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ISSN : 2288-4637(Print)
ISSN : 2288-4645(Online)
The Journal of Asian Finance, Economics and Business Vol.6 No.1 pp.169-175
DOI : https://doi.org/10.13106/jafeb.2019.vol6.no1.169

E-SERVQUAL and Its Impact on the Performance of Islamic Banks in Malaysia from the Customer’s Perspective

Hasnan Baber1
1 Affiliation: Assistant Professor, Endicott College of International Studies, Woosong University, Daejeon, South Korea. Email: h.baber@endicott.ac.kr
July 12, 2018. September 17, 2018. February 10, 2019

Abstract

Service quality has been a point of discussion from the decades as it is important for customer satisfaction, loyalty and retention. Various models have been proposed to measure the quality in the service sector. Models are modified in accordance with context and geography to assess the quality of service better. This study aims to investigate the impact of the modified e-SERVQUAL model on the customer perception about the existing relation and potential scope of doing business with a bank which in-turn will decide the performance of the bank. Statistical data was analyzed through various tests like reliability analysis, correlation and regression analysis using SPSS 25.0. The primary data of e-SQ and performance was gathered from 721 internet banking users using 32 item questionnaire, representing 72% response rates, of four selected Islamic banks of Malaysia. E-SERQUAL was modified by adding Shariah Compliance information about banks and products for Islamic banking customers. The finding specified that efficient & reliable services, fulfillment, security/trust, and Shariah compliance information have a significant association with the performance of Islamic banks. The research is original and its implications will be helpful for Islamic banks across the world to enhance the online experience of customers, which will help them to retain the customers in the rapid changing virtual environment.

JEL Classifications: G4, P2, P43.

초록


1. Introduction

 

Internet has become a pillar for every business enterprise. Now providing quality information and technology services to the customer is one of the major objectives of the business. As customer reaches to the website of a company must leave satisfied with the quality of information and service required by the customer (Zeithaml, Parasuraman, & Malhorta, 2002). Electronic service quality (e-SQ) has now gained importance as it is one of the factors which determine the satisfaction of customers from the services of a business. SERVQUAL model is known model for measuring service quality but there is still lack of scales which can measure the service quality in web-based applications and many existing e-SERVQUAL scales has limited or different dimensions (Zeithaml, 2002). Measuring e-service quality with use of known scales like e-SERVQUAL (Parasuraman, Zeithaml, & Malhotra, 2005), eTailQ (Wolfinbarger & Gilly, 2003), eSQ (Zeithaml et al.,

2002), WebQual 4.0 (Barnes & Vidgen, 2002), Site-Qual (Yoo & Donthu, 2001) and IS-SERVQUAL (Kettinger & Lee, 1997) need to analysis the context of research and the nature of service. However, given that the theories of e-SQ are based on consumer perceptions, do these perceptions translate well to Islamic banks?

As it is not certain whether the experience of internet website service has an impact on performance or both have no relation. Khalifa and Shen (2005) found in their study that web-based services have a positive impact on the performance and make customers loyal to the company. The objective of the present study is to check the relation and impact of e-SERVQUAL on the performance of Malaysian Islamic banks to grow their business and retain customers. 

 

2. Literature Review

 

Various scales and instruments have been proposed to measure the e-SERVQUAL. It depends on the context of services provided and the country in which those services are offered. Table 1. Summarize the models and variable proposed by various authors to measure service quality in the online experience of the customer.

The whole model of Islamic Banking originates from Islam itself and it’s all about moral and ethical values derived from principles of Islamic, Qur’an, and Sharia principles (Baber, 2018). In other words, Islamic Banking can be demarcated not only as banking that prohibits interests (known as riba) but also specifies how ethics and finance can be linked together as a notion to serve and lead society for the good purposes. In 2012, Director Mahmoud Mohieldin, then-World Bank Managing said “Islamic finance has the potential to cater more people’s banking and investment needs, magnify its reach, and add to greater financial inclusion and stability in the developing world” (Mohieldin, 2012). Islamic banking is likely to grow to US$296.29 billion by 2019. According to Islamic finance outlook report 2019, the global Islamic finance industry will grow slowly in 2018-2019 and in 2017 the industry has grown by 5%. Islamic finance stands for the well-being of society and mankind rather than being motivated exclusively for profit (Baber & Chinar, 2018). London is now a major center for international bonds and therefore is an important center for issuance and trading of sukuk (Islamic Bond) (Azma, Aisyah, Izzah, & Rahman, 2018). Usman (2015) in his study on Islamic banks in Indonesia found that Information technology infrastructure in Islamic banks needs to be developed in order to gain trust and retain customers.

There is an established relationship between service quality and customer satisfaction (Sureshchandar, Rajendran, & Anantharaman, 2002; Ladhari, 2009; Ilias & Panagiotis, 2010; Dahiyat, Akroush, & Abu-Lail, 2011; Samen, Akroush, & Abu-Lail, 2013; Baber, 2018). Customer satisfaction at an instance may not necessarily lead to future association with the company, so the intention to stay with company and spread word-of-mouth is really important. Services have high customer interaction with the employees of the company so they have a chance to satisfy their needs. In the online environment, company website or online application is the only means to interact with the customer and satisfy their needs (Hazlina, Reza, & Nasim, 2011). In a service sector like banking, there is a need for high customer interaction as a bank can win customer trust only by satisfying their needs. Now, this moment of truth is replaced by online interaction and while surfing banks application or website, the company has to satisfy the customer by providing the highest level of service quality (Schaupp & Belanger, 2005; Dai & Lee, 2018; Salehi, Khaksar, & Torabi, 2014). Osman, Cole, and Vessell (2006) examine service quality and customer satisfaction in Malaysia and has concluded that there is a significant relationship between the two. This study is based on traditional e-SERVQUAL model and adding one more dimension of Shariah Compliance for Islamic banks.

