQ16 which is .488. Though item SQ16 less than 0.50, the factor

54
loading close to 0.50 and the KMO and Bartletts test showed satisfying result. Due to

that, item SQ16 is deemed as valid item within the Service Quality variable. In overall,

these results confirm the measurement items of the same construct are highly correlated

and convergent validity is achieved. Construct validity of these concepts is considered

acceptable as well since they had been proved by past studies (Lin and Wang, 2006;

Cristobal et al., 2007; Casalo et al., 2008) whereby the constructs used in this study were

measured using the same items. Thus, in conclusion based on the discriminant and

convergent validity test, construct validity is achieved in this study.

Table 4.6

KMO and Bartletts Test of Sphericity of Research Variables

Bartletts Test of Sphericity

Variable KMO
Chi-Square df p-value
Service Quality .923 2169.811 136 .000*
Perceived Value .659 276.178 3 .000*
Trust .811 479.653 10 .000*
Habit .761 241.356 6 .000*
Reputation .826 630.650 6 .000*
Customer Loyalty .769 688.360 10 .000*
Note: * Indicates significant at the p < .01 level

Table 4.7

Factor Loadings and Measures of Research Variables

Factor
Variable Measure
Loading
Service Quality
SQ1 Products/services and its features are correctly presented .554
SQ2 Website information is regularly updated .597
SQ3 Website pages load quickly .646
SQ4 The contents are easily found in the web site (ease of navigation) .689
SQ5 Full information on product features and services offered .720
(continued)

55
Table 4.7 continued

Factor
Variable Measure
Loading
SQ6 When promise to do something within a certain time, they do it .674
SQ7 When a customer has a complaint or grievance, it is dealt with rapidly and effectively .700
SQ8 The service is performed properly first time .638
SQ9 The provider provides its customers with a tailor-made service .564
SQ10 The stated delivery period is adhered to, at the time agreed on .656
SQ11 An image of reliability and trustworthiness in ones transactions is transmitted .689
SQ12 The confidentiality of customer data is ensured .689
SQ13 Operation carried out satisfactorily once customer confirm the transaction .750
SQ14 Provide clear information on how to make the purchase/transaction .711
Security elements are incorporated in the website and customer is made aware of
SQ15 .690
these
Customer opts to modify and/or defer at any time the transaction process without
SQ16 .488
commitment
SQ17 Contains information on product availability when dealing/transacting .616

Perceived Value
PV1 Product/service is good value for money .896
PV2 Price/fee charges is acceptable .818
PV3 Product/service is considered to be a good deal/buy .803

Trust
TR1 Based on my experience in the past, I know it is honest .781
TR2 Based on my experience in the past, I know it cares about customers .784
TR3 Based on my experience in the past, I know it is not opportunistic .742
TR4 Based on my experience in the past, I know it is predictable .749
TR5 Based on my experience in the past, I know it knows its market .773

Habit
This website is where I usually go to buy/use banking products/services through
HB1 .765
internet
HB2 This is my preferred website providing the banking products/services .746
When I need to buy/use banking products/services through internet, this is the first
HB3 .750
website I try
HB4 I often buy/use the banking products/services from this website .751

Reputation
RP1 This website/provider has a good reputation .844
RP2 This website/provider has a good reputation compared to other rival websites .847
RP3 This website/provider has a reputation for offering good services .899
RP4 This website/provider has a reputation for being fair in its relationship with its users .860
(continued)

56
Table 4.7 continued
Factor
Variable Measure
Loading
Customer Loyalty
LOY1 My preference for this website would not willingly change .796
LOY2 It would be difficult to change my beliefs about this website .829
Even if close friends recommended another website, my preference still for this
LOY3 .842
website would not change
I will buy/deal from this website the next time I purchase/need the banking
LOY4 .742
product/service
LOY5 I intend to keep purchasing/using the banking products/services from this website .725

To summarize, the measurement scales used in this study are generally valid and reliable,

which permitted to draw further discussion on assessing the relationship between the

independent variables (service quality, perceived value, trust, habit, reputation) and

dependent variable (customer loyalty).

