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Marketing Intelligence & Planning
An examination of the relationship between service quality dimensions, overall internet

banking service quality and customer satisfaction: A New Zealand study
Michel Rod, Nicholas J. Ashill, Jinyi Shao, Janet Carruthers,
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Internet banking
An examination of the relationship service quality
between service quality
dimensions, overall internet
103
banking service quality and
customer satisfaction Received May 2008
Revised August 2008
Accepted September 2008
A New Zealand study
Michel Rod
School of Marketing & International Business,
Victoria University of Wellington, Wellington, New Zealand
Nicholas J. Ashill
School of Business and Management, American University of Sharjah,
Sharjah, United Arab Emirates, and
Jinyi Shao and Janet Carruthers
School of Marketing & International Business,
Victoria University of Wellington, Wellington, New Zealand
Abstract
Purpose The purpose of this paper is to examine the relationships among three dimensions of
service quality that influence overall internet banking service quality and its subsequent effect on
customer satisfaction in a New Zealand banking context.
Design/methodology/approach Internet banking service customers of a national bank in
New Zealand completed a self-administered questionnaire. Data obtained from the customers were
analysed using the SEM-based partial least squares (PLS) methodology.
Findings The results show significant relationships among online customer service quality, online
information system quality, banking service product quality, overall internet banking service quality
and customer satisfaction.
Originality/value Little attention has been given in the literature to understanding the service
quality dimensions that influence overall internet banking service quality and the specific outcome of
customer satisfaction. By expanding previous research in internet banking service quality, this paper
empirically examines the relationships between three service quality dimensions, overall internet
banking service quality and customer satisfaction.
Keywords Internet, Banking, Customer services quality, Customer satisfaction, Online operations,
New Zealand
Paper type Research paper
Marketing Intelligence & Planning

Vol. 27 No. 1, 2009
Introduction pp. 103-126
In service industries in general and in the banking industry, in particular, the internet has q Emerald Group Publishing Limited
0263-4503
been explored and exploited as a means of improving service provision (Jun et al., 2004). DOI 10.1108/02634500910928344
MIP Banks are not only competing in traditional banking services, but have also expanded the
27,1 scope of competition to an e-environment with internet banking services (Gonzalez et al.,
2004). These banks are introducing internet banking as an assurance to their customers
that they will be able to maintain a competitive quality of service in the future, in efforts to
avoid losing their customers to the branches of foreign banks (Jenkins, 2007). New
Zealanders have been avid adopters of internet banking (Fisher, 2001) and offering
104 internet banking is no longer regarded as a competitive advantage but a competitive
necessity (Gan et al., 2006). internet banking helps banks to build and maintain close
relationships with their customers, reduces operating and fixed costs (Mols, 2000), and
achieves more efficient and enhanced financial performance (DeYoung et al., 2007). From
the customer perspective, research has shown that consumers benefit from internet
banking in respect to enhanced control, ease of use, and reduced transaction charges
(Unsal and Movassaghi, 2001).

The current research seeks to examine the dimensions and one particular
outcome[1] of internet banking service quality in New Zealand. Specifically, our study
has two objectives. First, we build on the exploratory work of Jun and Cai (2001) who
identified three broad conceptual categories related to internet banking service quality,
and empirically test the relationships between:
.
online customer service quality;
.
online information system quality; and
.
banking service product quality and overall internet banking service quality.
Second, we examine the relationship between overall internet banking service quality
and customer satisfaction.
In the next section, we present the relevant literature leading to our specific research
hypotheses. This is followed by discussions of the research method and results of the
empirical study we conducted in a National Bank in New Zealand. We conclude the
paper with the implications of the results and avenues for future research.
Review of the relevant literature

