IMPACT OF INTERNET BANKING ON CUSTOMER SATISFACTION AND BUSINESS PERFORMANCE


IMPACT OF INTERNET BANKING ON CUSTOMER SATISFACTION AND BUSINESS PERFORMANCE  

Preface

Customers are the key contributors for the success and survival of any business and this is the same for banking sector also. So, need arises not only to satisfy the customers but also to retain them because it may lead to increased profitability and better performance of banks.

Technology is affecting the life of every individual in the present age and internet banking is one of the technologies which is fastest growing in banking practice now a days. Moreover, customers are shifting from traditional banking to online banking very rapidly because of various benefits such as cost and time effectiveness. Hence, it is required to study carefully the increasing significance of internet banking, with its impact on customer satisfaction and business performance. The study has been completed under six chapters.

The first chapter deals with the conceptual analysis and historical overview of internet banking and various factors that affect their customer satisfaction.

In the second chapter, literature has been reviewed both theoretically as well as in tabular form. Thorough review of literature generated the research gap to be studied.

The third chapter presents details about the research design and methodology followed in the study. It includes formulation of hypotheses on the basis of core studies, generation of scale items, data collection technique, data purification, reliability, validity and limitations of the study.

Fourth chapter presents the analysis of the data gathered from bank managers, hypotheses testing and major findings. This chapter also present the evaluative analysis of business performance.

Fifth chapter presents the analysis of the data gathered from online banking customers, its hypothesis testing and major findings.

The last chapter comprises of major findings, perceptual gap between private and public sector bank managers, private and public sector bank customers and further perceptual gap between customers and managers and managerial implications.

The study is expected to be useful to all the concerned including researchers and policy makers.

Shiffu Abrol

CHAPTER-1

IMPACT OF INTERNET BANKING ON CUSTOMER SATISFACTION AND BUSINESS PERFORMANCE: A CONCEPTUAL ANALYSIS

Background

Before initiating on „Impact of internet banking on customer satisfaction and business performance‟ an attempt has been made to summarise and synthesise the three most relevant concepts of the study viz. internet banking, customer satisfaction and business performance. This chapter summarises the important dimensions that directly or indirectly measure the impact of internet banking on customer satisfaction and business performance. These dimensions are- trust, service quality, perceived ease of use, perceived usefulness and commitment.

Internet Banking

Technology is affecting the life of every individual both qualitatively and quantitatively in the present age. The quick expansion of information technology has imbibed into the lives of millions of people and introduced major changes in the worldwide economic and business atmosphere. Technological developments in the banking sector have speeded up communication and transactions for clients (Booz et al., 1997). Internet banking is one of the technologies which is fastest growing banking practice now a days. It is defined as the provision of information or service by a bank to its customers over the internet. It is viewed as a supplemental channel used in conjunction with other channels to provide the convenience of banking anytime from one‟s home or work, without having to incur some of the costs associated with a branch visit like going to the branch or waiting on lines. Online banking eliminates physical and geographic boundaries and time limitations of banking services (Yang et al., 2007). Also as compared with traditional banking labour is replaced by machine very significantly (computer networks) which is low in cost and is available easily 24/7 (Wu et al., 2006). E-banking services first emerged in the early 1990‟s, when credit card, ATM, and telephone banking services were three major applications. During the last decade, database, information system and other technologies were applied into banking services at different levels. After the availability of internet facility, e-banking services are now conducted through a secure website operated by local banks and includes online

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enquiry, e-payments, e-transfer etc. There are two general business models to provide online banking facilities to its customers- First one is, incumbent bank also known as

„bricks and clicks‟ model, applying online banking as an enhancement to its traditional banking sector and integrating branches, ATM, call centres and online service into a whole system and using e-banking as a new channel of delivering services. Whereas the another one is known as direct bank or virtual bank or internet primary bank with no branch offices but using internet, telecommunication network and wireless networking to provide banking services (Xu and Zhao, 2000). Thus, providing online facility by banks is increasingly becoming a „need to have‟ than a „nice to have‟ service (Ganesan

R. and Vivekanandan K., 2009). In India ICICI bank was the first to initiate online banking revolution as early as 1998 under the brand name „Infinity‟. But in the current scenario, every bank in India has the internet banking facility. Moreover, these banks are extending their presence in rural areas also to lure more customers by educating them with new advancement in information technology.

