FYP Report

MBA – Final Year
Project
Customer Satisfaction
with technology based
services provided by
banking sector
By: Syed Yasir Hussain
MBA – 08 - 0849
FINAL YEAR PROJECT ON
I
CUSTOMER SATISFACTION WITH TECHNOLOGY BASED
SERVICES PROVIDED BY BANKING SECTOR
PREPARED BY:
SYED YASIR HUSSAIN (08-0849)
SUPERVISED BY:
ZAKI RASHIDI
SUBMISSION DATE:
MAY 9, 2009
DEPARTMENT OF MANAGEMENT SCIENCES

MASTERS OF BUSINESS ADMINISTRATION 2008 – BATCH
NATIONAL UNIVERSITY OF COMPUTER AND EMERGING
SCIENCES-FAST
II
Acknowledgement
Thanks to Allah for providing me the strength, courage, direction

and skills to learn, acquire knowledge and the ability to accept and
meet challenges.
Secondly I would like to thank all those who have helped in

performing this research especially my family members for their
support and my colleagues Mr. Mashood & Mr. Sabih
I would like to appreciate all those people who give their precious
time to guide me and to fill questionnaires. I would like to express
my sincere gratitude to my Supervisor and FYP-Coordinator Mr. Zaki
Rashidi for his continuous guidance and support throughout the FYP.
I hope this project will be beneficial for the students to come in

FAST after us. Once again I would like to thank all those who have
been involved directly or indirectly in this project.
III
Table of Contents
Acknowledgement...............................................III
List of Tables.........................................................I
List of Figures.......................................................I
Executive Summary..............................................II
1.0 Chapter – I Introduction..................................1
1.1 Introduction:......................................................................................1
2.0 Chapter – II Theoretical Framework..............23

2.1 Banking Sector of Pakistan:.............................................................23
2.2 E-banking in Pakistan:......................................................................25
2.3 E-commerce implementation in banking industry:...........................27
2.4 Customer acceptance of online banking:.........................................28
2.5 Customer Service:............................................................................29
2.6 Online Environment:........................................................................30
2.7 Rationale for Banks to provide online banking services:..................32
2.8 Traditional Service Quality Vs Electronic Service Quality:................33
2.9 Measurement of eservice quality:....................................................35
2.10 Relationship between satisfaction & service quality:.....................37
2.11 Risk associated with e-banking:.....................................................40
3.0 Chapter – III Research Methodology...............41

3.1 Research Design..............................................................................41
3.2 Research Procedure:........................................................................41
3.3 Population & Sample:.......................................................................42
3.3.1 Population..................................................................................42
3.3.2 Sample Size & Selection............................................................42
3.4 Measurement/Instrument Selection:................................................42
3.5 Variables:.........................................................................................43
3.6 Conceptual Framework:...................................................................44
3.7 Hypothesis:......................................................................................45
3.8 Data Analysis:..................................................................................48
IV
3.8.1 Statistical Tools.........................................................................48
3.8.2 Plan of Data Analysis................................................................49
3.8.3 Softwares Employed.................................................................49
4.0 Chapter – IV Research Analysis & Interpretation

..........................................................................49
4.1 Data Analysis and Interpretation of ATM:........................................50
4.2 Data Analysis and Interpretation of Internet Banking:....................55
4.3 Data Analysis and Interpretation of TeleBanking:............................61
5.0 Chapter – V Findings & Conclusion................67

5.1 Findings..........................................................................................67
5.2 Conclusion........................................................................................71
5.3 Recommendations...........................................................................72
5.4 Further Research.............................................................................73
References.........................................................74
Appendix............................................................80
V
List of Tables
Table 1 - Different Models for measuring customer
satisfaction........................................................11
Table 2 : Electronic Banking infrastructure...........15
Table 3: Conceptual Framework...........................45
Table 4: Reliability Statistics of ATM....................50
Table 5 : Regression Analysis of ATM...................51
Table 6 -ATM: Correlation between factors...........52
Table 7 : Descriptive Statistics of ATM.................54
Table 8 : Result of Hypothesis testing for ATM.....54
Table 9 - Reliability Statistics of Internet Banking 56
Table 10 : Regression Analysis of Internet Banking
..........................................................................57
Table 11 : Internet Banking: Correlation between
factors...............................................................58
Table 12 : Descriptive Statistics of Internet Banking
..........................................................................60
Table 13 : Result of Hypothesis testing for Internet
Banking..............................................................60
Table 14 : Reliability Statistics of TeleBanking.....62
Table 15 : Regression Analysis of TeleBanking.....63
Table 16 - TeleBanking: Correlation between factors
..........................................................................64
Table 17 : Descriptive Statistics of TeleBanking. . .66
Table 18 - Result of Hypothesis testing for
TeleBanking........................................................66
List of Figures
Figure 1 – Disposition of Thesis...........................22

Figure 2- Conceptual Framework.........................44
I
Executive Summary
This research is a part of my Master of Business Administration

degree. The purpose of this research is to gain a better
understanding of the service quality dimensions that affect
customer satisfaction with technology based services in the banking
sector. There are ten banks which included foreign, local and
national banks have been selected in this research, from which
surveys are conducted.
Electronic banking services are new, and the development and

diffusion of these technologies by financial institutions is expected
to result in a more efficient banking system. This technology offers
institution alternative or non-traditional delivery channels through
which banking products & services can be delivered to customers
more conveniently and economically without diminish the existing
series level.
Banks are providing technology based services to provide an ease

to their customers and to increase their profitability by reducing the
operational cost. But the technology based services don’t satisfy the
customer expectations and sometime become a cause of trouble to
the customers. Satisfaction is also of great interest to practitioners
because of its important effect on customer retention. Customer
satisfaction is major issue for the businesses which are dealing in
II
electronic commerce because it will determine whether the
business will survive or fail in future.
The result of this study reflected that bank customers are satisfied
with all three technology based services that are ATM, Internet
Banking and TeleBanking services provided by banking sector and
also by all Efficiency, Reliability, Fulfillment, Responsiveness and
Privacy of ATM, Internet Banking and TeleBanking services provided
by banking sector.
One of the ways for achieving high customer satisfaction and

gaining the loyalty of customers is for banks to offer high quality
services. That is why being able to measure and evaluate the
quality of their online banking services is deemed important for
banks in order for them to take action to correct those features of
their online services which customers don’t find that satisfactory.
Technology offers a means to improve internal communication,
productivity and efficiency within the organization to provide
seamless service to customers to create new and more effective
service delivery and to enhance customer satisfaction.
III
1.0 Chapter – I Introduction
1.1 Introduction:
In the world of banking, the development in Information Technology

has an enormous effect on development of more flexible payment
methods and more – user friendly banking services. Electronic
banking services are new, and the development and diffusion of
these technologies by financial institutions is expected to result in a
more efficient banking system. This technology offers institution
alternative or non-traditional delivery channels through which
banking products & services can be delivered to customers more
conveniently and economically without diminish the existing series
level. In recent years almost one fourth of banks in Pakistan have
starred to offer online banking services to customers and to satisfy
customers with their technology based services is one of the major
area of focus for banks.
The rapid advancement in electronic distribution channels has

produced tremendous changes in the financial industry in recent
years, with an increasing rate of change in technology, competition
among players and consumer needs (Hughes, 2001). Increasing
competition among banks and from non-bank financial institutions
also raises concerns as to why some people adopt one distributional
channel and others do not, and identifying the factors that may
influence this decision is vital for service providers. It is also
important to study the impact of technology based transactions on
bankers’ perceptions and behavior (Lymperopoulos and Chaniotakis
1
2004). IT-based distribution channels reduce personal contact
between the service providers and the customers, which inevitably
leads to a complete transformation of traditional bank-customers
relationships (Barnes and Howlett, 1998).
1.1.1 Background
In last few years we have witnessed a substantial growth of

technology-based services provided by banks. One of the key
challenges of technology based services as a delivery channel that
how bank manage service quality, which holds significant
importance to customer satisfaction. As the number of technology
based services are increasing its benefits and problems are also
increasing. Through the advent of technology the infrastructure of
any type of organization have faced a massive change, similarly
technology in banking sector have also changed the aspects of
doing banking in most areas.
1.1.2 Purpose
Banks are providing technology based services to provide an ease

to their customers and to increase their profitability by reducing the
operational cost. But the technology based services don’t satisfy the
customer expectations and sometime become a cause of trouble to
the customers. In a competitive market place understanding
customer’s need become an important factor. As a result companies
have moved from a product centric to a customer centric position.
Satisfaction is also of great interest to practitioners because of its
important effect on customer retention. Customer satisfaction is
major issue for the businesses which are dealing in electronic
commerce because it will determine whether the business will
2
survive or fail in future. The purpose of this research is to gain a
better understanding of the service quality dimensions that affect
customer satisfaction with technology based services in the banking
sector. For this research the main research question was;
“What are the service quality dimensions in technology

based services and how do they effect customer
satisfaction?”
1.1.3 Objectives
The objective of this study is to gain better understanding of service

quality dimensions that affect customer satisfaction with technology
based services in the banking sector from the consumer
perspective.
To determine up to what extent technology based services

are adopted by bank customers?
• Why people adopt technology for banking?
• Adopting a technology, do really fulfill their need?
To explore the problems faced by bank customers in using

technology based services?
• What are the problems faced by customers when they use

technology for banking?
• What are the solutions to those problems?
3
To find the level of customer satisfaction with technology
based services?
• From which services bank customers are satisfied?
• From which services bank customers are not satisfied & why?
To identify which service quality dimensions affect customer

satisfaction?
• Which service quality dimension highly affects customer

satisfaction?
• How service quality dimensions affect customer satisfaction?
1.2 Banking Sector:
1.2.1 Overview of Banking Industry of Pakistan
The financial sector in Pakistan comprises of De-Nationalized Banks