Service quality has been identified as a critical success factor for organisations to build
their competitive advantage and increase their competitiveness. Pioneering work by
Parasuraman et al. (1985) led to a list of ten determinants (reliability; responsiveness;
competence; access; courtesy; communication; credibility; security; understanding the
customer; and tangibles) of service quality as a result of their focus group studies with
service providers and customers which subsequently resulted in the development of
the SERVQUAL instrument with these ten attributes distilled into five overall
dimensions of service quality. The five dimensions of SERVQUAL are (Parasuraman
et al., 1988, 1991):
(1) tangibles, which pertain to the physical facilities, equipment, personnel and
communication materials;
(2) reliability, which refers to the ability to perform the promised services
dependably and accurately;
(3) responsiveness, which refers to the willingness of service providers to help
customers and provide prompt service;
(4) assurance, which relates to the knowledge and courtesy of employees and their Internet banking
ability to convey trust and confidence; and service quality
(5) empathy, which refers to the provision of caring and individualised attention to
customers.
If one looks to the literature on traditional banking and service quality, work by
Johnston (1995) revealed that there are some service quality determinants that are 105
predominantly satisfiers and others that are predominantly dissatisfiers with the main
sources of satisfaction being attentiveness, responsiveness, care and friendliness. The
main sources of dissatisfaction are integrity, reliability, responsiveness, availability
and functionality. Subsequent work by Johnston (1997) illustrates that certain actions,
such as increasing the speed of processing information and customers, are likely to
have an important effect in terms of pleasing customers; however other activities, such
as improving the reliability of equipment, will lessen dissatisfaction rather than delight
customers and suggests that it is more important to ensure that the dissatisfiers are
dealt with before the satisfiers. Johnson et al. (2008) also illustrate that the influence of
various dissatisfies such as inefficiency, chaos, incompetence and isolation on online
banking customer satisfaction is mediated by consumer performance ambiguity and
consumer trust in the technology. Thus, in order to maintain and expand their
customer base, it is critical for banks to understand the criteria consumers use to
evaluate internet banking services and how these impact on their perceptions of overall
internet banking service quality, and satisfaction with e-service and banking overall.
This leads to the relationship between service quality and satisfaction. In consumer
satisfaction/dissatisfaction literature, expectation disconfirmation has been given
attention where disconfirmation refers to the difference between prepurchase
expectations and perceptions of postpurchase (Peter and Olson, 1990). There are two
types of disconfirmation: negative disconfirmation and positive disconfirmation.
Negative disconfirmation occurs when product performance is less than expected,
hence consumers are more likely to be dissatisfied, and positive disconfirmation occurs
when product performance is better than expected, which is more likely to result in
satisfaction. Specifically, consumer satisfaction is the result of an evaluative process
that compares prepurchase expectations with perceptions of performance during and
after the consumption experience (McQuitty et al., 2000). Despite the cognitive
processes, some researchers suggest that affections (Homburg and Giering, 2001) and
cumulative experience (Anderson et al., 1994) could contribute to consumer satisfaction.
In the context of internet banking, there is a growing body of research that has
looked at influences on customer satisfaction. Jayawardhena and Foley (2000b)
illustrated that such web site features as speed, web site content and design,
navigation, interactivity and security all influence user satisfaction whereas Broderick
and Vachirapornpuk (2002) found that the level and nature of customer participation
had the greatest impact on the quality of the service experience and issues such as
customers zone of tolerance, the degree of role understanding by customers and
emotional response potentially determined, expected and perceived service quality.
Similarly, Lassar et al. (2000) demonstrated that a functional-quality based model did a
better job of predicting customer satisfaction than a SERQUAL instrument for those
customers actively involved or highly interested in service delivery. Research that
investigates the criteria customers use in evaluating internet banking service quality
MIP and their satisfaction with the bank overall is still a relatively new area (Jayawardhena,
27,1 2004; Sohail and Shaikh, 2008). Han and Baeks (2004) empirical study of online
banking in Korea found strong relationships between online banking service, customer
satisfaction, and customer retention.
Table I illustrates additional research that has looked at online service quality.
Yang and Fang (2004) found that ease of use and usefulness are important factors in
106 evaluating online service quality. Doll and Torkzadeh (1988) identified five quality
dimensions that have an impact on end-user satisfaction in an online environment:
content, accuracy, format, ease of use, timeliness. The reliability and validity of these
dimensions were confirmed by Doll et al. (1994) and Hendrickson and Collins (1996).
Zeithaml et al. (2001) developed e-SERVQUAL for measuring e-service quality, identifying
11 dimensions: access; ease of navigation; efficiency; flexibility; reliability;
personalisation; security/privacy; responsiveness; assurance/trust; site aesthetics; and

price knowledge. In terms of a satisfactory online retailing experience, Wolfinbarger and
Gilly (2002) uncovered four dimensions: web site design, reliability, privacy/security,
and customer service. With regard to the success of a web site, Liu and Arnett (2000)
suggested four factors. They are: system use, system design quality, information quality,
and playfulness. Exploratory research done in the context of online retailing by Jun et al.
(2004) revealed reliable/prompt responses, attentiveness, and ease of use had considerable
impacts on both customers perceived overall service quality and satisfaction. It also
indicated that there is a significant positive relationship between overall service quality
and satisfaction. Thus, from the literature it seems that the key drivers are ease of use and
reliability. However, other factors such as accuracy, responsiveness and web site design
are also important.
During the past several years, several conceptual and empirical studies have attempted
to address the key attributes of service quality directly or indirectly related to online
service and, SERVQUAL has been widely accepted and used in measuring information
system service quality (van Dyke et al., 1997). Yang and Jun (2002) redefined the traditional
service quality dimensions in the context of online services, and suggested an instrument
consisting of seven online service dimensions (reliability, access, ease of use,
personalisation, security, credibility, and responsiveness). Joseph et al. (1999) considered
banking service quality with respect to technology use, such as ATMs, telephone, and the
Authors Key dimensions discussed
Doll and Torkzadeh (1988) Content, accuracy, format, ease of use, timeliness
Jun et al. (2004) Reliable/prompt responses, attentiveness, and ease of use
Liu and Arnett (2000) System use, system design quality, information quality,
playfulness
Parasuraman et al. (2005) Privacy/security; information content and availability; web site
design or graphic style; ease of use; and reliability/fulfillment
Pikkarainen et al. (2006) Content, ease of use, accuracy
Wolfinbarger and Gilly (2002) Web site design, reliability, privacy/security, customer service
Yang and Fang (2004) Ease of use and usefulness are important factors in evaluating
online service quality
Table I. Zeithaml et al. (2001) Access; ease of navigation; efficiency; flexibility; reliability;
Selected online service personalisation; security/privacy; responsiveness; assurance/trust;
quality literature site aesthetics; price knowledge
internet and identified six dimensions. They were convenience/accuracy; Internet banking
feedback/complaint management; efficiency; queue management; accessibility; and service quality
customisation. A UK study uncovered five key service quality attributes, such as security
related issues, convenience, speed and timeliness of the service, and product
variety/diverse features (White and Nteli, 2004). Shamdasani et al. (2008) found
that perceived control has the strongest influence on service quality evaluations and that
perceived speed of delivery, reliability and enjoyment also have a significant impact on 107
service quality perceptions.
Although there have been attempts to use the SERVQUAL instrument in traditional
retail banking contexts across different countries (Arasli et al., 2005; Cui et al., 2003;
Jabnoun and Al-Tamimi, 2003; Najjar and Bishu, 2006), there has been far less
attention to its utility in assessing service quality and customer satisfaction in an
internet banking context. The research model and hypotheses which guide this
research follow. Against this background, we now present our conceptual framework
and hypotheses drawing upon the extant literature.
The research model and hypotheses

