The effect of e-service quality and perceived risk on customer loyalty among Bangladeshi online banking consumers

Abstract

Due to the recent advancement in technology, online banking has become very popular among the Bangladeshi banking customers. As a result, banking organizations are spreading their online operations across the country. The quality of online services has been shown to be related to customer satisfaction and customer loyalty which are considered as key indicator for profitability in banking organization. As such, satisfied customers are expected to remain active in dealing with banks for a period of time; moreover, if they find consistency in the quality of services offered, they eventually convert to loyal customers who are not only important for organization`s profitability, but also its survival. However, online banking (or e-banking) services have some perceived risks since there are attributed drawbacks to the technology; some of these are financial risk, time risk, performance risk, social risk, and privacy risk. Moreover, despite the fact that customer satisfaction, customer loyalty, and online services are interlinked, no significant research has been done so far to show the interlinked relationship. Furthermore, extensive review of literature reveals that no substantial research has been done on e-service quality of the online banking in Bangladesh. More so, it has been noted in the literature that Bangladesh has potential to adapt the new technological changes since government has set vision 2021 to create a digitalized country. In line with the above, the current study aimed at investigating the effects of e-service quality and perceived risk towards customer’s loyalty of online banking consumers in Bangladesh. As a quantitative study, selection of the respondents was based on convenience sampling technique. Based on this, a total 329 respondents were selected from both public and private commercial banks in the country. For this purpose, four major divisional cities which include Dhaka, Chittagong, Rajshahi, and Khulna, were selected. The researcher employed exploratory factors analysis to fit the right items for each construct, while structural equation modeling was used to assess the relationship between the constructs. The result of the study reveals that customer satisfaction is directly related to customer loyalty in an online banking organization. Also, customer satisfaction mediates the relationship between e-service quality and customer loyalty, as well as between perceived risk and customer loyalty. In addition, e-service quality has direct and positive relationship with customer loyalty. However, there is no direct positive relationship between perceived risk and customer loyalty in the Bangladeshi online banking services. Furthermore, there is insignificant difference between perceptions of service provides and service receivers. However, this study reveals some difference for the variables of perceived risk, indicating that customers’ opinion is different from service providers, suggesting that perceived risk is negatively related to the customers’ loyalty in online banking services. The findings of the study is valuable for online banking, particularly in the Bangladesh banking sectors; the findings are also useful for those who are strongly to confirm their e-service quality variables to create better customer satisfaction and also customer loyalty of their organizations. Practitioners, academicians, policy makers and researchers can also benefit from the present study. Furthermore, the researcher recommend future researcher to use mix methods to extend the opening of service receivers and providers. In addition, private and public banks can be studied independently due to their nature of online services.