(DNB), Development Financial Institutions (DFI), Foreign Banks
(FB) , Investment Banks (IB), Micro Finance Banks (MFB),
Nationalized Commercial Banks (NCB), Private Scheduled Banks
(PSCB), Provincial Banks (PB), Specialized Schedule Banks (SSB).
Under the prevalent legislative structure the supervisory
responsibilities in case of Banks, Development Finance Institutions
(DFI), and Microfinance Banks (MFB) falls within legal range of State
Bank of Pakistan while the rest of the financial institutions are
4
monitored by other authorities such as Securities and Exchange
Commission and Controller of Insurance.
In Pakistan all banks & DFI’s works under the supervision of the
State Bank of Pakistan, the four major sectors in which STATE BANK
OF PAKISTAN has divided banks operations are Corporate, SME,
Agriculture and Consumer Banking. STATE BANK OF PAKISTAN
provide regulations according to which all banks should work and
continuously keep a track that banks are complying through the
regulations or not.
The major banking market share is retained by BIG FIVE BANKS

which are National Bank of Pakistan, United Bank Limited, Habib
Bank Limited, MCB Bank Limited and Allied Bank Limited. Our
banking industry can be divided into three categories first of which
are five large banks with have branches of more of 700 each. Four
of these banks have been denationalized in recent years, secondly
of branches foreign banks in Pakistan and last local private banks.
Pakistan has a highly developed financial sector consisting
of 4 public 12 private 21 commercial banks, DFI, leasing
companies, mutual funds, Islamic venture capital fund
companies. The commercial banks have assets of over one
trillion rupees of which about 80% is held by domestic
banks. (Alam 2007, p.24)
Banking sector in Pakistan has undergone a significant

transformation in the recent years and has also acted as a catalyst
in the revival of the economy. Many privatization, acquisition and
mergers took place during last seven years which started from
privatization of Muslim Commercial Bank and from time to time
5
Allied Bank Limited, United Bank Limited, Habib Bank Limited were
also privatized by the government.
These years also witnessed acquisition of Union Bank by Standard

Chartered Bank, Prime Bank by ABN Amro, Metropolitan Bank has
been merged with Habib Bank AG Zurich and recently the merger of
SaudiPak Commercial Bank & Atlas Bank to took place came into
news. All these privatization, acquisition and mergers resulted in
high foreign investment in Pakistan and improved performance of
the banking industry while its has also helped banks to gain more
market share in short time and to easily meet the high paid-up-
capital requirement of STATE BANK OF PAKISTAN and to meet the
minimum branch requirement of commercial banks
1.2.2 Opportunities & Challenges
The banking industry of Pakistan has grown to a significant level in

last ten years and its still on a growth stage. Banks are opening new
branches, new foreign & local banks are entering to market and
merger & acquisition between banks are also taking place. On the
other side market is becoming more complex, banks are introducing
new innovative products and the market has become more
competitive. As the industry is growing its also getting many
opportunities and facing many challenges few of them are
described below;
• Interest Rate Variation
6
Banks are earning high spread by offering low rates on their
deposits and high rate on financing. This increases the bank
profitability but the consumer suffers because of high interest
spread.
Maintaining the critical balance between savings,
investment and borrowers debt-servicing ability is possible
if input prices remain stable affording business to sustain
their profitability and interest rates too remain stable to
ensure that in the medium term, debt servicing burden
remains affordable for both consumers and manufacturers.
(Shahid, 2003)
• Consumer Financing
The robust growth of auto and mortgage finance in preceding two

years has significantly increased the prices of these assets, and
thus has created inflationary pressures in the economy.
Growth in auto loans has registered an increase of
approximately Rs.8 billion from
Rs. 97.777 billion to Rs. 105.444 billion during the
corresponding period of growth of credit cards and personal
loans is more than 20%. Housing loans have also registered
an increase of approximately Rs11.0 billion in H1 CY 07 from
Rs43.205 billion in H1 CY06. (Sharif, 2007)
• E-banking
Although small and medium banks are now offering on-line services
to their customers, the large banks, with more expanded branch
network and number of customers, are required to move more
expeditiously so as to optimally utilize the E-banking network. This
will not only lower the transaction costs but will also help in
improving the customer services
• Islamic Banking
7
Islamic banking is a relatively new concept in our banking system.
More and more banks are seeking license to open Islamic bank
Branches. At present six full fledged Islamic banks and many Islamic
banking branches of conventional banks are operating in Pakistan.
The banks are fully prepared to run Islamic branches with the help
of their Shariah Board, Shariah Advisors, Auditors and trained staff.
This is a sector where growth is expected and the banks should
capture this opportunity.
• Anti-Money Laundering
With the growth of global financial industry, the misuse of banking

industry has been observed in recent years. These include the use
of banking services for activities like, terrorist financing, drug
trafficking and money laundering. There are a number of countries
where the entire regulatory framework is at initial stage, so there
are chance of such activities in the form of reputational,
operational, legal and concentration risks.
• Implementation of BASEL-II
STATE BANK OF PAKISTAN has instructed all commercial banks to

fully implement BASEL-II system by 2009 to reduce their risk. This
will not only reduce the probability of defaults in our banking
industry but it will also improve the image of our banking industry
by complying with the standards of BIS.
8
1.3 Customer Satisfaction:
1.3.1 Customer Satisfaction
According to Hill, Brierley and MacDougall (2003) ‘Customer

satisfaction is measure of how yours organization total product
perform in relation to a set of customer requirement’. Customer
satisfaction is the measurement about how products and services
supplied by any firm meet customer expectations. It is seen as a
key business performance indicator. Bauer, Hammerschmidt and
Falk (2005, p.153) highlighted that ‘Customer satisfaction and
customer retention are increasingly developing into key success
factor in e-banking’
1.3.2 Customer Satisfaction in Service Industry
Customer satisfaction has for many years been perceived as key in

determining why customers leave or stay with an organization.
Whether a firm is offering products or services customer satisfaction
is important in both. However managing and measuring customer
satisfaction in service industry is much more difficult. On the other
side, satisfied customers may look for other service providers
because they believe they might receive better service elsewhere.
According to Dash & Mahapatra (2007) ‘With the phenomenal
increase in the country's population and the increased demand for
banking services; speed, service quality and customer satisfaction
are going to be key differentiators for each bank's future success.’
In businesses where the underlying products have become
commodity-like, quality of service depends heavily on the
quality of its personnel. This is well documented in a study
9
by Leeds (1992), who documented that approximately 40
percent of customers switched banks because of what they
considered to be poor service. (Cohen et al. 2006)
1.3.3 The Need to Measure Customer Satisfaction
Satisfied customers are central to optimal performance and

financial returns. At many countries in the world, business
organizations have been inspiring the role of the customer to that of
a key stakeholder. Measuring customer satisfaction and keeping a
track of it can become the success factor for any firm.
With better understanding of customers' perceptions,
companies can determine the actions required to meet the
customers' needs. They can identify their own strengths and
weaknesses, where they stand in comparison to their
competitors, chart out path future progress and
improvement. Customer satisfaction measurement helps to
promote an increased focus on customer outcomes and
stimulate improvements in the work practices and
processes. (Dash & Mahapatra, 2007)
When buyers are powerful, the health and strength of the

company's relationship with its customers – its most critical
economic asset – is its best predictor of the future. Focusing on
competition has its place but it is more important for any firm to
pay attention to its customers.
1.3.4 Measuring Customer Satisfaction with e-services
With the increasing application of ecommerce in organizations, the

importance of measuring and monitoring eservice quality in the
10
virtual world has been recognized. According to Fassnacht & Koese
(2006, p.19) ‘For providers of electronic services, quality is a major
driving force on the route to long-term success. Comprehensive
measurement of quality, in turn, is the key to effective quality
management.’
Technology offers a means to improve internal
communication, productivity and efficiency within the
organization to provide seamless service to customers to
create new and more effective service delivery and to
enhance customer satisfaction. (Hernon & Whitman, 2001)
1.3.5 Different models & variables for measuring
customer satisfaction
The measurement of the gap between expected and perceived

service has been first operationalized with 10 dimensions: reliability,
responsiveness, competence, access, courtesy, communication,
credibility, security, understanding, and tangibles (Parasuraman et
al. 1985). Parasuraman, Zeithaml, and Berry developed and refined
SERVQUAL, a multiple-item instrument to quantify customers’
assessment of a company’s SQ. This scale contains five dimensions:
reliability, responsiveness, assurance, empathy, and tangibles.
Table 1 - Different Models for measuring customer satisfaction
11
(Dai & Yi, 2006)
1.4 Technology Based Services:
1.4.1 Overview of e-banking
E-banking is the use of electronic means to deliver banking services,

mainly through the Internet. The idea of online banking came into
existence, in Europe and America in the beginning of 1980s. It has been
estimated that more than forty percent of banking transactions are done
online. A large variety of services are being rendered by banks using the
electronic media. Banks are operating inter-city transfer of money by DD,
mail transfers and TT from one city to other or even within the same city
12
and also from bank to bank through telephones from many years.
Electronic commerce is very much assisted by the e-Banking through
electronic cash cheques and smart cards.
Worldwide banking is no longer restricted to the four walls. A lot of

countries are ahead of the technology based services being
available in our country. The idea in online banking in our country
was taken very late, but now focused efforts are being made to
catch up with rest of the world. Banking, a few years back, was
confined to only four walls of branch but after the entrance of new
private commercial banks, which focused less on number of
branches, but investment in technology was chosen as a main focus
point. The arrival and widespread use of Internet, leading to e-
commerce, enforced the banks worldwide to fit in e-banking.
1.4.2 Types of e-banking services
Currently the technology based services provided by banks in

Pakistan are Online Banking, Internet Banking, ATM, Credit/Debit
Cards, Online Bill Payment Facility, Mobile-SMS Banking,
TeleBanking/Call Center, etc. During the last five years banking
industry of Pakistan had witnessed a high change this change is not
only in its service and capital but also the technology based
services that they are offering. Common embodiments of e-banking
include the following:
• Mobile/SMS Banking
• Telephone Banking
13
• Electronic funds transfers
• Self Service (PC) Banking
• POS Banking (Credit and Debit cards)
• ATMs
• Interactive TV
• Branchless Banking
• Intranet
1.4.3 Growth of e-banking in Pakistan
According to a Report titled ‘Retail Payment Systems of Pakistan -

Paper‐based and E‐banking (STATE BANK OF PAKISTAN, 2008) ‘A
total of 124.6 million E‐banking transactions were recorded valuing
Rs 13.9 trillion during the last fiscal year (FY08), showing a growth
of 25.4% in numbers and 32.3% in amount when compared with the
fiscal year (FY07).’ During FY07, STATE BANK OF PAKISTAN
continued its focus on promoting electronic banking system in the
country. State Bank of Pakistan has encouraged the banks to
expand their technological infrastructure. Consequently the number
of ATM machines has increased significantly, apart from other
channels of e-banking, during the period under review. The facilities
being provided by the commercial banks through their ATMs have
also increased during FY07. These mainly included the expansion of
card systems, Point of Sale (POS) system used by merchants and
facility of accepting payment of utility bills via ATMs etc.
14
Table 2 : Electronic Banking infrastructure
30-06- 30-06- Increase in