Studies carried out in a variety of countries illustrate that internet banking service
quality influences customer satisfaction with banking over all (Curry and Penman,
2004; Partricio et al., 2003; Yang and Fang, 2004). Han and Baek (2004) empirically
investigated the relationships among service quality, customer satisfaction, and
customer retention by using the SERVQUAL instrument in the context of online
banking in Korea. They confirmed that service quality is an antecedent factor of
customer satisfaction and retention. Our conceptual framework shown in Figure 1 is
grounded in the exploratory findings of Jun and Cai (2001). The framework examines
the process through which internet banking service quality dimensions influence
overall internet banking service quality and the relationship between overall internet
banking service quality and customer satisfaction. The service quality dimensions that
Online Customer
Service Quality
H1
+
Online H2 Overall Internet H4

Customer
Information + Banking +
Satisfaction
System Quality Service Quality
H3
+
Banking Service
Product Quality Figure 1.
Research model
MIP influence overall internet banking service quality are: online customer service quality;
27,1 online system quality; and banking service product quality.
Gap theory suggests that differences between customers expectations about the
performance of service providers and their assessments of the actual performance of a
specific firm drive their perception of service quality and these perceptions of service
quality will be influenced by both the interpersonal and non-human interactions with
108 service providers (Jun and Cai, 2001). The present study subscribes to Jun and Cai
(2001, p. 277) in referring to the traditional banking service quality and customer
service literature as focused on the interpersonal service encounter, whereas online
information system quality is defined as concentrated on computer and
networking-based impersonal interactions, with a particular emphasis on end-user
computing satisfaction (Jun and Cai, 2001, p. 277). Similarly, Yang et al. (2004, p. 1153)
concluded the principal goal of information systems service is to enable customers to