4.3 Descriptive Statistics

4.3.1 Characteristics of Respondents

Table 4.8 presents descriptive profiles of the sample (n=289), including two major items

in this study: (1) demographic profiles: gender, age group, race, education level, income

level, marital status, and (2) internet banking usage profiles: list of internet banking used,

frequency of usage, latest time usage, latest internet banking website used. It is shown

that male respondents (54%) are slightly higher than female (46%). Majority respondents

belong to age group between 26 years old to 30 years old (61.9%) and are from Chinese

ethnic (74.4%). Respondents who possess a bachelor degree or professional certificate

are in the majority (70.9%). Furthermore, 40.5% of the respondents are from income

group between RM3,001 to RM5,000 and more than 67% of the respondents are single.

57
In addition to that, majority of the respondents (76.5%) is using Maybank2u.com internet

banking website which is the first internet banking website introduced in Malaysia by

Maybank. Latest internet banking website used by the respondents also fall on

Maybank2u.com with 60.6% compare to other internet banking websites. Most of the

respondents use internet banking website for more than five times per month (43.4%) and

the latest time they used the internet banking website is either one weeks ago or lesser, in

which it consists of 77.5% of the respondents.

Table 4.8

Profiles of the Sample

Classification Frequency Percentage (%)

Demographic Profile
Gender
Male 156 54
Female 133 46

Age Group
16-20 3 1
21-25 24 8.3
26-30 179 61.9
31-35 51 17.6
36-40 25 8.7
41-45 7 2.4

Race
Malay 46 15.9
Chinese 215 74.4
Indian 19 6.6
Others 9 3.1

(continued)

58
Table 4.8 continued

Classification Frequency Percentage (%)

Education Level
PMR/LCE or Below 1 0.3
Certificate/Diploma 33 11.4
Degree/Professional Certificate 205 70.9
Postgraduate 50 17.3

Income Level
<= RM1,500 15 5.2
RM1,501 RM3,000 67 23.2
RM3,001 RM5,000 117 40.5
RM5,001 RM7,000 32 11.1
RM7,001 RM9,000 12 4.2
>= RM9,001 17 5.9
Unknown (Missing Value) 29 10.0

Marital Status
Single 195 67.5
Married 92 31.8
Divorced 2 0.7

Usage Profiles
List of Internet Banking Website
Used
Maybank2u.com 221 76.5
CIMB Clicks 77 26.6
PBeBank.com (Public Bank) 49 16.9
RHB Internet Banking 28 9.7
Hong Leong Online 19 6.6
OCBC Internet Banking 35 12.1
AmOnline (Ambank) 14 4.8
UOB Internet Banking 12 4.2
Citibank Online 69 23.9
Standard Chartered Online 44 15.2
Online@HSBC 54 18.7
Others 7 2.4

Usage Frequency of Internet Banking Website

1-2 times per month 79 27.3
3-5 times per month 85 29.4
> 5 times per month 125 43.3

(continued)

59
Table 4.8 continued

Classification Frequency Percentage (%)

Latest Time Usage of Internet Banking Website
1 weeks ago or lesser 224 77.5
2-3 weeks ago 41 14.2
1-3 months ago 13 4.5
More than 3 months ago 1 0.3
More than 6 months ago 10 3.5

Latest Internet Banking Website Used

Maybank2u.com 175 60.6
CIMB Clicks 29 10.0
PBeBank.com (Public Bank) 16 5.5
RHB Internet Banking 8 2.8
Hong Leong Online 2 0.7
OCBC Internet Banking 23 8.0
AmOnline (Ambank) 3 1.0
UOB Internet Banking 3 1.0
Citibank Online 8 2.8
Standard Chartered Online 13 4.5
Online@HSBC 8 2.8
Others 1 0.3
* Note: The sample size (n) is 289.