Description 2006 2007 Increase %
On-line
Branches 3,555 4,719 1,164 32.7
Number of
ATMs 1,612 2,293 681 42.2
(STATE BANK OF PAKISTAN, 2007)
Electronic banking is the latest in the series of technological
wonders of the recent past. ATMs, TeleBanking, Internet
Banking, Credit Cards and Debit Cards have emerged as
effective delivery channels for traditional banking products.
In Pakistan, foreign banks took the lead by introducing
ATMs and credit cards in the mid 1990s, and domestic banks
followed in the late 1990s. (Kaleem and Saima, 2008)
The number of ATM transactions stood at 51.5 million during FY07

as compared to 35 million during the preceding year showing an
increase of 47.1 percent over the year. The value of transaction
stood at Rs.352.4 billion during FY07 as compared to Rs.211.0
billion in FY06 reflecting an increase of 67 percent. ATMs were
largely used for cash withdrawals and field offices of STATE BANK
OF PAKISTAN-BSC provided ample quantity of fresh currency notes
to the online branches of commercial banks to conveniently perform
electronic transactions through ATMs.
IT is affecting the life of every human being in this current
age. Online or e-banking is one of technological service
which is getting acknowledgment around the globe. There
are a lot of customers around the world who are accepting
this technology very quickly but in emerging countries like
Pakistan the acceptance ratio is very high. (Qureshi, Zafar &
Khan, 2008)
15
Kaleem & Saima (2008) concluded that it was changing consumer
attitudes rather than bank cost structures that determine the
changes in distribution channels; they added that virtual banks can
only be profitable when the segment that prefers electronic media
is approximately twice the size of the segment preferring street
banks.
1.4.4 Benefits of e-banking
Technological innovations are having significant importance in

human general and professional life. The rapid expansion of IT has
imbibed into the lives of millions of people. Rapid technology
advancement have introduced major changes in the worldwide
economic-business atmosphere. Information technology
developments in the banking sector have speed up communication
and transactions for clients.
E-banking is one of the technologies which are rapidly growing

banking practices these days. It is very important to extend this
new banking feature to banks clients for maximizing the advantages
of banks and its customers both. Few of the benefits of e-banking
are highlighted below;
• Access your account information and transactions.
• Make electronic funds transfers.
• View, download and print statements.
• View CBA’s up-to-date daily exchange rates.
• Transfer funds between your personal accounts
• Easy set-up.
16
• User-friendly and secure
• 24-hour access – no more space and time constraints.
• User support from highly trained and experienced customer
service teams.
1.4.5 Challenges faced by e-banking industry
The banking industry sector is one of the most important service

sectors for the whole national economy. Modern, highly developed
and technology driven economies are in danger by higher risks than
ever, and individual need to protect themselves against private risk.
From the banks point of view, use of Internet banking is likely to
lead to cost reductions and improved competitiveness. This service
delivery channel is seen as dominant because it can retain current
Web-based customers who continue using banking services from
any place. Furthermore, online banking provides opportunities for
the banks to develop its market by attracting a new customer base
from existing users.
In Pakistan, foreign banks took the lead by introducing
ATMs and credit cards in the mid 1990s, and domestic banks
followed in the late 1990s. The STATE BANK OF PAKISTAN
Annual Report explained this delayed entry in electronic
banking largely by regulatory hurdles, higher start up costs,
on-going banking sector reforms and lack of technical skills.
(Kaleem & Saima, 2008)
Some key challenges faced by online banking are highlighted below;

• Security: Majority of the customer shy away from E-Banking
services due to security concerns
• Human face: According some analysts, customers still value
personalized and responsive services from their bankers
• Ignorance: Bank customers do not even know whether their
banks provide online services
17
• Poor and/or lack of technological infrastructure and reliable
power supply
• Lack of proper legislation governing e-transactions
• Preference to paper money, as opposed to “virtual” cash in
transactions
• Balance between convenience and security.
• Designing products that offer a balance between competitive
pricing and functionality
• Keeping abreast with dynamism of customer needs &
innovation
• Lack of proper legislative framework to support the growth of
e-banking
1.5 Customer Satisfaction with technology based

services:
1.5.1 Importance of Customer Satisfaction
18
The trend towards electronic delivery of banking products is
occurring partly as a result of consumer demand and partly because
of the increasing competitive environment in the global banking
industry. The internet has changed the customer behavior who is
demanding more customized products/services at lower cost. Banks
are repositioning themselves to accept new visions because they
are in people business and now people demands have changed. If
experience of the service increases the expectations customers had
of the service then satisfaction will be more.
1.5.2 Customer Satisfaction in Virtual Environment
Many firms are moving to make virtual interfaces their

primary, or even sole, points of customer contact. Perceived
trustworthiness of an online broker is a significant
antecedent to investors’ satisfaction, and that perceived
environmental security and perceived operational
competence impact the formation of trust. (Balasubramanian,
Konana & Menon, 2003)
Three factors, quickness, easiness and cheapness have become the

catchwords for the competitiveness and usefulness of all the
business operations. Particularly it is routine today to say that
banking is undergoing through a major change. The symptoms are
new products, new players, etc. The change is taking place across
all areas of the banking industry. That is why banks urgently need
to improve their ability, to think strategically about technological
investments. Banks which use their technology resources effectively
have the opportunity to secure real competitive advantage in this
changing industry through real products and services
differentiation.
1.5.3 Online Service Quality and Customer Satisfaction
19
During last few years a substantial growth of internet-based
services, both from internet business and from traditional
companies that are developing online service took place. One of the
key challenges of online service delivery channel is how they
manage service quality which holds a significant importance to
customer satisfaction. Dash and Mahapatra (2007) highlighted that
‘There is obviously a strong link between customer satisfaction and
customer retention. Customer's perception of Service and Quality of
product will determine the success of the product or service in the
market’
1.6 Justification:
20
The increasing number of advancements took place in technology
based services provided by the banking sector and day by day new
technologies are on their way, there is a need to measure that
those services actually satisfy the customer expectation or not. This
study explores the key areas of technology based services provided
by the banking sector in which customers are not satisfied and what
are its reasons, further this report has also recommend solutions for
those problems.
This research will be highly beneficial for the banking industry

because it will give an idea to banks that how the service quality
dimensions affect customer satisfaction and what are the causes of
problems and how to solve them. The outcomes of this study will
also help the management of banks to do effective strategic
planning for the future of electronic banking in Pakistan.
1.7 Scope & Limitation:
This research is conducted on commercial banks of Pakistan and it

is from the consumer perspective only. Ten commercial banks are
selected in Karachi for the purpose of conducting survey. Only those
banks are selected for the purpose of survey who is offering at least
one these three technology based services which are ATM, Online
Banking and TeleBanking. The sample size is restricted to one-city
only namely Karachi and managing non-serious response of people
was difficult because of high sample size i.e. 600 (approx.)
21
1.8 Assumptions:
• Customer satisfaction with technology based services can be

measured by applying models of measuring electronic service
quality.
• The implementation and use of technology based services are

increasing and most of banks customers are using at least
one basic technology based services i.e. ATM.
1.9 Disposition of Thesis:
Figure 1 – Disposition of Thesis
Introduction
Theoretical
Framework
Methodology
Analysis &
Interpretation
22
Findings &
2.0 Chapter – II
Conclusion
Theoretical Framework
2.1 Banking Sector of Pakistan:
The State Bank of Pakistan is the Central Bank of Pakistan. The

state bank of Pakistan started its operation on 1st July 1948. State
Bank is not only responsible for issuing domestic currency and
regulating foreign currency but also for analyzing domestic
economy. The bank has been operating with a mission of promoting
both monetary and financial stability and to promote the financial
system for achieving sustainable growth by reducing inequality. The
relevant provisions of law which vest powers in State Bank of
Pakistan (SBP) to carry out inspection of banks.
Before 1990 public banks dominated the Pakistani financial market.

In 1991, two smaller banks, the Muslim Commercial Bank and the
Allied Bank, were privatized as part of the government's general
program of economic liberalization and the privatization of state
enterprises. The government also instructed the State Bank of
Pakistan (SBP) to approve proposals for the establishment of
commercial banks in the private sector since then, the government
has continuously advocated the privatization of the banking sector
and the setting up of new private and foreign banks (Kaleem &
Ahmed, 2008). The acquisitions of a local Union Bank by Standard
23
Chartered Bank and Prime Bank by ABN Amro Bank indicate foreign
interest in the domestic financial market.
Modern history of the Pakistani’s banking industry goes back into

the year 1985 when permission for the establishment of commercial
banks was granted for the first time in Punjab. The liberalization
effort was eagerly taken advantage of and by 1992 there were
already 14 banks in Pakistan. The number of banks increased to 39
by end of 2007 (Khan, 2007). Setting up a bank was extremely
popular in the beginning of 1992 because there were basically no
legislative restrictions to establishing a bank. But the scenario has
changed a lot in recent years by strict regulations and monitoring of
State Bank of Pakistan. Financial institutions are offering various
types of services besides conventional banking services, such as,
business loans, corporate banking, house financing and car leasing
facilities. Over the last three years, almost 70% banks have
converted to online banking, providing real-time information.
Consequently the performance of banking is increasing not only in
urban centers but also in rural areas.
“ In recent years, growth and turn-around in Pakistan’s
banking sector has been amazing and exceptional due to
online technology exploited by the banking sector” (Qureshi,
Zafar & Khan, 2008).
24
2.2 E-banking in Pakistan:
Pakistan has passed through its introductory phase and now it is

moving towards new avenues. After introductory phase customers
are well aware of e-products and are now demanding more
sophisticated services. Electronic banking is the latest in the series
of technological wonders of the recent past. ATMs, TeleBanking,
Internet Banking, Credit Cards and Debit Cards have emerged as
effective delivery channels for traditional banking products. In
Pakistan, foreign banks took the lead by introducing ATMs and
credit cards in the mid 1990s, and domestic banks followed in the
late 1990s (Kaleem & Ahmad, 2008).
“Online banking is also one of the technologies which are
fastest growing banking practices nowadays. It is vital to
extend this new banking feature to clients for maximizing
the advantages for both clients and service providers”
(Qureshi, Zafar & Khan, 2008)
The Government of Pakistan further promoted electronic banking