function independently and to conduct numerous transactions on their own. In
addition, as end-users, consumers often seek desired product and service information
through Web sites. Drawing on the above literature, the current study defines online
information system quality as the extent to which the information system performs its
intended function of enabling customers to carry out transactions and information
searches online. Following Yang et al. (2004) we define banking service product quality
as the number and relevance to customers of internet banking products and services.
Overall, internet banking service quality is conceptualised in the current study as the
perceived level of service quality of banking services delivered online (Jun and Cai,
2001). Finally, customer satisfaction is defined as customer satisfaction with internet
banking service quality and the bank overall (Jun and Cai, 2001). The hypothesised
relationships among these variables are discussed below.
Relationship between online customer service quality and overall internet banking service
quality
Although they do not experience face-to-face interaction with bank staff, online
customers expect to be treated with respect, provided with valuable information by
the web site, and receive prompt and reliable service (Jun and Cai, 2001). Intuitively, we
expect that the quality of interaction between customers and service providers
(i.e. banks) will be associated with overall service quality. Previous research has
identified the relative importance of key dimensions of customer service quality to
overall service quality (Rosen and Karwan, 1994) and in the context of internet banking,
Jayawardhena (2004) has developed a number of measures that can be used to measure
customer service quality in e-banking services across five dimensions, namely, access,
web site interface, trust, attention and credibility. The more positive customers
perceptions of online customer service quality in an internet banking environment, the
greater the likelihood that overall online service quality will be perceived to be high.
Using the SERVQUAL instrument, Han and Baek (2004) for example, found that there
was a positive relationship between online customer service quality and overall internet
banking service quality. In light of the above we suggest our first hypothesis:
H1. Online customer service quality is positively related to overall internet
banking service quality.
Relationship between online information system quality and overall internet banking Internet banking
service quality service quality
Online information system quality is vital to internet banking users perceptions of
overall internet banking service quality because it is a key enabler of the services they
wish to use (Jun and Cai, 2001). If the information system does not perform well,
customers are not able to reliably make transactions or access information,
compromising their perceptions of service quality (Yang et al., 2004). If the web site is 109
not informative, or the design of the web site is not user friendly, this will have a negative
impact on customers perceptions of overall internet banking service quality. The more
conveniently customers can interact with the bank through the web site, the safer their
online transactions, and the more error-free the transactions, the better customers
perceptions with the service quality provided online by the bank. Thus, our second
hypothesis is:
H2. Online system quality is positively related to overall internet banking service
quality.
Relationship between banking service product quality and overall internet banking
service quality
Studies have shown that banking service product quality is an important factor that
influences customers perceptions of overall banking service quality (Jayawardhena
and Foley, 2000a). Strieter et al. (1999) note that one of the most important developments
in banking is the increased emphasis on marketing a wide array of financial services.
Mols (2000) argues that the characteristics and features of the products offered to the
customers can attract more new customers. Cho and Park (2001) argue that variety of
products influences internet shopper satisfaction. Thus, a wide product range and
diverse features are important in influencing customers perceptions of internet
banking service quality (Jun and Cai, 2001; Yang et al., 2004), online customers prefer
firms that offer a variety of services and diverse features. Hence, our third hypothesis is:
H3. Banking service product quality is positively related to overall internet
banking service quality.
Relationship between overall internet banking service quality and customer satisfaction
There appears to be a consensus emerging that satisfaction refers to the outcome of
individual service transactions and the overall service encounter, whereas service
quality is the customers overall impression of the relative inferiority/superiority of the
organisation and its services (Johnston, 1995). Numerous studies have shown that
service quality is positively related to customers satisfaction in an online environment
(Han and Baek, 2004; Yang and Fang, 2004). Intuitively, the more positive customers
perception of online service quality, the better their overall satisfaction with the bank is
likely to be. The strength of this relationship depends on the weight given by
customers to overall internet banking service quality relative to other attributes of the
bank. Thus, our fourth hypothesis is:
H4. Overall internet banking service quality is positively related to customer
satisfaction.
MIP Research method
27,1 Sample
To collect the data for the study, a total of 300 individualised questionnaires were
distributed by mail to a systematic random sample of customers of a major New
Zealand retail bank with internet banking services as well as branches. This research
employed a systematic sampling technique. The sample was chosen by selecting a
110 random starting point and then picking every 100th individual customer in succession
from the banks derived database. Applying this technique, 300 individuals were
selected. These customers were identified as internet banking users at the time of the
survey and were made aware that the questionnaire related to their online banking
experiences. By the cut-off date for data collection, 72 usable questionnaires were
returned for a response rate of 24.0 per cent. Just under 55 per cent of the respondents
were female. Just over one-third (33.8 per cent) had secondary education and 54.9 per
cent had college/university education. Respondents were spread across all age groups
with 15.3 per cent of customers between the ages of 18 and 24, 20.8 per cent between
the ages of 25 and 34, 26.4 per cent between the ages of 35 and 44, 25 per cent between
the ages of 45 and 54 and 12.5 per cent 55 years and older. These profiles were
comparable to the total population of the banks internet customer base.
To ensure that sample bias and nonresponse bias were not present, appropriate
comparisons were made between early and late respondents, and between respondents
and nonrespondents (Armstrong and Overton, 1977). Early and late respondents were
compared on all variables of interest, using traditional t-tests following Armstrong and
Overtons (1977) recommendations. Unpaired t-tests were used to compare the group
means to each other. Differences between the means were not statistically significant at
the 0.05 level, indicating that there were no differences between the group means of early
and late respondents. Hence, it was assumed that non-response bias was not a problem.
At the same time, early and late respondents were compared and following the
recommendation of Mentzer and Flint (1997), 30 nonrespondents were contacted and
asked five questions (survey items) relating to the hypotheses. There was no statistically
significant difference between the answers of respondents and nonrespondents to these
questions.
Measurement
In designing the survey instrument the relevant writings in the online service quality
literature were canvassed (Han and Baek, 2004; Yang et al., 2004). The Appendix details
the items used to measure each construct. Following Han and Baek (2004), and Jun and
Cai (2001) we defined and measured online customer service quality and online
information system quality as multidimensional constructs. Specifically, online customer
service quality was operationalised using Han and Baeks (2004) four dimensions of
online customer service quality (tangibles, reliability, responsiveness and empathy).
Tangibles and reliability were measured with three items each, while responsiveness
was measured with two items and empathy was measured with four items.
Online information system quality was operationalised with six dimensions (ease of
use, accuracy, security/privacy, contents, timeliness, and aesthetics) from the work of Jun
and Cai (2001). In total, 15 items were used to measure these six dimensions. Banking
product service quality was operationalised using five items adapted from the work of
Jun and Cai (2001). Overall, internet banking service quality consisted of two items from
the work of Yang et al. (2004): overall online service quality of the bank; and overall Internet banking
perception of the bank as a good supplier of banking services. Finally, customer service quality
satisfaction was measured with four items (Yang et al., 2004). Responses to the
questionnaire items were elicited on five-point scales ranging from 5 strongly agree
to 1 strongly disagree (Appendix).
All constructs were deemed reflective constructs since the items reflect the meaning
of the construct. Reflective indicators are created under the perspective that they all 111
measure the same underlying phenomenon (Chin, 1998). We defined and measured
online customer service quality as a multidimensional construct and formed composite
measures for each dimension by averaging scores across items representing that
dimension. Specifically, we used the composite scores of each set of items comprising
tangibles, reliability, responsiveness and empathy to measure online customer service
quality since the use of composite scores to represent the construct as a partial
aggregation model acknowledges its multidimensional nature (Bagozzi and Heatherton,
1994). Strong correlations among tangibles, reliability, responsiveness, and empathy
provided empirical justification for treating the four as indicators of online customer
service quality. We followed the same procedure for the measurement of online
information system quality. Similarly, strong correlations among ease of use, accuracy,
security/privacy, content, timeliness and aesthetics provided empirical justification for
treating the six as indicators of online information system quality.
Owing to the self-report nature of the survey, method variance is identified as a
potential issue. Spector (1987) reported that the most frequently found sources of method
variance in self reports are acquiescence and social desirability bias. The survey
instrument was also organised into various sections by separating the independent and
dependent variables in an effort to reduce single-source method bias (Podsakoff et al.,
2003). Reynolds (1982) short form of the Marlowe-Crowne Social Desirability Scale
(Crowne and Marlowe, 1960) was also included in the survey. Examining the
correlations of the social desirability measure with all of the items used in the study
revealed that social desirability bias was not an issue in these data. A further post hoc
test for common method bias, a Harmans (1967) one-factor test was also performed.
According to this test, if a single factor emerges or one factor accounts for more than
50 per cent of the variance in the variables, common method variance is present
(Podsakoff et al., 2003). Our analysis showed that no general factor was present.
Following Podsakoff et al. (2003), we also specified, besides substantive factors, a
common method factor whose indicators include all the principal construct items in the
research model. The result is the proportion of the variance explained by the common
method. Our results showed that the average explained variance of substantive
indicators is 0.77, while the average method-based variance is 0.04. The subsequent
ratio of substantive variance to method variance is 19.5:1, with no significant method
factor loadings detected for all but two items at p , 0.05. This analysis also supports
the conclusion that common method bias did not impact our results. Furthermore, the
structural model results reported later show different levels of significance for path
coefficients, which prior work suggests provides additional evidence that common
method bias did not influence the statistical results (Patnayakuni et al., 2006).
The next step in data analysis involved model estimation using the soft-modelling
SEM methodology partial least squares (PLS Graph version 3.00). PLS has a rigorous
mathematics base, but the mathematical model is soft in that it makes no
MIP measurement, distributional or sample size assumptions. Lohmoller (1989) argues that
27,1 it is neither the concepts nor the models nor even the estimation techniques that are
soft, only the distributional assumptions. Results are also restricted to predictive
inferences, i.e. prediction not causality (Wold, 1985) because conditions of a closed
system are not met. We justify our use of PLS given the small sample size and our use
of measures that are not well established but are grounded in exploratory research
112 (Chin and Newstead, 1999).
Means and standard deviations of the model constructs are shown in Table II.
Frequency analysis of the 21 measures indicated no problems of floor or ceiling effects
in the measurements. The usable response number (n 72) is also above the
recommended minimum required for model estimation. PLS requires a minimum
sample size that equals ten times the greater of the number of items comprising the
most complex formative construct or the largest number of predictors leading to an