4.3.2 Descriptive Analysis of Research Variables

Table 4.9 shows some descriptive for the research variables used in this study. The table

shows minimum, maximum, mean and standard deviation for the research variables of

service quality, perceived value, trust, habit, reputation and customer loyalty. For the

research variables, there are 17 items of service quality, 3 items of perceived value, 5

items of trust, 4 items of habit, 4 items of reputation and 5 items of customer loyalty. The

result shown below is the summation of all the items belong to each variable from the

seven-point Likert scales. The mean scores of service quality is on average 5.29

(=90.24/17) in a seven-point Likert type scale in which it shows that the respondents have

60
slight degree of positive evaluations on the service quality of internet banking website.

Respondents also slightly higher perceived the value of internet banking website from the

average means score of 5.14 for perceived value variable (=15.43/3).

Besides that, the average means score in a seven-point Likert scale for trust is 5.21

(=26.03/5), for habit is 5.23 (=20.90/4) and for reputation is 5.31 (=21.23/4). These

scores mean that respondents tend to trust on the internet banking website, agree that

habit do influence their internet banking choice and internet banking website/provider has

positive reputation. Lastly, for customer loyalty variable, the means score is 4.89

(=24.43/5). This score fall to the seven-point Likert scale between neither and slightly

agree scale. Thus, the result suggests that the respondents tend to either not or slightly

loyal to the internet banking website.

Table 4.9

Descriptive Statistic of Research Variables

Minimum Maximum Mean Std. Deviation

Service Quality 62 119 90.24 11.803
Perceived Value 6 21 15.43 3.212
Trust 15 35 26.03 4.079
Habit 13 28 20.90 3.575
Reputation 12 28 21.23 3.619
Loyalty 12 35 24.43 4.745

4.4 Multiple Regression Analysis

In order to examine the factors influencing the customer loyalty towards internet banking

website in Malaysia, multiple regression analysis is conducted to test the effect of service
61
quality, perceived value, trust, habit and reputation with customer loyalty. This will

include testing of hypothesis 1-5.

Table 4.10 and Table 4.11 show that the regression is significant (F (5, 283) = 50.95, p <

.01). There is a correlation between 5 IVs (reputation, habit, perceived value, trust and

service quality) with DV, customer loyalty (R = .69). Reputation, habit, perceived value,

trust and service quality explain 47% of the variance of customer loyalty (R = .47) and

46.4% of the variance of customer loyalty in real population (Adjusted R = .464).

Table 4.10

Multiple Regression of IVs on DV (Customer Loyalty)

Model Summaryb

Change Statistics
Adjusted Std. Error of R Square
Model R R Square R Square the Estimate Change F Change df1 df2 Sig. F Change
1 .688a .474 .464 3.473 .474 50.951 5 283 .000
a. Predictors: (Constant), Reputation, Habit, Perceived Value, Trust, Service Quality
b. Dependent Variable: Loyalty

Table 4.11

Significant of IVs on DV (Customer Loyalty)

ANOVAb

Sum of
Model Squares df Mean Square F Sig.
1 Regression 3072.109 5 614.422 50.951 .000a
Residual 3412.687 283 12.059
Total 6484.796 288
a. Predictors: (Constant), Reputation, Habit, Perceived Value, Trust, Service Quality
b. Dependent Variable: Loyalty

62
Table 4.12 shows that trust, habit and reputation correlate positively and are significant

with customer loyalty but not for service quality and perceived value. Trust was found as

a significant, positive predictor on customer loyalty ( = .28, p < .01). Habit ( = .25, p <

.01) and reputation ( = .35, p < .01) also is a significant, positive predictor on customer

loyalty. However, service quality ( = -.07, p > .01) and perceived value ( = .04, p > .05)

was found not significantly predicting customer loyalty. Besides that, findings show that

reputation coefficients ( = .35) is the highest, follow by trust ( = .28) and habit ( =

.25). This indicates that reputation is more predictive of customer loyalty than trust and

habit.