with the promulgation of the Electronic Transaction Ordinance 2002;
this landmark step provided legal recognition of digital signatures
and documentation reducing the risks associated with the use of
25
electronic media in business. According to Kolachi (2006) Pakistani
banks provides the following online banking services and products.
(1) Inquiry: Account statement inquiry, Account balance inquiry,
Check statement inquiry, Fixed deposit inquiry (2) Payment:
Transfer of funds, Credit cards payments, Direct payments, Utility
bills payments (3) Request: Chequebook requests, Stop payment
requests, Demand draft requests, New fixed deposit requests (4)
Download: Customer profile, Statement download, Other
information and guidelines download.
Development in human culture has been consummated by the

development of new technologies. The last few years have
witnessed supreme changes throughout the world (Deshmukh S. G
et al, 1995). Due to increase in technology usage the banking
sector’s performance increases day by day. Online banking is
becoming the indispensable part of modern day banking services. It
is expected that 60 % of retail banking dealings will be online in ten
years' time (Barwise, P. 1997). A financial institution has a lot of
customers around the country; therefore they need their bank
online so that they can easily access it from anywhere. Pakistan is
also not lagging behind in this venture. One would imagine that
Pakistani banks would not only be proactive to give online banking
service but would also persuade consumers to shift to this form of
deliverance of banking services.
“An existing bank with physical offices can establish a
website and offer internet banking to its customers as an
addition to its traditional delivery channels” (Qureshi, Zafar &
Khan, 2008)
26
Electronic distribution channels provide alternatives for faster
delivery of banking services to a wider range of customers. E-
channels have gained increasing popularity and have attracted the
attention of both academics and practitioners in Pakistan.
2.3 E-commerce implementation in banking

industry:
Banks have not only been early adopters of ecommerce, but other
businesses’ move to ecommerce has been highly dependent on the
electronic financial infrastructure that banks provide. Awad defines
ecommerce in banking as consisting of;
“Procedures that support commercial activities
electronically or via networking to apply to bank-to-bank,
bank-to customer or bank-to-vendor” (Awad, 2000)
Technologies such as Automatic Teller Machines (ATMs), electronic

funds transfer and point of service banking via retail terminals,
phone banking, intranets and internet banking have assisted banks
27
and financial organizations to update their business processes still
further.
“In the USA, large organizations such as FleetBoston,
Citigroup and Wells Fargo are offering a one-stop shop,
which includes real time balances, corporate research and
stock trading” (Blount, Castleman & Swatman, 2002)
Controlling costs in the banking sector is a key management

objective and this industry has been keen to convert customers to
online media and to utilize ecommerce, as it is significantly cheaper
than face-to-face transactions and has additional benefits. Internet
provides an excellent opportunity for business communications and
transactions as it allows organizations to establish direct links with
current and new customers while being able to deliver new products
and services. Awad (2000) observes that the combination of
computers, the internet and information technology have become a
feasible substitute for labour- and paper-intensive banking
processes, the industry holds a positive view of technological
changes such as the ATM, phone banking and the utilization of the
internet which do not require face-to-face interaction between
customers and branch staff.
2.4 Customer acceptance of online banking:
Banking industry is also one of the influenced industries adopting

technologies which are helpful in providing better services to
customers. Quality of service is improved by using technological
innovations. Online banking is time-saving. About 20% of retail and
30 % of businessmen will use some shape of Internet banking
28
facility within the next five years (Booz et al, 1997). There will be
huge acceptance of online banking with the passage of time with
growing awareness and education. A great many people are shifting
to online banking and are readily accepting the usefulness of it.
Online banking service allows customers to manage their accounts

from any place at any time for minimum cost; it gives abundant
compensation to the client in terms of price and ease (Ekin et al,
2001). It is a fast growing phenomenon among general public in
Pakistan as well. Many factors are attracting the public like ease of
use, perceived usefulness, security and privacy. Perceived
usefulness is defined as the degree to which a person believes that
using a particular technology would improve job performance while
perceived ease of use is the degree to which using IT is free of effort
for the user (Davis et al., 1989).
2.5 Customer Service:
According to Shariq (2006) in today’s competitive business

environment, companies must understand that the customer hold
29
the key to success. The customer must be at the very heart of the
company’s decision making. The customers want many things from
the companies, they work with. In the language of customer service,
these wants are often referred as needs, most customer need
quality products, quality service and friendly interaction with
knowledgeable people who care about them.
Information technology can and is being used to improve customer

services, though the use of IT is dependent on the understanding of
customer services (Shariq, 2006). Customer service is being
influenced by information technology. Regardless of how one
visualizes customer service, either from a logistics or marketing
perspective, information technology now assumes and important
role in customer service.
2.6 Online Environment:
30
The web is the primary infrastructure for e-commerce. It is well
accepted that websites provided benefits for both corporation and
consumer. A corporation can display its identity and advertise its
products and services to many people. Also, corporations can get
feedback directly from customers. A website can also improve
communications with other corporations thus improving the
efficiency of business processes by increasing direct sales and
reducing costs. Online environment not only include web-sites but it
also include all kind on electronic services which don’t include any
physical process.
Usually for e-businesses, too much attention is paid to aesthetic

design, which ends up looking amazing but actually causes
frustration because sometime customers have difficult in finding
what they are looking for. The main reason why customer goes
online is to find information or buy products or use service with an
emphasis on convenience and speed. Dabholkar (2000) points out
that the concept of Internet has raised customer’s sensitivity to fast
customer service. Any e-business that sticks to this principle when
designing its online environment should be relatively successful.
According to Donlan (1999), although delivery is highly important in

fulfilling customer needs, perceptions and expectations also needs
to be managed and the website plays a main role in this. Once the
basis of online services is clear the type of customer is hope will be
attracted can then be assessed and judgment made on what
graphics, effects and other matter can be added to increase the
value proposed. Clear instructions are needed to avoid confusion
and frustration.
31
2.7 Rationale for Banks to provide online banking
services:
Rationale for banks to take advantages of Internet Banking services

are summarized and presented as follows: cost savings, increase
customer, enable mass customization for e-business services,
extend marketing and communication channel, search for new
innovation services, explore and development of non-core business.
According to Ongkasuwan (2002) customers ability to subscribe to
the Internet-base banking services depend on several factors, such
as,
1. user-friendly interface
2. level of Internet experience
3. type of services provided (for example, e-mail, file transfer, news,
online financial services, shopping, and multimedia services)
4. attitude and perception
5. access and delivery time
6. experience (if any) with the Internet.
Therefore, management of customer requirement is vital to

development of rational for the banks to initiate, explore and
develop Internet banking services that meet their needs and
changes.
32
2.8 Traditional Service Quality Vs Electronic Service
Quality:
Extensive research on traditional SQ has been conducted during the

past 20 years. In contrast, only a limited number of scholarly
articles deal directly with how customers assess e-SQ. A study
presented by Gounaris and Dimitriadis (2003) is the first attempt to
investigate the service quality of e-banking portals based on the
SERVQUAL, the authors identify three quality dimensions, namely
customer care and risk reduction benefit, information benefit and
interaction facilitation.
By traditional SQ we are referring to the quality of all non-Internet-

based customer interactions and experiences with companies.
Parasuraman, Zeithaml, and Berry (1991) conducted empirical
studies in several industry sectors to develop and refine SERVQUAL,
a multiple-item instrument to quantify customers assessment of a
company’s SQ. This scale measures SQ along five dimensions:
reliability, responsiveness, assurance, empathy, and tangibles. The
SERVQUAL instrument and its adaptations have been used for
measuring SQ in many published studies.
Three broad conclusions that are potentially relevant to defining,

conceptualizing, and measuring perceived e-SQ emerge from the
traditional SQ literature: (a) The notion that quality of service stems
33
from a comparison of actual service performance with what it
should or would be has broad conceptual support, although some
still question the empirical value of measuring expectations and
operationalizing SQ as a set of gap scores; (b) the five SERVQUAL
dimensions of reliability, responsiveness, assurance, empathy, and
tangibles capture the general domain of SQ fairly well, (c) customer
assessments of SQ are strongly linked to perceived value and
behavioral intentions.
From studies dealing with people-technology interactions imply that

customer evaluation of new technologies is a distinct process. For
instance, findings from an extensive qualitative study of how
customers interact with, and evaluate, technology-based products
(Mick and Fournier 1995) suggest that (a) customer satisfaction with
such products involves a highly complex, meaning-laden, long-term
process; (b) the process might vary across different customer
segments; and (c) satisfaction in such contexts is not always a
function of preconsumption comparison standards. Moreover, other
research involving both qualitative and empirical components
demonstrates that customers’ propensity to embrace new
technologies (i.e., their technology readiness) depends on the
relative dominance of positive and negative feelings in their overall
technology beliefs (Parasuraman 2000). Over the past three
decades researchers have made efforts to uncover the most
important dimensions of perceived service quality; lately these
efforts have also focused on eservices quality (Yang, 2004).
After extensive literature review ZEITHAML developed the e-

SERVQUAL (e-SQ) measure of electronic service quality to study
34
how customers judge e-service quality. This new model was drawn
up through a three-stage process involving exploratory focus groups
and two phases of empirical data collection and analysis. It contains
five broad sets of criteria as relevant to e-SQ perceptions: (a)
information availability and content; (b) ease of use or usability; (c)
privacy/security; (d) graphic style, and, (e) reliability/fulfillment.
Studies reveal important differences in acceptance and usage of
technologies across customers depending on their technology
beliefs and suggest that similar differences might exist in the
evaluative processes used in judging e-SQ. In other words,
customer-specific attributes (e.g., technology readiness) might
influence, for instance, the attributes that customers desire in an
ideal Web site and the performance levels that would signal
superior e-SQ.
2.9 Measurement of eservice quality:
With the increasing application of ecommerce in organizations, the

importance of measuring and monitoring service quality in the
virtual world has been recognized. Different studies have been
conducted aiming at developing measurement scales adapted to
eservice quality field. It is evident that most of these studies have
been conducted mainly on three different areas: online retailing
service quality, web site design quality and online service quality,
and there has been limited attention to other service contexts. In
fact both web site design quality and online retailing quality are
important components of online service quality (Cristoal, 2007).
35
One of the first definitions of eservice quality is conceptualized by
Zeithaml, Parasuraman, and Malhotra (2000). They state that
Internet service quality is the extent to which a web site facilitates
efficient and effective shopping, purchasing, and delivery of
products or services. Zeithaml (2002) state that some dimensions of
the SERVQUAL can be applied to eservice quality, but there are
additional dimensions in eservice, many of which are specifically
related to technology. The ESQUAL scale comprises 11 dimensions
in eservice quality, and later Parasuraman et al. (2005) developed
the ESQUAL into to a seven dimensions scale. The seven dimensions
are split into two separated scales the core dimensions and the
recovery dimensions. ESQUAL is the name of the scale for the core
dimensions: efficiency, system availability, fulfillment, and privacy.
The second scale is titled ERecSQUAL: responsiveness,
compensation, and contact (Parasuraman et al., 2005). It offers the
surface dimensions of eservice quality based on customers
experience and evaluation perspective, which are viewed also as
the antecedents to the adoption of eservice (Rowley, 2006).
Zeithaml, Parasuraman, and Malhotra’s (2000) study identified