Trust

Service is an act or performance that one party offers to another which is essentially intangible and does not result in the ownership of anything. Because of the service feature of intangibility, consumers are often faced with the problem of not knowing what to expect of a service until they consume it and hence perceive service as risky (Coulter and Coulter, 2002). Thus, need for trust arises as it is the management of risk, uncertainty and vulnerability and includes reliability, honesty, predictability, mutuality, expectation where a partner is equally committed (Tayler and Stanley, 2007). Internet is a competitive and technologically developed market presenting enormous challenges to the banks for maintaining relations with their clients. Trust and security received special attention in the marketing literature due to the notable influence that it has on the attainment of long-lasting and profitable relationships (Morgan and Hunt, 1994). It is also very important aspect in the provision of electronic services for e-commerce environments, especially those involving directly the user‟s activities like e-bank (Furnell and Karweni, 1999). Thus, customers perceive trust as a great challenge to internet banking and other electronic commerce forms that include sensible information. Trust is a very complex and multidimensional phenomenon. Traditionally it is defined as a group of beliefs held by a person derived from his perceptions about certain attributes. Trust is habitually related to security and risk avoidance (Stewart et

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al., 2001). It is the trait of trusting and believing in the honesty and reliability of others. Similarly in online context, security issue is crucial as it involves directly the user‟s activities who have few tangible and verifiable clues regarding the service provider‟s capabilities and intentions (Urban et al., 2001). Hence, trust in online transactions is defined as the subjective probability with which customers believe that an online transaction with a web retailer will occur in a manner consistent with their expectations (Stewart et al., 2001). There are many factors which will affect customer trust in online banking. The antecedents of trust in online banking are trusting beliefs, familiarity, disposition of trust, institutional based trust (structural assurance and situational normality), reputation and perceived site quality. The trusting beliefs (trust in online banking), include benevolence, competence and integrity (Mc Knight and Chervany, 2002), which will directly relate to the trusting intentions (the intention to continue using online banking services).

Service Quality

The digital revolution has undoubtedly changed almost every aspect of daily life as we stepped into the twenty first century. The power of the World Wide Web and global e- commerce is becoming more significant with the increasing number of people around the world getting connected to the internet (Siu and Mou, 2005). There are several competitive advantages associated with the adoption of technology in service organisations which include the creation of entry barriers, enhancement of productivity and increase of revenue generation from new services (Fitzsimmons and Fitzsimmons, 1997). However, developments in information and communication technology have provided a platform by which banks can design, develop and deliver services that can be perceived by customers as superior while accessing online channel for banking transactions (Surjadjaja et al., 2003). Service quality is one of the main factors that determines the success or failure of electronic commerce (Santos, 2003). It is very important component in any banking business. Service quality is the difference between customer expectations for the service encounter and the perceptions of the services received (Oliver, 1980). Service quality can also be defined as „the consumer‟s overall impression of the relative inferiority/superiority of the organisation and its services‟ (Bitner et al., 1990). Accordingly service quality is defined as how well a delivered service level matches customer expectations. Customers perceive the quality of services of online banking based on the performance of online delivery systems and not on the