Table 4.12

Coefficients and Significant of Each IV on DV (Customer Loyalty)

Coefficientsa

Unstandardized Standardized
Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) 1.144 1.675 .683 .495
Service Quality -.029 .027 -.073 -1.074 .284 .406 2.460
Perceived Value .064 .083 .043 .773 .440 .591 1.693
Trust .325 .070 .280 4.641 .000 .512 1.952
Habit .325 .069 .245 4.680 .000 .679 1.472
Reputation .456 .082 .348 5.539 .000 .472 2.117

a. Dependent Variable: Loyalty

Based on the findings, service quality and perceived value do not have a significant,

positive influence on customer loyalty. Therefore H1 and H2 are rejected in this study.

The results indicate that service quality and perceived value is not a predictor of customer

loyalty towards internet banking website in Malaysia. Rejection of H1 was supported by

past studies by Kouthouris and Alexandris (2005) in sport tourism industry, Manhaimer
63
(2007) in retail industry and Cristobal et al. (2007) in online context where higher level of

service quality do not foster customer loyalty. Furthermore, findings by Omar et al.

(2007) on perceived value not foster customer loyalty in retail market context and Petrick

and Backman (2002) on perceived value not applicable in prediction of loyalty in golf

traveler market have supported the rejection of H2.

Meanwhile, trust, habit and reputation have a significant, positive influence on customer

loyalty. Thus, H3, H4 and H5 are supported in this study. Beta value of .28 indicates that

1 unit increase in trust variable will result .28 increases in customer loyalty variable.

Habit with beta value .25 also indicates that 1 unit increase in habit variable will result

.25 increases in customer loyalty variable. Whereas for reputation variable, 1 unit

increase in reputation will increase .35 in customer loyalty. The empirical findings of this

study are in line with the evidences offered by Lin and Wang (2006) and Casalo et al.

(2008). Major findings of this study have indicated that trust, habit and reputation play an

important role in building customer loyalty in internet banking website context in

Malaysia.

Additionally, when compared independent variables of trust, habit and reputation,

reputation have a highly significant, positive influence on customer loyalty towards

internet banking website. Then, it is followed by trust and habit accordingly. Although

trust and habit are still necessary for customer loyal to the internet banking website, the

results have shown that reputation has becoming an essential factor to ensure customer

loyalty in Malaysia.

64
CHAPTER 5: CONCLUSION

This chapter addresses the summary results of this study as well as managerial

implication in the first section. Limitations and recommendations of this study are

subsequently presented.

5.1 Research Conclusions and Implications

The research questions for this study is to explore the influences of service quality,

perceived value, trust, habit and reputation on customer loyalty in the context of internet

banking website applicable to Malaysia and to investigate which factors are essential to

build loyalty among the customers using internet banking website.

Based on the data analyses discussed in the preceding chapter, the results of the

hypotheses testing are summarized in Table 5.1. The hypotheses define the links and

influence between these variables. The analysis finds that hypothesis three to five are

supported while hypothesis one and two are rejected at the significance level of .01. It is

also found that among the five independent variables, reputation is the best predictor of

customer loyalty towards internet banking website.

All these results lead to the achievement of the stated research questions and

consequently reflect a number of conclusions and managerial implications drawn as

follows.

65
Table 5.1

Summary of Hypotheses Testing

Hypothesis Coefficient Result Supported Literatures

H1 Service quality has a positive influence on customer loyalty -.073 Not Supported Manhaimer (2007);
towards internet banking website Cristobal et al. (2007);
Kouthouris & Alexandris (2005)

H2 Perceived value has a positive influence on customer loyalty .043 Not Supported Omar et al. (2007);
towards internet banking website Petrick & Backman (2002)

H3 Trust has a positive influence on customer loyalty towards .280 Supported Cyr et al. (2007);
internet banking website Floh & Treiblmaier (2006);
Lin & Wang (2006);
Ribbink et al. (2004);

H4 Habit has a positive influence on customer loyalty towards .245 Supported Lin & Wang (2006);
internet banking website Liao et al (2006);
Gefen (2003);

H5 Reputation has a positive influence on customer loyalty towards .348 Supported Casalo et al. (2008);
internet banking website Goode & Harris (2007);
Andreassen & Lindestad (1998);
Robertson (1993);

66
Firstly, service quality and perceived value is not a predictor on customer loyalty towards

internet banking website in Malaysia. Customers tend not to loyal although the internet

banking providers provide high quality services and gained high customers perceived

value. This is not consistent with most of the prior studies as mentioned in Chapter 2.

