What Keeps the E-Banking Customer Loyal? a Multigroup Analysis of the Moderating Role of Consumer Characteristics on E-Loyalty in the Financial Service Industry

Article excerpt


At first sight the Internet is the ideal medium for carrying out banking activities due to its cost savings potential and speed of information transmission. From a technological and cost-driven standpoint it may seem quite logical for banks to shift as many banking activities online as possible. At the same time, the question of how to foster customer loyalty arises when the relationship between the bank and the user becomes a virtual one.

This paper investigates the importance of antecedents of online loyalty such as trust, quality of the Web site, quality of the service and overall satisfaction. Rather than investigating which factors drive customers to use online banking instead of offline banking, this paper addresses the problem of how to keep customers online and loyal to a specific supplier.

A survey among more than 2,000 customers of an Austrian online bank was conducted and a structural equation modeling approach was used to gain important insights into how customer retention in the online banking business can be ensured. Satisfaction and trust were identified as important antecedents of loyalty. Additionally, the moderating role of consumer characteristics (gender, age, involvement, perceived risk and technophobia) was supported by the data.

Keywords: Loyalty, E-Banking, Structural Equation Modeling, Multigroup Analysis

1. Introduction

In order to reap the benefits of having loyal customers and gaining a competitive advantage online, companies need to develop a thorough understanding of the antecedents of loyalty on the World Wide Web (e-loyalty), such as business factors [Bhattacherjee 2001] or personal characteristics [Mägi 2003]. In order to investigate the importance of e-loyalty, the identification of variables influencing repeat purchasing behavior and word-of-mouth recommendation is a crucial area of research [Srinivasan et al. 2002]. This holds especially true for those industries which already depend heavily on their reputations and long-lasting relationships in the offline world, as is the case with the financial sector. The widespread adoption of online banking services calls for research investigating those factors which are responsible for keeping customers loyal.

A model explaining the antecedents of loyalty in the online banking industry has to incorporate factors which take into account the characteristics of the industry as well as those of the medium. Therefore, we consider antecedents such as trust (being important online and offline) and the perceived quality of the Web site (being important only online). Besides being topics of scholarly research in the information systems domain, these issues have been long discussed in marketing. More than two decades have passed since the concept of relationship marketing was first mentioned in the marketing literature [Berry 1983]. Drivers such as intense competition, demanding customers and enablers such as the Internet are the reason why relationship marketing has increasingly attracted the attention of researchers and practitioners alike [Sheth and Parvatiyar 2002]. In relationship marketing research the concept of customer loyalty plays a central role [Christopher et al. 2004]. The preeminent importance of retaining customers is supported by several studies [Chen et al. 2002], confirming the relevance of customers' loyalty to a firm's profitability.

New forms of online communication offer a host of new and promising opportunities for customer retention on the World Wide Web, while at the same time intensifying competition [Vatanasombut et al. 2004]. In particular, this applies to company-controlled communication, giving companies the ability to customize information with regard to the individual needs of a particular customer and to optimize the customer's feedback opportunities [Kierzkowski et al. 1996]. At the same time, companies also face completely new challenges arising from customer-controlled Internet communication, such as the growing importance of brand strength, economies of scale and size [Gallaugher 1999]. …