endogenous construct (Barclay et al., 1995). In this study, the most complex regression
involved three predictors leading to the endogenous construct, overall internet banking
Variable Factor loading
Overall internet banking service quality

ic 0.93, mean score 4.27, a 0.86, SD 0.76, AVE 0.870
Ovosq 0.9255
Ovexp 0.9395
Customer satisfaction
Ovservic 0.8955
Ovsatis 0.8560
Ovproduc 0.8821
Ovxyz 0.8034
Online customer service quality
Reliabit 0.8840
Response 0.8278
Tangible 0.7587
Empathy 0.8844
Online information system quality
Aestheti 0.7560
Timeline 0.7777
Contents 0.7944
Easeofus 0.8499
Security 0.7601
Accuracy 0.8872
Banking service product quality
Range 0.7129
Features 0.8510
Free 0.7604
Table II. Function 0.8254
Convergent and Menu 0.8538
discriminant validity of
the model constructs Notes: ic is internal consistency measure; a is Cronbachs a; AVE is average variance extracted
service quality, thus indicating that the minimum sample requirement for statistical Internet banking
analysis is 30 usable responses. service quality
The test of the measurement model includes the estimation of convergent and
discriminant validity of the instrument items. Convergent validity of the measurement
model was assessed by three measures: item reliability, construct (composite) reliability,
and average variance extracted (AVE) (Fornell and Larcker, 1981). Item reliability was
evaluated by the size of the loadings of the measures on their corresponding constructs. 113
The loadings should be at least 0.60 and ideally at 0.7 or above (Chin, 1998) indicating
each measure is accounting for 50 per cent or more of the variance of the underlying
latent variable (Fornell and Larcker, 1981). Table II shows that all loadings exceeded
0.70, thus indicating adequate convergent validity.
Composite reliability was assessed on the basis of internal consistency. The internal
consistency measure is similar to Cronbachs a. Cronbachs a assumes parallel

measures, and represents a lower bound of composite reliability (Chin, 1998). Fornell and
Larcker (1981) suggested that the measure of internal consistency is better than
Cronbachs a since it uses the item loadings obtained within the nomological network or
causal model. Table II illustrates that the composite reliability was satisfactory.
Convergent validity is adequate when constructs have an AVE of at least 0.50
(Fornell and Larcker, 1981). When AVE is greater than 0.50, the variance shared with a
construct and its measures is greater than the error. As shown in Table II all the
constructs have an AVE score above 0.50.
Discriminant validity was assessed using two methods. First, we examined the
cross-loadings of the constructs and the measures; second, we compared the square
root of the AVE for each construct with the correlation between the construct and other
constructs in the model. Going down the columns in Table III, the correlations of the
construct with its measures were higher than the correlations with any other measures.
Similarly, going across the rows in the table, the correlations of the measures with its
construct were higher than the correlations with any other construct.
Chin (1998) states that if the square root of the AVE for each construct is larger than
the correlation between the construct and any other construct in the model, then the
measures should be considered to have adequate discriminant validity. Table IV shows
all constructs in the estimated model satisfied this criterion. Since none of the
off-diagonal elements exceeded the respective diagonal element, the criteria for
discriminant validity were considered satisfied.
Overall, the measurement model results provided support for convergent and
discriminant validities of the measures used in this research.
Results
The structural model was evaluated using the R 2 for the dependent constructs and the
size, t-statistics and significance level for the structural path coefficients. The
t-statistics were estimated using the bootstrap resampling procedure (100 resamples).
The results of the structural model are shown in Table V.
The results demonstrate that the structural model explains 64.3 per cent of the
variance in overall internet banking service quality and 68.4 per cent of the variance in
customer satisfaction. The results show that online customer service quality and online
information system quality are significantly and positively related to overall internet
banking service quality. Thus, H1 and H2 are supported. Although banking service
MIP
Overall internet Online
27,1 banking service Customer Online customer information Banking service
Measures quality satisfaction service quality system quality product quality
Ovosq 0.9255 20.053 0.009 20.058 2 0.060

Ovexp 0.9395 0.048 2 0.008 0.052 0.050
114 Ovservic 2 0.027 0.8955 2 0.001 20.063 2 0.097
Ovsatis 0.059 0.8560 0.005 0.120 0.059
Ovproduc 2 0.034 0.8821 2 0.041 0.016 0.063
Ovxyz 2 0.004 0.8034 0.039 20.087 2 0.030
Reliabit 0.008 20.059 0.8840 0.031 2 0.036
Response 2 0.059 20.062 0.8278 20.071 2 0.120
Tangible 0.085 0.107 0.7587 0.094 0.081
Empathy 2 0.047 0.006 0.8844 20.070 0.062