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processes in which the delivered service is developed and produced. Numerous studies were carried out to conceptualise the service quality concept. It can also be defined by the practitioners in terms of key dimensions that customers use while evaluating the services (Lewis and Booms, 1983). The conceptualisation of service quality should include both the service delivery process (Parasuraman et al., 1995) as well as the service outcomes (Lehtinen and Lehtinen, 1991). In the early 1980s Nodic model was proposed by Gronroos (1984) which defined the dimensions of service quality and these include technical quality (what consumers get), functional quality (how consumer gets the services) and corporate image (how consumer perceives the firm and its services). Similarly, Lehtinen and Lehtinen (1991) offered another model with three dimensions of service quality viz. physical, interactive and corporate dimensions. Physical quality is about the quality of physical products involved in service delivery and consumption interactive dimension refers to the interaction between the customers and the service organization‟s employees. Corporate quality refers to the corporate image as perceived by the customers. E-SERVQUAL measures website e-SQ as perceived by customers. It is a method for measuring website e-SQ that is based on the same principle as the original SERVQUAL method and includes some dimensions similar to those of SERVQUAL. The E-SERVQUAL scale contains a core and recovery scale, represented by four and three dimensions respectively. Core scale is used to measure the customer‟s perceptions of service quality delivered by online retailers. Recovery scale refers to specific situations, when a customer has a question or runs into a problem (Zeithaml et al., 2002). In simpler terms, core scale refers to the quality of the website itself, while the recovery scale is more concerned with the actual performance of the company, rather than with website performance. Zeithaml (2002) identifies the need for businesses to focus on e-services in their e-business, and to understand the importance of e-service quality as a differentiating strategy. Businesses also need to recognize that the web experience presents the brand positioning to online consumers, and may be an important element in the establishment of trust and relationships with customers (Zeithaml et al., 2002). The measurement tool developed by Parasuraman, Zeithaml and Berry in 1985 to measure service quality includes ten dimensions viz, tangibility, reliability, responsiveness, communication, access, competence, courtesy, credibility, security and understanding which were later in 1988 reduced to five dimensions viz, tangibles, reliability, responsiveness, assurance and empathy to measure service quality. However Zeithaml et al., 2000 provided a

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comprehensive concept of online service quality based on pre and post service aspects. According to them e-service is the extent to which a website facilitates efficient and effective shopping, purchasing and delivery of products and services to users and consumers and includes dimensions such as access, ease of navigation, security/ privacy, responsiveness, trust/assurance, site aesthetics and price knowledge, which are significant indicators of online service quality. Further Lociacano et al., (2000) established a scale called WEBQUAL with twelve dimensions viz. information fit to need, interaction, trust, response time, design, intuitiveness, visual appeal, innovativeness, flow, integrated communication, business process and substitutability. Later Yang, Peterson and Huang in 2001 expressed online service quality to be the function of six elements namely ease of use, content, accuracy of content, timeliness of response, aesthetics and privacy. Wolfinbouger and Gilly (2002) have established four dimensions namely website design, reliability, privacy/security and customer service and found that reliability and fulfilment are the strongest predictors of customer satisfaction and commitment. Thus, continuous improvements in the information technology have enabled banks to provide their services in a more direct manner to adjust their products better to the clientele‟s needs. Although banking has always been an information business, until now information technology was mainly used to automate administrative processes. The shift from automating to informating-using information and its flow to inform managers provides opportunities to track a customer‟s behavior and respond at the right time. By making effective use of these opportunities, banks are able to transfer a great deal of transactions from branch offices to a call-centre. Accessibility has been extended through technological developments as well as with the introduction of new service delivery methods that allow consumers to do business with service firms from the home and office.

Perceived Ease of Use

The internet and World Wide Web (WWW) offer bankers and customers an opportunity with innovative new virtual environment that can hopefully stimulate and enhance their learning and operative process. The customer intention to adopt a new technology is primarily determined by the ease of use of the technology (Davis, 1989; Davis et al., 1989). Perceived ease of use has been an important factor in studying information technology acceptance and internet and World Wide Web adoption being no exception. It refers to the degree to which a person believes that using a particular