However, there are few literatures that support the negative findings which aligned with

the results in this study as shown in Table 5.1. Although the results suggest that service

quality and perceived value is not significantly influence customer loyalty in Malaysia,

however, past literatures of Koblov and Shiryaev (2007) found that service quality

influence their number of subscribers on mobile service market and Turel et al. (2007)

stated that perceived value is a critical factor in user adoption of wireless short messaging

services. These findings may apply to internet banking website context as well where

service quality and perceived value may play an important role in user adoption.

From managerial perspective, internet banking providers in Malaysia have to realize that

providing good internet banking services do not guarantee customer retention. Service

quality is not a major factor to differentiate themselves between the competitors. Based

on comments by some of the respondents, good service quality is a must and expected to

be offered by each internet banking provider in the first place. This perception will result

the bonding relationship between service quality and loyalty is not so strong in Malaysia.

Besides that, consumers feel that it do not necessarily to be loyal even they gained betters

perceived value from the internet banking provider. However, internet banking provider

should not totally ignore these two factors as they are the fundamental attributes to be

incorporated into internet banking services to strategise the internet banking business and

67
increase user adoption. In conclusion, although service quality and perceived value

cannot be totally ignored by internet banking providers, however for customer retention

strategy, internet banking providers in Malaysia should look for other factors that can

help to create loyalty in order to sustain at competitive advantage in long run.

Secondly, consumers who are heavily trusted on the internet banking provider are more

potentially to become a loyal customer to that particular internet banking website.

Customers who do not trust the internet banking provider will not use and loyal to that

internet banking website as the lower the trust, the higher the risk of consumers using that

particular internet banking website. The result is consistent with the prior studies as stated

in Table 5.1.

From managerial standpoint, as trust can retain customer, internet banking website

providers should create a trust relationship with the customers by being honest, sincere

and keeping promise to their customers. Moreover, showing care on customer welfare, do

not intend to show opportunist behavior by taking advantage on the customers, ability to

meet customer needs and consistency in delivering services can also create trust in

customer towards the internet banking website provider. In short, internet banking

website provider must try to establish an image which includes integrity, benevolence,

competence and predictability in order to keep their customers loyal.

Thirdly, habit of consumers is contributing on loyalty towards internet banking website in

Malaysia. Customers that used to that particular internet banking website are unlikely to

68
switch to another internet banking website. This is due to the fact that when switch to

another internet banking website, customers are required to learn a new internet banking

website which resulted a high switching cost. Therefore, customers will tend to stay to

the current internet banking website although more superior internet banking websites are

available.

For managerial implications, one way to increase customer loyalty is to develop a habit

of using the internet banking website among consumers. As reuse of the internet banking

website increase, the habit of using it is developed within the customer behavior. In order

to encourage customer to reuse the same internet banking website, internet banking

website providers should attract customers to go into the internet banking website

through promotions, contests, email blasting and coupons. Once customers begin using

the website and getting familiar with it, they may continue of using it if it has become a

habit. This will reduce switching behavior to the rival websites and subsequently build

customer loyalty.

Finally, the reputation of the internet banking website or provider has influence on

customer loyalty towards internet banking website. In fact, reputation plays the most

important and essential role in Malaysia in retaining customer using internet banking

website compare to trust and habit factor. Thus, reputation has a very strong effect in

keeping customer loyal to an internet banking website in Malaysia.

69
Accordingly, the managerial implications can be inferred from the last conclusion. It is

important that internet banking website providers should considered reputation as the

most critical and a must factor to foster loyalty among the Malaysian customers towards

their internet banking website. Continuous effort to build, increase or maintain the

website or provider reputation is a must to ensure customer loyalty. This can be done via

campaigns or advertising highlighting the positive aspects of the website and provider.