dozens of Web site features at the perceptual attribute level and
categorized them into 11 e-SQ dimensions which are;
1. Reliability: Correct technical functioning of the site and the

accuracy of service promises (having items in stock, delivering what
is ordered, delivering when promised), billing, and product
information.
2. Responsiveness: Quick response and the ability to get help if
there is a problem or question.
36
3. Access: Ability to get on the site quickly and to reach the
company when needed.
4. Flexibility: Choice of ways to pay, ship, buy, search for, and
return items.
5. Ease of navigation: Site contains functions that help customers
find what they need without difficulty, has good search
functionality, and allows the customer to maneuver easily and
quickly back and forth through the pages.
6. Efficiency: Site is simple to use, structured properly, and requires
a minimum of information to be input by the customer.
7. Assurance/trust: Confidence the customer feels in dealing with
the site and is due to the reputation of the site and the products or
services it sells, as well as clear and truthful information presented.
8. Security/privacy: Degree to which the customer believes the site
is safe from intrusion and personal information is protected.
9. Price knowledge: Extent to which the customer can determine
shipping price, total price, and comparative prices during the
shopping process.
10. Site aesthetics: Appearance of the site.
11. Customization/personalization: How much and how easily the
site can be tailored to individual customers’ preferences, histories,
and ways of shopping
2.10 Relationship between satisfaction & service

quality:
37
Service quality is the key to measure customer satisfaction (Pitt
et.al., 1995). Many studies to date have been undertaken to
indentify service quality dimensions and detailed aspects of online
services and their relationships with customer satisfaction. One of
the most widely used instruments for assessing customer
satisfaction is SERVQUAL developed by Zeithaml. SERVQUAL is a
widely recognized and used, and it is regarded as applicable to
number of industries including banking industry. In businesses
where the underlying products have become commodity-like,
quality of service depends heavily on the quality of its personnel.
Customer satisfaction has for many years been perceived as key in
determining why customers leave or stay with an organization
(Saha & Zhao, 2005).
The interest in studying satisfaction and service quality as the

antecedents of customer behavioural intentions in this paper has
been stimulated, firstly, by the recognition that customer
satisfaction does not, on its own, produce customer lifetime value
(Appiah-Adu, 1999). Secondly, satisfaction and quality are closely
linked to market share and customer retention (Rust and Zahorik,
1993). There are overwhelming arguments that it is more expensive
to win new customers than to keep existing ones (Hormozi and
Giles, 2004). Customer replacement costs, like advertising,
promotion and sales expenses, are high and it takes time for new
customers to become profitable. And lastly, the increase of
retention rate implied greater positive word of mouth (Appiah-Adu,
1999), decrease price sensitivity and future transaction costs
(Reichheld and Sasser, 1990) and, finally, leading to better business
performance.
38
From the literature that has been reviewed so far, customer
satisfaction seems to be the subject of considerable interest by both
marketing practitioners and academics since 1970s (Jones and Suh,
2000). Companies and researchers first tried to measure customer
satisfaction in the early 1970s, on the theory that increasing it
would help them prosper. Throughout the 1980s, researchers relied
on customer satisfaction and quality ratings obtained from surveys
for performance monitoring, compensation as well as resource
allocation and began to examine further the determinants of
customer satisfaction.
Reichheld (1996) suggests that unsatisfied customers may choose

not to defect, because they do not expect to receive better service
elsewhere but satisfied customers may look for other providers
because they believe they might receive better service elsewhere.
Berry (1984) stressed that employees must be viewed by the
management as ‘internal customers’. Maintenance of high level of
employee satisfaction and retention is important if banks are to
achieve high levels of customer satisfaction and retention. Today,
the definition of service quality and its relationship to other
constructs of interest is still being actively researched. Two main
conceptualizations of service quality exist in the literature - one
based on the disconfirmation approach, and the other based on a
performance-only approach (Santos, 2003).
“Bank management tends to differentiate their firm from
competitors through service quality” (Cohen et al., 2006)
39
2.11 Risk associated with e-banking:
Although, electronic banking provides many opportunities for the

banks, it is also the case that the current banking services provided
through Internet are limited due to security concerns, complexity
and technological problems (Sathye, 1999). Reputation of a service
provider is another important factor affecting trust. Doney and
Cannon (1997) defined reputation as the extent to which customers
believe a supplier or service provider is honest and concerned about
its customers. Tyler and Stanley (1999) argued that banks can build
close and long lasting relationships with customers only if trust,
commitment, honesty and cooperation is developed between them.
Frequent slow response time and delay of service delivery causes

customers to be unsure that the transaction has been completed
(Jun and Cai, 2001). Min and Galle (1999) found the disruption of
information access to be a common factor related to unwillingness
to use Internet channels for commerce. Lack of specific laws to
govern Internet banking is another important concern for both the
bankers and the customers. This relates to issues such as unfair and
deceptive trade practice by the supplier and unauthorized access by
hackers. Other risks associated to electronic banking are job losses,
40
lack of opportunities to socialize and the development of a lazy
society (Black at al., 2001).
3.0 Chapter – III Research Methodology
3.1 Research Design
This is an applied and quantitative research because it will help to

manage issues related to customer satisfaction with technology and
it involves information collection and analysis of data obtained from
questionnaire.
3.2 Research Procedure:
Secondary data collection has been done from various local and
international journals, books, newspapers, etc for literature review
after which primary data collection through Survey-Questionnaire at
branches of different bank have been conducted. Then the
compilation of data collected through Survey-Questionnaire and
data analysis - interpretation is performed.
41
3.3 Population & Sample:
3.3.1 Population
Currently there are four nationalized, twenty private, five Islamic
and seven foreign commercial banks in Pakistan with a total of 36
commercial banks and almost ninety percent of banks are providing
most of the technology based services.
3.3.2 Sample Size & Selection

Out of thirty-six commercial banks in Pakistan ten banks are
selected one nationalized, five privates, two Islamic and two foreign
banks by the ratio of 4:1. The selected banks offer at least one of
the technology based services from ATM, Online Banking or
TeleBanking. For the purpose of conducting survey the target
sample size was 800 and the sampling method will be stratified
random sampling. However at end of data collection I was able to
collect around 600 (usable) samples.
3.4 Measurement/Instrument Selection:
Both primary and secondary sources are used for data collection,
primary data have been collected through Survey-Questionnaire
while secondary data will be collected from journals, articles,
newspapers and magazine.
42
The model used in this research is taken from study conducted at
Lulea University of Technology on Relationship between Online
Service Quality & Customer Satisfaction the model used in this
research is based on different e-SERVQUAL studies conducted by
Zeithaml, Malhotra & Parasuraman. This same model is applied on
all three different QUESTIONNAIRES on ATM, TeleBanking & Internet
Banking.
3.5 Variables:
The questionnaire designed in this study based on e-SERVQUAL

Model by Zeithaml, Parasuraman & Malhotra in which following e-
service quality dimension will be used to measure customer
satisfaction with technology based services;
1. Efficiency
2. Reliability
3. Responsiveness
4. Privacy
5. Fulfillment
43
6. Customer Satisfaction
Efficiency, Reliability, Responsiveness, Privacy & Fulfillment are

used as independent variables and Customer Satisfaction is used as
dependent variable.
3.6 Conceptual Framework:
The model presented below is taken from research study conducted

at Lulea University of Technology on Relationship between Online
Service Quality & Customer Satisfaction.The five service quality
dimensions used have been selected from the study done by
Zeithaml et al. (2000)
Figure 2- Conceptual Framework
Efficiency
Reliability
44
Service Quality Customer
Dimensions Responsive
ness Satisfaction
Fulfillmen
t
Privacy
Table 3: Conceptual Framework
Online Service Measurement Criteria

Quality Dimension
The ability of customers to get their desired
Efficiency
information
Reliability The accuracy of information provided
The ability to provide appropriate information
Responsiveness
to customer when problem occurs
Accuracy of service promises, delivering the
Fulfillment
service on time
Personal information are not shared with
Privacy
anyone, all information is secure
3.7 Hypothesis:
Hypothesis for A T M
Ho : µ ≥3.5 Customers are satisfied with ATM services provided by banking

sector
H₁ : µ ≤3.5 Customers are not satisfied ATM services provided by banking
sector
Efficiency
45
Ho : µ ≥3.5 Customers are satisfied with efficiency ATM services provided by
banking sector
H₁ : µ ≤3.5 Customers are not satisfied with efficiency of ATM services
provided by banking sector
Privacy
Ho : µ ≥3.5 Customers are satisfied with privacy of ATM services provided by

banking sector
H₁ : µ ≤3.5 Customers are not satisfied with privacy of ATM services provided
by banking sector
Reliability
Ho : µ ≥3.5 Customers are satisfied with reliability of ATM services provided by

banking sector
H₁ : µ ≤3.5 Customers are not satisfied with reliability of ATM services provided
by banking sector
Fulfillment
Ho : µ ≥3.5 Customers are satisfied with fulfillment of ATM services provided by

banking sector
H₁ : µ ≤3.5 Customers are not satisfied with fulfillment of ATM services
Responsiveness
Ho : µ ≥3.5 Customers are satisfied with responsiveness of ATM services

H₁ : µ ≤3.5 Customers are not satisfied with responsiveness of ATM services
Hypothesis for Internet Banking
Ho : µ ≥3.5 Customers are satisfied with Internet Banking services provided by

banking sector
H₁ : µ ≤3.5 Customers are not satisfied Internet Banking services provided by
banking sector
46
Efficiency
Ho : µ ≥3.5 Customers are satisfied with efficiency Internet Banking services

H₁ : µ ≤3.5 Customers are not satisfied with efficiency of InternetBanking
services provided by bankingsector
Privacy
Ho : µ ≥3.5 Customers are satisfied with privacy of Internet Banking services

H₁ : µ ≤3.5 Customers are not satisfied with privacy of Internet Banking
services provided by banking sector
Reliability
Ho : µ ≥3.5 Customers are satisfied with reliability of Internet Banking services