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system would be free of effort. This follows from the definition of „ease‟ which means freedom from difficulty or great effort (Radner and Rothscheld, 1975). It can also be defined as the degree to which an innovation is perceived not to be difficult to understand, learn or operate (Rogers, 1983). Further Rogers (1983) stated that perceived ease of use is the degree to which consumers perceive a new product or service as much better than its substitutes. Moreover Zeithaml et al., (2002) stated that perceived ease of use is the degree to which an innovation is easy to understand or use. In the context of online banking, ease of use may refer to be easy to remember URL address, a well organised format, easy site navigability and concise and understandable contents, terms and conditions (Santos, 2003). Perceived ease of use is the consumer perception that banking on the internet will involve a minimum of effort (Mathieson, 1991). Further, Consult (2002) noted that perceived ease of use refers to the ability of customers to experiment with new innovation and evaluate its benefits easily. He also states that the drivers of growth in electronic banking are determined by the perceived ease of use which is a combination of convenience provided by those with easy internet access, the availability of secure, high standard electronic banking functionality and the necessity of banking services. Hence perceived ease of use is an important measure of customer satisfaction, system adoption or information systems success (Moore and Benbasat, 1991) and has been studied extensively in the context of information technology adoption and diffusion. In applying this construct in online banking context, banks should focus on website navigation and applicable functions to cater needs of their users so that an application perceived easier to use by users than another is more likely to be accepted by them and enhances their intention or willingness to use the technology. If the system of using an online channel for banking transactions does not outweigh customer deprival occasioned by factors such as impersonal communication, technical difficulties and learning efforts, the customer may simply switch its patronage back to traditional channel. Thus, it is apparent that a channel which is easy to use can play a pivotal role in customer satisfaction with online banking services (Davis et al., 1989).

Perceived Usefulness

Information technology rapidly changes the fabrics of industrial growth and development these days and thus internet banking has become more and more diversified and complex. Specialising is unlimited, speedy and convenient services

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through internet banking. Moreover traditional banking in many countries including India (Lichtenstein and Williamson, 2006) has created challenges before the bankers. There are several factors that predetermine the consumer attitude towards internet banking such as demographic background, motivation and behaviour towards different banking technologies and individual preferences and expectations of new technology (Rahmath and Abdullah, 2011). Customer attitudes towards internet banking are influenced by the prior experience of computer and new technology (Laforet and Li, 2005) and other environmental factors (Davis, 1989). The adoption of internet banking as a new channel for banking transactions forces customers to consider concerns about password integrity, privacy, data encryption, hacking and the protection of personal information (Benmati and Serva, 2007). In fact perceived usefulness, security and privacy are the main influencing factors to accept internet banking system to conduct banking transactions (Qureshi et al., 2008). Perceived usefulness is one of the important components of Technology Acceptance Model (TAM) which has been widely studied by information system researchers (Davis, 1989) and found the system enhancing job performance of users (Alsajjan and Dennis, 2009). Usefulness refers to user‟s assessment of the likelihood that the information will enhance their decision. It is the subjective probability that use of internet in banking transactions would improve the way a user could complete a given task (Laforet and Li, 2005). Further according to Davis et al., 1992, perceived usefulness refers to consumer‟s perception regarding the outcome of the experience. Mathwick et al., (2001) defined perceived usefulness as the extent to which a person deems a particular system to boost his or her job performance. Pikkarainen et al., (2004) found perceived usefulness as a determinant of actual behaviour which encouraged the users of twenty first century banking to use more innovative and user friendly self service technologies that give them greater autonomy in performing banking transactions, in obtaining information on financial affairs and in purchasing other financial products. However, Gerrard and Cunningham (2003) noted that the perceived usefulness depends on the banking services offered such as checking bank balances, applying for a loan, paying utility bills, transferring money abroad and obtaining information on mutual funds. Users may use information technology because it is appropriate for the job rather than it is convenient or useful (Goodhue and Thompson, 1995). Thus if the functions of internet banking support are appropriate for the user‟s job, they will use the technology. Goodhue and Thompson (1995) further suggest two important points which influence users to use the internet technology. First,

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it must be appropriate for the given job and secondly individual characteristics are important because what is appropriate is determined by individuals. The concept of absorptive capacity, consisting of three components, was proposed by Cohen and Levinthal (1990) and has been used in many areas such as management strategies, organisational learning and information technology acceptance. The first component is prior knowledge which provides the basis of assessing the value of new knowledge. The second component is knowledge internalisation ability, which internalises new knowledge by combining it with knowledge one already has. The third and last component is knowledge utilisation ability with which individuals can apply new knowledge to their jobs. Thus, if we apply this absorptive capacity to internet banking, people can use internet banking if they have prior knowledge of using computers and the actual ability to utilize it. Perceived usefulness may increase customer loyalty, adoption of recommendation provided by intelligent agents and intention to buy (Tam and Ho, 2006). Hence, perceived usefulness has become a key predictor of user‟s attitudes and intention to use a technology. As a consequence, the greater the perceived usefulness of using electronic banking services, the more likely that electronic banking will be adopted (Polatoglu and Ekin, 2001).