Besides that, internet banking website provider can also increase their reputation by

getting those reputable awards such as brand awards. For example, Maybank was

awarded The BrandLaureate Awards 2008 (Best Brands - Banking Online) and

Readers Digest Trusted Brands - Bank - Gold Award in 2008.

5.2 Research Limitations and Recommendations

Despite accomplishment in recognizing the relationship between service quality,

perceived value, trust, habit and reputation with customer loyalty in which the findings

are useful for further validation, this study is subject to some limitations.

Major limitation is that the results presented in this study are based on the analysis using

cross-sectional data due to the constraints on time and cost. As a result, strong evidence

of the effects between research variables in the research model cannot be examined as a

whole. Therefore, longitudinal study approach is suggested for future research projects.

Secondly, the sample was not representative from the actual population of Malaysia. The

study is only limited to Klang Valley and utilized a convenience sampling method where

70
the sample consists mainly postgraduate students and white-collar workers. Thus, the

study sample may limit the generalizability of results. As the result shows that hypothesis

one and two is rejected, further studies are necessary to confirm the causal relationships

between constructs by using a broader sample that represent Malaysia in order to increase

generalizability of the research findings.

In addition, current study not includes all possible variables which affect customer

loyalty towards internet banking website. As customer loyalty model is not tested in

Malaysia in the internet banking website context yet, current model serve as a basic

overview of loyalty concept whereby the model only emphasizes on the direct effect of

the variables on customer loyalty. The model may need to be further enhanced as there

may be other possible independent variables that may influence customer loyalty

significantly or the present of mediator or moderator variable in the research model may

produce new findings that meaningful to internet banking website provider in Malaysia.

Therefore, for future research, the model should be enhanced by searching for additional

variables that can improve the ability to more accurately predict customer loyalty towards

internet banking website in Malaysia. Such additional variables should be considered to

be relevant to apply in internet banking website context where they may includes

mediator variables (for example: customer satisfaction) or moderator variables (for

example: customer characteristics such as demographics, customer involvement and

technology readiness). This recommendation can be an interesting challenge for the

future researchers and offers them new and exciting research opportunities to work in the

71
time to come. Furthermore, with the new addition of variables that make the model

getting more complex, Structural Equation Modeling (SEM) analysis is proposed to test

the research model comprehensively in order to produce more accurate and reliable

results.

72
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APPENDICES

Appendix A: Normality Test for Research Variables

Appendix B: Regression Assumption Test for Research Variables

Appendix C: Questionnaire Survey

99
 Appendix A: Normality Test for Research Variables

Table A.1

Normality Test: Skewness and Kurtosis for Research Variables

Variables Statistic Std. Error Skewness Statistic Std. Error Kurtosis

Service Quality -.286 .143 -2.00 -.286 .286 -1.00
Perceived Value -.270 .143 -1.89 -.370 .286 -1.29
Trust -.121 .143 -0.85 -.496 .286 -1.73
Habit -.272 .143 -1.90 -.517 .286 -1.81
Reputation -.263 .143 -1.84 -.427 .286 -1.49
Customer Loyalty -.112 .143 -0.78 -.540 .286 -1.89

Table A.2

Normality Test: M-Estimators for Research Variables

Statistics Statistic
Service Quality Mean 90.24
5% Trimmed Mean 90.38
Median 92.00
Perceived Value Mean 15.43
M-Estimators
5% Trimmed Mean 15.50
Huber's Tukey's Hampel's Median 15.00
a b c d
M-Estimator Biweight M-Estimator Andrews' Wave
Trust Mean 26.03
Service Quality 91.24 91.30 90.91 91.30
5% Trimmed Mean 26.03
Perceived Value 15.50 15.52 15.50 15.52
Median 26.00
Trust 26.20 26.10 26.07 26.10 Habit Mean 20.90
Habit 21.31 21.49 21.19 21.50 5% Trimmed Mean 20.90
Reputation 21.60 21.73 21.50 21.74 Median 22.00
Loyalty 24.59 24.54 24.48 24.54 Reputation Mean 21.23
a. The weighting constant is 1.339. 5% Trimmed Mean 21.27
b. The weighting constant is 4.685. Median 22.00
c. The weighting constants are 1.700, 3.400, and 8.500 Loyalty Mean 24.43
d. The weighting constant is 1.340*pi. 5% Trimmed Mean 24.46
Median 25.00