H₁ : µ ≤3.5 Customers are not satisfied with reliability of InternetBanking
Fulfillment
Ho : µ ≥3.5 Customers are satisfied with fulfillment of Internet Banking services

H₁ : µ ≤3.5 Customers are not satisfied with fulfillment of InternetBanking
service provided by banking sector
Responsiveness
Ho : µ ≥3.5 Customers are satisfied with responsiveness of Internet Banking

H₁ : µ ≤3.5 Customers are not satisfied with responsiveness of Internet
Banking services provided by banking sector
Hypothesis for TeleBanking
Ho : µ ≥3.5 Customers are satisfied with TeleBanking services provided by

banking sector
H₁ : µ ≤3.5 Customers are not satisfied TeleBanking services provided by
banking sector
Efficiency
47
Ho : µ ≥3.5 Customers are satisfied with efficiency TeleBanking services
H₁ : µ ≤3.5 Customers are not satisfied with efficiency of TeleBanking services
Privacy
Ho : µ ≥3.5 Customers are satisfied with privacy of TeleBanking services

H₁ : µ ≤3.5 Customers are not satisfied with privacy of TeleBanking services
Reliability
Ho : µ ≥3.5 Customers are satisfied with reliability of TeleBanking services

H₁ : µ ≤3.5 Customers are not satisfied with reliability of TeleBanking services
Fulfillment
Ho : µ ≥3.5 Customers are satisfied with fulfillment of TeleBanking services

H₁ : µ ≤3.5 Customers are not satisfied with fulfillment of TeleBanking services
Responsiveness
Ho : µ ≥3.5 Customers are satisfied with responsiveness of TeleBanking

H₁ : µ ≤3.5 Customers are not satisfied with responsiveness of TeleBanking
service provided by banking sector
3.8 Data Analysis:
3.8.1 Statistical Tools

Statistical tools used in this research are;
• Descriptive Statistics (Mean & SD)
48
• Reliability Analysis – Cronbach’s Alpha
• Linear Regression Analysis
• Z-test
• Correlation
3.8.2 Plan of Data Analysis

• Z-test Descriptive Statistics (Mean & SD) is used in hypothesis
testing, measuring customer satisfaction and to analyze
response weightage
• Reliability Analysis – Cronbach’s Alpha is used in measuring

reliability of among all variables/factors and survey questions
• Linear Regression Analysis is used to analyze the effect of

independent variables on dependent variables
• Correlation is used to analyze which factors/variables have

high or low correlation
3.8.3 Softwares Employed

SPSS 13
Microsoft Excel 2007
4.0 Chapter – IV Research Analysis &

Interpretation
49
4.1 Data Analysis and Interpretation of ATM:
In order to prove the internal reliability of the model used,

Cronbach’s Alpha Test of Reliability has been performed on ATM
survey data. When performing this test, we grouped the different
items pertaining to the different quality factor/variable and
performed the test on each variable/factor separately and also on
overall questionnaire. Applying this test specifies whether the items
pertaining to each factor are internally consistent and whether they
can be used to measure the same construct. The table given below
highlights the result of Cronbach’s Alpha Test of Reliability.
Table 4: Reliability Statistics of ATM
No. of Cronbach
Items ’s Alpha
Among all 21 0.920
questions
Efficiency 04 0.742
Reliability 03 0.663
Fulfillment 03 0.476
Responsiveness 03 0.773
Privacy 04 0.732
Customer 04 0.726
Satisfaction
The result we get after conducting Cronbach’s Alpha Test of

Reliability reflected that four variables out of six that are Efficiency,
Responsiveness, Privacy and Customer Satisfaction have high
internal reliability in ATM survey data because their α-value is above
0.7, the remaining two variables which are Reliability and
Fulfillment seems to have less internal reliability. As we have
mentioned earlier that not all our collected data were in usable form
and in some questionnaires their were few missing data which were
represented by zero value which may be caused less internal
50
reliability of two variables which are Reliability and Fulfillment.
Because when we performed Cronbach’s Alpha Test of Reliability on
overall questionnaire the result was α-value of 0.92 which reflected
very high internal reliability of overall survey data of ATM.
To determine which factor is more dependent for measuring

customer satisfaction we have performed Regression Analysis on
ATM data by keeping Efficiency, Reliability, Fulfillment,
Responsiveness and Privacy as independent variable and Customer
Satisfaction as a dependent variable which gave us the evidence of
high or low dependency of Customer Satisfaction on different
variable for ATM, the result of Regression Analysis is presented in
below table;
Table 5 : Regression Analysis of ATM
ANOVA
Model Sum of Df Mean F Sig.
Squares Square
Regression 75.813 5 15.163 80.21 .000a
8
Residual 51.034 270 .189
Total 126.847 275
Coefficients
Model Unstandard Standardize Unstandard t Sig.
ized d ized
Coefficients Coefficients Coefficients
(Constant) .683 .164 4.156 .000
Efficiency .226 .059 .238 3.820 .000
Reliability .271 .048 .315 5.609 .000
Fulfillment .047 .063 .049 .739 .461
Responsive .045 .044 .057 1.018 .310
ness
Privacy .255 .052 .269 4.939 .000
51
(Constant) .683 .164 4.156 .000
The above table reflected that Customer Satisfaction for ATM users
is highly dependent on three factors that are Efficiency, Reliability
and Privacy while the remaining two factors Fulfillment and
Responsiveness seems to be least dependent for Customer
Satisfaction from ATM. This means that when bank customers use
ATM the three most important factors they consider are Efficiency,
Reliability and Privacy so these three factors should be given more
importance by the banks to ensure high level Customer Satisfaction
from ATM.
To figure out the association between different factors we have

calculated thirty six correlations between different factors of ATM.
This analysis gave us an idea of level of correlation between
different factors of ATM the result of correlation analysis in
presented in the below table;
Table 6 -ATM: Correlation between factors
Customer
Efficie Reliabili Fulfillme Satisfacti Responsive Privac
on
ncy ty nt ness y
Pearson
Efficiency Correlation 1 .606 **
.709 **
.675**
.538**
.673**
Sig. (2- .000 .000 .000 .000 .000
tailed)
N 276 276 276 276 276 276

Pearson
Reliability Correlation .606 **
1 .649 **
.653**
.640**
.468**
Sig. (2- .000 .000 .000 .000 .000
tailed)
N 276 276 276 276 276 276

Pearson
Fulfillment Correlation .709 **
.649 **
1 .628**
.669**
.624**
Sig. (2- .000 .000 .000 .000 .000
tailed)
52
N 276 276 276 276 276 276
Customer Pearson
Satisfactio Correlation .675 **
.653
**
.628
**
1 .541 **
.633**
n
Sig. (2- .000 .000 .000 .000 .000
tailed)
N 276 276 276 276 276 276

Pearson
Responsive Correlation .538 **
.640
**
.669
**
.541 **
1 .453**
ness
Sig. (2- .000 .000 .000 .000 .000
tailed)
N 276 276 276 276 276 276

Pearson
Privacy Correlation .673 **
.468
**
.624
**
.633 **
.453 **
1
Sig. (2- .000 .000 .000 .000 .000
tailed)
N 276 276 276 276 276 276

**. Correlation is significant at the 0.01 level (2-tailed).
The factors which have high correlation for ATM is Efficiency &
Reliability which
have correlation level of 0.709, the factors which have lowest
correlation for ATM are Reliability & Privacy and Privacy &
Responsiveness which have correlation level of 0.46 and 0.45
respectively while the factors which moderate correlation for ATM
are CustomerSatisfaction & Responsiveness and Responsiveness &
Efficiency which have correlation level of 0.54 and 0.53
respectively. The remaining factors have an above average
correlation for ATM which is greater then correlation level of 0.62 till
the correlation level of 0.67.
We have conducted a survey with 400 distributed ATM

questionnaires from which 276 (69%) were used. From the collected
400 questionnaires, those where the respondents have marked on
more than one answer in a specific question and those who have
53
stated that they have bank accounts outside our sample list, were
excluded from this study. The table below gives us the descriptive
statistics of ATM data through which we can analyze that Efficiency,
Fulfillment, Responsiveness and Customer Satisfaction are among
most important factors which are highly marked (which reflect
positive response) towards these factors.
Table 7 : Descriptive Statistics of ATM
N Minimu Maximu Mean Std. Varianc

m m Deviatio e
n
Efficiency 276 1.75 5.00 3.8397 .71533 .512
Reliability 276 1.00 5.00 3.5459 .78855 .622
Fulfillment 276 1.33 5.00 3.7451 .70615 .499
Responsiveness 276 .00 5.00 3.5895 .85427 .730
Privacy 276 1.50 5.00 3.9429 .71520 .512
CustomerSatisfa 276 1.50 5.00 3.8569 .67916 .461
ction
Table 8 : Result of Hypothesis testing for ATM
Hypothesis µ N Alpha Mean SD Z- Z- Resul

α value tabl t
e
Efficiency 3.5 276 0.05 3.839 0.715 7.8894 -1.65 Accep
3 t
7
Reliability 3.5 276 0.05 3.545 0.788 0.9670 -1.65 Accep
6 t
9
Fulfillment 3.5 276 0.05 3.745 0.706 5.7663 -1.65 Accep
2 t
1
Responsiveness 3.5 276 0.05 3.589 0.854 1.7405 -1.65 Accep
3 t
5
Privacy 3.5 276 0.05 3.942 0.715 10.288 -1.65 Accep
2 0 t
9
54
CustomerSatisf 3.5 276 0.05 3.856 0.679 8.7303 -1.65 Accep
2 t
action 9
The above table represent the result of hypothesis testing of ATM

according to the analysis all our hypothesis for ATM are accepted
because they have z-value above -1.65 which comes in acceptance
region.
This means that bank customers are satisfied with ATM services
provided by banking sector and also by Efficiency, Reliability,
Fulfillment, Responsiveness and Privacy of ATM services provided
by banking sector.
4.2 Data Analysis and Interpretation of Internet

Banking:

Cronbach’s Alpha Test of Reliability has been performed on Internet
55
Banking survey data. When performing this test, we grouped
different items pertaining to the different quality factor/variable and
Table 9 - Reliability Statistics of Internet Banking
No. of Cronbach
Items ’s Alpha
Among all 21 0.914
questions
Efficiency 03 0.680
Privacy 03 0.497
Customer 03 0.652
Satisfaction

Reliability reflected that three variables out of six that are
Responsiveness, Fulfillment and Reliability have high internal
reliability in Internet Banking survey data because their α-value is
above 0.7, the remaining three variables which are Privacy,
Customer Satisfaction and Efficiency seems to have less internal
reliability. As we have mentioned earlier that not all our collected
data were in usable form and in some questionnaires their were few
missing data which were represented by zero value which may be
caused less internal reliability of three variables which are Privacy,
Customer Satisfaction and Efficiency. Because when we performed
Cronbach’s Alpha Test of Reliability on overall questionnaire the
56
result was α-value of 0.91 which reflected very high internal
reliability of overall survey data of Internet Banking.