Customer Satisfaction

In any “business to customer” (B2C) type of environment, satisfying a customer is the ultimate goal of business. It is an important theoretical as well as practical issue for most marketers and consumer researchers because organisations sometimes do not really understand what actually goes on in customer‟s mind (Fournier and Mick, 1999). The concept of customer satisfaction is equally important for service organisations, such as banks, as many of them subscribe to the fact that higher customer satisfaction will lead to greater customer loyalty (Boulding et al., 1993) which in turn leads to future revenue. „Customer satisfaction‟ not only means a happy customer but rather more than that. The concept of customer satisfaction is a synthesis of two distinct words i.e customer and his/her satisfaction. In common language, the word „customer‟ means a buyer who purchases a product or avails a service from another. „Satisfaction‟ occurs when one gets what one needs, desires, expects, deserves or deems to be one‟s entitlement. Oliver (1980) defines customer satisfaction as product performance equivalent to customer expectation. Oliver (1981) expressed satisfaction as a psychological state resulting from a process of emotional and cognitive evaluation.

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According to Hansemark and Albinsson (2004), satisfaction is an overall customer attitude towards a service provider, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfilment of some need, goal or desire. Kotler (1997) defined satisfaction as a person‟s feeling of pleasure or disappointment resulting from comparing a product‟s perceived performance (or outcome) in relation to his or her expectations. Further customer satisfaction is a collective outcome of perception, evaluation and psychological reaction to the consumption experience with a product or service. Haoyer and Mach Innis (2001) expressed that satisfaction can be associated with the feelings of acceptance, happiness, relief, excitement and delight. In a competitive marketplace, where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. It can also be defined as a global issue that effects all organisations irrespective of their size, whether profit or non-profit, local or multinational companies that have a more satisfied customer base along with higher economic returns. Boulding et al., 1993 in turn, showed that satisfaction has a significant effect on purchase intention. For instance, if customers are satisfied with a particular service offering after its use, they are likely to engage in repeat purchase and try in building line extensions (East, 1997). In availing services, there are two general conceptualisations of satisfaction, namely, the transaction specific satisfaction and the cumulative satisfaction (Boulding et al., 1993; Yi and La, 2004). Transaction specific satisfaction is the customer‟s very own evaluation of his or her experience and reaction towards a particular service encounter (Boshoff and Gray, 2004). This reaction is expressed by the customer who experiences a product or service for the first time. On the other hand, cumulative satisfaction refers to the consumption experience to date (Johnson et al., 1995), an own accumulation of contacts with services provided to them. Thus, it is from this accumulation that customer‟s establish a personal standard which is used to gauge service quality. The proliferate use of technological convenience offered by service providers has promoted interest in its effect on customer‟s overall satisfaction and has given two more conceptualisation of customer satisfaction. These are human encounter satisfaction and technological encounter satisfaction (Bitner et al., 2000). The human encounter satisfaction, which a customer derives from an interaction with an employee of the company, plays an important role in consumer‟s overall satisfaction with the services of the organisation whereas technological encounter satisfaction means the satisfaction a customer derives from the interaction with the

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technology of the company, which plays an important role in consumer‟s overall satisfaction. Thus, it can be inferred that satisfaction is not simply an overall evaluation of a service experience, but an influence of different components of the service (Dixit and Datta, 2010). The boom of internet and electronic banking has evoked several research efforts aimed at understanding service satisfaction in relation to virtual business environment (Yang and Peterson, 2004). Thus, the unique characteristics of internet based services are extensive human- computer interactions and high level self service may imply that customers perceive satisfaction from online services differently when contrasted with their offline counterparts (Ribbink et al., 2004). With the growing trend of information technology in banking sector, customers prefer to deal online with their bank because of the rising trend of technology effecting quality and customer satisfaction. Moreover, online banking facilitates cost-effective decision thinking and applications on the part of the e-bank‟s operations and IT managers to enhance customer service quality, develops trust in customers and boosts market share in this expanding but increasingly competitive business area. It thus generates customer satisfaction and also customer commitment (Liao and Cheung, 2008).