 

 

 

 

3. Research Design

 

3.1. Conceptual Framework

 

 

 

 

3.2. Instrumentation

 

The survey instrument was a written questionnaire consisting of eight sections:

(a)Demographic profile (b) Efficient and reliable (c) Security-trust (d) Site aesthetic (e) Responsiveness (f) Ease of use (g) Fulfillment (h) Shariah compliance information (i) Customers Recommendations. All  the  questions  used  a  5-point Likert  scale  in which  1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, or 5 = strongly agree.

 

4. Estimations

 

The demographic profile of this study is presented in Table 2. This table provides the overall account of 721 respondents. In this profile, the majority of the respondents were male, that is, 88% and 12% of the respondents were female. Also, 64% of respondents were married, whereas 36% of participants were single. As per the data, most of the respondents were between 31–40 years of age (44%), followed by 41–50 (34%), 20–30 (10%) and 50 and above (10%). Most of the respondents use the internet and do banking transactions online rather than going to the bank in-person .

 

 

 

 

  

5. Validity and Reliability

 

The dimensions for this research are adapted and modified based on e-SERVQUAL developed by Parasuraman et al. (2005). For internet banking website, variables Efficient and reliable, Security-trust, Site aesthetic, Responsiveness, Ease of use and Fulfillment with 20 items are used in this study which are taken from various studies. Grounded on the review of Islamic banking, this study will add one new dimension –Shariah compliance information with 3 items to study how Shariah information about the products and services offered by banks have an impact on the performance of the bank. The construct of performance was developed with 9 items based on the customer perception about existing services and potential association with Islamic banks.

 

5.1. Reliability Analysis

 

The reliability test was assessed by measuring the internal consistency of the items representing each construct of e-SQ and performance using Cronbach’s alpha in table 3. The reliability of each construct of e-SQ and performance is more than 0.7 which is acceptable (Cronbach, 1951). Thus, the e-SQ and performance data in this research are reliable and valid for further analyses.

 

 

 

 

6. Results and Analysis

 

The Pearson’s correlation of coefficient analysis performed revealed that a strong positive relationship exists between Efficient and reliable services, Sharia compliance information and Fulfillment with the performance of Islamic banks as shown in Table 4. The three dimensions, Security, site aesthetics, and responsiveness, have a nearly similar moderate correlation with performance. Ease of use of website has a low and loose correlation with the performance of Islamic banks.

The result of the multiple regression analysis indicated that all variance inflation factor (VIF) values for the seven independent variables are less than 10 which indicated the threat of multicollinearity problem is insignificant with this model as each independent variable has a loose correlation as shown in Table 5.

 

 

 

 

 

Table 6. shows the results of regression analysis in which efficient and reliable services, security/trust, Shariah compliance information and fulfillment of promises and transaction has a significant impact on the customer recommendations and in turn on the performance of the banks.  Independent variables like site aesthetic, responsiveness and ease of use have no significant role in determining the performance of banks through internet banking. The analysis shows that 56 .3% of data fits in the model and thus the inclusion of Shariah compliance information variable in e-SERVQUAL Model in case of Islamic banks can be justified.

 

 

 

 

 

7. Discussions

 

The results of correlation analyses proved that there is a positive correlation between e-SQ and performance for Malaysian Islamic banks. The R-square value of the multiple regression results shows that 56.3 percent of the variation in performance can be explained by the variation in the independent variables of efficient and reliable services, fulfillment, security/trust, and Shariah compliance information Future researches should consider dimensions of reward points, FinTech, mobile application availability and convenience . Islamic banks which are efficient and reliable in banking transactions will retain customers. Online money transactions are always under threat of hacking and fraud so the security of the system will increase the customer base for banks. Site aesthetic may not hold importance as Islamic bank customers don’t choose banks based on ambiance and aesthetics. Shariah Compliance information helps customers to know about the product and they feel a sense of belonging towards their religion if they avail such products and services. Also providing such information on the website shows the commitment of the bank towards Shariah regulations. Fulfillment of transactions and other services makes the relationship better between customers and banks and also doesn’t leave any scope of the complaint and opportunity of switching to another bank.     

 

8. Conclusions

 

This research was conducted to study the impact of modified e-service quality dimensions on the performance of Islamic banks in Malaysia. It is important to know the customer perception about the existing relation and potential scope of doing business with a bank which in-turn will decide the performance of bank. Modified e-SERVQUAL was adopted by adding Shariah dimension in this scale to determine the impact on performance of bank. All the dimensions are positively correlated with performance and factors like Reliability, ease of use, fulfillment and Shariah compliance information has a signification association with the performance of Islamic banks in Malaysia.

 

9. Limitations

 

Only four Islamic banks were studied in this research. More banks may be included in future research to get a better conclusion.  

Figure

Table

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