Aestheti 0.026 0.070 0.080 0.7560 0.038
Timeline 2 0.100 20.129 2 0.011 0.7777 2 0.028
Contents 2 0.026 0.014 2 0.047 0.7944 0.011
Easeofus 0.018 0.009 2 0.010 0.8499 2 0.010
Security 0.073 0.048 2 0.053 0.7601 2 0.007
Accuracy 2 0.016 20.035 0.039 0.8872 2 0.005
Range 0.040 20.010 0.086 20.015 0.7129
Features 2 0.063 20.046 2 0.002 20.001 0.8510
Table III. Free 2 0.121 20.090 0.016 20.024 0.7604
Correlation between Function 0.089 0.113 2 0.062 0.067 0.8254
measures and constructs Menu 0.003 20.015 2 0.018 20.043 0.8538
Online Banking
Overall internet customer Online service
banking service Customer service information product
quality satisfaction quality system quality quality
Overall internet
banking service
quality 0.933
Customer
satisfaction 0.827 0.860
Online customer
service quality 0.706 0.737 0.840
Online
information
system quality 0.775 0.753 0.776 0.806
Banking service
Table IV.
product quality 0.664 0.731 0.675 0.708 0.802
Correlation among
construct scores Note: Square root of AVE in the diagonal
product quality does not have a significant relationship with overall internet banking
service quality ( p , 0.05) the relationship is marginally supported at p , 0.10. Thus,
there is marginal support for H3. The structural model results also show a significant
and positive relationship between perceptions of overall internet banking service
quality and customer satisfaction. Therefore, H4 is supported.
Finally, we performed the Stone-Geisser test of predictive relevance to assess model fit Internet banking
in PLS analysis (Geisser, 1975; Stone, 1974). q-Square is a measure of how well the service quality
observed values are reproduced by the model and its parameter estimates. q-Square
greater than 0 implies that the model has predictive relevance, whereas q-square less
than 0 suggest that the model lacks predictive relevance. In our main PLS model,
q-square is 0.54 for overall internet banking service quality and 0.48 for customer
satisfaction. 115
Discussion and managerial implications

Based on the work of Jun and Cai (2001), Han and Baek (2004) and Yang et al. (2004),
this research presented a model to explain how three dimensions of internet banking
service quality influence perceptions of overall internet banking service quality, and
how these overall perceptions of internet service quality influence customers

satisfaction. All hypotheses were confirmed albeit with H3 marginally. Our results
suggest that online information system quality is a significantly stronger predictor of
overall internet banking service quality than both online customer service quality and
banking service product quality individually and when combined.
The significant relationship between online customer service quality and overall
internet banking service quality indicates that the quality of customer service is
important for banks in the context of internet banking. Even in the absence of
face-to-face interactions, reliability, responsiveness, tangibles and empathy are still
important to customers. These dimensions directly affect customer perceptions of
overall internet banking service quality which influences overall customer satisfaction
with the bank.
Online information system quality is also significantly related to overall internet
banking service quality perceptions. A high-performance information system enables
customers to conduct banking transactions on their own through the computer system.
Without direct interaction with bank staff, ease of use, accuracy, security, timeliness,
contents and aesthetics are critical to enhancing customer perception of overall internet
banking service quality. The strong positive association between overall internet
banking service quality and customer satisfaction suggests that when overall internet
banking service quality is perceived to be high, customers are more likely to be
satisfied with their online service and consequently will be more satisfied with their
bank. Overall, the contribution that this research makes is in examining five relevant
and important constructs in one model. Specifically, we empirically examine the
Proposed Path Observed Sig.

effect coefficient t-value level
Overall internet banking service quality ( R 2 0.643)

H1. Online customer service quality 0.208 1.9562 **
H2. Online information system quality 0.485 3.6163 ***
H3. Banking service product quality 0.180 1.4533 *
Customer satisfaction ( R 2 0.684)
H4. Overall internet banking service quality 0.827 24.5843 *** Table V.
Structural (inner) model
Notes: p-values: *, 2 , 0.10; * *, 2 , 0.050; * * *, 2 , 0.001 results
MIP relationship between three service quality dimensions, overall internet banking service
27,1 quality and customer satisfaction in a New Zealand context. This exploration of
those service quality dimensions that lead to overall internet banking service quality
and its effect on overall satisfaction is a novel contribution to the literature.
The research findings suggest a number of implications for online banking services
management. This includes the need for managers to acknowledge that the provision
116 of online service quality is an expectation of bank customers. It is possible that
customers see online service as separate to their relationship with other banking
activities (and the bank as a whole) and merely perceive it as an expected service. The
findings suggest the following specific directions for managers regarding online
banking service provision:
.
When assessing online service quality, managers should not employ general
measures of online service quality, but should ensure that they are evaluating all
aspects of their specific online service where there may be a need to use
industry-specific measures.
.
Online banking service providers should continually monitor the level of
fulfilment of personal needs and satisfaction with the organisation of the site if
they wish customers to remain loyal to the online service.
.
Finally, there is a need to look beyond simply providing good online service sites
to build strong, enduring relationships with customers.
Conclusions and future research