Internet Banking data by keeping Efficiency, Reliability, Fulfillment,
variables for Internet Banking, the result of Regression Analysis is
presented in below table;
Table 10 : Regression Analysis of Internet Banking
ANOVA
Model Sum of Df Mean F Sig.
Squares Square
Regression 41.72
41.232 5 8.246 .000a
9
Residual 19.959 101 .198
Total 61.191 106
Coefficients
ized d ized
(Constant) .227 .277 .820 .414
Efficiency .249 .112 .219 2.219 .029
Reliability .383 .081 .425 4.721 .000
Fulfillment .078 .111 .069 .697 .487
Responsive
.230 .089 .217 2.575 .011
ness
Privacy 9.285E-5 .053 .000 .002 .999
(Constant) .227 .277 .820 .414
57
The above table reflected that Customer Satisfaction for Internet
Banking users is highly dependent on three factors that are
Efficiency, Reliability and Responsiveness while the remaining two
factors Privacy and Fulfillment seems to be least dependent for
Customer Satisfaction from Internet Banking. This means that when
bank customers use Internet Banking the three most important
factors they consider are Efficiency, Reliability and Responsiveness
so these three factors should be given more importance by the
banks to ensure high level Customer Satisfaction from Internet
Banking.

calculated thirty six correlations between different factors of
Internet Banking. This analysis gave us an idea of level of
correlation between different factors of Internet Banking the result
of correlation analysis in presented in the below table;
Table 11 : Internet Banking: Correlation between factors
Custome
Efficien Reliabili Fulfillm Responsive Priva r
Satisfacti
cy ty ent ness cy on
Pearson
Efficiency Correlation 1 .681** .780** .636** .432** .699**
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 107 107 107 107 107 107

Pearson
Reliability Correlation .681 **
1 .657 **
.688**
.494 **
.768**
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 107 107 107 107 107 107

Pearson
Fulfillment Correlation .780** .657** 1 .631** .510** .655**
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 107 107 107 107 107 107
58
Pearson
Responsiven Correlation
.636** .688** .631** 1 .440** .691**
ess
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 107 107 107 107 107 107

Pearson
.494 **
.510**
.440 **
1 .435**
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 107 107 107 107 107 107

Customer Pearson
Satisfaction Correlation .699** .768** .655** .691** .435** 1
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 107 107 107 107 107 107
The factors which have high correlation for Internet Banking are
Efficiency & Fulfillment which have correlation level of 0.780 and
Reliability & Customer Satisfaction which have correlation level of
0.768, the factors which have lowest correlation for Internet
Banking are Privacy & Efficiency, Privacy & Reliability, Privacy &
Responsiveness and Privacy & Customer Satisfaction which have
correlation level of 0.432, 0.494, 0.440 & 0.435 respectively while
the factor which have moderate correlation for Internet Banking is
Privacy & Fulfillment which have correlation level of 0.510. The
remaining factors have an above average correlation for Internet
Banking which is greater then correlation level of 0.636 till the
correlation level of 0.69.
We have conducted a survey with 150 distributed Internet Banking

questionnaires from which 107 (71.30%) were used. From the
collected 107 questionnaires, those where the respondents have
marked on more than one answer in a specific question and those
59
who have stated that they have bank accounts outside our sample
list, were excluded from this study. The table below gives us the
descriptive statistics of Internet Banking data through which we can
analyze that Efficiency, Reliability, Fulfillment and Customer
Satisfaction are among most important factors which are highly
marked (which reflect positive response) towards these factors.
Table 12 : Descriptive Statistics of Internet Banking

m m Deviatio e
n
Efficiency 107 2.33 5.00 3.9064 .66862 0.45
Reliability 107 1.00 5.00 3.7710 .84194 0.71
Fulfillment 107 2.00 5.00 3.8781 .67380 0.45
Responsiveness 107 1.60 4.80 3.6523 .71498 0.51
Privacy 107 .67 5.00 3.6168 .98849 0.98
CustomerSatisfa
107 1.33 5.00 3.7846 .75978
ction 0.58
Table 13 : Result of Hypothesis testing for Internet Banking
Hypothesis µ N Alpha Mean SD Z- Z- Resu

α value valu lt
e
Efficiency 3.5 0.05 3.906 . 6.287 -1.65 Accep
107 3 t
4 66862
Reliability 3.5 0.05 3.771 . 3.329 -1.65 Accep
107 5 t
0 84194
Fulfillment 3.5 0.05 3.878 . 5.804 -1.65 Accep
107 5 t
1 67380
Responsiveness 3.5 0.05 3.652 . 2.203 -1.65 Accep
107 4 t
3 71498
Privacy 3.5 0.05 3.616 . 1.222 -1.65 Accep
107 3 t
8 98849
CustomerSatisf 3.784 . 3.874 -1.65 Accep
3.5 107 0.05 t
action 6 75978 7
60
The above table represent the result of hypothesis testing of
Internet Banking according to the analysis all our hypothesis for
Internet Banking are accepted because they have z-value above
-1.65 which comes in acceptance region.
This means that bank customers are satisfied with Internet Banking
services provided by banking sector and also by Efficiency,
Reliability, Fulfillment, Responsiveness and Privacy of Internet
Banking services provided by banking sector.
4.3 Data Analysis and Interpretation of

TeleBanking:

Cronbach’s Alpha Test of Reliability has been performed on
61
TeleBanking survey data. When performing this test, we grouped
different items pertaining to the different quality factor/variable and
Table 14 : Reliability Statistics of TeleBanking
No. of Cronbach
items ’s Alpha
Among all 21 0.935
questions
Efficiency 04 0.743
Privacy 03 0.699
Customer 04 0.729
Satisfaction

Reliability on TeleBanking data it reflected that four variables out of
six that are Efficiency, Responsiveness, Customer Satisfaction and
Reliability have high internal reliability in TeleBanking survey data
because their α-value is above 0.7, the remaining two variables
which are Privacy and Fulfillment seems to have less internal
reliability. As we have mentioned earlier that not all our collected
data were in usable form and in some questionnaires their were few
missing data which were represented by zero value which may be
caused less internal reliability of two variables which are Privacy
and Fulfillment. Because when we performed Cronbach’s Alpha Test
62
of Reliability on overall questionnaire the result was α-value of 0.93
which reflected very high internal reliability of overall survey data of
TeleBanking.

TeleBanking data by keeping Efficiency, Reliability, Fulfillment,
variable for TeleBanking, the result of Regression Analysis is
presented in below table;
Table 15 : Regression Analysis of TeleBanking
ANOVA
Model Sum of df Mean F Sig.
Squares Square
Regression 84.23
91.197 5 18.239 .000a
6
Residual 43.522 201 .217
Total 134.720 206
Coefficients
ized d ized
(Constant) .476 .159 2.990 .003
Efficiency .307 .064 .307 4.795 .000
Reliability .196 .066 .213 2.971 .003
Fulfillment .223 .057 .243 3.899 .000
Responsive
.075 .052 .087 1.438 .152
ness
Privacy .082 .055 .096 1.507 .133
(Constant) .476 .159 2.990 .003
63
The above table reflected that Customer Satisfaction for
TeleBanking users is highly dependent on three factors that are
Efficiency, Reliability and Fulfillment while the remaining two factors
Privacy and Responsiveness seems to be least dependent for
Customer Satisfaction from TeleBanking. This means that when
bank customers use TeleBanking the three most important factors
they consider are Efficiency, Reliability and Responsiveness so
these three factors should be given more importance by the banks
to ensure high level Customer Satisfaction from TeleBanking.

calculated thirty six correlations between different factors of
TeleBanking. This analysis gave us an idea of level of correlation
between different factors of TeleBanking the result of correlation
analysis in presented in the below table;
Table 16 - TeleBanking: Correlation between factors
Custome
Efficienc Reliabil Fulfillme Responsive Privac r
Satisfacti
y ity nt ness y on
Pearson
Efficiency Correlation 1 .710** .684** .642** .661** .743**
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 207 207 207 207 207 207

Pearson
Reliability Correlation .710** 1 .688** .685** .743** .728**
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 207 207 207 207 207 207

Pearson
Fulfillment Correlation .684 **
.688 **
1 .656 **
.623 **
.716**
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 207 207 207 207 207 207

Pearson
Responsiven Correlation .642** .685** .656** 1 .616** .648**
64
ess
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 207 207 207 207 207 207

Pearson
.743 **
.623 **
.616 **
1 .662**
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 207 207 207 207 207 207

Customer Pearson
Satisfaction Correlation .743** .728** .716** .648** .662** 1
Sig. (2-
.000 .000 .000 .000 .000
tailed)
N 207 207 207 207 207 207

The factors which have high correlation for TeleBanking are

Efficiency & Reliability, Efficiency & Customer Satisfaction,
Reliability & Privacy, Reliability & Customer Satisfaction and
Fulfillment & Customer Satisfaction which have correlation level of
0.710, 0.743, 0.743, 0.728 & 0.716, while there is no factor seen
which have low level (below 0.50) or moderate level (0.50-0.59) of
relationship in TeleBanking data. The remaining factors have an
above average correlation for TeleBanking which is greater then
correlation level of 0.60 till the correlation level of 0.69.
We have conducted a survey with 250 distributed TeleBanking

questionnaires from
which 207 (82.80%) were used. From the collected 207
questionnaires, those where the respondents have marked on more
than one answer in a specific question and those who have stated
that they have bank accounts outside our sample list, were
excluded from this study.
65
The table below gives us the descriptive statistics of TeleBanking
data through which we can analyze that Efficiency, Reliability,
Privacy and Customer Satisfaction are among most important
factors which are highly marked (which reflect positive response)
towards these factors.
Table 17 : Descriptive Statistics of TeleBanking

m m Deviatio e
n
Efficiency 207 1.25 5.00 3.6437 .81002 0.66
Reliability 207 .00 5.00 3.6268 .87747 0.77
Fulfillment 207 .00 5.00 3.5037 .88084 0.78
Responsiveness 207 .00 5.00 3.4639 .94000 0.88
Privacy 207 .00 5.00 3.7282 .94126 0.89
CustomerSatisfa
207 1.25 5.00 3.6510 .80869
ction 0.65
Table 18 - Result of Hypothesis testing for TeleBanking
Hypothesis µ n Alpha Mean SD Z- z- Resul