Commitment

Similar to trust, commitment is one of the most important variables for understanding the strength of marketing relationship. Marketing relationship refers to marketing activities that attract, develop, maintain and enhance customer relationship (Berry and Parasuraman, 1991) for sustainable better business. It has changed the focus of marketing orientation from interacting for short term, discrete transactional customers to retaining long lasting intimate customer relationships. More specifically in the banking context, marketing relationship refers to the relationship banking where it is in the interest of the banks to establish and maintain long term bonds with their customers and make them committed so that they can conduct their financial transactions with their respective banks on regular basis (Ritter, 1993). Relationship banking is also an important construct in online banking transactions. Moorman et al., (1992) define relationship commitment as an enduring desire to maintain a valued relationship. Their valued relationship corresponds with the belief that relationship commitment exists only when the relationship is considered important for meaningful and long term business. Priluck (2003) found committed customers more loyal to the organisation and thus they may be retained by that organisation even when dissatisfied. Dwyer et al.,

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(1987), Morgan and Hunt (1994) defined commitment as an essential ingredient for successful long term relationship between customers and banks and it also involves moral duty to cooperate with customers. It is a desire to have a continual relationship and an effort to ensure its continuance or as a pledge for relational continuity between exchange partners (Dwyer et al., 1987). It can also be defined as a psychological sentiment of the mind through which an attitude concerning continuation of relationship between banks and customers is formed. Similarly in the context of internet banking, commitment can be defined as a psychological state that the user maintains with a website, statement characterising his/her relationship with the site having implications for the level of maintenance of the same or not, corresponding to an affective or calculative commitment of the surfer to the site (Boulaire and Mathieu, 2000). Commitment can be affective or normative and calculated and identity. The affective commitment refers to the customer‟s emotional attachment with the bank site and can result from experience on the internet and through a site and the immediate emotional gratification that it brings. In contrast normative commitment derives from a person‟s sense of moral obligation towards the site (Allen and Meyer, 1990). Two sub dimensions characterise affective commitment: the symbolic dimension and the hedonistic dimension of the site. Whereas calculated commitment refers to the cognitive process by monitoring the surfer to reach the outcome, the decision to continue his relationship with a site and arises from convenience, such as 24 hour access, no geographic limitation, speed of service and transaction automation. In this perspective, the calculated commitment is characterised by three sub dimensions: the absence of alternatives, satisfaction with the chosen site and then switching cost. Also identity commitment to technology refers to the value that consumers place on being perceived by others as a technologically competent individual and motivates them to clarify vulnerabilities and substantiate the capabilities of electronic channels (Stryker and Serpe, 1994). Thus, three forms of commitment arises: a commitment based on emotional attachment that develops in the relationship between the surfers and the site that expressing the emotions felt during the browsing experience and is more important than calculated dimension which depends on the number of alternatives and switching costs and also identity commitment which arises from social ties. Hence, customer is committed to deal online with the bank if the bank has proved to be trustworthy and able to offer solutions that successfully support the value generating processes of the customer. Also for achieving customer commitment, bank‟s strategy must be customer

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centred, long term and be based on mutual relationship benefits (Kassim and Abdullah, 2006). Chung and Kim (2003) note that online commitment is often seen as the intention to revisit the site, intention to buy on the site and intention to recommend others to visit the site. It is considered as an overall assessment resulting from satisfaction and is defined as an intention to maintain valued relationship with the bank‟s site.

