Customer Loyalty in e-Banking: A Structural Equation Modelling (SEM) Approach

Electronic banking, otherwise known as Internet banking (eB) is increasingly popularized in the global market place in facilitating e-commerce. However, the efficiency of these services; with varying degree in connectivity and other factors mostly aimed at cost and speed seems to be rising, especially in the developed and emerging economies. Tools for conducting research over the years have also been changing due to its dynamism in the contemporary e-World (digital age). Customer loyalty has become a benchmark for measuring success in a competitive economic environment where speed in innovation is the survival kit. Loyalty is the endogenous latent variable measured by ten items. The four antecedents of customer loyalty identified and its measurement are – (1) Satisfaction (5 items), (2) Reliability (5 items), (3) Responsiveness (4 items), and (4) Empathy (2 items). The data was collected using primary data collection method. 250 questionnaires were distributed to target respondents who are Graduate students (M.Sc and PhD/DBA) and administrative staff of a university in Northern Malaysia. The responses collected are 147 representing 58.5 percent responses rate. The data are analyzed using the structural equation modeling (SEM), specifically AMOS 16 software. The goodness of fit indices of the revised model indicate adequate fit (GFI=.946, RMSEA=.032, RATIO CMIN/DF=1.48, P-VALUE=.230).The study established significance in three direct effects; reliability to customer satisfaction (β=.0.94, CR=3.476, P<.001), responsiveness to loyalty (β=0.46, CR=2.126, P<.0.034), and satisfaction to loyalty (β=.0.45, CR=4.246, P<.001). These findings signify that responsiveness, satisfaction, reliability in bank services ranked high for customer’s loyalty in e-banking. It is therefore recommended that banks should evolve strategies that are reliable, responsive and satisfactory in e-banking services to reduce cyber related crime in internet banking amongst other things.