α value valu t
e
Efficiency 3.5 0.05 3.643 . 2.552 -1.65 Accep
207 4 t
7 81002
Reliability 3.5 0.05 3.626 . 2.079 -1.65 Accep
207 1 t
8 87747
Fulfillment 3.5 0.05 3.503 . 0.060 -1.65 Accep
207 4 t
7 88084
Responsiveness 3.5 0.05 - -1.65 Accep
3.463 .
207 0.552 t
9 94000 5
Privacy 3.5 0.05 3.728 . 3.488 -1.65 Accep
207 1 t
2 94126
CustomerSatisf 3.5 207 0.05 3.651 . 2.686 -1.65 Accep
5 t
66
action 0 80869
The above table represent the result of hypothesis testing of

TeleBanking according to the analysis all our hypothesis for
TeleBanking are accepted because they have z-value above -1.65
which comes in acceptance region.
This means that bank customers are satisfied with TeleBanking

services provided by banking sector and also by Efficiency,
Reliability, Fulfillment, Responsiveness and Privacy of TeleBanking
services provided by banking sector.
5.0 Chapter – V Findings & Conclusion
5.1 Findings
• We have found eleven service quality dimensions to measure

customer satisfaction which are reliability, responsiveness, trust,
67
flexibility, easy of navigation, access, efficiency, privacy, price
knowledge, aesthetics, customization/personalization
• Technology offers a means to improve internal

communication, productivity and efficiency within the
organization to provide seamless service to customers to create
new and more effective service delivery and to enhance
customer satisfaction.
• With better understanding of customer’s perceptions,

companies can determine the actions required to meet the
customer’s needs. They can identify their own strengths and
weaknesses, where they stand in comparison to their
competitors, chart out path future progress and improvement.
Customer satisfaction measurement helps to promote an
increased focus on customer outcomes and stimulate
improvements in the work practices and processes.
• According to a Report titled Retail Payment Systems of

Pakistan - Paper‐based and E‐banking (STATE BANK OF
PAKISTAN, 2008) ‘A total of 124.6 million E‐banking transactions
were recorded valuing Rs 13.9 trillion during the last fiscal year
(FY08), showing a growth of 25.4% in numbers and 32.3% in
amount when compared with the fiscal year (FY07).’
68
• Information technology developments in the banking sector
have speed up communication and transactions for clients. E-
banking is one of the technologies which are rapidly growing
banking practices these days. Easy set-up, User-friendly and
secure service & 24-hour access are the major reasons for
adopting technology for banking
• Online banking service allows customers to manage their

accounts from any place at any time for minimum cost; it gives
abundant compensation to the client in terms of price and ease.
Many factors are attracting the public like ease of use, perceived
usefulness, security and privacy.
• Poor and/or lack of technological infrastructure and reliable

power supply, lack of proper legislation governing e-transactions,
balance between convenience and security are major problems
faced by customer when they used technology for banking.
Management of customer requirement is vital to development of
rational for the banks to initiate, explore and develop electronic
banking services that meet their needs and changes.
• Cronbach’s Alpha Test of Reliability has been performed on

survey data of ATM, Internet Banking & TeleBanking for which α-
value have been found above 0.90 which shows high reliability of
collected data.
69
• After conducting regression analysis we have found that
customer satisfaction of ATM users is highly dependent on
Efficiency, Reliability and Privacy, customer satisfaction of
Internet Banking users is highly dependent on Efficiency,
Reliability and Responsiveness while customer satisfaction of
TeleBanking users in highly dependent on Efficiency, Reliability
and Fulfillment.
• The factors which have high correlation for ATM is Efficiency &
Reliability, for Internet Banking are Efficiency & Fulfillment and
Reliability & Customer Satisfaction while for TeleBanking
Efficiency & Reliability, Efficiency & Customer Satisfaction,
Reliability & Privacy, Reliability & Customer Satisfaction and
Fulfillment & Customer Satisfaction have high correlation.
• As a result of hypothesis testing it has been found that bank

customers are satisfied with all three technology based services
that are ATM, Internet Banking and TeleBanking services
provided by banking sector and also by all Efficiency, Reliability,
Fulfillment, Responsiveness and Privacy of ATM, Internet Banking
and TeleBanking services provided by banking sector.
70
5.2 Conclusion
Taking into consideration the huge investments banks make in

technology infrastructure, customer satisfaction and retention are
turning into the crucial factors for success in electronic banking
meaning that the generation of positive customer value on the
Internet requires the establishment of long-term customer
relationships (Bauer, Hammerschmidt & Falk, 2005).
For the purpose of this study, a survey has been conducted with
800 people, from which the responses from 590 have been used for
the analysis. To analyze the data and test its reliability, Cronbach’s
Alpha Test of Reliability was conducted. The Cronbach’s Alpha Test
of Reliability proved the relative reliability of the dimensions used in
the model.
One of the ways for achieving high customer satisfaction and

gaining the loyalty of customers is for banks to offer high quality
71
services. That is why being able to measure and evaluate the
quality of their online banking services is deemed important for
banks in order for them to take action to correct those features of
their online services which customers don’t find that satisfactory.
Consumer behavior is changing partly because of less spare time.
The way of use of financial services is characterized by individuality,
mobility, independence of place and time and flexibility.
Singh et al., (2000) feel that the challenge for financial institutions
is to find satisfactory answers to business issues of culture and
processes and to create a win-win game which both satisfies banks
and customers.
5.3 Recommendations
It is recommended that banks must create new ways of

differentiating their products through service and convenience.
Creating compelling services and conveniences will require some
offline presence like kiosk-like “micro-branches’, or the right
number of strategically located branches serving a larger number of
customers per branch than traditional competitors. Banks should
offer the best mix of online and offline conveniences, plus
competitive rates and deliver it all at a price the bank can afford.
This will help banks go a step forward to improve their service and
thus gain competitive advantage by retaining and attracting their
customers.
72
Some banks in Pakistan need to pay more attention to developing
Internet and TeleBanking services as they are not yet thoroughly
developed and thus, they can be exploited to the benefit of the
bank. Banks should try and publicize the e-banking services it
provides through advertisements, publications, though its website,
by means of pamphlets/brochures and encouraging bank employees
to talk about it with the customers. Also, attention should be paid to
different types of customers such as young and old customers, risk-
takers, regular and irregular customers.
Banks should conduct researches to obtain information on how best

to deal with the different types of customers it serves. My
suggestions to improve e-banking include offering a wider range of
financial services and products, building physical branches or kiosks
are ways to differentiate and improve the value proposition for
customers who might otherwise demand better rates.
At last but not the least is that Banks must adapt to the electronics
age and frequently update it. Because consumers demand it and
economics drives it. Banks must exploit it.
5.4 Further Research
Because of the time-constraints and the specific conditions under

which the study has been conducted, only 590 questionnaires were
used to collect data and test the theoretical model used to measure
quality of e-banking services. Although the reliability and validity of
the theoretical model used in the conducted study has been proven
73
to be satisfactory, it should be accepted as a preliminary scale and
tested further with higher number of respondents.
The underlying study was conducted in Karachi only and is relevant

only for the online services offered by banks in Karachi and the
experience of its residents. It would be interesting to conduct
similar researches at national contexts as well.
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MBA – Final Year

SERVICES PROVIDED BY BANKING SECTOR

DEPARTMENT OF MANAGEMENT SCIENCES

Thanks to Allah for providing me the strength, courage, direction

Secondly I would like to thank all those who have helped in

I hope this project will be beneficial for the students to come in

2.0 Chapter – II Theoretical Framework..............23

3.0 Chapter – III Research Methodology...............41

4.0 Chapter – IV Research Analysis & Interpretation

5.0 Chapter – V Findings & Conclusion................67

Figure 1 – Disposition of Thesis...........................22

This research is a part of my Master of Business Administration

Electronic banking services are new, and the development and

Banks are providing technology based services to provide an ease

One of the ways for achieving high customer satisfaction and

In the world of banking, the development in Information Technology

The rapid advancement in electronic distribution channels has

In last few years we have witnessed a substantial growth of

Banks are providing technology based services to provide an ease

“What are the service quality dimensions in technology

The objective of this study is to gain better understanding of service

To determine up to what extent technology based services

• Why people adopt technology for banking?

• Adopting a technology, do really fulfill their need?

To explore the problems faced by bank customers in using

• What are the problems faced by customers when they use

• What are the solutions to those problems?

• From which services bank customers are satisfied?

To identify which service quality dimensions affect customer

• Which service quality dimension highly affects customer

• How service quality dimensions affect customer satisfaction?

1.2 Banking Sector:

1.2.1 Overview of Banking Industry of Pakistan

The financial sector in Pakistan comprises of De-Nationalized Banks

The major banking market share is retained by BIG FIVE BANKS

Banking sector in Pakistan has undergone a significant

These years also witnessed acquisition of Union Bank by Standard

1.2.2 Opportunities & Challenges

The banking industry of Pakistan has grown to a significant level in

• Interest Rate Variation

The robust growth of auto and mortgage finance in preceding two

With the growth of global financial industry, the misuse of banking

STATE BANK OF PAKISTAN has instructed all commercial banks to

1.3.1 Customer Satisfaction

According to Hill, Brierley and MacDougall (2003) ‘Customer

1.3.2 Customer Satisfaction in Service Industry

Customer satisfaction has for many years been perceived as key in

1.3.3 The Need to Measure Customer Satisfaction

Satisfied customers are central to optimal performance and

When buyers are powerful, the health and strength of the

1.3.4 Measuring Customer Satisfaction with e-services

With the increasing application of ecommerce in organizations, the

1.3.5 Different models & variables for measuring

The measurement of the gap between expected and perceived

Table 1 - Different Models for measuring customer satisfaction

1.4.1 Overview of e-banking

E-banking is the use of electronic means to deliver banking services,

Worldwide banking is no longer restricted to the four walls. A lot of

1.4.2 Types of e-banking services

Currently the technology based services provided by banks in

• Self Service (PC) Banking

• POS Banking (Credit and Debit cards)

1.4.3 Growth of e-banking in Pakistan