It has been argued that internet banking helps banks to build and maintain close
relationships with their customers and reduces operating and fixed costs (Mols, 2000),
with daily and frequent internet banking users emphasising ease of use and
aesthetics for electronic fund transfer and foreign exchange transactions (Kam and
Riquelme, 2007). Recent research demonstrates that as customers become more
acclimatised to internet banking; they use these services more often and we are
beginning to see attempts to investigate internet banking service quality and customer
satisfaction in a global context. In a Malaysian internet banking context, Poon (2008)
found that convenience of usage, accessibility, features availability, bank management
and image, security, privacy, design, content, speed, and fees and were significant with
respect to the users adoption of e-banking services; with privacy and security being the
major sources of dissatisfaction and accessibility, convenience, design and content being
sources of satisfaction. In Estonia, continued usage of internet banking services is
dependent upon perceived usefulness (Eriksson and Nilsson, 2007). Shi and Fang (2006)
showed that attributes including information quality, transaction speed, and security
play significant roles in influencing attitude towards the adoption of internet banking in
Taiwan. In Qatar, although recent research demonstrates that in order to attract more
users to internet banking, in addition to ease of use, it is critical to develop secure and
private internet banking systems that are trustworthy (Kassim and Abdullah, 2006).
In Saudi Arabia, efficiency and security, fulfillment and responsiveness were found to
influence customers perceptions of service quality (Sohail and Shaikh, 2008). In a UK
context, Jayawardhena and Foley (2000b) illustrated that such web site features as
speed, web site content and design, navigation, interactivity and security all influence
user satisfaction. More recent work in the area corroborates such factors as usefulness,
ease of use, reliability, security, responsiveness, and continuous improvement in (Liao Internet banking
and Cheung, 2008) and credibility, efficiency, problem handling and security (Siu and service quality
Mou, 2005) in a Hong Kong internet banking context but to date, relatively little research
has investigated the criteria customers use in evaluating overall internet banking
service quality as a precursor to their overall satisfaction with the bank. This study
addresses this paucity and examines the service quality dimensions that lead to overall
internet banking service quality and its resulting impact on overall customer 117
satisfaction in a national bank in New Zealand.
In this study, the assurance dimension of SERVQUAL was dropped in the context
of online banking due to the unique features of online services. Online banking
customers heavily rely on the non-human interface of banking services. Thus, their
evaluations of service quality are mainly influenced by the features and the security of
online bank web sites and they cannot accurately assess the assurance dimension of
SERVQUAL which is defined by the knowledge and courtesy of administrators (Han
and Baek, 2004). The study builds on previous research (Jun and Cai, 2001; Han and
Baek, 2004; Yang et al., 2004) and extends this work by examining the relationships
among three quality constructs (online customer service quality, online information
system quality, and banking service product quality), overall internet banking service
quality, and customer satisfaction. In doing so, the study makes a contribution to
understanding the key determinants of overall internet banking service quality.
The findings of this study have a number of implications for managers. Online
customer service quality positively influences customers perceptions of overall internet
banking service quality offered by the bank. Consequently, bank management should
place emphasis on offering reliable, responsible, tangible and empathic customer
service. Moreover, the study reveals that online information system quality is the most
significant predictor of overall internet banking service quality. This suggests that
management should ensure that the internet banking environment; especially the web
site as interface between the bank and its customers, has the navigational and visual
characteristics, as well as practical considerations necessary for security and ease of use.
Furthermore, overall internet banking service quality is strongly related to overall
customer satisfaction with the bank. This suggests the relevance of delivering high
quality service online to maintain and/or increase customers satisfaction with the bank.
With respect to study limitations, although the sample has the strength of being a
random sample of real world banking customers, the sample size may be considered
small. The data collection was part of the third authors honours dissertation research
and as such, there were certain time and resource constraints. For this reason, a larger
sample size is desirable in future research. The sample is skewed to a particular ethnic
group with 83.1 per cent of the respondents being European New Zealanders. Although
this is likely to be representative of the banks customer base, future research could
focus on diversifying the samples across different ethic groups, gender, income, and
education. Business-to-business internet banking service quality could also be
investigated.
The research did not examine the relationship between customer satisfaction and
customer retention. Future research could look at the relationships among overall
internet banking service quality, customer satisfaction and customer retention. These
research findings would provide insights for banking service providers to keep their
existing customer base and increase their profitability. Another avenue for future
MIP research is to examine the dimensions and outcome of internet banking service quality in
27,1 a wider sample of banks, perhaps in different countries or even to try test the hypotheses
in multiple service contexts, i.e. services delivered through internet channels (e.g. travel
and insurance agents) in order to extend the models generalisability. The study did not
compare customer perceptions of internet banking service quality between internet
-only banks versus bricks-and-mortar banks. Customers may have different
118 expectations and perceptions of internet banking service quality from internet -only
banks versus bricks-and mortar banks. The work of Lassar et al. (2000) suggests that
customers who use internet-only banking may be more highly involved than others
and without knowing whether our sample of customers use other banking channels,
they may place more emphasis on some dimensions rather than others (e.g. the speed of
the service delivery). Similarly, Eriksson and Nilsson (2007) found that ongoing use of
online banking is negatively affected by multichannel satisfaction and customers do not

separate the service offerings of online channels from other channels.
An additional acknowledgement is that there has been academic debate over the
structure and conceptualisation of the SERVQUAL measurement tool, despite its use
by practitioners in services. While service quality evaluations involve both process
quality and outcome quality dimensions, SERVQUAL measures only the process
quality dimensions, i.e. that it does not address the service encounter outcomes (Buttle,
1996; Mangold and Babakus, 1991; Richard and Allaway, 1993) and it does not provide
good measures of the importance of service attributes and dimensions. Thus, there is
no academic consensus as to the nature or content of the service quality dimensions
(Brady and Cronin, 2001; Cronin and Taylor, 1992) except that service quality is a
multidimensional construct (Gronroos, 2001; Zineldin, 2002).
Finally, methodological limitation should be noted in that while many of the expected
relationships have been observed here and are consistent with a theory of causality;
these relationships do not demonstrate causality, since alternative explanations cannot
be ruled out. Thus, some might argue that the assumed relationship between service
quality leading to overall satisfaction might in fact, be in the opposite direction.
Note
1. Other possible outcomes that have been investigated in the literature include trust, loyalty,
commitment or dissatisfaction/switching, bank preference (Floh and Treiblmaier, 2006).
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Measuring Business Excellence, Vol. 6 No. 4, pp. 38-43.
Further reading 123

Devaraj, S., Fan, M. and Kohli, R. (2002), Antecedents of B2C channel satisfaction and
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pp. 316-34.
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Scullion, M. and Nicholas, D. (2001), The impact of the web on the stockbroking industry:
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Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1996), The behavioural consequences of
service quality, Journal of Marketing, Vol. 60 No. 2, pp. 31-46.
(The Appendix Table follows overleaf.)