Business Performance

The internet has altered the way in which many industries conduct business. Banking is no exception to this as technology and innovative thinking changed the design and delivery of banking services. These days banks use websites as a competitive tool to attract new customers, improve service quality and boost overall financial performance through regular feedback. The field of business performance measurement lacks cohesive body of knowledge (Marr et al., 2002). Business performance measurement from operations perspective is mainly perceived as a set of metrics used to quantify both the efficiency and effectiveness of actions (Neely et al., 1995). From Strategic control perspective, two different aspects of a business performance measurement can be identified, on the one hand it reflects the procedures used to cascade down those performance metrics used to implement strategy within the organisation (Gates, 1999). On the other hand, a business performance measurement system is the system that not only allows an organisation to cascade down its business performance measures, but also provides with necessary information to challenge the content and validity of the strategy (Ittner et al., 2003). Business performance measurement can also be defined from management accounting perspective, that is a system of multidimensional set of performance measures for the planning and management of a business. Thus, there are numerous concepts of business performance. The effectiveness of organisations in fulfilling its purpose can be defined as business performance (Bourne et al., 2003). Although performance can have a variety of meaning (Short or long term, financial or organisational benefits), it is broadly viewed from two perspectives (Sin et al., 2005). According to Aggarwal, Erramilli and Dev (2003) performance represents an input/output relationship and is a two dimensional construct based on objective and subjective performance. Objective performance is one of the dimensions which involves financial or market based measures such as profitability, market share, return on equity (ROE), return on assets (ROA) and capacity utilisation. On the other hand the

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subjective or judgemental performance involves customer or employee opinion based measures such as customer satisfaction, institutional image, employee satisfaction, service quality, customer commitment etc. There are numerous studies that have examined the impact of internet banking on business performance (Hajri and Tatnall, 2007; Malhotra and Singh, 2007; Karim and Hamdan, 2010; Shaukat and Zafarullah, 2009). Hajri and Tatnall (2007) made a comparative study of internet banking in Oman and Australia and found positive impact of internet banking on business performance measured in terms of perceived relative advantage, organisational performance, customer/organisational relationship and ease of use. Shaukat and Zafarullah (2009) also examined the impact of IT on business performance on the basis of subjective criteria and found positive impact measured in terms of customer satisfaction, customer/supplier links, company image, job interest of employees, stakeholder‟s confidence and inter office links/communication. Whereas Karim and Hamdan (2010) concluded that IT has positive impact on business performance measured in terms of ROA, ROE, market value added (MVA) and net profit margin. The marketing concept indicates that superior judgemental performance is a pre- requisite for superior objective performance. Narver and Slaver (1990) also elicited that to maximise long term performance, the banks must build and maintain long run mutually beneficial relationship with their customers. In an online banking context, there is no consensus as to how business performance should be measured. Scholars have relied on variety of both financial measures such as ROA (Narver and Slaver, 1990), ROE, MVA and net profit margin (Karim and Hamdan, 2010) and sales growth (Pelham, 1999) as well as more market specific measures as customer satisfaction, customer/supplier links (Shaukat and Zafarullah, 2009). Thus, a lack of uniformity suggests that it becomes necessary to categorise the performance indicators used in each study in terms of their scope (business level or market specific) and measurement (Objective versus subjective assessment). Business level performance was defined as any generic financial indicator applicable at the level of a firm (eg. profits, ROA/ROE, sales growth). Market specific performance was defined with reference to specific markets (eg. customer satisfaction or loyalty, market share, customer commitment). The objective performance is the outcome of business activities of the organisation whereas subjective performance relates to the perceptions of individuals about the organisational performance and may include customer satisfaction, employee satisfaction, and service quality. Thus, the widespread availability of internet banking is expected to affect the mixture of financial

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services produced and offered by banks and the resulting financial performance of these banks depends on their assessment of the profitability of such a delivery system for their services (Berger, 2003). In addition, banking through internet has emerged as a strategic resource for achieving higher efficiency, control of operations and reduction of costs by replacing paper based and labour intensive methods with automated processes, thus leading to higher productivity and profitability (Malhotra and Singh, 2004).

Conclusion

Online globalisation, increasing use of new technologies and fast competition, forced the banks to adopt new channels to gain competitive advantage, reduce cost, improve financial services, enlarge customer databases to generate customer satisfaction and commitment. Moreover, online customers are expensive to attract and difficult to retain because it is relatively easy for customers to switch their online providers providing additional benefits. Variables that influence customer commitment towards online banking include service quality, trust, perceived ease of use, perceived usefulness and satisfaction can also have a significant impact on bank‟s profitability. Thus, it becomes important for banks to understand which variable is most important for online business, which also affects their business performance.

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IMPACT OF INTERNET BANKING ON CUSTOMER SATISFACTION AND BUSINESS PERFORMANCE



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