100
Figure A.1

Normality Test: Histogram for Research Variables

Histogram: Service Quality

40

Mean =90.24
30 Std. Dev. =11.803
N =289
Frequency

20

10

0
60 70 80 90 100 110 120
Service Quality

Histogram: Perceived Value

60

50

Mean =15.43
Std. Dev. =3.212
40 N =289
Frequency

30

20

10

0
5 10 15 20
Perceived Value

101
 Histogram: Trust

60

50

40
Frequency

30
Mean =26.03
Std. Dev. =4.079
N =289

20

10

0
15 20 25 30 35
Trust

Histogram: Habit

50

40
Frequency

30
Mean =20.9
Std. Dev. =3.575
N =289

20

10

0
15 20 25
Habit

102
 Histogram: Reputation

60

50

40
Frequency

Mean =21.23
Std. Dev. =3.619
N =289
30

20

10

0
15 20 25
Reputation

Histogram: Customer Loyalty

40

30
Frequency

Mean =24.43
Std. Dev. =4.745
N =289
20

10

0
15 20 25 30 35
Loyalty

103
Figure A.2

Normality Test: Box-Plot Analysis for Research Variables

Box Plot: Service Quality

120

110

100

90

80

70

60

Service Quality

Box Plot: Perceived Value

25

20

15

10

Perceived Value

104
 Box Plot: Trust

35

30

25

20

15

Trust

Box Plot: Habit

30

25

20

15

10

Habit

105
 Box Plot: Reputation

30

25

20

15

10

Reputation

Box Plot: Customer Loyalty

35

30

25

20

15

10

Loyalty

106
 Appendix B: Regression Assumption Test for Research Variables

Figure B.1

Residual Scatterplot between Independent Variables and Dependent Variables

Dependent Variable: Loyalty

4
Regression Standardized Residual

-2

-4

-3 -2 -1 0 1 2 3
Regression Standardized Predicted Value

Figure B.2

Residual Normal P-P Plot between Independent Variables and Dependent Variables

Dependent Variable: Loyalty

1.0

0.8
Expected Cum Prob

0.6

0.4

0.2

0.0
0.0 0.2 0.4 0.6 0.8 1.0
Observed Cum Prob

107
Figure B.3

Frequencies of Mahalanobis Distance

Mahalanobis Distance

Cumulative
Frequency Percent Valid Percent Percent
Valid 23.53270 1 .3 .3 .3
23.33377 1 .3 .3 .7
21.95309 1 .3 .3 1.0
19.06049 1 .3 .3 1.4
15.71236 1 .3 .3 1.7
15.45943 1 .3 .3 2.1
15.27836 1 .3 .3 2.4
14.94452 1 .3 .3 2.8
14.44310 1 .3 .3 3.1
14.10579 1 .3 .3 3.5
13.55543 1 .3 .3 3.8
13.34815 1 .3 .3 4.2
13.13201 1 .3 .3 4.5
12.90708 1 .3 .3 4.8
12.78389 1 .3 .3 5.2
12.63846 1 .3 .3 5.5
12.17907 1 .3 .3 5.9
12.13154 1 .3 .3 6.2
11.56188 1 .3 .3 6.6
11.40380 1 .3 .3 6.9
11.15635 1 .3 .3 7.3
10.97176 1 .3 .3 7.6
10.67770 1 .3 .3 8.0
10.51620 1 .3 .3 8.3
10.42652 1 .3 .3 8.7
10.35536 1 .3 .3 9.0
10.02154 1 .3 .3 9.3
9.87634 1 .3 .3 9.7
9.81508 1 .3 .3 10.0
9.77873 1 .3 .3 10.4
9.43048 1 .3 .3 10.7
9.38312 1 .3 .3 11.1
9.06425 1 .3 .3 11.4
9.01688 1 .3 .3 11.8

108
Appendix C: Questionnaire Survey

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