MIP Appendix
27,1
Construct Sources Dimensions Items
Online customer Han and Baek Tangibles XYZBANKs internet banking web
124 service quality (2004) (tangible) site provides me with valuable
information
XYZBANKs internet banking web
site allows me to find information
easily
site is visually appealing
Reliability With my online banking, when

(reliabit) XYZBANK promises to do something
by a certain time, it does so
XYZBANK gets its online service
right first time
When there is a problem with my
online banking, XYZBANK shows a
sincere interest in solving it
Responsiveness With my online banking, XYZBANKs
(response) staff tell me exactly when the service I
require will be performed
For my online banking, XYZBANKs
staff give me prompt service
Empathy For my online banking, XYZBANKs
(empathy) staff have my best interests at heart
staff understand my specific needs
staff give me personal attention
For my online banking, the help line of
XYZBANK has operating hours
convenient to meet my needs
Online information Jun and Cai Ease of use The layout of the information in
system quality (2001) and (easeofus) XYZBANKs internet banking web
Yang et al. (2004) site is easy to follow
I can easily log on to my account
Using XYZBANKs internet banking
web site requires a lot of effort
It is easy for me to complete a
transaction through XYZBANKs
internet banking web site
I do not encounter long delays when
searching for information on
XYZBANKs internet banking
web site
Accuracy My online transactions are always
(accuracy) accurate
The information on XYZBANKs
internet banking web site is accurate
Table AI.
(continued)
Construct Sources Dimensions Items
Internet banking
service quality
The online transactions are accurately
dealt with
Security/privacy I believe that XYZBANK will not
(security) misuse my personal information
I feel safe in my online transactions
through XYZBANKs internet 125
banking web site
I feel secure in providing sensitive
information for online transactions
through XYZBANKs internet
banking web site
I feel the risk associated with online
transactions is low through

site
Contents My account information on
(contents) XYZBANKs internet banking web
site is well documented and clear
Timeliness The information on XYZBANKs
(timeline) internet banking web site is up-to-date
Aesthetics XYZBANKs internet banking web
(aestheti) site is attractive
Banking service Jun and Cai (2001) and XYZBANK provides online services
product quality Yang et al. (2004) with the features I want (features)
XYZBANK provides most of the
online service functions that I need
(function)
All my online service needs are
included in the menu options (menu)
XYZBANK provides a wide range of
online service packages (range)
XYZBANK provides me many useful
free online services (free)
Overall internet Yang et al. (2004) Overall, the online service quality of
banking service XYZBANK is excellent (ovosq)
quality
Overall, XYZBANK comes up to my
expectations of what makes a good
online banking supplier (ovexp)
Customer satisfaction Yang et al. (2004) Overall, I am satisfied with my
experience of XYZBANKs service
(ovservic)
Overall, I am satisfied with
XYZBANK internet-based
transactions (ovsatis)
Overall, I am satisfied with the
products/services offered by
XYZBANK (ovproduc)
Overall, I am satisfied with
XYZBANK (ovxyz) Table AI.
MIP About the authors
Michel Rod is a Senior Lecturer in Marketing at University of Victoria of Wellington,
27,1 New Zealand. His research interests include service recovery performance, burnout, the
development and management of collaborative relationships amongst university, industry, and
government organizations within the health sciences sector as well as the commercialisation of
university-developed intellectual property. Rod has published articles in Journal of Retailing and
Consumer Services, Journal of Pharmaceutical and Healthcare Marketing, Qualitative Market
126 Research: An International Journal, Journal of Information and Knowledge Management, Journal
of Entrepreneurship and Innovation, Management Research News, Journal of Transnational
Management Development, and Science and Public Policy. Michel Rod is the corresponding
author and can be contacted at: michel.rod@vuw.ac.nz
Nicholas J. Ashill is an Associate Professor in Marketing at the American University of
Sharjah, United Arab Emirates. Ashill has contributed to such journals as the European Journal
of Marketing, Decision Sciences, Journal of Services Marketing, Journal of Strategic Marketing,
Journal of Marketing Management, Qualitative Market Research: An International Journal,

Journal of Asia-Pacific Business, Journal of Business and Management, International Journal of
Bank Marketing and the International Review of Public and Non Profit Marketing.
Jinyi Shao is a former Masters student in Marketing at Victoria University of Wellington,
New Zealand.
Janet Carruthers is a Senior Lecturer in Social Marketing and Marketing Information
Management at Victoria University of Wellington, New Zealand. Her research interests include
the marketing of social change and healthcare marketing. Carruthers has contributed to such
journals as the Journal of Services Marketing, Journal of Retail and Consumer Services and the
International Review of Public and Non-Profit Marketing.
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints
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Marketing Intelligence & Planning

An examination of the relationship between service quality dimensions, overall internet

*Related content and download information correct at time of download.

Marketing Intelligence & Planning

(Unsal and Movassaghi, 2001).

Review of the relevant literature

personalisation; security/privacy; responsiveness; assurance/trust; site aesthetics; and

Authors Key dimensions discussed

The research model and hypotheses

Online H2 Overall Internet H4

concluded the principal goal of information systems service is to enable customers to

most complex formative construct or the largest number of predictors leading to an

Variable Factor loading

Overall internet banking service quality

consistency measure is similar to Cronbachs a. Cronbachs a assumes parallel

Ovosq 0.9255 20.053 0.009 20.058 2 0.060

Empathy 2 0.047 0.006 0.8844 20.070 0.062

Discussion and managerial implications

how these overall perceptions of internet service quality influence customers

Proposed Path Observed Sig.

Overall internet banking service quality ( R 2 0.643)

Conclusions and future research

online banking is negatively affected by multichannel satisfaction and customers do not

Marketing, Vol. 18 No. 1, pp. 43-66.

Further reading 123

(The Appendix Table follows overleaf.)

Reliability With my online banking, when

transactions is low through

Journal of Marketing Management, Qualitative Market Research: An International Journal,

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

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